EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 30, 1996 (this
"Agreement"), is made by and between RADIUS INC., a California corporation (the
"Company"), and the person named on the signature page hereto (the "Initial
Investor").
W I T N E S S E T H:
WHEREAS, in connection with each of the Subscription Agreements, between certain
unsecured creditors of the Company ("Creditors") and the Company (the
"Subscription Agreements"), the Company has issued and sold to the Creditors
shares (the "Shares") of Common Stock, no par value (the "Common Stock") and
certain Common Stock Purchase Rights ("Rights") in satisfaction of certain
claims of such Creditors as set forth in the Subscription Agreements;
WHEREAS, the Company has issued to IBM Credit Corporation ("IBM Credit") shares
of Series A Convertible Preferred Stock (the "Series A Preferred") and Warrants
("Warrants") to purchase 600,000 shares of Common Stock in satisfaction of
certain outstanding indebtedness of the Company to IBM Credit and extension by
IBM Credit of an advance of up to $500,000 as well as the restructuring of the
Company's remaining indebtedness to IBM Credit (such transactions with IBM
Credit are collectively referred to herein as the "Restructuring");
WHEREAS, the Company has issued or will issue to certain unsecured creditors
("Key Suppliers") Warrants to purchase an aggregate of 600,000 shares of Common
Stock;
WHEREAS, to induce (i) the Creditors to execute and deliver the Subscription
Agreements, (ii) IBM Credit to enter into the Restructuring and, (iii) the Key
Suppliers to accept Warrants to ensure favorable credit and supply terms, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), and applicable
state securities laws with respect to the Registrable Securities (defined
below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Demand Securities" means the Warrant Shares and the Dividend Shares.
(b) "Demand Registration" means a registration effected pursuant to Section
2(b) hereof.
(c) "Dividend Shares" means any shares of Common Stock issuable in lieu of cash
dividends paid or to be paid on the Series A Preferred.
(d) "Effectiveness Period" means with respect to (i) the Shelf Registration, a
period of 24 consecutive months from the effective date of the Registration
Statement relating to the Initial Registration and (ii) any Demand
Registration, a period of 90 consecutive days from the effective date of
the Demand Registration and excluding any period of time in which the
Effectiveness Period may be suspended pursuant to the provisions of clauses
(i)-(iv) of Section 3(a).
(e) "Form S-3" means such form under the Securities Act as is in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the
Company with the SEC.
(f) "Holdover Securities" means Registrable Securities which are held by an
Investor after the end of the Effectiveness Period for the Shelf
Registration and which Investor also holds Demand Securities.
(g) "Initial Registration" means a registration effect pursuant to Section 2(a)
hereof.
(h) "Investor" means the Initial Investor and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(i) "register," "registered" and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and, to the extent required hereunder,
pursuant to Rule 415, and the declaration or ordering of effectiveness of
such Registration Statement by the SEC.
2
(j) "Registrable Securities" means the Shares, the Warrant Shares, the Dividend
Shares, the Rights Shares, the Series A Shares, the Series A Preferred and
the Warrants.
(k) "Registration Statement" means a registration statement of the Company
under the Securities Act with respect to the Shelf Registration or the
Demand Registration, as the case may be.
(1) "Registration Termination Date" means the date on which the Company's
obligation to register or maintain any registration with respect to any
Registrable Securities terminates as provided in Section 11 hereof.
(m) "Rights Shares" means shares of Common Stock issued or issuable pursuant to
the Rights issued to the Creditors pursuant to the Subscription Agreements.
(n) "Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(o) "Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(p) "SEC" means the U.S. Securities and Exchange Commission.
(q) "Securities Act" means the Securities Act of 1933, as amended.
(r) "Series A Shares" means shares of Common Stock issued or issuable upon
conversion of the Series A Preferred.
(s) "Shelf Registration" means the Initial Registration and any Subsequent
Registration.
(t) "Subsequent Registration" has the meaning specified in Section 2 hereof.
(u) "Target Effective Date" means 60 days after the issuance of the Shares.
(v) "Target Filing Date" means 10 days after the issuance of the Shares.
(w) "Underwritten Offering" means an underwritten public offering on a firm
commitment basis.
(x) "Warrant Shares" means shares of Common Stock issued or issuable upon
exercise of the Warrants issued to IBM Credit and the Key Suppliers.
3
2. Registration.
(a) Initial Registration.
(i) The Company shall prepare and file with the SEC a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Registrable Securities. The Initial Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Securities
for resale by such holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). Such filing
shall be made on or before the Target Filing Date. The Company shall use its
best efforts to have such Initial Registration declared effective on or before
the Target Effective Date and to keep the Initial Registration continuously
effective under the Securities Act until the earlier to occur of the date that
is 24 months from the effectiveness date of the Initial Registration (the
"Initial Effectiveness Period") or the Registration Termination Date.
(ii) If the Initial Registration or a Subsequent Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the occurrence of the Registration Termination Date with respect to
the Registrable Securities covered thereby), the Company shall use its best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness file an amendment to the Initial Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a) "Subsequent
Registration"). If a Subsequent Registration is filed, the Company shall use its
best efforts to cause the Subsequent Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective until the earlier to occur of the end of the
Effectiveness Period or the Registration Termination Date.
(iii) The Company shall supplement and amend the Shelf Registration if required
by the rules, regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration, if required by the Securities
Act.
(b) Demand Registration.
(i) If the Company shall receive at any time after the end of the Effectiveness
Period for the Shelf Registration, a written request from the Investors of at
least thirty-three percent (33%) of the Demand Securities then outstanding that
the Company file a registration statement under the Securities Act covering the
registration of the Demand Securities pursuant to this Section
4
2(b), then the Company shall, within ten (10) business days of the receipt of
such written request, give written notice of such request ("Request Notice") to
all Investors, and file within thirty (30) days and use its best efforts to
cause such Registration Statement to become effective within an additional
thirty (30) days, the Registration Statement covering all Demand Securities
which Investors request to be registered and included in such registration by
written notice given such Investors to the Company within twenty (20) days after
receipt of the Request Notice; provided that the Registrable Securities
requested by all Investors to be registered pursuant to such request must be at
least thirty-three percent (33%) of all Demand Securities then outstanding;
provided further, that in the event the proposed offering described in the
Request Notice is an Underwritten Offering, then additional Holdover Securities
(other than Warrants and Series A Preferred) held by Investors may be included
in the registration described in the Request Notice, subject to compliance with
subsection (ii) below.
(ii) If the Investors initiating the registration request under this Section
2(b) ("Initiating Investors") intend to distribute the Demand Securities covered
by their request by means of an Underwritten Offering, then they shall so advise
the Company as a part of their request made pursuant to this Section 2(b) and
the Company shall include such information in the Request Notice referred to in
subsection (i) of this Section 2(b). In such event, the right of any Investor to
include his Demand Securities and, if applicable, Holdover Securities in such
registration shall be conditioned upon such Investor's participation in such
Underwritten Offering and the inclusion of such Investor's Demand Securities in
the Underwritten Offering (unless otherwise mutually agreed by a majority in
interest of the Initiating Investors and such Investor) to the extent provided
herein. All Investors proposing to distribute their securities through such
Underwritten Offering shall enter into an underwriting agreement in customary
form with the managing underwriter or underwriters selected for such
Underwritten Offering by the Company. Notwithstanding any other provision of
this Section 2(b), if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Investors owning Demand
Securities and, if applicable, Holdover Securities, which would otherwise be
registered and underwritten pursuant hereto, and the number of Demand Securities
and, if applicable, Holdover Securities, that may be included in the
Underwritten Offering shall be reduced as required by the underwriter(s) and
allocated among the Investors owning Demand Securities and, if applicable,
Holdover Securities, on a pro rata basis according to the number of Demand
Securities and, if applicable, Holdover Securities, then outstanding held by
each Investor requesting registration (including the Initiating Investors).
5
(iii) Maximum Number of Demand Registrations. The Company is obligated to effect
only two (2) such registrations pursuant to this Section 2(b) in any calendar
year.
(iv) Deferral. Notwithstanding the foregoing, if the Company shall furnish to
Investors requesting a Demand Registration, a certificate signed by the
President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for a period of not more than one hundred twenty (120) days after receipt
of the request of the Initiating Investors; provided, however, that the Company
may not utilize this right more than once in any twelve (12) month period.
(v) Form S-3 Registration. In lieu of the Company's obligation to effect Demand
Registrations pursuant to this Section 2(b), the Company may, at its election,
at any time after the Effectiveness Period of the Shelf Registration, prepare,
file and cause to be effective a Registration Statement on Form S-3, and subject
to the provisions of Section 3(a), keep such Registration Statement effective
pursuant to Rule 415 until the Registration Termination Date. Upon the
effectiveness of such Registration Statement on Form S-3, the Investors shall no
longer be permitted to effect a Demand Registration.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to this Agreement, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event later than
as is set forth in Section 2 hereof) a Registration Statement with respect to
all Registrable Securities to be included therein, and thereafter use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 (except in the case of an underwritten offering,
for which Rule 415 will not be used) at all times during the Effectiveness
Period or until the Registration Termination Date, whichever occurs first, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading provided, however, that each Investor shall have
complied with its obligations under Section 4 with respect to the Registrable
Securities of such Investor to be included in the Registration Statement.
Notwithstanding the foregoing, in the event that (i) any request is made by the
SEC or any other federal or
6
state governmental authority during the Effectiveness Period for amendments or
supplements to a Registration Statement or related prospectus, (ii) any event
occurs that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement or prospectus so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, (iii) during
the Effective Period for the Shelf Registration, the Company becomes eligible to
utilize From S- 3 (in which case, the Company shall be permitted to terminate
the effectiveness of the Initial Registration and file a Registration Statement
on Form S-3 and use its best efforts to cause such Registration Statement to
become effective within thirty (30) days with respect to the Registrable
Securities), or (iv) in the judgment of the Company, it is advisable to suspend
use of the prospectus included in such Registration Statement for a discrete
period of time due to pending corporate developments (including the pending
automatic conversion of the Series A Shares referred to in Section 7.2(a) of
Article III of the Company's Articles of Incorporation, as amended, in which
case such discrete period shall be one day), public filings with the SEC or
similar events, then the Company shall deliver a certificate in writing to the
Investors whose Registrable Securities are included in the Registration
Statement to the effect of the foregoing and, upon receipt of such certificate,
the use of the Registration Statement and prospectus will be deferred or
suspended and will not recommence until such Investor's receipt of copies of the
supplemented or amended prospectus, or until such Investors are advised in
writing by the Company that the prospectus may be used, and until such Investors
have received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus. The Company
will use its best efforts to ensure that the use of the Registration Statement
and prospectus may be resumed, as soon as practicable and, in the case of a
pending development, filing or event referred to in (iv) above, as soon, in the
judgment of the Company, as disclosure of the material information relating to
such pending development, filing or event would not have a materially adverse
effect on the Company's ability to consummate the transaction, if any, to which
such development, filing or event relates. Notwithstanding the foregoing or any
other provision of this Agreement, the period during which the Company shall be
required to maintain the effectiveness of a Registration Statement with respect
to a Demand Registration shall be extended by 1 day for each full or partial day
during which the use of such Registration Statement or prospectus is deferred or
suspended by
7
the Company in accordance with this Section 2(b);
(b) prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Shelf Registration or Demand Registration effective at all times until the
end of the Effectiveness Period or the Registration Termination Date, whichever
occurs first, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in the
Registration Statement, such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Shelf Registration or Demand Registration under such
other securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Securities or Demand Securities,
as applicable, being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until the end of the
Effectiveness Period or the Registration Termination Date, whichever occurs
first, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities or Demand Securities, as applicable, for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (I) quality to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) subject itself to general taxation in any such
jurisdiction, (III) file a general consent to service of process in any such
jurisdiction, (IV) provide any undertakings that cause more than nominal expense
or burden to the Company or (V) make any change in its charter or by-laws;
(e) as promptly as practicable after becoming aware of such event, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Shelf Registration or Demand
Registration, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
8
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
Underwritten Offering, the managing underwriters) of the issuance by the SEC (or
any state agency) of any stop order or other suspension of effectiveness of any
Registration Statement (or state qualification) at the earliest possible time;
(g) permit a single firm of counsel designated as selling shareholders' counsel
by the Investors to review a Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, provided, however, any such objection to the filing of any Registration
Statement or amendment thereto or any prospectus or supplement thereto shall be
made by written notice (the "Objection Notice") delivered to the Company no
later than three (3) Business Days after the party or parties asserting such
objection receives draft copies of the documents that the Company proposes to
file. The Objection Notice shall set forth the objections and the specific areas
in the draft documents where such objections arise, and shall not file any
document in a form to which such counsel reasonably objects, provided that the
Company shall be permitted to take such actions that are required to comply with
applicable law;
(h) make generally available to its security holders as soon as practical, but
not later than ninety (90) days after the close of the period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
any Registration Statement and any post effective amendment thereto;
(i) make available for inspection by any Investor, any underwriter participating
to any Underwritten Offering, and any attorney, accountant or other agent
retained by any such Investor or underwriter (collectively, the "Inspectors"),
all pertinent documents of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable each Inspector to exercise its due diligence
responsibility, if and to the extent it has any such responsibility under the
Securities Act, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an
9
Investor) of any Record or other non-public information relating to the Company
received by such Inspector unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement; and
provided further, however, that in the event any Investor obtains material
nonpublic information concerning the Company pursuant to this Section 3(i) or
Section 3(a) or 3(e) or otherwise, such Investor shall not purchase or sell or
otherwise trade in any securities of the Company in violation of applicable law
until such information is made public by the Company. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(i). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction, given prompt notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential;
(j) use its best efforts either to (i) cause all the Registrable Securities
covered by any Registration Statement to be listed on a national securities
exchange, if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure the quotation of the Registrable
Securities on the Nasdaq National Market if such quotation is then permitted
under the rules of the Nasdaq;
(k) provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of any Registration
Statement;
(1) cooperate with the Investors who hold Registrable Securities being sold and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be sold pursuant to the Shelf
Registration or Demand Registration, as the case may be, and enable such
certificates to be in such denominations or amounts as the case may be, and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may reasonable request; and
(m) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
10
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement with respect to any Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to the effect
the registration of the Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least fifteen (15) days prior to the first anticipated filing date of the Shelf
Registration or the Demand Registration, as the case may be, the Company shall
notify each Investor of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration Statement.
If within five (5) business days prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Shelf Registration or the Demand
Registration, as the case may be, without including Registrable Securities of
such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of any kind described in Section 3(e) or 3(f), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(d) No Investor may participate in any Underwritten Offering hereunder unless
such Investor (i) agrees to sell such Investor's Registrable Securities on the
basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
11
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discount. and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement;
(e) No Investor shall include the Investor's Registrable Securities in any
Registration Statement relating to a Demand Registration unless the Investor has
at such time a current intent to sell such Registrable Securities, and by
including such Registrable Securities in such Registration Statement, the
Investor will be deemed to represent to the Company that the Investor has such
intent. Any sale of any Registrable Securities by any Investor under any
Registration Statement will constitute a representation and warranty by such
Investor that the information relating to such Investor and its plan of
distribution is as set forth in the prospectus prepared by the Company and
furnished to such Investor for use in connection with such disposition, and such
prospectus does not as of the time of such sale contain any untrue statement of
a material fact relating to such Investor or its plan of distribution and that
such prospectus does not as of the time of such sale omit to state any material
fact relating to such Investor or its plan of distribution necessary to make the
statements in such Prospectus, in light of the circumstances under which they
were made, not misleading;
(f) Each Investor agrees that, in disposing of any Registrable Securities
pursuant to any Registration Statement, the Investor will cause the disposition
to be made in accordance with the terms of the Registration Statement, including
the plan of distribution described therein, and will comply with all applicable
securities laws, including Rules lOb-2, lOb-5, lOb-6 and lOb-7 promulgated under
the Exchange Act. Each Investor agrees that in selling any Registrable
Securities under any Registration Statement, the Investor will deliver the
current prospectus contained in the Registration Statement, as amended and
supplemented, to all persons as required by the Securities Act and the
regulations thereunder and will comply with any applicable "blue sky" laws and
regulations in connection with the disposition of such shares.
(g) Each Investor hereby agrees that it shall not, to the extent requested by an
underwriter of securities of the Company, sell or otherwise transfer or dispose
of any Registrable Securities or other securities of the Company then owned by
such Investor (other than to donees or affiliates of the Investor who agree to
be similarly bound) for up to one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that all executive officers and directors of
the Company then holding Common Stock of
12
the Company enter into similar agreements. In order to enforce the foregoing
covenant, the Company shall have the right to place restrictive legends on the
certificates representing the shares subject to this Section and to impose stop
transfer instructions with respect to the Registrable Securities and such other
shares of stock of each Investor (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
5. Expenses of Registration. All expenses, other than underwriting discounts and
commissions and brokerage commissions and other fees and expenses of investment
bankers, incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company and counsel for the Investors as
provided in Section 3(g), shall be borne by the Company; provided, however, that
the Investors shall bear the fees and out-of-pocket expenses of their legal
counsel, if any, selected by the Investors pursuant to Subsection (ii) of
Section 2(b) hereof in the case of an Underwritten Offering. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2(b) if the registration
request is subsequently withdrawn at the request of the Investors of a majority
of the Demand Securities to be registered, unless the Investors of a majority of
the Demand Securities then outstanding agree to forfeit their right to one (1)
demand registration pursuant to this Section 2(b) (in which case such right
shall be forfeited by all Investors holding Demand Securities).
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Investor who holds such Registrable Securities, the directors, if any, of
such Investor, the officers, if any, of such Investor, each person, if any, who
controls any Investor within the meaning of the Securities Act or the Exchange
Act, and, in the case of a Demand Registration, if the Registration Statement is
for an underwritten offering, any underwriter (as defined in the Securities Act)
for the Investors, the directors, if any, of such underwriter and the officers,
if any, of such underwriter, and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act (each,
an "Indemnified Person"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively, "Claims"): to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in any Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Registration
13
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, any state securities law or any
rule or regulation by the Company of the Securities Act, the Exchange Act or any
state securities law (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Persons, promptly as such expense are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon (A) a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person (to the extent
such information was provided by or on behalf of such Indemnified Person)
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof or (B) any violation by an Investor of the Investor's obligations under
this Agreement; (II) with respect to any preliminary prospectus shall not inure
to the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld, provided, however, that if such claim is settled
without the consent of the Company and such claim is subsequently reduced to a
final, nonappealable judgment or settlement which is adverse to the Company,
then the provisions of this clause III shall be of no effect. Such indemnity
14
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, any other shareholder and, in the case of a
Demand Registration, any underwriter selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such shareholder or underwriter within the meaning of the Securities
Act or the Exchange Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon (i) any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim or (ii) any
violation by any Investor of such Investor's obligations under this Agreement;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any
15
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interests between such Indemnified Person or Indemnified Party and
any other party represented by such it counsel in such proceeding. The Company
shall pay for only one separate legal counsel for the Indemnified Persons; such
legal counsel shall be selected by the Investors holding a majority in interest
of the Registrable Securities and shall be approved by the Company, such
approval not to be unreasonably withheld. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC
16
that may at any time permit the Investors to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are understood
and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities other than Rights Shares pursuant to this
Agreement shall be automatically assigned by the Investors to transferees or
assignees of all of any portion of such securities only if: (a) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein and (e) the transfer or assignment is made in
compliance with the transfer restrictions in any Subscription Agreement, Rights
Agreement, Warrant Agreement, or Series A Preferred Purchase Agreement, as
applicable.
10. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities with each share of Series A Preferred and each Series
A Share being treated as one security and each Warrant and each Warrant Share
being treated as one security. Any
17
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. Term. The term of this Agreement and the obligations of the parties
hereunder (other than their obligations under Sections 5, 6 and 7, which will
continue) will end (the "Registration Termination Date") (i) with respect to
Registrable Securities other than Demand Shares or Holdover Securities, on the
earlier to occur of (A) the sale of the Registrable Securities, or (B) at the
end of the Effectiveness Period for the Shelf Registration, and (ii) with
respect to the Demand Shares and Holdover Securities, on the earlier to occur of
(A) the sale of the Demand Securities and Holdover Securities, or (B) 24 months
from the date of issuance of such securities. In no event will the Company be
required to register hereunder or maintain any registration hereunder of any
Registrable Securities that are then eligible for resale under Rule 144.
12. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered (by hand, by
courier or overnight delivery service, by telephone, facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage prepaid (i) if to the Company, at Radius Inc.,
000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: President, (ii)
if to the Initial Investor, at the address set forth under its name in the
Subscription Agreement and (iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 12(b), and shall be effective, when personally delivered, upon receipt
and, when so sent by certified mail, four days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a wavier thereof.
(d) This Agreement shall be enforced, governed by and construed in accordance
with the laws of the State of California applicable to agreements made and to be
performed entirely within such State. In
18
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
(g) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers "hereunto duly authorized as of the day and year
first above written.
RADIUS INC.
By: /s/Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and CEO
INITIAL INVESTOR:
Name: AVNET, INC.
By: /s/Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: VP of Credit
19
