-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RGuYmiqMLN0vlMiWDB3rIsw0CDeP+f5FOg5MG8aZaw+i+MsvbtqexnGO4fFok1TV q7v00ZfaGf4dkBoMo1QxbQ== 0001047469-98-037102.txt : 19981014 0001047469-98-037102.hdr.sgml : 19981014 ACCESSION NUMBER: 0001047469-98-037102 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980925 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ODS NETWORKS INC CENTRAL INDEX KEY: 0000736012 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 751911917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20191 FILM NUMBER: 98724705 BUSINESS ADDRESS: STREET 1: 1101 E ARAPAHO ROAD CITY: RICHARDSON STATE: TX ZIP: 75081 BUSINESS PHONE: 2142346400 MAIL ADDRESS: STREET 1: 1101 E ARAPAHO ROAD CITY: RICHRICHARDSON STATE: TX ZIP: 75081 FORMER COMPANY: FORMER CONFORMED NAME: OPTICAL DATA SYSTEMS INC DATE OF NAME CHANGE: 19950517 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 25, 1998 ----------------------------- ODS NETWORKS, INC. - ------------------------------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Delaware - ------------------------------------------------------------------------------ (State of Other Jurisdiction of Incorporation) 000-20191 75-1911917 (Commission File Number) (IRS Employer Identification No.) 1101 East Arapaho Road, Richardson, Texas 75081 - ------------------------------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) (972) 234-6400 - ------------------------------------------------------------------------------ (Registrant's Telephone Number, Including Area Code) N/A - ------------------------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. On September 25, 1998, ODS Networks, Inc. ("the Registrant") acquired certain assets from Science Applications International Corporation, a Delaware corporation ("SAIC"), including the software program Computer Misuse and Detection System ("CMDS"), and certain products under development including Vunerability Assessment System ("VAS"), Audit Monitoring and Intrusion Detection System ("AMIDS") and Malicious Code Detection and Eradication System ("MCDES"), and certain other assets, including computer hardware and software and $1,500,000 in cash (collectively, the "Assets"). In consideration for the Assets, the Registrant issued to SAIC (i) 1,600,000 shares of the Registrant's common stock, par value $0.01 per share, (ii) a Warrant to purchase 750,000 shares of the Registrant's common stock at an exercise price of $8.00 per share, exercisable at any time on or before March 25, 2000, and (iii) a Warrant to purchase 750,000 shares of the Registrant's common stock at an exercise price of $10.50 per share, exercisable at any time on or before September 25, 2000. Pursuant to the Stockholder and Voting Agreement dated as of September 25, 1998 by and among the Registrant, SAIC and certain stockholders of the Registrant, the Registrant and such stockholders have agreed, for so long as SAIC beneficially owns, directly or indirectly, the lesser of (i) five percent (5%) or more of the outstanding shares of common stock of the Registrant or (ii) 1,000,000 shares of common stock of the Registrant to cause the Board of Directors of the Registrant to be increased from five (5) to six (6) members and for a designee of SAIC to be elected to the Board, and granted certain other rights with respect to further increases in the number of members of the Board of Directors of the Registrant, approval rights with respect to certain corporate transactions and certain preemptive rights. As a condition to the acquisition of the Assets, and effective as of September 25, 1998, the Board of Directors of the Registrant was increased to six (6) members and William A. Roper, Chief Financial Officer of SAIC, was elected to the Registrant's Board of Directors. The terms of the acquisition were the result of arm's-length negotiations between the Registrant and SAIC. All shares of common stock issued in this transaction were issued (and will be issued) out of Registrant's authorized but unissued Common Stock. The securities issued to SAIC were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereof. The Registrant granted SAIC certain rights with respect the registration under the Securities Act of the shares of common stock issued to SAIC, and any shares issued to SAIC upon exercise of the Warrants. The Registrant is not aware of any pre-existing material relationships between SAIC and the Registrant, its affiliates, its directors or officers, or any associate of any such director or officer. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED: Not applicable. (b) PRO FORMA FINANCIAL INFORMATION. Not applicable. (c) EXHIBITS. 2.1* Asset and Securities Purchase Agreement, dated as of September 25, 1998, by and among the Registrant and Science Applications International Corporation. (The schedules and exhibits which are referenced in the list of schedules and exhibits and elsewhere in such agreement are hereby incorporated by reference. Such schedules and exhibits which are not included as exhibits to this Form 8-K will be furnished supplementally to the Commission upon request.) 99.1 Text of press release of the Registrant, dated September 28, 1998, announcing the acquisition. 99.2 Text of press release of the Registrant, dated September 28, 1998, announcing the acquisition. 99.3 Registration Rights Agreement, dated as of September 25, 1998, by and between the Registrant and Science Applications International Corporation. 99.4 $8.00 Warrant to Purchase Common Stock of the Registrant, dated September 25, 1998, issued to Science Applications International Corporation. 99.5 $10.50 Warrant to Purchase Common Stock of the Registrant, dated September 25, 1998, issued to Science Applications International Corporation. 99.6 Stockholder and Voting Agreement, dated as of September 25, 1998, by and among Science Applications International Corporation, the Registrant and certain stockholders of the Registrant. 99.7 Strategic Alliance Agreement, dated as of September 25, 1998, by and between Science Applications International Corporation and the Registrant. 2 99.8* Software Royalty, Grant Back and Improvements License Agreement, dated as of September 25, 1998, by and between Science Applications International Corporation and the Registrant. 99.9* PartnersPlus Agreement, dated September 25, 1998, by and between the Registrant and Science Applications International Corporation. _______________________ * Portions of this document are subject to a request for confidential treatment filed with the Commission. 3 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 hereunto duly authorized. ODS NETWORKS, INC. Dated: October 13, 1998 By: /s/ Timothy W. Kinnear ------------------------------------ Timothy W. Kinnear, Vice President and Chief Financial Officer 4 EXHIBIT INDEX
Exhibit No. Description of Exhibit - ----------- ---------------------- 2.1* Asset and Securities Purchase Agreement, dated as of September 25, 1998, by and among the Registrant and Science Applications International Corporation. (The schedules and exhibits which are referenced in the list of schedules and exhibits and elsewhere in such agreement are hereby incorporated by reference. Such schedules and exhibits which are not included as exhibits to this Form 8-K will be furnished supplementally to the Commission upon request.) 99.1 Text of press release of the Registrant, dated September 28, 1998, announcing the acquisition. 99.2 Text of press release of the Registrant, dated September 28, 1998, announcing the acquisition. 99.3 Registration Rights Agreement, dated as of September 25, 1998, by and between the Registrant and Science Applications International Corporation. 99.4 $8.00 Warrant to Purchase Common Stock of the Registrant, dated September 25, 1998, issued to Science Applications International Corporation. 99.5 $10.50 Warrant to Purchase Common Stock of the Registrant, dated September 25, 1998, issued to Science Applications International Corporation. 99.6 Stockholder and Voting Agreement, dated as of September 25, 1998, by and among Science Applications International Corporation, the Registrant and certain stockholders of the Registrant. 99.7 Strategic Alliance Agreement, dated as of September 25, 1998, by and between Science Applications International Corporation and the Registrant. 99.8* Software Royalty, Grant Back and Improvements License Agreement, dated as of September 25, 1998, by and between Science Applications International Corporation and the Registrant.
99.9* PartnersPlus Agreement, dated September 25, 1998, by and between the Registrant and Science Applications International Corporation.
_______________________ * Portions of this document are subject to a request for confidential treatment filed with the Commission. 2 EX-2.1 2 EXHIBIT 2.1 ASSET & SECURITIES PURCH. AGREE. Exhibit 2.1 ASSET AND SECURITIES PURCHASE AGREEMENT This Asset and Securities Purchase Agreement ("AGREEMENT") is made and entered into as of September 25, 1998, by and among ODS NETWORKS, INC. a Delaware corporation (the "COMPANY") and SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"). RECITALS WHEREAS, SAIC desires to sell, and the Company desires to purchase, the assets set forth herein (the "ASSETS"); WHEREAS, the Company is authorized to issue shares of the Company's $0.01 par value common stock ("COMMON STOCK"); WHEREAS, in connection with and in consideration for the sale by SAIC to the Company of the Assets and the payment by SAIC to the Company of One Million Five Hundred Thousand Dollars ($1,500,000.00) in cash at Closing (as hereinafter defined), the Company shall issue to SAIC (i) one million six hundred thousand (1,600,000) shares ("SHARES") of the Company's Common Stock, (ii) a warrant to purchase an additional seven hundred fifty thousand (750,000) shares of the Company's Common Stock at an exercise price of $8.00 per share (the "$8.00 WARRANT"), exercisable at any time on or before the date which is eighteen (18) months following the Closing, (iii) a warrant to purchase seven hundred fifty thousand (750,000) shares of the Company's Common Stock at an exercise price of $10.50 per share) exercisable at any time on or before the date which is twenty-four (24) months following the Closing (the "$10.50 WARRANT", and together with the $8.00 Warrant, the "WARRANTS"), all as more fully described herein and the attachments hereto; and WHEREAS, SAIC and the Company desire to execute and enter into certain other agreements to set forth their mutual agreements regarding the marketing and sale of products and services by both parties, the grant back by the Company of certain licenses to SAIC and the protection of the equity interest in the Company that SAIC shall receive hereunder, in the form of a Software Royalty, Grant Back and Improvements License Agreement, a Strategic Alliance Agreement, a PartnersPlus Agreement, a Facilities Use Agreement, a Stockholder and Voting Agreement, a Ritz Premier subcontract and a Registration Rights Agreement all as more fully described herein and the attachments hereto. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF ASSETS AND SECURITIES 1.1 PURCHASE AND SALE OF ASSETS. Subject to the rights of the United States Government under the contract listed on SCHEDULE 1.1 (the "WITHHELD RIGHTS"), upon the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined below), SAIC shall sell, transfer, assign and deliver to the Company, and the Company shall purchase and acquire from SAIC, for the consideration hereinafter described, all right, title and interest of SAIC, in and to the Assets, free and clear of any mortgage, security interest, pledge, lien, charge or other encumbrance. The "ASSETS" are as follows: (a) the software programs contained on the CD-ROMs attached hereto as EXHIBIT 1.1 (a) that are also known as "Computer Misuse and Detection System" ("CMDS"), "Vulnerability Assessment System" ("VAS"), "Audit Monitoring and Intrusion Detection System" ("AMIDS"), "Malicious Code Detection and Eradication System" ("MCDES"), the documentation pertaining to each of the foregoing software programs and all intellectual property rights to the software programs and documentation vested in SAIC including, but not limited to patents, trademarks, trade names, service marks, copyrights, prosecution and regulatory files including any common law rights to any of the foregoing, including the rights of SAIC under the SAIC Invention, Copyright and Confidentiality Agreements as provided in Section 5.3(c) as such agreements may pertain to the foregoing (collectively the "SOFTWARE"); and the trademark "CMDS"and logo (United States Reg. No. 2,085,833) and the patent application presently pending in the United States Patent and Trademark Office [***]; (b) the value adder reseller agreement, existing advertising contracts, maintenance and year 2000 compliance (as described in Section 4.12 below) obligations of SAIC under the purchase orders, agreements and contracts listed on SCHEDULE 1.1(b) (collectively, the "CONTRACTS") and unearned prepaid amounts that have been paid to or billed by SAIC under the Contracts for maintenance services to be provided in the future that will now be performed by ODS pursuant to the Contracts and which amounts to $101,777.68; (c) the personal property listed on SCHEDULE 1.1(c) hereto (the "PERSONAL PROPERTY"); ________________________ *** Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 24b-2. 2 (d) all income, royalties, damages and payments due with respect to any of the Assets arising on or after the Closing Date (as defined below) and all other rights with respect thereto (including, without limitation, rights to damages and payments for past, present or future infringements or misappropriations, if any, of any intellectual property rights included in the Assets) in all countries; and (e) all causes of action, demands, judgments, claims (including insurance claims), indemnity rights or other rights of SAIC relating to the Assets or arising under express or implied warranties from suppliers and/or licensors with respect to the Assets. 1.2 NO LIABILITIES OR OBLIGATIONS ASSUMED. Except as set forth on SCHEDULE 1.2 the Company shall not, by the execution, delivery and performance of this Agreement, or otherwise, assume or otherwise be responsible for any liability or obligation of any nature of SAIC, or any claims of such liability or obligation, matured or unmatured, liquidated or unliquidated, fixed or contingent, known or unknown, whether arising out of acts or occurrences prior to the date hereof. Without limiting the generality of the foregoing, SAIC shall remain liable for all liabilities and obligations to SAIC personnel with respect to any notice and continuation coverage requirements, payroll, overtime, accrued vacation time, holiday time, severance arrangements or workers' compensation of any nature which are required by law or regulation that are accrued but unpaid as of the Closing Date or which accrued as a result of the consummation of the transactions contemplated herein. 1.3 PURCHASE AND SALE OF SHARES. In consideration of the foregoing, subject to the terms and conditions of this Agreement, and in reliance upon the representations, warranties and agreements herein contained, on the Closing Date, the Company shall issue to SAIC, and SAIC shall acquire from the Company, the Shares, the $8.00 Warrant and the $10.50 Warrant free and clear of all liens, security interests, options, rights, mortgages, pledges, restrictions on transferability of any type (other than restrictions on transferability as may be applicable under federal and state securities laws or as set forth herein or therein) and SAIC shall deliver the Assets to Company and pay on the Closing Date to the Company One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) (the "CASH CONSIDERATION") by wire transfer to such account as is designated by the Company to SAIC in writing. ARTICLE II CLOSING 2.1 THE CLOSING. The consummation of the sale and purchase of the Assets, the Shares, the $8.00 Warrant and the $10.50 Warrant referred to in Section 1.1 (the "CLOSING") shall take place on September 25, 1998 at the offices of Haynes and Boone, L.L.P., 901 Main St, Dallas, Texas 75202, or at such other date, time or place as the parties hereto mutually agree, either verbally or in writing. Such date is referred to herein as the "CLOSING DATE" and the Closing shall be deemed to be effective as of 12:00 p.m. midnight, Pacific Time on the Closing Date. ARTICLE III 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as disclosed in a document of even date herewith and delivered by the Company to SAIC prior to the execution and delivery of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the Company represents and warrants to SAIC as follows: 3.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Company has the corporate power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing would have a material adverse effect on the Company. Neither the Company nor any of its subsidiaries is in violation of any of the provisions of its Certificate of Incorporation or Bylaws or equivalent organizational documents. 3.2 CAPITAL STRUCTURE. The authorized capital stock of the Company consists of 80,000,000 shares of Common Stock, par value $0.01 per share and 5,000,000 shares of Preferred Stock, par value $0.01 per share, of which there were issued and outstanding as of the close of business on July 31, 1998, 16,887,233 shares of Common Stock and no shares of Preferred Stock. All outstanding shares of Common Stock have been duly authorized, validly issued, fully paid and are nonassessable and free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof and have been issued in compliance with all federal and state securities laws. The shares of Common Stock to be issued pursuant to this Agreement, the $8.00 Warrant, the $10.50 Warrant and the shares of Common Stock to be issued upon the exercise of either such warrant shall be duly authorized, validly issued, fully paid and non-assessable, and free of preemptive rights or rights of first refusal created by statute, the Company's Certificate of Incorporation or Bylaws or any agreement to which the Company is a party or by which it is bound and, based on the representations of SAIC contained in Sections 4.6, 4.7 and 4.8 of this Agreement, shall be issued in compliance with all federal and state securities laws. 3.3 AUTHORITY. The Company has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The Company has taken all action required by law, its Certificate of Incorporation and Bylaws or otherwise to authorize the execution and delivery of this Agreement and the transactions contemplated hereby. This Agreement and all other agreements delivered hereunder are valid and binding agreements of the Company enforceable in accordance with their terms, except that: (a) the enforceability of this Agreement and all other agreements delivered hereunder may be subject to general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; and (b) the enforceability of this Agreement and all other agreements delivered hereunder may be subject to or limited by bankruptcy, insolvency, reorganization, arrangement, moratorium, or other similar laws relating to or affecting the rights of creditors generally. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby shall not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under (i) 4 any provision of the Certificate of Incorporation or Bylaws of the Company or (ii) any material mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or its properties or assets. Assuming the accuracy of the representations and warranties of SAIC in Sections 4.6, 4.7 and 4.8 of this Agreement, no consent, approval order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority (each a "GOVERNMENTAL ENTITY"), is required by or with respect to the Company or in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for (i) such approval, or termination of the waiting period, as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") prior to exercise of either of the Warrants and (ii) such filings or registrations as may be required under federal and state securities laws. 3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has made available to SAIC each statement, report, registration statement (with the prospectus in the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy statement, and other filing filed with the Securities and Exchange Commission ("SEC") by the Company since June 30, 1998 (collectively, the "COMPANY SEC DOCUMENTS"). In addition, the Company has made available to SAIC all exhibits to the Company SEC Documents filed prior to the date hereof, and shall promptly make available to SAIC all exhibits to any additional Company SEC Documents filed prior to the Closing. As of their respective filing dates, the Company SEC Documents were filed on a timely basis and complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Securities Act, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading except to the extent corrected by a subsequently filed Company SEC Document. The financial statements of the Company, including the notes thereto, included in the Company SEC Documents (the "COMPANY FINANCIAL STATEMENTS") were complete and correct in all material respects as of their respective dates, complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates, and have been prepared in accordance with generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto or, in the case of unaudited statements included in Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Company Financial Statements fairly present the consolidated financial condition and operating results of the Company and its subsidiaries at the dates and during the periods indicated therein (subject, in the case of unaudited statements, to normal, recurring year-end adjustments). 3.5 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no material obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (i) those set forth or adequately provided for in the Balance Sheet included in the Company's Annual Report on Form 10-Q for the quarterly period ended June 30, 1998 (the "COMPANY BALANCE SHEET"), (ii) those incurred in the ordinary course of business and not required to be set forth in the Company Balance Sheet under generally accepted accounting principles, and (iii) 5 those incurred in the ordinary course of business since the Company Balance Sheet Date and consistent with past practice. 3.6 BROKER'S AND FINDERS' FEES. The Company has not incurred, nor shall it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 3.7 BOARD APPROVAL. The Board of Directors of the Company have approved this Agreement and the transactions contemplated hereby. No vote or consent of the Company's stockholders is required for the consummation of the transactions contemplated hereby. 3.8 NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet included in the Company's most recently filed report on Form 10-Q or Form 10-K, the Company has conducted its business in the ordinary course and there has not occurred: (a) any material adverse change in the financial condition, liabilities, assets or business of the Company other than continuing operating losses and declining stock price; (b) any amendment or change in the Certificate of Incorporation or Bylaws of the Company; or (c) any damage to, destruction or loss of any assets of the Company, (whether or not covered by insurance) that materially and adversely affects the financial condition or business of the Company. 3.9 LITIGATION. There is no action, suit, proceeding, claim, arbitration or investigation pending, or as to which the Company has received any notice of assertion against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement. 3.10 REPRESENTATIONS COMPLETE. None of the representations or warranties made by the Company herein or in any Schedule hereto, including the Company Disclosure Schedule, or certificate furnished by the Company pursuant to this Agreement, or the Company SEC Documents, when all such documents are read together in their entirety, contains or shall contain at the Closing any untrue statement of a material fact, or omits or shall omit at the Closing to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SAIC For the purposes of this Article IV, any reference to "SAIC's Knowledge" means actual knowledge of the persons that are listed on SCHEDULE IV and no other persons. Except as disclosed in a document of even date herewith and delivered by the SAIC to the Company prior to the execution and delivery of this Agreement (the "SAIC DISCLOSURE SCHEDULE"), the SAIC represents and warrants to Company as follows: 6 4.1 CORPORATE ORGANIZATION. SAIC is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. SAIC has full corporate power and authority to carry on its business as it is now being conducted. 4.2 AUTHORIZATION. SAIC has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. SAIC has taken all action required by law, its Certificate of Incorporation and Bylaws or otherwise to authorize the execution and delivery of this Agreement and the transactions contemplated hereby. This Agreement and all other agreements delivered hereunder are valid and binding agreements of SAIC enforceable in accordance with their terms, except that: (a) the enforceability of this Agreement and all other agreements delivered hereunder may be subject to general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; and (b) the enforceability of this Agreement and all other agreements delivered hereunder may be subject to or limited by bankruptcy, insolvency, reorganization, arrangement, moratorium, or other similar laws relating to or affecting the rights of creditors generally. 4.3 NO VIOLATION. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby shall violate any provisions of the Certificate of Incorporation or Bylaws of SAIC or violate, or be in conflict with, or constitute a default under, or cause the acceleration of the maturity of any material debt or material obligation pursuant to, any material agreement or material commitment to which SAIC is a party or by which SAIC is bound, or violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority. 4.4 BROKERS AND FINDERS. SAIC has not incurred, nor shall it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with this Agreement or any transaction contemplated hereby. 4.5 CORPORATE APPROVAL. All necessary corporate actions have been taken by SAIC for the approval of SAIC to enter this Agreement and the transactions contemplated hereby. No vote or consent of the stockholders of SAIC is required for the consummation of the transactions contemplated hereby. 4.6 INVESTMENT INTENT. SAIC is purchasing the Shares and the Warrants for its own account not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and SAIC has no present intention of selling, granting any participation in, or otherwise distributing the same, and does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of such securities. 4.7 ACCESS TO INFORMATION. SAIC has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Shares and Warrants and has received a copy of and reviewed to the extent SAIC deems necessary, the Company's Annual Report on Form 10-K for the year ended December 31, 1997, Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1998 and June 7 30, 1998, Proxy Statement dated March 20, 1998 and 1997 Annual Report to Stockholders. SAIC has had an opportunity to ask questions of and receive answers from the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to SAIC or to which the Company has access. 4.8 ACCREDITED INVESTOR. SAIC is an "accredited investor" within the meaning of SEC Rule 501 of Regulation D, as presently in effect. 4.9 RESTRICTED SECURITIES. SAIC understands that the Shares and Warrants (and the shares to be issued upon exercise of the Warrants) are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, SAIC represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. 4.10 FURTHER LIMITATIONS ON DISPOSITION. SAIC agrees not to offer, sell, exchange, transfer, pledge or otherwise dispose of any of the Shares, the Warrants or shares issuable upon exercise of the Warrants except in compliance with the Stockholder Voting Agreement and unless at that time either: (a) such transaction is permitted pursuant to the provisions of Rule 144 under the Securities Act; (b) counsel representing SAIC reasonably satisfactory to the Company shall have advised the Company in a written opinion letter reasonably satisfactory to the Company and the Company's counsel, and upon which the Company and its counsel may rely, that no registration under the Securities Act is required in connection with the proposed sale, transfer or other disposition; (c) a registration statement under the Securities Act (a "REGISTRATION STATEMENT") covering such securities proposed to be sold, transferred or otherwise disposed of, describing the manner and terms of the proposed sale, transfer or other disposition, and containing a current prospectus, is filed with the SEC and made effective under the Securities Act; (d) an authorized representative of the SEC shall have rendered written advice to SAIC (sought by SAIC or counsel to the undersigned SAIC, with a copy thereof and of all other related communications delivered to the Company) to the effect that the SEC will take no action, or that the staff of the SEC will recommend that the SEC take no action, with respect to the proposed offer, sale, exchange, transfer, pledge or other disposition if consummated; or 8 (e) all certificates representing such securities deliverable to SAIC and any certificates subsequently issued with respect thereto or in substitution therefor shall bear a legend that such securities may only be sold or disposed of in accordance with (i) the provisions of Rule 144 under the Securities Act, (ii) pursuant to an effective Registration Statement or (iii) pursuant to an exemption provided by the Securities Act. The Company, at its reasonable discretion, may cause stop transfer orders to be placed with its transfer agent with respect to the certificates for such securities but not as to the certificates for any part of such securities as to which said legend is no longer required. 4.11 EXCLUSIVE WARRANTIES REGARDING SOFTWARE. The exclusive warranties of SAIC with respect to the Software are: (a) SAIC owns all right, title and interest in and to versions 3.5, 3.5.1 and 4.0 of the CMDS software program and has the right to sell, transfer and convey it's right, title and interest in the same to ODS in accordance with the provisions of this Agreement; (b) versions 3.5, 3.5.1 and 4.0 of the CMDS software program are otherwise provided "AS IS" except as provided below in Section 4.12; and (c) all other Software is provided to the Company "AS IS" with any and all faults and with no warranty against title, patent, trademark, copyright, trade secret infringement or other infringement of the rights of a third party. To the extent applicable, SCHEDULE 4.11 lists: (i) the software programs on the CD-ROMs attached to Exhibit 1.1(a); (ii) the jurisdiction(s) in which an application for patent or application for registration of each Software program has been made, including the respective application numbers and dates; (iii) the jurisdiction(s) in which each Software program has been patented or registered, including the respective patent or registration numbers and dates; (iv) all material licenses, sublicenses and other agreements to which SAIC is a party pertaining to the origin of the Software or any component thereof that SAIC has Knowledge of; (v) the material licenses, sublicenses and other agreements of which SAIC has Knowledge and to which SAIC is a party and pursuant to which any other party is authorized to use, exercise, or receive any benefit from the Software; (vi) all parties to whom SAIC has delivered copies of source code included in the Software, whether pursuant to an escrow arrangement or otherwise, or parties who have the right to receive such source code; and (vii) the written assignments obtained by SAIC from SAIC consultants and SAIC employees who contributed to the creation or development of the Software of any rights they may have with respect to such creation or development of the Software. SAIC has not brought any actions or lawsuits alleging (i) infringement of the Software or (ii) breach of any license, sublicense or other agreement authorizing another party to use the Software. SAIC has not entered into any agreement granting any third party the right to bring infringement actions with respect to, or otherwise to enforce rights with respect to, the Software. To SAIC's Knowledge, no person has asserted or threatened to assert any claims with respect to the Software (i) contesting the right of SAIC or any subsidiary of SAIC to use, exercise, sell, license, transfer or dispose of the Software or (ii) challenging the ownership, validity or enforceability of the Software. 9 To SAIC's Knowledge, no Software is subject to any outstanding order, judgment, decree or stipulation related to or restricting in any manner the licensing, assignment, transfer or conveyance thereof by SAIC. Notwithstanding anything to the contrary stated in or inferred from this Agreement, with respect to the Software SAIC makes no representation or warranty with respect to infringement nor is any indemnification obligation on the part of SAIC to be inferred. 4.12 YEAR 2000 COMPLIANCE. To SAIC's Knowledge and as except as set forth on the SAIC Disclosure Schedule, provided that all hardware and software products used with the CMDS software program properly exchange date data with the CMDS software program, the CMDS software program will (i) handle date information before, during, and after January 1, 2000, including but not limited to accepting date input, providing date output, and performing calculations on dates or portions of dates; (ii) function accurately and without interruption before, during, and after January 1, 2000, without any change in operations associated with the advent of the new century; (iii) respond to two-digit year-date input in a way that resolves the ambiguity as to century in a disclosed, defined, and predetermined manner, and (iv) store and provide output of date information in ways that are unambiguous as to century. Notwithstanding the foregoing, SAIC acknowledges and agrees that (i) the CMDS software program does not identify or remedy Year 2000 problems in third party systems or other products or applications not provided or supplied by the Company and (ii) the CMDS software program operates with the date information it receives; thus, if incorrect date information is provided by the user, the system or from any other external product or other source, this information will be used by the CMDS software program as received. The foregoing Year 2000 Warranty of the Company shall not apply to Year 2000 problems caused by such external sources. 4.13 ASSETS OTHER THAN SOFTWARE. The Personal Property is provided to the Company "AS IS." Upon consummation of the transactions contemplated by this Agreement and all other agreements delivered hereunder, the Company will acquire good and marketable title to, and will become the legal beneficial owner of, the Personal Property, free and clear of all taxes, mortgages, pledges, liens, security interests, encumbrances or charges of any kind. To SAIC's Knowledge, SAIC is not (nor is any other party) in material default under, nor does any event, circumstance or situation exist which, with the passage of time will cause a default under any material lease, Contract, material license or other material agreement relating to or constituting any of the Assets under which any person, firm, corporation or other entity is or may be entitled to assert any rights against any of the Assets. ARTICLE V COVENANTS 5.1 FURTHER ASSURANCES. (a) Upon the terms and subject to the conditions hereof, each of the parties hereto agrees to use commercially reasonable efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable to 10 consummate the transactions contemplated by this Agreement shall use commercially reasonable efforts to obtain all necessary waivers, consents and approvals and to effect all necessary registrations and filings to be obtained in connection with the transactions contemplated by this Agreement. (b) In the event SAIC or the Company, as the case may be, is unable to obtain, prior to the Closing, any consents, approvals, waivers or other authorizations to transfer to the Company any Asset, SAIC and the Company will cooperate with each other in order to obtain such consents, approvals, waivers or other authorizations at the earliest practicable date. In each instance where such consents, approvals, waivers or other authorizations cannot be obtained prior to the Closing, SAIC shall use commercially reasonable efforts to enter into such alternative arrangements and agreements with the Company as may be appropriate in order to permit the Company to realize, receive and enjoy substantially similar rights and benefits and to enable the Company utilize the Assets as proposed until the consents, approvals, waivers or other authorizations are obtained. If, after the exercise of diligent effort, any such consents, approvals, waivers or other authorizations are not obtained, SAIC agrees to cooperate with the Company in any reasonable arrangements designed to provide, to the extent reasonably practicable, for the benefit of the Company any and all rights of SAIC in and to such asset. Nothing in this Section 5.1(b) shall be construed to be a waiver by the Company of any condition set forth in Article VII. (c) SAIC shall provide the Company with all reasonably requested and available information in order for the Company to pursue or defend the Company's rights to the Assets. 5.2 PRESERVATION OF RECORDS. After the Closing, both parties agree to preserve such books, records and filings relating to the Assets as may be appropriate or required by applicable law. 5.3 EMPLOYMENT OF SAIC PERSONNEL. (a) SAIC agrees that the Company may, but is not hereby obligated to, solicit for employment and hire the personnel identified on SCHEDULE 5.3 (a) hereto and SAIC agrees to provide commercially reasonable assistance to the Company in such solicitation and hiring. (b) Except as provided herein, all SAIC employees who accept the employment offer of the Company ("TRANSFERRED PERSONNEL") shall be subject to the terms and conditions of employment that the Company has with employees in comparable positions. The Company represents and warrants that it will provide to each of the Transferred Personnel compensation and benefits, taken as a whole, that will be substantially comparable to, or greater than, the compensation and benefits such Transferred Personnel were receiving from SAIC immediately preceding their employment by the Company. During the first eighteen (18) months of the employment of any Transferred Personnel, no such Transferred Personnel shall be subject to 11 relocation outside of San Diego County California unless such Transferred Personnel agrees to such relocation. The Company agrees to provide all Transferred Personnel with stock options or other stock-based incentive compensation. (c) Only with respect to the Software, SAIC hereby transfers and assigns to the Company the rights of SAIC, if any, with respect to any employees or consultants of SAIC who authored any of the Software including, but not limited to the rights of SAIC under any SAIC Invention, Copyright and Confidentiality Agreement between SAIC and any employees but only as the SAIC Invention, Copyright and Confidentiality Agreement pertains to the Software; provided, however, that any such personnel will not be encouraged or requested by the Company to make any disclosure of the identity of licensees of the Software that have not been disclosed to the Company by SAIC or with respect to matters that are not directly related to the Software. Notwithstanding the foregoing, the parties agree that SAIC shall retain the right to freely use for any purpose the residuals resulting from access to or work with the Software, provided such residuals will not be used to create computer programs that perform substantially the same functions in substantially the same way, to achieve the same or substantially the same result as the Software. The term "residuals" means technical information related to the Software in non-tangible form, which may be retained by persons who have had access to the Software, including ideas, concepts, know-how, or techniques contained therein. Neither party shall have any obligation to limit or restrict the assignment of such persons or to pay royalties for any work resulting from the use of residuals. Nothing in the foregoing shall, however, be deemed to be the grant of a license under the copyrights and patent application conveyed under this Agreement. (d) For a period of five (5) years from the date of this Agreement, the Company shall notify SAIC of the termination of the employment by the Company or its successors or assigns of any Transferred Personnel ("TERMINATION OF EMPLOYMENT"), no matter what the reason was for the Termination of Employment. Such notice shall be sent to the attention of SAIC's Stock Programs Department, Attention: Karen Grasson, 10260 Campus Point Drive, M/S F3, San Diego, CA 92121, within ten (10) days after the date of the Termination of Employment and shall state the date of the Termination of Employment and last known address, home telephone number and e-mail address (if known by the Company) of such Transferred Personnel. If the Termination of Employment was due to death or disability of the Transferred Personnel, the notice shall so state if the Company is not restricted by law from disclosing. The notice will not state the reason, if any, for the Termination of Employment. (e) Effective at the close of business on the Closing Date, all Transferred Personnel shall cease to be covered by SAIC's employee welfare benefit plans, including plans, programs, policies and arrangements which provide medical and dental coverage, life and accident insurance and disability coverage (collectively, "WELFARE PLANS"). SAIC shall retain responsibility for all Welfare Plans claims incurred by all Transferred Personnel (and their dependents) on or prior to the Closing Date. For purposes of this paragraph, a claim shall be deemed to have been incurred on the date treatment is 12 rendered except as to claims resulting from hospital confinement commencing on or prior to the Closing Date. (f) The Company acknowledges and agrees that SAIC may enter into consulting agreements with certain of the Transferred Personnel for the purpose of incentivizing such employees to remain as employees of the Company following the Closing Date; provided, however, that no Transferred Personnel shall perform services for SAIC while they are employed by the Company unless a Vice President of Company has agreed in writing to the performance of such services in advance. 5.4 PAYROLL; ACCRUED VACATION; SICK LEAVE. SAIC shall pay all Transferred Personnel all wages to which they are entitled through the Closing Date at its regular pay date. As of the Closing Date, SAIC shall pay to the Transferred Personnel for all vacation time and sick leave accrued to the Transferred Personnel as required by law and consistent with SAIC policies. 5.5 NO HIRING OF EMPLOYEES. For a period of one (1) year from the Closing Date, neither party shall solicit, offer employment to or hire any current employee of the other party or any person who was an employee of the other party during the nine (9) month period preceding the date of solicitation, offer of employment or hiring of the former employee of the other party. 5.6 NO REQUEST TO DISCLOSE. Except as provided in Section 5.3 (c) above, neither party shall solicit, request or encourage any employee or former employee of the other to disclose confidential information of the other party; provided, however, that information directly related to the Software may be disclosed by Transferred Personnel to the Company. ARTICLE VI CONDITIONS TO SAIC'S OBLIGATION TO CLOSE The obligations of SAIC to the Company under this Agreement are subject to the fulfillment by the Company on or before the Closing of each of the following conditions, unless waived by SAIC in writing: 6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Article III shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing Date. 6.2 PERFORMANCE. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date. 6.3 COMPLIANCE CERTIFICATE. The Chairman of the Board, President or a Vice President of the Company shall deliver to SAIC at the Closing a certificate certifying that the conditions specified in Sections 6.1 and 6.2 have been fulfilled and stating that, except as set 13 forth in the Company Disclosure Schedule hereto, there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or conditions of the Company since June 30, 1998 other than continuing operating losses and declining stock price, such certificate being substantially in the form of EXHIBIT 6.3. 6.4 BOARD OF DIRECTORS. Effective as of the Closing, the Board of Directors of the Company shall consist of not more than six (6) members and shall be comprised of the persons listed on SCHEDULE 6.4 hereto. 6.5 BILL OF SALE. The Company and SAIC shall have entered into a Bill of Sale substantially in the form attached hereto as EXHIBIT 6.5. 6.6 SOFTWARE ROYALTY, GRANT BACK AND IMPROVEMENTS LICENSE AGREEMENT. The Company and SAIC shall have entered into a Software Royalty, Grant Back and Improvements License Agreement substantially in the form attached hereto as EXHIBIT 6.6. 6.7 STRATEGIC ALLIANCE AGREEMENT. The Company and SAIC shall have entered into a Strategic Alliance Agreement substantially in the form attached hereto as EXHIBIT 6.7. 6.8 PARTNERSPLUS AGREEMENT. The Company and SAIC shall have entered into a PartnersPlus Agreement substantially in the form attached hereto as EXHIBIT 6.8. 6.9 FACILITIES USE AGREEMENT. The Company and SAIC shall have entered into a Facilities Use Agreement substantially in the form attached hereto as EXHIBIT 6.9. 6.10 STOCKHOLDER AND VOTING AGREEMENT. The Company and SAIC shall have entered into a Stockholder and Voting Agreement substantially in the form attached hereto as EXHIBIT 6.10. 6.11 $8.00 WARRANT TO PURCHASE COMMON STOCK. The Company shall have executed and delivered to SAIC the $8.00 Warrant substantially in the form attached hereto as EXHIBIT 6.11. 6.12 $10.50 WARRANT TO PURCHASE COMMON STOCK. The Company shall have executed and delivered to SAIC the $10.50 Warrant substantially in the form attached hereto as EXHIBIT 6.12. 6.13 RITZ PREMIER SUBCONTRACT. The Company shall have executed and delivered to SAIC a subcontract to the contract known by the parties as the Ritz Premier contract. 6.14 REGISTRATION RIGHTS AGREEMENT. The Company and SAIC shall have executed and entered into the Registration Rights Agreement substantially in the form attached hereto as EXHIBIT 6.14. 14 6.15 PATENT, COPYRIGHT AND TRADEMARK ASSIGNMENT. The Company and SAIC shall have executed and entered into the Patent, Copyright and Trademark Assignment substantially in the form attached hereto as EXHIBIT 6.15. 6.16 STOCK CERTIFICATE. The Company shall have duly issued and delivered to SAIC a stock certificate for the Shares in accordance with the provisions of this Agreement. 6.17 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the consummation of the transactions contemplated by this Agreement, which makes the consummation of the transactions contemplated by this Agreement illegal. In the event an injunction or other order shall have been issued, each party agrees to use its reasonable efforts to have such injunction or other order lifted. 6.18 GOVERNMENTAL APPROVAL. The Company and SAIC shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for consummation of the transactions contemplated by this Agreement and the several transactions contemplated hereby, and required to be obtained on or before the Closing Date. ARTICLE VII CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE The obligations of the Company to SAIC under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, unless waived by the Company in writing: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of SAIC contained in Article IV hereof shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing Date. 7.2 PERFORMANCE. SAIC shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing Date. 7.3 COMPLIANCE CERTIFICATE A duly authorized executive Vice President of the SAIC shall deliver to the Company at the Closing a certificate certifying that the conditions specified in Sections 7.1 and 7.2 have been fulfilled. 7.4 PAYMENT OF CONSIDERATION. SAIC shall have paid and delivered the Cash Consideration specified in Section 1.3. 15 7.5 BILL OF SALE. The Company and SAIC shall have entered into a Bill of Sale substantially in the form attached hereto as EXHIBIT 6.5. 7.6 SOFTWARE ROYALTY, GRANT BACK AND IMPROVEMENTS LICENSE AGREEMENT. The Company and SAIC shall have entered into a Software Royalty, Grant Back and Improvements License Agreement substantially in the form attached hereto as EXHIBIT 6.6. 7.7 STRATEGIC ALLIANCE AGREEMENT. The Company and SAIC shall have entered into a Strategic Alliance Agreement substantially in the form attached hereto as EXHIBIT 6.7. 7.8 PARTNERSPLUS AGREEMENT. The Company and SAIC shall have entered into a PartnersPlus Agreement substantially in the form attached hereto as EXHIBIT 6.8. 7.9 FACILITIES USE AGREEMENT. The Company and SAIC shall have entered into a Facilities Use Agreement substantially in the form attached hereto as EXHIBIT 6.9. 7.10 STOCKHOLDER AND VOTING AGREEMENT. The Company and SAIC shall have entered into a Stockholder and Voting Agreement substantially in the form attached hereto as EXHIBIT 6.10. 7.11 RITZ PREMIER SUBCONTRACT. SAIC shall have executed and delivered to the Company a subcontract to the contract known by the parties as the Ritz Premier contract. 7.12 REGISTRATION RIGHTS AGREEMENT. The Company and SAIC shall have executed and entered into the Registration Rights Agreement substantially in the form attached hereto as EXHIBIT 6.14. 7.13 PATENT, COPYRIGHT AND TRADEMARK ASSIGNMENT. The Company and SAIC shall have executed and entered into the Patent, Copyright and Trademark Assignment substantially in the form attached hereto as EXHIBIT 6.15. 7.14 THIRD PARTY CONSENTS. SAIC shall have obtained the consents or approvals of those persons or entities whose consent or approval are required for the consummation of the transactions contemplated hereunder. 7.15 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the consummation of the transactions contemplated by this Agreement, which makes the consummation of the transactions contemplated by this Agreement illegal. In the event an 16 injunction or other order shall have been issued, each party agrees to use its reasonable efforts to have such injunction or other order lifted. 7.16 GOVERNMENTAL APPROVAL. The Company and SAIC shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for consummation of the transactions contemplated by this Agreement and the several transactions contemplated hereby and are required to be obtained on or before the Closing Date. ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 8.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of the parties as contained in this Agreement (including the Disclosure Schedules) shall survive the Closing and shall terminate on September 25, 1999; provided that there shall be no limitation period for matters involving fraud or intentional misrepresentation. 8.2 STATEMENTS AS REPRESENTATIONS. All statements contained in the Company Disclosure Schedule and any certificate delivered pursuant to this Agreement shall be deemed representations and warranties within the meaning of Section 8.1 hereof. 8.3 INDEMNIFICATION BY THE COMPANY Subject to the limitations set forth in this Article VIII, the Company hereby agrees to indemnify, defend and hold harmless SAIC, any subsidiary, director, officer, employee, agent or representative of SAIC (individually, an "SAIC INDEMNITEE" and collectively, "SAIC INDEMNITEES") from and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties, attorneys' fees and expenses (collectively, "DAMAGES") asserted against, resulting from, imposed upon or incurred by the SAIC Indemnitees or any SAIC Indemnitee, resulting from, or arising out of any breach of any representation, warranty or agreement of the Company, contained in or made pursuant to this Agreement. 8.4 INDEMNIFICATION BY SAIC. Subject to the limitations set forth in this Article VIII, SAIC hereby agrees to indemnify, defend and hold harmless the Company, any subsidiary, director, officer, employee, agent or representative of the Company (individually, an "COMPANY INDEMNITEE" and collectively, "COMPANY INDEMNITEES") from and against all Damages asserted against, resulting from, imposed upon or incurred by the Company Indemnitees or any Company Indemnitee, resulting from, or arising out of any breach of any representation, warranty or agreement of SAIC, contained in or made pursuant to this Agreement. 8.5 LIMITATION OF LIABILITY. 17 (a) NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (b) IN NO EVENT SHALL COMPANY MAKE ANY CLAIM AGAINST SAIC UNLESS THE ACTUAL AGGREGATE DIRECT DAMAGES INCURRED BY COMPANY ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT THAT ARE PROXIMATELY CAUSED BY SAIC EXCEED ONE MILLION DOLLARS ($1,000,000.00) AND ANY SUCH CLAIM SHALL BE LIMITED IN ANY EVENT TO THE AMOUNT OF SUCH DAMAGES IN EXCESS OF ONE MILLION DOLLARS ($1,000,000.00); PROVIDED, HOWEVER, THAT SUCH LIMITATIONS SHALL NOT BE APPLICABLE TO CLAIMS BASED ON FRAUD OR INTENTIONAL MISREPRESENTATION. (c) IN NO EVENT SHALL THE LIABILITY OF EITHER PARTY ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE EXCEED TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00); PROVIDED, HOWEVER, THAT SUCH LIMITATIONS SHALL NOT BE APPLICABLE TO CLAIMS BASED ON FRAUD OR INTENTIONAL MISREPRESENTATION. (d) THESE LIMITATIONS OF LIABILITY ARE EXPRESSLY BARGAINED FOR PORTIONS OF THE CONSIDERATION FOR THE PARTIES TO ENTER INTO THIS AGREEMENT. ARTICLE IX MISCELLANEOUS PROVISIONS 9.1 AMENDMENT AND MODIFICATIONS. This Agreement may be amended, modified and supplemented only by written agreement between the parties hereto which states that it is intended to be a modification of this Agreement. 9.2 WAIVER OF COMPLIANCE. Any failure of the Company or SAIC to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by the other party, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 9.3 EXPENSES. The parties agree that all fees and expenses incurred by them in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such fees and expenses, including, without limitation, all fees of counsel, actuaries and accountants. 18 9.4 REMEDIES WAIVER. All rights and remedies existing under this Agreement are cumulative to and not exclusive of, any rights or remedies otherwise available under applicable law. No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. No right or remedy of a party shall be deemed waived unless expressly made a term, covenant or condition in this Agreement. 9.5 NOTICES. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or by commercial delivery service, sent by facsimile transmission with confirmation of receipt, or mailed by certified or registered mail (return receipt requested) with postage prepaid, to the parties at the following address (or such other address for a party as shall be specified by like notice): if to the Company, to: Mr. G. Ward Paxton Chairman, President and Chief Executive Officer ODS Networks, Inc. 1101 E. Arapaho Road Richardson, TX 75081 FAX: 972-301-3841 with a copy to: Mr. Timothy Kinnear Chief Financial Officer ODS Networks, Inc. 1101 E. Arapaho Road Richardson, TX 75081 FAX: 972-301-3841 if to SAIC, to: Douglas M. Schrier, Senior Vice President Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego, CA 92121 FAX: 619-546-6980 19 with a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego, CA 92121 FAX: 619-535-7992 9.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other party. 9.7 PUBLICITY. Neither the Company nor SAIC shall make or issue, or cause to be made or issued, any announcement or written statement concerning this Agreement or the transactions contemplated hereby for dissemination to the general public without the prior consent of the other parties. This provision shall not apply, however, to any announcement or written statement required to be made by law or the regulations of any federal or state governmental agency or by obligations pursuant to any listing agreement with any national securities exchange or with the NASD, except that the party required to make such announcement shall, whenever practicable, consult with the other party concerning the timing and content of such announcement before such announcement is made. 9.8 SEVERABILITY. If any portion of this Agreement shall be deemed illegal, void or unenforceable by a court of competent jurisdiction, the remaining portions will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. 9.9 ARBITRATION OF DISPUTES. The parties agree that any controversy or claim (whether such controversy or claim is based upon or sounds in statute, contract, tort or otherwise) arising out of or relating to this Agreement, any performance or dealings between the parties, or any dispute arising out of the interpretation or application of this Agreement, which the parties are not able to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant to the American Arbitration Association's Commercial Arbitration Rules then in effect and judgment upon the award rendered by the arbitrator shall be entered in any court having jurisdiction thereof and such arbitrator shall have the authority to grant injunctive relief in a form similar to that which a court of law would otherwise grant. The arbitrator shall be chosen from a panel of licensed attorneys having at least fifteen (15) years of professional experience who are familiar with the subject matter of this Agreement. The arbitrator shall be appointed within thirty (30) days of the date the demand for arbitration was sent to the other party. Discovery shall be permitted in accordance with the Federal Rules of Civil Procedure. If an arbitration proceeding is brought pursuant to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements incurred in addition to any other relief to which such party may be entitled. 20 9.10 GOVERNING LAW. This Agreement and the legal relations among the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware (excluding its choice of laws rules). 9.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.12 HEADINGS. The headings of the Sections and Articles of this Agreement are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Agreement. 9.13 THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement. 9.14 FURTHER ASSURANCES. Each of the parties hereto agrees that from time to time, at the request of any of the other parties hereto and without further consideration, it will execute and deliver such other documents and take such other action as such other party may reasonably request in order to consummate more effectively the transactions contemplated hereby. 9.15 SCHEDULES AND EXHIBITS. The Exhibits and Schedules to this Agreement are deemed incorporated in this Agreement and may contain information that is not expressly required to be disclosed by this Agreement. 9.16 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules hereto, the other documents and certificates delivered pursuant to the terms hereof, set forth the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and supersede all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto, including but not limited to the Agreement In Principal For Purchase Of ODS Networks, Inc. Common Stock of July 14 signed by Douglas M. Schrier on behalf of SAIC and signed by G. Ward Paxton on behalf of the Company and the Agreement In Principal For Purchase Of ODS Networks, Inc. Common Stock of July 16 signed by Douglas M. Schrier on behalf of SAIC and signed by G. Ward Paxton on behalf of the Company. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly and in accordance with its terms and without strict construction in favor of or against either party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereto duly authorized, all as of the day and year first above written. 21 SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation By: /s/ Douglas M. Schrier ---------------------------------------- Name: Douglas M. Schrier -------------------------------------- Title: Senior Vice President ------------------------------------- ODS NETWORKS, INC., a Delaware corporation By: /s/ G. Ward Paxton ---------------------------------------- Name: G. Ward Paxton -------------------------------------- Title: President ------------------------------------- 22 LIST OF SCHEDULES AND EXHIBITS Company Disclosure Schedule SAIC Disclosure Schedule Schedule 1.1 Withheld Rights Schedule 1.1(a) Software CD-ROMs Schedule 1.1(b) Contracts Schedule 1.1(c) Assets Schedule 1.2 Liabilities Being Assumed by the Company Schedule IV List of SAIC Employees Constituting SAIC's Knowledge Schedule 4.11 Lists Regarding the Software Schedule 5.3(a) SAIC Personnel to be Offered Employment by the Company Exhibit 6.3 Company Compliance Certificate Exhibit 6.4 Members of the Board of Directors Exhibit 6.5 Bill of Sale Exhibit 6.6 Software Royalty, Grant Back and Improvements License Agreement Exhibit 6.7 Strategic Alliance Agreement Exhibit 6.8 PartnersPlus Agreement Exhibit 6.11 $8.00 Warrant Exhibit 6.12 $10.50 Warrant Exhibit 6.14 Registration Rights Agreement Exhibit 6.15 Patent, Copyright and Trademark Assignment Exhibit 7.3 SAIC Compliance Certificate EX-99.1 3 EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 ODS NETWORKS AND SAIC JOIN FORCES IN NETWORK SECURITY MARKET -- ODS Acquires the CMDS Assets of SAIC and SAIC Obtains Right to Acquire up to 16% of ODS' Common Shares -- RICHARDSON, Texas, September 28, 1998 - ODS Networks, Inc. (NASDAQ: ODSI), a leading provider of enterprise-wide information security and switched network solutions, today announced it has acquired certain assets of the CMDS (Computer Misuse and Detection System) Division of Science Applications International Corporation (SAIC) and certain other information security products under development. In addition, SAIC's Chief Financial Officer, William A. Roper, has joined ODS' Board of Directors. This acquisition represents a key component of ODS Network's strategy to provide the most comprehensive security portfolio in the industry. CMDS has developed one of the industry's most advanced software tools for host-based intrusion detection, data forensics and audit management. In exchange for the CMDS assets, the information security products under development and $1,500,000 in cash, ODS issued to SAIC 1,600,000 shares of its common stock and warrants to purchase 1,500,000 shares of its common stock. Two separate warrants each grant SAIC the right to purchase 750,000 shares of ODS common stock. The first warrant has an exercise price of $8.00 per share and a term of 18 months. The second warrant has an exercise price of $10.50 per share and a term of 24 months. Based on the closing price of ODS common stock on the Nasdaq National Market on September 25, 1998, the transaction is valued at approximately $6,600,000. ODS' acquisition will be accounted for as a purchase of software and in-process technology. As part of the strategic relationship, ODS will be a preferred partner for certain other information security products developed by SAIC in the future, and SAIC will become a value added reseller of ODS products including ODS Network's award-winning CryptoCom(tm), SecureCom(tm) , InfiniteSwitch(tm) and LanBlazer(tm) product families. Deal Solidifies ODS' Comprehensive Security Arsenal David Drake was elected by ODS' Board of Directors as a vice president of ODS and now heads the newly formed division. Additionally, about 20 professional staff members, including experienced security engineers, located in San Diego, California, are now part of ODS. According to a Yankee Group report from June 1998, the market for intrusion detection and security assessment was $45 million in 1997, and is expected to grow to more than $300 million in 1999 and $747 million in 2003. The report also noted that intrusion detection and security assessment systems complement firewalls, encryption and authentication systems and are integral components of an effective network security policy. "Customers want a comprehensive information security solution. The combination of CMDS with ODS' SecureCom and CryptoCom security products will give ODS one of the most complete network security solutions in the industry," stated G. Ward Paxton, chairman, president, and CEO of ODS Networks. "In addition, our strategic relationship with SAIC provides us with an important channel for our products and future access to valuable technology and resources," added Paxton. "This strategic business relationship with ODS gives SAIC a vehicle to realize financial returns for network security products and technology developed by SAIC," said Steve Manning, vice president of the Center for Information Security Technology at SAIC. "Our investment in ODS is a sign of our commitment to the future working relationship with them," concluded Manning. About CMDS SAIC has developed one of the industry's most advanced software tools for host-based intrusion detection, data forensics and audit management to protect an organization's information assets from security threats. CMDS is a software program that detects misuse by analyzing audit data that is generated from operating systems, databases and application programs, as well as network-related devices installed within an enterprise. Unlike other intrusion and computer misuse detection products, CMDS uses an integrated expert system to analyze and correlate the massive amounts of data necessary to highlight subtle changes in authorized user behavior that can indicate data theft or socially engineered attacks. CMDS can simultaneously track tens of thousands of users of any sized network from the smallest bank branch to the largest networks, far beyond the capabilities of even the largest and most sophisticated security staffs. The CMDS product is highly complementary to ODS' SecureCom and CryptoCom families. Together, these products enable organizations to perform comprehensive analyses of their network security systems to identify and correct weaknesses in their current system configurations, to monitor the network and audit data for suspicious activities, and to quickly respond to potential security breaches. About SAIC Employee-owned SAIC provides high-technology products and services to government and commercial customers in the areas of information technology, systems integration, telecommunications, national and international security, health systems and services, transportation, energy, and environmental systems and engineering. With the recent acquisition of Bellcore, SAIC and its subsidiaries have estimated annual revenues of $4 billion and more than 33,000 employees at offices in over 150 cities worldwide. More information about SAIC can be found on the Internet at www.saic.com. Information about Bellcore is available at www.bellcore.com. About ODS Networks The ODS Networks, Inc. SecureCom and CryptoCom security product families provide one of the most comprehensive suites of infrastructure and remote access-based solutions for both detecting security violations to a network and preventing them. The SecureCom family offers an advanced infrastructure solution for on-line intrusion detection, asset protection and auditing. The ODS CryptoCom VPN (Virtual Private Network) family is one of the strongest VPN solutions in the industry and uses the Internet to enable secure communications at substantial cost and management savings. ODS enterprise networking products include a broad range of enterprise, workgroup, and remote access networking products for large and mid-range organizations, including its award-winning InfiniteSwitch and LANBlazer Gigabit Ethernet switch. Its recent acquisition of Essential Communications Corporation has allowed ODS to extend its line of high performance network products to leading-edge Gigabyte System Network (GSN) and High Performance Parallel Interface (HIPPI) switches, network interface cards (NICs) and modems. More information about ODS Networks can be found at their website: www.ods.com. This release, other than historical information, includes forward-looking statements with respect to the future development of security products, the market for intrusion detection and security assessment products, the offering of products incorporating the acquired technologies, and certain other matters. These statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the difficulties and uncertainties in successfully developing and introducing new products, market demand and acceptance of products, the impact of changing economic conditions, business conditions in the networking and information security industries, reliance on third-party vendors and resellers, the impact of market peers and their products, the integration of acquired technologies and products, as well as risks concerning future technology and others identified in the Company's Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q and other Securities and Exchange Commission filings. These filings can be obtained by contacting ODS Investor Relations. ODS is a registered trademark of ODS Networks, Inc. InfiniteSwitch, LANBlazer, SecureCom, CryptoCom and CMDS are trademarks of ODS Networks, Inc. All other trademarks are the property of their respective owners. CONTACT: Charleigh Shayne Terri Griffin Cynthia Stine Director of Investor Relations Director of Marketing PRTek, Inc. ODS Networks, Inc. ODS Networks, Inc. 972-276-5724 EX-99.2 4 EXHIBIT 99.2 Exhibit 99.2 ODS NETWORKS ACQUIRES NEW PRODUCTS FOR THE COMPUTER MISUSE/INTRUSION DETECTION MARKET FROM SAIC -ODS NETWORKS AND SAIC TEAM IN THE COMPUTER SECURITY MARKET- RICHARDSON, Texas, September 28, 1998 - ODS Networks, Inc., (NASDAQ:ODSI), a leading supplier of secure and high speed networking, today announced that it has acquired the Computer Misuse and Detection System (CMDS) and certain other intellectual property from Science Applications International Corporation (SAIC), and announced that ODS will incorporate CMDS into its "Hardened Networks" security architecture. CMDS SOLVES "INSIDER PROBLEM" CMDS is the first misuse and intrusion detection system to completely solve the "INSIDER PROBLEM," while also protecting against hacker threats. According to Matthew Kovar, Senior Data Security Analyst with Yankee Group, "70 percent of security incidents involve insider theft of confidential data, damage by disgruntled employees and misuse of computer resources." CMDS is designed to protect critical network devices such as servers, hosts, firewalls and data repositories. Unlike other intrusion and computer misuse detection products, CMDS uses an integrated expert system to analyze and correlate the massive amounts of data necessary to highlight subtle changes in authorized user behavior that can indicate data theft or socially engineered attacks. The CMDS approach solves both the insider problem and detects intruders who manage to thwart network perimeter defenses. The CMDS reporting engine can produce a wide range of management reports and graphs to any level of detail required. The security administrator can accurately track system use to security policy requirements as well as highlight areas of deficiency. -more- ODS ACQUIRES CMDS ASSETS - PAGE 2 The difficulty with misuse detection is that trusted users have authorization to use shared systems like servers and hosts. Distinguishing between "normal use" and "misuse" requires on-going analysis and correlation of massive amounts of data. With CMDS, user behavior is automatically analyzed based on historical usage patterns and also compared against peer group behavior. Any significant change in a user's behavior like daytime and nighttime activity, increases in file browsing, program executions or failed logins is automatically correlated and tracked. Without the CMDS approach, there is no practical way to analyze misuse data to find a data thief. CMDS can be configured to warn, alert or increase its surveillance of the user for developing a prosecution file. ODS OFFERS HARDENED NETWORKS With the CMDS product addition, ODS Networks offers the unique seven-layer "Hardened Networks" framework for security administrators in the commercial and government markets. The Hardened Networks architecture encompasses a mesh of threat detection and elimination technologies that focus on the enterprise security infrastructure instead of the "just the network perimeter" concept touted by most security vendors. "Very few security vendors are focused on the whole security problem," said G. Ward Paxton, chairman, president, and CEO of ODS Networks. "Our product strategy is designed to catch both insider and external threats. With the ODS Hardened Networks product architecture, we provide superior protection through layers of defense. No other vendor has the breadth of products to match our capability." ABOUT CMDS CMDS supports most major host and network operating systems, including UNIX and Windows NT. CMDS for Firewalls also supports Raptor, Cyberguard and Interlock. Server agent prices start at $995.00 for UNIX servers and $795.00 for Windows NT Servers. Workstation agent prices start at $100.00 for UNIX workstations and $75.00 for Windows NT Workstations. The CMDS console is priced at $6,995.00. -more- ODS ACQUIRES CMDS ASSETS - PAGE 3 ABOUT SAIC Employee-owned SAIC provides high-technology products and services to government and commercial customers in the areas of information technology, systems integration, telecommunications, national and international security, health systems and services, transportation, energy, and environmental systems and engineering. With its subsidiaries, including recently acquired Bellcore, SAIC has estimated annual revenues of $4 billion and more than 33,000 employees at offices in over 150 cities worldwide. More information about SAIC can be found on the Internet at www.saic.com. ABOUT ODS NETWORKS The ODS Networks, Inc. has been implementing high security networks for over a decade. ODS' HARDENED NETWORKS security architecture provides a wide range of stand-alone and integrated security products to address large-scale enterprise threat detection and elimination. Together these applications provide the strongest and most complete architecture for enterprise security available. ODS' Hardened Networks strategy includes the CMDS Intrusion/Misuse Detection System, ProtoCop network infrastructure analysis system, SecureSwitch-TM- and SecureDetector and the CryptoCom-TM- VPN encryption and remote access solution. ODS enterprise networking products include a broad range of enterprise, workgroup, and remote access networking products for large and mid-range organizations, including its award-winning InfiniteSwitch-TM-. Its recent acquisition of Essential Communications Corporation has allowed ODS to extend its line of high performance network products to leading-edge High Performance Parallel Interface (HIPPI) switches, network interface cards (NICs) and modems. More information about ODS Networks can be found on their website at www.ods.com. -more- ODS ACQUIRES CMDS ASSETS - PAGE 4 This release, other than historical information, includes forward-looking statements with respect to the future development of security products, the market for intrusion detection and security assessment products, the offering of products incorporating acquired technologies and certain other matters. These statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the difficulties and uncertainties in successfully developing and introducing new products, market demand and acceptance of products, the impact of changing economic conditions, business conditions in the networking and information security industries, reliance on third-party vendors and resellers, the impact of market peers and their products, the integration of acquired technologies and products, as well as risks concerning future technology and others identified in the Company's Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q and other Securities and Exchange Commission filings. These filings can be obtained by contacting ODS Investor Relations. ODS IS A REGISTERED TRADEMARK OF ODS NETWORKS, INC. INFINITESWITCH, LANBLAZER, SECURECOM AND CRYPTOCOM ARE TRADEMARKS OF ODS NETWORKS, INC. ALL OTHER TRADEMARKS ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS. CONTACT: Dru Popper-Lopez Penny Rackley Manager, Marketing Programs PRTek, Inc. ODS Networks, Inc. 512-847-3559 505-344-0080 prtek@flash.net dpopper@ods.com EX-99.3 5 EXHIBIT 99.3 REGISTRATION RIGHTS AGREEMENT Exhibit 99.3 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into as of September 25, 1998, by and between ODS NETWORKS, INC., a Delaware corporation (the "COMPANY"), and SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"). RECITALS The Company and SAIC are parties to an Asset and Securities Purchase Agreement of even date herewith (the "ASPA"), providing, among other things, for the purchase by SAIC of shares of common stock of the Company. The execution and delivery of this Agreement by the Company and SAIC is a condition to the closing of the transactions contemplated by the ASPA. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings indicated: "BUSINESS DAY" means any day except Saturday, Sunday and any day which shall be a legal holiday. "CLOSING DATE" means the date of the closing of the ASPA, as provided in SECTION 2.1 therein. "COMMISSION" means the United States Securities and Exchange Commission. "COMMON STOCK" means the Company's Common Stock, par value $.01 per share. "DEMAND REGISTRATION" means the type of registration referred to in SECTION 2.1(a) hereof. "HOLDER" or "HOLDERS" means SAIC and any transferee of Registrable Stock transferred in accordance with SECTION 4.5 hereof. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "POTENTIAL MATERIAL EVENT" means any of the following: (a) the possession by the Company of material non-public information required to be disclosed or incorporated by reference in the Registration Statement and the determination in good faith by the Board of Directors of the Company that disclosure of such information in the Registration Statement at that time would be detrimental to the business and affairs of the Company; or (b) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, if disclosed or incorporated by reference in the Registration Statement at such time, be materially and adversely affected, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the Registration Statement would be materially misleading absent the inclusion of such information. "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "PROSPECTUS" means the Prospectus included in the Registration Statement (including, without limitation, a Prospectus that includes any information previously omitted from a Prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any Prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Stock covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "REGISTRATION EXPENSES" means all expenses incident to the Company's performance of or compliance with ARTICLE II hereof, including, without limitation, all registration, filing fees, NASD fees, all fees and expenses of complying with securities or blue sky laws, printing expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and, in the case of a registration pursuant to SECTION 2.1 the reasonable fees and expenses (not to exceed $30,000) of Special Counsel to the selling Holders (selected by the selling Holders representing at least 50% of the Registrable Stock covered by such registration); PROVIDED, HOWEVER, that Registration Expenses shall exclude, and the Holders of the Registrable Stock being registered shall pay, any underwriting discounts, commissions and transfer taxes in respect of the Registrable Stock being registered. "REGISTRABLE STOCK" means (a) all Common Stock received by SAIC in connection with the ASPA and to be received by SAIC and/or Holders upon exercise of the Warrants (as defined in the ASPA) and (b) any securities issued or issuable with respect to such shares of Common Stock by way of a stock dividend or stock split or in connection with a combination or reclassification of shares, recapitalization, merger, consolidation or other reorganization or otherwise; PROVIDED, HOWEVER, that any particular Registrable Stock shall cease to be Registrable Stock when (x) a Registration Statement with respect to the sale of such stock shall become effective under the Securities Act and such stock shall have been disposed of in accordance with such Registration Statement, or (y) such stock shall have been sold pursuant to Rule 144, or (z) such stock is transferred without complying with the provisions of SECTION 4.5 hereof; and PROVIDED, FURTHER, that all Registrable Stock held by a particular Holder shall cease to be Registrable Stock when all such stock may be disposed of by such Holder within a single three (3)-month period pursuant to Rule 144. "REGISTRATION STATEMENT" means the Registration Statement and any additional Registration Statements contemplated by SECTION 2.1, including (in each case) the Prospectus, amendments and supplements to such Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statement. "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 Commission having substantially the same effect as such Rule. "RULE 158" means Rule 158 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SPECIAL COUNSEL" means one special counsel to the Holders (initially Haynes and Boone, LLP). "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a registration in connection with which securities of the Company are sold to an underwriter on a firm commitment basis for reoffering to the public pursuant to an effective Registration Statement. ARTICLE II REGISTRATION RIGHTS 2.1 REQUEST FOR REGISTRATION. (a) On no more than three (3) occasions, Holders of at least 66 2/3% of the Registrable Stock then outstanding may request that the Company register the offering of up to all of the shares of Registrable Stock held by the Holders; PROVIDED, HOWEVER, that any such request relates to the registration of shares having a market value of at least $2,000,000. If so requested by the Holders initiating such request, such registration shall be in the form of a shelf registration providing for the registration and resale of such shares on a continuous or delayed basis (a "SHELF REGISTRATION"). (b) The Company shall not be required to cause any Registration Statement to be declared effective prior to the first anniversary of the Closing Date. The Holders shall take into account a reasonable period of time for preparation of the Registration Statement and any SEC review period that may be required prior to the effectiveness of the Registration Statement when making its request for a Demand Registration (a "REGISTRATION REQUEST"). Such Registration Request shall specify (i) the number of shares of Registrable Stock held by the requesting Holders that are requested to be included in such registration and (ii) the intended method of distribution of such shares. The Company will promptly give notice of such requested registration to all other Holders of Registrable Stock and, subject to Section 2.1(c), will include in such registration all shares of Registrable Stock that Holders of Registrable Stock have requested the Company to include in such registration by notice to the Company within 20 days after the date of receipt of the Company's notice. (c) If the Holders initiating a Registration Request intend to distribute the Registrable Stock covered by such request by means of an Underwritten Offering, then such Holders shall so advise the Company as a part of their Registration Request and the Company shall include such information in the written notice referred to in SECTION 2.1(b). In such event, the right of the Holders to include their Registrable Stock in such registration shall be conditioned upon the Holders participation in such underwriting and the inclusion of the Holders' Registrable Stock in the underwriting. Any Registrable Stock excluded and withdrawn from such underwriting shall be withdrawn from the registration. Notwithstanding any other provision of this Agreement, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter may exclude shares (including Registrable Stock) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, FIRST, pro rata among the Holders of Registrable Stock requesting to be included in such registration on the basis of the number of shares that such Holders have requested be included in the registration, SECOND, to the Company, THIRD, pro rata among all other security holders having contractual rights to include their securities in such registration on the basis of the number of shares that such holders have requested to be included in the registration, and FOURTH, to all other security holders requesting to include securities in such registration. 2.2 SELECTION OF MANAGING UNDERWRITER(S). The Company will have the right to select one or more nationally recognized underwriters to manage any offering which is the subject of a Demand Registration that is intended to be an Underwritten Offering. 2.3 RIGHT TO DEFER REGISTRATION. No Registration Request shall require a Registration Statement requested therein to be filed (i) prior to the effective date of a registration statement filed by the Company covering an Underwritten Offering of Common Stock if the Company shall have given written notice in the manner provided in SECTION 2.4 below of such Registration Statement to the Holders prior to the receipt of a Registration Request and shall have thereafter pursued the preparation, filing and effectiveness of such registration statement with diligence (it being understood by such Holders that advance notice of the pendency of such registration may be material, non-public information) or (ii) if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board 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 stockholders for such registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Registration Statement for a period of not more than sixty (60) days after receipt of the Registration Request. If the Company shall so postpone the filing of a Registration Statement, such Holders of Registrable Stock requesting registration thereof pursuant to SECTION 2.1 shall have the right to withdraw the request for registration by giving written notice to the Company within thirty (30) days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not count as the request for registration to which Holders of Registrable Stock are entitled pursuant to SECTION 2.1 hereof. Any registration requested pursuant to SECTION 2.1 shall not be deemed to have been effected (i) unless the Registration Statement with respect thereto has become effective, (ii) if after it has become effective and prior to the sale of all of the Registrable Stock covered thereby, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the selling Holders and has not thereafter become effective, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the selling Holders. 2.4 PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. If, after the first anniversary of the Closing Date, the Company proposes to register any offering of its securities under the Securities Act, whether or not for sale for its own account (other than pursuant to a Demand Registration or on Form S-4, Form S-8 or any successor form), and the registration form to be used permits the registration of an offering of Registrable Stock by the Holders (a "PIGGYBACK REGISTRATION"), the Company will give prompt notice to all Holders of Registrable Stock of its intention to effect such a registration (each a "PIGGYBACK NOTICE"). Subject to SECTION 2.4(b) below, the Company will include in such registration all shares of Registrable Stock that the Holders thereof have requested the Company to include in such registration by notice to the Company within 20 days after the date of receipt of the Company's notice. No such registration effected under this SECTION 2.4 shall relieve the Company of its obligation to effect any registration upon request under SECTION 2.1. (b) PRIORITY ON PRIMARY REGISTRATIONS. If any Piggyback Registration shall be an Underwritten Offering, the right of any such Holder's Registrable Stock to be included in such Piggyback Registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Stock in the underwriting to the extent provided herein. Notwithstanding any other provision of this Agreement, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter may exclude shares (including Registrable Stock) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, FIRST, to the Company, SECOND, pro rata among all security holders having contractual rights to include their securities in such registration (including the Holders) on the basis of the number of shares that such holders have requested (consistent with their contractual rights) to be included in the registration, and THIRD, to all other security holders requesting to include securities in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any Registrable Stock excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. 2.5 REGISTRATION PROCEDURES. In connection with any registration hereunder, the Company will use its best efforts to effect the registration and the sale of such Registrable Stock in accordance with the intended method of distribution thereof and will as expeditiously as possible: (a) prepare and file with the Commission, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Stock on Form S-3 such registration shall be on another appropriate form) which shall contain a "Plan of Distribution" in the form (which shall be reasonable and customary) to be supplied to the Company in writing by the selling Holders, and use its best efforts to cause the Registration Statement to become effective and remain effective as provided herein; PROVIDED, HOWEVER, that within a reasonable period prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall furnish to the Holders, the Special Counsel and any managing underwriters, copies of all such documents proposed to be filed, which documents will be subject to the reasonable comments of such Holders, the Special Counsel and such managing underwriters. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Stock, their Special Counsel, or any managing underwriters, shall reasonably object on a timely basis; (b) (i) prepare and file with the Commission such amendments and post-effective amendments to such Registration Statement as may be necessary to keep such Registration Statement effective for such period as shall be required for the disposition pursuant to the terms of such registration of all Registrable Stock covered thereby (but not to exceed, in the case of: (A) any Demand Registration (if not a Shelf Registration) or any Piggyback Registration, 60 days PLUS any additional periods represented by any "BLACK-OUT PERIOD" (as defined in the last paragraph of this SECTION 2.5) or (B) any Demand Registration (if a Shelf Registration), the first anniversary of the effective date of such registration PLUS any additional periods represented by any Black-Out Period), (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Stock covered by the Registration Statement during the applicable period in accordance with the intended methods of distribution by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented; (c) furnish to each Holder, the Special Counsel and any managing underwriters, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; (d) deliver to each Holder, the Special Counsel, and any underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request in order to facilitate the disposition of the Registrable Stock proposed to be sold; (e) use its best efforts to register or qualify or cooperate with the selling Holders, any underwriters or its Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Stock for offer and sale under such other securities or blue sky laws of such jurisdictions as any Holder or underwriter reasonably requests to keep such registration or qualification (or exemption therefrom) in effect for as long as the relevant Registration Statement is in effect and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Stock proposed to be sold by such Holder; PROVIDED, HOWEVER, that the Company will not be required (i) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this SUBSECTION (e) or (ii) to consent to general service of process in any such jurisdiction; (f) notify each Holder of such Registrable Stock, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such Holder, the Company will promptly prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Stock, such Prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which such statements are made, not misleading; (g) cause all such Registrable Stock to be listed on each securities exchange on which similar securities issued by the Company are then listed and to be qualified for trading on each system on which similar securities issued by the Company are from time to time qualified; (h) provide a transfer agent and registrar for all such Registrable Stock not later than the effective date of such Registration Statement and thereafter maintain such a transfer agent and registrar; (i) cooperate with the Holders and any managing underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Stock to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Stock to be in such denominations and registered in such names as any such managing underwriters or Holders may request at least two Business Days prior to any sale of Registrable Stock; (j) in the case of any Underwritten Offering, enter into such customary agreements (including an underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other reasonable actions in connection therewith (including those reasonably requested by any managing underwriters and the Holders of a majority of the Registrable Stock being sold) in order to expedite or facilitate the disposition of such Registrable Stock, and (i) make such representations and warranties to such Holders and such underwriters as are customarily made by issuers in Underwritten Offerings; (ii) obtain and deliver copies thereof to each Holder and the managing underwriters, if any, of opinions of counsel to the Company and updates thereof addressed to each Holder and each such underwriter, in form, scope and substance reasonably satisfactory to any such managing underwriters and Special Counsel to the selling Holders covering the matters customarily covered in opinions requested in Underwritten Offerings; (iii) immediately prior to the effectiveness of the Registration Statement, and at the time of delivery of any Registrable Stock sold pursuant thereto, obtain and deliver copies to the Holders and the managing underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to the Company in form and substance as are customary in connection with Underwritten Offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders than those set forth in ARTICLE III hereof (or such other provisions and procedures acceptable to the holders of a majority of Registrable Stock participating in such Underwritten Offering); (k) make available for inspection by the selling Holders, any representative of such Holders, any underwriter participating in any disposition of Registrable Stock, and any attorney or accountant retained by such selling Holders or underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Holder, representative, underwriter, attorney, accountant or agent in connection with such Registration Statement; (l) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months beginning with the first day of the Company's first full calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (m) notify the Holders of Registrable Stock to be sold, the Special Counsel and any managing underwriters as promptly as reasonably possible when: (i)(A) a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to each of the selling Holders); and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Stock for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that requires any revisions to the Registration Statement, Prospectus or any document incorporated therein by reference so that, in the case of the Registration Statement or the Prospectus, as the case may be, 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 light of the circumstances under which they were made, not misleading. Each Holder of shares covered by a Registration Statement agrees that if the Company has delivered preliminary or final Prospectuses to such Holder and after having done so the Company shall give notice to such Holder that (i) the Prospectus needs to be amended or supplemented to comply with the requirements of the Securities Act, (ii) a stop order suspending the effectiveness of the Registration Statement is issued by the Commission or (iii) a Potential Material Event shall exist, then each such Holder shall immediately cease making offers and sales of Registrable Stock and return all remaining Prospectuses to the Company. Following such amendment or supplement, the lifting of any stop order or such time as the Potential Material Event shall no longer exist, the Company shall promptly provide such Holders with revised Prospectuses and, following receipt of the revised Prospectuses, such Holders shall be free to resume making offers of the Registrable Stock, or any portion thereof. The period during which the Company exercises its rights as described in this paragraph to postpone, delay or interrupt the offer and sale of the Registrable Stock (which may not exceed 90 days during any twelve-month period) or during the pendency of any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court shall be referred to herein as a "BLACK-OUT PERIOD." 2.6 PAYMENT OF EXPENSES. The Company shall pay all Registration Expenses in connection with any Demand Registration and any Piggyback Registration. 2.7 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any registration hereunder which is underwritten unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements; (b) completes and executes all questionnaires, powers of attorney, indemnities, standstill or holdback agreements, underwriting agreements and other documents required under the terms of such underwriting arrangements; and (c) if requested by the managing underwriter, agrees not to sell or otherwise dispose of Registrable Stock or other Company securities held by such Holder in any transaction other than pursuant to such underwriting for such period (not to exceed 180 days) as determined in the discretion of the Board of Directors of the Company (such agreement to be in writing in a form satisfactory to the Company and such managing underwriter), PROVIDED, that no Holder of Registrable Stock shall be required to enter into such an agreement unless each other Holder of Registrable Stock participating in such offering enters into a substantially identical agreement relating to such underwriting. The Company may impose stop-transfer instructions to its transfer agent with respect to the Registrable Stock and other securities subject to the restriction described in clause (c) above until the end of the lock-up period. 2.8 INFORMATION OF THE HOLDERS. As a condition to participation in any registration hereunder, each Holder shall furnish to the Company such information regarding such Holder and the distribution proposed by the Holder as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance contemplated by this Agreement. 2.9 RULE 144 INFORMATION. From and after the first anniversary of the Closing Date and for so long as necessary in order to permit the Holders to sell the Registrable Stock pursuant to Rule 144 under the Securities Act, the Company will file on a timely basis all reports required to be filed by it pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, referred to in paragraph (c)(1) of Rule 144 under the Securities Act (or, if applicable, the Company will make publicly available the information regarding itself referred to in paragraph (c)(2) of Rule 144), in order to permit the Holders to sell the Registrable Stock, pursuant to the terms and conditions of the applicable provisions of Rule 144. ARTICLE III INDEMNIFICATION 3.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify, to the extent permitted by law, each Holder, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder, its officers and directors and each Person who controls such Holder expressly for use therein or by such Holder's failure to deliver a copy of the Registration Statement or Prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. 3.2 INDEMNIFICATION BY HOLDERS. In connection with any Registration Statement in which a Holder is participating, each such Holder will, to the extent permitted by law, indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Holder expressly for use therein) and any failure by each such Holder to deliver a copy of the Registration Statement or Prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. 3.3 NOTICE: DEFENSE OF CLAIMS. Any Person entitled to indemnification hereunder will (a) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (b) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel (in addition to local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. 3.4 CONTRIBUTION. If the indemnification provided for in this ARTICLE III is unavailable or insufficient to hold harmless an indemnified party under SECTION 3.1 or 3.2, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to above (a) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other from the offering of the securities or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but also the relative fault of the indemnifying party on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other equitable considerations. The relative benefits received by the indemnifying party on the one hand and the indemnified party on the other shall be deemed to be in the same proportion as the total net proceeds from the offering received by the indemnifying party bear to the total net proceeds received by the indemnified party. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact related to information supplied by the indemnifying party or written information supplied by indemnified party, and the parties' relevant intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this SECTION 3.4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim that is the subject of this section. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any obligation of a Holder to provide contribution will be individual to such Holder and will be limited to the net amount of proceeds received by such Holder from the sale of Registrable Stock that is the subject of any claim. 3.5 SURVIVAL. The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. ARTICLE IV MISCELLANEOUS 4.1 NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with confirmation of receipt) to the parties at the following address (or at such other address for a party as shall be specified by like notice): (a) if to the Company, to: Timothy Kinnear Chief Financial Officer 1101 E. Arapaho Road Richardson, Texas 75081 Fax: (972) 301-3841 Tel: (972) 301-3899 with a copy (which shall not constitute notice) to: Brobeck, Phleger & Harrison LLP 301 Congress Avenue Suite 1200 Austin, Texas 78701 Attention: Ronald G. Skloss Fax: (512) 477-5813 Tel: (512) 477-5495 (b) if to the Holder, to: Douglas M. Schrier Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego, California 92121 Fax: (619) 546-6980 Tel: (619) 546-6730 with a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego, California 92121 Fax: (619) 535-7992 Tel: (619) 535-7360 (c) If to any other Person who is then the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company or such other address as may be designated in writing hereafter by such Person. Notice given by personal delivery, commercial delivery service or mail shall be effective upon actual receipt. Notice given by facsimile shall be confirmed by appropriate answer back and shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. 4.2 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 4.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or cancellation of this Agreement shall be effective as to (a) the Company, unless made in writing signed by the Company or (b) the Holders of Registrable Stock, unless made in writing signed by the Holders of 66-2/3 of the then outstanding shares of Registrable Stock. 4.4 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and obligations hereunder, shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. 4.5 ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder hereunder, including the rights to cause the Company to register securities, may be transferred or assigned by a Holder only to a transferee or an assignee of not less than 800,000 shares of Registrable Stock (as presently constituted and subject to adjustments for stock splits, stock dividends, reverse stock splits, and the like), PROVIDED that the Company is given written notice at the time of or within a reasonable time after said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned, and, PROVIDED FURTHER, that the transferee or assignee assumes in writing the obligations of such Holder under this Agreement. Any such transferee or assignee shall be deemed a "Holder" for purposes of this Agreement. 4.6 SEVERABILITY. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 4.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 4.8 OTHER AGREEMENTS. After the date hereof, the Company shall not grant to any holder of securities of the Company any registration rights which have a priority greater than or equal to those granted to the Holders pursuant to this Agreement without the prior written consent of the Holders of at least 50% of the then-outstanding Registrable Stock. 4.9 HEADINGS. The headings of this Agreement are for convenience only and do not constitute a part of this Agreement. 4.10 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (other than the conflicts of law principles thereof). 4.11 FURTHER ASSURANCES. Each party to this Agreement hereby covenants and agrees, without the necessity of any further consideration, to execute and deliver any and all such further documents and take any and all such other actions as may be necessary to appropriately carry out the intent and purposes of this Agreement and to consummate the transactions contemplated hereby. 4.12 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. IN WITNESS WHEREOF, the Company and SAIC have executed this Agreement as of the date first written above. ODS NETWORKS, INC. By: /s/ Timothy W. Kinnear Timothy Kinnear Chief Financial Officer SCIENCE APPLICATIONS INTERNATIONAL CORPORATION By: /s/ Douglas M. Schrier Name: Douglas M. Schrier Title: Senior Vice President EX-99.4 6 EXHIBIT 99.4 $8.00 WARRANT Exhibit 99.4 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND APPLICABLE LAWS, OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER. No. W-1 September 25, 1998 $8.00 WARRANT TO PURCHASE COMMON STOCK OF ODS NETWORKS, INC. This certifies that, for value received, SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"), or registered assigns (the "HOLDER"), during the term of this Warrant as set forth in SECTION 1, is entitled to purchase from ODS NETWORKS, INC., a Delaware corporation (the "COMPANY"), for value received, shares of the Common Stock of the Company, $0.01 par value (the "COMMON STOCK"), in the amount set forth in SECTION 2, upon surrender hereof, at the principal office of the Company referred to below, with a duly executed Notice of Exercise in the form attached, and simultaneous payment therefor in lawful money of the United States, at the Exercise Price set forth in SECTION 3. The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below. The term "Warrant" as used herein shall include this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein. 1. TERM OF WARRANT. Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, at any time or from time to time before 5:00 p.m., on March 25, 2000. After such date, this Warrant shall be void. 2. NUMBER OF SHARES WHICH MAY BE PURCHASED. The total number of shares of Common Stock purchasable pursuant to this Warrant is SEVEN HUNDRED FIFTY THOUSAND (750,000). 3. EXERCISE PRICE. The purchase price per share for the Common Stock purchased under this Warrant shall be EIGHT AND NO/100 DOLLARS ($8.00) the "EXERCISE PRICE"). 4. EXERCISE OF WARRANT. -1- (1) METHOD OF EXERCISE. The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, during the term hereof as described in SECTION 1 above, by the surrender of this Warrant and delivery of the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company, and upon payment equal to the product of the Exercise Price multiplied by the number of shares designated by the Holder in the Notice of Exercise in cash or by check payable to the Company. (2) OTHER MATTERS. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issued upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the remaining number of shares for which this Warrant may then be exercised. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 6. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount. 7. NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle its Holder to any of the rights of a stockholder of the Company. 8. TRANSFER OF WARRANT. (1) WARRANT REGISTER. The Company will maintain a register (the "WARRANT REGISTER") containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary. (2) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company). Subject to compliance with the foregoing and the Securities Act of 1933, as amended (the "ACT"), and applicable state securities laws, title to this Warrant may be transferred by endorsement (by the -2- Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. The Holder or owner hereof by the taking hereof consents and agrees that any person in possession of this Warrant properly endorsed for transfer to such person (including endorsed in blank) is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his rights in this Warrant in favor of each such bona fide purchaser, and each bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. (3) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this SECTION 8, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof. (4) COMPLIANCE WITH SECURITIES LAWS. (1) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired for investment, and not with a view toward distribution or resale in violation of applicable securities laws. (2) All shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws and the Asset and Securities Purchase Agreement of even date herewith): THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER. 9. RESERVATION OF STOCK. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its corporate charter to provide sufficient reserves of shares of Common Stock issuable upon exercise of the Warrant. The Company further covenants that all shares that may be issued upon the exercise of this Warrant will be free from all taxes, liens and charges except for restrictions on transfer and any taxes, liens and charges imposed on the Holder unrelated to the Company's issuance of shares upon exercise of the Warrant. -3- 10. NOTICES. All such notices, advices and communications hereunder shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing. 11. AMENDMENTS. Any term of this Warrant may be amended with the written consent of the Company and all of the Holders of this Warrant. 12. ADJUSTMENTS. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows: (1) ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.; RECLASSIFICATION, ETC. In case at any time and from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired, the holders of Common Stock shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor, (1) other or additional stock or other securities or property (other than cash) by way of dividend; or (2) other or additional stock or other securities or property by way of stock-split, spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement, other than additional shares of Common Stock or Convertible Securities (as defined in SECTION 12(d)) or any rights or options to acquire any of the foregoing, adjustments in respect of which are provided for hereafter, then and in each such case the Holder, upon the exercise hereof, shall be entitled to receive the amount of stock and other securities and property which such Holder would hold on the date of such exercise if on the original issue date he had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant and had thereafter, during the period from the original issue date to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and properties receivable by him as aforesaid during such period, giving effect to all adjustments called for during such period by this SECTION 12. (2) ADJUSTMENTS FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case of any reorganization of the Company (or any other issuer of other securities) at any time and from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired, or if the Company (or such other issuer) shall transfer all or substantially all of its properties or assets to or consolidate with or merge into any other person (corporate or otherwise), then and in each such case the Holder, upon the exercise hereof, at any time after the consummation of such reorganization, conveyance, consolidation or merger, shall be entitled to receive, in lieu of the Common Stock (or other securities) issuable upon such exercise prior to such consummation, the stock and other securities or property (including cash) to which such Holder would have been entitled upon such consummation if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustments thereafter as provided in SECTION 12(a) and SECTION 12(c); in each such case, the terms of this Warrant shall be applicable to the shares of stock and other securities receivable upon the exercise of this Warrant after such consummation and shall be binding upon the issuer thereof. (3) ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN FAIR MARKET VALUE. In case at any time or from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired the Company shall issue or sell shares of its -4- Common Stock (other than shares of Common Stock excepted from the provisions of this SECTION 12(c) by SECTION 12(h) without consideration or for a consideration per share less than the Fair Market Value (as defined in SECTION 12(d)) in effect immediately prior to such issue or sale, then and in each such case the Pro Forma Exercise Price (as defined in SECTION 12(d)) shall be adjusted to reflect such issue or sale; and the holder of this Warrant, upon the exercise hereof, shall be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of this SECTION 12(c) be issuable upon such exercise by the fraction of which (i) the numerator is the Exercise Price and (ii) the denominator is the Pro Forma Exercise Price, both as in effect on the date of such exercise. (4) DEFINITIONS, ETC. For purposes of this SECTION 12: (1) The "PRO FORMA EXERCISE PRICE" per share of Common Stock, which shall be adjusted and readjusted from time to time as provided in this SECTION 12 (and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this SECTION 12), shall (upon any such adjustment or readjustment) be computed (to the nearest cent, a half cent being considered a full cent) by dividing (x) the sum of (i) the result obtained by multiplying the number of shares of Common Stock of the Company outstanding immediately prior to such issue or sale by the Pro Forma Exercise Price in effect immediately prior to such issue or sale and (ii) the consideration, if any, received by the Company upon such issue or sale by (y) the number of shares of Common Stock of the Company outstanding immediately after such issue or sale, PROVIDED THAT (i) prior to the first issue or sale referred to in SECTION 12(c) the Pro Forma Exercise Price shall be the Exercise Price in effect on the date of this Warrant and (ii) at no time shall the Pro Forma Exercise Price exceed the Exercise Price then in effect. (2) The term "CONVERTIBLE SECURITIES" shall mean any stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Common Stock. (3) The consideration received by the Company for any issue or sale of Common Stock shall include any consideration received for shares of Common Stock referred to in SECTION 12(h), and shall, (1) insofar as it consists of cash, be computed at the net amount thereof received by the Company after deduction of any expenses payable at the Company and any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale; (2) insofar as it consists of assets other than cash, be computed at the fair value thereof as determined in good faith by the Board of Directors of the Company, but in no event at more than the amount at which such tangible or intangible assets are recorded on the books of the Company for accounting purposes; and (3) insofar as it is attributable to the issue or sale of stock or other securities or other assets of the Company other than Common Stock or Convertible -5- Securities, be allocated in good faith by the Board of Directors of the Company among such other stock, securities and assets and Common Stock and Convertible Securities. (4) The date of the issue or sale of Common Stock issuable upon the exercise of any rights or options or the conversion or exchange of any Convertible Securities shall be deemed to be the date of issue or sale of such rights or options or such Convertible Securities, or rights or options to subscribe for, purchase or otherwise acquire such Convertible Securities; PROVIDED that if a record of the holders of any class of securities shall be taken for the purpose of entitling such holders to receive any dividend or other distribution payable in, or any rights or options to subscribe for, purchase or otherwise acquire, Common Stock or Convertible Securities, the date of the issue or sale of any Common Stock issuable in payment of any such dividend or other distribution or upon the exercise of any such rights or options, or upon the conversion or exchange of any Convertible Securities so issuable, shall be deemed to be the date of such record. (5) The term "FAIR MARKET VALUE" shall mean the value of the Common Stock as determined by the Company's Board of Directors in good faith; PROVIDED, HOWEVER, that where there exists a public market for the Company's Common Stock, the Fair Market Value per share shall be equal to the average of the closing bid and asked prices of the Common Stock as quoted on the NASDAQ Small-Cap Market or the closing price quoted on the Nasdaq National Market or on any exchange on which the Common Stock is listed, whichever is applicable, for the five (5) trading days prior to the date of determination of Fair Market Value. (5) ADJUSTMENTS FOR STOCK DIVIDENDS, ETC. In case the Company shall declare any dividend or make any other distribution on any stock of the Company of any class, payable in Common Stock or Convertible Securities, such declaration or other distribution shall be deemed to be an issue or sale, without consideration, of such Common Stock or Convertible Securities, as the case may be, and the Pro Forma Exercise Price shall thereupon be adjusted to reflect such issue or sale. (6) ADJUSTMENTS FOR ISSUES, ETC. OF OPTIONS OR CONVERTIBLE SECURITIES. In case the Company shall (a) grant any rights or options to subscribe for, purchase or otherwise acquire Common Stock, or (b) issue or sell any Convertible Securities, the price per share of Common Stock issuable upon the exercise of such rights or options or the conversion or exchange of such Convertible Securities shall be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options or the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options or the conversion or exchange of such Convertible Securities, by (ii) the maximum number of shares of Common Stock issuable upon such exercise or conversion or exchange, all as the case may be. If the price per share so determined is less than the Fair Market Value immediately prior to the granting of such rights or options or the issue or sale of such Convertible Securities, such granting or issue or sale shall be deemed to be an issue or sale for cash of such maximum number of shares of Common Stock at such price per share, and the Pro Forma Exercise Price shall thereupon be adjusted to reflect (on the basis of such determination) such issue or sale, provided that (1) if such rights or options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the amount of additional consideration payable to the Company or decrease in the number of shares of Common -6- Stock issuable upon such exercise or conversion or exchange (by change of rate or otherwise), the Pro Forma Exercise Price shall, upon each such increase or decrease becoming effective, be readjusted to reflect such increase or decrease insofar as it affects rights of acquisition, exchange or conversion which have not theretofore expired, and (2) upon the expiration of such rights or options or the rights of conversion or exchange of such Convertible Securities, if any thereof shall not have been exercised, the Pro Forma Exercise Price shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been adjusted on the basis that (x) the only shares of Common Stock so issued were the shares of Common Stock issued or sold upon the exercise of such rights or options or the rights of conversion or exchange of such Convertible Securities and (y) such shares of Common Stock were issued or sold for the consideration actually received by the Company upon such exercise plus the consideration, if any, actually received by the Company for the granting of all of such rights or options, whether or not exercised, or for the issue or sale of all such Convertible Securities which shall have been converted or exchanged, all as the case may be; and provided further that no such readjustment shall have the effect of increasing the Pro Forma Exercise Price by an amount in excess of the amount of the adjustment thereof initially made in respect of the granting of such rights or options or the issue or sale of such Convertible Securities. In case the Company shall grant any rights or options to subscribe for, purchase or otherwise acquire Convertible Securities, such Convertible Securities shall be deemed, for the purposes of this SECTION 12(f), to have been issued or sold; and the total amount received or receivable by the Company as consideration for such issue or sale shall be computed (for the purposes of clause (i) of this SECTION 12(f), in determining the price per share of Common Stock issuable upon the conversion or exchange of such Convertible Securities) and the Pro Forma Exercise Price shall be adjusted and readjusted as provided above in this SECTION 12(f) in the case of rights or options for the acquisition of shares of Common Stock. (7) DILUTION IN CASE OF OTHER SECURITIES. In case any other securities shall be issued or sold, or shall become subject to issue upon the conversion or exchange or any stock (or other securities) of the Company (or any other issuer of other securities or any other person referred to in SECTION 12(b) or to subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other issuer or person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this SECTION 12 with respect to the Pro Forma Exercise Price shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable upon the exercise of the Warrant, so as to protect the Holder of the Warrant against the effect of such dilution. (8) EXCEPTED ISSUES. The following issues of Common Stock shall, for the purposes of SECTION 12(c), be deemed not to be issues or sales of Common Stock at less than the Fair Market Value, and no adjustment or readjustment pursuant to this SECTION 12 in the Pro Forma Exercise Price shall be made in respect thereof: (1) the issuance of Common Stock (or other securities) upon the exercise of this Warrant or the $10.50 Warrant issued to SAIC on the date hereof; (2) the issuance of Common Stock (or other securities) upon the exercise of warrants, options, or convertible securities outstanding on the date hereof; and -7- (3) the issuance of Common Stock (and options therefor) pursuant to employee stock option plans approved by the Company's Board of Directors. (9) NO DILUTION OR IMPAIRMENT. The Company will not, by amendment to its certificate of incorporation or through any reorganization, sale of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of the Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable upon the exercise of the Warrant above the amount payable therefor upon such exercise; (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock upon the full exercise of the Warrant as from time to time outstanding; and (c) will not transfer all or substantially all of its properties and assets to any other person (corporate or otherwise), or consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company (if the Company is not the surviving person), unless such other person shall expressly assume in writing and will be bound by all the terms of this Warrant. (10) CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or other securities) issuable upon the exercise of the Warrant, the Company's Chief Financial Officer will promptly compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding and (c) the Pro Forma Exercise Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by SECTION 12) on account thereof. The Company will forthwith mail a copy of each such certificate to each Holder. Upon request, the Company will mail to the Holder a certificate of the Company's Chief Financial Officer containing a statement of the Pro Forma Exercise Price at the time in effect and showing how it was calculated. (11) NOTICES OF RECORD DATE, ETC. In the event of: (1) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (2) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any conveyance of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation; or (3) any voluntary or involuntary dissolution, liquidation or winding up of the Company; then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, -8- distribution or right, and stating the amount and character of such dividend, distribution or right; (ii) the date on which any such reorganization, reclassification, conveyance, consolidation, merger, dissolution, liquidation, or winding up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, conveyance, consolidation, merger, dissolution, liquidation, or winding up; and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall be mailed at least 15 days prior to the date therein specified. 2. MISCELLANEOUS. (1) SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the Holder and their respective permitted assigns. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. (2) HEADINGS. The headings of the Sections of this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. (3) CHOICE OF LAW. This Warrant and the performance or breach thereof shall be governed by and interpreted as to substantive matters in accordance with the applicable laws of the State of Delaware (excluding its choice of law rules). IN WITNESS WHEREOF, the undersigned has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: September 25, 1998 The Company: ODS NETWORKS, INC. By: /s/ G. Ward Paxton ----------------------------------- Title: President -------------------------------- -9- NOTICE OF EXERCISE (1) The undersigned hereby elects to purchase ___________ shares of Common Stock of ODS NETWORKS, INC., pursuant to the provisions of SECTION 4(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full. (2) In exercising this Warrant, the undersign hereby confirms and acknowledges that the shares of Common Stock are being acquired solely for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except in compliance with the Securities Act of 1933, as amended, or any applicable state securities laws. (3) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in the following name: _______________________ . (4) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in the following name: ____________________ . SCIENCE APPLICATIONS INTERNATIONAL CORPORATION By: --------------------------- Title: ------------------------ Date: ------------------------- -10- ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ____________________ to make such transfer on the books of ODS Networks, Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except in compliance with the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee has acknowledge that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Printed Name of Holder: --------------------------- Signature: ----------------------------------------- Name of Authorized Representative, if a legal entity: -------------------------------- Title of Representative: --------------------------- Date: ---------------------------------------------- -11- EX-99.5 7 EXHIBIT 99.5 $10.50 WARRANT Exhibit 99.5 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND APPLICABLE LAWS, OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER. No. W-2 September 25, 1998 $10.50 WARRANT TO PURCHASE COMMON STOCK OF ODS NETWORKS, INC. This certifies that, for value received, SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"), or registered assigns (the "HOLDER"), during the term of this Warrant as set forth in SECTION 1, is entitled to purchase from ODS NETWORKS, INC., a Delaware corporation (the "COMPANY"), for value received, shares of the Common Stock of the Company, $0.01 par value (the "COMMON STOCK"), in the amount set forth in SECTION 2, upon surrender hereof, at the principal office of the Company referred to below, with a duly executed Notice of Exercise in the form attached, and simultaneous payment therefor in lawful money of the United States, at the Exercise Price set forth in SECTION 3. The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below. The term "Warrant" as used herein shall include this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein. 1. TERM OF WARRANT. Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, at any time or from time to time before 5:00 p.m., on September 25, 2000. After such date, this Warrant shall be void. 2. NUMBER OF SHARES WHICH MAY BE PURCHASED. The total number of shares of Common Stock purchasable pursuant to this Warrant is SEVEN HUNDRED FIFTY THOUSAND (750,000). 3. EXERCISE PRICE. The purchase price per share for the Common Stock purchased under this Warrant shall be TEN AND 50/100 DOLLARS ($10.50) the "EXERCISE PRICE"). 4. EXERCISE OF WARRANT. -1- (1) METHOD OF EXERCISE. The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, during the term hereof as described in SECTION 1 above, by the surrender of this Warrant and delivery of the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company, and upon payment equal to the product of the Exercise Price multiplied by the number of shares designated by the Holder in the Notice of Exercise in cash or by check payable to the Company. (2) OTHER MATTERS. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issued upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the remaining number of shares for which this Warrant may then be exercised. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 6. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount. 7. NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle its Holder to any of the rights of a stockholder of the Company. 8. TRANSFER OF WARRANT. (1) WARRANT REGISTER. The Company will maintain a register (the "WARRANT REGISTER") containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary. (2) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company). Subject to compliance with the foregoing and the Securities Act of 1933, as amended (the "ACT"), and applicable state securities laws, title to this Warrant may be transferred by endorsement (by the -2- Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. The Holder or owner hereof by the taking hereof consents and agrees that any person in possession of this Warrant properly endorsed for transfer to such person (including endorsed in blank) is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his rights in this Warrant in favor of each such bona fide purchaser, and each bona fide purchaser shall acquire absolute title hereto and to all rights represented hereby. (3) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this SECTION 8, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof. (4) COMPLIANCE WITH SECURITIES LAWS. (1) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired solely for the Holder's own account for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired for investment, and not with a view toward distribution or resale in violation of applicable securities laws. (2) All shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws and the Asset and Securities Purchase Agreement of even date herewith): THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER. 9. RESERVATION OF STOCK. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its corporate charter to provide sufficient reserves of shares of Common Stock issuable upon exercise of the Warrant. The Company further covenants that all shares that may be issued upon the exercise of this Warrant will be free from all taxes, liens and charges except for restrictions on transfer and any taxes, liens and charges imposed on the Holder unrelated to the Company's issuance of shares upon exercise of the Warrant. -3- 10. NOTICES. All such notices, advices and communications hereunder shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing. 11. AMENDMENTS. Any term of this Warrant may be amended with the written consent of the Company and all of the Holders of this Warrant. 12. ADJUSTMENTS. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows: (1) ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.; RECLASSIFICATION, ETC. In case at any time and from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired, the holders of Common Stock shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor, (1) other or additional stock or other securities or property (other than cash) by way of dividend; or (2) other or additional stock or other securities or property by way of stock-split, spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement, other than additional shares of Common Stock or Convertible Securities (as defined in SECTION 12(d)) or any rights or options to acquire any of the foregoing, adjustments in respect of which are provided for hereafter, then and in each such case the Holder, upon the exercise hereof, shall be entitled to receive the amount of stock and other securities and property which such Holder would hold on the date of such exercise if on the original issue date he had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant and had thereafter, during the period from the original issue date to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and properties receivable by him as aforesaid during such period, giving effect to all adjustments called for during such period by this SECTION 12. (2) ADJUSTMENTS FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case of any reorganization of the Company (or any other issuer of other securities) at any time and from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired, or if the Company (or such other issuer) shall transfer all or substantially all of its properties or assets to or consolidate with or merge into any other person (corporate or otherwise), then and in each such case the Holder, upon the exercise hereof, at any time after the consummation of such reorganization, conveyance, consolidation or merger, shall be entitled to receive, in lieu of the Common Stock (or other securities) issuable upon such exercise prior to such consummation, the stock and other securities or property (including cash) to which such Holder would have been entitled upon such consummation if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustments thereafter as provided in SECTION 12(a) and SECTION 12(c); in each such case, the terms of this Warrant shall be applicable to the shares of stock and other securities receivable upon the exercise of this Warrant after such consummation and shall be binding upon the issuer thereof. (3) ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN FAIR MARKET VALUE. In case at any time or from time to time while this Warrant (or any Warrant issued in exchange or replacement hereof) is outstanding and unexpired the Company shall issue or sell shares of its -4- Common Stock (other than shares of Common Stock excepted from the provisions of this SECTION 12(c) by SECTION 12(h) without consideration or for a consideration per share less than the Fair Market Value (as defined in SECTION 12(d)) in effect immediately prior to such issue or sale, then and in each such case the Pro Forma Exercise Price (as defined in SECTION 12(d)) shall be adjusted to reflect such issue or sale; and the holder of this Warrant, upon the exercise hereof, shall be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of this SECTION 12(c) be issuable upon such exercise by the fraction of which (i) the numerator is the Exercise Price and (ii) the denominator is the Pro Forma Exercise Price, both as in effect on the date of such exercise. (4) DEFINITIONS, ETC. For purposes of this SECTION 12: (1) The "PRO FORMA EXERCISE PRICE" per share of Common Stock, which shall be adjusted and readjusted from time to time as provided in this SECTION 12 (and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this SECTION 12), shall (upon any such adjustment or readjustment) be computed (to the nearest cent, a half cent being considered a full cent) by dividing (x) the sum of (i) the result obtained by multiplying the number of shares of Common Stock of the Company outstanding immediately prior to such issue or sale by the Pro Forma Exercise Price in effect immediately prior to such issue or sale and (ii) the consideration, if any, received by the Company upon such issue or sale by (y) the number of shares of Common Stock of the Company outstanding immediately after such issue or sale, PROVIDED THAT (i) prior to the first issue or sale referred to in SECTION 12(c) the Pro Forma Exercise Price shall be the Exercise Price in effect on the date of this Warrant and (ii) at no time shall the Pro Forma Exercise Price exceed the Exercise Price then in effect. (2) The term "CONVERTIBLE SECURITIES" shall mean any stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Common Stock. (3) The consideration received by the Company for any issue or sale of Common Stock shall include any consideration received for shares of Common Stock referred to in SECTION 12(h), and shall, (1) insofar as it consists of cash, be computed at the net amount thereof received by the Company after deduction of any expenses payable at the Company and any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale; (2) insofar as it consists of assets other than cash, be computed at the fair value thereof as determined in good faith by the Board of Directors of the Company, but in no event at more than the amount at which such tangible or intangible assets are recorded on the books of the Company for accounting purposes; and (3) insofar as it is attributable to the issue or sale of stock or other securities or other assets of the Company other than Common Stock or Convertible -5- Securities, be Company among such other stock, securities and assets and Common Stock and Convertible Securities. (4) The date of the issue or sale of Common Stock issuable upon the exercise of any rights or options or the conversion or exchange of any Convertible Securities shall be deemed to be the date of issue or sale of such rights or options or such Convertible Securities, or rights or options to subscribe for, purchase or otherwise acquire such Convertible Securities; PROVIDED that if a record of the holders of any class of securities shall be taken for the purpose of entitling such holders to receive any dividend or other distribution payable in, or any rights or options to subscribe for, purchase or otherwise acquire, Common Stock or Convertible Securities, the date of the issue or sale of any Common Stock issuable in payment of any such dividend or other distribution or upon the exercise of any such rights or options, or upon the conversion or exchange of any Convertible Securities so issuable, shall be deemed to be the date of such record. (5) The term "FAIR MARKET VALUE" shall mean the value of the Common Stock as determined by the Company's Board of Directors in good faith; PROVIDED, HOWEVER, that where there exists a public market for the Company's Common Stock, the Fair Market Value per share shall be equal to the average of the closing bid and asked prices of the Common Stock as quoted on the NASDAQ Small-Cap Market or the closing price quoted on the Nasdaq National Market or on any exchange on which the Common Stock is listed, whichever is applicable, for the five (5) trading days prior to the date of determination of Fair Market Value. (5) ADJUSTMENTS FOR STOCK DIVIDENDS, ETC. In case the Company shall declare any dividend or make any other distribution on any stock of the Company of any class, payable in Common Stock or Convertible Securities, such declaration or other distribution shall be deemed to be an issue or sale, without consideration, of such Common Stock or Convertible Securities, as the case may be, and the Pro Forma Exercise Price shall thereupon be adjusted to reflect such issue or sale. (6) ADJUSTMENTS FOR ISSUES, ETC. OF OPTIONS OR CONVERTIBLE SECURITIES. In case the Company shall (a) grant any rights or options to subscribe for, purchase or otherwise acquire Common Stock, or (b) issue or sell any Convertible Securities, the price per share of Common Stock issuable upon the exercise of such rights or options or the conversion or exchange of such Convertible Securities shall be determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options or the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options or the conversion or exchange of such Convertible Securities, by (ii) the maximum number of shares of Common Stock issuable upon such exercise or conversion or exchange, all as the case may be. If the price per share so determined is less than the Fair Market Value immediately prior to the granting of such rights or options or the issue or sale of such Convertible Securities, such granting or issue or sale shall be deemed to be an issue or sale for cash of such maximum number of shares of Common Stock at such price per share, and the Pro Forma Exercise Price shall thereupon be adjusted to reflect (on the basis of such determination) such issue or sale, provided that (1) if such rights or options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the amount of additional consideration payable to the Company or decrease in the number of shares of Common -6- Stock issuable upon such exercise or conversion or exchange (by change of rate or otherwise), the Pro Forma Exercise Price shall, upon each such increase or decrease becoming effective, be readjusted to reflect such increase or decrease insofar as it affects rights of acquisition, exchange or conversion which have not theretofore expired, and (2) upon the expiration of such rights or options or the rights of conversion or exchange of such Convertible Securities, if any thereof shall not have been exercised, the Pro Forma Exercise Price shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been adjusted on the basis that (x) the only shares of Common Stock so issued were the shares of Common Stock issued or sold upon the exercise of such rights or options or the rights of conversion or exchange of such Convertible Securities and (y) such shares of Common Stock were issued or sold for the consideration actually received by the Company upon such exercise plus the consideration, if any, actually received by the Company for the granting of all of such rights or options, whether or not exercised, or for the issue or sale of all such Convertible Securities which shall have been converted or exchanged, all as the case may be; and provided further that no such readjustment shall have the effect of increasing the Pro Forma Exercise Price by an amount in excess of the amount of the adjustment thereof initially made in respect of the granting of such rights or options or the issue or sale of such Convertible Securities. In case the Company shall grant any rights or options to subscribe for, purchase or otherwise acquire Convertible Securities, such Convertible Securities shall be deemed, for the purposes of this SECTION 12(f), to have been issued or sold; and the total amount received or receivable by the Company as consideration for such issue or sale shall be computed (for the purposes of clause (i) of this SECTION 12(f), in determining the price per share of Common Stock issuable upon the conversion or exchange of such Convertible Securities) and the Pro Forma Exercise Price shall be adjusted and readjusted as provided above in this SECTION 12(f) in the case of rights or options for the acquisition of shares of Common Stock. (7) DILUTION IN CASE OF OTHER SECURITIES. In case any other securities shall be issued or sold, or shall become subject to issue upon the conversion or exchange or any stock (or other securities) of the Company (or any other issuer of other securities or any other person referred to in SECTION 12(b) or to subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other issuer or person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this SECTION 12 with respect to the Pro Forma Exercise Price shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable upon the exercise of the Warrant, so as to protect the Holder of the Warrant against the effect of such dilution. (8) EXCEPTED ISSUES. The following issues of Common Stock shall, for the purposes of SECTION 12(c), be deemed not to be issues or sales of Common Stock at less than the Fair Market Value, and no adjustment or readjustment pursuant to this SECTION 12 in the Pro Forma Exercise Price shall be made in respect thereof: (1) the issuance of Common Stock (or other securities) upon the exercise of this Warrant or the $8.00 Warrant issued to SAIC on the date hereof; (2) the issuance of Common Stock (or other securities) upon the exercise of warrants, options, or convertible securities outstanding on the date hereof; and -7- (3) the issuance of Common Stock (and options therefor) pursuant to employee stock option plans approved by the Company's Board of Directors. (9) NO DILUTION OR IMPAIRMENT. The Company will not, by amendment to its certificate of incorporation or through any reorganization, sale of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of the Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable upon the exercise of the Warrant above the amount payable therefor upon such exercise; (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock upon the full exercise of the Warrant as from time to time outstanding; and (c) will not transfer all or substantially all of its properties and assets to any other person (corporate or otherwise), or consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company (if the Company is not the surviving person), unless such other person shall expressly assume in writing and will be bound by all the terms of this Warrant. (10) CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or other securities) issuable upon the exercise of the Warrant, the Company's Chief Financial Officer will promptly compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding and (c) the Pro Forma Exercise Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by SECTION 12) on account thereof. The Company will forthwith mail a copy of each such certificate to each Holder. Upon request, the Company will mail to the Holder a certificate of the Company's Chief Financial Officer containing a statement of the Pro Forma Exercise Price at the time in effect and showing how it was calculated. (11) NOTICES OF RECORD DATE, ETC. In the event of: (1) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (2) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any conveyance of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other corporation; or (3) any voluntary or involuntary dissolution, liquidation or winding up of the Company; then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, -8- distribution or right, and stating the amount and character of such dividend, distribution or right; (ii) the date on which any such reorganization, reclassification, conveyance, consolidation, merger, dissolution, liquidation, or winding up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, conveyance, consolidation, merger, dissolution, liquidation, or winding up; and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall be mailed at least 15 days prior to the date therein specified. 2. MISCELLANEOUS. (1) SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the Holder and their respective permitted assigns. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. (2) HEADINGS. The headings of the Sections of this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. (3) CHOICE OF LAW. This Warrant and the performance or breach thereof shall be governed by and interpreted as to substantive matters in accordance with the applicable laws of the State of Delaware (excluding its choice of law rules). IN WITNESS WHEREOF, the undersigned has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: September 25, 1998 The Company: ODS NETWORKS, INC. By: /s/ G. Ward Paxton ----------------------------------- Title: President -------------------------------- -9- NOTICE OF EXERCISE (1) The undersigned hereby elects to purchase ___________ shares of Common Stock of ODS NETWORKS, INC., pursuant to the provisions of Section 4(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full. (2) In exercising this Warrant, the undersign hereby confirms and acknowledges that the shares of Common Stock are being acquired solely for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except in compliance with the Securities Act of 1933, as amended, or any applicable state securities laws. (3) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in the following name: _______________________ . (4) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in the following name: ____________________ . SCIENCE APPLICATIONS INTERNATIONAL CORPORATION By: ----------------------------- Title: -------------------------- Date: --------------------------- -10- ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES - ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ____________________ to make such transfer on the books of ODS Networks, Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except in compliance with the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee has acknowledge that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Printed Name of Holder: ---------------------------- Signature: ----------------------------------------- Name of Authorized Representative, if a legal entity: -------------------------------- Title of Representative: --------------------------- Date: ---------------------------------------------- -11- EX-99.6 8 EXHIBIT 99.6 STOCKHOLDER & VOTING AGREEMENT Exhibit 99.6 STOCKHOLDER AND VOTING AGREEMENT This Stockholder and Voting Agreement ("AGREEMENT"), is made effective as of September 25, 1998, by and among SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"), ODS NETWORKS, INC., a Delaware corporation ("ODS"), and the stockholders of ODS identified below ("STOCKHOLDERS"), who agree as follows: 1. BOARD OF DIRECTORS; OTHER. In consideration of SAIC's investment in ODS pursuant to the Asset and Securities Purchase Agreement between SAIC and ODS of even date herewith ("A&SPA"), so long as SAIC beneficially owns, directly or indirectly, the lesser of (i) five percent (5%) or more of the outstanding shares of the common stock of ODS ("COMMON STOCK")or (ii) 1,000,000 shares of the Common Stock (as appropriately adjusted for stock splits, stock dividends or other similar transactions), Stockholders and ODS agree to take such action as may be required to cause: (a) the expansion of the number of members of the ODS Board of Directors from five (5) to six (6) members contemporaneously with the closing of the A&SPA and; (b) said sixth director to be nominated by SAIC and the Stockholders to affirmatively support the election of such SAIC nominee; (c) the ODS Board of Directors to permit a non-voting SAIC designee to attend and observe any meetings of the ODS Board of Directors or any committee thereof, provided, however, that in the event that the ODS Board of Directors is expanded to more than six (6) members and a nominee of SAIC is elected as the seventh member of the Board of Directors, then upon such election, SAIC's right to have a non-voting designee attend the ODS Board of Directors meetings shall cease; (d) SAIC to designate a nominee as the seventh director in the event the ODS Board of Directors is expanded to more than six (6) directors and the Stockholders to affirmatively support the election of such SAIC nominee; (e) SAIC to have the right to approve the nomination by any of the Stockholders of additional members of the ODS Board of Directors in the event the ODS Board of Directors is expanded up to nine (9) members, which such approval shall not be unreasonably withheld or delayed; -1- (f) the Board of Directors to not be increased above nine (9) members without the advance written consent of the members of the Board of Directors nominated by SAIC; (g) ODS to obtain the consent of SAIC to engage in a transaction involving: (i) the sale of all or substantially all of the assets of ODS or the merger of ODS, other than a merger into a wholly owned subsidiary, in which ODS is not the surviving entity or the consolidation of ODS with one or more other corporations where, in any such event, the transaction proceeds consist, in whole or in part, of unregistered securities or registered securities of a company that is publicly traded and the average trading volume of said entity is less than fifteen percent (15%), on a fully-diluted basis, of SAIC's holdings of shares of Common Stock AND the shares of Common Stock to be issued upon the exercise of any warrants held by SAIC from time to time or (ii) any future issuance by ODS of shares of ODS stock representing twenty percent (20%) or more of the then outstanding voting stock of ODS whether in a single transaction or a series of transactions between ODS and the same party or the affiliates of such party (in which case SAIC may condition its consent upon SAIC receiving preemptive rights); provided, however, that SAIC's approval will not be required with respect to any ODS stock (i) to be issued pursuant to an employee stock option plan, or (ii) to be offered to the public pursuant to an underwritten public offering. (h) preemptive rights to be provided to SAIC with respect to any future offering of additional shares of ODS stock other than shares of ODS stock (i) any transaction approved by SAIC pursuant to this Agreement, (ii) to be issued pursuant to an employee stock option plan, (iii) to be offered to the public pursuant to an underwritten public offering, or (iv) issued as full or partial consideration in connection with a merger or acquisition by or of ODS. 2. TRANSFER OF SHARES. Nothing in this Agreement shall restrict the ability of the a Stockholder to sell, transfer, or otherwise dispose of any of the shares of Common Stock owned by them (the "STOCKHOLDER SHARES"); provided, however that for as long as a Stockholder owns any Common Stock such Stockholder shall be bound by this Agreement. 3. STANDSTILL. For a period of one (1) year from the date of this Agreement and subject to the exceptions provided in this Agreement, unless SAIC shall have obtained the written consent of ODS, SAIC agrees that it will not purchase, directly or indirectly, any additional shares of Common Stock (other than pursuant to the exercise of warrants issued to SAIC by ODS) except to retain SAIC's relative percentage of ownership of ODS stock. Notwithstanding the foregoing, in the event a Stockholder sells any Stockholder Shares, SAIC may, at any time thereafter, and without the consent of ODS, purchase an amount equal to the Stockholder Shares sold by the Stockholder(s). -2- 4. HOLDING PERIOD. SAIC agrees that it will hold the Common Stock, warrants to purchase Common Stock or other securities of ODS issued to or held by SAIC pursuant to the A&SPA and any shares of Common Stock or other securities issued upon the exercise of the warrants (collectively, the "SHARES") for at least twelve (12) months from the date of this Agreement; provided, however, that nothing in the foregoing will be deemed to preclude SAIC from exercising any warrants during the twelve (12) month period following the date of this Agreement or to purchase additional Common Stock as provided for in Section 3 above. 5. MISCELLANEOUS. SAIC agrees to make appropriate personnel available for comment to industry analysts from time to time. 6. ARBITRATION OF DISPUTES. The parties agree that any controversy or claim (whether such controversy or claim is based upon or sounds in statute, contract, tort or otherwise) arising out of or relating to this Agreement, any performance or dealings among the parties, or any dispute arising out of the interpretation or application of this Agreement, which the parties are not able to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant to the American Arbitration Association's Commercial Arbitration Rules then in effect and judgment upon the award rendered by the arbitrator shall be entered in any court having jurisdiction thereof and such arbitrator shall have the authority to grant injunctive relief in a form similar to that which a court of law would otherwise grant. The arbitrator shall be chosen from a panel of licensed attorneys having at least fifteen (15) years of professional experience who are familiar with the subject matter of this Agreement. The arbitrator shall be appointed within thirty (30) days of the date the demand for arbitration was sent to the other party. Discovery shall be permitted in accordance with the Federal Rules of Civil Procedure. If an arbitration proceeding is brought pursuant to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements incurred in addition to any other relief to which such party may be entitled. 7. CHOICE OF LAW. The Agreement and the performance or breach thereof shall be governed by and interpreted as to substantive matters in accordance with the applicable laws of the State of Delaware (excluding its choice of law rules). 8. ASSIGNMENT. No portion of this Agreement or any right or obligation hereunder can be assigned, in whole or in part, by any Stockholder hereto without the prior written consent of SAIC unless the assignee executes a document substantially similar to this Agreement, intending to be legally bound thereby, and delivers same to SAIC. SAIC may not assign this Agreement and any attempt to do so will be void and of no effect. 9. WAIVER. No waiver of, no delay in the exercise of, and no omission to exercise any rights or remedies by any party shall be construed as a waiver by such party of any other rights or remedies that such party may have under this Agreement. -3- 10. NOTICE. Unless otherwise specified herein, any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and shall be deemed to be fully given if personally delivered, if sent by registered mail, by facsimile with an original copy by regular mail, or by telex with receipt acknowledged, to the following addresses: (a) If to SAIC, to: Douglas M. Schrier, Senior Vice President Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego CA 92121 FAX: 619-546-6980 With a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego CA 92121 FAX: 619-535-7992 (b) If to ODS, to: G. Ward Paxton Chairman, President and Chief Executive Officer ODS Networks, Inc. 1101 E. Arapaho Road Richardson, Texas 75081 FAX: 972-301-3841 (c) If to Stockholders, to the address immediately below such Stockholder's name. The foregoing addresses and individuals may be changed by either party by giving to the other party prior written notice of any such change. 11. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement. -4- 12. FURTHER ASSURANCES. Each of the parties hereto agrees that from time to time, at the request of any of the other parties hereto and without further consideration, it will execute and deliver such other documents and take such other action as such other party may reasonably request in order to consummate more effectively the transactions contemplated hereby. 13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and may only be modified by a written instrument executed by an authorized officer of both parties. All proposals, negotiations and representations (if any) made prior, and with reference to the subject matter of this Agreement, are merged herein. This Agreement may be executed in multiple counterparts and each counterpart will be deemed an original, but all counterparts together will constitute a single instrument. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. Neither SAIC, ODS nor any Stockholder shall be bound by any oral agreement or representation, irrespective of when made. IN WITNESS WHEREOF, as of the day first above written, SAIC and ODS have caused this Agreement to be signed by their respective duly authorized officers and each Stockholder and spouse, if any, have caused this Agreement to be signed. SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation By: /s/ Douglas M. Schrier ----------------------------------- Name: Douglas M. Schrier --------------------------------- Title: Senior Vice President -------------------------------- ODS NETWORKS, INC., a Delaware corporation By: /s/ G. Ward Paxton ----------------------------------- Name: G. Ward Paxton --------------------------------- Title: President -------------------------------- -5- STOCKHOLDERS OF ODS NETWORKS, INC. /s/ T. Joe Head -------------------------------------- T. Joe Head --------------------------------- (spouse) /s/ Timothy W. Kinnear -------------------------------------- Timothy W. Kinnear /s/ Judy E. Kinnear --------------------------------- (spouse) /s/ G. Ward Paxton -------------------------------------- G. Ward Paxton /s/ Pat Paxton --------------------------------- (spouse) /s/ Mark A. Paxton -------------------------------------- Mark A. Paxton /s/ Barbara E. Paxton --------------------------------- (spouse) /s/ Michael L. Paxton -------------------------------------- Michael L. Paxton /s/ Kathryn Paxton --------------------------------- (spouse) /s/ Julie Paxton Puckett -------------------------------------- Julie Paxton Puckett --------------------------------- (spouse) -6- EX-99.7 9 EXHIBIT 99.7 STRATEGIC ALLIANCE AGREEMENT Exhibit 99.7 STRATEGIC ALLIANCE AGREEMENT This Strategic Alliance Agreement ("AGREEMENT"), is made effective as of September 25, 1998, by and between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC"), and ODS NETWORKS, INC. a Delaware corporation ("ODS"), who agree as follows: 1. PREFERENTIAL TREATMENT. This Agreement is not an exclusive dealings agreement and either party is free to do business with others with respect to future discrete (i.e., software programs designed to be marketed on an individual program basis and not as a component of another software program) computer network security software programs ("COMPUTER NETWORK SECURITY PROGRAM(S)") created by or for SAIC or ODS; provided, however, that in the event the SAIC executive principally responsible for managing the business activities of the SAIC Software and Systems Group ("SAIC-SSG") determines, in such executive's sole discretion, that any SAIC Computer Network Security Program(s) that have been created exclusively by SAIC employees employed within the SAIC Software and Systems Group which are freely transferable by SAIC to a third party (including ODS) ("SAIC-SSG COMPUTER NETWORK SECURITY PROGRAM(S)") should be licensed, sold, transferred and/or assigned to a third party on an exclusive basis solely for marketing, licensing or otherwise distributing such SAIC-SSG Computer Network Security Program(s) exclusively into the commercial marketplace by the acquiror (the "CONTEMPLATED EXCLUSIVE TRANSFER"), SAIC shall submit the Contemplated Exclusive Transfer to ODS in reasonable detail for its consideration before presenting the Contemplated Exclusive Transfer to other parties. If ODS is interested in consummating the proposed Contemplated Exclusive Transfer with SAIC, the parties shall negotiate in good faith the terms, conditions, prices and other matters related to consummation of such Contemplated Exclusive Transfer. In the event the parties do not reach a basic agreement summarized in a writing signed by both parties within thirty (30) days of the date SAIC discloses the Contemplated Exclusive Transfer to ODS and consummate a definitive agreement concerning the Contemplated Exclusive Transfer within sixty (60) days of the date SAIC discloses the Contemplated Exclusive Transfer to ODS, SAIC will be free to deal with other parties with respect to the Contemplated Exclusive Transfer. All information disclosed by SAIC with respect to the Contemplated Exclusive Transfer, including the fact that SAIC is considering a Contemplated Exclusive Transfer, constitutes Confidential Information subject to the provisions of Article 3 of this Agreement. The provisions of this Section 1 shall apply only to the SAIC-SSG and not to any other business units, groups, joint ventures, subsidiaries or affiliates of SAIC. 2. EXPRESSION OF DESIRES. The parties hereby express their mutual desire, but no legal obligation, to use their respective best efforts to generate, within two (2) years of the date of this Agreement, at least $25 million in combined revenues from (i) sales of any ODS products and/or services initiated by SAIC as well as from systems integration and consulting projects conducted by SAIC or its subsidiaries and affiliates involving ODS products and/or services whether -1- such revenues arise from this Agreement, the PartnersPlus Agreement between the parties of even date herewith or the respective contracts of the parties and/or their resellers, and (ii) sales of the computer network security programs presently known as the Computer Misuse and Detection System ("CMDS"), Vulnerability Assessment System ("VAS"), Audit Monitoring and Intrusion Detection System ("AMIDS") and Malicious Code Detection and Eradication System ("MCDES") initiated by ODS and its resellers (excluding the sales of such products and/or services by SAIC which shall be accounted for in clause (i) of this Section 2); provided, however, that neither party shall be liable to the other nor shall there be any economic consequence if the parties fail to achieve this goal or even if they fail to use their best efforts in pursuit of this goal. THE PARTIES RECOGNIZE THAT THE AFOREMENTIONED EXPRESSION OF DESIRE IS NOT LEGALLY ENFORCEABLE AND THAT NEITHER PARTY SHALL MAKE A CLAIM, DIRECTLY OR INDIRECTLY, AGAINST THE OTHER WITH RESPECT TO THE FOREGOING. 3. CONFIDENTIAL INFORMATION. 3.1 The parties anticipate that under this Agreement it may be necessary for either party to transfer to the other information of a confidential and/or proprietary nature concerning the contemplated exclusive transfer ("CONFIDENTIAL INFORMATION"). The disclosing party shall clearly identify Confidential Information at the time of disclosure by being either marked with a legend clearly indicating that it is confidential or proprietary and all oral information that they reduce to writing and is identified as confidential or proprietary and such writing is given to the recipient within fifteen (15) days of the date of the oral disclosure. Any information otherwise provided shall be deemed to not be confidential or proprietary. 3.2 Each of the parties agree that it shall use the same efforts to protect such Confidential Information as are used to protect its own Confidential Information. Disclosures of such Confidential Information shall be restricted to those individuals who are directly participating in the proposal and contracting efforts hereunder. 3.3 Neither party shall make any reproductions, disclosure or use of such Confidential Information except in performing its obligations under this Agreement. 3.4 The limitations on reproduction, disclosure or use of Confidential Information shall not apply to, and neither party shall be liable for reproduction, disclosure or use of Confidential Information with respect to which any of the following conditions exist: (a) If, prior to the receipt thereof under this Agreement, it has been developed independently by the party receiving it, or was lawfully known to the party receiving it, or has been lawfully received from other sources, including the Customer, provided such other source did not receive it due to a breach of this Agreement; (b) If, subsequent to the receipt thereof under this Agreement, (i) it is published by the party furnishing it or is disclosed by the party furnishing it to others, including the Customer, without restriction, or (ii) it has been lawfully obtained by the party receiving it from other sources, provided such other source did not receive -2- it due to a breach of this Agreement, or (iii) if such information otherwise comes within the public knowledge or becomes generally known to the public; or (c) If any part of the Confidential Information has been or hereafter shall be disclosed in a United States patent issued to the party furnishing the Confidential Information hereunder, then, after the issuance of said patent, the limitations on such Confidential Information as disclosed in the patent shall be only that afforded by the United States Patent Laws. 3.5 Neither the execution and delivery of this Agreement, nor the furnishing of any Confidential Information by either party shall be construed as granting to the other party either expressly, by implication, estoppel, or otherwise, any license under any invention, patent, trademark, or copyright now or hereafter owned or controlled by the party furnishing same. 3.6 Each of the parties shall identify a person responsible for receipt of Confidential Information subject to this Article. 4. INDEPENDENT CONTRACTORS. The parties hereto intend that the relationship between them created by this Agreement shall be that of independent contractors and that the relationship shall continue as such as long as this Agreement remains in effect. Nothing contained in this Agreement shall be construed to constitute either party as a partner, employee or agent of the other, and no employee or agent of either party shall be or be deemed to be the employee or agent of the other. 5. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO ONE ANOTHER OR TO ANY THIRD PARTY IN CONTRACT, TORT OR OTHERWISE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION, LOST BUSINESS PROFITS OR LOSS, DAMAGE OR DESTRUCTION OF DATA. 6. TERMINATION. This Agreement shall have an initial term of two (2) years. Thereafter either party shall have the right to terminate this Agreement at any time, with or without cause, effective upon thirty (30) day's written notice to the other party. The termination of this Agreement shall not terminate the obligations under Section 3 hereof or impact any transactions entered by the parties previous thereto which shall continue according to the provisions established by the parties for same. 7. ARBITRATION OF DISPUTES. The parties agree that any controversy or claim (whether such controversy or claim is based upon or sounds in statute, contract, tort or otherwise) arising out of or relating to this Agreement, any performance or dealings between the parties, or any dispute arising out of the interpretation or application of this Agreement, which the parties are not able to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant to the American Arbitration Association's Commercial Arbitration Rules then in effect and judgment upon the award rendered by the arbitrator shall be entered in any court having jurisdiction thereof and such arbitrator shall have the authority to grant injunctive relief in a form similar to that -3- which a court of law would otherwise grant. The arbitrator shall be chosen from a panel of licensed attorneys having at least fifteen (15) years of professional experience who are familiar with the subject matter of this Agreement. The arbitrator shall be appointed within thirty (30) days of the date the demand for arbitration was sent to the other party. Discovery shall be permitted in accordance with the Federal Rules of Civil Procedure. If an arbitration proceeding is brought pursuant to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements incurred in addition to any other relief to which such party may be entitled. 8. CHOICE OF LAW. The Agreement and the performance or breach thereof shall be governed by and interpreted as to substantive matters in accordance with the applicable laws of the State of Delaware (excluding its choice of law rules). 9. ASSIGNMENT. No portion of this Agreement or any right or obligation hereunder can be assigned, in whole or in part, by either party hereto without the prior written consent of the other party. 10. WAIVER. No waiver of, no delay in the exercise of, and no omission to exercise any rights or remedies by either party shall be construed as a waiver by such party of any other rights or remedies that such party may have under this Agreement. 11. NOTICE. Unless otherwise specified herein, any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and shall be deemed to be fully given if personally delivered, if sent by registered mail, by facsimile with an original copy by regular mail, or by telex with receipt acknowledged, to the following addresses: (a) If to SAIC, to: Douglas M. Schrier, Senior Vice President Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego CA 92121 FAX: 619-546-6980 With a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego CA 92121 FAX: 619-535-7992 (b) If to ODS, to: G. Ward Paxton -4- Chairman, President and Chief Executive Officer ODS Networks, Inc. 1101 E. Arapaho Road Richardson, Texas 75081 FAX: 972-301-3841 The foregoing addresses and individuals may be changed by either party by giving to the other party prior written notice of any such change. 12. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement. 13. FURTHER ASSURANCES. Each of the parties hereto agrees that from time to time, at the request of any of the other parties hereto and without further consideration, it shall execute and deliver such other documents and take such other action as such other party may reasonably request in order to consummate more effectively the transactions contemplated hereby. 14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and may only be modified by a written instrument executed by an authorized officer of both parties. All proposals, negotiations and representations (if any) made prior, and with reference to the subject matter of this Agreement, are merged herein. This Agreement may be executed in two (2) or more counterparts and each counterpart will be deemed an original, but all counterparts together will constitute a single instrument. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. Neither SAIC nor ODS shall be bound by any oral agreement or representation, irrespective of when made. IN WITNESS WHEREOF, as of the day first above written, SAIC and ODS have caused this Agreement to be signed by their respective duly authorized officers. SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation By: /s/ Douglas M. Schrier ----------------------------------- Name: Douglas M. Schrier --------------------------------- Title: Senior Vice President -------------------------------- -5- ODS NETWORKS, INC., a Delaware corporation By: /s/ G. Ward Paxton ----------------------------------- Name: G. Ward Paxton --------------------------------- Title: President -------------------------------- -6- EX-99.8 10 EXHIBIT 99.8 Exhibit 99.8 CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R Sections 200.80(b)(4), 200.83 and 240.24b-2 SOFTWARE ROYALTY, GRANT BACK AND IMPROVEMENTS LICENSE AGREEMENT This Software Royalty, Grant Back and Improvements License Agreement (this "AGREEMENT") is made effective as of September 25, 1998 (the "EFFECTIVE DATE") by and between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION ("SAIC"), a Delaware corporation doing business at 10260 Campus Point Drive, San Diego, California 92121-1578 and ODS NETWORKS, INC. ("ODS"), a Delaware corporation doing business at 1101 E. Arapaho Road, Richardson, Texas 75081. WHEREAS, pursuant to an Asset and Securities Purchase Agreement between the parties of even date herewith (the "PURCHASE AGREEMENT"), SAIC transferred and assigned certain intellectual property rights and other assets to ODS; WHEREAS, SAIC wishes to obtain limited licenses from ODS with respect to SAIC customers or licensees (as specified herein); WHEREAS, the parties desire to provide one another with improvements to certain software products; and In consideration of the mutual promises hereinafter set forth and in the Purchase Agreement, SAIC and ODS, intending to be legally bound, do hereby agree as follows: 1. DEFINITIONS. "AMIDS" means the Audit Monitoring and Intrusion Detection System software program; "CMDS" means the Computer Misuse and Detection System software program; "CONVEYED ITEMS" means the software programs contained on the CD-ROMs attached to EXHIBIT 1.1 (a) of the Purchase Agreement that are also known as "Computer Misuse and Detection System" ("CMDS"), "Vulnerability Assessment System" ("VAS"), "Audit Monitoring and Intrusion Detection System" ("AMIDS") and "Malicious Code Detection and Eradication System" ("MCDES"), and the documentation pertaining to each of the foregoing software programs; "IMPROVEMENTS" means any material enhancements, modifications, or customization made by or for SAIC or ODS to the principal functions and features of AMIDS (principal functions and features: integration of intrusion detection products to facilitate a common base for analysis and reporting), CMDS (principal functions and features: detection of the misuse of internal computer network systems), MCDES (principal functions and features: integration of malicious code detection and eradication tools to facilitate a common base for analysis and reporting) or VAS (principal functions and features: integration of vulnerability assessment tools to facilitate a common base for analysis and reporting) that are developed within the two (2) year period subsequent to the Effective Date and specifically include any enhancements dealing with Year 2000 Compliance; provided, however, that Improvements shall not include (a) any software programs that incorporate AMIDS, CMDS, MCDES or VAS (i) without materially modifying the principal functions or features of AMIDS, CMDS, MCDES or VAS or (ii) whose primary function differs from the purpose of AMIDS, CMDS, MCDES or VAS nor (b) any enhancements, modifications or customization made for any government entities that have prohibitions relating to transfer of such enhancements, modifications or customization, whether by contract or by statute or federal regulation, until such prohibitions are lifted. Any enhancement, modification or customization under (b) that becomes transferable shall be deemed an Improvement as of the date that the prohibition is no longer effective; "MCDES" means the Malicious Code Detection and Eradication System software program; "VAS" means the Vulnerability Assessment System software program; "YEAR 2000 COMPLIANT/COMPLIANCE" means that if all hardware and software products used with a software program properly exchanges date data with such software program, such software program will (i) handle date information before, during, and after January 1, 2000, including but not limited to accepting date input, providing date output, and performing calculations on dates or portions of dates; (ii) function accurately and without interruption before, during, and after January 1, 2000, without any change in operations associated with the advent of the new century; (iii) respond to two-digit year-date input in a way that resolves the ambiguity as to century in a disclosed, defined, and predetermined manner, and (iv) store and provide output of date information in ways that are unambiguous as to century. Notwithstanding the foregoing, Year 2000 Compliance does not mean that (i) such software program will identify or remedy Year 2000 problems in third party systems or other products or applications not provided or supplied by the supplier, or (ii) the software program will operate with the date information it receives; thus, if incorrect date information is provided by the user, the system or from any other external product or other source, this information will be used by such software program software program as received. Year 2000 Compliance does not include resolving problems caused by such external sources; and "Y2K CUSTOMER" means any existing customers that SAIC may have an obligation to provide a Year 2000 Compliant version of the Conveyed Items. -2- 2. CONVEYED ITEMS AND IMPROVEMENTS ROYALTY. Excepting any Conveyed Items and/or Improvements for which SAIC receives a Finder's Fee as defined in and pursuant to the PartnersPlus Agreement between the parties of even date herewith, with respect to any license of or other grant of a right to use any Conveyed Items and/or any Improvements or any portion thereof by the United States Government that occurs on and after the date of this Agreement and during the first two (2) years after the date of this Agreement, ODS shall pay SAIC a royalty in an amount equal to [***] of all amounts paid to ODS pertaining to such license or rights. ODS shall pay the royalty to SAIC within ninety (90) days after the date that ODS invoices the United States Government or ODS' customer, if the ODS customer is invoicing the United States Government, with respect to any Conveyed Items and/or any Improvements or any portion thereof. ODS shall not deliberately bundle or market Conveyed Items and/or Improvements in a manner that is designed to or that has the effect of lowering the royalty fees to be paid by ODS to SAIC. If ODS or SAIC become aware of such effect, and ODS is notified by SAIC of such effect or in the event ODS otherwise becomes aware of such effect, ODS shall immediately take appropriate corrective action. Upon providing reasonable advance notice to ODS, SAIC shall be entitled to inspect ODS' books and records during ODS' normal business hours to audit ODS' compliance with this provision for royalty payments. 3. DELIVERY OF IMPROVEMENTS. Each party shall deliver a copy of the Conveyed Items containing any Improvements (the "IMPROVED CONVEYED ITEMS") to the other party within ten (10) days of the occurrence of (a) the release of a beta-version of the Improved Conveyed Items to a customer or prospective customer, (b) the release of a commercial version of the Improved Conveyed Items or (c) when any prohibition on the transfer of an Improvement is no longer effective. In addition, each party shall provide the other with a then current copy of any Improved Conveyed Items on the first day of the ninth, eighteenth and twenty-fourth month following the date of this Agreement. 4. GRANT OF LICENSES. (a) SAIC CONVEYED ITEM LICENSES. ODS hereby grants SAIC a worldwide, perpetual, royalty-free, non- transferable, limited exclusive license to copy, modify, transfer, license and market the Conveyed Items and any Improvements specified below to be used in conjunction with the licensing, support, maintenance, enhancement, modification or customization of said Conveyed Items and Improvements to, and only to, the customers as follows: (i) VAS, AMIDS and MCDES for the Defense Information System Agency (DISA) under the Basic Ordering Agreement INFOSEC Technical Services Contract (ITSC) No. DCA100-95-D-0104. (ii) CMDS for the customer known by the parties as Ritz Premier; (iii) CMDS to provide maintenance, upgrades and revisions of CMDS for the customer whose identity is confidential (P.O. Numbers 4600004406, 4600005370 - ------------------- *** Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 24b-2. -3- and 4600003960); provided, however, that the license granted hereunder shall not be perpetual but shall continue until the expiration of the SAIC's obligations under the aforesaid purchase orders; and (iv) CMDS to provide replacement copies of CMDS to any customer or licensee of CMDS pursuant to any license, purchase order, agreement, contract or other document entered by SAIC and such customer or licensee prior to the date hereof. ; provided, however, that SAIC shall not issue new licenses of Conveyed Items to the foregoing maintenance customers, any such new licenses shall be provided pursuant to the PartnersPlus Agreement between the parties of even date herewith. (b) SAIC LICENSE TO YEAR 2000 COMPLIANT IMPROVEMENTS BY ODS. With respect any Y2K Customers, to the extent that Year 2000 Compliant Improvements are available from ODS, ODS hereby grants SAIC a worldwide, perpetual, royalty-free, non-transferable, limited license to copy, modify, transfer, license and/or provide any such Year 2000 Compliant Improvements in conjunction with the licensing, support, maintenance, enhancement, modification or customization of the software provided of or to the Y2K Customer and for SAIC to undertake any activities deemed necessary by SAIC or desirable with respect to the such Year 2000 Compliant Improvements to, and only to, Y2K Customers. (c) INTERNAL & CONSULTING SAIC CONVEYED ITEMS AND IMPROVEMENTS LICENSE. (i) For a period of two (2) years following the date of this Agreement, ODS hereby grants SAIC a worldwide, royalty-free, non- transferable, limited license to copy, modify and use CMDS and any Improvements to CMDS in conjunction with SAIC's (and SAIC's subsidiaries and affiliates) internal computer systems. (ii) For a period of two (2) years following the date of this Agreement, ODS hereby grants SAIC's Software and Systems Group ("SAIC-SSG") a worldwide, royalty-free, non-transferable, limited license to make up to fifty (50) copies of VAS and any Improvements to VAS and to modify and use VAS and any Improvements to VAS in conjunction with SAIC-SSG's performance of consulting, testing, monitoring and evaluation services for customers or prospective customers of SAIC-SSG, provided that the customer or prospective customer is not permitted to retain any such copy of VAS and/or any Improvements to VAS after the services have been performed by SAIC-SSG. 5. OWNERSHIP OF IMPROVEMENTS To the extent assignable, ODS shall have sole ownership of any Improvements. SAIC further agrees, at no expense to SAIC, to execute or have executed any necessary documents, reasonably requested by ODS, to perfect such ownership and to allow ODS to file copyright and/or patent applications on such Improvements. 6. DISPUTES CONCERNING IMPROVEMENTS The parties recognize that they cannot presently predict or determine everything in the future that may constitute an enhancement, modification, or customization of the principal functions and features of the Conveyed Items and -4- therefore agree that in the event the parties disagree whether an Improvement has been created and before the dispute is referred to arbitration, a vice president or higher titled representative of each party will meet and bargain in good faith for a period of not less than thirty (30) days in an effort to resolve the disagreement. 7. EXCLUSIVE WARRANTIES. (a) SAIC IMPROVEMENTS. Any Improvements provided to ODS by SAIC pursuant to this Agreement are provided "AS IS" with any and all faults and with no warranty against title, patent, trademark, copyright, trade secret infringement or other infringement of the rights of a third party. (b) CONVEYED ITEMS AND IMPROVEMENTS PROVIDED BY ODS TO SAIC. The Conveyed Items and Improvements provided to SAIC by ODS pursuant to this Agreement are provided "AS IS" with any and all faults and with no warranty against title, patent, trademark, copyright, trade secret infringement or other infringement of the rights of a third party. SINCE ODS RECEIVED THE CONVEYED ITEMS VIA THE PURCHASE AGREEMENT FROM SAIC, ODS MAKES NO REPRESENTATION OR GUARANTEE WHATSOEVER WITH RESPECT TO THE CONVEYED ITEMS OR IMPROVEMENTS LICENSED TO SAIC PURSUANT TO THIS AGREEMENT AND ODS SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. (c) MUTUAL PROVISIONS CONCERNING IMPROVEMENTS. WITH RESPECT TO IMPROVEMENTS, NEITHER PARTY MAKES ANY REPRESENTATION OR GUARANTEE WHATSOEVER WITH RESPECT TO ANY IMPROVEMENT AND EACH PARTY SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AS TO THE IMPROVEMENTS. 8. EXPORT REGULATION. The export of commodities or technical data from the United States of America and/or the re-export from foreign countries of commodities or technical data or direct products of technical data of United States of America origin, may be conditioned upon the issuance of an export license by the government of the United States of America. Each party represents that it will not export or re-export any commodities or technical data or direct products of technical data in furtherance of this Agreement unless and until it has complied in all respects with the United States of America Export Control Regulations and all applicable laws and regulations concerning the Conveyed Items or Improvements. 9. ARBITRATION OF DISPUTES. The parties agree that any controversy or claim (whether such controversy or claim is based upon or sounds in statute, contract, tort or otherwise) arising out of or relating to this Agreement, any performance or dealings between the parties, or any dispute arising out of the interpretation or application of this Agreement, which the parties are not able to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant to the American Arbitration Association's Commercial -5- Arbitration Rules then in effect and judgment uponthe award rendered by the arbitrator shall be entered in any court having jurisdiction thereof and such arbitrator shall have the authority to grant injunctive relief in a form similar to that which a court of law would otherwise grant. The arbitrator shall be chosen from a panel of licensed attorneys having at least fifteen (15) years of professional experience who are familiar with the subject matter of this Agreement. The arbitrator shall be appointed within thirty (30) days of the date the demand for arbitration was sent to the other party. Discovery shall be permitted in accordance with the Federal Rules of Civil Procedure. If an arbitration proceeding is brought pursuant to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements incurred in addition to any other relief to which such party may be entitled. 10. CHOICE OF LAW. The Agreement and the performance or breach thereof shall be governed by and interpreted as to substantive matters in accordance with the applicable laws of the State of Delaware (excluding its choice of law rules). 11. ASSIGNMENT. No portion of this Agreement or any right or obligation hereunder can be assigned, in whole or in part, by either party hereto without the prior written consent of the other party. 12. WAIVER. No waiver of, no delay in the exercise of, and no omission to exercise any rights or remedies by either party shall be construed as a waiver by such party of any other rights or remedies that such party may have under this Agreement. 13. NOTICE. Unless otherwise specified herein, any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and shall be deemed to be fully given if personally delivered, if sent by registered mail, by facsimile with an original copy by regular mail, or by telex with receipt acknowledged, to the following addresses: If to SAIC, to: Douglas M. Schrier, Senior Vice President Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego CA 92121 FAX: 619-546-6980 With a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego CA 92121 FAX: 619-535-7992 If to ODS, to: -6- G. Ward Paxton Chairman, President and Chief Executive Officer ODS Networks, Inc. 1101 E. Arapaho Road Richardson, Texas 75081 FAX: 972-301-3841 The foregoing addresses and individuals may be changed by either party by giving to the other party prior written notice of any such change. 14. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement. 15. FURTHER ASSURANCES. Each of the parties hereto agrees that from time to time, at the request of any of the other parties hereto and without further consideration, it will execute and deliver such other documents and take such other action as such other party may reasonably request in order to consummate more effectively the transactions contemplated hereby. 16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and may only be modified by a written instrument executed by an authorized officer of both parties. All proposals, negotiations and representations (if any) made prior, and with reference to the subject matter of this Agreement, are merged herein. This Agreement may be executed in two (2) or more counterparts and each counterpart will be deemed an original, but all counterparts together will constitute a single instrument. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. Neither SAIC nor ODS shall be bound by any oral agreement or representation, irrespective of when made. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first date written above. SCIENCE APPLICATIONS ODS NETWORKS, INC. INTERNATIONAL CORPORATION By: /s/ Douglas M. Schrier By: /s/ G. Ward Paxton ----------------------------- ----------------------------- Name: Douglas M. Schrier Name: G. Ward Paxton ----------------------------- ----------------------------- Title: Senior Vice President Title: President ----------------------------- ----------------------------- -7- EX-99.9 11 EXHIBIT 99.9 Exhibit 99.9 CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F. R. Sections 200.80(b)(4), 200.83 and 240.24b-2 ODS NETWORKS, INC. PARTNERSPLUS AGREEMENT Effective Date: September 25, 1998 BETWEEN: ODS Networks, Inc. 1101 E. Arapaho Road Richardson, TX 75081 (Hereafter "ODS") AND: Science Applications International Corporation. 10260 Campus Point Drive San Diego, CA 92121 (Hereafter "SAIC") EXHIBITS A. PRODUCT LIST PRICES AND DISCOUNTS B. ORDER LEAD-TIMES TABLE OF CONTENTS
Page ---- 1. PURPOSE 2 2. DEFINITIONS 2 3. LICENSE GRANT 3 4. END-USER SUBLICENSE RESTRICTIONS 4 5. TERM 4 6. ORDERING, SCHEDULING, AND FORECASTING 4 7. PRICES, PAYMENT, AND TAXES 5 8. PACKING AND SHIPMENT 6 9. CHANGE CONTROL 6 10. INSPECTION AND TESTING 6 11. PRODUCT SUPPORT 7 12. WARRANTIES 7 13. OUT-OF-WARRANTY REPAIR 9 14. PROPRIETARY INFORMATION 9 16. PATENT, COPYRIGHT AND TRADE SECRET INDEMNIFICATION 11 17. TERMINATION AND CANCELLATION 12 18. INDEMNIFICATION AND INSURANCE 13 19. MOST FAVORED CUSTOMER 13 20. DISPUTE RESOLUTION 14 21. LIMITATION OF LIABILITY 14 22. FINDER'S FEES 14 23. GENERAL 15
-1- 1. PURPOSE This PartnersPlus Agreement and its exhibits (hereby incorporated by reference) (this "Agreement") set forth the agreement of SAIC and ODS with respect to the terms and conditions pursuant to which ODS shall provide Products to SAIC for internal use or distribution by SAIC. This Agreement shall govern ODS, SAIC, and any subsidiary or business unit of SAIC that uses or distributes the Products. This Agreement establishes a non- exclusive relationship between the parties. Accordingly, nothing in this Agreement shall be construed as limiting in any manner ODS' appointment of other dealers, distributors, licensees or agents or SAIC's marketing or distribution activities (except as provided in Articles 14 and 15 hereof). 2. DEFINITIONS 2.1 "EQUIPMENT" PRODUCTS ARE LISTED IN EXHIBIT A AND AS MAY BE REVISED HEREAFTER. 2.2 "CONVEYED ITEMS" MEANS THE SOFTWARE ODS OBTAINED FROM SAIC PURSUANT TO THE ASSET AND SECURITIES PURCHASE AGREEMENT BETWEEN THE PARTIES OF EVEN DATE HEREWITH ("A&SPA") AND WHICH ARE SET FORTH ON THE CD-ROMs ATTACHED THERETO THAT ARE ALSO KNOWN AS "COMPUTER MISUSE AND DETECTION SYSTEM" ("CMDS"), "VULNERABILITY ASSESSMENT SYSTEM" ("VAS"), "AUDIT MONITORING AND INTRUSION DETECTION SYSTEM" ("AMIDS") AND "MALICIOUS CODE DETECTION AND ERADICATION SYSTEM" ("MCDES") AND THE DOCUMENTATION PERTAINING TO EACH OF THE FOREGOING AND/OR ANY IMPROVEMENTS THERETO AS DEFINED IN THE SOFTWARE ROYALTY, GRANT BACK AND IMPROVEMENTS LICENSE AGREEMENT BETWEEN THE PARTIES OF EVEN DATE HEREWITH ("SRGBLA"). 2.3 "LICENSED SOFTWARE" PRODUCTS ARE LISTED IN EXHIBIT A AND AS MAY BE REVISED HEREAFTER. LICENSED SOFTWARE INCLUDES CONVEYED ITEMS. 2.4 "DOCUMENTATION" MEANS VISUAL OR MACHINE READABLE MATERIALS DEVELOPED BY OR FOR ODS OR LICENSED TO ODS FOR USE IN CONNECTION WITH THE EQUIPMENT AND LICENSED SOFTWARE AS WELL AS ALL REVISIONS TO REFLECT CHANGES. 2.5 "PRODUCTS" MEANS EQUIPMENT, LICENSED SOFTWARE, AND DOCUMENTATION. 2.6 "CORRECTION" MEANS CHANGES TO PRODUCTS TO CONFORM TO SPECIFICATIONS. -2- 2.7 "IMPROVEMENT" MEANS AN ADDITION OR CHANGE TO PRODUCTS INTENDED TO IMPROVE PERFORMANCE. 2.8 "ENHANCEMENT" MEANS A NEW FUNCTION OR FEATURE FOR PRODUCTS WHICH PROVIDES A NEW CAPABILITY WHICH MAY BE INCORPORATED BY MODIFICATION OF EXISTING PRODUCTS OR DEVELOPMENT OF NEW PRODUCTS. 2.9 "UPDATE" MEANS A NEW RELEASE LEVEL OF SOFTWARE WHICH INCORPORATES ACCUMULATED CORRECTIONS, IMPROVEMENTS AND ENHANCEMENTS TOGETHER WITH REVISED DOCUMENTATION FOR THE UPDATE. 2.10 "END-USER" MEANS AN ENTITY ACQUIRING PRODUCTS FOR ITS OWN PRODUCTIVE USE. 2.11 "PROPRIETARY INFORMATION" MEANS THAT INFORMATION WHICH THE DISCLOSING PARTY HAS NOT RELEASED PUBLICLY AND WHICH IT CONSIDERS TO BE PROPRIETARY AND/OR CONFIDENTIAL. 2.12 "SPECIFICATIONS" MEANS ODS' PUBLISHED SPECIFICATIONS, DOCUMENTATION AND LITERATURE RELATING TO THE PRODUCTS. 2.13 "NON-CONFORMING PRODUCT" MEANS A PRODUCT WHICH DOES NOT CONFORM TO THE SPECIFICATIONS AND LITERATURE PUBLISHED BY ODS FOR THE PRODUCT. 3. LICENSE GRANT 3.1 LICENSE. Subject to all the terms and conditions of this Agreement, ODS grants to SAIC a nonexclusive, nontransferable, sublicensable license: (i) to distribute Licensed Software only in object and/or executable code form and bundled with (or for use only with) Equipment and/or with SAIC's hardware and software products for SAIC's internal use or for use by End-Users and (ii) to use the Licensed Software only for the purpose of testing or demonstrating to prospective end-users in accordance with documentation provided by ODS. Products are licensed for distribution or internal use only and SAIC is not entitled to receive any source code or source documentation relating to the Licensed Software. 3.2 RETENTION OF TITLE. Notwithstanding anything else, ODS and its licensors retain (i) all title and rights to the Products, all copies and derivative works thereof (by whomever produced), including any Improvements, Enhancements, and Updates, and all related documentation and materials, (ii) all of their service marks, trademarks, trade names or any other designations, and (iii) all copyrights, patent rights, trade secret rights and other proprietary rights in the Products. -3- 3.3 COPYING. Whenever Licensed Software is licensed to permit SAIC to copy the Licensed Software, SAIC may make copies of the Licensed Software in machine readable form together with copies of the Documentation included in the definition of such Licensed Software solely for purposes of distribution of the Products as provided herein. Upon providing reasonable advance notice to SAIC, ODS shall be entitled to inspect SAIC's books and records during SAIC's normal business hours to audit SAIC's compliance with this provision for copying Licensed Software. 4. END-USER SUBLICENSE RESTRICTIONS Unless otherwise agreed by ODS, no distribution or license of Licensed Software by SAIC will be made except pursuant to a written end-user agreement in such form as is mutually satisfactory to ODS and SAIC. 5. TERM This Agreement shall commence on the Effective Date, and shall continue thereafter until the earlier to occur of (i) the date that SAIC no longer holds at least five percent (5%) of the outstanding common stock of ODS, or (ii) thirty (30) days after the date SAIC delivers to ODS written notice of termination; or (iii) the date ODS and SAIC agree in writing to terminate this Agreement; provided, however, that with respect to the provisions of Article 22, this Agreement shall continue in full force and effect for so long as necessary to resolve any matters relating to said Article 22 notwithstanding the occurrence of any event of termination previously stated herein. 6. ORDERING, SCHEDULING, AND FORECASTING 6.1 ORDER. Products will be ordered by individual purchase orders (including change orders, collectively "Orders") issued to ODS from time to time during the term of this Agreement by SAIC. The terms of this Agreement supersede all preprinted terms of Orders, acknowledgments, quotations, invoices and commercial documents and shall be applicable to each Order whether or not this Agreement is specifically referenced in an Order. 6.2 TRANSACTION DESCRIPTION. Each Order shall specify quantity, delivery schedule, destination, price and any special requirements necessary to adequately describe the transaction. 6.3 FACSIMILE ORDERS. ODS may accept and perform against facsimile Orders and SAIC shall promptly confirm such by delivery to ODS of the original written Orders; however, failure by SAIC to so deliver the original written order will not relieve SAIC of its obligations under facsimile orders accepted by ODS. 6.4 PRODUCT LEAD-TIME. Delivery schedules are subject to a minimum lead-time requirement for each type of Product as set forth in EXHIBIT B. If an Order requests earlier delivery, then ODS shall accept the early delivery schedule or offer a different delivery schedule within five (5) business days from receipt of such Order, such different delivery -4- schedule shall be subject to SAIC acceptance, which SAIC will accept within the time period specified in the notice of the different delivery schedule. 6.5 FORECAST. SAIC will provide a non-binding forecast to ODS at least quarterly by the fifteenth (15th) day of the month preceding each calendar quarter for Price List items (as defined in Exhibit A) it anticipates purchasing during the next three (3) month period. The forecast will set forth the ODS part number, description, quantity, and, if known by SAIC at the time of submission of the forecast, anticipated shipping day of each item it anticipates will be purchased. 6.6 RESCHEDULING. SAIC may issue a written change order to reschedule delivery, without additional charge or increase in unit price with written notice at least 30 days prior to the original scheduled ship date and with a ship date no more than 60 days after the original scheduled ship date. Rescheduling a ship date between 29 and 15 days of scheduled ship date is subject to a 10% rescheduling charge. There will be no rescheduling within 15 days of scheduled ship date. In no event will rescheduling exceed 60 days from original scheduled ship date. 6.7 RETURNS. SAIC may return unopened Products or Non-Conforming Products subject to Section 10.4.1 upon the prior written approval of ODS in the form of a Return Material Authorization ("RMA") for credit within 30 days of SAIC's receipt of the Products at no additional charge. Conforming Products returned between 30 and 60 days will require a 15% restocking fee based on the list price of the Products. Any conforming Products shipped to SAIC after 60 days can not be returned for credit. All Products must be returned to ODS' corporate facility in Richardson, Texas and must have an RMA number attached. 7. PRICES, PAYMENT, AND TAXES 7.1 PRICES. The list prices for Products will be ODS' published price on the date of the Order. List prices and discounts for Products in effect on the date of this Agreement are set forth in EXHIBIT A. Prices are F.O.B. Richardson, TX and, subject to Section 8 hereto, include standard packaging and packing suitable for shipment by common carrier. The discount offered to SAIC will, at all times, be in compliance with Section 19 of this Agreement. Price revisions may be made on the ODS Web Site at www.ods.com. 7.1.1 Prices will not be increased by ODS for a period of one (1) year from the date of the last price increase. The prices listed on EXHIBIT A will not be increased by ODS for a period of one (1) year from the date of this Agreement. 7.2 PAYMENT. ODS may invoice SAIC for Products no earlier than the date Products are shipped by ODS. ODS may invoice SAIC for services and other amounts chargeable to SAIC in accordance with this Agreement and the Orders. Each ODS invoice will reference the specific SAIC Order number, if any. -5- 7.2.1 Invoices are due and payable within thirty (30) days from receipt by SAIC provided conforming Products or services have been delivered or provided by ODS. 7.3 TAXES. Taxes applicable to SAIC's Order (excluding taxes based on ODS' net income) shall be separately stated on each invoice. SAIC will provide an exemption certificate when SAIC is exempt from the imposition of any tax. 8. PACKING AND SHIPMENT 8.1 SHIPMENT. ODS shall ship Products, in the absence of written instruction from SAIC, in a manner consistent with ODS' usual shipping practices. 8.2 TRANSPORTATION CHARGES. If SAIC directs the use of specific carriers or premium mode of transportation or packaging, SAIC will pay the incremental charges, if any. 9. CHANGE CONTROL 9.1 CONTROL. ODS shall deliver to SAIC Products which meet the Specifications for same. ODS shall not make or incorporate any changes to Products contained in orders which affect form, function, interface, interchangeability, integration with SAIC Products, reliability or maintainability without SAIC's prior written approval, which shall not be unreasonably withheld. 9.1.1 Other types of changes may be incorporated into Products at ODS' expense without prior written notice provided the unit price to SAIC is not increased because of such changes. 10. INSPECTION AND TESTING 10.1 ODS INSPECTION. ODS shall manufacture, inspect and test Products to assure conformance with the Specifications and in accordance with the current ODS Quality Assurance Manual prior to shipment to SAIC. 10.2 PRODUCT FAILURE. If SAIC submits certain Products which have failed during SAIC test attempt or during normal operation along with information describing failure, ODS shall promptly investigate and attempt to determine the nature and cause of the failure and shall take appropriate corrective action to prevent reoccurrence of a diagnosed failure. 10.3 PRODUCT TESTING. ODS' manufacture and testing of Products to be delivered to SAIC may be witnessed by SAIC at ODS' facility at all reasonable times, on a noninterference basis. 10.4 ACCEPTANCE INSPECTION. SAIC shall conduct acceptance inspection within thirty (30) days of receipt of Products. The failure of the SAIC to conduct this inspection within said thirty (30) days constitutes acceptance. -6- 10.4.1 In the event of a failure, SAIC will contact ODS for a RMA prior to the return of defective items for repair. SAIC will furnish the following information, ODS part number, SAIC contact with phone number, return address, part serial number, quantities, and description of defect or failure. 10.4.2 No Trouble Found (NTF): In the event ODS determines after inspection and testing of a Product returned as defective or non-conforming that such was NTF, then ODS will invoice SAIC $150.00 for each item tested. 11. PRODUCT SUPPORT 11.1 PERSONNEL. All technical services shall be performed by qualified personnel who are experienced with the subject matter of the services to be provided. 11.2 TELEPHONE TECHNICAL SUPPORT SERVICES. Technical support services ordered by SAIC will be provided in accordance with the following: 11.2.1 Technical support will be available from ODS to SAIC during ODS' normal business hours (8:00 a.m. to 6:00 p.m. CST time, Monday through Friday, national holidays excepted) for minor problems and technical assistance. When an emergency or major problem is reported or technical assistance is needed outside of ODS' normal business hours, pager coverage will be provided by ODS. 11.2.2 ODS will provide SAIC with technical support within thirty (30) minutes after ODS is notified during ODS' normal business hours and within one (1) hour after ODS has been notified outside ODS' normal business hours. 11.3 ON-SITE AND ADDITIONAL SUPPORT SERVICES. ODS offers numerous NETShield service and support programs (as currently described at www.ods.com/support/sup_1001.shtml). SAIC may order and purchase any applicable service program from ODS at a mutually agreed upon discount from list prices. Otherwise, SAIC will pay ODS time and material charges and reimburse reasonable travel and living expenses incurred for on-site technical assistance requested by SAIC. 11.4 CONSULTING AND TRAINING SERVICES. ODS shall provide consulting and training services generally offered by ODS. All such consulting and training services shall be billed on a time and materials basis unless the parties expressly agree otherwise in writing. 12. WARRANTIES 12.1 EQUIPMENT. ODS warrants Equipment shall meet the Specifications and be free of defects in materials and workmanship, under normal use and service, for a period of twelve (12) months from the date of shipment. This warranty does not cover damage during the -7- warranty period from improper installation, misuse, accident or modifications or repairs by unauthorized persons. 12.1.1 Third party items purchased through ODS but not incorporated into the Products will carry that item's warranty as provided by the original manufacturer. 12.2 SOFTWARE. 12.2.1 ODS warrants that Licensed Software (excepting Conveyed Items), for twelve (12) months from the date of shipment, in the unaltered form provided by ODS, will (i) meet the Specifications for such Licensed Software and (ii) will interface and operate with Equipment specified for such Licensed Software. 12.2.2 Other than the Conveyed Items, ODS represents it has title or sufficient rights to Licensed Software and Proprietary Information to grant the licenses to SAIC. 12.3 SOLE OBLIGATION. ODS' SOLE OBLIGATION UNDER THIS WARRANTY PROVISION WILL BE TO PROVIDE THE REMEDIES DESCRIBED IN THIS ARTICLE 12. EXCEPT FOR THE EXPRESSED WARRANTIES STATED IN THIS ARTICLE 12, ODS DISCLAIMS ALL WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, WITH RESPECT TO ITS PRODUCTS AND SERVICES (INCLUDING CONVEYED ITEMS), INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE. 12.4 MEDIA WARRANTY. ODS warrants the tapes, diskettes or other media to be free of defects in materials and workmanship under normal use for 90 days from the Commencement Date. 12.5 NO VIRUSES. ODS is not aware of, and will take all commercially reasonable measures to identify and eliminate, any viruses from any media or other delivery systems used in the delivery to SAIC of any Products (excepting Conveyed Items) hereunder; for purposes of this section, a "virus" is an extraneous and undocumented potentially damaging code or program the effect of which may be the destruction of computer data or the permanent or temporary disabling of a computer system, including but not limited to "time bombs," "logic bombs," and other computer viruses. 12.6 NO DISABLING DEVICES. ODS is not aware of, and shall take all commercially reasonable measures to identify and eliminate any security mechanisms imbedded in the Products (excepting Conveyed Items), including but not limited to, copy protect mechanisms, encryptions, time-activated disabling devices or other codes, instructions or devices which may disable the Products or other software or erase or corrupt data. -8- 12.7 SERVICES WARRANTY. ODS warrants that its technical support, training and consulting services will be performed consistent with generally accepted industry standards. This warranty shall be valid for 90 days from performance of service. 12.8 YEAR 2000. ODS warrants that each Product (excepting Conveyed Items) will promptly and properly perform all of the functions described in the Specifications without any degradation in the performance or features of the Product before, upon the occurrence of, during and after calendar year 2000, it being understood and agreed that this warranty provision will expressly continue until December 31, 2002 whether or not software or hardware maintenance services are purchased by SAIC (the "Year 2000 Warranty"). This warranty will continue until December 31, 2002. In the event of ODS' breach of this Year 2000 Warranty, ODS will repair or replace any nonconforming component, at ODS' expense within five (5) days of ODS' receipt of a written request from SAIC. SAIC may require ODS to refund all of the amounts paid to ODS for Products distributed by SAIC and, with respect to Products used internally by SAIC, the amount equal to all payments to ODS depreciated on a straight-line basis over five years for nonconforming Product returned to ODS by SAIC under this Agreement within ten (10) days after the date SAIC determines that the Product does not perform as required hereunder and ODS has not cured the nonconformity in the time permitted. Notwithstanding the foregoing, SAIC acknowledges and agrees that (i) the Product does not identify or remedy Year 2000 problems in third party systems or other products or applications not provided or supplied by ODS and (ii) the Product operates with the date information it receives; thus, if incorrect date information is provided by the user, the system or from any other external product or other source, this information will be used by the Product as received. The foregoing Year 2000 Warranty of ODS shall not apply to Year 2000 problems caused by such external sources. 12.9 NO CONFLICT. ODS represents and warrants that it is under no obligation or restriction, nor will it assume any such obligation or restriction that does or would in any way interfere or conflict with, or that does or would present a conflict of interest concerning, the services to be performed or Products to be delivered by ODS under this Agreement. 13. OUT-OF-WARRANTY REPAIR 13.1 ODS shall provide out-of-warranty repair and refurbishment services for Equipment at the then prevailing rates if such Equipment is not covered by an ODS service and support program pursuant to Section 11.3 of this Agreement. SAIC shall issue an Order authorizing repair and/or refurbishment and will ship Products to ODS freight prepaid. ODS shall complete services and return Products to SAIC within thirty (30) days of receipt. SAIC shall have risk of loss until returned Products are received by ODS. ODS shall have risk of loss from receipt of returned Products until repaired or replaced Products are received by SAIC. 13.1.1 ODS warrants repaired Equipment will conform to applicable Specifications and be free from defects in material and workmanship for a period of ninety (90) days from ODS shipment. 14. PROPRIETARY INFORMATION -9- 14.1 All Proprietary Information disclosed by either party to the other in tangible form shall be clearly marked "Proprietary", "Confidential", or "Restricted" or with a similar legend. If Proprietary Information is disclosed in other than tangible form, then the disclosing party shall inform the receiving party that the information is Proprietary Information at the time of disclosure and shall describe such information in writing delivered to the receiving party within fifteen (15) days after disclosure to be entitled to enforce the rights and obligations under this section. 14.2 Neither party shall disclose any Proprietary Information which it does not have the right to disclose and shall defend and indemnify the receiving party against any claim or liability resulting from breach of this obligation. 14.3 The disclosing party shall retain title to its Proprietary Information. 14.4 Proprietary Information shall be protected against disclosure to unauthorized persons using the same standard of care as the receiving party uses to protect its own Proprietary Information of equivalent importance, but in no event less than reasonable care. 14.5 The obligation not to disclose Proprietary Information shall not apply to Proprietary Information: (i) already known by or available to the receiving party at the time of disclosure; (ii) independently developed by the receiving party or an affiliated entity and not derived from any Proprietary Information supplied by the disclosing party; (iii) known or available to the public, or which may become available to the public, except where such knowledge or availability is the result of an unauthorized disclosure by the receiving party; (iv) disclosed to the receiving party or to an affiliated entity without a nondisclosure restriction by a third party having the right to disclose; (v) made available by the disclosing party to a third party without a nondisclosure restriction; or (vi) to the extent required to be disclosed by law, regulation, court order or other legal process provided the disclosing party is given prior written notice and the opportunity to intervene to protect its interest in nondisclosure. Notwithstanding the above and subject to the provisions of the A&SPA and the agreements provided for therein, ODS Proprietary Information includes ODS' rights in the Conveyed Items and Improvements created by ODS or any portion thereof subject to SAIC retaining the right to freely use for any purpose the residuals resulting from access to or work with any Conveyed Items or Improvements created by SAIC so long as such residuals are not used to create computer programs that perform substantially the same functions in substantially the same way, to achieve the same or substantially the same result as the Conveyed Items or Improvements created by ODS. The term "residuals" means technical information related to any Conveyed Items or Improvements created by SAIC in non-tangible form, which may be retained by persons who have had access to any Conveyed Items or Improvements created by SAIC, including ideas, concepts, know-how, or techniques contained therein. Neither party shall have any obligation to limit or restrict the assignment of such persons or to pay royalties for any work resulting from the use of residuals. Nothing in the foregoing shall, however, be deemed to be the grant of a license under the copyrights and patent application conveyed under the A&SPA. -10- 15. SAIC OBLIGATIONS 15.1 The following restrictions do not apply to the license grants under the SRGBLA. SAIC agrees not to (i) disassemble, decompile or otherwise reverse engineer the Products or otherwise attempt to learn the source code, structure, algorithms or ideas underlying the Products except as may be necessary to achieve interoperability between the Software and another independently created software program, (ii) rent, lease or otherwise provide temporary access to a Product, (iii) take any action contrary to ODS' or its licensors' end-user license agreement (which ODS shall provide to SAIC on a current edition basis as and when issued) except as allowed under this Agreement (iv) copy, alter or modify the Products except as may be necessary to achieve interoperability between the Products and another independently created software program or (v) allow others to do any of the foregoing. 15.2 SAIC will be responsible for all technical support of its customers; ODS will provide technical support and assistance to SAIC pursuant to ODS's standard support and maintenance terms and conditions. In its distribution efforts, SAIC will use the then current names, marks and designations used by ODS for the Products ("Marks") but will not represent or imply that it is ODS or is a part of ODS; provided that all advertisements and promotional materials, packaging and anything else bearing a Mark shall identify ODS as the Mark owner and Product manufacturer and shall be subject to prior written approval of ODS, which approval shall not be unreasonably withheld, and, provided further, that no other right to use any name or designation is granted by this Agreement. SAIC also agrees not to use or contest, during or after the term of this Agreement, any name, mark or designation used by ODS anywhere in the world (or any name, mark or designation similar thereto). SAIC acknowledges and agrees that all use of the Marks by SAIC shall inure to the benefit of ODS. 15.3 SAIC agrees to keep ODS informed as to any problems encountered with the Products and any resolutions arrived at for those problems, and to communicate promptly to ODS any and all modifications, design changes or improvements of the Products suggested by any customer, employee or agent. 15.4 SAIC agrees in all cases, to deliver all components of the Products to End-Users thereof; such components shall include, without limitation, software disks or other media bearing labels, ODS's or its licensors' end user manuals and documentation, ODS's or its licensors' end user license agreements and, at the option of SAIC, advertising and promotional materials supplied by ODS. 15.5 SAIC agrees to keep for three (3) years after termination of this Agreement records of all Product sales and customers sufficient to adequately administer a recall of any Product and to fully cooperate in any decision by ODS to recall, retrieve and/or replace any Product. 16. PATENT, COPYRIGHT AND TRADE SECRET INDEMNIFICATION 16.1 INDEMNIFICATION FOR INFRINGEMENT. For the purposes of this Article 16, the term "Products" shall not include any "Conveyed Items." To the extent not proximately caused -11- by SAIC, ODS, at its own expense, will defend, indemnify and hold SAIC and its directors, officers, employees and agents harmless against claims or actions (and all related costs and expenses as and when incurred) alleging that Products infringe a patent, copyright or misappropriate trade secrets or other intellectual property rights of a third party provided SAIC (i) gives ODS prompt written notice of the claim or action, (ii) permits ODS to defend or settle such claim or action and (iii) provides reasonable assistance to ODS in defending or settling the claim or action. SAIC reserves the right, at its expense, to participate in defense of any claim or action through counsel selected by SAIC. SAIC's rights under this Article extend to ODS Products only and do not extend to third-party items not incorporated into the Products. The foregoing obligation of ODS does not apply with respect to Products (i) specially made by ODS to the specifications of SAIC, (ii) which are modified by other than ODS after their shipment by ODS if the alleged infringement relates to such modification, (iii) combined by parties other than ODS with other products, processes or materials where the alleged infringement relates to such combination, or (iv) where SAIC continues allegedly infringing activity after being notified thereof or after being informed by ODS of the availability of modifications (at no expense to SAIC) that would have avoided the infringement. 16.2 INFRINGEMENT. As to any Product, which is or, in the opinion of ODS, may become subject to a claim of infringement or misappropriation and to the extent not proximately and directly caused by SAIC, ODS may elect to (i) obtain the right for continued sale and/or use by SAIC, or (ii) replace or modify the Product to avoid such claim. If neither of the aforementioned are completed promptly, ODS promptly shall refund all amounts paid by SAIC with respect to Products distributed by SAIC and, with respect to Products used internally by SAIC, the depreciated amount on a straight-line five year basis, relating to the infringing Product, in either case, such refund shall be paid to SAIC within ten (10) days after the return of the Products to ODS. 17. TERMINATION AND CANCELLATION 17.1 ODS DEFAULT. This Agreement or any Order(s), in whole or in part, shall be deemed canceled for default of ODS if a material default is not cured within thirty (30) days from SAIC's written notice describing such material default and specifying the Agreement or the Order(s) to be canceled. 17.2 SAIC DEFAULT. This Agreement or any Order(s), in whole or in part, at ODS' election may be canceled for default of SAIC if a Material Default by SAIC is not cured within thirty (30) days from ODS' written notice describing such Material Default and specifying that this Agreement and/or the Order(s) to be canceled. "Material Default" by SAIC shall include, but not be limited to: 17.2.1 More than sixty (60) day delinquency in payment of an invoice for conforming Products; 17.2.2 Breach by SAIC of its obligations under Section 14 as to Proprietary Information disclosed by ODS to SAIC; -12- 17.2.3 (i) the commencement of liquidation or winding-up proceedings of SAIC, (ii) voluntarily filing by SAIC of a bankruptcy petition of SAIC, (iii) the granting of an order of relief in an involuntary bankruptcy proceeding filed against SAIC or (iv) any assignment for the benefit of creditors. 17.3 CONTINUATION. Termination or cancellation of this Agreement shall not affect Licensed Software sublicenses granted to End-Users prior to the effective date of termination or cancellation or the continued license and right of SAIC to use Licensed Software and Documentation to support use of Products by the then existing End-Users at the time of termination. 18. INDEMNIFICATION AND INSURANCE 18.1 INDEMNIFICATION. ODS agrees to indemnify SAIC as to any and all third party claims (including damages, all related expenses, attorney fees, court costs and penalties) for personal injury, death or damage to property proximately caused by ODS's actions or omissions in the course of performing this Agreement or from Products (excepting Conveyed Items) delivered by ODS under this Agreement. 18.2 INSURANCE. During the term of this Agreement and for two (2) years thereafter, each party agrees to purchase at its own cost and to maintain at all times during the performance of this Agreement the following insurance coverage: (1) workers' compensation insurance in the amount required by applicable laws and regulations, (2) employer's liability insurance in an amount not less than $500,000 per occurrence, (3) commercial general liability insurance including Premises/Operations, Contractual, Products/Completed Operations and Contractor's Contingent Liability coverages in an amount not less than $2,000,000 per occurrence and in the aggregate, and (4) comprehensive automobile liability insurance covering personal and property damage in an amount not less than $1,000,000 combined single limit. Upon request, each party shall produce substantiation that such insurance coverages are in place to the other, which may be by a letter or other document signed by an insurance professional. All insurance information shall be deemed to be confidential information under the confidentiality section of this Agreement. 19. MOST FAVORED CUSTOMER ODS represents and warrants that the prices, discounts, Product offerings, license provisions and availability, services and other provisions having a financial impact (e.g., a no-charge extended warranty, a no-charge extension of service availability, etc.) ("PROVISIONS") of this Agreement are at least as favorable as those offered by ODS to any other customer of ODS or offered by ODS to a prospective customer. ODS agrees to automatically extend any more favorable Provisions to SAIC on and after the date such provisions are offered by ODS to any customer of ODS or to a prospective customer of ODS subject to the exceptions set forth in the following sentence. The terms of this Agreement shall be deemed to have been modified by such more favorable Provisions subject to the following exceptions: (i) limited special promotions to select customers or potential customers and (ii) unusually large discounts or variance in terms related to select Product offerings to select customers or -13- potential customers designed to encourage such customers to purchase, or purchase additional, products from ODS (collectively referred to as "SPECIAL OFFERINGS"). ODS hereby authorizes SAIC to review its books and records on an annual basis to verify ODS' compliance with this section. Notwithstanding the foregoing, whenever ODS knows or has reason to know that SAIC and another customer of ODS or a prospective customer of ODS are competing for the same project, request for proposal or other contract, ODS shall extend the same or more favorable Provisions to SAIC, even if a Special Offering is involved, it being the intention of the parties that SAIC shall never be placed at a competitive disadvantage in dealing with the Products. 20. DISPUTE RESOLUTION 20.1 ARBITRATION. The parties agree that any controversy or claim (whether such controversy or claim is based upon or sounds in statute, contract, tort or otherwise) arising out of or relating to this Agreement, any performance or dealings between the parties, or any dispute arising out of the interpretation or application of this Agreement, which the parties are not able to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant to the American Arbitration Association's Commercial Arbitration Rules then in effect and judgment upon the award rendered by the arbitrator shall be entered in any court having jurisdiction thereof and such arbitrator shall have the authority to grant injunctive relief in a form similar to that which a court of law would otherwise grant. The arbitrator shall be chosen from a panel of licensed attorneys having at least fifteen (15) years of professional experience who are familiar with the subject matter of this Agreement. The arbitrator shall be appointed within thirty (30) days of the date the demand for arbitration was sent to the other party. Discovery shall be permitted in accordance with the Federal Rules of Civil Procedure. If an arbitration proceeding is brought pursuant to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements incurred in addition to any other relief to which such party may be entitled. 20.2 STATUTE OF LIMITATIONS. No proceeding, regardless of its form, arising out of or in relation to this Agreement, its making or performance, may be commenced by either party more than two (2) years after the cause of action has accrued. 21. LIMITATION OF LIABILITY 21.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO ONE ANOTHER OR TO ANY THIRD PARTY IN CONTRACT, TORT OR OTHERWISE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION, LOST BUSINESS PROFITS OR LOSS, DAMAGE OR DESTRUCTION OF DATA, EVEN IF THE PARTY CAUSING THE DAMAGE HAS BEEN ADVISED AS TO THE POSSIBILITY OF SAME. 22. FINDER'S FEES -14- During the first two (2) years following the date of this Agreement ("FINDER'S FEE PERIOD"), if, as and when SAIC identifies an opportunity whereby ODS may enter a business transaction with a prospective customer concerning any of the Conveyed Items, SAIC may notify ODS in writing as to the opportunity and will provide ODS with a reasonable description of the opportunity, including the names of appropriate contacts, general scope of the opportunity envisioned and such other information as SAIC may possess concerning the opportunity (the "SAIC IDENTIFIED PROSPECT"). If agreed upon by SAIC and ODS with respect to an SAIC Identified Prospect, SAIC will help in scheduling meetings with the SAIC Identified Prospect's personnel, attending such meetings as requested by ODS, preparing reports as reasonably requested by ODS, helping in the creation of proposals by ODS, and such other things as ODS and SAIC mutually agree upon, however, ODS acknowledges that SAIC is not obligated to undertake any of the foregoing to receive the fees provided herein. ODS will solely determine the terms of any offering submitted to an SAIC Identified Prospect. In return for SAIC's advising ODS of an SAIC Identified Prospect with which ODS enters a business transaction involving the purchase, license or other acquisition of any of the Conveyed Items by the SAIC Identified Prospect within one (1) year of the date of disclosure to ODS of the identity of the SAIC Identified Prospect by SAIC, ODS agrees to pay SAIC a commission of [***] of the amount invoiced by ODS to the SAIC Identified Prospect with respect to any of the Conveyed Items that ODS furnishes to or for the SAIC Identified Prospect during the Finder's Fee Period and during the six (6) month period following thereafter (the "FINDER'S FEE"). ODS will pay the Finder's Fee to SAIC within ninety (90) days after the date ODS invoices the SAIC Identified Prospect. It is agreed by the parties that the Finder's Fees will apply to transactions between ODS or SAIC with respect to [***] that are outstanding as of the date of this Agreement. No royalty as provided in the SRGBLA will be payable by ODS to SAIC with respect to any of the Conveyed Items when a Finder's Fee is paid to SAIC hereunder. Finder's Fees are not applicable to Products other than the Conveyed Items. ODS shall not deliberately bundle or market Conveyed Items in a manner that is designed to or that has the effect of lowering the Finder's Fees to be paid by ODS to SAIC. If ODS or SAIC become aware of such effect, and ODS is notified by SAIC of such effect or in the event ODS otherwise becomes aware of such effect, ODS shall immediately take appropriate corrective action. Upon providing reasonable advance notice to ODS, SAIC shall be entitled to inspect ODS' books and records during ODS' normal business hours to audit ODS' compliance with this provision for Finder's Fees. 23. GENERAL 23.1 FORCE MAJEURE. Neither party shall be liable for delays in performance if such delay is caused by strike, riots, wars, government regulations, fire, floods, acts of God nor other similar causes beyond its control provided the other party is given prompt notice of any such delay. - --------------- *** Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 24b-2. -15 23.2 CHOICE OF LAW. This Agreement shall be deemed to have been entered into and shall be governed by and construed in accordance with the laws of the State of Delaware. 23.3 RELATIONSHIP. The relationship between the parties is that of ODS and SAIC. Nothing in this Agreement shall be construed or implied to create the relationship of partners, joint venturers, principal and agent, or employer/employee between the parties. At no time shall either party make commitments or incur any changes or expenses for or in the name of the other party. 23.4 PUBLICITY. Neither party shall issue a press release or otherwise publicly disclose the existence or terms of this Agreement without the prior written approval of the text of any statement by the other party. This provision shall not apply, however, to any announcement or written statement required to be made by law or the regulations of any federal or state governmental agency or by obligations pursuant to any listing agreement with any national securities exchange or with the NASD, except that the party required to make such announcement shall, whenever practicable, consult with the other party concerning the timing and content of such announcement before such announcement is made. 23.5 EXPORT. Each party shall comply with the export laws and regulations of the United States relating to export of Products and technical data originating in the United States. Such compliance includes restrictions on providing technical data to foreign nationals within the United States. 23.6 COMPLIANCE WITH LAW. In the performance of this Agreement, ODS and SAIC shall comply with all applicable laws and regulations of federal, state and local governments. 23.7 NON-WAIVER. The failure of either party to insist, in any one or more instances, upon performance of any provision of this Agreement shall not be construed as a waiver of future performance of such provision or future exercise of such right or of any other provision or right. 23.8 SEVERABILITY. In the event of invalidity or unenforceability of any provision of this Agreement, the remaining provisions shall continue in full force and effect. 23.9 INTEGRATION. This Agreement, including all Exhibits, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior written and oral agreements and representations concerning the subject matter hereof. This Agreement may only be modified by a writing signed by a duly authorized representative of each of the parties. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. 23.10 INTERPRETATION. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -16- 23.11 NOTICE. Unless otherwise specified herein, any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and shall be deemed to be fully given if personally delivered or by commercial courier service, if sent by registered mail return receipt requested, by facsimile with confirmation of transmission, or by telex with receipt acknowledged, to the following addresses: If to SAIC, to: Douglas Schrier, Senior Vice President Science Applications International Corporation 10260 Campus Point Drive, M/S L5-A San Diego CA 92121 FAX: 619-546-6980 With a copy to: Kevin A. Werner, Esq. Associate General Counsel Science Applications International Corporation 10260 Campus Point Drive, M/S F3 San Diego CA 92121 FAX: 619-535-7992 If to ODS, to: Tim Kinnear Chief Financial Officer ODS Inc. 1101 E. Arapaho Road Richardson, Texas 75081 FAX: 972-301-3841 The foregoing addresses and individuals may be changed by either party by giving to the other party prior written notice of any such change. 23.12 ASSIGNMENT. Neither party may assign or delegate its performance hereunder without the advance written consent of the other party, which such consent shall not be unreasonably withheld or delayed. 23.13 THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement. 23.14 COUNTERPARTS. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which together constitute one and the same instrument. -17- ODS NETWORKS, INC., a Delaware corporation By: /s/ G. Ward Paxton -------------------------- Name: G. Ward Paxton -------------------------- Title: President -------------------------- SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware corporation By: /s/ Douglas M. Schrier -------------------------- Name: Douglas M. Schrier -------------------------- Title: Senior Vice President -------------------------- -18- EXHIBIT A PRODUCT LIST PRICES AND DISCOUNTS LIST PRICES: See price list (the "Price List"). This list is changed on a frequent basis to reflect pricing and Product changes. ODS will publish the most current pricing on the ODS Web Site at www.ods.com. DISCOUNT: The ODS authorized discount for SAIC is as follows: ODS Products: [***] ODS Supplied 3rd Party Products: [***] ODS Network Management Products: [***] - --------------- *** Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 24b-2. -19- EXHIBIT B 1.0 ORDER LEAD TIMES All orders placed for Price List items shall be shipped following ODS' receipt of a purchase order to the address listed on the order in accordance with the schedule set forth below. ODS will use its reasonable efforts to meet any expedited shipping schedule reasonable requested by SAIC consistent with ODS meeting delivery obligations to its other customers. Amount of Product Shipping Time Ordered Following Order Within Forecast 30 Days Over Forecast by 5 units 30 Days Over Forecast more than 5 units, less than 25 45 Days Over Forecast more than 25 units Subject to mutual agreement. -20- -----END PRIVACY-ENHANCED MESSAGE-----