-----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, Pa3jJHDWrjRs58SIEaN2C7bQt2JvVwpaYaxw98+xTW30tFKggzE7As4LuIdAY9eH Y9b1JFBMslDawFuQVy+a2g== 0001047469-98-030418.txt : 19980812 0001047469-98-030418.hdr.sgml : 19980812 ACCESSION NUMBER: 0001047469-98-030418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980627 FILED AS OF DATE: 19980811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIUS INC CENTRAL INDEX KEY: 0000805574 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 680101300 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18690 FILM NUMBER: 98682454 BUSINESS ADDRESS: STREET 1: 460 E MIDDLEFIELD RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 6504046000 MAIL ADDRESS: STREET 1: 460 E MIDDLEFIELD RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 10-Q 1 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13(d) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER: 0-18690 RADIUS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 68-0101300 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 460 E. MIDDLEFIELD ROAD MOUNTAIN VIEW, CA 94043 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) (650) 404-6000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK ON AUGUST 7, 1998 WAS 5,522,816. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- RADIUS INC. INDEX
PART I. FINANCIAL INFORMATION PAGE - ------------------------------ ---- Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1998 (unaudited) and September 30, 1997 3 Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 1998 and 1997 (unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 1998 and 1997 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20 - ----------
-2- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RADIUS INC. CONSOLIDATED BALANCE SHEETS (in thousands)
JUNE 30, SEPTEMBER 30, 1998 1997 (1) --------- ------------- (unaudited) ASSETS: Current assets: Cash $ 1,188 $ 773 Receivable from sale of shares of Splash Technology Holdings, Inc. 728 - Accounts receivable, net 2,008 2,168 Inventories 1,081 805 Investment in Splash Technology Holdings, Inc. 532 22,093 Prepaid expenses and other current assets 200 184 -------- ------- Total current assets 5,737 26,023 Property and equipment, net 110 249 -------- ------- $ 5,847 $26,272 -------- ------- -------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY (Net capital deficiency): Current liabilities: Accounts payable $ 4,404 $ 4,511 Accrued payroll and related expenses 440 1,320 Accrued warranty costs 216 538 Other accrued liabilities 1,949 2,690 Deferred Income 500 - Accrued income taxes 2,122 2,111 Accrued restructuring and other charges 497 2,033 Short-term borrowings 1,597 4,638 Obligation under capital leases - 273 -------- ------- Total current liabilities 11,725 18,114 Shareholders' equity (Net capital deficiency): Common stock 169,102 168,994 Unrealized gain on available-for-sale securities 532 22,093 Accumulated deficit (175,560) (182,972) Accumulated translation adjustment 48 43 -------- ------- Total shareholders' equity (Net capital deficiency) (5,878) 8,158 -------- ------- $ 5,847 $26,272 -------- ------- -------- -------
(1) The balance sheet at September 30, 1997 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. -3- RADIUS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data; unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ------------------------ 1998 1997 1998 1997 -------- -------- --------- --------- Sales $ 3,823 $ 4,816 $ 13,514 $ 23,867 Commissions and royalties 47 1,225 911 4,418 -------- -------- --------- --------- Total net sales 3,870 6,041 14,425 28,285 Cost of sales 2,223 5,472 9,283 20,907 -------- -------- --------- --------- Gross profit 1,647 569 5,142 7,378 -------- -------- --------- --------- Operating expenses: Research and development 737 1,633 2,051 3,534 Selling, general and administrative 1,661 5,986 5,474 15,307 -------- -------- --------- --------- Total operating expenses 2,398 7,619 7,525 18,841 -------- -------- --------- --------- Loss from operations (751) (7,050) (2,383) (11,463) Other income (expense), net 4,715 (10) 10,211 (22) Interest expense (78) (757) (416) (2,251) -------- -------- --------- --------- Income (loss) before income taxes 3,886 (7,817) 7,412 (13,736) Provision for income taxes - - - 316 -------- -------- --------- --------- Net income (loss) $ 3,886 $ (7,817) $ 7,412 $ (14,052) -------- -------- --------- --------- -------- -------- --------- --------- Preferred stock dividend - 75 - 225 Net income (loss) applicable to common shareholders $ 3,886 $ (7,892) $ 7,412 $`(14,277) -------- -------- --------- --------- -------- -------- --------- --------- Net income (loss) per share: Basic net income (loss) per share applicable to common shareholders $ 0.70 $ (1.43) $ 1.34 $ (2.60) -------- -------- --------- --------- -------- -------- --------- --------- Diluted net income (loss) per share applicable to common shareholders $ 0.70 $ (1.43) $ 1.33 $ (2.60) -------- -------- --------- --------- -------- -------- --------- --------- Shares used in per share computations: Shares used in computing basic net income (loss) per share 5,529 5,521 5,519 5,491 -------- -------- --------- --------- -------- -------- --------- --------- Shares used in computing diluted net income (loss) per share 5,546 5,521 5,566 5,491 -------- -------- --------- --------- -------- -------- --------- ---------
See accompanying notes. -4- RADIUS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (in thousands, unaudited)
NINE MONTHS ENDED JUNE 30, ----------------------- 1998 1997 -------- ------ Cash flows from operating activities: Net income (loss) $ 7,412 (14,052) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 115 769 Gain on the sale of Splash and UCC Common Stock (9,016) - Loss on the disposal of fixed assets 25 446 (Increase) decrease in assets: Accounts receivable 165 (151) Inventories (276) 9,210 Prepaid expenses and other current assets (16) - Income tax receivable - 514 Increase (decrease) in liabilities: Accounts payable (107) 1,671 Accrued payroll and related expenses (880) (1,294) Accrued warranty costs (322) (132) Other accrued liabilities (741) (770) Accrued restructuring costs (1,536) (394) Accrued income taxes 11 (112) -------- ------ Total adjustments (12,578) 9,757 -------- ------ Net cash used in operating activities (5,166) (4,295) Cash flows from investing activities: Capital expenditures (1) (55) Deposits and other assets - 50 Payment from KDS 500 - Net proceeds from the sale of Splash and UCC Common Stock 8,288 - -------- ------ Net cash provided by (used in) investing activities 8,787 (5) Cash flows from financing activities: Short-term borrowings, net (3,041) 2,919 Principal payments of long-term debt and capital leases (273) (875) Issuance of common stock 108 48 -------- ------ Net cash (used in) provided by financing activities (3,206) 2,092 -------- ------ Net increase (decrease) in cash and cash equivalents 415 (2,208) Cash and cash equivalents, beginning of period 773 2,974 -------- ------ Cash and cash equivalents, end of period $ 1,188 $ 766 -------- ------ -------- ------ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 427 $ 2,254 -------- ------ -------- ------ Income taxes $ - $ 1 -------- ------ -------- ------ Non-cash financing activity: Dividend paid on preferred stock $ - $ 225 -------- ------ -------- ------ Non-cash investing activity: Receivable from sale of shares of Splash Technology Holdings, Inc. $ 728 $ - -------- ------ -------- ------
See accompanying notes. -5- RADIUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The consolidated financial statements of Radius Inc. ("Radius" or the "Company") as of June 30, 1998 and for the three and nine months ended June 30, 1998 and 1997 are unaudited. In the opinion of management, the consolidated financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair presentation in conformity with generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include provisions for returns and bad debts and the length of product life cycles. The information included in this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997. For clarity of presentation, all fiscal periods are reported as ending on a calendar month end. NOTE 2. INVENTORIES Inventories, stated at the lower of cost or market, consist of (in thousands):
JUNE 30, SEPTEMBER 30, 1998 1997 ----------- ------------- (unaudited) Work in process $144 $176 Finished goods 937 629 ------- ------- $ 1,081 $ 805 ------- ------- ------- -------
NOTE 3. COMMITMENTS AND CONTINGENCIES (a) On November 16, 1995, Electronics for Imaging, Inc. ("EFI") filed a suit in the United States District Court in the Northern District of California alleging that the Company infringes a patent allegedly owned by EFI. Although the complaint does not specify which of the Company's products allegedly infringe the patent, subsequent pleading indicates that EFI alleges that the Company's Color Server products infringe. In January 1996, the Company completed the divestiture of the Color Server Group. The Company has filed an answer denying all material allegations, and has filed counterclaims against EFI alleging causes of action for interference with prospective economic benefit, antitrust violations, and unfair business practices. EFI's motion to dismiss or sever the Company's amended counterclaims was granted in part and the ruling permitted the Company to file an amended counterclaim for antitrust violations. The Company has filed an amended antitrust claim. The Company believes it has meritorious defenses to EFI's claims and is defending them vigorously. In addition, the Company believes it may have indemnification rights or additional immunity with respect to elements of EFI's claims. A motion for summary judgment based on these indemnification rights disposing of EFI's claims was filed, and the court granted this motion finding the Company immune from suit under the patent after February 22, 1995. In March 1998, EFI and the Company agreed to dismiss their remaining claims against each other pending the outcome of EFI's appeal of this summary judgment finding. If the Company prevails on appeal, the remaining claims will be dismissed. On the other hand, if EFI prevails on appeal, then EFI can refile its claims and the Company would intend to continue to vigorously defend against such claims and prosecute its own claims against EFI. In such event, neither the Company nor Splash Technology Holdings, Inc. would be able to advance the immunity defense ruled on in the summary judgment motion, which would require the Company to defend EFI's claims based upon their merits. EFI filed its notice of appeal on April 7, 1998, and each party has submitted opening briefs. Oral argument and a determination of this appeal are expected during the 1999 fiscal year. While the Company believes it has meritorious defenses, the costs of defending any litigation could adversely affect the Company's results of operations and cash flows. (b) The Company was named as one of approximately 42 defendants in Shapiro et al. v. ADI Systems, Inc. et al., Superior Court of California, Santa Clara County, case no. CV751685, filed August 14, 1995. Radius was named as one -6- of approximately 32 defendants in Maizes & Maizes et al. v. Apple Computer et al., Superior Court of New Jersey, Essex County, case no. L-13780-95, filed December 15, 1995. Plaintiffs in each case purport to represent alleged classes of similarly situated persons and/or the general public, and allege that the defendants falsely advertised that the viewing areas of their computer monitors are larger than in fact they are. The Company was served with the Shapiro complaint on August 22, 1995 and was served with the Maizes complaint on January 5, 1996. Defendants' petition to the California State Judicial Council to coordinate the Shapiro case with similar cases brought in other California jurisdictions was granted in part and the coordinated proceedings are being held in Superior Court of California, San Francisco County. An amended consolidated complaint was filed on March 26, 1996. Although the Company believes it has meritorious defenses to the plaintiffs' claims, due to the costs of defense, on March 11, 1997, the Company along with all but two of the other named defendants agreed to settle the suits, subject to final court approval. The settlement has been approved by the court. The settlement provides that class members are eligible for a $13 rebate per monitor purchased during the class period on applicable new purchases over a three year period, subject to specific limitations. Class members who are consumers and do not elect to use the rebate fully can thereafter elect to receive a $6 refund per monitor (up to a maximum of $30 per consumer class member) during the following six months. The Company is responsible only to class members who purchased Radius branded monitors during the class period of May 1, 1991 to May 1, 1995. Additionally, the Company will pay its share of publication and administration costs associated with the implementation of the settlement, pay its share of plaintiffs' stipulated attorneys' fees and will agree to abide by certain limitations in the description of its monitors. (c) On July 18, 1997, Intelligent Electronics, Inc. and its affiliates filed a suit in the United States District Court for the District of Colorado alleging a breach of contract and related claims in the approximate amount of $800,000, maintaining that the Company failed to comply with various return, price protection, inventory balancing and marketing development funding undertakings. In 1997, the Company filed an answer to the complaint and cross claimed against the plaintiffs and in October 1997 additionally cross claimed against Deutsche Financial, Inc., a factor in the account relationship between the Company and the plaintiffs, seeking the recovery of approximately $2 million. The Company continues to investigate these claims as well as cross claims and expects to vigorously defend and prosecute them as applicable. (d) The Company is involved in a number of other judicial and administrative proceedings incidental to its business. The Company intends to defend such lawsuits vigorously and although adverse decisions (or settlements) may occur in one or more of such cases, the final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing of an unfavorable resolution of these lawsuits, it is possible that the Company's future results of operations or cash flows could be materially adversely affected in a particular period. In addition, the costs of defense, regardless of the outcome, could have a material adverse effect on the results of operations and financial condition of the Company. (e) In September 1992, the Company and certain of its officers and directors were named as defendants in a securities class action litigation brought in the United States District Court for the Northern District of California that sought unspecified damages, prejudgment and postjudgment interest, attorneys' fees, expert witness fees and costs, and equitable relief. In July 1994, SuperMac and certain of its officers and directors, several venture capital firms and several of the underwriters of SuperMac's May 1992 initial public offering and its February 1993 secondary offering were named as defendants in a class action litigation brought in the same court that sought unspecified damages, prejudgment and postjudgment interest, attorneys' fees, experts' fees and costs, and equitable relief (including the imposition of a constructive trust on the proceeds of defendants' trading activities). In June 1995, the Court approved the settlement of both litigations and entered a Final Judgment and Order of Dismissal. Under the settlement of the litigation brought in 1992 against the Company, the Company's insurance carrier paid $3.7 million in cash and the Company is required to issue 12,869 shares of its Common Stock to a class action settlement fund. In the settlement of the litigation brought in 1994 against SuperMac, the Company paid $250,000 in cash and is required to issue into a class action settlement fund 70,761 shares of its Common Stock. The number of shares required to be issued by the Company increased by 10,000 since the price of the Common Stock was below $120 per share during the 60-day period following the initial issuance of shares. In connection with these settlements, the Company recorded a charge of $12.4 million in the Consolidated Statement of Operations in 1995 reflecting settlement costs not covered by insurance as well as related legal fees. As of June 30, 1998, the Company had issued 83,630 of its Common Stock due to the settlement and approximately 10,000 shares remained to be issued. -7- NOTE 4. INVESTMENT IN SPLASH TECHNOLOGY HOLDINGS, INC. In January 1996, the Company completed the sale of its Color Server Group ("CSG") to Splash Merger Company, Inc. (the "Buyer"), a wholly owned subsidiary of Splash Technology Holdings, Inc. ("Splash"), a corporation formed by various investment entities associated with Summit Partners. In fiscal 1996, the Company received approximately $21.0 million in cash and, as of June 30, 1998, an additional $2.0 million is being maintained in escrow to secure certain indemnification obligations relating to the EFI litigation. The Company also received 4,282 shares of Splash's 6% Series B Redeemable and Convertible Preferred Stock (the "Series B Preferred Stock"). The shares of Series B Preferred Stock were converted into shares of Splash's Common Stock in connection with the initial public offering of Splash. In June 1996, the Company granted IBM Credit, its secured lender, an option to purchase 428 shares of Series B Preferred (now 174,113 shares of Splash Common Stock) in connection with the restructuring of the terms of its loan agreement with IBM Credit. As of July 16, 1998, IBM Credit had exercised all its option of Splash Common Stock. During the fourth quarter of fiscal 1997 and the nine months ended June 30, 1998, the Company sold an aggregate of 996,875 and 537,411 shares, respectively, of the 1,741,127 shares of Splash Common Stock owned by the Company. The investment, which is available for sale, subject to certain market trading restrictions, is accounted for in accordance with FASB Statement No. 115. The unrealized gain of $0.5 million relating to the remaining 32,728 shares held (net of the option to buy 174,113 shares held by IBM Credit exercisable at a nominal price), based upon the closing price of $16.25 per share at June 26, 1998 is recorded as a component of shareholders' equity at June 30, 1998. Since June 30, 1998, the Company has sold the remaining 32,728 shares of Splash Common Stock and has repaid in full its working line of credit with IBM Credit. See Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources. NOTE 5. UMAX DATA SYSTEMS, INC. In February 1996, the Company sold its MacOS compatible systems business to UMAX Computer Corporation ("UCC"), a company formed by UMAX Data Systems, Inc. ("UMAX"). The Company received approximately $2.3 million in cash and debt relief and 1,492,500 shares of UCC's Common Stock, representing approximately 19.9% of UCC's then outstanding shares of UCC Common Stock. The cash proceeds were paid to IBM Credit. In March 1998, due to Apple Computer's recent reversal in MacOS licensing policy, the Company sold the common stock of Umax Computer Corporation held by it to Umax Data Systems, Inc. for $550,000. NOTE 6. EARNINGS PER SHARE On March 9, 1998, the Company effected a one-for ten reverse stock split. All per share data and number of common shares, where appropriate, have been retroactively adjusted to reflect the stock split. Basic earnings per share is computed using the weighted average number of common shares. Diluted earnings per share is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of employee stock options using the treasury stock method. -8- The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------ 1998 1997 1998 1997 ---------- -------- --------- -------- (UNAUDITED) (UNAUDITED) NUMERATOR: Net income (loss) $ 3,886 $(7,817) $ 7,412 $(14,052) Preferred stock dividends - (75) - (225) ---------- -------- --------- -------- Numerator for basic and diluted earnings per share - income (loss) available to common stockholders $ 3,886 $ (7,892) $ 7,412 $(14,277) ---------- -------- --------- -------- ---------- -------- --------- -------- DENOMINATOR: Denominator for basic earnings per share - weighted-average shares outstanding 5,529 5,521 5,519 5,491 Effect of dilutive securities: Employee stock options 17 - 47 - ---------- -------- --------- -------- Dilutive potential common shares 17 - 47 - Denominator for diluted earnings per share - adjusted weighted-average shares outstanding 5,546 5,521 5,566 5,491 ---------- -------- --------- -------- ---------- -------- --------- -------- Basic earnings (loss) per share $ 0.70 $ (1.43) $ 1.34 $ (2.60) ---------- -------- --------- -------- ---------- -------- --------- -------- Diluted earnings (loss) per share $ 0.70 $ (1.43)(1) $ 1.33 $ (2.60)(1) ---------- -------- --------- -------- ---------- -------- --------- --------
(1) Diluted earnings per share does not reflect any potential shares relating to employee stock options or the convertible preferred stock due to a loss reported for the period, in accordance with FAS 128. The assumed issuance of any additional shares would be antidilutive. For additional disclosure regarding the employee stock options and convertible preferred stock, see Note 4 in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997. NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board ("FASB") issued statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting comprehensive income in a financial statement. Comprehensive income items include changes in equity (net assets) not included in net income. Examples are foreign currency translation adjustments and unrealized gains/losses on available for sale securities. This disclosure prescribed by SFAS 130 is required beginning with the quarter ending December 31, 1998. In June 1997, FASB issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for the way companies report information about operating segments in financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has not yet determined the impact, if any, of adopting this standard. The disclosures prescribed by SFAS 131 are required in fiscal year 1999. In October 1997, FASB approved the new American Institute of Certified Public Accountants Statements of Position, "Software Revenue Recognition" ("SOP 97-2"). SOP 97-2 will be effective for the Company beginning in the first quarter of fiscal 1999. The Company is evaluating this pronouncement and the effects, if any, on the Company's current policies. -9- NOTE 8. SUBSEQUENT EVENTS On August 7, 1998, the Company agreed to sell certain significant assets related to its monitor business to Korea Data Systems (America), Inc. ("KDS"). Under the agreement, Radius will transfer its Radius, Supermac, PressView and certain other trademarks to KDS and will license certain intellectual property pertaining to PressView and PrecisionView monitors to KDS. KDS has not agreed to purchase any inventory or other tangible assets of Radius. The expected value of the transaction is $6.2 million, including $1.0 million payable in August 1998 under the related license agreement. The remaining amount is payable in installments over the next twelve months. Two affiliates of KDS have guaranteed KDS' performance of its obligations. The agreement is expected to close in February 1999 if KDS elects to have the agreement submitted to Radius' shareholders for approval and such approval is obtained and certain other contingencies are satisfied. In the interim, Radius has licensed KDS the use of its monitor trademarks and specific technology and expects to wind down its monitor business activities as current supplies of monitors are sold, whether or not the asset purchase agreement is completed. In the event that the asset purchase agreement is not completed, the license agreement will continue as a perpetual license and KDS will pay an additional $5.2 million under the extended license over fifteen months instead of twelve. Radius will continue to use the transferred trademarks and technology until the transition is completed over the next several months and expects to focus on its digital video line of business during this transition period. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: The following discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that are subject to risks and uncertainties. Statements indicating that the Company or management "intends", "plans", "expects," "estimates" or "believes" are forward-looking, as are all other statements concerning future financial results, product offerings or other events that have not yet occurred. There are several important factors that could cause actual results or events to differ materially from those anticipated by the forward-looking statements contained in this discussion and other sections of this Form 10-Q. Such factors include, but are not limited to: the Company's ability to achieve profitability; the Company's ability to successfully conclude or settle its patent infringement litigation with EFI; the success of the Company's digital video software products on which the Company expects to be substantially dependent; the success of the Apple Macintosh computer line and operating system, the success of Apple as well as the Company's ability to compete successfully with Apple in its market; the Company's ability to successfully develop, introduce and market new software products, including products for Windows operating system, and to keep pace with technological innovation, particularly in light of its limited financial resources; the ability of the Company's manufacturers and suppliers to deliver components and manufacture the Company's products; the Company's reliance on international sales and the effect of its partially exclusive distributor arrangements with respect to Europe and Japan; and the Company's ability to attract and retain its key personnel. Each forward-looking statement should be read in conjunction with the entire consolidated interim financial statements and the notes thereto in Part I, Item 1 of this Quarterly Report, with the information contained in Item 2, including, but not limited to, "Certain Factors That May Affect Future Results," and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997, including, but not limited to, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Certain Factors That May Affect the Company's Future Results of Operations." OVERVIEW The Company designs, develops, assembles, markets and supports color publishing and digital video computer products for creative professionals. The Company's current product line includes: multimedia authoring and editing video systems and software that can acquire and manipulate video and audio information; high resolution color reference displays that allow users to view text, graphics, images and video. To date, substantially all of the Company's products have been designed for and sold to users of Macintosh computer products (the "Macintosh") manufactured by Apple Computer, Inc. ("Apple") as Apple products have been the preferred platform in the Company's target markets. Furthermore, substantially all of the Company's historic revenues have been attributed to hardware/monitors. The Company's current product development plans include adding cross platform (Windows) capabilities to some of the Company's products in order to market these products to users of the Windows operating system. There can be no assurance that the Company will be successful in developing and marketing products for the Windows operating system, particularly in light of the Company's current financial condition. The Company has released and shipped its second product for the Windows operating system, MotoDV for Windows in the third quarter of fiscal 1998. On August 7, 1998, the Company agreed to sell certain significant assets related to its monitor business to KDS, see Notes to the Financial Statements, Note 8 - Subsequent Events. The monitor business accounts for substantially all of the revenues of the color publishing product line. The two companies are in the process of defining the transition timetable, but at the completion of the transition the Company will no longer realize any revenues from the sale of monitors. The primary focus of the Company at that time will be its digital video product line, which includes multimedia authoring and editing video systems and software that can acquire and manipulate video and audio information. The Company has also agreed with KDS to continue to support the sale of the monitors through the Company's sales force during August and September in return for $55 thousand a month and a sharing of the gross margin from the sale of the monitor products during this period. As shown in the accompanying consolidated financial statements, the Company has incurred substantial operating and net losses and currently has liabilities in excess of assets. During fiscal 1996, 1997 and 1998, management implemented a number of actions to address its cash flow and operating issues including: restructuring its outstanding indebtedness to trade -11- creditors and its secured creditor; refocusing its efforts on providing solutions for high end digital video and graphics customers; discontinuing sales of mass market and other low value added products; divesting a number of businesses and product lines, including most recently the agreement for the sale and related license of significant assets of its monitor business to Korea Data Systems (America), Inc. (See Notes to Consolidated Financial Statements - Subsequent events - Note 8); significantly reducing expenses and headcount; and reducing its lease obligations for its current facility lease given its reduced occupancy requirements. There can be no assurance that these measures will be sufficient to allow the Company to achieve profitability. RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain operational data as a percentage of net sales (may not add due to rounding).
THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ------ ------ ------ ------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 57.4 90.6 64.4 73.9 ------ ------ ------ ------ Gross profit 42.6 9.4 35.6 26.1 ------ ------ ------ ------ Operating expenses: Research and development 19.1 27.0 14.2 12.5 Selling, general and administrative 42.9 99.1 37.9 54.1 ------ ------ ------ ------ Total operating expenses 62.0 126.1 52.1 66.6 ------ ------ ------ ------ Loss from operations (19.4) (116.7) (16.5) (40.5) Other income(expense), net 121.8 (0.2) 70.8 (0.1) Interest Expense (2.0) (12.5) (2.9) (8.0) ------ ------ ------ ------ Income (loss) before income taxes 100.4 (129.4) 51.4 (48.6) Provision for income taxes 0.0 - 0.0 1.1 ------ ------ ------ ------ Net income (loss) 100.4% (129.4)% 51.4% (49.7)% ------ ------ ------ ------ ------ ------ ------ ------
NET SALES The Company's total net sales decreased 35.9% to $3.9 million in the third quarter of fiscal 1998 from $6.0 million for the same quarter in fiscal 1997. Net sales for the first nine months of fiscal 1998 decreased 49.0% to $14.4 million from $28.3 million in the same period of fiscal 1997. The decline is due primarily to the following factors: the Company's decision to focus its efforts on its digital video software product lines while discontinuing the development of its color publishing, accelerated color graphics products and its DOS on Mac products; a decline in the sales of its color publishing products; reduced commissions paid by its international distributors due to the Company's change in product focus; and reduced royalties paid by Umax Computer Corporation under its license agreement for the MacOS compatible systems signed in February 1996. As a result of the planned sale by the Company of significant monitor business assets to KDS, the Company anticipates lower overall net sales in the immediate future. Future sales will be predominately attributable to sales of software products since in the Company's digital video product line, the sales of the systems products have been declining while the sale of the software products for digital video camcorders (PhotoDV introduced in April 1997, MotoDV introduced in September 1997 and EditDV introduced in November 1997) have increased during fiscal 1998. Additionally, the Company introduced PhotoDV for Windows in March 1998 and MotoDV for Windows in June 1998. There can be no assurance that sales of these software products will continue to increase or that they will increase to a sufficient extent to offset the anticipated decline in hardware sales. Moreover, the royalties from Umax have ended due to the expiration of this obligation in March 1998. -12- Effective January 1, 1998, the Company has modified its relationships with its distributors in Japan and Europe for its digital video software products and will instead purchase products from the Company at a discount from the price list. Sales will now be made for these products based upon a price list and they will no longer pay commissions upon their sale of these products. Commissions will still be paid on the sales of the Company's other products sold through these distributors, although the Company believes that these sales will not be material. Sales to Ingram Micro and Microage Computer Center accounted for 57.2% and 3.6% of net sales for the third quarter of fiscal 1998, respectively. For the corresponding period of fiscal 1997, the same customers accounted for 42.5% and 15.9% of the Company's net sales. For the nine month period ended June 30, 1998, Ingram Micro accounted for 55.8% of the Company's net sales as compared to 63.7% for the corresponding period of fiscal 1997. GROSS PROFIT The Company's gross profit margin was 42.6% and 35.6% for the three and nine month periods ended June 30, 1998, as compared with 9.4% and 26.1% for the corresponding periods in fiscal 1997. The gross profit margin for the three month period ended June 30, 1997 included higher start-up manufacturing cost for the DOS on Mac products. The gross profit margin for the nine month period ended June 30, 1997 reflects a net charge of $3.6 million relating to inventory write downs. Excluding this charge, the gross profit margin would have been 38.8%. The increase in gross profit margin for the three and nine month periods ended June 30, 1998 was due primarily to increased sales of higher gross margin software products. The Company anticipates the gross profit margins will be higher in the future due to the impact of the planned sale of significant monitor business assets and the increase in sales of higher gross margin software products that are expected to become a focus of the Company's sales and marketing efforts in the coming periods, although there can be no assurance that the Company will be successful in marketing these products. Additionally, the Company is taking further steps to reduce product costs and controlling expenses. There can be no assurance that the Company's gross margins will improve or remain at current levels. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses decreased to $0.7 million or 19.0% of net sales in the third quarter of fiscal 1998 from $1.6 million or 27.0% of net sales in the same quarter of fiscal 1997. Research and development expenses decreased from $3.5 million or 12.5% of net sales for the first nine months of fiscal 1997 to $2.1 million or 14.2% of net sales for the corresponding period of fiscal 1998. The increase in research and development expenses expressed as a percentage of net sales for the nine month period were primarily attributed to the decrease in net sales. The decrease in research and development expenses in absolute dollars is primarily the result of reducing expenses related to headcount resulting from the efforts to refocus its business. The Company expects that decreases in its research and development expenses due to the planned sale of significant monitor business assets will be offset by increases in the expenses for the digital video product line and therefore, expects research and development to remain at third quarter levels. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased to $1.7 million or 42.9% of net sales in the third quarter of fiscal 1998 from $6.0 million or 99.1% of net sales in the same quarter of fiscal 1997. Selling, general and administrative expenses decreased from $15.3 million or 54.1% of net sales for the first nine months of fiscal 1997 to $5.5 million or 37.9% of net sales for the corresponding period in fiscal 1998. Included in the selling, general and administrative expenses for the three and nine months ended June 30, 1997 is an increase of $1.1 million to the allowance of doubtful accounts. The Company decreased its selling, general and administrative expenses primarily by reducing expenses related to headcount resulting from the efforts to refocus its business. As a result of the planned sale of significant monitor business assets, the Company expects selling, general and administrative expenses to decrease slightly over the next several quarters. After that the Company expects selling, general and administrative expenses to increase gradually over time, however, the Company does not expect them to approach historical levels in absolute amount. OTHER INCOME (EXPENSE), NET Other income was $4.7 million and $10.2 million for the three and nine month periods ended June 30, 1998, respectively, and was not material in the same periods of fiscal 1997. Other income resulted from the sale of 537,411 shares of Splash Common Stock during the nine month period ended June 30, 1998. -13- INTEREST EXPENSE Interest expense was $0.1 million and $0.4 million for the three and nine month periods ended June 30, 1998, as compared with $0.8 and $2.3 million for the corresponding periods in fiscal 1997. This decrease was due to lower average borrowings primarily as a result of the repayment of the IBM Credit term loan in August 1997. NET PROFIT As a result of the above factors, the Company had a net profit of $3.9 million and $7.4 million for the three and nine months ended June 30, 1998, respectively, as compared to a net loss of $7.8 million and $14.1 million for the three and nine months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents increased to $1.2 million at June 30, 1998, as compared with $0.8 million for the same quarter in fiscal 1997. However, as of June 30, 1998, the Company's liabilities exceeded its assets. The value of the Company's investment in Splash Technology Holdings, Inc. also declined from $22.1 million at the end of fiscal year 1997 to $0.5 million at the end of the third quarter of fiscal 1998 due to the sale of 537,411 shares of Splash Common Stock, and due to the substantial decline in the trading price of the Splash Common Stock from $38.75 to $16.25 during that period of time. Since June 30, 1998, the Company has sold the remaining 32,728 shares of Splash Common Stock and has repaid in full its working line of credit with IBM Credit. The planned sale of significant monitor business assets and the related license is expected to generate improved liquidity for the Company, if installment payments are timely made, other things equal. Under the agreement with KDS, see Notes to consolidated Financial Statements, Note 8 - Subsequent Events, the $6.2 million is due to be paid in monthly installments over the next twelve months. Additionally, the Company has agreed with KDS to continue to support the sale of the monitors through the Company's sales force during August and September in return for $55 thousand a month and a sharing of the gross margin from the sale of the monitor products during this period. It is anticipated that these funds will provide the working capital that the Company needs to offset the operating losses during the coming months. However, there can be no assurances that the sale of software products will continue to increase to a sufficient extent to offset the loss of revenues and gross margin from the monitor business. The Company may need to further reduce its operating expenses or seek additional sources of working capital if the sale of the software products does not increase at the rate that it has assumed in its operating plans. CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS OF OPERATIONS A number of uncertainties exist that could affect the Company's future operating results, including, without limitation, the following: CONTINUING OPERATING LOSSES The Company experienced operating losses in each of its prior five fiscal years and currently has liabilities in excess of assets. In the future, the Company's ability to achieve and subsequently sustain profitable operations will depend upon a number of factors, including the Company's ability to control costs; the Company's ability to generate sufficient cash from operations or obtain additional funds to fund its operating expenses; the Company's ability to successfully market its software products; the Company's ability to develop innovative and cost-competitive new products and to bring those products to market in a timely manner; the commercial acceptance of Apple computers and the MacOS and the rate and mix of Apple computers and related products sold; the Company's ability to successfully develop and market products for the Microsoft Windows and NT operating systems in a timely manner; competitive factors such as new product introductions, product enhancements and aggressive marketing and pricing practices; general economic conditions; the Company's ability to negotiate a settlement or other favorable conclusion of the EFI litigation; and other factors. For these and other reasons, there can be no assurance that the Company will be able to achieve or subsequently maintain profitability in the near term, if at all. -14- FLUCTUATIONS IN OPERATING RESULTS The Company has experienced substantial fluctuations in operating results. The Company's customers generally order on an as-needed basis, and the Company has historically operated with relatively small backlogs. Quarterly sales and operating results depend heavily on the volume and timing of bookings received during the quarter, which are difficult to forecast. A substantial portion of the Company's revenues are derived from sales made late in each quarter, which increases the difficulty in forecasting sales accurately. Since the end of the Company's 1995 fiscal year, shortages of available cash have restricted the Company's ability to purchase inventory and have delayed the Company's receipt of products from suppliers and increased shipping and other costs. Furthermore, because of its financial condition, the Company believes that many suppliers are hesitant to continue their relationships with or extend credit terms to the Company and potential new suppliers are reluctant to provide goods to the Company. The Company recognizes sales upon shipment of product, and allowances are recorded for estimated uncollectable amounts, returns, credits and similar costs, including product warranties and price protection. Due to the inherent uncertainty of such estimates, there can be no assurance that the Company's forecasts regarding bookings, collections, rates of return, credits and related matters will be accurate. A significant portion of the operating expenses of the Company are relatively fixed in nature, and planned expenditures are based primarily on sales forecasts which, as indicated above, are uncertain. Any inability on the part of the Company to adjust spending quickly enough to compensate for any failure to meet sales forecasts or to receive anticipated collections, or any unexpected increase in product returns or other costs, could also have an adverse impact on the Company's operating results. As a strategic response to a changing competitive environment, the Company has elected, and, in the future, may elect from time to time, to make certain pricing, service or marketing decisions or acquisitions that could have a material adverse effect on the Company's business, results of operations and financial condition. The Company also completed a variety of business divestitures during fiscal 1996 and 1997, restructured the terms of its indebtedness to IBM Credit and issued a substantial amount of equity in the Company to its creditors in satisfaction of approximately $45.9 million in claims and indebtedness during the fourth quarter of fiscal 1996 and agreed to sell its monitor business in August, 1998. In addition, the Company has focused its efforts on developing and marketing software products, an area in which it has limited experience. As a result, the Company believes that period-to-period comparisons of its results of operations will not necessarily be meaningful and should not be relied upon as any indication of future performance. Due to all of the foregoing factors, it is likely that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would be likely to be materially adversely affected. NEED FOR ADDITIONAL FINANCING The Company intends to finance its working capital needs through cash generated by operations and proceeds from the planned sale of significant monitor business assets and the related license to KDS America. Because the Company has experienced operating losses in each of its prior five fiscal years and has liabilities in excess of assets, the Company must significantly reduce operating expenses and/or significantly increase net sales in order to finance its working capital needs with cash generated by operations. Accordingly, there can be no assurance that the Company will be able to successfully fund its working capital needs internally. Furthermore, there can be no assurance that the Company will be able to raise additional capital on commercially reasonable terms or at all. DEPENDENCE ON AND COMPETITION WITH APPLE Historically, substantially all of the Company's products have been designed for and sold to users of Apple personal computers. Although the Company has begun to market certain products for the Windows environment, it is expected that sales of products for Apple computers will continue to represent substantially all of the sales of the Company for fiscal 1998. Apple has lost significant market share over the past couple of years and is experiencing declining sales in an absolute sense. The Company's operating results would be adversely affected if these trends should continue or if other developments were to adversely affect Apple's business. Furthermore, any continued difficulty that may be experienced by Apple in the development, manufacturing, marketing or sale of its computers, or other disruptions to, or uncertainty in the market regarding, Apple's business, resulting from these or other factors could result in further reduced demand for Apple computers, which in turn could materially and adversely affect sales of the Company's products. As software applications for the multimedia markets become more available on platforms other than Macintosh, it is likely that these other platforms will continue to gain acceptance in these markets. For example, newer versions of the Windows operating environment support high performance graphics and video applications similar to those offered on the Macintosh. There is a risk that this trend will reduce the support given to Macintosh products by third party developers and could substantially reduce demand for Macintosh products over the long term. -15- A number of the Company's products compete with products marketed by Apple. As a competitor of the Company, Apple could in the future take steps to hinder the Company's development of compatible products and slow sales of the Company's products. The Company's business is based in part on supplying products that meet the needs of high-end customers that are not fully met by Apple's products. As Apple improves its products or bundles additional hardware or software into its computers, it reduces the market for Radius products that provide those capabilities. In the past, the Company has developed new products as Apple's progress has rendered existing Company products obsolete. However, in light of the Company's current financial condition there can be no assurance that the Company will continue to develop new products on a timely basis or that any such products will be successful. In order to develop products for the Macintosh on a timely basis, the Company depends upon access to advance information concerning new Macintosh products. A decision by Apple to cease sharing advance product information with the Company would adversely affect the Company's business. COMPETITION The markets for the Company's products are highly competitive, and the Company expects competition to intensify. Many of the Company's current and prospective competitors have significantly greater financial, technical, manufacturing and marketing resources than the Company. The Company believes that its ability to compete will depend on a number of factors, including the amount of financial resources available to the Company, success and timing of new product developments by the Company and its competitors, product performance, price and quality, breadth of distribution and customer support. There can be no assurance that the Company will be able to compete successfully with respect to these factors, particularly in light of its financial condition. In addition, the introduction of lower priced competitive products could result in price reductions that would adversely affect the Company's results of operations. DEPENDENCE ON LIMITED NUMBER OF MANUFACTURERS AND SUPPLIERS The Company outsources the manufacturing and assembly of its products to a third party manufacturer. The failure of the manufacturer to ship the quantities of a product ordered by the Company could cause a material disruption in the Company's sales of that product. In the past, most recently in the fourth quarter of fiscal 1996, the Company has experienced substantial delays in its ability to fill customer orders for displays and other products, due to the inability of certain manufacturers to meet their volume and schedule requirements and, more recently, due to the Company's shortages in available cash. Such shortages have caused some manufacturers to put the Company on a cash or prepay basis and/or to require the Company to provide security for their risk in procuring components or reserving manufacturing time, and there is a risk that manufacturers will discontinue their relationship with the Company. The Company is also dependent on sole or limited source suppliers for certain key components used in its products, including certain cables, digital video integrated circuits, and other products. The Company purchases these sole or limited source components primarily pursuant to purchase orders placed from time to time in the ordinary course of business and has no guaranteed supply arrangements with sole or limited source suppliers. Therefore, these suppliers are not obligated to supply products to the Company for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order. Although the Company expects that these suppliers will continue to meet its requirements for the components, there can be no assurance that they will do so, particularly in light of the Company's financial condition. The Company's reliance on a limited number of suppliers involves a number of risks, including the absence of adequate capacity, the unavailability or interruption in the supply of key components and reduced control over delivery schedules and costs. The Company expects to continue to rely on a limited number of suppliers for the foreseeable future. If these suppliers became unwilling or unable to continue to provide these components the Company would have to develop alternative sources for these components which could result in delays or reductions in product shipments which could have a material adverse effect on the Company's business, operating results and financial condition. Certain suppliers, due to the Company's shortages in available cash, have put the Company on a cash or prepay basis and/or required the Company to provide security for their risk in procuring components or reserving manufacturing time, and there is a risk that suppliers will discontinue their relationship with the Company. TECHNOLOGICAL CHANGE; CONTINUING NEED TO DEVELOP NEW PRODUCTS The video applications within the industry, are characterized by rapidly changing technology, often resulting in short product life cycles and rapid price declines. The Company believes that its success will be highly dependent on its ability to develop innovative and cost-competitive new products and to bring them to the marketplace in a timely manner. Should the Company fail to introduce new products or enhancements to existing products on a timely basis, the Company's operating results could be adversely affected. As a result of the Company's financial condition, it has had to significantly reduce its research and development expenditures. For the 1997 fiscal year, the Company spent approximately $5.0 million on research and development as compared with approximately $7.5 million for the 1996 fiscal -16- year and $19.3 for the 1995 fiscal year. Research and development was $2.1 million in the nine months ended June 30, 1998 compared to $3.5 million for the same period in 1997. The Company's financial condition could result in the interruption or cancellation of research and product development efforts, which would have a material adverse effect on the business, operating results and financial condition of the Company. The Company anticipates that the video editing industry will follow the pattern of the professional publishing industry in which desktop publishing products, including those produced by Radius, replaced more expensive, proprietary products, and the Company also anticipates that this evolution will lead to an increase in the purchase and use of video editing products, in particular digital video editing products for use with digital video camcorders. As a result, the Company has devoted significant resources to this product line. There can be no assurance that this evolution will occur in the digital video editing industry as expected by the Company, or that even if it does occur that it will not occur at a slower pace than anticipated. There can also be no assurance that any digital video editing products developed or marketed by the Company will achieve consumer acceptance or broad commercial success. In the event that the increased use of such video editing products does not occur or in the event that the Company is unable to successfully develop and market such products, the Company's business, operating results and financial condition would be materially adversely affected, particularly in light of the fact that the Company has agreed to sell its remaining hardware product line. DEPENDENCE ON INDIRECT DISTRIBUTION CHANNELS The Company's primary means of distribution is through a limited number of third-party distributors and master resellers that are not under the direct control of the Company. Furthermore, the Company relies on one exclusive or primary distributor for its sales in each of Japan and Europe. The Company does not maintain a direct sales force. As a result, the Company's business and financial results are highly dependent on the amount of the Company's products that is ordered by these distributors and resellers. Such orders are in turn dependent upon the continued viability and financial condition of these distributors and resellers as well as on their ability to resell such products and maintain appropriate inventory levels. Furthermore, many of these distributors and resellers generally carry the product lines of a number of companies, are not subject to minimum order requirements and can discontinue marketing the Company's products at any time. Accordingly, the Company must compete for the focus and sales efforts of these third parties. The future growth and success of the Company will continue to depend in large part upon its indirect distribution channels, including its reseller channels. If its resellers or other distributors were to experience financial difficulties, the Company's results of operations could be adversely affected. INTERNATIONAL SALES Prior to the second fiscal quarter of 1996, the Company's international sales were primarily made through distributors and the Company's subsidiary in Japan. Effective April 1, and July 1, 1996 the Company appointed an exclusive distributor for Japan and Europe, respectively. The Company expects that international sales, particularly sales to Japan, will represent a significant portion of its business activity and that it will be subject to the normal risks of international sales such as currency fluctuations, longer payment cycles, export controls and other governmental regulations and, in some countries, a lesser degree of intellectual property protection as compared to that provided under the laws of the United States. Sales in Japan could be affected by the economic conditions in that region, which are currently unstable. Sales in Asian markets have not been, and the Company does not expect them to be, material in the future outside of Japan which is currently unstable. Furthermore, a reduction in sales efforts or financial viability of the distributors could adversely affect the Company's net sales and its ability to provide service and support to Japanese and European customers. Additionally, fluctuations in exchange rates could affect demand for the Company's products. If for any reason exchange or price controls or other restrictions on foreign currencies are imposed, the Company's business, operating results and financial condition could be materially adversely affected. Net sales could also be adversely affected in the future as a result of the exclusive distributor relationships for Japan and Europe because the Company only recognizes as net sales a portion of the sales price of any product sold through such distributor arrangements. Accordingly, even if sales for such regions increase or remain similar to historic levels, the Company would recognize a lesser amount of net sales for such regions as compared to historic levels. DEPENDENCE ON KEY PERSONNEL The Company's success depends to a significant degree upon the continued contributions of its key management, marketing, product development and operational personnel and the Company's ability to retain and continue to attract highly skilled personnel. The Company does not carry any key person life insurance with respect to any of its personnel. Competition for employees in the computer industry is intense, and there can be no assurance that the Company will be able to attract and retain qualified employees. Many members of the Company's management have departed within the past year, including its former President and Chief Executive Officer and four other Vice Presidents, including its former Senior -17- Vice President on March 31, 1998. The Company has also had substantial layoffs and other employee departures. Because of the Company's financial difficulties and the very tight labor market for technical personnel, it has become increasingly difficult for it to hire new employees and retain key management and current employees. The failure of the Company to attract and retain key personnel would have a material adverse effect on the Company's business, operating results and financial condition. IMPACT OF YEAR 2000 The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has been studying this issue but has not yet completed the process. As a result, the Company currently has no reasonable basis to conclude that the Year 2000 Issue will not materially affect future financial results, or cause reported financial information not to be indicative of future operating results or future financial condition. -18- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 3 to Consolidated Financial Statements - Commitments and Contingencies. ITEM 5. OTHER INFORMATION Possible Delisting from Nasdaq SmallCap Market. As of June 30, 1998, the Company had assets of $5.8 million and total liabilities of $11.7 million and therefore had net tangible assets of $(5.9 million). In order for the Company's Common Stock to continue to be listed on the Nasdaq SmallCap Market, the Company will be required to maintain net tangible assets of at least $2.0 million, or must have net income in its most recently completed fiscal year or in two of the three prior fiscal years. The Company had net income in its most recently completed fiscal year. However, in the event that the Company does not increase its net tangible assets to greater than $2.0 million, the Company's Common Stock would be subject to delisting if it also failed to achieve net income for its current fiscal year. On August 7, 1998, the Company agreed to sell certain significant assets related to its monitor business to Korea Data Systems (America), Inc. ("KDS"). Under the agreement, Radius will transfer its Radius, Supermac, PressView and certain other trademarks to KDS and will license certain intellectual property pertaining to PressView and PrecisionView monitors to KDS. KDS has not agreed to purchase any inventory or other tangible assets of Radius. The expected value of the transaction is $6.2 million, including $1.0 million payable in August 1998 under the related license agreement. The remaining amount is payable in installments over the next twelve months. Two affiliates of KDS have guaranteed KDS' performance of its obligations. The agreement is expected to close in February 1999 if KDS elects to have the agreement submitted to Radius' shareholders for approval and such approval is obtained and certain other contingencies are satisfied. In the interim, Radius has licensed KDS the use of its monitor trademarks and specific technology and expects to wind down its monitor business activities as current supplies of monitors are sold, whether or not the asset purchase agreement is completed. In the event that the asset purchase agreement is not completed, the license agreement will continue as a perpetual license and KDS will pay an additional $5.2 million under the extended license over fifteen months instead of twelve. Radius will continue to use the transferred trademarks and technology until the transition is completed over the next several months and expects to focus on its digital video line of business during this transition period. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The following exhibits are filed with this Quarterly Report:
10.01 Asset Purchase Agreement dated as of August 7, 1998 between Korea Data Systems (America), Inc. and the Registrant. 10.02 Amended and Restated License Agreement dated as of August 7, 1998 between Korea Data Systems (America), Inc. and the Registrant. 27.01 Financial Data Schedule (EDGAR version only).
(b) REPORTS ON FORM 8-K No report on Form 8-K was filed during the three months ended June 30, 1998. -19- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 10, 1998 RADIUS INC. By: /s/ Henry V. Morgan ----------------------- Henry V. Morgan Chief Financial Officer -20- EX-10.01 2 EXHIBIT 10.01 EXHIBIT 10.01 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this "AGREEMENT"), dated August 7, 1998, is made between Radius Inc. ("SELLER"), a California corporation doing business at 460 East Middlefield Road, Mountain View, CA 94043, and Korea Data Services (America), Inc. ("BUYER"), a California corporation doing business at 12300 Edison Way, Garden Grove, CA 92841, with reference to the following facts: A. Seller is engaged in the business of designing, developing, assembling, marketing and selling PressView and PrecisionView computer monitor and graphics displays (the "Products") under the Radius-Registered Trademark- mark (the "DISPLAY BUSINESS"). (Although Seller does not develop or distribute flat panel devices, for purposes of this Agreement use of the word "Display" includes such devices.) Seller has licensed Buyer's use of such mark, other marks and other intellectual property for use in the Display Business pursuant to a License Agreement dated June 5, 1998, which license has been amended and restated by license agreement of even date (the "Original License"). B. Buyer desires to buy, and Seller desires to sell to Buyer, certain assets used in the Display Business, including, without limitation, all of Seller's right, title and interest in and to the Radius-Registered Trademark- trademark and related goodwill and certain other intellectual property and other intangible assets of Seller related to the Display Business, on the terms and conditions set forth in this Agreement. The parties, therefore, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the following meanings: 1.1 "BUYER'S LICENSE" has the meaning set forth in Section 2.5. 1.2 "CLOSING" means the day upon which the conditions to concluding this Agreement are met and the parties exchange the deliveries specified in Section 2 below. 1.3 "DISCLOSURE SCHEDULE" means SCHEDULE B to this Agreement. 1.4 "INTANGIBLE ASSETS" means all rights, title and interest of Seller in and to the trademarks, copyrights, intellectual property and other intangible assets described on SCHEDULE A to this Agreement, including without limitation, all trade and service mark registrations and applications therefor and rights of Seller thereto in any and all jurisdictions worldwide and all goodwill associated therewith. Buyer's License is not included in the Intangible Assets. Seller's "Radius" corporate name is not included in Intangible or Purchased Assets and is subject to the provisions set forth in Section 9 below. 1.5 "INTELLECTUAL PROPERTY RIGHTS" means any and all patents, patents pending and other patent rights, copyright rights (including but not limited to rights in audiovisual works), Moral Rights, trade secret rights, trade and service marks and any other intellectual property rights recognized by the law of any jurisdiction. 1.6 "MORAL RIGHTS" means any right to claim authorship of a work, any right to object to any distortion or other modification of a work, and any similar right, existing under the law of any country in the world, or under any treaty. 1.7 "PRESSVIEW IP" means the intellectual property and other intangible assets (including certain documentation for Products) of Seller described in "Buyer's License" (see Section 2.5 and Exhibit A to this Agreement). 1.8 "PURCHASE PRICE" means the purchase price payable to Seller for the Purchased Assets and Buyer's License as specified in Section 3.2 below. 1 1.9 "PURCHASED ASSETS" means the Intangible Assets . Purchased Assets shall not include Buyer's License. 1.10 "SELLER'S LICENSE" has the meaning set forth in Section 2.6. 1.11 "SITE" means the address of Seller set forth in the introductory paragraph of this Agreement. 1.12 "THIRD-PARTY INTANGIBLES" means the Intellectual Property Rights of third parties specifically identified on SCHEDULE B to this Agreement. 2. PURCHASE, SALE AND LICENSE. 2.1 PURCHASE AND SALE On the Closing, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and accept from Seller, all right, title and interest of Seller in and to the Purchased Assets, free and clear of all liens, claims, encumbrances, security interests, restrictions and rights of any third parties other than Seller's License and Third-Party Intangibles, except as set forth in the Disclosure Schedule. 2.2 TRANSFER OF PURCHASED ASSETS. On or before the Closing, Seller shall, at its expense, tender possession of the Purchased Assets to Buyer at the Site or such other locations and times and by such means as have been agreed by the parties. 2.3 FURTHER ACTION. On the Closing, Seller will execute and deliver to Buyer such documents and instruments of transfer and take such further action as may be reasonably requested by Buyer to transfer to Buyer the Purchased Assets and vest or perfect in Buyer good and marketable title in and to the Purchased Assets subject to the terms of this Agreement. 2.4 NO ASSUMPTION OF LIABILITY. Buyer has not and will not, by the execution, delivery or performance for this Agreement, or otherwise, assume or otherwise become responsible for any liability or obligation of any nature of Seller, including without limitation: (i) any liability or obligation under contracts of Seller arising during any period on or prior to the Closing ; (ii) any tax liabilities related to the Purchased Assets arising prior to the Closing; (iii) any taxes, wage claims or liabilities for employment-related contributions or liabilities; (iv) any liabilities arising from a failure to properly withhold from employees or a failure to file required tax returns or reports with respect to employees or consultants, and (v) any compensation or benefits to which the Seller's employees are entitled from Seller (sometimes collectively referred to as "PRE-CLOSING RISKS"); and Seller hereby agrees to indemnify, defend and hold Buyer harmless from and against all loss, liability, claims and expenses (including reasonable attorneys' fees) related to such Pre-Closing Risks. 2.5 BUYER'S LICENSE. On the Closing, Seller and Buyer shall enter into a license agreement, substantially in the form attached as Exhibit A to this Agreement (the "BUYER'S LICENSE"), pursuant to which Seller grants to Buyer a license as provided therein to the PressView IP. 2.6 SELLER'S LICENSE. On the Closing, Seller and Buyer shall enter into a license agreement, substantially in the form attached as Exhibit B to this Agreement (the "SELLER'S LICENSE"), pursuant to which Buyer shall grant to Seller a license as provided therein to the Intangible Assets solely for the purposes specified therein. Except for the Seller's License and the Security Agreement (defined below), following the Closing, Seller shall have no right or license whatsoever in or to any of the Purchased Assets. 3. PURCHASE PRICE AND MANNER OF PAYMENT. 3.1 PURCHASE PRICE. As consideration for the sale of the Purchased Assets and grant of Buyer's License, Buyer will prepay the final three payments required under the $5,200,000 promissory note of Buyer delivered to Seller on the date hereof pursuant to the Original License. 2 3.2 EXPENSES AND TAXES. Each party will bear its own costs in preparing this Agreement and for taxes in connection with this Agreement and the transactions contemplated hereby, except as set forth below. Buyer agrees that it shall be responsible for the timely payment of any applicable sales and use taxes on the transfer of the Purchased Assets and will indemnify Seller from all loss, liability, claim, risk and expense (including reasonable attorneys' fees) occasioned by Buyer's failure to pay such taxes. 3.3 SURVIVAL OF ORIGINAL LICENSE. Until the Closing, the Original License shall remain in full force and effect. Thereafter, it shall be terminated and superseded by this Agreement. The promissory note, security agreement and guaranties delivered to Seller in connection with the Original License shall survive by their terms, however. 4. DUE AUTHORIZATION. As of the date of this Agreement and as of the Closing: 4.1 BUYER. Buyer hereby represents and warrants to Seller that Buyer has the full right, power, legal capacity and authority to execute and delivery this Agreement and to perform its obligations hereunder, and that no approval and consent of any other person, entity or governmental authority is necessary to such performance hereof, except as shall be validly and timely obtained before such performance is required. 4.2 SELLER. Seller hereby represents and warrants to Buyer that Seller has the full right, power, legal capacity and authority to execute and deliver this Agreement and to perform its obligations hereunder, and no approval or consent of any other person, entity or governmental authority is necessary to such performance thereof, except as shall be validly and timely obtained before such performance is required; provided however, that no representation or warranty is being made with respect to shareholder approval. 5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and warrants to Buyer that, except as set forth the Disclosure Schedule, the matters set forth in the following subsections of this Section 5 are true and correct as of the date hereof and the Closing. 5.1 CORPORATE ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing and in good standing under the laws of California. The nature of the business conducted or properties owned by Seller do not require Seller to be qualified in any other jurisdiction. Seller has all corporate power and authority to own, lease and operate its properties and to conduct its business as such is presently conducted. 5.2 AUTHORIZATION FOR AGREEMENT. The execution, delivery and performance of this Agreement by Seller has been duly authorized by all necessary actions of its Board of Directors, and this Agreement, when executed and delivered by Seller, will constitute the valid and binding obligation of Seller, enforceable according to its terms; provided however, that no representation or warranty is being made with respect to shareholder approval. 5.3 NO BREACH OF STATUTE OR CONTRACT. Neither the execution nor delivery by Seller of this Agreement nor compliance by Seller with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, the Articles of Incorporation or Bylaws of Seller, any judgment or award of any court or arbitrator or any other agreement (including any agreement with shareholders) or any applicable law to which Seller or any of the Purchased Assets is subject, nor will such execution or delivery result in the creation of any lien or charge upon the Purchased Assets. Seller is not a party to, or otherwise subject to any provision contained in, any instrument evidencing indebtedness, any agreement relating thereto or any other contract or agreement (including its Articles of Incorporation) which restricts or otherwise limits Seller's power or authority to transfer the Purchased Assets. Seller is not a party to any joint venture or similar affiliation involving the Purchased Assets. 5.4 TITLE AND CONDITION OF PROPERTY. To Seller's knowledge, Seller owns all right, title and interest in and to the Purchased Assets free and clear of all claims, mortgages, liens, security interests or encumbrances of any nature and the transfer of the Purchased Assets to Buyer and Buyer's use 3 thereof does not infringe upon any Intellectual Property Rights of any third party. 5.5 LITIGATION. There are no actions, suits, investigations or proceedings pending, or, to the knowledge of Seller, threatened (i) against Seller or any properties or rights of Seller before any court, arbitrator or administrator or governmental body which arose out of or are based upon the ownership or use of the Purchased Assets, and there is no judgment, order, writ or decree of any governmental authority applicable to Seller which might result in any material adverse change in the value of the Purchased Assets or Buyer's ability to design, develop, assemble, market and sell the Products, (ii) challenging the ownership or use, in any respect, of the Purchased Assets, or (iii) asserting the invalidity of this Agreement or seeking to prevent any of the transactions contemplated hereby. To the knowledge of Seller, no valid basis for any successful action, suit, investigation or proceeding of the nature referred to above exists, which if so asserted would have a material adverse effect on the value of the Purchased Assets or Buyer's ability to design, develop, assemble, market and sell the Products. 5.6 FINANCIAL RECORDS. On or before the date hereof, Seller has made available to Buyer access to all records of Seller pertaining to the Display Business ("FINANCIAL RECORDS"). 5.7 UNDISCLOSED LIABILITIES. To Seller's knowledge, Seller has no obligations or liabilities related to the Display Business of any material nature, including but not limited to employees or consultants, whether absolute, accrued, contingent or otherwise, except and to the extent disclosed in the Disclosure Schedule, this Agreement or in the public filings of Seller. Buyer is not assuming any Seller obligations hereunder except as set forth in Section 2.4. 5.8 PROPRIETARY INFORMATION AGREEMENTS. To Seller's knowledge, all persons who have had access to the confidential and proprietary information related to the Purchased Assets have executed a non-disclosure agreement and assignment with Seller. Concurrently with the execution of this Agreement, the rights to enforce these agreements with respect to the Purchased Assets and the confidential and proprietary information contained therein is being assigned to Buyer to the extent necessary to preserve Buyer's Intellectual Property Rights in the Purchased Assets. 5.9 SCOPE OF PURCHASED ASSETS. To Seller's knowledge, the Purchased Assets and the Buyer's License constitute all or substantially all intangible assets and rights necessary for Buyer's continued conduct of the Display Business as currently conducted by Seller (except for research and development capability (i.e., employees), distribution rights and channel and related goodwill, equipment, inventory, spare parts and warranty coverage for historical sales). To Seller's knowledge, other than the Purchased Assets and Buyer's License being acquired hereunder, Seller and its affiliates own no other intangible assets or Intellectual Property Rights necessary for the continued conduct of the Display Business as currently conducted by Seller (other than any rights associated with the previous parenthetical expression). 5.10 NO OTHER WARRANTIES. Seller makes no other warranties in connection with the Purchased Assets or Buyer's License, express or implied, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. The Intangible Assets and the PressView IP may not be error free and may not satisfy Buyer's needs. 6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and warrants to Seller that the matters set forth in the following subsections of this Section 6 are true and correct as of the date hereof and the Closing. 6.1 CORPORATE ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of California. Buyer has all corporate power and authority to own, lease and operate its properties and to conduct its business as such is presently conducted. 6.2 AUTHORIZATION FOR AGREEMENT. The execution and performance of this Agreement by Buyer has been duly authorized by all necessary actions of its Board of Directors and shareholders, and this Agreement, when executed and delivered by Buyer, will constitute the valid and binding obligation of Buyer, enforceable against Buyer according to its terms. 4 6.3 ABILITY TO PERFORM. Buyer represents that the financial statements of Buyer attached as SCHEDULE C to this Agreement fairly reflect Buyer's financial condition as of the dates indicated. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. As of the Closing, the following conditions have been satisfied, unless waived by BUYER in accordance with Section 9: 7.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations and warranties made by Seller in Sections 4 and 5 above shall be true and correct in all material respects on the Closing Date. 7.02 BOARD APPROVAL. On or prior to the Closing, this Agreement and all transactions contemplated hereby shall have been duly and validly authorized and adopted by the Board of Directors. 7.03 CONSENTS. Seller will have used commercially reasonable efforts to obtain all consents, permits and waivers and made all filings necessary or appropriate for the consummation of the transactions contemplated hereby, including but not limited to the approvals of parties to the Contracts identified in Schedule C. 7.04 CLOSING CERTIFICATE. On the Closing Date, Seller shall have delivered to BUYER a certificate signed by the chief financial officer of Seller, dated the Closing Date and certifying to the fulfillment of the conditions set forth in Sections 7.01, 7.02, and 7.03 above. 7.05 SHAREHOLDER APPROVAL OR SATISFACTORY OPINION OF COUNSEL. Prior to the Closing, Seller shall have secured the approval of Seller's shareholders to this Agreement or provided an opinion of counsel satisfactory to Buyer's counsel that all corporate action necessary to authorize the Agreement has been taken by Seller; provided however, that Buyer must give written notice of its desire for shareholder approval to Seller by December 15, 1998 or within ten business days after any earlier request of Seller (in order to supplement relevant proxy materials). 7.06 DELIVERIES OBTAINED. All deliveries to Buyer required to be made by Seller under Section 2 hereof shall have been tendered. 7.07 CONDITION OF TITLE. Buyer's counsel is reasonably satisfied that the liens of IBM Credit Corporation and Mitsubishi Electronics America, Ltd. have been released and that any rights of Seller's European and Japanese distributors referred to in the Disclosure Scheduledo not present material legal risks to Buyer's ability to use the Purchased Assets in view of the terms of such agreements and any amendments to them entered into prior to Closing.. 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. As of the Closing, all of the following conditions shall have been satisfied, unless waived by Seller in accordance with Section 9: 8.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations and warranties made by BUYER in Sections 4 and 6 above shall be true and correct in all material respects on the Closing. 8.02 CORPORATE APPROVAL. On or prior to the Closing Date, this Agreement and all transactions contemplated hereby shall have been duly and validly authorized and adopted by the Board of Directors of BUYER, and BUYER shall have delivered to Seller certified copies of the resolutions of its Board of Directors authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby. 5 8.03 CLOSING CERTIFICATE. On the Closing Date, BUYER shall have delivered to Seller a certificate signed by the chief financial officer of BUYER, dated the Closing Date and certifying to the fulfillment of the conditions set forth in Sections 8.01 and 8.02 and that there have been no material adverse changes to BUYER's financial conditions or business. 8.04 DELIVERIES. The payments specified in Section 3.01 have been received. 8.05 GOODSTANDING UNDER ORIGINAL LICENSE. All required payments have been received from Buyer under, and Buyer is not in default of, the Original License. 9. Waivers of Conditions; TERMINATION; CERTAIN COVENANTS.. 9.01 WAIVERS OF CONDITIONS. Either party can elect to waive any condition for its benefit on prior written notice to the other party and upon such waiver will not thereafter be able to seek any legal recourse against the other party for the failure to satisfy such condition. In any event, Seller shall have no liability to Buyer if the conditions identified in Sections 7.03. 7.05 or 7.07 are not satisfied, provided that commercially reasonable efforts are made to satisfy them during the term of this Agreement. 9.02 TERMINATION OF THIS AGREEMENT. This Agreement may be terminated upon the mutual written consent of Seller and BUYER, and will be terminated in any event if the Closing has not occurred within thirty days after the next regular shareholders meeting of Seller (expected in February 1999) (unless extended by agreement of the parties), in which case only the obligations of Articles 10 and 12 shall survive. 9.03 CERTAIN COVENANTS. (a) Prior to Closing, Seller agrees to use commercially reasonable efforts to secure as soon as practicable following the date of this Agreement a full termination or release of the liens of IBM Credit Corporation and Mitsubishi Electronics America referred to in the Disclosure Schedule. (b) In connection with Closing, if Buyer is reasonably disatisfied with the status of the rights of the Europe master distributor (see the Disclosure Schedule), i.e., if Buyer reasonably believes that such distributor may present material legal risks to Buyer's ability to use the Purchased Assets in Europe, then in connection with the satisfaction of part of the conditions referred to in Section 7.07 above and upon Buyer's request, at Closing, (i) Seller will assign all of Seller's claims against such distributor to Buyer, including all rights under the master distributor agreement dated July 1, 1996 and related documentation (the "Documentation") , and (ii) Seller will assign the Documentation to Buyer, subjec to the terms of the Documentation; provided that Buyer indemnifies, defends and holds Seller harmless from any claims of such distributor in a form reasonably satisfactory to Seller's counsel. (c) Prior to Closing, Seller shall not renew or extend, nor permit the renewal or extension of, the Documentation or of Seller's master distributor agreement with its Japanese master distributor (see the Disclosure Schedule) beyond the existing expiration dates of such arrangements. (d) After Closing and except as otherwise permitted in Seller's License, Seller will limit its use of its corporate name ("Radius Inc.") as legally necessary to identify itself with various levels of government and regulatory agencies and as otherwise required by law. If at any time after the full and timely satisfaction of the Note, Buyer reasonably determines that it requires the corporate name for purposes of continuing the Display Business as a California corporation or a 6 foreign corporation doing business in California, then Radius will consent to the use of similar corporate names (with the Secretary of State or other appropriate official), and if such consent is not sufficient for Buyer to secure the right to use a variation of "Radius" in its corporate name, e.g., "Radius Displays, Inc.", then Seller will use commercially reasonable efforts to change its legal name by seeking shareholder approval for the amendment of its articles of incorporation at the next regular meeting of shareholders (or earlier at the election of Seller or at the time Seller seeks shareholder approval of this Agreement, if Buyer elects to submit this Agreement to such process pursuant to Section 7.05). Such efforts shall include the preparation of appropriate proxy materials and good faith efforts to obtain regulatory and shareholder approval of such materials. Seller shall have no liability to Buyer if Seller's shareholders do not approve such name change, provided that Seller timely use commercially reasonable efforts to secure such change. However, Buyer can elect to terminate this Agreement within ten days after the failure of Seller shareholders to approve of this Agreement, in which case, only the provisions of Articles 10 and 12 shall survive. 10. Survival, INDEMNIFICATION AND EXCULPATION. 10.1 INDEMNIFICATION OF SELLER. Buyer will defend, indemnify and hold Seller (including Seller's officers, directors, shareholders, employees, distributors and agents) harmless from all loss, liability, claims and expenses (including reasonable attorneys' and experts' charges) (collectively "LOSSES") occasioned by Buyer's breach of any of its representations and warranties herein or its use of the Purchased Assets or Buyer's License, or any breach of Buyer's License, except to the extent such Losses are caused by Seller's intentional misconduct, gross negligence or breach of Seller's representations and warranties contained in Articles 4 and 5 above prior to the beginning of the thirteenth month after the Closing. In no event will Seller be liable to Buyer for more than the Purchase Price payments received and actually receivable from Buyer in connection with the breach of or performance of this Agreement, except for the intentional or grossly negligent breach of Seller's License. . 10.2 INDEMNIFICATION OF BUYER. Seller will defend, indemnify and hold Buyer (including Buyer's officers, directors, shareholders, employees, distributors and agents) harmless from all Losses occasioned by Seller's breach of any of its representations and warranties herein or its use of the Purchased Assets or Seller's License, or any breach of Seller's License, except to the extent such Losses are caused by Buyer's intentional misconduct, gross negligence or breach of Buyer's representations and warranties contained in Articles 4 and 6 above prior to the beginning of the thirteenth month after the Closing. 10.3 SURVIVAL. The representations and warranties of Seller and Buyer pursuant to Articles 4, 5 and 6 respectively will survive through the end of the twelfth month after the Closing. Any action for breach must therefore accrue prior to such expiration. 11. NONCOMPETITION AND NONSOLICITATION As an inducement to enter into this Agreement and consummate the transactions contemplated hereby, the parties agree as follows: (a) During the period from the Closing until the first anniversary of the Closing (the "NONCOMPETE PERIOD"), Seller shall not (I) engage in the Display Business, except as authorized by Seller's License or as incidental to Seller's digital video business, nor (II) knowingly induce any employee of Buyer to leave the employ of Buyer in order to provide services to Seller without Buyer's written approval. Notwithstanding the foregoing, no successor in interest to substantially all of Seller or its business or assets, whether by merger, combination, liquidation, distribution, law, assignment, purchase, or change in effective control, shall be bound by the provisions of this Article 11. (b) During the Noncompete Period, Buyer and its affiliates shall not (I) use the "Radius" brand name in connection with the development, manufacture, marketing or sale of any digital video product nor (II) knowingly induce any employee of Seller to leave the employment of Seller in order to provide services to Buyer without Seller's written approval. (c) The parties acknowledge and agree that money damages may not be an 7 adequate remedy for any breach or threatened breach of the provisions of subparagraph (a) or (b) and that, in such event, the aggrieved party or its successors or assigns may, in addition to any other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance, injunctive and other relief in order to enforce or prevent any violations of the provisions of this Section 11 (including the extension of the Noncompete Period by a period equal to the length of court proceedings necessary to stop such violation). Any injunction shall be available without the posting of any bond or other security. In the event of an alleged breach or violation of any of the provisions of this Section 11, the Noncompete Period will be tolled until such alleged breach or violation is resolved; PROVIDED, HOWEVER, that if it is found that the provisions of this Section 8 have not been violated, then the Noncompete Period will not be deemed to have been tolled. The parties agree that the restrictions contained in this Section 11 are reasonable in all respects in light of all circumstances. 12. MISCELLANEOUS 12.1 NO ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by Seller or Buyer and any attempt to do so will be void. Seller may use this Agreement as security for any borrowing, however. Furthermore, either party may assign this Agreement in connection with a merger or sale of substantially all of its assets or similar reorganization. This Agreement and the terms and conditions contained herein are binding upon, and will inure to the benefit of, the parties hereto and their respective representatives, executors, administrators, heirs, successors and assigns. 12.2 SEVERABILITY. If any provision of this Agreement is found to be invalid, illegal or unenforceable, then it will be enforced to the maximum extent possible and the remaining provisions of this Agreement will continue unaffected to the extent equitable. 12.3 WAIVERS. No waiver by any party hereto of any term or condition of this Agreement will be effective unless set forth in a writing signed by such party. No waiver of any provision of this Agreement will be deemed a waiver of any other provision, or constitute a continuing waiver unless otherwise expressly provided in writing by the waiving party. No failure or delay on the part of any party in exercising any right, power or privilege under this Agreement will operate as a waiver thereof, nor will a single or partial exercise thereof preclude any other or further exercise of any other rights, powers or privileges. 12.4 CONFIDENTIALITY. Each party acknowledges that it will receive information which is confidential and proprietary to the other party. Each party agrees not to use such information except in performance of this Agreement and not to disclose such information to third parties. Neither party will issue a press release in connection with the entry into or Closing of this Agreement without the prior approval of the other party, except as may be required by law. 12.5 NOTICES. All notices which are required to be given hereunder shall be in writing and shall be addressed (i) if to Seller, at Seller's address set forth in the introductory paragraph of this Agreement, or (ii) if to Buyer, at the address as set forth in the introductory paragraph of this Agreement (each to the attention of the chief executive officer or chief financial officer), or at such other address as the relevant party furnishes to the other party hereto in writing pursuant to this Section. Any such notice may be delivered personally, by commercial overnight courier or facsimile transmission which shall be followed by a hard copy (U.S. mail prepaid, first class or better) and shall be deemed to have been served if by hand when delivered, if by commercial overnight courier 48 hours after deposit with such courier, and if by facsimile transmission when transmission has been confirmed. 12.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts (original or facsimile), each of which shall be deemed an original and all of which together shall constitute but one instrument. 12.7 BROKER'S FEES/EXPENSES. Each party represents that it has not engaged the services of any broker or finder, other than Michael Kuehn, in connection with the transactions contemplated by this Agreement and jointly and severally agree to indemnify the other and hold it harmless from and against any claims for broker's or finder's fees or other compensation in connection with such transactions. Otherwise, each party will bear its own expenses in connection with this 8 Agreement, and Seller will be solely responsible for its obligations to Michael Kuehn. 12.8 DISPUTES. If any dispute arising out of or in connection with this Agreement cannot be resolved by the parties consensually or through mutually agreeable forms of mediation or arbitration, then such dispute shall be adjudicated in any court of competent jurisdiction applying California law. The parties agree that the state or federal courts of Santa Clara County California are competent to hear any such dispute and consent to service there. 12.9 NO ADDITIONAL REPRESENTATIONS. Buyer and Seller each acknowledge that the other has not made any representations or warranties, of any kind, either express or implied, except as expressly set forth in this Agreement, Buyer's License and Seller's License. 12.10 ATTORNEYS' FEES. If any action at law or in equity or arbitration or mediation proceeding is necessary to enforce or interpret the provisions of this Agreement, then the prevailing party shall be entitled to reasonable attorneys' and experts' charges in addition to any other relief to which such prevailing party may be entitled. 12.11 INTEREST. Except as otherwise provided in the Note, any obligation under the Agreement which can be reduced to a monetary sum and which is not satisfied when due under this Agreement will bear interest at the rate of one percent per month or any lower legal maximum until satisfied. 12.12 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together with the schedules and exhibits attached hereto, each of which is incorporated herein by this reference, constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes in its entirety all prior agreements, understandings, negotiations and discussions between the parties, whether oral or written, with respect to the subject matter hereof. No supplement, modification or amendment to this Agreement will be binding unless executed in writing by all parties hereto. There are no intended third party beneficiaries of this Agreement. An ambiguity or inconsistency in this Agreement shall not be construed against its drafter. "Including" and "for example" are used inclusively, without limitation. The adequacy of consideration is acknowledged by each party. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written: Korea Data Systems (America), Inc. RADIUS INC. By: By: ----------------------------------- -------------------------------- Name: John Hui Name: Mark Housley Title: Chief Executive Officer Title: Chief Executive Officer 9 SCHEDULES AND EXHIBITS TO ASSET PURCHASE AGREEMENT Schedule A Intangible Assets Schedule B Disclosure Schedule Schedule C Financial Records Exhibit A Buyer's License Exhibit B Seller's License 10 Schedule A Intangible Assets The following trademarks and applications (and the goodwill associated with each) are included: 1. Precisionview, as filed March 17, 1995. 2. The stylized "S" (for Supermac), reg. No. 1,869,309. 3. Intellicolor, reg. No. 1,858,443. 4. Pressview, reg No. 1,865,214. 5. Precisioncolor, reg. No. 1,799,104. 6. Radius, reg. No. 1,816,667. 7. Supermac Platinum, reg. No. 1,849,010. 8. Supermac, reg. No. 1,898,615. 9. Prosense, reg. No. 2,032,840 10. Supermatch, reg. No. 1,829,245 Along with the rights to the "Radius" internet domain name, subject to Seller's License. 11 Schedule B Disclosure Schedules The following agreements and matters are germane to the Sections noted, among others: 0. 5.03 The Letter Agreement dated January 26, 1989 with Radius Systems, Ltd and related correspondence. 1. 5.03 The Consent and Coexistence Agreement with Motorola dated April 11, 1996. 2. 5.03 The license to Umax of "Supermac" and the stylized "S" in the Asset Transfer Agreement dated January 9, 1996. 3. 5.03 The master distributior agreement for Japan with QMS KKdated April 1, 1996, as amended July 1, 1997. 4. 5.03 The master distributior agreement for Europe with Gradeup, Ltd. dated July 1, 1996 and related documentary materials pertaining to Abacus Technology Europe, Ltd.. 5. 5.03 The Splash license dated January 30, 1996. 6. 5.03 The Purchase Agreement with Sequel dated October 10, 1996. 7. 5.03 The CRA Agreement dated May 1, 1997 and related agreements, as amended. 8. 5.03 The Sun Java Developer's License. 9. 5.04 The lien of IBM Credit Corporation for sums paid in full. 10. 5.04 The lien of Mitsubishi Electronics, America on PressView IP and related trademarks for component risk in the manufacture of PressView and PrecisionView monitors pursuant to Security Agreement dated June 1996. (Radius believes that this lien should be released in due course.) 11. 5.05 The Electronics for Imaging litigation. 12. 5.05 The Monitor Class Action Suit and related Attorney General matter. 13. 5.07 The potential claim of Mitsubishi Electronics, America for inventory. 14. 5.07 Claims related to warranties for previously sold products. 15. 5.07 The potential claim of Finnegan et al related to monitors generally as described in correspondence dated March 17, 1998 and responsive correspondence 16. 5.07 The matters raised with respective to foreign trademark rights in correspondence from Anita Ersoy of Fenwick & West LLP to James 12 Given. 17. 5.03 The patent license dated March 8, 1996 between Radius and the inventor Waintroob for Pressview hoods. Items 0,1,2,11,15,16 and 17 are considered Third Party Intangibles. Schedule C Financial Records of Buyer (see attached) 13 EXHIBIT A (Buyer's License) LICENSE AGREEMENT This License Agreement (this "Agreement") is made and entered into as of ______, 199__, by and between Radius Inc., a California corporation having its principal office at 460 East Middlefield Road, Mountain View, California 94043 ("Licensor"), and Korea Data Systems (America), Inc., a California corporation having its principal office at 12300 Edison Way, Garden Grove, California 92841 ("Licensee"), with reference to the following facts: R E C I T A L S: A. Licensee is engaged in the business of designing, developing, assembling, marketing, selling, servicing and supporting computer monitors and similar displays (the "Display Business"). B. Licensor and Licensee are parties to an Asset Purchase Agreement dated as of _____________, 1998 (the "Purchase Agreement"), pursuant to which Licensee has acquired from Licensor the registered marks and associated goodwill of Licensor described therein (the "Purchased Assets"). C. As contemplated by the Purchase Agreement, Licensee desires to acquire from Licensor, and Licensor is willing to grant to Licensee, the perpetual, fully-paid, nonexclusive right and license to use the technology described on Exhibit 1 to this Agreement (the "Technology") on the terms set forth herein. Now, therefore, in consideration of the mutual covenants and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, it is understood and agreed between the parties hereto as follows: SECTION GRANT OF LICENSE. 1. 1.1 Licensor hereby grants to Licensee, on the terms set forth herein, the nonexclusive perpetual, fully-paid right and license (the "License") to use, sublicense and make use of the Technology, and all associated goodwill generated by Licensee, and to make enhancements, improvements, inventions and additions thereto (collectively, "Licensee Improvements") worldwide in connection with the manufacturing, marketing, advertising, selling and servicing of computer hardware (other than digital video hardware) and all business and activities related to or incidental thereto. 1.2 Licensee shall have the right and license hereunder to make Licensee Improvements, and all such Licensee Improvements shall be encompassed by the License. Licensee hereby assigns to Licensor all of its right, title and interest in and to any such Licensee Improvements and agrees to execute such documents and take such other actions as are necessary to effectuate such assignment. 1.3 Licensee shall have the right to grant to any party sublicenses with respect to all or any part of the License, provided only that each sublicensee shall agree in writing, as a condition to such sublicense, to be bound by all of the restrictions and obligations under this Agreement. 1.4 Licensee covenants and agrees to use the Technology strictly in accordance with the terms of this Agreement and shall not engage in any activities in circumvention of this Agreement. SECTION TERM OF LICENSE. 1. 2.1 The License is terminable only as follows: (a) by Licensee, for any or no reason, upon 30 days' prior notice to Licensor; (b) by Licensor, if Licensee breaches any material provision of the License and fails to cure the breach within 60 days after notice thereof from Licensor; and (c) by Licensor, if Licensee breaches any material provision of the Purchase Agreement, including the "Note" (as defined therein), and fails to cure such breach within 30 days after notice thereof from Licensor. In the event this License is terminated as aforesaid, Licensee and any sublicensees shall promptly cease all production and distribution of products that incorporates the Technology or any Licensee Improvements and other uses of the Technology and shall so certify to Licensor; provided, however, that Licensee and any sublicensees shall be entitled thereafter to continue to use the Technology and any Licensee Improvements solely in connection with their service and support of products previously sold or distributed by them, and provided further, that the rights of end-users of products manufactured prior to such termination that incorporate the Technology or Licensee Improvements shall not be impaired by the termination. The foregoing rights do not limit any other rights and remedies of any party hereto, including the right to injunctive or other equitable relief. SECTION CERTAIN COVENANTS OF LICENSEE. 1. 3.1 Licensee disclaims any right or interest in the Technology and Licensee Improvements, other than as specifically provided in this Agreement. 3.2 Without limiting the exercise of Licensee's right and license under the License, Licensee shall not, directly or indirectly, infringe upon, harm, dissipate or contest Licensor's ownership of or rights in and to the Technology. Licensee, moreover, will not contest, directly or indirectly, Licensor's rights to use or license others to use the Technology in connection with the Display Business or any other business or activity. 3.3 Licensee shall not permit any trademarks or trade names, service marks or other registrations included as part of the Technology to be or become abandoned, unless it first gives Licensor not less than 60 days written notice thereof and the right to assume or continue such trademark, trade name, service mark or other registration in Licensor's name and for its sole benefit. Licensee shall cooperate with Licensor with respect to Licensor's assumption or continuation of any such trademark, trade name, service mark or other registration hereunder. SECTION REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR. 1. Licensor makes the following representations, warranties and covenants to Licensee, each of which is subject to the Disclosure Schedule provisions of the Purchase Agreement and shall survive the execution and delivery of this Agreement for one year from the date of this Agreement: 4.1 Licensor is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. 4.2 The execution and delivery by Licensor of this Agreement, the performance and observance by Licensor of its obligations hereunder and the consummation by Licensor of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Licensor. This Agreement has been duly executed and delivered by a duly authorized officer of Licensor and constitutes the valid and legally binding obligation of Licensor, enforceable against Licensor in accordance with its terms. 4.3 The execution and delivery of this Agreement by Licensor will not violate or result in the breach of, constitute a default under, or accelerate the performance required by, any term, provision, covenant, condition, warranty or representation contained in any agreement, contract, document, writing or understanding to which Licensor is a party, or any decision, judgment, order, decree, law, rule, regulation, policy or interpretation to which Licensor is subject. No consents or agreements of any third party or governmental body are necessary for the execution, delivery, performance or observance by Licensor of its obligations under this Agreement. [ADD EXCEPTION WITH RESPECT TO SHAREHOLDER APPROVAL, IF NECESSARY.] SECTION REPRESENTATIONS AND WARRANTIES OF LICENSEE. 1. Licensee makes the following representations, warranties and covenants to Licensor, each of which shall survive the execution and delivery of this Agreement for one year from the date of this Agreement: 5.1 Licensee is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. 5.2 The execution and delivery of this Agreement, the performance of Licensee's obligations hereunder and the consummation by Licensee of the transactions contemplated hereby have been duly authorized by all necessary actions on the part of Licensee. This Agreement has been duly executed and delivered by a duly authorized officer of Licensee and constitutes the valid and legally binding obligation of Licensee, enforceable against Licensee in accordance with its terms. 5.3 The execution and delivery of this Agreement by Licensee will not violate or result in the breach of, constitute a default under, or accelerate the performance required by, any term, provision, covenant, condition, warranty or representation contained in any agreement, contract, document, writing or understanding to which Licensee is a party, or any judgment, order, decree, law, rule, regulation, policy or interpretation to which Licensee is subject. No consents or agreements of any third party or governmental body are necessary for the performance or observation by Licensee of its obligations under this Agreement. SECTION INDEMNIFICATION. 1. 6.1 To the fullest extent allowed by law, Licensee agrees to indemnify and hold harmless Licensor from any and all loss, liability (including strict liability in tort), costs and expenses (including reasonable attorneys' and experts' fees and disbursements) resulting from any claims for damages (including incidental and consequential damages), suits, actions, proceedings, recoveries, judgments or executions, which may be threatened, made, sought, had, brought or recovered against Licensor by reason of or on account of injury (including death resulting therefrom), to any person whomsoever or for damage to the property of any person whomsoever, caused by, arising from, incident to, connected with or growing out of, directly or indirectly, (i)Efailure of Licensee to observe or perform any term, provision, covenant or condition, contained in this Agreement to be performed by it, (ii)Ethe breach of any warranty or representation made or given by Licensee, or (iii) any use by Licensee of the Technology, whether or not in accordance with the terms of this Agreement. 6.2 Licensor agrees to give Licensee written notice of any event or assertion of which it has knowledge concerning any loss, liability, damage, cost, expense, claim, lien or other obligation as to which it may request indemnification under this Agreement within 20 days after acquiring such knowledge; provided, however, that failure to give such notice shall not affect Licensee's indemnification obligations hereunder except to the extent of any actual prejudice to Licensee caused thereby. Licensee shall have the right to cure, within a reasonable time and in a manner reasonably satisfactory to the other, any matter giving rise to liabilities under this ArticleE6; provided, however, that any such cure shall not relieve Licensee of its obligation under this ArticleE6 arising prior to, during or because of such cure or to the extent that such cure is inadequate. 6.3 In the case of any third-party suit, proceeding, claim or assertion being made against Licensor, Licensee will cooperate with Licensee in determining the validity of such claim or assertion. Licensee shall have the right to control the conduct of such defense with counsel of its choice who shall be reasonably satisfactory to Licensor, provided that Licensor shall have the right to participate in such defense with counsel of its choice, at its sole cost and expense. Licensor agrees not to settle or compromise any such third-party suit, proceeding, claim or assertion for which such party will seek or has sought indemnification hereunder from Licensee without the prior written consent of Licensee (which consent shall not be unreasonably withheld). A settlement or compromise of any such third-party suit without such consent shall operate as a forfeiture of Licensor's right to seek indemnification hereunder with respect to such suit, proceeding, claim or assertion, and any monies previously paid over to Licensor by Licensee with respect thereto shall forthwith be refunded to Licensee, together with simple interest at the rate of 7% per annum calculated from the date of payment to the date of refund. In the event that Licensor has a right against any third party with respect to any matter to which this indemnity applies, the indemnity shall be net of any amounts recovered from third parties and any amounts paid to Licensor by Licensee shall entitle Licensee to the extent of such indemnity, to be subrogated to the rights of Licensor to the extent Licensee can legally do so. SECTION FURTHER ASSURANCES; COOPERATION. 1. 7.1 From and after the date hereof, without further consideration, Licensor shall take all such other actions and shall execute, acknowledge and deliver all such writings, formulas, consents and other documents as Licensee or its counsel may reasonably request to vest more fully in Licensee, and perfect, Licensee's right to use the Technology and any Licensee Improvements in accordance with this Agreement. 7.2 From time to time after the date hereof, without further consideration, the parties hereto shall deliver to each other such information and data concerning the transactions contemplated hereby as any party may reasonably request including that required in order to enable such requesting party to complete and file all federal, state and local forms which may be required to be filed by it and to complete all customary tax and accounting procedures. SECTION ASSIGNMENT. 1. 8.1 This Agreement may be assigned, in whole or in part, by either party upon not less than ten days prior notice to the other party. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns. SECTION DEFAULT; REMEDIES. 1. 9.1 In the event Licensee shall violate or default under any of the provisions of this Agreement and fail within a reasonable time to cure such violation or default, Licensor shall have the following rights and remedies, each of which is independent of the other and jointly or severally enforceable, and all of which are in addition to, and not in lieu of, any other rights or remedies available to Licensor under this Agreement or under law or equity: a) the right to sue Licensee in any court of competent jurisdiction for money damages suffered by Licensor as a result of Licensee's breach of or default under any of the provisions of this Agreement; and a) the right to have this Agreement enforced by injunction, specific performance or other equitable remedy by any court having jurisdiction, it being acknowledged and agreed that any such breach or default will cause irreparable injury to Licensor and that money damages will not provide adequate remedy to Licensor. SECTION RELATIONSHIP BETWEEN PARTIES. 1. 10.1 This Agreement does not in any way create the relationship of principal and agent between Licensor and Licensee, and in no circumstances shall Licensee be considered the agent of Licensor, or Licensor be considered the agent of Licensee. Licensee shall not act or attempt to act or represent itself, directly or by implication, as agent of Licensor, or in any manner assume or create or attempt to assume or create any obligation or make any contract, agreement, representation or warranty on behalf or in the name of Licensor, nor shall Licensee act or represent itself as an affiliate of any other authorized licensee of Licensor. Licensor shall not act or attempt to act or represent itself, directly or by implication, as agent of Licensee, or in any manner assume or create or attempt to assume or create any obligation to make any contract, agreement, representation or warranty on behalf or in the name of Licensee, nor shall Licensor act or represent itself as an affiliate of any other authorized licensee of Licensee. SECTION MISCELLANEOUS. 1. 11.1 Each party to this Agreement shall pay its own expenses in connection with the preparation of this Agreement and the consummation of the transactions contemplated hereby, including the fees of any attorneys, accountants and other representatives and agents engaged by such party. 11.2 This Agreement contains the entire Agreement of the parties with respect to the License granted herein and no representation, inducements, promises or agreements, oral or otherwise, between the parties relative thereto not embodied herein shall be of any force or effect. No failure of any party to exercise any power given it hereunder or to insist upon strict compliance by any other party of any obligation hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver by such party of its right to demand exact compliance with the terms hereof. Waiver by any party of any particular violation or default under this Agreement shall not affect or impair such party's rights with respect to any subsequent violation or default of the same or of a different nature, nor shall any delay or omission on the part of the party to exercise any rights arising from any violation or default affect or impair such party's rights as to such violation or default or any subsequent violation or default of the same or of a different nature. 11.3 If any covenant or other provision of this Agreement is invalid or incapable of being enforced by reason of any rule of law or public policy, all other conditions and provisions of this Agreement shall, nevertheless, remain in full force and effect, and no covenant or provision shall be deemed dependent upon any other covenant or provision unless expressly stated herein. 11.4 Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 11.5 Unless otherwise specifically provided, all notices required or permitted to be given hereunder shall be in writing and (i)Esent by certified or registered mail, with postage thereon prepaid, or (ii)Esent by U.S. Express Mail or Federal Express or other reputable overnight delivery service, as follows: if to Licensor, addressed to its President at the address set forth in the introductory paragraph of this Agreement, and if to Licensee, addressed to its President at the address set forth in the introductory paragraph of this Agreement, or at such other address as any of the parties shall designate by written notice to the others from time to time. Such notice shall be deemed given upon delivery one business day after mailing, if by overnight delivery service, and two business days after mailing, if by certified or registered mail. 11.6 This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and performed solely within such State. 11.7 This Agreement shall be binding upon the parties and their respective permitted successors and assigns. 11.8 This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but which counterparts together shall constitute but one and the same instrument. 11.9 All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context or sense of this Agreement or any paragraph or clause herein may require, as if such words had been fully and properly written in the appropriate number and gender. 11.10 The various titles of the Sections herein are used solely for convenience and shall not be used for interpreting or constructing any word, clause, paragraph or section of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date set forth below. LICENSOR: RADIUS INC. Date: ___________, 199__ By: , President LICENSEE: KOREA DATA SYSTEMS (AMERICA),EINC. Date: ___________, 199__ By: , President EXHIBIT 1 TO LICENSE AGREEMENT DATED AS OF _________, 199___ Description of Technology 1) The "C" language version of the PressView software that runs only under the MacOS from Apple computer. 1) The "java" language version of the software that runs under Microsoft (MS) Windows-95. This software also runs under MS Windows NT 4.0 with specific code for each graphics adapter. The code may also work under MS Windows-98 and MS Windows NT 5.0 but this has not been fully tested. The java code used to support the N and G chassis of Mitsubishi. 1) The foregoing includes both source and object code (to be transmitted electronically). 1) The 12 ICC color profiles listed below and the corresponding PhotoShop separation tables, subject to any rights of Splash Technology Holdings, Inc. The profiles are identified by their names on the Macintosh partition of the ColorMatch-Registered Trademark- 3.01 CD-ROM. The ISO-9660 names are similar: 1. Agfa Euroscale 2. Agfa Japan Color 3. DIC Japan Coated 4. DIC Japan Matte 5. DIC Japan Uncoated 6. Fuji Japan C1 7. Fuji Japan C2 8. Fuji US Coated 9. 3M MatchPrint III Publication Base Japan 10. 3M MatchPrint III Publication Base US 11. SWOP Coated 12. SWOP Uncoated 5) Diagrams documentation, samples and other information needed to make the cables assemblies necessary for PressView for Macintosh and PressView for Windows. 6) Machine-readable and hard copy versions of the current documentation for the PressView for Macintosh, if available, and PressView for Windows manuals. 7) Artwork for the current CD silk screen labels and manual covers. 8) Claim #'s 1 and 4 of United States Patent #54 99 040 filed June 27, 1994 for front panel lockout feature. 9) Information relating to sourcing the Radius ProSense-Registered Trademark- Colorimeter from the OEM supplier. 10) All written specifications and documents owned by Radius necessary for or specifically related to the sale, use and maintenance of Radius' PressView and PrecisionView monitors, including but not limited to, user guides, installation guides, narrative descriptions, design files, file layouts, logic flow diagrams, source and loud modules, output reports, test data, test programs, advertisements and promotional material, and all camera ready copy and/or media masters of such product documentation, in whatever forms they exist (i.e., electronic or physical). EXHIBIT B (Seller's License) LICENSE AGREEMENT __________ This License Agreement (this "Agreement") is made and entered into as of ________, 199_, by and between Karla Data Systems (America), Inc., a California corporation having its principal office at 12300 Edison Way, Garden Grove, California 92841 ("Licensor"), and Radius Inc., a California corporation having its principal office at 460 East Middlefield Road, Mountain View, California 94043 ("Licensee"), with reference to the following facts: R E C I T A L S: A. Licensor and Licensee are parties to an Asset Purchase Agreement, dated _________, 1998 (the "Purchase Agreement"), pursuant to which Licensor has acquired from Licensee all proprietary and other property rights and interests in and to the corporate and trade name "Radius" and the marks and trademarks specified on ExhibitE1 hereto under which Licensee has previously conducted its business of designing, developing, assembling, marketing and selling computer displays (the "Display Business"). B. As contemplated by the Purchase Agreement, Licensee now desires to acquire from Licensor, and Licensor is willing to grant back to Licensee, the nonexclusive right and license for the period specified herein to use the foregoing corporate and trade name, marks and trademarks (collectively, the "Marks"), worldwide, solely in connection with certain activities of Licensee as specifically provided herein. Now, therefore, in consideration of the mutual covenants and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, it is understood and agreed between the parties hereto as follows: SECTION GRANT OF LICENSE. 1. 1.1 Licensor hereby grants to Licensee, on the terms and subject to the conditions herein contained, the nonexclusive right and license (the "License") to use the Marks, and all associated goodwill generated by Licensee before or after the date of this Agreement, worldwide solely in connection with the service and support by Licensee or its sublicenses or distributors. 1.2 The License shall include, without limitation, the right and license of Licensee to continue to use the word "Radius" in Licensee's corporate and internet domain name, subject to the provisions of SectionE3 below. 1.3 It is expressly understood and agreed that Licensee's right and license under the License to use the Marks as provided in Section 1.1 shall terminate upon Licensee's fulfillment of the last of its obligations referred to in Section 1.1, and Seller shall thereafter have no right or license under the License to service or support any computer displays. It is further understood and agreed that the License does not extend to any other business application. SECTION TERM OF LICENSE. 1. [Intentionally omitted]. SECTION CERTAIN COVENANTS OF LICENSEE. 1. 3.1 At Licensee's request, Licensee shall use its best efforts during the term of this Agreement to change its corporate name and internet domain name to one that omits any use of or reference to the Marks and, if necessary, to submit and recommend such name change for approval by its shareholders; provided, however, that Licensee shall not be obligated to call or convene an special meeting of shareholders solely for this purpose. Licensee further agrees in that event to cooperate with Licensor in effecting an assignment to Licensor of Licensee's current corporate name. 3.2 In the event that, notwithstanding Licensee's best efforts as provided in Section 3.1, the shareholders of Licensee fail to approve a change in Licensee's name so as to comply with Section 3.1, Licensee shall take all commercially reasonable steps necessary or appropriate to do business under a fictitious business name which does not include any of the Marks. SECTION SERVICE MARKS AND TRADE MARKS. 1. 4.1 Licensee disclaims any right or interest in the Marks, other than as provided in this Agreement, or to any goodwill derived therefrom. 4.2 In the event Licensee shall learn of any unauthorized use of the Marks (an "Infringement") or other unfair competitive act ("Unfair Competition") by any third party related to the Marks, it shall promptly notify Licensor thereof. Licensor shall have the sole and exclusive right, in its discretion, at its own cost and expense and for its own use and benefit, to institute suit or to take such other action as it may deem proper (collectively, an "Action") to restrain or to recover damages for any such Infringement or Unfair Competition. Notwithstanding the foregoing, Licensee, at its own cost and expense, shall be entitled to join or be represented in any Action instituted or taken by Licensor under this SectionE4.2, provided that the Infringement or Unfair Competition that is the subject of such Action has damaged Licensee or otherwise adversely affects its interest under the License in and to the Marks. If Licensee so joins in any such Action, Licensor and Licensee shall share in any recovery therefrom, whether by judgment, settlement or otherwise, to the extent that the amount so recovered represents the damages suffered by each of them in respect to the Infringement or Unfair Competition that is the subject of such Action, or in proportion to which the amount recovered otherwise relates to their respective interests in and to the Marks. In any Action under this SectionE4.2, Licensee, whether or not it is a participant therein, shall fully cooperate with Licensor, if so requested, provided that it is reimbursed for its actual costs and expenses for doing so. 4.3 Without limiting the exercise of Licensee's right and license under the License, Licensee shall not, directly or indirectly, infringe upon, harm, dissipate or contest Licensor's ownership of or rights in and to the Marks. Licensee, moreover, will not contest, directly or indirectly, Licensor's rights to use or license others to use the Marks in connection with the Display Business or any other business or activity, including, without limitation, any business or activity competitive with the Non-Display Business, or the Purchase Agreement. Licensee's obligations under this Section 4.3 shall survive the expiration or earlier termination of this Agreement. 4.4 After one year following the date hereof, Licensor shall have no obligations hereunder, or otherwise, to continue the registration of the Marks in any territory or jurisdiction. Prior thereto, Licensor shall use commercially reasonable efforts to preserve the registration rights associated with the [Marks worldwide]. SECTION STANDARDS OF OPERATION; COVENANTS OF LICENSEE. 1. 5.1 Licensee covenants and agrees to use the Marks strictly in accordance with the terms of this Agreement and shall not engage in any activities in circumvention of this Agreement. 5.2 Licensee will comply with all guidelines provided by Radius with respect to the reproduction and use of the Marks and will protect the goodwill of the Marks by maintaining the highest quality and integrity for all products utilizing the Marks Licensor will have the right to inspect all such products to verify compliance with this Section 5.2. Section REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR. 1. Licensor makes the following representations, warranties and covenants to Licensee, each of which shall survive the execution and delivery of this Agreement: 6.1 Licensor is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. 6.2 The execution and delivery by Licensor of this Agreement, the performance and observance by Licensor of its obligations hereunder and the consummation by Licensor of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Licensor. This Agreement has been duly executed and delivered by a duly authorized officer of Licensor and constitutes the valid and legally binding obligation of Licensor, enforceable against Licensor in accordance with its terms. 6.3 The execution and delivery of this Agreement by Licensor will not violate or result in the breach of, constitute a default under, or accelerate the performance required by, any term, provision, covenant, condition, warranty or representation contained in any agreement, contract, document, writing or understanding to which Licensor is a party, or any decision, judgment, order, decree, law, rule, regulation, policy or interpretation to which Licensor is subject. No consents or agreements of any third party or governmental body are necessary for the execution, delivery, performance or observance by Licensor of its obligations under this Agreement. SECTION REPRESENTATIONS AND WARRANTIES OF LICENSEE. 1. 7.1 Licensee is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. 7.2 The execution and delivery of this Agreement, the performance of Licensee's obligations hereunder and the consummation by Licensee of the transactions contemplated hereby have been duly authorized by all necessary actions on the part of Licensee. This Agreement has been duly executed and delivered by a duly authorized officer of Licensee and constitutes the valid and legally binding obligation of Licensee, enforceable against Licensee in accordance with its terms. 7.3 The execution and delivery of this Agreement by Licensee will not violate or result in the breach of, constitute a default under, or accelerate the performance required by, any term, provision, covenant, condition, warranty or representation contained in any agreement, contract, document, writing or understanding to which Licensee is a party, or any judgment, order, decree, law, rule, regulation, policy or interpretation to which Licensee is subject. No consents or agreements of any third party or governmental body are necessary for the performance or observation by Licensee of its obligations under this Agreement. SECTION INDEMNIFICATION. 1. 8.1 To the fullest extent allowed by law, Licensee agrees to indemnify and hold harmless Licensor from any and all loss, liability (including strict liability in tort), costs and expenses (including reasonable attorneys' and experts' fees and disbursements) resulting from any claims for damages (including incidental and consequential damages), suits, actions, proceedings, recoveries, judgments or executions, which may be threatened, made, sought, had, brought or recovered against Licensor by reason of or on account of injury (including death resulting therefrom), to any person whomsoever or for damage to the property of any person whomsoever, caused by, arising from, incident to, connected with or growing out of, directly or indirectly, (i)Efailure of Licensee to observe or perform any term, provision, covenant or condition, contained in this Agreement to be performed by it, (ii)Ethe breach of any warranty or representation made or given by Licensee, or (iii) any use by Licensee of the Marks, whether or not in accordance with the terms of this Agreement. 8.2 Licensor agrees to give Licensee written notice of any event or assertion of which it has knowledge concerning any loss, liability, damage, cost, expense, claim, lien or other obligation as to which it may request indemnification under this Agreement within 20 days after acquiring such knowledge; provided, however, that failure to give such notice shall not affect Licensee's indemnification obligations hereunder except to the extent of any actual prejudice to Licensee caused thereby. Licensee shall have the right to cure, within a reasonable time and in a manner reasonably satisfactory to the other, any matter giving rise to liabilities under this ArticleE8; provided, however, that any such cure shall not relieve Licensee of its obligation under this ArticleE8 arising prior to, during or because of such cure or to the extent that such cure is inadequate. 8.3 In the case of any third-party suit, proceeding, claim or assertion being made against Licensor, Licensee will cooperate with Licensee in determining the validity of such claim or assertion. Licensee shall have the right to control the conduct of such defense with counsel of its choice who shall be reasonably satisfactory to Licensor, provided that Licensor shall have the right to participate in such defense with counsel of its choice, at its sole cost and expense. Licensor agrees not to settle or compromise any such third-party suit, proceeding, claim or assertion for which such party will seek or has sought indemnification hereunder from Licensee without the prior written consent of Licensee (which consent shall not be unreasonably withheld). A settlement or compromise of any such third-party suit without such consent shall operate as a forfeiture of Licensor's right to seek indemnification hereunder with respect to such suit, proceeding, claim or assertion, and any monies previously paid over to Licensor by Licensee with respect thereto shall forthwith be refunded to Licensee, together with simple interest at the rate of 7% per annum calculated from the date of payment to the date of refund. In the event that Licensor has a right against any third party with respect to any matter to which this indemnity applies, the indemnity shall be net of any amounts recovered from third parties and any amounts paid to Licensor by Licensee shall entitle Licensee to the extent of such indemnity, to be subrogated to the rights of Licensor to the extent Licensee can legally do so. 8.4 The indemnification contained in this Article 8 shall survive the termination or expiration of this Agreement for a period of one year thereafter. SECTION FURTHER ASSURANCES; COOPERATION. 1. 9.1 From and after the date hereof, without further consideration, Licensor shall take all such other actions and shall execute, acknowledge and deliver all such writings, formulas, consents and other documents as Licensee or its counsel may reasonably request to vest more fully in Licensee, and perfect, Licensee's right to use the Marks in accordance with this Agreement. 9.2 From time to time after the date hereof, without further consideration, the parties hereto shall deliver to each other such information and data concerning the transactions contemplated hereby as any party may reasonably request including that required in order to enable such requesting party to complete and file all federal, state and local forms which may be required to be filed by it and to complete all customary tax and accounting procedures. SECTION ASSIGNMENT. 1. 10.1 This Agreement may be assigned, in whole or in part, by either party upon not less than ten days prior notice to the other party. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns. SECTION DEFAULT; TERMINATION; REMEDIES. 1. 11.1 In the event that Licensee fails to cure any violation or default by Licensee of or under this Agreement within a reasonable time after written notice thereof is received from Licensor, then, in any such event, Licensor, at its option and without prejudice to any other rights or remedies provided for hereunder or by law or equity, may terminate this Agreement as set forth below. 11.2 Any time after the occurrence of any violation or default and the expiration of any applicable cure period without the violation or default being cured, Licensor may terminate this Agreement by giving Licensee written notice of such termination. Such notice shall specify a date, not less than 15 days after the date of such notice, on which date this Agreement shall terminate as if such date were a date herein specifically fixed for the expiration of this Agreement, and during such period Licensee shall have no further right to cure the violation or default giving rise to the right of termination; provided that if Licensee has contested the grounds for termination by commencing a proceeding, Licensor may not terminate this Agreement unless an order has been entered therein in favor of Licensor and Licensee fails within 30 days to pay, appeal or satisfy such order. 11.3 In the event Licensee shall violate or default under any of the provisions of this Agreement and fail to cure such violation or default within any applicable cure period, Licensor shall have the following rights and remedies, each of which is independent of the other and jointly or severally enforceable, and all of which are in addition to, and not in lieu of, any other rights or remedies available to Licensor under this Agreement or under law or equity: a) the right to sue Licensee in any court of competent jurisdiction for money damages suffered by Licensor as a result of Licensee's breach of or default under any of the provisions of this Agreement; and a) the right to have this Agreement enforced by injunction, specific performance or other equitable remedy by any court having jurisdiction, it being acknowledged and agreed that any such breach or default will cause irreparable injury to Licensor and that money damages will not provide adequate remedy to Licensor. 11.4 Upon termination of this Agreement, Licensee's right to use in any manner the Marks, or any confusingly similar trademark, service mark, trade name or insignia, shall terminate forthwith. Licensee shall thereupon immediately discontinue the use of the Marks. Licensee shall not thereafter directly or indirectly identify itself in any manner as a licensee of Licensor or of the Marks. Such termination, however, shall not affect the obligations of Licensee to take action or abstain from taking action after the termination hereof as may be provided elsewhere in this Agreement. SECTION RELATIONSHIP BETWEEN PARTIES. 1. 12.1 This Agreement does not in any way create the relationship of principal and agent between Licensor and Licensee, and in no circumstances shall Licensee be considered the agent of Licensor, or Licensor be considered the agent of Licensee. Licensee shall not act or attempt to act or represent itself, directly or by implication, as agent of Licensor, or in any manner assume or create or attempt to assume or create any obligation or make any contract, agreement, representation or warranty on behalf or in the name of Licensor, nor shall Licensee act or represent itself as an affiliate of any other authorized licensee of Licensor. Licensor shall not act or attempt to act or represent itself, directly or by implication, as agent of Licensee, or in any manner assume or create or attempt to assume or create any obligation to make any contract, agreement, representation or warranty on behalf or in the name of Licensee, nor shall Licensor act or represent itself as an affiliate of any other authorized licensee of Licensee. SECTION MISCELLANEOUS. 1. 13.1 Each party to this Agreement shall pay its own expenses in connection with the preparation of this Agreement and the consummation of the transactions contemplated hereby, including the fees of any attorneys, accountants and other representatives and agents engaged by such party. 13.2 This Agreement contains the entire Agreement of the parties with respect to the License granted herein and no representation, inducements, promises or agreements, oral or otherwise, between the parties relative thereto not embodied herein shall be of any force or effect. No failure of any party to exercise any power given it hereunder or to insist upon strict compliance by any other party of any obligation hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver by such party of its right to demand exact compliance with the terms hereof. Waiver by any party of any particular violation or default under this Agreement shall not affect or impair such party's rights with respect to any subsequent violation or default of the same or of a different nature, nor shall any delay or omission on the part of the party to exercise any rights arising from any violation or default affect or impair such party's rights as to such violation or default or any subsequent violation or default of the same or of a different nature. 13.3 If any action at law or in equity, or any arbitration or mediation proceeding, is necessary to enforce or interpret the provisions of this Agreement, then the prevailing party shall be entitled to reasonable attorneys' and experts' charges in addition to any other relief available to such prevailing party. 13.4 If any covenant or other provision of this Agreement is invalid or incapable of being enforced by reason of any rule of law or public policy, all other conditions and provisions of this Agreement shall, nevertheless, remain in full force and effect, and no covenant or provision shall be deemed dependent upon any other covenant or provision unless expressly stated herein. 13.5 Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 13.6 Unless otherwise specifically provided, all notices required or permitted to be given hereunder shall be in writing and (i)Esent by certified or registered mail, with postage thereon prepaid, or (ii)Esent by U.S. Express Mail or Federal Express or other reputable overnight delivery service, as follows: if to Licensor, addressed to its President at the address set forth in the introductory paragraph of this Agreement, and if to Licensee, addressed to its President at the address set forth in the introductory paragraph of this Agreement, or at such other address as any of the parties shall designate by written notice to the others from time to time. Such notice shall be deemed given upon delivery one business day after mailing, if by overnight delivery service, and two business days after mailing, if by certified or registered mail. 13.7 This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and performed solely within such State. 13.8 This Agreement shall be binding upon the parties and their respective permitted successors and assigns. 13.9 This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but which counterparts together shall constitute but one and the same instrument. 13.10 All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context or sense of this Agreement or any paragraph or clause herein may require, as if such words had been fully and properly written in the appropriate number and gender. 13.11 The various titles of the Sections herein are used solely for convenience and shall not be used for interpreting or constructing any word, clause, paragraph or section of this Agreement. 13.12 As used herein, "Licensor" shall mean Licensor, its subsidiaries and affiliates and "Licensee" shall mean Licensee, its subsidiaries and affiliates. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date set forth below. KOREA DATA SYSTEMS (AMERICA), INC. Date: ___________, 1998 By:_____________________________ John Hui, President RADIUS INC. Date: ___________, 1998 By:_____________________________ Mark Housley, President EXHIBIT 2 TO LICENSE AGREEMENT DATED AS OF _____ __, 199_ DATE TYPE U.S. REG. NO. MARK GRANTED EX-10.02 3 EXHIBIT 10.02 EXHIBIT 10.02 AMENDED AND RESTATED LICENSE AGREEMENT This Amended and Restated License Agreement (this "License") is made as of August 7, 1998 (the "Effective Date") between Radius Inc., a California corporation, maintaining its principal place of business at 460 East Middlefield Road, Mountain View, CA 94043 ("Radius"), and Korea Data Systems (America), a California corporation, maintaining its principal place of business at 12300 Edison Way, Garden Grove, CA 92841("KDS"). This License replaces and supersedes in its entirety a License Agreement dated June 5, 1998 between the parties (and related guaranties). 1. Relationship. Radius and KDS recently concluded the negotiation of the transfer of various Radius brand names and trademarks and related intellectual property for use in connection with KDS' computer monitor business (the "Transfer"). Pending the Closing (as defined in the Asset Purchase Agreement of even date) of the Transfer, or in the event such Agreement does not close for any reason, Radius will license the use of the trademarks identified on Exhibit A to this License (the "Trademarks") and the "PressView IP" (as defined on Exhibit B) to KDS on the terms and conditions set forth below. During the term of this License, Radius will continue to use the Trademarks and PressView IP and reserves all rights to such and related goodwill; however, Radius shall not use, directly or indirectly, the Trademarks with computer monitors and "graphics adapters" (which for purposes of this License, include flat panel displays) with limited exceptions described in Section 2. The parties are independent contractors. KDS will comply with all reasonable criteria and policies developed and modified by Radius from time to time in connection with the use of its trademarks by licensees generally. Neither party will issue press releases referring to the other or disclose the terms or existence of this License, without the other's prior written approval, except as may be required by law. 2. License Grant. During the term of this License (or longer, subject to the last sentence in Section 6) and subject to Radius' rights below, Radius grants KDS (a) all of Radius' rights to use the Trademarks worldwide on an exclusive basis solely for purposes of manufacturing, marketing, advertising, selling and servicing computer monitors and graphics adapters manufactured by or for KDS, and (b) all of Radius' rights to use the Trademarks and PressView IP worldwide on a non exclusive basis solely for purposes of manufacturing, marketing, advertising, selling and servicing computer hardware manufactured by or for KDS other than digital video hardware; all provided that such monitors, graphics adapters and computer hardware are of a quality acceptable to Radius and KDS remains in good standing under this Agreement Subject to the last sentence of Section 6, this License is nontransferable, nonsublicensable and subject to early termination as set forth in Section 6 below. Radius reserves all rights and benefits associated with the Trademarks and PressView IP and the use of same, including the right to use and license the Trademarks and the PressView IP; however, Radius will not use or authorize others to use the Trademarks during the term of this Agreement in connection with the distribution, manufacturing, marketing, advertising, selling and servicing of computer monitors and graphics adapters, except: (a) in connection with the distribution of existing inventories of Radius branded monitors (whether held by Radius or third parties), (b) in connection with the service and support of previously sold Radius and Supermac monitors and graphics adapters, and (c) as previously authorized to its Japanese and European master distributors by existing agreements or applicable law. (The parties acknowledge that third parties may continue 1 to distribute, refurbish and resell previously sold monitors and graphics adapters, subject to Radius' trademark rights.) KDS will not at any time during or after this License do anything that may adversely affect the validity or enforceability of or contribute to the infringement of the Trademarks. During the term of this License (and thereafter, if the license becomes perpetual as set forth in the last sentence to Section 6), Radius will use commercially reasonable efforts to (i) maintain the effectiveness of its trademark registrations in all countries where the Trademarks are currently registered and in good standing as well as (ii) defend the Trademarks from infringement by third parties. If KDS desires trademark registration protection beyond what Radius considers reasonable or in any other country during the term or desires more assertive trademark enforcement against third parties, then Radius will reasonably cooperate in such efforts after notice from KDS and at KDS' expense, provided that such registrations and actions will be in Radius' name unless Radius elects otherwise. 3. Payment. In consideration of the license rights conferred above, KDS has paid Radius $1,000,000 and tenders a note to Radius in the amount of $5,200,000 in the form attached hereto (the "Note"). The Note is secured in the form of the Security Agreement attached and is guarantied by Korea Data Sytems Co., Ltd. and Korea Data Systems (USA), Inc. in the form attached (the "Guaranties"), all duly executed and delivered to Radius in connection with this License. 4. Miscellaneous. KDS may not refer to itself as an authorized Radius Reseller or agent and is not authorized to use other Radius trademarks or intellectual property pursuant to this License. KDS will not make any representation, warranty or guarantee on behalf of Radius. KDS must disclaim warranties and limit liability for Radius with respect to Radius branded monitors and graphics adapters sold by or for KDS to the same extent that KDS disclaims its own warranties and limits its own liability on other KDS monitors and graphics adapters, and in any event, KDS must at least disclaim all indirect, punitive, special and consequential damages. KDS will have the exclusive responsibility to support purchasers of Radius branded monitors and graphics adapters sold by or through KDS which utilize any of the Trademarks or the PressView IP. KDS shall not refer its customers, distributors or resellers to Radius for support. Each party acknowledges that it will have access to certain information and materials concerning the other party's business, plans, customers, technology and products that are confidential and of substantial value to the other party, which value will be impaired if such information and materials were disclosed to third parties. Each party further agrees that it will not use such information (except in performance of this License), or disclose such information to third parties, and that it will not obtain any rights in such information except as specified in this License. Each party will also take every reasonable precaution to protect the confidentiality of such information, including but not limited to executing confidentiality agreements in form and substance satisfactory to the other party. KDS will indemnify, defend and hold Radius (including its officers, directors, shareholders, employees, distributors and agents) harmless from all loss, liability, expense (including reasonable attorneys' and experts' charges) and claims ("Losses") occasioned by KDS' use of the Trademarks and PressView IP or any breach by KDS of this Agreement, except to the extent such Losses are caused by Radius' intentional misconduct or gross negligence and except to the extent such Losses are caused by the Trademarks or PressView IP's infringement or violation of the rights of any third parties. 5. Limitations. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF 2 MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE LICENSE, EXCEPT THAT (I) EACH PARTY HAS AUTHORITY TO ENTER INTO THIS LICENSE AND (II) TO EACH PARTY'S KNOWLEDGE ENTRY INTO THIS LICENSE DOES NOT VIOLATE ANY DOCUMENT OR ORDER AND IS NOT SUBJECT TO LITIGATION. RADIUS' LIABILITY UNDER THIS AGREEMENT, WHETHER RESULTING FROM STATUTE, TORT, STRICT LIABILITY, BREACH OF CONTRACT OR OTHER FORM OF ACTION, SHALL BE LIMITED TO THE ACTUAL AMOUNTS PAID BY KDS UNDER THIS LICENSE AND SHALL IN NO EVENT INCLUDE INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF RADIUS IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. SIMILARLY, KDS' LIABILITY TO RADIUS HEREUNDER SHALL BE LIMITED TO THE PAYMENTS DUE PLUS ANY LIABILITY UNDER INDEMNIFICATION PROVISIONS OF SECTION 4 ABOVE. 6. Term. The term of this License will expire on any date the Transfer is closed and the final three monthly Note payments are prepaid to Radius. (The Note, Security Agreement and Guaranties will survive such termination, however.) Prior to such time, either party may terminate this License prior to its expiration if the other party fails to perform any material obligation under this License and such failure continues unremedied for thirty business days after written notice, in which event, KDS' right to use the Trademarks and PressView IP shall immediately cease. NEITHER PARTY SHALL BE LIABLE TO THE OTHER AS A RESULT OF THE EXPIRATION OR TERMINATION OF THIS LICENSE PURSUANT TO ITS TERMS, INCLUDING FOR ANY SUMS EXPENDED, DAMAGES SUFFERED OR LIABILITIES INCURRED BY EITHER IN THE CONDUCTING OR PROMOTING OF THEIR BUSINESS, OR FOR LOST PROFITS OR CONSEQUENTIAL DAMAGES OF ANY KIND. KDS' obligations to pay Radius all amounts due under this License will survive the expiration and any termination of this License except termination by Radius without cause, along with the provisions of Sections 4, 5 and 7. In the event there is no Transfer and KDS remains in good standing under this License, then after the Note has been timely paid in full the license rights conferred in Section 2 above will become fully paid up (subject to all previously accrued obligations having been paid), perpetual, irrevocable, transferable (after notice to Radius) and sublicensable (after notice to Radius). 7. General. This License is not assignable by either party without the prior written consent of the other party, which shall not be unreasonably withheld, except in connection with a merger or disposition of substantially all of the assignor's related assets or business. Any other attempted assignment will be null and void. These provisions shall be binding upon and inure to the benefit of the parties, their successors and permitted assigns. All notices and demands hereunder shall be in writing and shall be served by personal service or by first class certified or registered mail, or by any return receipt express courier to the address indicated on the signature page of this License, or to any other address of the receiving party designated by written notice. The parties acknowledge that breaches of this License warrant equitable or injunctive relief in addition to other remedies. This License constitutes the entire agreement between the parties pertaining to its subject matter and supersedes any prior or contemporaneous written or oral agreements between the parties. The parties acknowledge that they are not entering into this License on the basis of any representations not expressly made in this License. Any modifications of this License must be in writing and signed by both parties. The waiver by one party of any default of the other party shall not waive subsequent defaults of the same or different kind. This License shall become binding only after it has been signed jointly by Radius and KDS. This License will be 3 governed by and construed in accordance with the laws of the United States and the State of California as applied to agreements entered into and to be performed entirely within California between California residents. The parties hereby submit to the jurisdiction of, and waive any venue objections against, the United States District Court for the Northern District of California and the Superior Court of the State of California for the County of Santa Clara in any litigation arising out of or related to this License. THE PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY IN ANY SUCH LITIGATION. The parties and their respective counsel have negotiated this License. Therefore, this License will be interpreted without any strict construction in favor of or against either party. In the event any provision of this License is determined to be invalid or unenforceable by a court of competent jurisdiction, then the remaining provisions will remain effective. In such event, the parties agree to negotiate in good faith to substitute a valid and enforceable provision that preserves the intent and economic effect of the original provision. If the parties cannot agree on such a substitute provision, the court will establish a provision that is enforceable that follows the parties expressed intent and economic effect of the unenforceable clause as closely as possible. This License may be executed in two counterparts by original or facsimile signature, each of which when so executed shall be deemed an original, and both of which together shall constitute one instrument. Use of the word "including" is inclusive, as if "without limitation" followed each instance. The parties execute this License on the dates specified below. RADIUS INC. Korea Data Systems (America), Inc. Signature and Date: Signature and Date: - ----------------------------------- -------------------------------------- Name and Title: Name and Title: -------------------- ---------------------- 4 PROMISSORY NOTE Amount: $5,200,000.00 August 7, 1998 Mountain View, California FOR VALUE RECEIVED, the undersigned "Maker" promises to pay to Radius Inc., or order (the "Holder"), at Mountain View, California, or at such place as the Holder of this Note may from time to time designate, the principal sum of five million two hundred thousand and no hundredths dollars ($5,200,000.00), without offset or deduction in fourteen monthly installments of principal of $350,000.00 each on beginning on the date of this Note and continuing on the first business day of each month thereafter until October 1, 1999, on which date a final payment of $300,000 principal shall be made .(all unless "accelerated" as set forth below). No interest will be due on timely payments of principal; however, interest on delinquent or accelerated principal will accrue at the monthly rate of one percent per month or any lower legal maximum. This Note may be prepaid at any time without penalty. No notice of payment due or made is required. In the event that Maker fails to timely pay any sum due under this Note after five days' notice from Holder, a late charge of the lesser of $10,000 or five percent of the delinquent amount will become immediately due and payable in addition to such sum and Holder can elect on ten days' notice to Maker to accelerate the entire outstanding balance due. In the latter event, the entire indebtedness must be paid to Holder within fifteen days after Holder sends its notice of acceleration election to Maker and will accrue interest thereafter at the rate set forth above. Maker also promises to pay Holder's costs of collection and reasonable attorneys' charges if Holder seeks legal redress to recover the amount due under this Note. This Note is governed by California law and forum and is intended to be negotiable or assignable at Holder's election. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date written above. Maker: Korea Data Systems (America), Inc. By John Hui, President - --------------------------------------- ------------------------- Please sign Date 5 SECURITY AGREEMENT This Security Agreement (the "AGREEMENT") is made and entered into as of August 7, 1998 by Korea Data Systems (America), Inc., a California corporation ("DEBTOR"), in favor of Radius Inc., a California corporation (the "SECURED PARTY"). RECITALS A. Secured Party has or will extend credit to Debtor in the amount of $5.2 million (the "TOTAL PRINCIPAL") under the terms of a certain Amended and Restated License Agreement, Asset Purchase Agreement and Promissory Note of even date executed by Debtor in favor of the Secured Party (collectively, the "Transfer Agreement"); and B. Secured Party desires to obtain, and Debtor desires to give, security for the full and punctual performance of the obligations created by the Transfer Agreement and any substitutions or extensions thereof and any expenses, fees or costs associated therewith (the "OBLIGATIONS"), all as more fully set forth below; NOW, THEREFORE, in consideration of the extension of credit by Secured Party and the covenants and agreements set forth in the Transfer Agreement and this Agreement, the parties agree as follows: 1. SECURITY AGREEMENT. To secure performance of the Obligations and Debtor's obligations hereunder, Debtor hereby grants Secured Party a security interest in the rights and property set forth on EXHIBIT A hereto (the "COLLATERAL") with the security interest in the Collateral being senior to all other security interest holders. 1.1 COVENANTS. The security interest created in this Section 1 is given to secure all of the Obligations and the obligations of Debtor hereunder. While such security interest is in existence, Debtor will: (a) promptly pay, when due, all taxes and assessments levied or assessed against the Collateral, or any part thereof, or for its use or operation and (b) notify Secured Party when requested from time to time of the physical location of such Collateral if tangible. The physical location of any tangible collateral is currently at the address of Debtor set forth below. 1.2 DEFAULT. In the event of default under the Transfer Agreement or this Agreement: 1.2.1 Secured Party may exercise any or all of its rights and remedies under California law, and any other applicable laws, and may elect to offset, against any payment due from Secured Party to Debtor, the whole or any part of any indebtedness of Debtor to the Secured Party. 1.2.2 While Debtor is in default, Debtor will: (a) deliver to Secured Party from time to time, as requested by such Secured Party, current lists of Collateral; (b) not dispose of Collateral except on terms approved by Secured Party or in the ordinary course of Debtor's business; and (c) assemble and deliver all Collateral to a designated representative of Secured Party at a reasonably convenient place designated by Secured Party. Debtor hereby consents to the entry of Secured Party (or a Secured Party agent) following reasonable notice on Debtor's business premises, between the hours of 8:00 a.m. and 5:00 p.m. on Monday through Friday, in order to enforce the Secured Party's rights or remedies set forth herein or given to Secured Party by law or in equity, all of which shall be cumulative. 1.2.3 If required by law, Secured Party will give Debtor reasonable notice of the time and place of any public sale of the Collateral, or any part thereof, or of the time after which any private sale or any intended disposition of the Collateral is to be made. Unless otherwise provided by law, the requirement of reasonable notice shall be met if such notice is delivered in accordance with Section 3.6 below at least thirty (30) calendar days before the time of such intended sale or other disposition. Upon such sale and to the extent permitted by law, Secured Party may bid for and purchase all or any portion of the Collateral to the extent and for purchase price agreed to by Secured Party may bid on its sole behalf therefor. On compliance with the terms of sale, Secured Party may hold, retain, possess and dispose of such Collateral in its own absolute right, without further accountability. Debtor agrees to reimburse Secured 6 Party, upon demand, for any and all costs (including, by way of example, reasonable attorneys' fees and expenses) incurred or paid by Secured Party in exercising its rights or remedies or protecting its interests under this Agreement. 1.3 PERFECTION IN GENERAL. Debtor agrees to execute and deliver all financing statements, PTO cover sheets, UCC-1s or other documents, or procure any document reasonably deemed necessary by Secured Party to perfect the security interest granted in this Section 1 and to confer a security interest senior to all other security interests in the Purchased Assets portion of the Collateral. The current form of UCC-1 is attached as Exhibit B. The current form of PTO cover sheet is attached as Exhibit C. Upon performance of all of Debtor's obligations under and secured hereby, Secured Party agrees to execute and deliver such documents as may be reasonably requested by Debtor in order to release the Collateral from the security interest granted herein. 2. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor hereby represents, warrants and agrees as follows: 2.1 LITIGATION. Debtor is neither a party to, nor, except as disclosed in the Transfer Agreement, has it any notice or knowledge of, any pending or threatened action, suit, proceeding or investigation involving it, at law or in equity or otherwise, in, before or by a court or any governmental board, commission, agency, department or officer, in which an adverse determination would have a material adverse effect on the assets or financial condition of Debtor or the Collateral described herein. 2.2 NO RESTRICTION OR TRANSACTION. Debtor is not subject to any charter provision, bylaw, indenture, mortgage, lien, lease agreement, instrument, law, rule, regulation, order, judgment or decree or any other restriction which would interfere with the consummation of the transaction contemplated by this Agreement. This Agreement is a valid and enforceable obligation of Debtor, enforceable in accordance with its terms. 2.3 COLLATERAL. Debtor has good and marketable title to the Collateral subject to no material mortgage, lien, pledge, claim, charge or encumbrance, security interest or other defect in title, excluding those which may have existed prior to the effective date of the Transfer Agreement arising by or through Secured Party. Subject to such security interests and to Secured Party's security interest in the Collateral, Debtor is, and will remain while any Obligation is outstanding, the sole owner of the Collateral with full right to transfer or encumber same without obtaining the consent or approval of any other person or entity, except as disclosed in the Transfer Agreement. Debtor hereby agrees, without the prior written consent of Secured Party, other than in the ordinary course of business and other than in a sale and leaseback transaction, not to sell, lend or transfer ownership of a substantial portion of the Collateral while the Obligations, or any part thereof, are outstanding. 3. GENERAL PROVISIONS. 3.1 AMENDMENT AND WAIVER. No failure or delay by Secured Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or of any other right, power or privilege. No waiver shall be deemed to be made by Secured Party of any of its rights under this Agreement unless the same shall be in writing, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of Secured Party or the obligations of Debtor to Secured Party in any other respect at any other time. This Agreement may not be altered or amended except by an agreement in writing signed by Debtor and Secured Party. 3.2 ASSIGNMENT. This Agreement shall be binding upon Debtor, its representatives, successors and assigns and shall inure to the benefit of Secured Party, its heirs, representatives, successors and assigns, except that Debtor shall not voluntarily assign any or all of its obligations hereunder. This Agreement shall continue in full force and be binding upon Debtor, and its successors notwithstanding the merger, liquidation or dissolution of Debtor. 3.3 SEVERABILITY. If any provision of this Agreement is held to be unenforceable for any reason, such provision shall be adjusted, if possible, to the extent necessary in order to achieve the intent of the parties or shall be stricken from this Agreement if adjustment is not possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable. 7 3.4 ENTIRE AGREEMENT. This Agreement (in connection with the Transfer Agreement) contains the entire agreement of the parties and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties regarding the subject matter hereof. 3.5 NOTICES. Any demand or other notice required or permitted to be given to a party hereunder shall be deemed duly given or delivered if personally delivered or if sent by certified mail, postage prepaid, addressed to the receiving party at its address set forth under its signature or to such other address as the receiving party shall duly notice the sending party in writing (which demand or notice shall be effective on deposit in the United States mail, if delivery is by mail, and on receipt, if personally delivered). 3.6. TIME. Time is of the essence of this Agreement. 3.7 GOVERNING LAW AND FORUM. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California. Debtor, by its execution of this Agreement, hereby irrevocably submits to the personal jurisdiction of the state courts of the State of California and of the United States District Court for the Northern District of California that are located in Santa Clara County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement. 3.8 COUNTERPARTS. This Agreement may be entered into in any number of counterparts, each of which will be deemed an original and all of which, taken together, will constitute one and the same Agreement. 3.9 ATTORNEYS' CHARGES. Debtor agrees to pay all reasonable attorneys' fees, court costs and all other costs and expenses which may be incurred by Secured Party in the enforcement of this Security Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by persons duly authorized by or on behalf of the parties as of the date first above written. DEBTOR: KOREA DATA SYSTEMS (AMERICA), Inc. By: ---------------------------------- Its: -------------------------------- Address: SECURED PARTY: RADIUS INC. By: ---------------------------------- Its: -------------------------------- Address: 8 EXHIBIT A COLLATERAL This Financing Statement covers: (a) the license under the Amended and Restated License Agreement dated August 7, 1998, the Purchased Assets and the Buyer's License (as defined in the Transfer Agreement) and all Intellectual Property Rights therein (as defined in the Transfer Agreement); (b) All proceeds and products of any and all of the foregoing collateral and, to the extent not otherwise included, all payments under insurance or in connection with any indemnity, warranty or guaranty payable by reason of loss or damage to, or otherwise with respect to, any of the foregoing collateral. 9 EXHIBIT B ATTACH INITIAL UCC-1 10 EXHIBIT C ATTACH INITIAL PTO COVER SHEET 11 GUARANTY This Guaranty is made and given as of August 7, 1998 by [Korea Data Systems Co., Ltd. or Korea Data Systems (USA), Inc.] with a place of business at _______________________________________ ______________________________________________________________________________ ("GUARANTOR") in favor of Radius Inc., a California corporation ("SELLER"). R E C I T A L S A. Guarantor is affiliated with Korean Data Services (America), Inc. ("BUYER"). B. Guarantor desires to induce Seller to extend credit to Buyer under a certain Amended and Restated License Agreement and Asset Purchase Agreement (and related agreements and instruments including a promissory note and security agreement) dated of even date herewith between Seller and Buyer (collectively, the "TRANFER AGREEMENT") by providing Seller with this Guaranty. It is a condition precedent, and a material inducement, to the extension of credit by Seller to Buyer under the Transfer Agreement that Guarantor makes and provides this Guaranty to Seller. Guarantor will benefit significantly as a result of such extension of credit. NOW, THEREFORE, as a material inducement to Seller to enter into the Transfer Agreement, and in consideration of loans made or to be made by Seller under the Transfer Agreement, and for other good and valuable consideration, Guarantor hereby agrees with Seller as follows: 1. MEANINGS OF CAPITALIZED TERMS. Unless they are otherwise expressly defined herein, each capitalized term used in this Guaranty will have the same meaning given to such term in the Transfer Agreement. 2. GUARANTY. As a material inducement and consideration for Seller to enter into the Transfer Agreement and to extend credit to Buyer under the Transfer Agreement, which Seller is unwilling to do without Guarantor's agreements and guaranty hereunder, Guarantor hereby guarantees and promises to pay Seller, or order, on demand, in lawful money of the United States of America, any and all Indebtedness (as defined below) of Buyer to Seller when such Indebtedness is due. The liability of Guarantor under this Guaranty is exclusive and independent of any security for or other guarantee of the Indebtedness of Buyer, whether executed by Guarantor or any other party, and the liability of Guarantor under this Guaranty shall not be affected or impaired by (a) any Indebtedness exceeding Guarantor's liability; (b) any other continuing or other guaranty, or undertaking or liability of Guarantor or of any other party as to any Indebtedness of Buyer; (c) any payment on or in reduction of any other guaranty or undertaking; or (d) any payment made on the Indebtedness which Seller repays to Buyer pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium, or other debtor relief proceeding, and Guarantor hereby waives any right to the deferral or modification of Guarantor's obligations hereunder by virtue of any such proceeding. 3. INDEBTEDNESS DEFINED. The word "INDEBTEDNESS" as used herein means any and all debts, obligations, or liabilities of Buyer to Seller under the Transfer Agreement executed and delivered by Buyer thereunder (including but not limited to principal, accrued interest and attorneys' fees) whether or not recovery of such Indebtedness may now be or may hereafter become barred by any statute of limitations, or whether such Indebtedness may now be or may hereafter otherwise become unenforceable against, or uncollectible from, Buyer for any reason, including but not limited to Buyer's bankruptcy or insolvency, other principles of equity or usury laws. 4. SEPARATE AND INDEPENDENT OBLIGATIONS; CERTAIN WAIVERS. The obligations of Guarantor under this Guaranty are separate and independent of the obligations of Buyer under the Transfer Agreement and a separate action or actions may be brought and prosecuted against Guarantor, whether or not any action is brought 12 against Buyer or whether Buyer be joined in any such action or actions; and Guarantor hereby waives the benefit of any statute of limitations affecting its liability under this Guaranty or the enforcement of this Guaranty, to the maximum extent permitted by law. Any part payment by Buyer or other circumstances which operate to toll any statute of limitations as to Buyer will operate to toll the statute of limitations as to Guarantor. Guarantor further agrees that recourse may be had under this Guaranty against any and all property and property interests owned by Guarantor, whether legally or beneficially, including but not limited to any property which is such Guarantor's separate property and any property in which such Guarantor has a community property interest, to satisfy such Guarantor's obligations under this Guaranty. 5. AUTHORIZATION. Guarantor authorizes Seller, without notice or demand or any further or additional consent of Guarantor, and without affecting Guarantor's liability hereunder, to at any time and/or from time to time: (a) renew, extend, accelerate or otherwise change the time for payment of, or otherwise change or modify the terms of, any Indebtedness or any part thereof ; and (b) apply the collateral and direct the order or manner of sale thereof as Seller in its discretion may determine, and Guarantor agrees that no such renewal, extension, acceleration, or other change, or any such application or non-application of collateral shall relieve Guarantor of any of Guarantor's obligations or liabilities hereunder. Seller may, without notice to Seller, assign this Guaranty in whole or in part and any rights in related collateral. 6. WAIVERS OF GUARANTOR. Guarantor expressly waives any right to require Seller to: (a) proceed against Buyer, or to proceed against Buyer prior to proceeding against Guarantor under this Guaranty or otherwise; (b) proceed against any other party or guarantor; (c) protect, preserve or perfect any of Seller's rights in or to, or to proceed against, or exercise any rights or remedies of a secured creditor with respect to, or to exhaust, any collateral, security, mortgage, deed of trust, security interest or lien held by Seller in any assets or properties of Buyer; or (c) pursue any other right or remedy in Seller's power whatsoever with respect to the Indebtedness or any part thereof. Seller may, at its election, exercise or refrain from exercising any right or remedy it may have against Buyer or any security interest in Buyer's assets (including without limitation the right to foreclose upon any such security by judicial or nonjudicial sale), without thereby affecting or impairing in any way Guarantor's liability hereunder, except to the extent that Buyer has reduced the amount of the Indebtedness. In addition, Guarantor hereby also waives: (a) any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation or other right or remedy of such Guarantor against Buyer or any such security; (b) any defense arising by reason of any disability or other defense of Buyer or by reason of the cessation from any cause whatsoever of the liability of Buyer to Seller; and (c) all presentments, demands for performance, notices of nonperformance, protests, notice of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation or incurring of new or additional Indebtedness. 7. GUARANTOR'S UNDERSTANDING. Guarantor warrants and agrees that each of the authorizations and waivers set forth in Sections 5 and 6 above are made with Guarantor's full knowledge and understanding of their significance and consequences, and that under the circumstances, such authorizations and waivers are reasonable and not contrary to public policy or law. If any of said authorizations or waivers are determined to be contrary to any applicable law or public policy, such authorizations and waivers will nevertheless be effective to the fullest extent permitted by law or public policy. 8. SUBROGATION. Until all Indebtedness shall have been paid in full, Guarantor will have no right of subrogation to any right of Seller against Buyer, and Guarantor waives any right to enforce any remedy which Seller now has or may hereafter have against Buyer, and waives any benefit of, and any right to participate in, any security now or hereinafter held by Seller. 9. INFORMATION. Guarantor assumes the responsibility for being and keeping itself informed of the financial condition of Buyer and of all other circumstances bearing upon the risk of nonpayment of the Indebtedness and agrees that Seller will have no duty to advise Guarantor of any information regarding such condition or any such circumstances. 10. SUBORDINATION. In the event of any default by Buyer under the Transfer Agreement or other failure to pay any sum when due, then any debt or obligation of Buyer now or hereafter held by Guarantor is hereby 13 fully subordinated in right of payment to the repayment of the Indebtedness and any such debt or obligation of Buyer to Guarantor will, if Seller so requests, be collected, enforced and received by Guarantor as trustee for Seller and be paid over to Seller on account of the Indebtedness, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. 11. JURISDICTION; VENUE. Guarantor, by its execution of this Guaranty, hereby irrevocably submits to the personal jurisdiction of the state courts of the State of California and of the United States District Court for the Northern District of California that are located in Santa Clara County, California for the purpose of any suit, action or other proceeding arising out of or based upon this Guaranty. 12. AMENDMENT; WAIVER. No amendment or modification of this Guaranty may be made unless it is set forth in writing and signed by both Guarantor and Seller. No waiver of any right of Seller under this Guaranty will be effective unless expressly set forth in a writing signed by Seller. No course of dealing between the parties will operate as a waiver of Seller's rights under this Guaranty. A waiver by Seller on any one occasion will not be construed as a bar to or waiver by Seller of any right or remedy on any future occasion. 13. ATTORNEYS' FEES. Guarantor agrees to pay all reasonable attorneys' fees, court costs and all other costs and expenses which may be incurred by Seller in the enforcement of this Guaranty. 14. SUCCESSORS AND ASSIGNS. The provisions of this Guaranty will inure to the benefit of, and be binding on, each party's respective heirs, successors and assigns; EXCEPT THAT Guarantor may not assign or delegate any of its rights or obligations under this Guaranty without Seller's prior written consent. 15. SEVERABILITY. The invalidity or unenforceability of any term or provision of this Guaranty will not affect the validity or enforceability of any other term or provision hereof. The headings in this Guaranty are for convenience of reference only and will not alter or otherwise affect the meaning of this Guaranty. 16. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in any number of counterparts, which together will constitute one instrument. 17. GOVERNING LAW. This Guaranty will be governed by and construed in accordance with the laws of the State of California. 18. ENTIRE AGREEMENT. This Guaranty will constitute the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior understandings or agreements regarding such subject matter. IN WITNESS WHEREOF, the undersigned Guarantor has executed and delivered this Guaranty effective as of the date first above written. Accepted by: "SELLER" "GUARANTOR" Name: Name: ------------------------- ---------------------------- By: By: --------------------------- ------------------------------ Title: Title: -------------------------- ---------------------------- 14 EX-27.01 4 EXHIBIT 27.01
5 9-MOS SEP-30-1998 JUN-30-1998 1188 0 5877 (3869) 1081 5737 19745 (19635) 5847 11725 0 0 0 169102 (174980) 5847 14425 14425 9283 9283 7525 0 416 7412 0 0 0 0 0 7412 1.34 1.33
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