<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1996, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _____ to _________.
Commission file number: 0-26952
SYNC RESEARCH, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0676350
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Parker
Irvine, CA 92618
(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 588-2070
7 Studebaker
, Irvine, CA 92618
(former address, if changed since last report)
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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, as
amended (the "Exchange Act") 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
---- ----
As of November 8, 1996, 16,674,766 shares of the Registrant's Common Stock
were issued and outstanding.
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SYNC RESEARCH, INC.
INDEX
PAGE
----
Part I. Financial Information 3
Item 1. a) Condensed consolidated balance sheets at
September 30, 1996 (unaudited) and December 31, 1995 3
b) Condensed consolidated statements of operations
(unaudited) for the three and nine months ended
September 30, 1996 and September 30,1995 4
c) Condensed consolidated statements of cash flows
(unaudited) for the nine-month periods ended
September 30, 1996 and September 30, 1995 5
d) Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 22
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995*
------------- ------------
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 24,758 $ 50,633
Short-term investments 12,751 --
Accounts and other receivables, net 7,874 7,803
Inventories 6,356 5,256
Prepaid expenses and other current assets 536 389
-------- --------
Total current assets 52,275 64,081
Furniture, fixtures and equipment, net 3,539 2,239
Other assets 361 352
-------- --------
Total assets $ 56,175 $ 66,672
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,127 $ 5,643
Bank borrowings and current maturities
of capitalized lease obligations 852 176
-------- --------
Total current liabilities 5,979 5,819
Capitalized lease obligations, less current maturities 157 398
Series B mandatorily redeemable preferred stock -- 5,591
Common stockholders' equity:
Common stock, $.001 par value:
Authorized shares--50,000
Issued and outstanding shares--
16,486 at September 30, 1996
and 15,833 at December 31, 1995 16 16
Additional paid-in capital 70,722 68,429
Deferred compensation (197) (421)
Accumulated deficit (20,502) (13,160)
-------- --------
Total common stockholders' equity 50,039 54,864
-------- --------
Total liabilities and common stockholders' equity $ 56,175 $ 66,672
-------- --------
-------- --------
* December 31, 1995 figures are derived from the audited, fiscal year-end
balance sheets of Sync Research, Inc. at December 31, 1995 and TyLink
Corporation at March 31, 1996.
See accompanying notes.
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<PAGE>
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 9,251 $ 9,439 $25,915 $24,537
Cost of sales 4,976 4,901 14,395 12,271
---------- ---------- ----------- ----------
Gross profit 4,275 4,538 11,520 12,266
Operating expenses:
Research and development 1,921 1,436 5,400 4,147
Selling and marketing 3,832 2,841 10,674 7,942
General and administrative 2,534 815 4,777 2,204
---------- ---------- ----------- ----------
Total operating expenses 8,287 5,092 20,851 14,293
---------- ---------- ----------- ----------
Operating loss (4,012) (554) (9,331) (2,027)
Interest expense (28) (30) (65) (73)
Interest income 559 51 1,831 196
---------- ---------- ----------- ----------
Loss before income taxes (3,481) (533) (7,565) (1,904)
Provision for income taxes 2 10 2 -
---------- ---------- ----------- ----------
Net loss $(3,483) $(543) $(7,567) $(1,915)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Net loss per share $(0.23) $(0.12) $(0.52) $(0.47)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Shares used in computing net
loss per share 16,183 6,732 16,068 6,606
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Pro forma net loss per share $(0.06) $(0.22)
---------- ----------
---------- ----------
Shares used in computing pro forma
net loss per share 14,335 14,209
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
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<PAGE>
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,567) $ (1,915)
TyLink net loss for the three months ended
March 31, 1996 711 --
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 699 474
Provision for losses on accounts receivable 347 69
Stock issued in lieu of payment for services -- 175
Deferred compensation expense 224 128
Changes in operating assets and liabilities (2,190) (1,557)
-------- --------
Net cash used in operating activities (7,776) (2,626)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in marketable securities, net (12,751) --
Purchases of furniture, fixtures and equipment (1,966) (910)
-------- --------
Net cash used in investing activities (14,717) (910)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of Series B preferred stock (4,000) --
Net bank borrowings 802 287
Payments on capitalized lease obligations (400) (82)
Proceeds from common stock options exercised 216 60
Proceeds from sale of restricted stock -- 115
-------- --------
Net cash provided by (used in) financing activities (3,382) 380
-------- --------
Net decrease in cash and cash equivalents (25,875) (3,156)
Cash and cash equivalents at beginning of period 50,633 8,512
-------- --------
Cash and cash equivalents at end of period $ 24,758 $ 5,356
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 90 $ 74
-------- --------
-------- --------
Income taxes paid $ 41 $ 2
-------- --------
-------- --------
</TABLE>
See accompanying notes.
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<PAGE>
SYNC RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION
On August 23, 1996, Sync Research, Inc. ("Sync" or the "Company")
acquired TyLink Corporation ("TyLink"), pursuant to a merger (the "Merger") of a
wholly-owned subsidiary of the Company with and into TyLink. In the Merger, the
Company exchanged 2,148,168 shares of its common stock for all of the
outstanding shares of TyLink common and Series A preferred stock and reserved
423,155 shares of Sync common stock for issuance upon exercise of TyLink
options, which were assumed by the Company. In addition, Sync acquired all of
the issued and outstanding Series B preferred stock for $4 million in cash and
208,677 shares of Sync common stock. The merger has been accounted for as a
pooling of interests. Accordingly, the accompanying financial statements
reflect the combination of Sync and Tylink for all periods presented.
The condensed consolidated balance sheets as of September 30, 1996,
the condensed consolidated statements of operations for the three and nine
months ended September 30, 1996 and 1995 and the condensed consolidated
statements of cash flows for the nine month periods ended September 30, 1996
and 1995 have been prepared without audit. In the opinion of management, the
unaudited financial statements include all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the financial position at
September 30, 1996, the results of operations for the three and nine-months
ended September 30, 1996 and 1995 and cash flows for the nine month ended
September 30, 1996 and 1995. The condensed financial statements should be
read in conjunction with the audited financial statements of Sync Research,
Inc. and notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 and the audited financial statements of
TyLink Corporation and notes thereto included in the Company's current report
on Form 8-K, as amended, dated August 23, 1996. The results of operations
for the three months and nine months ended September 30, 1996 are not
necessarily indicative of the operating results to be expected for the full
year.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
accompanying financial statements. Actual results could differ from those
estimates.
Sync results for the three and nine month periods ended September 30,
1995 have been combined with TyLink results for the three and nine month periods
ended December 31, 1995, respectively. Revenues and net income for Sync, TyLink
and on a combined basis for the six months ended June 30, 1996 and the nine
months ended September 30, 1995 are as follows (in thousands):
Six months ended Nine months ended
June 30, 1996 September 30, 1995
---------------- ------------------
Revenues
Sync $10,079 $15,832
TyLink 6,585 8,705
------- -------
Combined $16,664 $24,537
------- -------
------- -------
Net income (loss)
Sync $(3,101) $285
TyLink (983) (2,200)
------- -------
Combined $(4,084) $(1,915)
------- -------
------- -------
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<PAGE>
Sync and TyLink have incurred direct transaction costs of approximately $1.3
million associated with the Merger consisting of transaction fees for investment
bankers, attorneys, accountants, financial printing and other related charges.
These nonrecurring transaction costs have been recorded in the accompanying
statements of operations for the three and nine months ended September 30, 1996.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company invests its excess cash in money market funds and debt
instruments of U.S. corporations with strong credit ratings. The Company has
established guidelines with respect to the diversification and maturities in
order to maintain safety and liquidity. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company considers investments with original maturities between
three and twelve months to be short-term investments. Management determines the
appropriate classification of such securities at the time of purchase and
reevaluates such classification as of each balance sheet date. Based on its
intent, the Company's investments are classified as available-for-sale and are
carried at fair value, with unrealized gains and losses, net of tax, reported as
a separate component of stockholders' equity. The investments are adjusted for
amortization of premiums and discounts to maturity and such amortization is
included in interest income. Realized gains and losses and declines in value
judged to be other than temporary are determined based on the specific
identification method and are reported in the consolidated statements of
operations. There were no significant unrealized gains or losses at
September 30, 1996.
3. INVENTORIES
Inventories consist primarily of computer hardware and components and
are stated at the lower of cost (first-in, first-out) or market as follows (in
thousands):
SEPTEMBER 30, DECEMBER 31,
1996 1995
------- -------
Raw Materials $3,823 $2,656
Work in Process 683 862
Finished Goods 1,850 1,738
------ ------
$6,356 $5,256
------ ------
------ ------
4. EARNINGS PER SHARE
Net loss per share is computed using the weighted average number of
common shares and common share equivalents outstanding during the periods
presented and includes the accretion of Series B preferred stock redemption
value and cumulative dividends. The accretion for the three months ended
September 30, 1996 and 1995 and the nine months ended September 30, 1996 and
1995 was $242,000 $292,000, and $775,000 and $1,221,000, respectively.
Common stock equivalents result from the dilutive effect, if any, of
outstanding options and warrants to purchase common stock. Pursuant to the
requirements of the Securities and Exchange Commission (SEC), common shares
issued by the Company during the twelve months immediately preceding the
Company's initial offering, plus the number of equivalent shares resulting
from stock options and warrants granted during this period, have been
included in the calculation of the shares used in computing net loss per
share as if they were outstanding for all of fiscal 1995 (using the treasury
stock method and the estimated public offering price in calculating
equivalent shares). Pro forma net loss per
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<PAGE>
share also includes 7,603,240 weighted average shares of common stock in 1995 as
if the conversion of preferred stock occurred at the beginning of that year.
5. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 1996, the Company adopted the FASB Statement of
Financial Accounting Standards No. 121 (SFAS 121), ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The adoption
of SFAS 121 had no impact on the Company's financial condition or results of
operations.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (FAS 123) was issued and is effective
for 1996. The Company intends to continue to account for employee stock options
in accordance with APB Opinion No. 25 and will make the pro forma disclosures
required by FAS 123 in its annual financial statements for 1996; accordingly,
the adoption of the standard will not have a material effect on the Company's
financial position or results of operations.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto
included in Part I--Item 1 of this Quarterly Report. In addition, except for
the historical statements contained therein, the following discussion
contains forward-looking statements. The Company wishes to alert readers that
the factors set forth in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, and in the section of this Item 2 titled
"Additional Factors That May Affect Future Results," as well as other
factors, could in the future affect, and in the past have affected, the
Company's results. The Company's actual results for future periods could
differ materially from those expressed in any forward-looking statements made
by or on behalf of the Company.
ACQUISITION OF TYLINK CORPORATION
On August 23, 1996, Sync Research, Inc. ("Sync" or the "Company") acquired
TyLink Corporation ("TyLink"), pursuant to a merger (the "Merger") of a wholly-
owned subsidiary of the Company with and into TyLink. In the Merger, the
Company exchanged 2,148,168 shares of its common stock for all of the
outstanding shares of TyLink common and Series A preferred stock and reserved
423,155 shares of Sync common stock for issuance upon exercise of TyLink
options, which were assumed by the Company. In addition, Sync acquired all of
the issued and outstanding Series B preferred stock for $4 million in cash and
208,677 shares of Sync common stock. The merger has been accounted for as
pooling of interest. Accordingly, the accompanying financial statements
reflect the combination of Sync and Tylink for all periods presented.
OVERVIEW
Sync Research, Inc. ("Sync" or the "Company") is a wide-area network
("WAN") access company, providing internetworking solutions for International
Business Machines Corporation ("IBM") customers' wide-area networks. Sync
develops, markets and supports advanced networking products that adapt IBM
Systems Network Architecture ("SNA") networks to emerging switched WAN services
such as Frame Relay. Sync products also support the integration of the
installed-base SNA and emerging client/server network applications using these
new WAN services. Industry analysts have estimated that there are approximately
50,000 IBM SNA networks worldwide. In these networks, wide-area circuit costs
are significant. Frame Relay has emerged as a less expensive, more efficient,
direct substitute for such traditional leased-line connections. The market for
Frame Relay services and equipment is expected to exceed $5 billion in 1998, and
it is estimated that more than half of all data traffic on Frame Relay networks
in 1999 will be attributable to SNA. As a Frame Relay pioneer, the Company was
an early developer of SNA-over-Frame Relay solutions, which provided the basis
for Sync's current product family. The Company believes it is a recognized
leader in SNA-centric networking solutions.
The Company has established strategic sales channels to its prospective
market through marketing and sales relationships with selected, leading
communications and networking companies. The Company intends to leverage its
expertise in SNA-based networks to develop additional channel partnerships and
other marketing relationships, while maintaining direct sales, marketing and
systems engineering activities in order to respond directly to end user needs
and to support the sales efforts of its channel partners.
Sync's TyLink Product Group develops multiservice WAN transmission and
circuit management products for mission-critical network applications. These
products offer end-users and service providers high performance access to
digital carrier services (transmission product) and proactive management,
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diagnosis and capacity planning for public, private and hybrid frame relay
networks (circuit management product).
There can be no assurance that the operations and personnel of TyLink
will be successfully assimilated into the Company's business. The risks
associated with the Merger include the potential disruption of the respective
ongoing businesses of TyLink and the Company, the inability of the Company's
management to maximize the financial and strategic position of the combined
entity through successful incorporation of TyLink's personnel and clients,
the inability to implement uniform standards, controls, procedures and
policies and the impairment of relationships with existing employees and
clients as a result of the Company's integration of new management personnel.
These factors could have a material adverse effect on the Company's business,
financial condition and operating results.
RESULTS OF OPERATIONS
NET REVENUES
The Company derives its revenues primarily from sales of advanced wide-area
networking products, which are recognized upon shipment. The Company generally
does not have any significant remaining obligations upon shipment of its
products. Product returns and sales allowances are provided for at the date of
sale. Service revenues from customer maintenance fees for ongoing customer
support and product updates, which have not been material to date, are
recognized ratably over the term of the maintenance period, which is typically
12 months.
Net revenues for the third quarter of 1996 were $9.3 million, a decrease
of 2% from the net revenues of $9.4 million for the third quarter of 1995.
For the nine months ended September 30, 1996, net revenues were $25.9 million
or 6% higher than the net revenues of $24.5 million in the same period in the
prior year. The lower net revenues for the third quarter and nine months
ended September 30, 1996 reflect lower sales of the traditional products
(conversion and transmission products) and lower average selling prices
partially offset by increased customer acceptance of the newer frame relay
access and circuit management products. Sales of the Company's frame relay
access products represented approximately 49% of total net sales for the
third quarter and 41% of total net sales for the nine months ended September
30, 1996 as compared to 19% and 19% for the comparable prior year periods.
Sales of the Company's circuit management products represented 21% and 18% of
net revenues for the third quarter and nine months ended September 30, 1996,
respectively, as compared to 8% and 6% in the comparable prior year periods.
Sales of the Company's transmission products represented 13% and 15% of net
revenues for the third quarter and nine months ended September 30, 1996,
respectively, as compared to 17% and 22% in the comparable prior year
periods. The Company expects that average selling prices will continue to
decline. Sales of frame relay access products and circuit management
products are expected on a forward-looking basis to grow as a percentage of
net sales and transmission and conversion products revenues are expected to
decline.
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GROSS PROFIT
Cost of sales primarily consists of purchased materials used in the
assembly of the Company's products and compensation paid to employees in the
Company's manufacturing organization.
Gross profit decreased to $4.3 million for the third quarter of 1996
from $4.5 million in the third quarter of 1995, due primarily to lower net
sales, lower average selling prices, especially in transmission products
which faced severe price pressure in the marketplace, and increases in the
percentage of sales of frame relay access products through channel partners
and other resellers, which typically have lower margins than direct sales,
partially offset by lower manufacturing costs. For the nine months ended
September 30, 1996, gross profits decreased to $11.5 million as compared to
$12.3 million in the prior year period primarily because of increases in the
percentage of sales to channel partners and other resellers and lower average
selling prices, partially offset by increased net revenue and lower
manufacturing costs.
Gross profit as a percentage of net sales decreased to 46.2% and 44.5% for
the three and nine months ended September 30, 1996, respectively, as compared to
48.1% and 50.0% for the comparable prior year periods due primarily to increases
in the percentage of sales of frame relay access products to channel partners
and resellers and lower average prices, partially offset by lower manufacturing
costs.
OPERATING EXPENSES
Research and development expenses primarily consist of compensation paid to
personnel, including consultants, engaged in research and development, amounts
paid for outside development services; costs of materials utilized in the
development of hardware products, including prototype units; and license fees
and other payments to acquire rights to technology. The Company expenses all
research and development costs as incurred. Research and development expenses
increased in the three and nine months ended September 30, 1996 to $1.9 million
and $5.4 million, respectively, as compared to $1.4 million and $4.1 million in
the comparable prior year periods. The increased expenses in the current year
were primarily due to the addition of personnel for the development of new
products and the continued enhancement of existing products. The Company
believes that significant research and development efforts are necessary in
order for it to compete in the evolving marketplace in which it operates.
Accordingly, if the Company is successful in hiring additional development
engineers, research and development expenditures are expected, on a forward
looking basis, to continue to increase in absolute dollars.
Selling and marketing expenses consist primarily of base and incentive
compensation paid to sales and marketing personnel, travel and related expenses,
and costs associated with promotional and trade show activities. Selling and
marketing expenses increased to $3.8 million for the third quarter of 1996 and
$10.7 million for the nine months ended September 30, 1996 as compared to $2.8
million and $7.9 million for the third quarter of 1995 and the nine months ended
September 30, 1995, respectively. The increased expenses principally reflected
increased hiring and personnel-related expenses associated with the build-up of
the Company's sales organization.
General and administrative expenses consist primarily of compensation paid
to administrative personnel, payments to consultants and for professional
services, and costs incurred in recruiting senior management personnel. General
and administrative expenses increased to $2.5 million and $4.8 million for the
three and nine months ended September 30, 1996, respectively, as compared with
$0.8 million and $2.2 million for the comparable prior year periods in 1995.
The increases were primarily due to
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expenditures incurred in connection with the Merger aggregating approximately
$1.3 million, increased administrative personnel costs, and costs related to
public company and investor relation activities since the Company completed its
initial public offering in November 1995.
The Company recorded deferred compensation of $644,000 during 1995 for the
difference between the option exercise price or restricted stock price and the
deemed fair value of the Company's Common Stock for options granted and
restricted stock sold in 1995. The deferred compensation is being amortized to
operating expense and cost of sales over the related 48-month vesting period of
the shares and will, therefore, continue to have an adverse effect on the
Company's results of operations. Included in operating expenses and cost of
sales for the three and nine months ended September 30, 1996 were $49,000 and
$224,000 of such expenses, respectively, as compared to $95,000 and $128,000 for
the comparable prior year periods.
Net interest income was $0.5 million in the third quarter of 1996 and $1.8
million for the nine months ended September 30, 1996 as compared to $21,000 and
$123,000 respectively, in the comparable prior year periods, as a result of
significantly higher cash balances from the Company's initial public offering in
November 1995.
INCOME TAXES
The provisions for income taxes in 1996 and 1995 represent minimum state
taxes and federal and state alternative minimum taxes, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company's principal sources of liquidity
consisted of $24.8 million of cash and cash equivalents, and $12.7 million of
short-term investments.
As of September 30, 1996, $12.7 million of the Company's cash was
invested in high grade commercial paper with maturities of more than three
months. Also, during the nine months ended September 30, 1996, cash utilized
by operating activities was $7.8 million, compared to $2.6 million for the
nine months ended September 30, 1995. Cash utilized during the nine month
period ended September 30 1996 was due primarily to the Company's net loss, a
reduction in accounts payable and accrued liabilities and an increase in
inventory of $ 7.6 million, $0.5 million and $1.1 million, respectively.
These changes reflected the higher operating loss, lower level of purchasing
and related payables, higher levels of inventory and slower collections of
accounts receivable in the first nine months of 1996. In addition, the
Company paid the holders of TyLink Series B preferred stock an aggregate of
$4 million in cash as partial consideration for the acquisition of their
shares. Capital expenditures during the first nine months of 1996 were $2.0
million, compared to $0.9 million for the prior year period, which reflects
the computer hardware support of increased staffing, and the establishment of
improved hardware and software test capability.
The Company has entered into a new seven year real estate lease and will
relocate its primary operations during the fourth quarter of 1996. Therefore,
the Company expects, on a forward looking basis, that lease, operating and
maintenance costs will increase in future periods. In addition, the Company
anticipates that it will expend approximately $1.0 million for leasehold
improvements for the facility.
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<PAGE>
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that, except for the historical information contained
herein, the above discussion under "Acquisition of TyLink Corporation," "Results
of Operations" and "Liquidity and Capital Resources" constitutes forward-looking
statements that are dependent on certain risks and uncertainties. These and
other factors that may cause actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company
are described below and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, in the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors."
HISTORY OF LOSSES; SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS; UNCERTAIN
PROFITABILITY
The Company experienced operating losses in fiscal years 1991, 1992, 1993,
1994, and 1995 and operating losses for the nine months ended September 30,
1996. As of September 30, 1996, the Company had an accumulated deficit of
approximately $20.5 million. The Company has experienced, and may in the future
experience, significant fluctuations in revenues and operating results from
quarter to quarter and from year to year due to a combination of factors.
Factors that can cause the Company's revenues and operating results to vary
significantly from period to period include: the timing of significant orders;
competition and pricing in the industry; the Company's success in developing,
introducing and shipping new products; increases in the length of the sales
cycles for the Company's products; new product introductions by the Company's
competitors; announcements by IBM relating to products, services or pricing
relevant to the Company; production or quality problems; changes in material
costs; disruption in sources of supply; and general economic conditions. In
addition, revenues and gross margins may fluctuate due to the mix of
distribution channels employed and the mix of products sold. For example, the
Company generally realizes a higher gross margin on direct sales than on sales
through its channel partners and other resellers. Accordingly, as channel
partners and other resellers continue to account for a substantial majority of
the Company's net revenues, gross profit as a percentage of net revenues may
decline.
The Company's future revenues are difficult to predict. Revenues and
operating results in any quarter depend on the volume and timing of, and the
ability to fulfill, orders received within the quarter. In addition, sales of
the Company's products typically involve a sales cycle of several months from
the point of initial customer contact until receipt of the first system order.
There can be no assurance that average sales cycles will not increase in future
periods. Furthermore, due to the Company's focus on its channel partner
marketing strategy, the Company's revenues in any period are highly dependent
upon the sales efforts and success of Sync's channel partners and other
resellers, which are not within the control of the Company. There can be no
assurance that the Company's channel partners and other resellers will give a
high priority to the marketing of the Company's products as compared to
competitive products or alternative networking solutions or that Sync's channel
partners and other resellers will continue to offer the Company's products. A
significant portion of the Company's expenses are relatively fixed in advance,
based in large part on the Company's forecasts of future sales. If sales are
below expectations in any given period, the adverse effect of a shortfall in
sales on the Company's operating results may be magnified by the Company's
inability to adjust spending to compensate for such shortfall. The Company has
in the past and may in the future reduce prices or increase spending in response
to competition or to pursue new product or market opportunities. Accordingly,
there can be no assurance that the Company will be able to attain or sustain
profitability on a quarterly or an annual basis. In addition, it is possible
that in some future quarter the Company's operating results may be below the
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expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially and adversely affected.
DEPENDENCE ON THE IBM CUSTOMER BASE
The Company's products are targeted at the large installed base of IBM
customers utilizing SNA networks. These customers are likely to follow
recommendations from IBM with respect to products or services to support their
SNA networks. In 1994, IBM announced support for Frame Relay, and IBM's current
SNA and WAN products incorporate a Frame Relay interface, and a wide array of
Frame Relay switching and termination functions. In August 1995, the Company
entered into a cooperative marketing agreement with IBM. In March 1996, Sync
and IBM announced a new strategic relationship in which IBM will make available
Sync's FrameNode product family under the IBM logo. There can be no assurance
that IBM will continue to support Frame Relay, that IBM will not develop SNA-
over-Frame Relay products competitive with the Company's products, that either
the cooperative marketing arrangement or the new strategic relationship between
the Company and IBM will be successful, that IBM will not terminate the
cooperative marketing agreement or the new strategic relationship or that IBM
will not endorse the products of competitors or networking solutions not offered
by the Company. Any of these events could have a material adverse effect on the
Company's business, operating results and financial condition.
UNCERTAIN MARKET ACCEPTANCE OF FRAME RELAY FOR MISSION-CRITICAL
APPLICATIONS
The growth in the Company's net revenues in the first nine months of 1996
relative to the first nine months of 1995 was due in part to growth in sales of
Sync's Frame Relay Access products, which enable SNA and client/server
internetworking over Frame Relay. The market for SNA-over-Frame Relay products
is relatively new and still evolving. The success of the Company and its
channel partners in generating significant sales of Frame Relay Access products
will depend in part on their ability to educate end users about the benefits of
the Company's technology and convince end users to switch their mission-critical
applications to Frame Relay. In addition, broad acceptance of Frame Relay
services will also depend upon the tariffs for such services, which are
determined by carriers. If the tariff structure for dedicated leased lines
becomes more favorable relative to tariffs for a comparable network utilizing
Frame Relay, the market for Frame Relay networking products, such as Frame Relay
Access, could be adversely affected. There can be no assurance that the market
will adopt Frame Relay for mission-critical applications to any significant
extent. The failure of such adoption to occur could have a material adverse
effect on the Company's business, operating results and financial condition.
UNCERTAIN MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS; PRODUCT
CONCENTRATION
The Company currently derives substantially all of its revenues from its
frame relay access, circuit management, transmission and other products and
expects that revenues from these products will continue to account for
substantially all of its revenues for the foreseeable future. Broad market
acceptance of and continuing demand for these products is, therefore, critical
to the Company's future success. Factors that may affect the market acceptance
of the Company's products include the extent to which Frame Relay is adopted for
mission-critical applications, the availability and price of competing products
and technologies, announcements by IBM relating to products, services or pricing
relevant to the Company, the success of the sales efforts of the Company and its
resellers and tariff rates for carrier services. Moreover, the Company's
operating history in the WAN internetworking market and its resources are
limited relative to those of certain of its current and potential competitors.
The Company's future performance will also depend in part on the successful
development, introduction and market
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<PAGE>
acceptance of new and enhanced products. Failure of the Company's products to
achieve market acceptance could have a material adverse effect on the Company's
business, operating results and financial condition.
DEPENDENCE ON CHANNEL PARTNERS AND OTHER RESELLERS
The Company is pursuing a channel partner sales and marketing strategy
focused on establishing marketing partnerships with selected communications and
networking companies, as well as carriers. The Company currently maintains
marketing and sales arrangements with selected, leading communications and
networking companies such as 3Com and NET and, most recently, IBM, as well as
carriers such as Sprint Corp., GTE Corp., CompuServe, Inc., Ameritech and MCI
Communications. The Company relies on its network of channel partners and other
resellers for a substantial majority of its revenues, including virtually all of
its sales outside of the United States. The Company's agreements with its
channel partners and other resellers do not restrict the sale of products that
compete with those of the Company. In addition, these agreements generally
provide for discounts based on expected or actual volumes of products purchased
or resold by the reseller in a given period, do not require minimum purchases,
prohibit distribution of certain products by the Company through certain
categories of third parties under certain conditions and provide manufacturing
rights and access to source code upon the occurrence of specified conditions or
defaults. The Company expects that certain of its channel partners may in the
future develop competitive products, and, if they do so, they may decide to
terminate their relationships with the Company. In addition, many of the
Company's resellers offer competitive products manufactured either by third
parties or by themselves. Furthermore, certain of the Company's channel
partners offer alternative solutions, designed by themselves or third parties,
for SNA internetworking or have pre-existing relationships with current or
potential competitors of the Company. There can be no assurance that the
Company's channel partners and other resellers will give a high priority to the
marketing of the Company's products as compared to competitive products or
alternative networking solutions or that Sync's channel partners and other
resellers will continue to offer the Company's products. Any reduction or delay
in sales of the Company's products by its channel partners could have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company's channel partners and other resellers account, and are
expected to continue to account, for a substantial majority of the Company's net
revenues. Sales through channel partners and other resellers accounted for
84.9%, 72.8% and 64.8% of net revenues of the Company, excluding TyLink, in
1995, 1994 and 1993 fiscal years, respectively. Sales to 3Com accounted for
27.0% and 12.8% of net revenues of the Company, excluding TyLink, in 1995 and
1994 fiscal years, respectively. The Company believes the relative amount of
revenues derived from sales to 3Com will likely decline as competitive products
impact the conversion product business. During 1995, sales to Cabletron
accounted for 16.8% of net revenues of the Company, excluding TyLink, but sales
to Cabletron have declined substantially in 1996, and sales to Cabletron are not
expected to increase in the future. Each of the Company's channel partners or
other resellers can cease marketing the Company's products at the reseller's
option, under certain conditions, with limited notice and with little or no
penalty. There can be no assurance that the Company will retain its current
channel partners or other resellers or that it will be able to recruit
additional or replacement channel partners. The loss of one or more of the
Company's channel partners or other resellers could have a material adverse
effect on the Company's business, operating results and financial condition.
The Company generally realizes a higher gross margin on direct sales than on
sales through its channel partners and other resellers. Accordingly, as channel
partners and other resellers continue to account for a substantial majority of
the Company's net revenues, gross profit as a percentage of net revenues may
decline.
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<PAGE>
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's success will depend to a substantial degree upon its ability to
develop and introduce in a timely fashion enhancements to its existing products
and new products that meet changing customer requirements and emerging industry
standards. For example, the Company believes that the timely development of end
user and carrier based products supporting next generation networking standards,
such as asynchronous transfer mode ("ATM"), which many industry experts expect
to be the next generation networking standard, may be critical to the Company's
future success. The development of new, technologically advanced products is a
complex and uncertain process requiring high levels of innovation, as well as
the accurate anticipation of technological and market trends. There can be no
assurance that the Company will be able to identify, develop, manufacture,
market or support new products successfully, that such new products will gain
market acceptance or that the Company will be able to respond effectively to
technological changes, emerging industry standards or product announcements by
competitors. In addition, the Company has on occasion experienced delays in the
introduction of product enhancements and new products. There can be no
assurance that in the future the Company will be able to introduce product
enhancements or new products on a timely basis. Furthermore, from time to time,
the Company may announce new products, capabilities or technologies that have
the potential to replace or shorten the life cycle of the Company's existing
product offerings. There can be no assurance that announcements of product
enhancements or new product offerings will not cause customers to defer
purchasing existing Company products or cause resellers to return products to
the Company. Failure to introduce new products or product enhancements
effectively and on a timely basis, customer delays in purchasing products in
anticipation of new product introductions and any inability of the Company to
respond effectively to technological changes, emerging industry standards or
product announcements by competitors could have a material adverse effect on the
Company's business, operating results and financial condition.
PRODUCT ERRORS
Products as complex as those offered by the Company may contain undetected
software or hardware errors when first introduced or as new versions are
released. Such errors have occurred in the past, and there can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in new or enhanced products after commencement of
commercial shipments. Moreover, there can be no assurance that once detected,
such errors can be corrected in a timely manner, if at all. Software errors may
take several months to correct, if they can be corrected at all, and hardware
errors may take even longer to rectify. The occurrence of such software or
hardware errors, as well as any delay in correcting them, could result in the
delay or loss of market acceptance of the Company's products, additional
warranty expense, diversion of engineering and other resources from the
Company's product development efforts or the loss of credibility with Sync's
channel partners and other resellers, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
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<PAGE>
INTENSE COMPETITION
The market for communications products is intensely competitive and subject
to rapid technological change and emerging industry standards. The Company's
current competitors include LAN networking companies such as Cisco Systems, Inc.
("Cisco"), Hypercom Inc. ("Hypercom") and Motorola Information Systems Group,
Netlink, Inc. ("Netlink"), an internetworking company that Cabletron recently
announced the acquisition of, carriers and other providers of telecommunications
equipment and services. Potential competitors include other LAN networking
companies, Frame Relay switching companies, IBM and the Company's other channel
partners. Certain of these companies, including Cisco, Hypercom, Netlink and
Bay Networks, Inc., have announced their intention to target the SNA-over-Frame
Relay market, and Cisco has recently introduced new products for this market.
Many of the Company's current and potential competitors have longer operating
histories and greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base, than
the Company. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or will be able to
devote greater resources to the development, promotion, sale and support of
their products than the Company. Many also have long-standing customer
relationships with large enterprises that are part of the Company's target
market, and these relationships may make it more difficult to complete sales of
the Company's products to these enterprises. Furthermore, the Company expects
that certain of its channel partners will in the future develop competitive
products and may then decide to terminate their relationships with the Company.
Consequently, the Company expects to encounter increased competition,
particularly in the Frame Relay market. Increased competition could result in
significant price competition, reduced profit margins or loss of market share,
any of which could have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully in the future.
INTEGRATION OF TYLINK
There can be no assurance that the operations and personnel of TyLink will
be successfully assimilated into the Company's business. The risks associated
with the Merger include the potential disruption of the respective ongoing
businesses of TyLink and the Company, the inability of the Company's management
to maximize the financial and strategic position of the combined entity through
successful incorporation of TyLink's personnel and clients, the inability to
implement uniform standards, controls, procedures and policies and the
impairment of relationships with existing employees and clients as a result of
the Company's integration of new management personnel. In addition, the
combined entity incurred significant expenses as a result of the negotiation and
implementation of the merger. These factors could have a material adverse
effect on the Company's business, financial condition and operating results.
DEPENDENCE ON CONTRACT MANUFACTURERS
The Company's manufacturing operations consist primarily of materials
planning and procurement, light assembly, system integration, testing and
quality assurance. The Company subcontracts most component kitting and printed
circuit board assembly to companies that specialize in those services. In
addition, the Company has an arrangement with a contract manufacturer pursuant
to which the Company intends to outsource substantial portions of its
procurement, assembly and system integration operations. The Company expects to
enter into similar arrangements with other contract manufacturers. There can be
no assurance that these independent contract manufacturers will be able to
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<PAGE>
meet the Company's future requirements for manufactured products or that such
independent contract manufacturers will not experience quality problems in
manufacturing the Company's products. The inability of the Company's contract
manufacturers to provide the Company with adequate supplies of high quality
products could have a material adverse effect upon the Company's business,
operating results and financial condition. The loss of any of the Company's
contract manufacturers could cause a delay in Sync's ability to fulfill orders
while the Company identifies a replacement manufacturer. Such an event could
have a material adverse effect on the Company's business, operating results and
financial condition.
The Company's manufacturing procedures are designed to assure rapid
response to customer orders, but may in certain instances create a risk of
excess or inadequate inventory if orders do not match forecasts. The Company
increased manufacturing capacity in 1995 and 1996 through the expansion of its
relationships with contract manufacturers and internal manufacturing resources.
Any manufacturing delays, inability to increase manufacturing capacity as
required or failure to forecast accurately inventory requirements could have a
material adverse effect on the Company's business, operating results and
financial condition.
DEPENDENCE ON SUPPLIERS
Certain key components used in the manufacture of the Company's products
are currently purchased only from single or limited sources. At present,
single-sourced components include programmable integrated circuits, other
selected integrated circuits and cables, custom-molded plastics and custom-
tooled sheet metal and limited-sourced components, including flash memories,
dynamic random access memories ("DRAMs"), printed circuit boards and selected
integrated circuits. The Company generally does not have long-term agreements
with any of these single or limited sources of supply. Any interruption in the
supply of any of these components, or the inability of the Company to procure
these components from alternate sources at acceptable prices and within a
reasonable time, could have a material adverse effect upon the Company's
business, operating results and financial condition. The Company uses a rolling
six-month forecast based on anticipated orders to determine its general
materials and manufacturing staffing requirements. Lead times for materials and
components ordered by the Company vary significantly and depend on factors such
as the specific supplier, contract terms and demand for a component at a given
time. If orders do not match forecasts, the Company may have excess or
inadequate inventory of certain materials and components. From time to time the
Company has experienced shortages of certain components and has paid above-
market prices to acquire such components on an accelerated basis or has
experienced delays in fulfilling orders while waiting to obtain the necessary
components. Such shortages may occur in the future and could have a material
adverse effect on the Company's business, operating results and financial
condition.
DEPENDENCE ON AND RISKS ASSOCIATED WITH INTERNATIONAL SALES
Sales to customers outside of the United States accounted for approximately
6.5%, 8.6%, 11.6% and 14.4% of the Company's net revenues, excluding TyLink, in
the nine months ended September 30, 1996 and in 1995, 1994 and 1993,
respectively. However, these percentages may understate sales of the Company's
products to international end users because certain of the Company's U.S.-based
channel partners market the Company's products abroad. Historically, the
Company's international sales have been conducted primarily through independent
country-specific distributors. The Company intends to market its products in
foreign countries in the future increasingly through its channel partners.
Failure of these resellers to market the Company's products internationally or
the loss of any of these resellers could have a material adverse effect on the
Company's business, operating results and financial
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<PAGE>
condition. In addition, the Company's ability to increase sales of its products
to international end users may be limited if the carrier services, such as Frame
Relay, or protocols supported by the Company's products are not widely adopted
internationally. A number of additional risks are inherent in international
transactions. The Company's international sales currently are U.S. dollar-
denominated. As a result, an increase in the value of the U.S. dollar relative
to foreign currencies could make the Company's products less competitive in
international markets. International sales may also be limited or disrupted by
the imposition of governmental controls, export license requirements,
restrictions on the export of critical technology, currency exchange
fluctuations, political instability, trade restrictions and changes in tariffs.
In addition, sales in Europe and certain other parts of the world typically are
adversely affected in the third quarter of each year as many customers and end
users reduce their business activities during the summer months. These
international factors could have a material adverse effect on future sales of
the Company's products to international end users and, consequently, the
Company's business, operating results and financial condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's future success depends, in part, upon its proprietary
technology. The Company does not hold any patents and currently relies on a
combination of contractual rights, trade secrets and copyright laws to establish
and protect its proprietary rights in its products. There can be no assurance
that the steps taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. In the event that
protective measures are not successful, the Company's business, operating
results and financial condition could be materially and adversely affected. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. The
Company is also subject to the risk of adverse claims and litigation alleging
infringement of intellectual property rights of others. There can be no
assurance that third parties will not assert infringement claims in the future
with respect to the Company's current or future products or that any such claims
will not require the Company to enter into license arrangements or result in
litigation, regardless of the merits of such claims. No assurance can be given
that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms. Should litigation
with respect to any such claims commence, such litigation could be extremely
expensive and time-consuming and could have a material adverse effect on the
Company's business, operating results and financial condition regardless of the
outcome of such litigation.
TARIFF AND REGULATORY MATTERS
Rates for public telecommunications services, including features and
capacity of such services, are governed by tariffs determined by carriers and
subject to regulatory approval. Future changes in these tariffs could have a
material effect on the Company's business. For example, should tariffs for
Frame Relay services increase in the future relative to tariffs for dedicated
leased lines, the cost-effectiveness of the Company's products could be reduced,
which could have a material adverse effect on the Company's business, operating
results and financial condition. In addition, the Company's products must meet
industry standards and receive certification for connection to certain public
telecommunications networks prior to their sale. In the United States, the
Company's products must comply with various regulations defined by the Federal
Communications Commission and Underwriters Laboratories. Internationally, the
Company's products must comply with standards established by telecommunications
authorities in various countries as well as with recommendations of the
Consultative Committee on International Telegraph and Telephony. In addition,
carriers require
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<PAGE>
that equipment connected to their networks comply with their own standards,
which in part reflect their currently installed equipment. Some public carriers
have installed equipment that does not fully comply with current industry
standards, and this noncompliance must be addressed in the design of the
Company's products. Any future inability to obtain on a timely basis or retain
domestic or foreign regulatory approvals or certifications or to comply with
existing or evolving industry standards could have a material adverse effect on
the Company's business, operating results and financial condition.
MANAGEMENT OF EXPANDING OPERATIONS
The Company has recently experienced rapid growth and expansion (as well
as the merger with TyLink), which has placed, and will continue to place, a
significant strain on its administrative, operational and financial resources
and increased demands on its systems and controls. This growth has resulted
in a continuing increase in the level of responsibility for existing
management personnel and the hiring of significant new management personnel.
For example, three of the Company's eight current executive officers joined
the Company in 1995 and four in 1996: Roger Dorf, President and Chief
Operating Officer; Otto Berlin, Vice President of International Sales; Robert
Degan, Executive Vice President of Operations and Product Fulfillment (former
CEO of TyLink); Dominic Genovese, Vice President of Sales; Karen Ratta, Vice
President of Manufacturing; Nicholas Redding, Vice President of Engineering;
and Ronald J. Scioscia, Vice President of Finance and Administration and
Chief Financial Officer. The Company anticipates that any continued growth
will require it to recruit and hire a substantial number of new employees,
particularly development engineers. There can be no assurance that the
Company will be successful in hiring, integrating or retaining such
personnel. The Company's ability to manage its growth successfully will
require the Company to continue to expand and improve its operational,
management and financial systems and controls. Any inability of the Company
to manage growth effectively, hire and integrate necessary personnel or
increase manufacturing capacity as required could have a material adverse
effect on the Company's business, results of operations and financial
condition.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends, to a significant degree, upon the
continued contributions of its key management, sales, marketing, research and
development and manufacturing personnel, many of whom would be difficult to
replace. The Company maintains a key person life insurance policy only on
John H. Rademaker, the Company's Chief Executive Officer. The Company
believes its future success will also depend in large part upon its ability
to attract and retain highly skilled engineering, managerial, sales and
marketing personnel, particularly development engineers. Competition for
such personnel is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. The loss of
the services of any of the Company's key personnel, the inability to attract
or retain qualified personnel in the future or delays in hiring required
development engineers could have a material adverse effect on the Company's
business, operating results or financial condition.
GENERAL ECONOMIC CONDITIONS
Demand for the Company's products depends in large part on the overall
demand for communications and networking products, which has in the past and may
in the future fluctuate significantly based on numerous factors, including
capital spending levels and general economic conditions. There can be no
assurance that the Company will not experience a decline in demand for
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its products due to general economic conditions. Any such decline could have a
material adverse effect on the Company's business, operating results and
financial condition.
VOLATILITY OF STOCK PRICE
Factors such as announcements of technological innovations or the
introduction of new products by the Company or its competitors, as well as
market conditions in the technology sector, may have a significant effect on the
market price of the Company's Common Stock. Furthermore, the stock market has
experienced volatility which has particularly affected the market prices of
equity securities of many high technology companies and which often has been
unrelated to the operating performance of such companies. These market
fluctuations may have an adverse effect on the price of the Company's Common
Stock.
ANTI-TAKEOVER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In addition, certain provisions
of the Company's charter documents, including provisions eliminating cumulative
voting, eliminating the ability of stockholders to take actions by written
consent and limiting the ability of stockholders to raise matters at a meeting
of stockholders without giving advance notice, may have the effect of delaying
or preventing a change in control or management of the Company, which could have
an adverse effect on the market price of the Company's Common Stock. Certain of
the Company's stock option and purchase plans provide for assumption of such
plans, or, alternatively, immediate vesting upon a change of control or similar
event. In addition, the Company has entered into severance agreements with its
officers, pursuant to which they are entitled to specified severance payments if
they are actually or constructively terminated within specified time periods
following a change of control of the Company. The Board of Directors has
authority to issue up to 2,000,000 shares of Preferred Stock and to fix the
rights, preferences, privileges and restrictions, including voting rights, of
these shares without any further vote or action by the stockholders. The rights
of the holders of the Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring or preventing a change in control of the Company.
Furthermore, such Preferred Stock may have other rights, including economic
rights senior to the Common Stock, and as a result, the issuance of such
Preferred Stock could have a material adverse effect on the market value of the
Common Stock. The Company has no present plan to issue shares of Preferred
Stock.
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SYNC RESEARCH, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.3 Amended 1995 Employee Stock Purchase Plan.
10.20* Assumed TyLink Corporation 1994 Equity Incentive
Plan
10.21 Employment Agreement between the Company and Robert
Degan, dated August 23, 1996.
10.22 Employment Agreement between the Company and Richard
Swee, dated August 23, 1996.
10.23 Form of Noncompetition Agreement between the Company
and each of Robert Degan and Richard Swee, dated
August 23, 1996.
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10.24 Form of Severance Agreement between the Company and
each of John Rademaker and Roger Dorf, dated
September 30, 1996.
10.25 Form of Severance Agreement between the Company and
other Company executive officers, dated September
30, 1996.
10.26 Real Estate Lease between TyLink and Thomas J. Flatley,
d/b/a The Flatley Company, dated May 14, 1991.
11.1 Computation of Earnings (Loss) per Share.
27.1 Financial Data Schedule.
*Incorporated by reference from Registrant's Registration
Statement on Form S-8 (Registration No. 333-12315),
filed with the Commission on September 19, 1996.
(b) REPORTS ON FORM 8-K
A report on Form 8-K (with a report date of August 23, 1996) was
filed on September 6, 1996, describing the acquisition of TyLink
Corporation. The item reported thereunder was Item 2
(Acquisition or Disposition of Assets). On November 8, 1996, an
amendment to this Form 8-K was filed on Form 8-K/A. The item
reported thereunder was Item 7 (Financial Statements and
Exhibits). The audited financial statements of TyLink
Corporation filed therewith contained balance sheets as of
March 29, 1996 and March 31, 1995 and statements of operations
and cash flows for the years ended March 29, 1996, March 31,
1995 and April 1, 1994. The unaudited pro forma combined,
condensed financial statements for Sync and TyLink filed
therewith contained statements of operations for the three years
ended December 31, 1993, 1994 and 1995 and the six months ended
June 30, 1996 and balance sheets as of December 31, 1995 and
June 30, 1996.
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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.
SYNC RESEARCH, INC.
By: /s/ Ronald J. Scioscia
Ronald J. Scioscia
Vice President of Finance and Administration
and Chief Financial Officer
(Duly Authorized Signatory and Principal
Financial and Accounting Officer)
Date: November 14, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------
10.3 Amended 1995 Employee Stock Purchase Plan.
10.20* Assumed TyLink Corporation 1994 Equity Incentive Plan
10.21 Employment Agreement between the Company and Robert Degan, dated
August 23, 1996.
10.22 Employment Agreement between the Company and Richard Swee, dated
August 23, 1996.
10.23 Form Noncompetition Agreement between the Company and each of
Robert Degan and Richard Swee, dated August 23, 1996.
10.24 Form of Severance Agreement between the Company and each of John
Rademaker and Roger Dorf, dated September 30, 1996.
10.25 Form of Severance Agreement between the Company and other Company
executive officers, dated September 30, 1996.
10.26 Real Estate Lease between TyLink and Thomas J. Flatley d/b/a The
Flatley Company dated May 14, 1991.
11.1 Computation of Earnings (Loss) per Share.
27.1 Financial Data Schedule.
*Incorporated by reference from Registrant's Registration Statement on
Form S-8 (Registration Statement No. 333-12315), filed with the
Commission on September 19, 1996
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SYNC RESEARCH, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1995 Employee Stock Purchase
Plan of Sync Research, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Sync Research, Inc., a Delaware corporation.
(e) "COMPENSATION" shall mean all regular straight time gross
earnings, excluding payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions and other compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "CONTRIBUTIONS" shall mean all amounts credited to the account of
a participant pursuant to the Plan.
(h) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "EMPLOYEE" shall mean any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE>
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "EXERCISE DATE" shall mean the last day of each Offering Period
of the Plan.
(l) "OFFERING DATE" shall mean the first business day of each
Offering Period of the Plan, except that in the case of an individual who
becomes an eligible Employee after the first business day of an Offering Period
but prior to the first business day of the last calendar quarter of such
Offering Period, the term "Offering Date" shall mean the first business day of
the calendar quarter coinciding with or next succeeding the day on which that
individual becomes an eligible Employee.
Options granted after the first business day of an Offering
Period will be subject to the same terms as the options granted on the first
business day of such Offering Period except that they will have a different
grant date (thus, potentially, a different exercise price) and, because they
expire at the same time as the options granted on the first business day of such
Offering Period, a shorter term.
(m) "OFFERING PERIOD" shall mean a period of six (6) months except
for the first offering period as set forth in Section 4.
(n) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "PLAN" shall mean this Employee Stock Purchase Plan.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, provided that such person was not eligible to participate in such
Offering Period as of any prior Offering Date, and further, subject to the
requirements of Section 5(a) and the limitations imposed by Section 423(b) of
the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five
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<PAGE>
Thousand Dollars ($25,000) of fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by a series of
Offering Periods, with new Offering Periods commencing on or about January 1 and
August 1 of 1997 and February 1 and August 1 of all years thereafter (or at such
other time or times as may be determined by the Board of Directors). The Plan
shall continue until terminated in accordance with Section 19 hereof. The Board
of Directors of the Company shall have the power to change the duration and/or
the frequency of Offering Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 5%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the
Exercise Date of the offering to which the subscription agreement is applicable,
unless sooner terminated by the participant as provided in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) The participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one
percent (1%) and not more than five percent (5%) of such participant's
Compensation on each such payday. All payroll deductions made by a participant
shall be credited to his or her account under the Plan. A participant may not
make any additional payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the Offering
Period by completing and filing with the Company a new subscription agreement.
The change in rate shall be effective as of the beginning of the calendar
quarter following the date of filing of the new subscription agreement.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Offering
Period and any other Offering Period ending within the same calendar year equal
$21,250. Payroll deductions shall re-commence at the rate provided in such
participant's
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<PAGE>
subscription Agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Exercise Date and retained in the participant's account as of the Exercise Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Exercise Date; provided however, that the maximum number of shares an
Employee may purchase during each Offering Period shall be determined at the
Offering Date by dividing $12,500 by the fair market value of a share of the
Company's Common Stock on the Offering Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 12.
The fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date of the Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Exercise Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate
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<PAGE>
representing the shares purchased upon exercise of his or her option. Any cash
remaining to the credit of a participant's account under the Plan after a
purchase by him or her of shares at the termination of each Offering Period, or
which is insufficient to purchase a full share of Common Stock of the Company,
shall be carried over to the next Offering Period if the Employee continues to
participate in the Plan, or if the Employee does not continue to participate,
shall be returned to said participant.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
the Exercise Date of the Offering Period by giving written notice to the
Company. All of the participant's Contributions credited to his or her account
will be paid to him or her promptly after receipt of his or her notice of
withdrawal and his or her option for the current period will be automatically
terminated, and no further Contributions for the purchase of shares will be made
during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 200,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 18. If the total number of shares which would otherwise be subject to
options granted pursuant to Section 7(a) on the Offering Date of an Offering
Period exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the
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<PAGE>
option to each Employee affected thereby and shall similarly reduce the rate of
Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of the
Offering Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of the Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
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<PAGE>
16. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Exercise Date (the "New
Exercise Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Exercise Date, that the Exercise Date for his or her option has been
changed to the New Exercise Date and that his or her option will be exercised
automatically on the New Exercise Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or
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<PAGE>
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time terminate
or amend the Plan. Except as provided in Section 18, no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor rule
or provision or any applicable law or regulation), the Company shall obtain
stockholder approval in such a manner and to such a degree as so required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant
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<PAGE>
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the stockholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 19.
23. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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<PAGE>
SYNC RESEARCH, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the SYNC
RESEARCH, INC. 1995 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, 19__ to _______________, 19__, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 5% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Exercise
Date of the Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Exercise
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can decrease the rate of my Contributions on one occasion only
during any Offering Period by completing and filing a new Subscription Agreement
with such decrease taking effect as of the beginning of the calendar quarter
following the date of filing of the new Subscription Agreement. Further, I may
change the rate of deductions for future Offering Periods by filing a new
Subscription Agreement, and any such change will be effective as of the
beginning of the next Offering Period. In addition, I acknowledge that, unless
I discontinue my participation in the Plan as provided in Section 10 of the
Plan, my election will continue to be effective for each successive Offering
Period.
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "SYNC RESEARCH, INC. 1995 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
<PAGE>
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
________________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Exercise Date (the last day of the Offering Period), I will be treated for
federal income tax purposes as having received ordinary compensation income at
the time of such disposition in an amount equal to the excess of the fair market
value of the shares on the Exercise Date over the price which I paid for the
shares, regardless of whether I disposed of the shares at a price less than
their fair market value at the Exercise Date. The remainder of the gain or
loss, if any, recognized on such disposition will be treated as capital gain or
loss.
I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER
THE DATE OF ANY SUCH DISPOSITION, AND I WILL MAKE ADEQUATE PROVISION FOR
FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON
THE DISPOSITION OF THE COMMON STOCK. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the shares
on the Offering Date. The remainder of the gain or loss, if any, recognized on
such disposition will be treated as capital gain or loss.
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<PAGE>
I UNDERSTAND THAT THIS TAX SUMMARY IS ONLY A SUMMARY AND IS SUBJECT TO
CHANGE. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: ______________________________
SOCIAL SECURITY #: ______________________
DATE: ___________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
_________________________________________
(Signature)
_________________________________________
(Print name)
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<PAGE>
SYNC RESEARCH, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation in
the SYNC RESEARCH, INC. 1995 Employee Stock Purchase Plan (the "Plan") for the
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
If the undersigned is an Officer or Director of SYNC RESEARCH, INC. or
other person subject to Section 16 of the Securities Exchange Act of 1934, the
undersigned further understands that under rules promulgated by the U.S.
Securities and Exchange Commission he or she may not re-enroll in the Plan for a
period of six (6) months after withdrawal.
Dated:________________________ ___________________________________
Signature of Employee
___________________________________
Social Security Number
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of the Effective
Date indicated below by and between Sync Research, Inc., a Delaware corporation
("Parent") and Robert A. Degan ("EMPLOYEE").
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization (the "PLAN") dated as of June 27, 1996
among Parent, SR Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("MERGER SUB"), and TyLink Corporation, a Delaware
corporation ("COMPANY"), pursuant to which Merger Sub is to merge with and into
Company, Company will continue as the surviving corporation in the merger and
will become a wholly owned subsidiary of Parent, and the shares of Company
capital stock outstanding immediately prior to the effective time of the merger
will be converted into shares of Parent Common Stock, all as set forth in the
Plan (the "MERGER"). The date on which the Merger becomes effective will be the
effective date of this Agreement (the "EFFECTIVE DATE").
Employee is the President and Chief Executive Officer of Company and has
been actively involved in the development and/or marketing of Company's
products. Parent intends to continue the business of Company after the Merger
and integrate such business into Parent's ongoing business as a subsidiary of
Parent. To preserve and protect the assets of Company, including Company's
goodwill, customers and trade secrets of which Employee has and will have
knowledge in Employee's role as an employee of Parent and to preserve and
protect Parent's goodwill and business interests going forward, and in
consideration for Parent's entering into and performing under the Plan, Employee
has agreed to enter into this Agreement.
In addition, as required by and defined in Section 7 below, Employee is
concurrently herewith entering into a Proprietary Information Agreement in favor
of Parent designed to protect Parent's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties contained herein, Parent and Employee hereby agree as follows:
1. EMPLOYMENT. Parent will employ Employee and Employee accepts
employment with Parent for a period of two years from the Effective Date (the
"INITIAL PERIOD"), unless Employee's employment is terminated during the Initial
Period in accordance with this Agreement. Employee's employment may continue
after this Initial Period but will then be terminable by either party at will,
with or without cause. The obligations of Parent and Employee set forth in the
"Proprietary Information Agreement" (referring to confidentiality) and in
Section 8 hereof (referring to termination) and, to the extent specifically
provided therein, the obligations of Parent and Employee set forth in Section 5
(referring to employee benefits) and Section 6 (referring to reimbursement of
expenses), will survive the termination of Employee's employment, regardless of
cause.
<PAGE>
2. DUTIES. Employee will be employed as a full-time employee of Parent
and initially will serve as Executive Vice President, Operations and Product
Fulfillment. Employee agrees that, to the best of Employee's ability and
experience, Employee will at all times conscientiously perform all of the duties
and obligations assigned to Employee in accordance with this Agreement.
3. FULL-TIME EMPLOYMENT. Employee's employment will be on a full-time
basis, in accordance with standard employee policies for Parent. Except for
such activities, if any, as may be set forth in SCHEDULE A attached hereto or as
may hereafter be consented to by Parent in its sole discretion, Employee will
not engage in any other business or render any commercial or professional
services, directly or indirectly, to any other person or organization, whether
for compensation or otherwise, provided that Employee may (i) provide incidental
assistance to family members on matters of family business, and (ii) sit on the
boards of charitable and nonprofit organizations which do not, at the time of
Employee's appointment or election, to Employee's knowledge, compete with
Parent, provided in each case that such activities do not conflict with or
interfere with Employee's obligations to Parent. Employee may make personal
investments in nonpublicly traded corporations, partnerships or other entities,
which, to the knowledge of Employee, do not at the time of such investment
design, research, distribute or otherwise market, sell, license or support
products competitive with Parent in the following markets: networking products
that adapt Systems Network Architecture ("SNA") networks to frame relay,
integrated services digital network, asynchronous transfer mode or other
switched wide area network services, or products that provide circuit or network
management capabilities for such networks (the foregoing description of business
activities and markets shall be referred to in this Agreement as "COMPETITIVE
BUSINESSES"). Notwithstanding anything to the contrary contained in this
Agreement, Employee may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Employee does not at any time own in excess of 1% of the issued and outstanding
stock of any such publicly traded corporation that is engaged in any Competitive
Businesses.
4. COMPENSATION.
(a) SALARY. Employee's annualized base salary from the date hereof
through December 31, 1996 will be $191,000, pro rated from the date hereof
through December 31, 1996. Employee's annualized base salary for calendar year
1997 will be determined by Parent on or before January 1, 1997, PROVIDED HOWEVER
that Employee's annualized base salary for calendar year 1997 will be no less
than $191,000.
(b) BONUS. Beginning in calendar year 1997, Employee will be
eligible for participation in any management bonus plan adopted by Parent's
Board of Directors in amounts as may be determined by the Board. If a bonus
plan is adopted by Parent's Board of Directors, Employee's bonus opportunity
thereunder will be substantially similar to the bonus opportunity provided to
other executives of Parent who are at a similar level of seniority as is
Employee, PROVIDED HOWEVER that Parent is not obligated to adopt any such bonus
plan.
(c) STOCK OPTIONS. In addition to the stock options to purchase
Parent's Common Stock provided for in Section 5.13 of the Plan, Employee will be
granted stock options
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<PAGE>
to purchase 75,000 shares of Parent's Common Stock at a price equal to the
closing sales price per share of such Common Stock on the closing date of the
Merger, as quoted on the Nasdaq National Market and as reported in the Wall
Street Journal. The stock options will be granted as nonqualified stock
options. If and when the Employee sells any shares issued upon exercise of any
stock options, the Employee will promptly notify Parent of such sale in writing.
The stock options will vest 25% on the first anniversary of the Effective Date
and will vest 1/48th per month thereafter, so that they will be fully vested on
the fourth anniversary of the Effective Date. The stock options will have a term
of ten years and will be subject to the terms and conditions set forth on the
form of stock option agreement approved by the Board of Directors of Parent.
5. EMPLOYEE BENEFITS. Employee will be entitled to insurance, vacation
and other benefits commensurate with Employee's position in accordance with
Parent's standard employee policies in effect from time to time. For purposes
of satisfying the terms and conditions of such benefit plans, Parent shall give
full credit for eligibility, vesting or benefit accrual for each participant's
period of service with Company prior to the Effective Date. Employee has
received a summary of Parent's standard employee benefits policies in effect as
of the date hereof. Employee shall receive credit for 91.2 hours of vacation
accrued at Company, in accordance with Parent's standard employee policies.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Parent will, in accordance with
Parent's policies in effect from time to time, reimburse Employee for all
reasonable business expenses incurred by Employee in connection with the
performance of Employee's duties under this Agreement, including, without
limitation, reasonable expenditures for office space, supplies, equipment and
expenses and for business entertainment and travel, upon submission of the
required documentation required pursuant to Parent's standard policies and
record keeping procedures.
7. CONFIDENTIALITY. Simultaneously with the execution of this Agreement,
Employee is executing and delivering and hereby adopts and agrees to be bound by
Parent's standard Proprietary Information and Inventions Agreement, a copy of
which is attached to this Agreement as Schedule B (the "Proprietary Information
Agreement") and deemed a part of this Agreement for the purposes hereof.
8. TERMINATION.
(a) BY PARENT WITHOUT CAUSE. Parent may terminate Employee's
employment at will, at any time without cause upon written notice to Employee.
(b) BY PARENT WITH CAUSE. Parent may terminate Employee's employment
at any time for "cause" upon written notice to Employee.
(c) BY EMPLOYEE FOR BREACH. Employee may terminate Employee's
employment upon written notice to Parent in the event that Parent is in material
breach of this Agreement, provided that such termination will become effective
only upon the expiration of 30 days following such notice and then only if the
alleged breach remains uncured.
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<PAGE>
(d) BY EMPLOYEE FOR GOOD REASON. Employee may terminate Employee's
employment at any time for Good Reason upon written notice to Parent.
(e) BY EMPLOYEE FOR OTHER REASONS. Employee may terminate Employee's
employment at any time for any reason other than as set forth in Section 8(c) or
(d) upon written notice to Parent.
(f) DEFINITION OF "CAUSE". As used in Section 8(b) of this
Agreement, the term "cause" shall mean:
(i) Employee personally engaging in knowing and intentional
illegal conduct that is seriously injurious to Parent or its affiliates;
(ii) Employee being convicted of a felony, or committing an act
of dishonesty or fraud against, or the misappropriation of property belonging
to, Parent or its affiliates;
(iii) Employee's commencement of employment with another
employer while employed by Parent; or
(iv) any material breach by Employee of any material provision of
the Proprietary Information Agreement, and any material breach by Employee of
any material provision of this Agreement, which continues uncured for 30 days
following notice thereof.
(g) DEFINITION OF "GOOD REASON". As used in Section 8(d) of this
Agreement, the term "Good Reason" shall mean:
(i) a reduction in the Employee's annual base salary as provided
in Section 4(a) or as the same may be increased from time to time, unless such
reduction is pursuant to a general salary reduction undertaken by the Parent
with respect to its executive employees;
(ii) the failure by the Parent to provide the Employee with
pension benefits or life, medical, health and accident insurance or disability
plans at a level commensurate with other of Parent's employees who occupy
positions at Parent at a similar level of seniority as Employee occupied with
Company immediately before the execution hereof, which failure shall continue
for 30 days following notice thereof. For purposes of determining eligibility
under such benefits or plans, Employee shall receive credit for Employee's
period of service at Company; or
(iii) the relocation of an Employee to an office that is more
than fifty (50) miles away from the Company's office at which the Employee was
based immediately prior to the execution hereof, without the Employee's consent,
provided however that required business travel consistent with the Employee's
position described in Section 2 hereof without such a relocation shall not
constitute Good Reason.
(iv) a material reduction in the Employee's duties from those
initially established in connection with the Employee's position described in
Section 2 hereof, provided
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<PAGE>
however that a change in title without such a material reduction in duties shall
not constitute Good Reason.
(h) TERMINATION PAYMENTS. Upon termination of Employee's employment
pursuant to Section 8(a), 8(c) or 8(d), Parent will continue to pay Employee on
a monthly basis and at a monthly rate based on the greater of: (x) Employee's
annualized base salary during 1996, as specified in Section 4(a), or (y)
Employee's annualized base salary at the time of termination, for the period
beginning on the date of such termination through the end of the Initial Period
(the "Severance Period"), regardless of whether Employee has found new
employment (the "TERMINATION PAYMENTS"), subject to applicable tax withholding,
PROVIDED HOWEVER that if such termination occurs during the Initial Period and
on or after one year from the Effective Date, Parent will continue to pay
Employee for a period of one year from the date of such termination on a monthly
basis and at a monthly rate based on the greater of (x) or (y) above, subject to
applicable tax withholding. Parent's obligation to make the Termination
Payments pursuant to this Section 8(h) is in lieu of any damages or any other
payment or benefits, if any, that Parent might otherwise be obligated to pay
Employee as a result of Employee's termination of employment; PROVIDED, however,
that the Termination Payments shall not be in lieu of payments of such benefits
due or accrued on the date of termination of employment. Parent and Employee
agree that, in view of the nature of the issues likely to arise in the event of
such a termination, it would be impracticable or extremely difficult to fix the
actual damages resulting from such termination, and proving actual damages,
causation and foreseeability in the case of such termination would be costly,
inconvenient and difficult. In requiring Parent to make the Termination
Payments as set forth herein, it is the intent of the parties to provide, as of
the date of this Agreement, for a liquidated amount of damages to be paid by
Parent to Employee. Such liquidated amount shall be deemed full and adequate
damages for such termination and is not intended by either party to be a
penalty.
(i) UPON DEATH. If Employee dies during the term of this Agreement,
Parent will pay Employee's estate an amount equal to all salary, bonuses and
benefits accrued as of the date of Employee's death.
(j) SURVIVAL. Employee's and Parent's obligations under Sections 5,
6, 7, 8 and 9 (i) of this Agreement will survive the termination of Employee's
employment by Parent.
9. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be given
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
9(a):
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<PAGE>
If to Parent: Sync Research, Inc.
7 Studebaker
Irvine, CA 92718
Attn: Roger A. Dorf, President and Chief Operating Officer
If to Employee: c/o TyLink Corporation
10 Commerce Way
Norton, MA 02766
(b) AMENDMENTS. This Agreement, including the Exhibits hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between Parent and Employee or Company and Employee concerning Employee's
employment. This Agreement may not be changed or modified in whole or in part
except by a writing signed by the party against whom enforcement of the change
or modification is sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable by
either Employee or Parent, except that the rights and obligations of Parent
under this Agreement may be assigned to a corporation which becomes the
successor to Parent as the result of a merger or other corporate reorganization
and which continues the business of Parent, or any subsidiary of Parent,
provided that Parent guarantees the performance by such subsidiary of Parent's
obligations hereunder.
(d) GOVERNING LAW. This Agreement will be governed by and
interpreted according to the substantive laws of the State of Delaware without
regard to such state's conflicts law.
(e) NO WAIVER. The failure of either party to insist on strict
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) SEVERABILITY. Employee and Parent recognize that the limitations
contained herein are reasonably and properly required for the adequate
protection of the interests of Parent. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) COUNTERPARTS. This Agreement may be executed in counterparts
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(h) EFFECT OF AGREEMENT. This Agreement will be void and have no
effect if the Effective Date does not occur on or before August 31, 1996.
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<PAGE>
(i) DISPUTE RESOLUTION.
(i) ARBITRATION OF DISPUTES. Any dispute under this Agreement
shall be resolved by arbitration in Boston, Massachusetts, and, except as herein
specifically stated, in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA Rules") then in effect. However, in all
events, these arbitration provisions shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. Any judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
over the subject matter thereof. The arbitrator shall have the authority to
grant any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve such dispute.
(ii) COMPENSATION OF ARBITRATOR. Any such arbitration will be
conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
(iii) PAYMENT OF COSTS. Parent and Employee will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. Each party will pay its own costs, fees and
expenses incurred in connection with the arbitration, including reasonable fees
and expenses of attorneys, accountants and other professionals, which each party
engages.
(iv) BURDEN OF PROOF. For any dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(v) AWARD. Upon the conclusion of any arbitration proceedings
hereunder. the arbitrator will render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any decision
reached and will deliver such documents to each party to this Agreement along
with a signed copy of the award.
(vi) TERMS OF ARBITRATION. The arbitrator chosen in accordance
with these provisions will not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Agreement.
(vii) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any dispute arising out of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective Date.
SYNC RESEARCH, INC. EMPLOYEE
By: _____________________________________ ______________________________
Name: Roger A. Dorf Robert Degan
Title: President and Chief Operating Officer
LIST OF SCHEDULES:
Schedule A Outside Activities
Schedule B Proprietary Information Agreement
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<PAGE>
SCHEDULE A
OUTSIDE ACTIVITIES
Duties as a member of the Board of Directors of Summa Four, Inc., a publicly
held corporation, and any committees thereof.
<PAGE>
SCHEDULE B
PROPRIETARY INFORMATION AGREEMENT
[omitted]
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of the Effective
Date indicated below by and between Sync Research, Inc., a Delaware corporation
("Parent") and Richard Swee ("EMPLOYEE").
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization (the "PLAN") dated as of June 27, 1996
among Parent, SR Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("MERGER SUB"), and TyLink Corporation, a Delaware
corporation ("COMPANY"), pursuant to which Merger Sub is to merge with and into
Company, Company will continue as the surviving corporation in the merger and
will become a wholly owned subsidiary of Parent, and the shares of Company
capital stock outstanding immediately prior to the effective time of the merger
will be converted into shares of Parent Common Stock, all as set forth in the
Plan (the "MERGER"). The date on which the Merger becomes effective will be the
effective date of this Agreement (the "EFFECTIVE DATE").
Employee is Vice President of Engineering of Company and has been actively
involved in the development and/or marketing of Company's products. Parent
intends to continue the business of Company after the Merger and integrate such
business into Parent's ongoing business as a subsidiary of Parent. To preserve
and protect the assets of Company, including Company's goodwill, customers and
trade secrets of which Employee has and will have knowledge in Employee's role
as an employee of Parent and to preserve and protect Parent's goodwill and
business interests going forward, and in consideration for Parent's entering
into and performing under the Plan, Employee has agreed to enter into this
Agreement.
In addition, as required by and defined in Section 7 below, Employee is
concurrently herewith entering into a Proprietary Information Agreement in favor
of Parent designed to protect Parent's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties contained herein, Parent and Employee hereby agree as follows:
1. EMPLOYMENT. Parent will employ Employee and Employee accepts
employment with Parent for a period of two years from the Effective Date (the
"INITIAL PERIOD"), unless Employee's employment is terminated during the Initial
Period in accordance with this Agreement. Employee's employment may continue
after this Initial Period but will then be terminable by either party at will,
with or without cause. The obligations of Parent and Employee set forth in the
"Proprietary Information Agreement" (referring to confidentiality) and in
Section 8 hereof (referring to termination) and, to the extent specifically
provided therein, the obligations of Parent and Employee set forth in Section 5
(referring to employee benefits) and Section 6 (referring to reimbursement of
expenses), will survive the termination of Employee's employment, regardless of
cause.
<PAGE>
2. DUTIES. Employee will be employed as a full-time employee of Parent
and initially will serve as Vice President of Platform Systems. Employee agrees
that, to the best of Employee's ability and experience, Employee will at all
times conscientiously perform all of the duties and obligations assigned to
Employee in accordance with this Agreement.
3. FULL-TIME EMPLOYMENT. Employee's employment will be on a full-time
basis, in accordance with standard employee policies for Parent. Except for
such activities, if any, as may be set forth in SCHEDULE A attached hereto or as
may hereafter be consented to by Parent in its sole discretion, Employee will
not engage in any other business or render any commercial or professional
services, directly or indirectly, to any other person or organization, whether
for compensation or otherwise, provided that Employee may (i) provide incidental
assistance to family members on matters of family business, and (ii) sit on the
boards of charitable and nonprofit organizations which do not, at the time of
Employee's appointment or election, to Employee's knowledge, compete with
Parent, provided in each case that such activities do not conflict with or
interfere with Employee's obligations to Parent. Employee may make personal
investments in nonpublicly traded corporations, partnerships or other entities,
which, to the knowledge of Employee, do not at the time of such investment
design, research, distribute or otherwise market, sell, license or support
products competitive with Parent in the following markets: networking products
that adapt Systems Network Architecture ("SNA") networks to frame relay,
integrated services digital network, asynchronous transfer mode or other
switched wide area network services, or products that provide circuit or network
management capabilities for such networks (the foregoing description of business
activities and markets shall be referred to in this Agreement as "COMPETITIVE
BUSINESSES"). Notwithstanding anything to the contrary contained in this
Agreement, Employee may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Employee does not at any time own in excess of 1% of the issued and outstanding
stock of any such publicly traded corporation that is engaged in any Competitive
Businesses.
4. COMPENSATION.
(a) SALARY. Employee's annualized base salary from the date hereof
through December 31, 1996 will be $126,000, pro rated from the date hereof
through December 31, 1996. Employee's annualized base salary for calendar year
1997 will be determined by Parent on or before January 1, 1997, PROVIDED HOWEVER
that Employee's annualized base salary for calendar year 1997 will be no less
than $126,000.
(b) BONUS. Beginning in calendar year 1997, Employee will be
eligible for participation in any management bonus plan adopted by Parent's
Board of Directors in amounts as may be determined by the Board. If a bonus
plan is adopted by Parent's Board of Directors, Employee's bonus opportunity
thereunder will be substantially similar to the bonus opportunity provided to
other executives of Parent who are at a similar level of seniority as is
Employee, PROVIDED HOWEVER that Parent is not obligated to adopt any such bonus
plan.
(c) STOCK OPTIONS. In addition to the stock options to purchase
Parent's Common Stock provided for in Section 5.13 of the Plan, Employee will be
granted stock options to purchase 35,000 shares of Parent's Common Stock at a
price equal to the closing sales price
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<PAGE>
per share of such Common Stock on the closing date of the Merger, as quoted on
the Nasdaq National Market and as reported in the Wall Street Journal. The
stock options will be granted as nonqualified stock options. If and when the
Employee sells any shares issued upon exercise of any stock options, the
Employee will promptly notify Parent of such sale in writing. The stock options
will vest 25% on the first anniversary of the Effective Date and will vest
1/48th per month thereafter, so that they will be fully vested on the fourth
anniversary of the Effective Date. The stock options will have a term of ten
years and will be subject to the terms and conditions set forth on the form of
stock option agreement approved by the Board of Directors of Parent.
5. EMPLOYEE BENEFITS. Employee will be entitled to insurance, vacation
and other benefits commensurate with Employee's position in accordance with
Parent's standard employee policies in effect from time to time. For purposes
of satisfying the terms and conditions of such benefit plans, Parent shall give
full credit for eligibility, vesting or benefit accrual for each participant's
period of service with Company prior to the Effective Date. Employee has
received a summary of Parent's standard employee benefits policies in effect as
of the date hereof. Employee shall receive credit for 60.06 hours of vacation
accrued at Company, in accordance with Parent's standard employee policies.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Parent will, in accordance with
Parent's policies in effect from time to time, reimburse Employee for all
reasonable business expenses incurred by Employee in connection with the
performance of Employee's duties under this Agreement, including, without
limitation, reasonable expenditures for office space, supplies, equipment and
expenses and for business entertainment and travel, upon submission of the
required documentation required pursuant to Parent's standard policies and
record keeping procedures.
7. CONFIDENTIALITY. Simultaneously with the execution of this Agreement,
Employee is executing and delivering and hereby adopts and agrees to be bound by
Parent's standard Proprietary Information and Inventions Agreement, a copy of
which is attached to this Agreement as Attachment A (the "Proprietary
Information Agreement") and deemed a part of this Agreement for the purposes
hereof.
8. TERMINATION.
(a) BY PARENT WITHOUT CAUSE. Parent may terminate Employee's
employment at will, at any time without cause upon written notice to Employee.
(b) BY PARENT WITH CAUSE. Parent may terminate Employee's employment
at any time for "cause" upon written notice to Employee.
(c) BY EMPLOYEE FOR BREACH. Employee may terminate Employee's
employment upon written notice to Parent in the event that Parent is in material
breach of this Agreement, provided that such termination will become effective
only upon the expiration of 30 days following such notice and then only if the
alleged breach remains uncured.
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<PAGE>
(d) BY EMPLOYEE FOR GOOD REASON. Employee may terminate Employee's
employment at any time for Good Reason upon written notice to Parent.
(e) BY EMPLOYEE FOR OTHER REASONS. Employee may terminate Employee's
employment at any time for any reason other than as set forth in Section 8(c) or
(d) upon written notice to Parent.
(f) DEFINITION OF "CAUSE". As used in Section 8(b) of this
Agreement, the term "cause" shall mean:
(i) Employee personally engaging in knowing and intentional
illegal conduct that is seriously injurious to Parent or its affiliates;
(ii) Employee being convicted of a felony, or committing an
act of dishonesty or fraud against, or the misappropriation of property
belonging to, Parent or its affiliates;
(iii) Employee's commencement of employment with another
employer while employed by Parent; or
(iv) any material breach by Employee of any material provision
of the Proprietary Information Agreement, and any material breach by Employee of
any material provision of this Agreement, which continues uncured for 30 days
following notice thereof.
(g) DEFINITION OF "GOOD REASON". As used in Section 8(d) of this
Agreement, the term "Good Reason" shall mean:
(i) a reduction in the Employee's annual base salary as
provided in Section 4(a) or as the same may be increased from time to time,
unless such reduction is pursuant to a general salary reduction undertaken by
the Parent with respect to its executive employees;
(ii) the failure by the Parent to provide the Employee with
pension benefits or life, medical, health and accident insurance or disability
plans at a level commensurate with other of Parent's employees who occupy
positions at Parent at a similar level of seniority as Employee occupied with
Company immediately before the execution hereof, which failure shall continue
for 30 days following notice thereof. For purposes of determining eligibility
under such benefits or plans, Employee shall receive credit for Employee's
period of service at Company;
(iii) the relocation of an Employee to an office that is more
than fifty (50) miles away from the Company's office at which the Employee was
based immediately prior to the execution hereof, without the Employee's consent,
provided however that required business travel consistent with the Employee's
position described in Section 2 hereof without such a relocation shall not
constitute Good Reason; or
(iv) a material reduction in the Employee's duties from those
initially established in connection with the Employee's position described in
Section 2 hereof, provided
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<PAGE>
however that a change in title without such a material reduction in duties shall
not constitute Good Reason.
(h) TERMINATION PAYMENTS. Upon termination of Employee's employment
pursuant to Section 8(a), 8(c) or 8(d), Parent will continue to pay Employee on
a monthly basis and at a monthly rate based on the greater of: (x) Employee's
annualized base salary during 1996 as specified in Section 4(a), or (y)
Employee's annualized base salary at the time of termination, for the period
beginning on the date of such termination through the end of the Initial Period
(the "Severance Period"), regardless of whether Employee has found new
employment (the "TERMINATION PAYMENTS"), subject to applicable tax withholding.
Parent's obligation to make the Termination Payments pursuant to this Section
8(h) is in lieu of any damages or any other payment or benefits, if any, that
Parent might otherwise be obligated to pay Employee as a result of Employee's
termination of employment; PROVIDED, however, that the Termination Payments
shall not be in lieu of payments of such benefits due or accrued on the date of
termination of employment. Parent and Employee agree that, in view of the
nature of the issues likely to arise in the event of such a termination, it
would be impracticable or extremely difficult to fix the actual damages
resulting from such termination, and proving actual damages, causation and
foreseeability in the case of such termination would be costly, inconvenient and
difficult. In requiring Parent to make the Termination Payments as set forth
herein, it is the intent of the parties to provide, as of the date of this
Agreement, for a liquidated amount of damages to be paid by Parent to Employee.
Such liquidated amount shall be deemed full and adequate damages for such
termination and is not intended by either party to be a penalty.
(i) UPON DEATH. If Employee dies during the term of this Agreement,
Parent will pay Employee's estate an amount equal to all salary, bonuses and
benefits accrued as of the date of Employee's death.
(j) SURVIVAL. Employee's and Parent's obligations under Sections 5,
6, 7, 8 and 9 (i) of this Agreement will survive the termination of Employee's
employment by Parent.
9. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be given
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
9(a):
If to Parent: SYNC RESEARCH, INC.
7 Studebaker
Irvine, CA 92718
Attn: Roger A. Dorf, President
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<PAGE>
If to Employee: c/o TyLink Corporation
10 Commerce Way
Norton, MA 02766
(b) AMENDMENTS. This Agreement, including the Exhibits hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between Parent and Employee or Company and Employee concerning Employee's
employment. This Agreement may not be changed or modified in whole or in part
except by a writing signed by the party against whom enforcement of the change
or modification is sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable by
either Employee or Parent, except that the rights and obligations of Parent
under this Agreement may be assigned to a corporation which becomes the
successor to Parent as the result of a merger or other corporate reorganization
and which continues the business of Parent, or any subsidiary of Parent,
provided that Parent guarantees the performance by such subsidiary of Parent's
obligations hereunder.
(d) GOVERNING LAW. This Agreement will be governed by and
interpreted according to the substantive laws of the State of Delaware without
regard to such state's conflicts law.
(e) NO WAIVER. The failure of either party to insist on strict
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) SEVERABILITY. Employee and Parent recognize that the limitations
contained herein are reasonably and properly required for the adequate
protection of the interests of Parent. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) COUNTERPARTS. This Agreement may be executed in counterparts
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(h) EFFECT OF AGREEMENT. This Agreement will be void and have no
effect if the Effective Date does not occur on or before August 31, 1996.
(i) DISPUTE RESOLUTION.
(i) ARBITRATION OF DISPUTES. Any dispute under this
Agreement shall be resolved by arbitration in Boston, Massachusetts, and, except
as herein specifically stated, in
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<PAGE>
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA Rules") then in effect. However, in all events, these
arbitration provisions shall govern over any conflicting rules which may now or
hereafter be contained in the AAA Rules. Any judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction over the
subject matter thereof. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve such dispute.
(ii) COMPENSATION OF ARBITRATOR. Any such arbitration will be
conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
(iii) PAYMENT OF COSTS. Parent and Employee will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. Each party will pay its own costs, fees and
expenses incurred in connection with the arbitration, including reasonable fees
and expenses of attorneys, accountants and other professionals, which each party
engages.
(iv) BURDEN OF PROOF. For any dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(v) AWARD. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
(vi) TERMS OF ARBITRATION. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vii) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any dispute arising out of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective Date.
SYNC RESEARCH, INC. EMPLOYEE
By: _____________________________________ ______________________________
Name: Roger A. Dorf Richard Swee
Title: President and Chief Operating Officer
LIST OF EXHIBITS:
Attachment A Proprietary Information Agreement
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<PAGE>
ATTACHMENT A
PROPRIETARY INFORMATION AGREEMENT
[omitted]
<PAGE>
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "AGREEMENT") is made as of the
Effective Date indicated below by and between Sync Research, Inc., a Delaware
corporation ("PARENT"), and Robert A. Degan ("KEY EMPLOYEE").
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization (the "PLAN") dated as of June 27, 1996
among Parent, SR Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("Merger Sub"), and TyLink Corporation, a Delaware
corporation ("Company"), pursuant to which Merger Sub is to merge with and into
Company, Company will continue as the surviving corporation in the merger and
will become a wholly owned subsidiary of Parent, and the shares of Company
capital stock outstanding immediately prior to the effective time of the merger
will be converted into shares of Parent Common Stock, all as set forth in the
Plan (the "MERGER"). The date on which the Merger becomes effective will be the
effective date of this Agreement (the "EFFECTIVE DATE").
Key Employee is an option holder and the Chief Executive Officer of
Company and has been actively involved in the development and/or marketing of
Company's products. Parent is engaged in the Restricted Business, as defined
below. Parent intends to continue the business of Company after the Merger
and integrate such business into Parent's ongoing business as a subsidiary of
Parent. To preserve and protect the assets of Company, including Company's
goodwill, customers and trade secrets of which Key Employee has and will have
knowledge in his or her role as an employee of Parent and to preserve and
protect Parent's goodwill and business interests going forward, and in
consideration for Parent's entering into and performing under the Plan, Key
Employee has agreed to enter into this Agreement. Parent and Key Employee
have entered into an Employment Agreement (the "EMPLOYMENT AGREEMENT")
concurrently with execution of this Agreement.
Key Employee and Parent believe the limitations as to time, geographical
area and scope of activity contained in this Agreement hereof are reasonably
necessary to, and no greater than that required to, protect the goodwill and
business interests of Parent.
1. For a period ending on (i) the first anniversary of the Effective
Date or (ii) the end of the Severance Period (as defined in the Employment
Agreement), if a Severance Period is initiated pursuant to the Employment
Agreement and the Severance Period ends prior to the second anniversary of the
Effective Date, Key Employee will not (except to the extent permitted in
Section 3 of the Employment Agreement) individually or as an employee, partner,
officer, director or shareholder or in any other capacity whatsoever of or for
any person, firm, partnership, company or corporation other than Parent or its
subsidiaries:
(a) Own, manage, operate, sell, control or participate in the
ownership, management, operation, sales or control of any business (a
"COMPETITIVE BUSINESS") engaged, in
<PAGE>
the geographical areas referred to in Section 2 below, in the design, research,
development, marketing, sale, licensing or support of networking products that
adapt Systems Network Architecture ("SNA") networks to frame relay, integrated
services digital network, asynchronous transfer mode or other switched wide area
network services, or products that provide circuit, access, transmission or
network management capabilities for wide area access networks (the "RESTRICTED
BUSINESS"); or
(b) Recruit, attempt to hire, solicit, assist others in
recruiting or hiring, or refer to others concerning employment, in or with
respect to the geographical areas referred to in Section 2 below, any person who
is an employee of Parent or any of its subsidiaries or induce or attempt to
induce any such employee to terminate such employee's employment with Parent or
any of its subsidiaries.
2. The geographical areas in which the restrictions provided for in
this Agreement apply include all cities, counties and states of the United
States, and all other countries, in which Parent or Company has engaged in sales
or otherwise conducted business or selling or licensing efforts in the
Restricted Business at any time during the two years prior to the Effective Date
hereof or during the term of this Agreement. Key Employee acknowledges that the
scope and period of restrictions and the geographical area to which the
restrictions imposed in this Section 2 applies are fair and reasonable and are
reasonably required for the protection of Parent and that this Agreement
accurately describes the business to which the restrictions are intended to
apply.
3. It is the intent of the parties that the provisions of this
Agreement will be enforced to the fullest extent permissible under applicable
law. If any particular provision or portion of this Section is adjudicated to
be invalid or unenforceable, this Agreement will be deemed amended to revise
that provision or portion to the minimum extent necessary to render it
enforceable. Such amendment will apply only with respect to the operation of
this paragraph in the particular jurisdiction in which such adjudication was
made.
4. Key Employee acknowledges that any breach of the covenants of
this Agreement will result in immediate and irreparable injury to Parent and,
accordingly, consents to the application of injunctive relief and such other
equitable remedies for the benefit of Parent as may be appropriate in the event
such a breach occurs or is threatened. The foregoing remedies will be in
addition to all other legal remedies to which Parent may be entitled hereunder,
including, without limitation, monetary damages.
5. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be
given under this Agreement must be in writing. Notices will be deemed given
(i) when personally received or when sent by facsimile transmission (to the
receiving party's facsimile number), (ii) on the first business day after having
been sent by commercial overnight courier with written verification of receipt,
or (iii) on the third business day after having been sent by registered or
certified mail from a location on the United States mainland, return receipt
requested, postage
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<PAGE>
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
5(a):
If to Parent: Sync Research, Inc.
7 Studebaker
Irvine, CA 92718
Attn: Roger A. Dorf, President
If to Key Employee: c/o TyLink Corporation
10 Commerce Way
Norton, MA 02766
(b) AMENDMENTS. This Agreement contains the entire agreement
and supersedes and replaces all prior agreements between Parent and Key Employee
or Company and Key Employee concerning the subject matter hereof. This
Agreement may not be changed or modified in whole or in part except by a writing
signed by the party against whom enforcement of the change or modification is
sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be
assignable by either Key Employee or Parent, except that the rights and
obligations of Parent under this Agreement may be assigned to a corporation
which becomes the successor to Parent as the result of a merger or other
corporate reorganization and which continues the business of Parent, or any
subsidiary of Parent, provided that Parent guarantees the performance by such
subsidiary of Parent's obligations hereunder.
(d) GOVERNING LAW. This Agreement will be governed by and
interpreted according to the substantive laws of the State of Delaware without
regard to such state's conflicts law.
(e) NO WAIVER. The failure of either party to insist on strict
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) SEVERABILITY. Key Employee and Parent recognize that the
limitations contained herein are reasonably and properly required for the
adequate protection of the interests of Parent. If for any reason a court of
competent jurisdiction or binding arbitration proceeding finds any provision of
this Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforcecable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
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<PAGE>
(g) COUNTERPARTS. This Agreement may be executed in
counterparts which when taken together will constitute one instrument. Any copy
of this Agreement with the original signatures of all parties appended will
constitute an original.
(h) EFFECT OF AGREEMENT. This Agreement will be void and have
no effect if the Effective Date does not occur on or before August 31, 1996.
(i) DISPUTE RESOLUTION.
(i) ARBITRATION OF DISPUTES. Any dispute under this
Agreement shall be resolved by arbitration in Boston, Massachusetts, and, except
as herein specifically stated, in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA RULES") then in effect.
However, in all events, these arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the AAA Rules. Any
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve such dispute.
(ii) COMPENSATION OF ARBITRATOR. Any such arbitration
will be conducted before a single arbitrator who will be compensated for his or
her services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
(iii) PAYMENT OF COSTS. Parent and the Key Employee will
bear the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. Each party will pay its own costs, fees and
expenses incurred in connection with the arbitration, including reasonable fees
and expenses of attorneys, accountants and other professionals which each party
engages.
(iv) BURDEN OF PROOF. For any dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(v) AWARD. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
(vi) TERMS OF ARBITRATION. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vii) EXCLUSIVE REMEDY. Except as specifically otherwise provided in
this Agreement, arbitration will be the sole and exclusive remedy of the parties
for any dispute arising out of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective Date.
SYNC RESEARCH, INC. KEY EMPLOYEE
By: ______________________________________ ______________________________
Name: Roger A. Dorf --Name--
Title: President and Chief Operating Officer
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<PAGE>
Noncompetition Agreement for Richard Swee is identical to the one for Robert
Degan, except for the following information: "Key Employee" name is Richard
Swee, and Title (in paragraph 2) is Vice President of Engineering.
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<PAGE>
SYNC RESEARCH, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between John H. Rademaker (the "Employee") and Sync
Research, Inc., a Delaware corporation (the "Company"), effective as of
September 30, 1996.
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control that provide the Employee with enhanced financial security and
incentive and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with
<PAGE>
the Company's established employee plans and practices or pursuant to other
agreements with the Company.
3. CONSULTING ARRANGEMENT.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates as a result of Involuntary Termination other than for
Cause at any time within twelve (12) months following a Change of Control, then,
subject to Section 5, the Employee and the Company shall enter into a consulting
arrangement on the following terms:
(1) CONSULTING ENGAGEMENT. Effective as of the Termination
Date, and subject to the terms of this Agreement, the Company agrees to retain
the Employee as a consultant to perform such services (the "Consulting
Services") for the Company as may be reasonably requested from time to time by
an officer of the Company (the "Consulting Arrangement"). The term of this
Consulting Arrangement shall commence on the Termination Date and expire on the
earlier of (i) the date the employee is working as a salaried employee of or
consultant to another person, company or entity which is actually or potentially
in competition with any business conducted by the Company, as determined by the
Company in its sole discretion, (ii) at the Employee's option, the date the
Employee is working as a salaried employee of or consultant to another person,
company or entity, or (iii) 24 months following the Termination Date. As
consideration for the Employee's services under the Consulting Arrangement, the
Company shall pay in cash to Employee an amount equal to 1/12th of the
Employee's Annual Compensation on the last day of each full month following the
Termination Date during which the Consulting Arrangement is in effect. The
Employee's stock options and/or restricted stock shall continue to vest during
the term of the Consulting Arrangement to the extent provided in the applicable
stock option or restricted stock purchase agreement. Notwithstanding the
foregoing, the Consulting Arrangement may be terminated earlier by either party
upon five days written notice of termination if the other party fails to cure
any material breach of its obligations hereunder within 10 days after receipt of
notice specifying such breach.
(2) CONTINUED INSURANCE COVERAGE. Subject to the provisions of
this Section 3(a)(2), the Employee shall be entitled to one hundred percent
(100%) Company-paid health, dental and life insurance coverage at the same level
of coverage as was provided to such Employee immediately prior to the Change of
Control (the "Company-Paid Coverage"). If such coverage includes the Employee's
dependents immediately prior to the Change of Control, such dependents shall
also be covered at Company expense. Company-Paid Coverage shall continue until
the earlier of (i) termination of the Consulting Arrangement or (ii) the date
that the Employee and his or her dependents become covered under another
employer's group health, dental or life insurance plans that provide Employee
and his or her dependents with comparable benefits and levels of coverage. For
purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
("Cobra"), the date of the "qualifying event" for Employee and
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<PAGE>
his or her dependents shall be the date upon which the Company-Paid Coverage
terminates.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive payments for consulting
services or other benefits under Section 3(a) except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive payments for consulting services or other
benefits under Section 3(a) except for those (if any) as may then be established
under the Company's then existing severance and benefits plans and practices or
pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall not be entitled to receive payments
for consulting services or other benefits under Section 3(a) except for those
(if any) as may then be established under the Company's existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
4. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
5. LIMITATION ON PAYMENTS. In the event that the payments and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 5, would be subject to the excise tax imposed by Section 4999 of the
Code (or any corresponding provisions of state income tax law), then the
Employee's benefits under Section 3(a) shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
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<PAGE>
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax-basis, of the greater amount of
benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 5
shall be made in writing by the Company's independent public accountants (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 5. In the event that
subsection (a) above applies, then Employee shall be responsible for any excise
taxes imposed with respect to such benefits. In the event that subsection (b)
above applies, then each benefit provided hereunder shall be proportionately
reduced to the extent necessary to avoid imposition of such excise taxes.
6. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) ANNUAL COMPENSATION. "Annual Compensation" means an amount equal
to (i) Employee's Company salary for the twelve months preceding the Change of
Control, and (ii) Employee's maximum target bonus for the year in which the
Change of Control occurs.
(b) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's committing and being convicted of a felony, (iii) a
willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company or an act of fraud by Employee against the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his or her duties, continued violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
(c) CHANGE OF CONTROL. "Change of Control" means the occurrence of
any of the following events:
(i) Any "Person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of
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<PAGE>
the Company representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the directors
are Incumbent Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) DISABILITY. "Disability" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company in the
base salary of the Employee as in effect immediately prior to such reduction;
(iv) a material reduction by the Company in the kind or level of employee
benefits, including bonuses, to which the Employee was entitled immediately
prior to such reduction with the
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<PAGE>
result that the Employee's overall benefits package is significantly reduced;
(v) the relocation of the Employee to a facility or a location more than thirty
(30) miles from the Employee's then present location, without the Employee's
express written consent; (vi) any purported termination of the Employee by the
Company which is not effected for Disability or for Cause, or any purported
termination for which the grounds relied upon are not valid; (vii) the failure
of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 7(a) below; or (viii) any act or set of facts or
circumstances which would, under California case law or statute, constitute a
constructive termination of the Employee.
(f) TERMINATION DATE. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
7. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
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<PAGE>
8. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him or her at the home
address which he or she most recently communicated to the Company in writing.
In the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation and any Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source, subject to the termination provisions of Section 3(a)(1).
(b) WAIVER. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement represents the entire agreement
between the Employee and the Company with respect to the matters set forth
herein. No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as
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<PAGE>
applied to agreements entered into and performed within California solely by
residents of that state.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY: SYNC RESEARCH, INC.
By: _________________________________
Title: _________________________________
EMPLOYEE:
________________________________________
Signature
________________________________________
Please print name
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<PAGE>
SEVERANCE AGREEMENT BETWEEN THE COMPANY AND ROGER A. DORF
This agreement is identical to the one included in Exhibit 10.24 for
John Rademaker, except that the name of the "Employee" is Roger A. Dorf.
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<PAGE>
SYNC RESEARCH, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between --EmployeeName-- (the "Employee") and Sync Research,
Inc., a Delaware corporation (the "Company"), effective as of September 30,
1996.
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control that provide the Employee with enhanced financial security and
incentive and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with
<PAGE>
the Company's established employee plans and practices or pursuant to other
agreements with the Company.
3. CONSULTING ARRANGEMENT.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates as a result of Involuntary Termination other than for
Cause at any time within twelve (12) months following a Change of Control, then,
subject to Section 5, the Employee and the Company shall enter into a consulting
arrangement on the following terms:
(1) CONSULTING ENGAGEMENT. Effective as of the Termination
Date, and subject to the terms of this Agreement, the Company agrees to retain
the Employee as a consultant to perform such services (the "Consulting
Services") for the Company as may be reasonably requested from time to time by
an officer of the Company (the "Consulting Arrangement"). The term of this
Consulting Arrangement shall commence on the Termination Date and expire on the
earlier of (i) the date the employee is working as a salaried employee of or
consultant to another person, company or entity which is actually or potentially
in competition with any business conducted by the Company, as determined by the
Company in its sole discretion, (ii) at the Employee's option, the date the
Employee is working as a salaried employee of or consultant to another person,
company or entity, or (iii) 24 months following the Termination Date. As
consideration for the Employee's services under the Consulting Arrangement, the
Company shall pay in cash to Employee an amount equal to 1/24th of the
Employee's Annual Compensation on the last day of each full month following the
Termination Date during which the Consulting Arrangement is in effect. The
Employee's stock options and/or restricted stock shall continue to vest during
the term of the Consulting Arrangement to the extent provided in the applicable
stock option or restricted stock purchase agreement. Notwithstanding the
foregoing, the Consulting Arrangement may be terminated earlier by either party
upon five days written notice of termination if the other party fails to cure
any material breach of its obligations hereunder within 10 days after receipt of
notice specifying such breach.
(2) CONTINUED INSURANCE COVERAGE. Subject to the provisions of
this Section 3(a)(2), the Employee shall be entitled to one hundred percent
(100%) Company-paid health, dental and life insurance coverage at the same level
of coverage as was provided to such Employee immediately prior to the Change of
Control (the "Company-Paid Coverage"). If such coverage includes the Employee's
dependents immediately prior to the Change of Control, such dependents shall
also be covered at Company expense. Company-Paid Coverage shall continue until
the earlier of (i) termination of the Consulting Arrangement or (ii) the date
that the Employee and his or her dependents become covered under another
employer's group health, dental or life insurance plans that provide Employee
and his or her dependents with comparable benefits and levels of coverage. For
purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
("Cobra"), the date of the "qualifying event" for Employee and
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<PAGE>
his or her dependents shall be the date upon which the Company-Paid Coverage
terminates.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive payments for consulting
services or other benefits under Section 3(a) except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive payments for consulting services or other
benefits under Section 3(a) except for those (if any) as may then be established
under the Company's then existing severance and benefits plans and practices or
pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall not be entitled to receive payments
for consulting services or other benefits under Section 3(a) except for those
(if any) as may then be established under the Company's existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
4. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
5. LIMITATION ON PAYMENTS. In the event that the payments and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 5, would be subject to the excise tax imposed by Section 4999 of the
Code (or any corresponding provisions of state income tax law), then the
Employee's benefits under Section 3(a) shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
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<PAGE>
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax-basis, of the greater amount of
benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 5
shall be made in writing by the Company's independent public accountants (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 5. In the event that
subsection (a) above applies, then Employee shall be responsible for any excise
taxes imposed with respect to such benefits. In the event that subsection (b)
above applies, then each benefit provided hereunder shall be proportionately
reduced to the extent necessary to avoid imposition of such excise taxes.
6. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) ANNUAL COMPENSATION. "Annual Compensation" means an amount equal
to (i) Employee's Company salary for the twelve months preceding the Change of
Control, and (ii) Employee's maximum target bonus for the year in which the
Change of Control occurs.
(b) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's committing and being convicted of a felony, (iii) a
willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company or an act of fraud by Employee against the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his or her duties, continued violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
(c) CHANGE OF CONTROL. "Change of Control" means the occurrence of
any of the following events:
(i) Any "Person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"Beneficial Owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of
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<PAGE>
the Company representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the directors
are Incumbent Directors. "Incumbent Directors" shall mean directors who either
(A) are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) DISABILITY. "Disability" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company in the
base salary of the Employee as in effect immediately prior to such reduction;
(iv) a material reduction by the Company in the kind or level of employee
benefits, including bonuses, to which the Employee was entitled immediately
prior to such reduction with the
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<PAGE>
result that the Employee's overall benefits package is significantly reduced;
(v) the relocation of the Employee to a facility or a location more than thirty
(30) miles from the Employee's then present location, without the Employee's
express written consent; (vi) any purported termination of the Employee by the
Company which is not effected for Disability or for Cause, or any purported
termination for which the grounds relied upon are not valid; (vii) the failure
of the Company to obtain the assumption of this Agreement by any successors
contemplated in Section 7(a) below; or (viii) any act or set of facts or
circumstances which would, under California case law or statute, constitute a
constructive termination of the Employee.
(f) TERMINATION DATE. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
7. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
-6-
<PAGE>
8. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him or her at the home
address which he or she most recently communicated to the Company in writing.
In the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation and any Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source, subject to the termination provisions of Section 3(a)(1).
(b) WAIVER. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement represents the entire agreement
between the Employee and the Company with respect to the matters set forth
herein. No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as
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<PAGE>
applied to agreements entered into and performed within California solely by
residents of that state.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY: SYNC RESEARCH, INC.
By: _________________________________
Title: _________________________________
EMPLOYEE:
________________________________________
Signature
________________________________________
Please print name
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<PAGE>
The following Executive Officers of Sync have entered into a severance
agreement in the form attached as Exhibit 10.25:
Otto Berlin
Robert Degan
Dominic Genovese
Todd J. Krautkremer
Karen Ratta
Nicholas J. Redding
Ronald J. Scioscia
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<PAGE>
THE FLATLEY COMPANY
STANDARD FORM OF INDUSTRIAL LEASE
SUBMISSION NOT AN OPTION
THE SUBMISSION 0F THIS LEASE FOR EXAMINATION AND NEGOTIATION DOES NOT CONSTITUTE
AN OFFER TO LEASE. A RESERVATION OR, OR OPTION FOR THE PREMISES AND SHALL VEST
NO RIGHT IN ANY PARTY. TENANT OR ANYONE CLAIMING UNDER OR THROUGH TENANT SHALL
HAVE THE RIGHTS TO THE PREMISES AS SET FORTH HEREIN AND THIS LEASE BECOMES
EFFECTIVE AS A LEASE ONLY UPON EXECUTION, ACKNOWLEDGMENT AND DELIVERY THEREOF BY
LANDLORD AND TENANT, REGARDLESS OF ANY WRITTEN OR VERBAL REPRESENTATION OF ANY
AGENT, MANAGER OR EMPLOYEE OF LANDLORD TO THE CONTRARY.
Revision Date: 10/85
<PAGE>
Lease Agreement
(Standard Industrial Form)
This lease is made as of this 14th day of May, 1991, by and between the party
named as landlord in the "Basic Data" set forth below (hereinafter "Landlord")
and the party named as tenant in the "Basic Data" set forth below (hereinafter
"Tenant"). In consideration of the mutual convenants herein set forth, the
parties agree as follows:
1. INCORPORATION OF BASIC DATA. All capitalized terms in this Lease shall
have the meanings as described to them in the Basic Data set forth below unless
otherwise defined herein.
BASIC DATA
LANDLORD. shall mean Thomas J. Flatley d/b/a The Flatley Company, having a
principal place of business and current mailing address at 50 Braintree Hill
Office Park, Braintree, MA 02184.
TENANT: shall mean TyLink Corporation, having a principal place of
business and current mailing address at 10 Commerce Way, Norton, MA 02766.
PREMISES: shall mean 25,220 square feet, which shall include at least
9,4000 square feet of office space, being the approximate size of the Premises
and the basis on which Annual Rent and Additional Rent shall be paid by Tenant
to Landlord, in the building located at Norton Commerce Center, 10 Commerce Way,
Norton, MA 02766 (the "Building"), which Building is located on a lot (the
"Lot"), all as such Premises, Building and Lot are described and/or outlined in
Exhibit A.
TERMS: shall mean the period of five (5) years commencing upon the
Commencement Date.
SECURITY DEPOSIT: shall mean the sum of TEN THOUSAND FIVE HUNDRED EIGHT AND
33/100 ($10,508.33) DOLLARS paid this day by Tenant to Landlord, to be held by
Landlord pursuant to the terms of Paragraph 4 of this Lease.
ANNUAL RENT: shall mean the annual sum of ONE HUNDRED TWENTY-SIX THOUSAND ONE
HUNDRED AND 00/100 ($126,100.00) DOLLARS, payable in equal monthly installments
of TEN THOUSAND FIVE HUNDRED EIGHT AND 33/100 ($10,508.33) DOLLARS, for the Term
of this Lease payable in accordance with Paragraph 5 of this Lease plus all
other charges, amounts, reimbursements or other sums (collectively "Additional
Rent") to be paid by Tenant to Landlord in accordance with Paragraph 6 and any
other terms of this Lease calling for the payment of money by Tenant to
Landlord.
USE: shall mean general offices, light manufacturing, and
manufacturing and distribution of electronic products and no other use or
purpose whatsoever.
COMMENCEMENT DATE: shall mean May 1, 1991.
RENT/COMMENCE DATE: Annual Rent as described hereinabove shall commence on May
1, 1991. Notwithstanding the foregoing, Landlord hereby grants to Tenant a rent
allowance in the amount of TWO THOUSAND AND 00/100 dollars per month, and at
that rate for any fraction of a month, effective with the Commencement Date of
this Lease and continuing until the date the construction as detailed on Exhibit
"A-2", attached hereto and made a part hereof, is substantially completed with
the exception of minor items which can be fully completed within thirty (30)
days without material interference with Tenant's occupancy of the Premises.
TENANT'S PRO RATA SHARE: shall be based on the fraction:
25,220
<PAGE>
50,100
TENANT'S INSURANCE REQUIREMENTS: Public Liability: ONE MILLION AND 00/100
($1,000,000.00) DOLLARS for injury to one person, ONE MILLION AND 00/100
($1,000,000.00) DOLLARS for injury to more than one person, per incident.
Property Damage: ONE MILLION AND 00/100
($1,000,000.00) DOLLARS per incident.
2. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, subject to and with the benefit of the terms, convenants,
conditions and provisions of this Lease, the Premises, but reserving and
excepting to Landlord the use of the exterior walls, the roof and the right to
install, maintain, use, repair and replace pipes, ducts, conduits, wires and
appurtenant fixtures leading through the Premises and serving other parts of the
Building or Lot in locations which will not materially interfere with Tenant's
use thereof. Exhibit A is intended only to show the location of the Premises in
relation to the Building and/or Lot and the initial size of such Building and
Lot, the Building and/or Lot and other data thereon is to be disregarded and in
no event deemed or construed to be a representation that the Building or
Buildings, parking areas and other improvements shown thereon will be construed
and/or maintained as indicated thereon, or that additions to, or reductions from
the Building or Lot may not be made by the Landlord during the Term of this
Lease, but rather the Landlord shall have the right to do so and any such
addition or reduction shall take effect upon Landlord's giving notice to Tenant
to the effect. Landlord reserved the right to construct or sell any free-
standing buildings on any portion of the Lot.
3. TERM. The Term of this Lease shall commence upon the Commencement Date,
which shall be the date set forth in the Basic Data.
4. SECURITY DEPOSIT. Tenant has deposited with Landlord the Security
Deposit as security for the faithful performance and observation of Tenant of
the terms, provisions and conditions of this Lease. It is agreed that in the
event Tenant defaults in respect of any of the terms, provisions and conditions
of this Lease, Landlord may use, apply or retain the whole or any part of the
Security Deposit to the extent required for payment of any Annual Rent,
Additional Rent, or any other sum as to which Tenant is in default or for any
sum which Landlord may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this Lease,
including but not limited to any damage or deficiency accrued before or after
summary proceedings or other reentry by Landlord, including the costs of such
proceeding or reentry and further including, without limitation, reasonable
attorney's fees. It is agreed that Landlord shall always have the right to
apply the Security Deposit, or any part thereof, as aforesaid, without notice
land without prejudice to any other remedy or remedies which Landlord may have,
or Landlord may pursue any other such remedy or remedies in lieu of applying the
Security Deposit or any part thereof. No interest shall be payable on the
Security Deposit. If Landlord shall apply the Security Deposit in whole or in
part, Tenant shall upon demand pay the Landlord the amount so applied to restore
the Security Deposit to its original amount. In the event that Tenant shall
fully and faithfully comply with all of the terms, provisions, covenants and
conditions of this Lease, the Security Deposit shall be returned to Tenant
within ninety (90) days after the date fixed as the end of the Lease and after
delivery of entire possession of the Premises to Landlord in accordance with the
terms of this Lease. In the event of a sale or other transfer of the Building,
or leasing of the entire Building including the Premises subject to Tenant's
tenancy thereunder, Landlord shall transfer the Security Deposit then remaining
to the vendee or lessee and Landlord shall thereupon be released from all
liability for the return of such Security Deposit to Tenant; and Tenant agrees
to look solely to the new Landlord for the return of said Security Deposit then
remaining. The holder of any mortgage upon the Building or Lot shall never be
responsible to Tenant for the Security Deposit or its application or return
unless the Security Deposit shall actually have been received in hand by such
holder. Tenant further convenants that it will not assign or encumber or
attempt to assign or encumber the Security Deposit and that neither Landlord nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
<PAGE>
5. ANNUAL RENT. Tenant hereby covenants and agrees to pay to Landlord, at
the place to which notices to Landlord are required to be sent or such other
person or place as Landlord may from time to time designate, as Annual Rent for
the Premises in lawful money of the United States, without demand, setoff or
deduction, during the Term of this Lease, the sum set forth in Basic Data,
payable in equal monthly installments as set forth there, in advance on the
first day of each and every calendar month during said Term. Annual Rent for
any fraction of a month at the commencement or expiration of said Term shall be
prorated on a per diem basis.
6. ADDITIONAL RENT.
(a) TAXES Tenant convenants and agrees to pay, as Additional Rent,
with respect to each calendar or other tax year beginning or ending during the
Term hereof, an amount equal to Tenant's Pro Rata Share, as set forth in the
Basic Data, of the real estate taxes (including betterment's and other special
assessments) allocated to the Building and Lot for such tax year. If there
shall be more than one taxing authority, the real estate taxes for any period
shall be the sum of the real estate taxes for said period attributable to each
taxing authority. Tenant's Pro Rata Share of the real estate taxes shall be
adjusted for and with respect to any partial tax years on a per diem basis. The
expression "real estate taxes" shall include all general and special
assessments, so-called, rent taxes and other governmental charges which may be
charged, assessed or imposed upon the Building and Lot or Landlord. If at any
time during the term hereof the present system of ad valorem taxation of real
property shall be changed so that in lieu of the ad valorem tax on real property
in whole or in part, or in addition thereto, there shall be assessed on Landlord
a capital levy or other tax on, but not limited to, the Annual Rent and/or any
Additional Rent ("Gross Rents") received with respect to the Building and Lot,
or a federal, state, county, municipal or other local income, franchise, excise
or similar tax, assessment, levy or charge (distinct from any method of taxation
prevailing at the commencement of the Term hereof)a measured by or based, in
whole or in part, upon any such Gross Rents, then any and all of such taxes,
assessments, levies or charges, to the extent that the same would be payable if
the Building and Lot were the only property of Landlord subject to them, and if
the income from the Building and Lot were the only taxable income of Landlord
during the year in question, shall be deemed to be included within the term
"real estate taxes". Notwithstanding anything to the contrary herein, "real
estate taxes" shall not include Landlord's Federal or State or any income taxes
as presently imposed.
(b) TAX PAYMENTS Payment of Tenant's Pro Rate Share of the real estate
taxes allocated to the Building and Lot shall be paid, as Additional Rent,
monthly, and at the times and in the fashion herein provided for the payment of
Annual Rent. For an initial period from the Commencement Date until the end of
the first full tax year in which the Building and/or Lot containing the Premises
shall be assessed as a completed improvement, as distinguished from inprocess
construction ("the full assessment year"), the amount so to be paid shall be the
initial monthly payment reasonably fixed by Landlord on or about the
Commencement Date. Promptly after the determination by any taxing authority of
real estate taxes upon the Building and Lot or each tax year, Landlord shall
make a determination of the Tenant's Pro Rata Share of the real estate taxes and
if the aforesaid payments theretofore made for such tax year by Tenant exceed
Tenant's Pro Rata Share of the real estate taxes such overpayments shall be
credited against the payments thereafter to be made by Tenant pursuant to this
paragraph; and if the real estate taxes for such tax year are greater than such
payments theretofore made on account for such tax year, Tenant shall pay such
deficiency to Landlord within ten (10) days of demand therefore. Copies of tax
bills submitted by Landlord with any such statement shall be conclusive evidence
of the amount of real estate taxes charged, assessed or imposed. After the full
assessment year, the initial monthly payment on account of the Tenant's Pro Rate
Share of the real estate taxes shall be replaced each year by a payment which is
one-twelfth (1-12th) of the Tenant's Pro Rate Share of the real estate taxes for
the immediately preceding tax year. An equitable adjustment shall be made in
the event of any change in the method or system of taxation from that which is
now applicable, including without limitation any change in the dates and periods
for which such taxes were levied. Tenant shall pay all taxes upon its signs and
other property in or upon the Premises and Tenant convenants and agrees to pay
promptly when due all municipal, county state and federal taxes assessed against
Tenant's leasehold interest and Tenant's fixtures, furnishing, equipment,
<PAGE>
stock-in-trade, and other personal property of any kind owned, installed or
existing in the Premises. For the purpose of this paragraph such taxes shall
not be included within real estate taxes upon the Building and Lot.
(c) COMMON AREAS Tenant and its officers, employees, agents, customers
and invitees shall have the right, in common with Landlord and all others to
whom Landlord may from time to time grant rights, to use the common areas of the
Building and Lot for their intended purposes subject to such reasonable rules
and regulations as Landlord may from time to time impose. Landlord warrants
that available parking will in no event be less than that of the local code
governing parking for said building. Tenant agrees after notice thereof to
abide by such rules and regulations and to cause its officers, employees,
agents, customers and invitees to conform thereto. Landlord shall at all times
have full control, management and direction of the common areas and the right to
put the common areas to such use as the landlord may determine in its sole
discretion. Landlord shall have the right at any time and from time to time to
change the layout of the common areas including, but without limitation, the
right to add to or subtract from their shape and size and to alter their
location; provided, however, Landlord shall always maintain such amount of
parking in the common areas as may be required by local zoning law or ordinance
at the time of such parking area's original construction.
(d) CHARGES FOR COMMON AREAS. Tenant shall pay its Pro Rata Share of
the Common Areas Maintenance Costs during the Term of this lease as Additional
Rent and in the manner hereafter provided. "Common Areas Maintenance Costs" as
used herein shall mean the total cost and expenses incurred by Landlord, its
agents, contractors and/or designees for operating, maintaining, insuring (or,
if Landlord elects to self insure, an amount equal to the cost of insurance if
it were to be provided by a third party of Landlord's choosing), managing,
repairing and/or replacing all or any part of the common areas and any
installations therein, thereon, thereunder or thereover. Payment on account of
Tenant's Pro Rate Share of the Common Areas Maintenance costs shall be paid as
Additional Rent, monthly, and at the times and in the fashion herein provided
for the payment of Annual Rent based initially on Landlord's reasonable
estimate. Promptly after the end of the partial calendar year during which the
Term begins and promptly after the end of each year thereafter, Landlord shall
make a determination of Tenant's Pro Rata Share of the Common Areas Maintenance
Costs. If the aforesaid payments theretofore made for such period by Tenant
exceed Tenant's Pro Rata Share, such overpayment shall be credited against the
payments thereafter to be made by Tenant pursuant to this paragraph; and if
Tenant's Pro Rata Share is greater than such payments theretofore made on
account for such period, Tenant shall pay such deficiency to Landlord within ten
(10) days of demand therefore. The initial monthly payment on account of the
Common Areas Maintenance Costs shall be replaced after Landlord's determination
of Tenant's Pro Rata Share thereof for the preceding accounting period by a
payment which is one-twelfth (1/12th) of Tenant's actual Pro Rata Share thereof
for the immediately preceding account period, with adjustments as appropriate
where such preceding period is less than a full twelve-month period.
Appropriate adjustments shall be made for any partial month at the commencement
of the Term and for any partial month r year at the end of the Term.
7. UTILITIES. Tenants agree to pay or cause to be paid, as
Additional Rent, directly to the authority or party charged with the collection
thereof, all charges for gas, electricity, light, heat, power, water, sewerage,
telephone or other service used, rendered or supplied to or for the Tenant upon
or in connection with the Premises throughout the Term of this Lease, and to
indemnify Landlord and save it harmless against any liability or damages on such
account. Tenant shall also at its sole cost and expense procure any and all
necessary permits, licenses or other authorizations required for the lawful and
proper maintenance and use upon the Premises of wires, pipes, conduits, tubes
and other equipment and appliances for use in supplying any such services to and
upon the Premises except such permits, licenses and authorizations which shall
be required in connection with original construction of the Premises, which
shall be obtained by Landlord. It is understood and agreed that Landlord shall
be under no obligation to furnish any utilities to the Premises and shall not be
liable for any interruptions or failure in the supply of any such utilities to
the Premises. If a charge shall be made from time to time by the public
authority having jurisdiction of the Premises for the use of the apportionable
sewer system, Tenant shall pay the share thereof equitably apportionable to the
Premises. Tenant shall also pay for the sprinkler standby
<PAGE>
service charge equitably apportionable to the Premises. If the Premises are not
separately metered, Tenant shall pay to landlord, as billed and as additional
Rent, its share of water and/or sewer bills. In case any such water and sewer
charges are not paid by Tenant at the time when the same are payable, if to
municipal officials, Landlord may nevertheless pay the same to such officials
and charge Tenant the cost thereof, which charge shall become payable on the
first day of the following month as Additional Rent.
8. TENANT'S USE OF PREMISES AND MISCELLANEOUS COVENANTS. During the
Term of this Lease Tenant shall use the Premises solely for the purposes listed
in the Basic Data. Tenant agrees that it will not use, or permit or suffer the
use of, the Premises or any part thereof for any other business or purpose.
Tenant shall use and occupy the Premises in a careful, safe and proper manner
and shall keep the Premises in a clean and safe condition in accordance with all
applicable laws, ordinances and government regulations. Tenant agrees that it
will not do or suffer to be done, or keep or suffer to be kept, anything in,
upon or about the Premises which will contravene Landlord's policies insuring
against loss or damage by fire or other hazards, or which will prevent Landlord
from procuring such policies from companies acceptable to Landlord.
During the Term of this Lease, Tenant further convenants and agrees as follows:
(a) Not to use the Premises for any use involving the emission of
objectionable odors, fumes, noise or vibration, or, except to the extent
previously consented to by Landlord in writing, involving the use, storage or
disposition of toxic or hazardous substances or materials except for components
associated with the usual use of wave solder machine. Landlord acknowledges
Tenant's use of an air compressor, said compressor to be enclosed by Tenant, at
Tenant's expense, to reduce noise. Tenant covenants and agrees that it shall
advise Landlord in writing of any materials or substances it deals with in any
way on the Premises that may be deemed to be hazardous or toxic prior to such
substance or materials being brought upon the Premises or Lot. In any event,
Tenant shall strictly comply with all state, federal and municipal laws,
regulations, guidelines and ordinances concerning the use, storage, handling and
disposition of any substance or material that is or may be deemed to be toxic or
hazardous and Tenant agrees to indemnify Landlord against any liability,
including attorney's fees and costs, in connection therewith. At Landlord's
request, Tenant shall provide Landlord with reasonable assurances that Tenant
can and will comply with the foregoing and, if Landlord so requests, Tenant
shall obtain insurance of such type and in such amount as Landlord may
reasonable specify, such policy to name Landlord as an insured party and be
obtained at Tenant's sole cost prior to such substances/or materials being
brought upon the Premises or Lot. Any such policy shall provide that it may not
be canceled or amended without thirty (30) days prior notice to Landlord, and
shall be issued by a company or companies reasonably satisfactory to Landlord.
Failure to Tenant to provide Landlord with such reasonable assurances or
evidence of any reasonable requested insurance in connection with the bringing
of such materials or substances upon the Premises or Lot shall be reasonable
cause for Landlord to prohibit such substances or materials from bring brought
upon the Premises or Lot or, at Landlord's election, a default under this Lease.
This Subparagraph (a) notwithstanding, Landlord acknowledges that Tenant can use
the Premises for its intended purpose as described under the Basic Data herein.
(b) INTENTIONALLY OMITTED
(c) Not to place on the Premises or Building any placard or sign of
advertising that the Premises or any part thereof may be sublet, nor to place
any other sign or placard on the Premises or Building which is visible from the
exterior of the Premises or Building without the written consent of Landlord.
(d) Not to injure, overload, deface or permit to be injured,
overloaded, or defaced, the Premises or Building, and not to permit any holes to
be made in the exterior of the building; and not to make, allow to suffer any
waste or any unlawful, improper or offensive use of the Premises that shall be
<PAGE>
injurious to any person or property or invalidate any insurance on the Premises,
Building or Lot or increase the premium thereof.
(e) To conform to and comply with all state and municipal laws and
with all requirements of any public body or officers having jurisdiction of the
Premises and with the requirements or regulations of any Board of Fire
Underwriters or insurance company insuring the Premises at the time with respect
to the care, maintenance, use and nonstructural alteration of the Premises, all
at Tenant's sole expense.
9. REPAIRS TO AND MAINTENANCE OF PREMISES BY TENANT Tenant shall keep the
Premises, including without limitation, both the inside and outside of all doors
and windows therein, in the same order and repair as they are on the
Commencement Date, reasonable wear and tear and damage by fire or other casualty
normally insured under a so-called "extended coverage endorsement" only
excepted; and to keep all fixtures and equipment on the Premises including,
without limitation, all mechanical fixtures and equipment serving only the
Premises in the same order and repair as they are in on Commencement Date,
damage by fire and other casualty normally insured under an "extended coverage
endorsement" only excepted. Tenant shall, at it sole cost and expense, during
the entire Term of this Lease, maintain in force a service contracting providing
for the repair and annual service and maintenance of all heating, ventilating
and air conditioning equipment serving the Premises, such contract to be with a
party reasonably acceptable to Landlord or, if Landlord should so elect, with a
party designated by Landlord. Tenant shall make all repairs and replacements
and do all other work necessary for the foregoing purposes. It is further
agreed that the exception of reasonable wear and tear shall not apply so as to
permit Tenant to keep the Premises in anything less than suitable, tenant like,
efficient and usable condition considering the nature of the Premises and the
use reasonably made thereof, or in less than good and tenant like repair, and
that except in case of fire or other casualty normally insured under an
"extended coverage endorsement" there is no exception to the rule that all glass
must be kept good and whole by Tenant. Tenant shall also be responsible for the
cost of all repairs to the Building (including, without limitation, the
structure and roof thereon and common areas therein) and the Lot if the same are
occasioned by Tenant's or its employees, agents or invitees improper or
negligent use thereof.
10. SUBLETTING AND ASSIGNMENT
(a) Tenant convenants and agrees not to assign, sell, mortgage,
pledge or in any manner transfer this Lease or any interest therein or sublet
the Premises or any part thereof, or grant any concession or license or
otherwise permit occupancy of all or any part thereof by another person or
entity without the prior written consent of Landlord, which consent shall not be
unreasonably withheld provided all the provisions of this Paragraph 10 are
complied with and subject to Landlord's right to terminate this Lease as set
forth in this paragraph 10. Any such consent by Landlord shall be held to apply
only to the specific transaction thereby authorized. Such consent shall not be
construed as a waiver of the obligation of Tenant to obtain from Landlord
consent to any other or subsequent assignment or subletting period., The
collection of rent by Landlord from any assignee, subtenant or other occupant
shall not be deemed as acceptance of the assignee, subtenant or occupant as
tenant or release of Tenant from its obligation under this Lease.
(b) Notwithstanding the provisions of Paragraph 10(a), above, any
proposed assignee or subleasee submitted to the Landlord for approval must have
the same or greater financial strength as Tenant and if such is not the case,
Landlord's withholding of consent shall be reasonable. Landlord shall not be
considered unreasonable in the event at the time of such request by Tenant to
assign or sublet this Lease, Tenant shall be in default under this Lease. If
Tenant shall request permission to assign this Lease or sublet the Premises or
any part thereof Tenant shall, together with such request for consent thereto,
inform Landlord of the rental and any other amounts to be paid by such assignee
or subtenant in connection with such subletting or assignment regardless of the
nomenclature such payment may take, the term of any subletting, and any
financial information required or requested by Landlord to make the
determination required by the first sentence of this Paragraph 10(b). Landlord
shall have the right to terminate this Lease in lieu of consenting or reasonably
withholding its consent to the proposed subletting
<PAGE>
or assignment, provided that Landlord shall exercise such right with forty-five
(45) days of its receipt of Tenant's request for such consent and provided,
further, that Tenant shall have the right to withdraw its request for such
consent within fifteen (15) days after its receipt of such notice from Landlord,
in which event such notice of termination shall become null and void. If this
Lease shall be terminated pursuant to the provisions of the immediately
preceding sentence, such termination shall become effective upon the last day of
the calendar month next following Landlord's giving said notice of termination.
(c) If Landlord consents in writing to an assignment or subletting,
such consent shall be deemed conditioned upon Tenant's compliance with the
following provisions and the failure to so comply shall be deemed to give
landlord reasonable cause for withholding or withdrawing its consent:
(1) The assignment or subletting must be, respectively, of all
Tenant's leasehold interest or of the entire Premises and, in the case of an
assignment, shall also transfer to the assignee all of Tenant's rights in and
interests under this lease, including but without limitation, the Security
Deposit hereunder.
(2) INTENTIONALLY OMITTED
(3) The assignee or subleasee shall assume, by written
recordable instrument, in form and content satisfactory to Landlord, the due
performance of all Tenant's obligations under this Lease, including any accrued
obligations at the time of the assignment or subletting.
(4) A copy of the assignment of sublease and the original
assumption agreement (both in form and content satisfactory to Landlord) fully
executed and acknowledged by the assignee or subleassee, together with a
certified copy of a properly executed corporate resolution authorizing such
assumption agreement, shall be received by Landlord within ten (10) days from
the effective date of such assignment or subletting.
(5) Such assignment or subletting shall be upon and subject to
all the provisions, terms, covenants and conditions of this Lease including but
without limitation the use permitted hereby and Tenant (and any assignee(s),
subtenants(s) and guarantor(s) of this Lease) shall continue to be and remain
primarily and unconditionally liable hereunder.
(6) Tenant shall reimburse Landlord for Landlord's attorneys'
fees for examination of and/or preparation of any documents in connection with
the assignment or subletting.
(7) Any rent, sum or other consideration to be paid or given
in connection with such sublease or assignment, either initially or over time,
in excess of the Annual Rent and/or Additional Rent and/or other charges to be
paid under this Lease shall be paid directly to Landlord as if such amount were
originally called for by the terms of this Lease as Additional Rent and Tenant
shall be liable to Landlord for all such amounts.
(d) Subject to the enumerated conditions of the preceding Paragraph
10(c), Landlord hereby consents to the assignment or subletting of the entire
Premises to a corporation which is a wholly owned subsidiary of Tenant, or to a
company that owns majority of all the issued and outstanding capital stock of
Tenant. Notwithstanding any such assignment or subletting as provided in this
Paragraph 10(d), such assignment or subletting shall be upon and subject to all
the provisions, terms, covenants and conditions of this Lease and Tenant (and
any assignee(s), subtenant(s) and guarantor(s) of this Lease) shall continue to
be and remain liable hereunder.
(e) INTENTIONALLY OMITTED
11. ALTERATIONS. Tenant Shall not modify the leasehold improvements or
make any to the Premises (except for non-structural improvements and alterations
which do not exceed $5.000.00) without first
<PAGE>
obtaining Landlord's prior written approval of such modifications and
alterations; provided, however, Landlord shall not unreasonably withhold its
consent to nonstructural alternations of the Premises.
12. TRASH REMOVAL. Tenant shall be responsible for the removal of its own
trash, rubbish, garbage and refuse removal, at its sole cost and expense.
Tenant shall not permit the accumulation of rubbish, trash, garbage and other
refuse in and around the Premises. No rubbish, trash, garbage or other refuse
shall be burned by Tenant in the Premises or elsewhere in the Building or Lot
and all of the same shall be kept in suitable containers in the interior of the
Premises (or in locations outside the Premises as Landlord may permit by notice
in writing until the same is picked up from the Premises and the Building and/or
Lot. The removal agency selected by Tenant shall be subject to Landlord's
reasonable approval. In the event Tenant fails to remove any accumulation of
rubbish within twenty-four (24) hours after notice from Landlord to remove the
same, Landlord shall have the right (but not the obligation) to remove the same,
in which event the cost thereof shall be paid by Tenant as Additional Rent
immediately upon demand.
13. MECHANIC'S LIENS. Tenant will not permit to be created or to remain
undischarged any items, encumbrance or charge arising out of any work of any
contractor, mechanic, laborer or material man which might be or become a lien
or encumbrance or charge upon the Premises or any part thereof or the income
therefrom, and Tenant will not permit the rights and interest of Landlord in
the Premises or any part thereof might be impaired. If any lien on account
of an alleged debt of Tenant or any notice of contract by a party engaged by
Tenant or Tenant's contractor to work on the Premises shall be filed against
the Premises, Building or Lot, or any part hereof, within ten (10) days after
notice of the filing thereof Tenant shall cause the same to be discharged of
record by payment or bond. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid then, in addition to any other right
or remedy, Landlord may, but shall not be obligated to, discharge the same
either by paying the amounts claimed to be due or by procuring the discharge of
such lien by deposit or by bonding proceedings, and in any such event Landlord
shall be entitled to compel the prosecution of an action for the foreclosure of
such lien by the lienor or to pay the amount of the judgment in favor of the
lienor with interest, costs and allowances. Any amount so paid by Landlord and
all costs and expenses, including without limitation reasonable attorney fees,
incurred by Landlord in connection therewith, together with interest thereon at
the rate specified in Paragraph 19(d) from the respective date of Landlord's
making of the payment or incurring of the cost and expense, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord immediately upon demand.
14. ACCESS TO PREMISES . Landlord has free access to the Premises at all
reasonable time (and in case of emergency at any time) for the purpose of
examining the same or making such repairs, alterations, additions or
improvements to the Premises, or the Building of which the Premises are a part,
that Landlord may deem necessary or which Tenant has failed to do (but nothing
in this Paragraph shall obligate Landlord to make any such repairs, alteration,
additions or improvements) and also for the purpose of exhibiting the Premises
and putting up notices "To Rent" or "For Sale", which notices shall not be
removed, obliterated or hidden by Tenant. No forcible entry shall be made by
Landlord unless such entry shall be reasonably necessary to prevent injury, loss
or damage to persons or property, and Landlord shall repair any damage to
property occasioned thereby. Landlord shall repair any damage to property of
Tenant or anyone claiming under Tenant caused by or resulting from Landlord's
making any such repairs, alterations, additions or improvements except only such
damage as shall result from the entry to the Premises and/or the making of such
repairs, alternations, additions or improvements which Landlord shall make as a
result of an emergency or improvements which Landlord shall make as a result of
an emergency or the default, negligence, fault or willful misconduct of Tenant
or anyone claiming under or through Tenant. No action of Landlord pursuant to
this Paragraph shall be deemed an eviction or disturbance of Tenant nor shall
Tenant be allowed any abatement or rent or damages for any injury or
inconvenience occasioned thereby unless Landlord materially interferes with
Tenant's use and enjoyment of the Premises.
15. REMOVAL OF IMPROVEMENTS. Except as otherwise hereinafter provided, all
trade fixtures, furniture, furnishings and signs installed in the Premises by
Tenant and paid for by it shall remain the property of Tenant and shall be
removed by Tenant upon the expiration of the Term of this Lease or its earlier
<PAGE>
termination, provided (a) that any of such items as are affixed to the Premises
and require severance may be removed only if Tenant shall repair any damage
caused by such removal, (b) that Tenant shall have fully performed all of the
covenants and agreements to be performed by it under the provisions of this
Lease, and (c) that Tenant shall comply with the last sentence of this
Paragraph. If the Tenant fails to remove such items from the Premises prior to
the expiration of this Lease or earlier termination hereof, all such trade
fixtures, furniture, furnishings and signs shall become the property of the
Landlord. All lighting fixtures, heating and cooling equipment and all other
installations, alterations, additions and improvements to the Premises shall be
and remain the property of Landlord on the ending of the Term hereof or any
earlier termination of this Lease and shall not be removed from the Premises.
16. TENANT'S INSURANCE OBLIGATIONS. Tenant shall carry public liability
insurance in a company of companies licensed to do business in the state in
which the Premises are located and reasonably approved by Landlord. Said
insurance shall be in minimum amounts reasonably required by Landlord from time
to time by notice to Tenant and shall name Landlord as an additional insured, as
its interests may appear, and Tenant shall provide Landlord with evidence, when
requested, that such insurance is in full force and effect. Tenant shall carry
property damage insurance for all of its equipment and for all leasehold
improvements above the building standard which are made by the Landlord or
Tenant in and to the Premises, which policies shall name Landlord as an
additional insured. If required by Landlord, receipts evidencing payment for
said insurance shall be delivered to Landlord at least annually by Tenant and
each policy shall contain an endorsement that will prohibit its cancellation or
amendment prior to the expiration of thirty (30) days after notice of such
proposed cancellation or amendment to landlord. Tenant shall carry insurance in
the initial amounts listed in the Basic Data and shall provide Landlord with
certificates of such Tenant Insurance Requirements on or prior to the
Commencement Date..
17. REPAIRS BY LANDLORD. Landlord agrees to make all necessary repairs or
alterations to the foundation, roof and structural parts of the exterior walls
of the Premises. Notwithstanding the foregoing, if any of said repairs or
alterations shall be made necessary by reason of repairs, installations,
alternations, additions or improvements made by Tenant or anyone claiming under
or through Tenant, by reason of the default, negligence, fault, or willful
misconduct of such party, or by reason of a default in the performance or
observance of any agreements, conditions or other provisions on the part of the
Tenant to be performed or observed, or by reason of any special use to which the
Premises may be put, Tenant shall be liable for the cost of all such repairs or
alterations as may be necessary. Landlord shall not be deemed to have committed
a breach of any obligation to make repairs or alterations or perform any other
act unless (a) it shall have made such repairs of alterations or performed such
other act negligently, or (b) it shall have received notice from Tenant
designating the particular repairs or alterations needed or the other act of
which there has been failure of performance and Landlord shall have failed to
make such repairs or alterations or performed such other act within a reasonable
time after the receipt of such notice; and in the latter event Landlord's
liability shall be limited to the cost of making such repairs of alterations or
performing such other act. As used in this Lease, the expression "exterior
walls of the Premises" does not include glass, windows, doors or door frame, or
window sashes or frames. Landlord shall make all necessary repairs to the
common areas and shall maintain such common areas (except sidewalks abutting the
Premises) reasonably clear of litter and shall perform snow handling to the
extent required for business operations of the Building. The provisions of this
Paragraph shall not apply in the case of damage or destruction by fire or other
casualty or by eminent domain, in which events the obligations of Landlord shall
be controlled by paragraph 18 hereof.
18. DAMAGE OR DESTRUCTION BY EMINENT DOMAIN, FIRE OR CASUALTY
(a) In the event that the Premises and/or Building and/or Lot, or
any material part thereof, shall be taken by any public authority or for any
public use, or shall be destroyed or damaged by fire or casualty, or by the
action of any public authority, then this Lease may be terminated at the
election of Landlord. Such election shall be made by the giving of written
notice by Landlord or Tenant within thirty (30) days after the right of election
accrues. If by such taking Tenant is deprived of the use of more than twenty
percent (20%) of the Square Footage of the Premises, or if by such fire or other
casualty more than
<PAGE>
forty percent (40%) of the Square Footage of the Premises shall be rendered
untenable, and if Landlord does not within a reasonable time after notice from
Tenant commence and diligently pursue to rebuild or repair, Tenant may at its
option terminate this lease by notice in writing to Landlord within thirty (30)
days after the date of such damage to destruction, or within thirty (30) days
after it has received notice of such taking, as the case may be. If either
Landlord or Tenant exercise such option, this Lease shall terminate on the date
of such loss or taking.
(b) If this Lease is not terminated pursuant to the provisions of
Paragraph 18(a) above, this Lease shall continue in full force and effect and a
just proportion of the Annual Rent shall be suspended or abated in proportion to
the square footage utilized by Tenant until the Premises shall be put by
Landlord in proper condition for use, which Landlord covenants to do with
reasonable diligence and to the extent permitted by the net proceeds of
insurance recovered or damages awarded for such destruction or taking, and
subject to zoning and building laws then in existence. "Net proceeds of
insurance recovered or damaged awarded" refers to the gross amount of such
insurance or award less the reasonable expenses of Landlord in connection with
the collection of same, including without limitations, reasonable fees and
expenses for legal and appraisal services. In the case of a taking which
permanently reduces the Square Footage of the Premises, the rent shall be abated
for the remainder of the Term in proportion to the amount by which the Square
Footage has been reduced. Landlord warrants that Landlord shall maintain
insurance coverage as set forth herein during the Term of this Lease in an
amount equal to one hundred percent (100%) replacement value of the Building.
(c) Irrespective of the form in which recovery may be had by law, all
rights to damages or compensation shall belong to Landlord in all cases, except
for damages to Tenant's fixtures, properly or equipment, and for damages, if
any, separately awarded for relocation expenses and business interruption,
provided that none of the same shall reduce the damages or compensation which
Landlord would otherwise recover. Tenant awards and convenants to deliver such
further assignments thereof as Landlord may from time to time request.
19. TENANT'S DEFAULT.
(a) Events of Default: The following shall be "Events of Default"
under this Lease:
(i) If Tenant shall fail to pay any monthly installment of
Annual Rent or Additional Rent when due, and such default shall continue for ten
(10) days after written notice from Landlord; provided that no such notice shall
be required if Tenant has received two (2) such similar notices within three
hundred sixty-five (365) days prior to such violation or failure;
(ii) If Tenant shall fail to timely make any other payment
required under this Lease and such default shall continue for two (10) days
after written notice from Landlord; provided that no such notice shall be
required if Tenant has received two (2) such similar notices within three
hundred sixty-five (365) days prior to such violation or failure;
(iii) If Tenant shall violate or fail to perform any of the
other terms, conditions, covenants or agreements herein made by Tenant, if such
violation or failure continues for a period of thirty (30) days after Landlord's
written notice thereof to Tenant; provided that no such notice shall be required
if Tenant has received two (2) such similar notices within three hundred sixty-
five (365) days prior to such violation or failure;
(iv through vii crossed out)
(viii) Tenant's making or consenting to an assignment for the
benefit of creditors or a common law composition of creditors; or
<PAGE>
(ix) Tenant's interest in this Lease being taken on execution
in any action against the Tenant.
(b) LANDLORD'S REMEDIES. Should an Event of Default occur under this
Lease, Landlord may pursue any or all of the following remedies:
(i) TERMINATION OF LEASE. Landlord may terminate this Lease
by giving written notice of such termination to Tenant, or by reentry, whereupon
the mailing of such notice of termination addressed to Tenant, or in the case of
reentry, upon such reentry, with or without notice or demand and with or without
process of law (forcibly if necessary), this Lease shall automatically cease and
terminate and Tenant shall be immediately obligated to quit the Premises.
Termination by entry or notice as provided herein shall be effective and
complete upon entry or the mailing of notice, respectively, and shall require no
further action on the part of Landlord including, without limitation, resort to
legal process under applicable law. Any other notice to quit or notice of
Landlord's intention to reenter the Premises is hereby expressly waived. If
Landlord elects to terminate this Lease, everything contained in the Lease on
the part of Landlord to be done and performed shall cease without prejudice,
subject, however, to the right of Landlord to recover from Tenant all Annual
Rent and Additional Rent and any other sums accrued up to the time of
termination or recovery of possession by Landlord, whichever is later.
(ii) SUIT FOR POSSESSION. Landlord may proceed to recover
possession of the Premises under and by virtue of the provisions of the laws of
the state in which the Premises are located or by such other proceedings,
including reentry and possession, as may be applicable.
(iii) RELETTING OF PREMISES. Should this Lease be terminated
before the expiration of the Term of this Lease by reason of Tenant's default as
hereinabove provided, or if Tenant shall abandon or vacate the Premises before
the expiration or termination of the Term of this Lease without having paid the
full rental for the remainder of such Term, Landlord shall have the option, but
not the obligation, to relet the Premises for such rent and upon such terms as
are not unreasonable under the circumstances and, if the full Annual Rent and
Additional Rent reserved under this Lease (and any of the costs, expenses or
damages indicated below) shall not be realized by Landlord, Tenant shall be
liable for all damages sustained by Landlord, including, without limitation,
deficiency in rent, reasonable attorney's fees, brokerage fees and expenses of
placing the Premises in the same condition as existed on the Commencement Date,
normal ware and tear excepted. Landlord shall in no event be liable in any way
whatsoever for failure to relet the Premises, or in the event that the Premises
are relet, for failure to collect the rent under such reletting, and in no event
shall Tenant be entitled to receive the excess, if any, of such net rent
collected over the sums payable by Tenant to Landlord hereunder.
(iv) ACCELERATION OF PAYMENT. INTENTIONALLY OMITTED
(v) MONETARY DAMAGES. Any damage or loss of rent sustained
by Landlord may be recovered by Landlord, at Landlord's option, at the time of
the reletting, or in separate actions, from time to time, as said damage shall
have been made more easily ascertainable by successive relettings, or at
Landlord's option in a single proceeding deferred until the expiration of the
Term of this Lease (in which event Tenant hereby agrees that the cause of action
shall not be deemed to have accrued until the date of expiration of said Term)
or in a single proceeding prior to either the time or reletting or the
expiration of the Term of this Lease. In addition, should it be necessary for
Landlord to employ legal counsel to enforce any of the provisions herein
contained, Tenant agrees to pay all attorney's fees and court costs reasonably
incurred.
(vi) ANTICIPATORY BREACH; CUMULATIVE REMEDIES. Nothing
contained herein shall prevent the enforcement of any claim Landlord may have
against Tenant for anticipatory breach of the unexpired Term of this Lease. In
the event of a breach or anticipatory breach by Tenant or any of the covenants
or previsions hereof, Landlord shall have the aright of injunction and the right
to invoke any remedy allowed at law or in equity as if reentry, summary
proceedings and other remedies were not
<PAGE>
provided for herein. Mention in this Lease of any particular remedy whether or
not mentioned herein. Landlord's election to pursue one or more remedies,
whether as set forth herein or otherwise, shall not bar Landlord from seeking
any other or additional remedies at any time and in no event shall landlord ever
be deemed to have elected one or more rights and remedies that landlord may have
under this Lease, and at law and in equity, shall be cumulative and shall not be
deemed inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law. Tenant
hereby expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event of Landlord obtaining possession of the Premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease, or otherwise. In no event will Landlord implement the terms of this
Subparagraph (vi) unless Tenant has defaulted under Paragraph 19.
(c) WAIVER. No waiver by Landlord of any breach of any covenant,
condition or agreement herein contained shall operate as a waiver of such
covenant,, condition, or agreement itself, or of any subsequent breach thereof.
No payment by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or letter accompanying a check for payment of Annual Rent,
Additional Rent or any other sum be deemed an accord and satisfaction, and
landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such Annual Rent, Additional Rent or any other sum or
so pursue any other remedy provided in this Lease. No reentry by Landlord, and
no acceptance by Landlord of keys from Tenant, shall be considered an acceptance
of a surrender of the Lease or Premises.
(d) RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT. If Tenant defaults
in the making of any payment or in the doing of any act herein required to be
made or done by Tenant, then Landlord may but shall not be required to be made
or done by Tenant, then Landlord may, but shall not be required to, make such
payment or do such act, and charge the amount of the expense thereof, if made or
done by Landlord, with interest thereon at the rate per annum which is four
percent (4%) greater than the "base lending rate" then in effect at the First
National Bank of Boston, Boston, MA, or the highest rate permitted by law,
whichever may be less; with it being the express intent of the parties that
nothing herein contained shall be construed or implemented in such a manner as
to allow Landlord to charge or receive interest in excess of the maximum legal
rate than allowed by law. Such payment and interest shall constitute Additional
Rent; hereunder due and payable with the next monthly installment of Annual
Rent; but the making of such payment or the taking of such action by Landlord
shall not operate to cure such default or to stop Landlord from the pursuit of
any remedy to which Landlord would otherwise be entitled.
(e) LATE PAYMENT. If Tenant fails to pay any installment of Annual
Rent and/or Additional Rent on or before the first (1st) day of the calendar
month when such installment becomes due and payable, Tenant shall pay to
Landlord a late charge of five percent (5%) of the amount of such installment,
and, in addition, such unpaid installment shall bear interest at the rate per
annum which is four percent (4%) greater than the "base lending rate" then in
effect at The First National Bank of Boston, Boston, MA, or the highest rate by
law, whichever may be less; with it being the express intent of the parties that
nothing herein contained shall be construed or implemented in such manner as to
allow Landlord to charge or receive interest in excess of the maximum legal rate
than allowed by law. Such late charge and interest shall constitute Additional
Rent hereunder due and payable with the next monthly installment of Annual Rent
due or if payments have been accelerated pursuant to this Paragraph 19, due and
payable immediately.
(f) LIEN ON PERSONAL PROPERTY. INTENTIONALLY OMITTED.
20. LIABILITY OF LANDLORD; INDEMNIFICATION.
(a) Landlord shall not be liable to Tenant, its employees, agents,
contractors, business invitees, licensees, customers, clients, family members or
guests for any damage, compensation or claim
<PAGE>
arising from (i) the necessity of repairing any portion of the Premises,
Building or Lot, (ii) the interruption in the use of the Premises, (iii)
accident or damage to persons or property resulting from the use of operation
(by Landlord, Tenant, or any other person or persons whatsoever) of the Premises
or of any elevators or heating, cooling, electrical or plumbing equipment or
apparatus in the Premises or Building, (iv) the termination of this Lease by
reason of the destruction of the Premises, (v) any fire, robbery, theft,
mysterious disappearance and/or any other casualty, (vi) any leakage in any part
or portion of the Premises or the Building, or from water, rain or snow that may
leak into, or flow from, any part of the Premises or the Building, or from
drains, pipes or plumbing work in the Building, or from any other cause
whatsoever, or (vii) for any personal injury arising from the use, occupancy and
condition of the Premises, unless such personal injury is caused by the gross
negligence of Landlord, or a willful act or failure to act on the part of the
Landlord. Tenant shall not be entitled to any abatement or diminution of rent
as a result of any of the foregoing occurrences, nor shall the same release
Tenant from its obligations hereunder or constitute an eviction. Any goods,
property or personal effects of Tenant, its employees, agents, contractors,
business invitees, licenses, customers, clients, family members or guests,
stored or place in or about the Premises, Building or Lot shall be at their risk
and the Landlord shall not in any manner be held responsible therefor. The
employees of the Landlord are prohibited from receiving any packages or other
articles delivered to the Building by Tenant, and if any such employee receives
any such package or articles, such employee shall be the agent of the Tenant for
such purposes and not of the Landlord. Tenant acknowledges that Landlord will
not carry insurance on Tenant's furniture, furnishings, fixtures, equipment
and/or improvements in or to the Premises and Tenant shall have full
responsibilities therefor and shall bear the full risk of loss thereto. It is
expressly understood and agreed that Tenant shall look to its business
interruption and property damage insurance policies, and not to Landlord or its
agents or employees, for reimbursement for any damages or losses incurred as a
result of any of the foregoing occurrences, other than clause (a) (vii) above,
and that said policies shall contain waiver or subrogation clauses.
(b) If Landlord shall fail to perform any convenient, term or
condition of this Lease upon Landlord's part to be performed or be guilty of
negligence with regard to any party claiming by, under of through Tenant and, as
a consequence of such default or negligence. Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levy thereof
against the right, title and interest of Landlord in the Premises, Building and
Lot, and neither Landlord nor any of the partners designated herein as Landlord
comprising any partnership designated herein as Landlord or any trustees or
beneficiaries designated herein as Landlord shall be personally liable for any
judgment rendered against Landlord or any deficiency thereunder. Kit is agreed
that in no event shall Tenant have any right to levy execution against any
property of Landlord other than its interest in the Premises, Building and Lot
and the rents or other income therefrom as hereinbefore expressly provided. In
the event of sale or other transfer of Landlord's right, title and interest in
the Premises, Building and Lot, Landlord shall be released from all liability
and obligations hereunder. If all or any part of Landlord's interest in this
Lease shall be held by a trust, not trustee, shareholder or beneficiary of such
trust shall be personally liable for any of the covenants or agreements,
expressed or implied hereunder. IN NO EVENT SHALL LANDLORD EVER BE PERSONALLY
LIABLE TO TENANT OR ANYONE CLAIMING BY, UNDER OR THROUGH TENANT FOR
CONSEQUENTIAL DAMAGES, SUCH DAMAGES OR CLAIMS THEREFORE BEING HEREBY EXPRESSLY
WAIVED BY TENANT.
(c) Tenant hereby agrees to indemnify and hold landlord harmless from
and again any cost, damage, claim, liability or expense (including attorney's
fees) incurred by or claimed against Landlord directly or indirectly, which is
occasioned by or results from any default hereunder or any willful or negligent
act or omission on the part of Tenant, its agents, employees, contractors,
invitees, licensees, customers, clients, family members and guests, or as a
result of or in anyway arising from Tenant's use and occupancy of the Premises,
Building and/or Lot or in any other manner which related to the business of
Tenant. Any such cost, damage, claim, liability or expense incurred by Landlord
for which Tenant is obligated to reimburse Landlord shall be deemed Additional
Rent due and payable as Addition Rent upon demand by Landlord. It is expressly
understood and agreed that Tenant's liability under this Lease extends
<PAGE>
to the acts and omissions of any subtenant or assignee and any agent, employee,
contractor, invitee, licensee, customer, client, family member or guest of any
subtenant or assignee.
21. LEASE NOT TO BE RECORDED. Tenant agrees that it will not record this
Lease. Both parties shall, upon the request of either, execute and deliver a
notice or short form of this Lease in such form, if any, as may be permitted by
applicable statue. If this Lease is terminated before the Term expires, the
parties shall execute, deliver and record an instrument acknowledging such fact
and the actual date of termination of this Lease, and Tenant hereby appoints
Landlord its attorney-in-fact in its name and on its behalf to execute and
record such instrument, such appointment being coupled with an interest and
irrevocable.
22. SEVERABILITY. It is agreed that if any provision of this Lease shall be
determined to be void by any court of competent jurisdiction, then such
determination shall not affect any other provisions of this Lease, all of which
other provisions shall remain in full force and effect; and it is the intention
of the parties that if a provision of this Lease is capable of two
constructions, one of which would render the provision void and the other of
which would render the provision valid, then the provision shall have the
meaning which renders it valid.
23. DELAYS. In any case where either party hereto is required to do any
act, and is delayed in so doing by reason of or resulting from an Act of God,
war, civil commotion, fire or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations or other causes beyond
such party's reasonable control, such period of time shall not be counted in
determining the time during which such work or act shall be completed, whether
such time shall be designated by a fixed date, a fixed time or "a reasonable
time". In any case where work is to be paid for out of insurance proceeds or
condemnation awards, due allowance shall be made for delays in the collection of
such proceeds and awards.
24. ESTOPPEL CERTIFICATES. Tenant and Landlord each agree from time to
time, upon not less than fifteen (15) days prior written request, to execute,
acknowledge and deliver to the other a statement in writing certifying that this
Lease is unmodified and in full force and effect, or if modified, stating the
modifications; that the requested party has no defenses, offsets or
counterclaims against its obligations under this Lease (including Tenant's
obligation to pay Annual Rent and Additional Rent) or, if there are any
defenses, offsets, or counterclaims, setting them forth in reasonable detail;
and setting forth the dates to which the Annual Rent and Additional Rent and
other charges have been paid. Any such statement delivered pursuant to this
paragraph may be relied upon by any prospective purchaser or mortgagee of the
Premises, Building and/or Lot, or any prospective assignee or any such mortgage,
or any prospective assigned of this Lease, or any other similarly interested
party.
25. WAIVER OF SUBROGATION. Tenant and landlord each hereby release the
other to the extent of their respective insurance coverage, from any and all
liability for any loss or damage caused by fire or any of the extended coverage
casualties or any other casualty insured against, even if such fire or other
casualty shall be brought about by the fault or negligence of Tenant, Landlord
or their agents. Tenant and Landlord agree that their respective policies
covering such loss or damage shall contain a clause to the effect that this
release shall not affect said policies or the right of Tenant or landlord, as
the case may be, to recover thereunder and otherwise acknowledging this mutual
waiver of subrogation.
26. WAIVER. No waiver of any condition or legal right or remedy shall be
implied by the failure of Landlord to declare a forfeiture, or any other
reasons, and no waiver of any condition or covenant shall be valid unless it be
in writing signed by landlord. No waiver by landlord in respect to one tenant
of the Building or Lot shall constitute a waiver in favor of any other tenant,
now shall the waiver or a breach of any condition or covenant be claimed or
pleaded to excuse a future breach of the same condition or covenant. The
mention in this Lease of any specific right or from having any other remedy or
from maintaining any action to which it may be otherwise entitled either at law
or in equity; and for the purpose of any suit by Landlord brought or based on
this Lease, this Lease shall be construed to be a divisible contract, to the end
that successive actions may be maintained as successive periodic sums shall
mature
<PAGE>
under this lease. It is further agreed that failure to include in any suit or
action any sum or sums then matured shall not be a bar to the maintenance of any
suit or action for the recovering of said sum or sums so omitted at a later
time.
27. SURRENDER AND HOLDING OVER. Tenant shall deliver up and surrender to
Landlord possession of the Premises upon the expiration of the Term of this
Lease or its earlier termination in any way, broom clean and in as good
condition and repair as the same shall be at the commencement of said Term
(damage by fire and other perils covered by standard fire and extended coverage
insurance and ordinary wear and tear, subject to Paragraph 9 of this Lease, only
excepted), and shall deliver the keys at the office of Landlord or Landlord's
agent. Should Tenant or any party claiming under Tenant remain in possession of
the Premises, or any part thereof, after any termination of this lease, no
tenancy or interest in the Premises shall result therefrom but such holding over
shall be an unlawful detainer and all such parties shall be subject to immediate
eviction and removal; a sum equal to double the Annual Rent, Additional Rent and
any other sums to be paid as specified herein for any period during which Tenant
shall hold the Premises after the stipulated Term of this Lease may be
terminated or have expired.
28. LEASE INURES TO BENEFIT OF SUCCESSORS AND ASSIGNS. Subject to the
provision hereof, this Lease and all the terms, covenants, provisions and
conditions herein contained shall inure to the benefit of and be binding upon
their respective successors and assigns including, without limitation, their
heirs, personal representative, debtor in possession, trustee, custodian,
receiver, or any similar functionary serving in proceedings brought by or
against Landlord or Tenant (or their respective successors and assigns) under
the Bankruptcy Code (as now or hereafter in effect), insolvency Laws, or any
similar laws relating to bankruptcy, insolvency or the adjustment of debts,
provided however, that no subletting or assignment by, from, through or under
Tenant in violation of the provisions hereof shall vest in the subletees or
assigns any right, title or interest whatever.
29. QUIET ENJOYMENT. Landlord hereby covenants and agrees that if Tenant
shall perform all the covenants, agreements and other provisions herein
stipulated to be performed or observed on Tenant's part, Tenant shall at all
time during the continuance hereof have the peaceable and quiet enjoyment and
possession of the Premises without any manner of molestation or hindrance from
Landlord or any person or persons lawfully claiming under Landlord. The rights
granted by this Paragraph are in lieu of any other rights Tenant may have by
statue or at law.
30. NO PARTNERSHIP. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business or otherwise, or point
venture or a member of a joint enterprise with Tenant.
31. NOTICES. Any notice or consent required to be given by or on behalf of
either party to the other shall be in writing and shall be given by mailing such
notice or consent by registered or certified mail, return receipt requested,
postage prepaid, addressed, if to landlord, at the address hereinabove
specified, and, if to Tenant, at the address hereinabove specified to the
attention of Tenant's Chief Financial Officer, or at such other address as may
be specified from time to time in writing sent to the other party by like
notice. Notices so given shall be deemed to be given and effective upon the
date of receipt.
32. INTERPRETATION. Wherever either the word "Landlord" or "Tenant" is used
in this Lease, it shall be considered as meaning the parties respectively,
wherever the context permits or requires, and when the singular and/or neuter
pronouns are used herein, the small shall be construed as including all persons
and corporations designated respectively as Landlord or Tenant in this
instrument wherever the context requires.
33. PARAGRAPH HEADINGS. The paragraph headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope or intent of this lease now in any way affect this Lease.
<PAGE>
34. BROKER'S COMMISSIONS. Other than Peter Hayes of Hayes & Sherry, Tenant
warrants that there are no claims for broker's commission or finder's fees in
connection with its execution of this Lease or the tenancy hereby created and
agrees to indemnify and save Landlord harmless from any liability that may arise
from such claim, including reasonable attorney fees.
35. INTERRUPTION OF SERVICES. With respect to any services furnished by
Landlord to Tenant, Landlord shall in no event be liable for failure to furnish
the same when prevented from doing so by strike, lockout, breakdown, accident,
or regulation of or by any governmental authority, or failure of supply, parts
or employees necessary to furnish such services, or because of war or other
emergency, or for any cause beyond Landlord's reasonable control, or for any
cause due to any act or neglect of Tenant or its servants, agents, employees,
licensees or any person claiming by, through or under Tenant, and in no event
shall Landlord ever be liable to Tenant for any indirect or consequential
damages.
36. SUBORDINATION. Upon the written request of Landlord, Tenant shall enter
into a recordable agreement with the holder of any present or future mortgage of
the Premises, Building or Lot which shall provide that (1) this Lease shall be
subordinated to such mortgage, (ii) in the event of foreclosure of said mortgage
or any other action thereunder by the mortgage, the mortgagee (and its
successors in interest) and Tenant shall be directly bound to each other to
perform the respective undischarged obligations of Landlord and Tenant hereunder
(in the case of Landlord accruing after such foreclosure or other action and in
the case of Tenant whether accruing before or after such foreclosure or other
action), (iii) this Lease shall continue in full force and effect, and (iv)
Tenant's rights hereunder shall not be disturbed, except as in this Lease
provided. The word "Mortgage" as used herein includes mortgages, deeds of trust
and all similar instruments, all modifications, extensions, renewals and
replacements thereof, and any and all assignments of the Landlord's interest in
this Lease given as collateral security for any obligation of Landlord.
37. MODIFICATION. In the event that any holder or prospective holder of any
mortgage, as hereinbefore defined, which includes the Premises as part of the
mortgaged Premises, shall request any provision directly related to the Annual
Rent, Additional Rent or other sums payable hereunder, the duration of the Term
hereof, or the size, use or location of the Premises, Tenant agrees that Tenant
will enter into a written agreement in recordable form with such holder or
prospective holder which shall effect such modification and provide that such
modification shall become effective and binding upon Tenant and shall have the
same force and effect as an amendment to this Lease in the event of foreclosure
or other similar action taken by such holder or prospective holder or by anyone
calming by, through or under such holder or prospective holder.
38. MULTIPLE PARTIES. If Tenant shall consist of more than one person or if
there shall be a guarantor of Tenant's obligations, then the liability of all
such persons, including the guarantor, if any, shall be joint and several.
39. SUBMISSION NOT AN OPTION. The submission of this Lease for examination
and negotiation does not constitute an offer to lease, a reservation or, or
option for the Premises and shall vest no right in any party. Tenant or anyone
claiming under or through Tenant shall have the rights to the Premises as set
forth herein and this Lease becomes effective as a Lease only upon execution,
acknowledgment and delivery thereof by Landlord and Tenant, regardless of any
written or verbal representation of any agent, manager or employee of Landlord
to the contrary.
40. FINANCIAL INFORMATION. It is hereby agreed that prior to the execution
of this document by Landlord, Tenant shall furnish to Landlord, a financial
statement, credit references or similar documentation certifying Tenant's
financial standing.
41. CONTINGENCY. Notwithstanding anything contained herein to the contrary,
it is hereby understood and agreed that this Lease Agreement is contingent upon
the existing tenant executing a Termination Agreement by April 30, 1991, or an
extended date as mutually agreed upon by Landlord and Tenant in
<PAGE>
writing. In the event the existing Tenant fails to execute such Termination
Agreement by this April 30, 1991, date, or said extended date, this Lease
Agreement shall become null and void and of no further force or effect.
42. FUTURE CONSTRUCTION. Landlord agrees to perform the construction as
detailed on Exhibit "B-1", attached hereto and made a part hereof (hereinafter
referred to as the "Future Construction"), following Landlord's receipt of
Tenant's written notice requesting same. Upon receipt of Tenant's notice,
Landlord shall immediately apply to the Town of Norton for a building permit to
perform such Future Construction. Landlord agrees to use its best efforts to
fully complete such Future Construction within thirty (30) days following the
Town of Norton's issuing such building permit; However, in the event Landlord
is delayed in completing such Future Construction and such delay is caused by
the inability of the Landlord's supplier to deliver the equipment in a timely
manner, then Landlord shall have such longer period of time as is necessary
under the circumstances.
Landlord hereby estimates the total cost of performing the Future Construction
at NINETY-ONE THOUSAND NINE HUNDRED SIX AND 00/100 ($91,906.00)DOLLARS. Tenant
agrees to reimburse Landlord for same in accordance with the following schedule:
a. Tenant shall pay Landlord one-half (1/2) of the total cost of
such Future Construction, on the date it sends written notice requesting
Landlord perform the Future Construction.
b. Landlord shall amortize the remaining one-half (1/2) of such
Future Construction over the remaining Lease Term with an interest rate of ten
percent (10%). Prior to Landlord's commencement of the Future Construction,
Landlord and Tenant agree to enter into a mutually acceptable Amendment to this
Lease setting forth the amount, terms and conditions of such amortization.
Tenant hereby acknowledges that the cost of the Future Construction set forth
hereinabove is an ESTIMATE. Upon Landlord's receipt of Tenant's written notice
requesting Landlord to perform the Future Construction, Landlord shall re-
estimate the cost of the Future Construction and in the event the cost of same
is higher than the amount described hereinabove, then Tenant shall have the
option of (1) rescinding its notice to Landlord to perform the Future
Construction or (ii) paying Landlord for such higher amount.
Tenant hereby acknowledges that the Future Construction may interfere with or
interrupt Tenant's operations and use of the Premises; however, Landlord shall
use its best efforts to perform such Future Construction in a manner as to
minimize such interference or interruption of Tenant's normal business
operations. Tenant further acknowledges that a "shut down" period may be
required to Tenant in order for Landlord to complete the Future Construction.
Tenant hereby agrees to cooperate with Landlord in the scheduling for the
performance of such future Construction. Notwithstanding the foregoing, it is
hereby understood and agreed by the parties that in no event shall Tenant
receive an equitable abatement or reduction in Rent and/or Additional Rent as a
result of any interference, interruption or "shut down" in Tenant's business
operations as a result of landlord's Future Construction described hereinabove.
Notwithstanding anything contained in this Paragraph 42 to the contract, Tenant
must exercise its option for the Landlord to perform the Future Construction no
later than May 1, 1993, or this entire Paragraph 42 shall be deemed null and
void and of no further force or effect as of such May 1, 1993, date.
43. EARLY AGREEMENT. This Lease and the exhibits and any rider attached
hereto, set forth all the covenants, promises, agreements conditions,
representations and understandings, either oral or written between them other
than those herein set forth and this Lease expressly supersedes and proposals or
other written documents relating hereto. Except as herein otherwise provided,
no subsequent alteration, amendment, change of addition to this Lease shall be
binding upon Landlord and Tenant unless reduced to writing and sign by them.
Tenant agrees that Landlord and its agents have made no representations or
promises with respect to the Premises, or the Building of which the Premises are
a part, or the Lot, except as herein expressly set forth.
<PAGE>
IN WITNESS WHEREOF, the Landlord and Tenant have caused this Lease to be signed
in triplicate, under seal, as of the day and year first above written, one copy
for Tenant and two copies for the Landlord.
Witness as to Landlord: Landlord: Thomas J. Flately, d/b/a
The Flately Company
By Richard P Brooks
Its Senior Vice President
Authorized Agent
Witness as to Tenant: Tenant: TyLink Corporation
Andy Salazar Stephen Gallaker
SR VP Operations & Devel VP Finance
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF NORFOLK )
May 14, 1991
Then personally appeared Richard P. Rourke to me known to be the
individual who acknowledge himself to be the Senior Vice President/Authorized
Agent of the Flately Company, Landlord, and that he, as such, being authorized
to do so, executed the foregoing instrument and acknowledged the execution
thereof to be his free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Norfolk
County, Braintree, Massachusetts, this 14th day of May, 1991.
Notary Public
Commission Expires 7/2/93
<PAGE>
SECOND AMENDMENT TO LEASE
This Agreement made this 30th day of May, 1996, by and between Thomas J.
Flatley a/b/a The Flatley Company (hereinafter referred to as LANDLORD), and
TyLink Corp. (hereinafter referred to as TENANT),
WITNESSETH:
WHEREAS, by a certain Lease Agreement May 14, 1991, as amended by a First
Amendment to Lease dated September 12, 1991 (hereinafter collectively referred
to as the "Lease"), LESSOR leased to LESSEE, a certain premises described as
Norton Commerce Center , 10 Commerce Way, Norton, MA 02766, consisting of
approximately 25,220 square feet of space, more particularly described therein
as ("Premises"), and,
NOW, THEREFORE, for valuable consideration, the receipt of which is hereby
acknowledged each to the other, the above named parties do hereby agree to amend
said Lease as follows:
1. The original Term of the Lease, which expires April. 30, 1996, is hereby
extended for a period of three (3) years, commencing May 1, 1996 and
expiring April 30, 1999, (hereinafter referred to as the "Extended Term").
2. Effective May 1, 1996, Paragraph I of the Lease, Incorporation of Basic
Data, namely Annual Rent, shall be deleted in its entirety and replaced
with the following:
shall mean the annual sum of ONE HUNDRED FIFTY-ONE THOUSAND THREE HUNDRED
TWENTY AND 00/100 ($I51320.00) DOLLARS, payable in equal monthly
installments of TWELVE THOUSAND SIX HUNDRED TEN AND 00/100 ($12,610.00)
DOLLARS, for the period commencing may 1, 1996, and Continuing through and
including April 30, 1997 of the Lease Term; and
the annual sum of ONE HUNDRED FIFTY-SEVEN THOUSAND SIX HUNDRED TWENTY-FIVE
AND 00/100 ($157,625.00) DOLLARS, payable in equal monthly installments of
THIRTEEN THOUSAND ONE HUNDRED THIRTY-FIVE AND 42/100 ($13,135.42) DOLLARS,
for the period commencing May 1, 1997' and continuing through and including
April 30, 1998 of the Lease Term; and
the annual sum of ONE HUNDRED SIXTY-THREE THOUSAND NINE HUNDRED THIRTY AND
00/100 ($163,930.00) DOLLARS, payable in equal monthly installment of
THIRTEEN THOUSAND SIX HUNDRED SIXTY AND 83/100 (13,660.83) DOLLARS, for the
period commencing May 1, 1998 and Continuing through and including April
30, 1999 of the Lease Term, payable in accordance with Paragraph 5 of the
Lease plus all other charges, amounts, reimbursements or other sums
(collectively "Additional Rent") to be paid by TENANT to LANDLORD in
accordance with Paragraph 6 and any other terms of the Lease calling for
the payment of money by Tenant to Landlord.
<PAGE>
3. LANDLORD shall have sixty (60) days from mutual Lease execution to complete
LANDLORD'S Work as delineated on Exhibit "B-2", attached hereto and made a
part hereof. LANDLORD and TENANT acknowledge that TENANT is in possession
of the space at the Commencement Date of this Lease. LANDLORD shall
minimize interference with TENANT'S use of the Premises in performing
LANDLORD'S work and completing the punch-list items. LANDLORD and TENANT
agree while simultaneously performing work and set-up within the Premises
to work in harmony with each other.
TENANT is responsible for moving all furniture and equipment within the
Premises for LANDLORD to perform LANDLORD'S Work as described hereabove.
Notwithstanding anything contained herein to the contrary, in the event,
LANDLORD'S Work is delayed by TENANT for any reason, LANDLORD shall receive
one (1) additional day for each and every day that is needed to complete
the work,
4. Except where this Second Amendment to lease specifically changes same, all
other terms, conditions and covenants of the original Lease Agreement and
any Amendments thereto, shall remain the same, where applicable, and are
hereby reaffirmed.
5. The submission of this document for examination and negotiation does not
constitute an offer, and this document shall become effective and binding
only upon the execution thereof by both LESSOR and LESSEE, regardless of
any written or verbal representation of any agent, manager or other
employee of LESSOR to the contrary. All negotiations , consideration,
representations and understandings between LESSOR and LESSEE are
incorporated herein and the Lease and this Amendment expressly supersede
any proposals or other written documents relating hereto. The Lease and
this Amendment may be modified or altered only by written agreement between
LESSOR and LESSEE, and no act or omission of any employee or agent of
LESSOR shall alter, change or modify any of the provisions thereof.
IN WITTINESS WHEREOF, the parties hereto have signed and sealed this instrument
on the day and year first above written.
LESSOR Thomas Flatley d/b/a
The Flately Company
BY Thomas O' . Flatley
Its President
LESSEE TyLink Corp.
By
Its President
<PAGE>
Duly Authorized
COMMONWEALTH OF MASSACHUSETTS )
SS.
COUNTY OF NORFOLK
June 4, 1996
Then personally appeared Thomas J. Flatley to me known to be the individual who
acknowledged himself to be the President of The Flatley Company, LESSOR, and
that he, as such, being authorized to do so, executed the foregoing instrument
and acknowledged the execution thereof to be his free act and deed for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Norfolk County,
Braintree, Massachusetts", this 4th day of June, 1996.
STATE 0F MASSACHUSETTS
COUNTY OF BRISTOL
23 May 1996.
Then personally appeared Robert A. Degan to me known to be the individual who
acknowledged himself to be the President of TyLink Corp., LESSEE, and that he,
as such, being authorized to do so, executed the foregoing instrument and
acknowledged the execution thereof to be his free act and deed for the purposes
therein contained.
WITNESS WHEREOF, I hereunto set my hand and official seal at Bristol County,
Norton, Massachusetts, this 23 day May, 1996.
Notary Public
my commission expires: 3/14/97
<PAGE>
EXHIBIT "B-211"
Description of LANDLORD'S Work
1. LANDLORD to paint all walls including bathrooms and re-carpet all office
areas and common corridors within the Premises only; not to include warehouse.
<PAGE>
EXHIBIT 11.1
SYNC RESEARCH, INC.
COMPUTATION OF NET LOSS PER SHARE
NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- ---------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss $(3,483,000) $(543,000) $(7,567,000) $(1,905,000)
Accretion of mandatorily redeemable
Series B preferred stock redemption value
and dividends (242,000) (292,000) (775,000) (1,221,000)
----------- --------- ----------- -----------
Net loss attributable to common stockholders $(3,725,000) $ (835,000) $(8,342,000) $(3,126,000)
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Calculation of shares outstanding for
computing net loss per share:
Weighted average common and common
equivalent shares outstanding used in
calculating net loss per share in accordance
with generally accepted accounting principles 16,183,387 5,491,336 16,067,850 5,294,128
----------- --------- ----------- -----------
Adjustments to reflect requirements of the
SEC in accordance with SAB 83 -- 1,240,517 -- 1,311,743
----------- --------- ----------- -----------
Shares used in computing net loss per share 16,183,387 6,731,933 16,067,850 6,605,871
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Historical loss per share $ (0.23) $ (0.12) $ (0.52) $ (0.47)
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</TABLE>
PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1995
---------------- ----------------
<S> <C> <C>
Net loss $ (543,000) $(1,905,000)
Accretion of mandatorily redeemable
Series B preferred stock redemption value
and dividends (292,000) (1,221,000)
----------- -----------
Net loss attributable to common stockholders $ (835,000) $(3,126,000)
----------- -----------
----------- -----------
Calculation of shares outstanding for computing
net loss per share:
Weighted average common and common equivalent
shares outstanding used in calculating
net loss per share in accordance with generally
accepted accounting principles 5,491,336 5,294,128
Adjustments to reflect requirements of the SEC
in accordance with SAB 83 1,240,597 1,311,743
Adjustment to reflect the effects of the assumed
conversion of convertible preferred stock from
date of issuance 7,603,240 7,603,240
----------- -----------
Shares used in computing pro forma net loss per share 14,335,173 14,209,111
----------- -----------
----------- -----------
Pro forma net loss per share $ (0.06) $ (0.22)
----------- -----------
----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 24,758 5,356
<SECURITIES> 12,751 0
<RECEIVABLES> 8,134 0
<ALLOWANCES> 6,747 (133)
<INVENTORY> 6,356 4,220
<CURRENT-ASSETS> 52,275 16,565
<PP&E> 3,600 (1,836)
<DEPRECIATION> (2,681) 0
<TOTAL-ASSETS> 56,175 18,787
<CURRENT-LIABILITIES> 5,979 5,223
<BONDS> 0 0
0 5,300
0 8
<COMMON> 70,738 21,233
<OTHER-SE> (20,699) 13,313
<TOTAL-LIABILITY-AND-EQUITY> 50,039 18,787
<SALES> 25,915 24,537
<TOTAL-REVENUES> 25,915 24,537
<CGS> 14,395 12,271
<TOTAL-COSTS> 14,395 12,271
<OTHER-EXPENSES> 20,851 14,293
<LOSS-PROVISION> 347 93
<INTEREST-EXPENSE> (1,766) (123)
<INCOME-PRETAX> (7,565) (1,904)
<INCOME-TAX> 2 11
<INCOME-CONTINUING> (2,567) (1,915)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,567) (1,915)
<EPS-PRIMARY> $(0.52) $(0.47)
<EPS-DILUTED> $(0.52) $(0.47)
</TABLE>
