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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Sync Research, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
785065202
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(CUSIP Number)
Mr. Rohit Phansalkar With a copy to:
Entrada Holdings, LLC Jeffry S. Hoffman, Esq.
c/o Andersen Weinroth Capital Corporation Swidler Berlin Shereff Friedman, LLP
1330 Avenue of the Americas, 36th Floor 405 Lexington Avenue
New York, New York 10022 New York, New York 10174
(212) 842-1600 (212) 973-0111
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 12, 2000
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(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(e), (f) or (g), check the following: [ ].
Note: One copy and an EDGAR version of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-7(b) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 785065202 Page 2 of Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Entrada Holdings, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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NUMBER OF 7 SOLE VOTING POWER
SHARES 0
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BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
700,000
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
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PERSON 10 SHARED DISPOSITIVE POWER
WITH 700,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
700,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.5%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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SCHEDULE 13D
Item 1. Security and Issuer
The class of equity security to which this Statement on Schedule 13D
(this "Schedule 13D") relates is the common stock, par value $.001 per share
(the "Common Stock") of Sync Research, Inc., a Delaware corporation (the
"Issuer" or the "Company"), with its principal executive offices located at 40
Parker, Irvine, CA 92618.
Item 2. Identity and Background
(a), (b), (c) and (f) This Schedule 13D is being filed by Entrada
Holdings, LLC, a New York limited liability company ("Holdings" or the
"Reporting Person") with a business address at 1330 Avenue of the Americas, 36th
Floor, New York. In accordance with the requirements of Schedule 13D, responses
to Items 2 through 6 of Schedule 13D are also being provided with respect to
Andersen Weinroth & Co., L.P., a Delaware limited partnership and the sole
voting member of Holdings ("AW"), G. Chris Andersen ("Andersen"), Stephen
Weinroth ("Weinroth"), and Rohit K. Phansalkar ("Phansalkar"). Each of Holdings,
AW, and Messrs. Andersen, Weinroth and Phansalkar are collectively referred to
herein as the "Covered Persons".
Holdings is a New York limited liability company with a business
address of 1330 Avenue of the Americas, 36th Floor, New York.
AW is a Delaware limited partnership with a business address of 1330
Avenue of the Americas, 36th Floor, New York. AW is the sole voting member of
Holdings.
Mr. Andersen is a United States citizen with a business address of
Andersen Weinroth & Co., L.P., 1330 Avenue of the Americas, 36th Floor, New
York. Mr. Andersen is one of the two managers of Holdings and one of the two
general partners of AW.
Mr. Weinroth is a United States citizen with a business address of
Andersen Weinroth & Co., L.P., 1330 Avenue of the Americas, 36th Floor, New
York. Mr. Weinroth is one of the two general partners of AW.
Mr. Phansalkar is a United States citizen with a business address of
Andersen Weinroth & Co., L.P., 1330 Avenue of the Americas, 36th Floor, New
York. Mr. Phansalkar is one of the two managers of Holdings.
(d) and (e). During the past five years, none of the Covered Persons
has been convicted in any criminal proceeding (excluding traffic violations or
similar misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
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Item 3. Source and Amount of Funds
Holdings used its working capital to purchase the 700,000 shares of
Series A Preferred Stock of the Company (the "Series A Stock") at an aggregate
cost of $2,235,625 as disclosed in Item 4 below.
Item 4. Purpose of the Transaction
On May 12, 2000, pursuant to the Stock Purchase Agreement, dated May
12, 2000, between the Company and Holdings (the "Stock Purchase Agreement"),
Holdings purchased from the Company 700,000 shares of Series A Stock (the
"Purchase Agreement Shares") at a per share price of $3.19375 and an aggregate
price of $2,235,625. Each share of Series A Stock is convertible at any time at
the option of the holder into Common Stock on a one-for-one basis. In addition,
the Series A Stock is mandatorily convertible into an aggregate of 700,000
shares of Common Stock upon the closing of the merger of a subsidiary of the
Company into Osicom Technologies, Inc. (the "Osicom Merger"). The Series A Stock
is entitled to vote on an as converted basis on all matters on which common
stockholders vote.
The Stock Purchase Agreement provides that beginning on September 1,
2000, Holdings shall have the right to designate one member of the Board of
Directors of the Company (and to fill the vacancy of such member in the event of
the resignation, death or removal of such member). The nominee shall be required
to complete a questionnaire in the same form as has been executed by all other
directors of the Company. Subject to the approval of the existing directors upon
review of such questionnaire and any other relevant information, such approval
not to be unreasonably withheld, the existing directors will elect such nominee
to the Board of Directors, and the Company shall include such designee in its
proposed slate of directors for each subsequent annual meeting of stockholders,
and such individual shall receive the same compensation as each other
non-employee director of the Company.
All of the shares of Common Stock reported herein were acquired for
investment purposes. Each of the Covered Persons may acquire or dispose of
securities of the Issuer, including shares of Common Stock, directly or
indirectly, in open-market or privately negotiated transactions, depending upon
the evaluation of the performance and prospects of the Issuer by the Covered
Persons, and upon other developments and circumstances, including, but not
limited to, general economic and business conditions and stock market
conditions.
Except for the foregoing, no Covered Person has any present plans or
proposals which relate to or would result in any of the actions or events
described in paragraphs (a) through (j) of Item 4 of Schedule 13D. However, the
Covered Persons retain their respective rights to modify their plans with
respect to the transactions described in this Item 4, to acquire or dispose of
securities of the Issuer and to formulate plans and proposals which could result
in the occurrence of any such events, subject to applicable laws and
regulations.
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Item 5. Interest in Securities of the Issuer
(a) and (b) Holdings is the beneficial owner of 700,000 shares of
Common Stock (representing 16.5% of the outstanding shares of Common Stock)
which are owned directly by Holdings, and with respect to such shares, Holdings
has shared power with AW, and Messrs. Andersen, Weinroth and Phansalkar to vote
and dispose of such shares.
AW is the beneficial owner of 700,000 shares of Common Stock
(representing 16.5% of the outstanding shares of Common Stock), of which 700,000
shares of Common Stock are directly owned by Holdings and may be deemed to be
indirectly owned by AW, in its capacity as the sole voting member of Holdings.
AW has shared power with Holdings, and Messrs. Andersen, Weinroth and Phansalkar
to vote and dispose of such shares.
Mr. Andersen is the beneficial owner of 700,000 shares of Common Stock
(representing 16.5% of the outstanding shares of Common Stock), of which 700,000
shares of Common Stock are owned directly by Holdings and may be deemed to be
indirectly owned by Mr. Andersen, in his capacity as one of the general partners
of AW and a manager of Holdings, and with respect to such shares, Mr. Andersen
has shared power with Holdings, AW, and Messrs. Weinroth and Phansalkar to vote
and dispose of such shares.
Mr. Weinroth is the beneficial owner of 700,000 shares of Common Stock
(representing 16.5% of the outstanding shares of Common Stock), of which 700,000
shares of Common Stock are directly owned by Holdings and may be deemed to be
indirectly owned by Mr. Weinroth in his capacity as one of the general partners
of AW, and with respect to such shares, Mr. Weinroth has shared power with
Holdings, Mr. Andersen and Mr. Phansalkar to vote and dispose of such shares.
Mr. Phansalkar is the beneficial owner of 700,000 shares of Common
Stock (representing 16.5% of the outstanding shares of Common Stock), of which
700,000 shares of Common Stock are owned directly by Holdings and may be deemed
to be indirectly owned by Mr. Phansalkar in his capacity as a manager of
Holdings, and with respect to such shares, Mr. Phansalkar has shared power with
Holdings, AW, and Messrs. Andersen and Weinroth to vote and dispose of such
shares.
The number of shares beneficially owned by each of the Covered Persons
and the percentage of outstanding shares represented thereby, have been computed
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. The ownership of the Covered Persons is based on 3,531,007 outstanding
shares of Common Stock of the Issuer as of March 31, 2000, as represented by the
Company to Holdings in its disclosure schedule to the Stock Purchase Agreement.
(c) On May 12, 2000, pursuant to the Stock Purchase Agreement, Holdings
purchased from the Company 700,000 shares of Series A Stock at a per share price
of $3.19375 and an aggregate price of $2,235,625. Each share of Series A Stock
is convertible at any time at the option of the holder into Common Stock on a
one-for-one basis. In addition, the Series A Stock is mandatorily convertible
into an aggregate of 700,000 shares of Common Stock upon the closing of the
Osicom Merger. During the past sixty days, no other transactions in the Common
Stock have been effected by Holdings.
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During the past sixty days, no transactions in the Common Stock have
been effected by Messrs. Andersen, Weinroth or Phansalkar.
(d) Not Applicable.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relations with Respect to
Securities of the Issuer
On May 12, 2000, pursuant to the Stock Purchase Agreement, Holdings
purchased from the Company 700,000 shares of Series A Stock at a per share price
of $3.19375 and an aggregate price of $2,235,625. Each share of Series A Stock
is convertible at any time at the option of the holder into Common Stock on a
one-for-one basis. In addition, the Series A Stock is mandatorily convertible
into an aggregate of 700,000 shares of Common Stock upon the closing of the
Osicom Merger. The Series A Stock is entitled to vote on an as converted basis
on all matters on which common stockholders vote. The Series A Stock accrues
dividends at the rate of 6% per annum and has a liquidation preference equal to
the sum of $3.19375 and all accrued and unpaid dividends thereon. A copy of the
Certificate of Designation of the Series A Stock is attached hereto as Exhibit
1.
The Stock Purchase Agreement provides that beginning on September 1,
2000, Holdings shall have the right to designate one member of the Board of
Directors of the Company (and to fill the vacancy of such member in the event of
the resignation, death or removal of such member). The nominee shall be required
to complete a questionnaire in the same form as has been executed by all other
directors of the Company. Subject to the approval of the existing directors upon
review of such questionnaire and any other relevant information, such approval
not to be unreasonably withheld, the existing directors will elect such nominee
to the Board of Directors, and the Company shall include such designee in its
proposed slate of directors for each subsequent annual meeting of stockholders,
and such individual shall receive the same compensation as each other
non-employee director of the Company. In addition, the Stock Purchase Agreement
provides Holdings with certain affirmative and negative covenants of the Company
with respect to its operations.
At the Closing, the Company paid to Andersen Weinroth Capital Corp.
$111,781.25 in connection with the transactions contemplated by the Stock
Purchase Agreement.
A copy of the Stock Purchase Agreement is attached hereto as Exhibit 2.
Pursuant to the Registration Rights Agreement, dated May 12, 2000
between the Company and Holdings (the "Registration Rights"), at any time after
the Registrable Date (as defined below), subject to the terms and conditions of
the Registration Rights Agreement, Holdings on behalf of the holders of the
Transfer Restricted Securities (as defined below) shall have the right to
require the Company, by written request, to cause the Transfer Restricted
Securities to be registered with the Securities Exchange Commission by filing a
registration statement to cover the offer and resale by a holder from time to
time and the methods of distribution elected by such holder of the Purchase
Agreement Shares as set forth in such registration statement. The Registrable
Date is defined as the
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earlier of (a) ninety (90) days after the closing of the Osicom Merger or (b)
May 12, 2001. Pursuant to the Registration Rights Agreement, subject to the
terms and conditions set forth in the Registration Rights Agreement, if the
Company at any time proposes to register (other than a registration on Form S-8
or S-4 or any successor or similar forms) any of its equity securities under the
Act, whether or not for sale for its own account, in a manner which would permit
registration of Transfer Restricted Securities for offer or resale under the
Act, it will each such time use its best efforts to effect the registration
under the Act of all Transfer Restricted Securities held by the holders.
"Transfer Restricted Securities" are defined as the Common Stock issued upon
conversion of the Purchase Agreement Shares until each such share (i) has been
effectively registered under the Securities Act of 1933, as amended (the "Act"),
or (ii) is distributed to the public pursuant to Rule 144 under the Act or (iii)
may be sold or transferred pursuant to Rule 144(k)(or any similar provisions
then in force) under the Act or otherwise.
The Registration Rights Agreement shall not inure to the benefit of or
be binding upon a successor or assign of a holder of Transfer Restricted
Securities unless and to the extent such successor or assign acquired Transfer
Restricted Securities from such holder. Notwithstanding any assignment by
Holdings of the Registration Rights Agreement, Holdings shall remain the entity
which has the right to require the Company by written request to cause the
Transfer Restricted Securities to be registered pursuant to the terms of the
demand registration provisions thereof unless Holdings expressly agrees
otherwise in a written instrument executed by Holdings.
A copy of the Registration Rights Agreement is attached hereto as
Exhibit 3.
The Operating Agreement, dated May 12, 2000, of Holdings (the
"Operating Agreement"), by and among AW, Vision Adventures Ltd., Oman
International Development and Investment Co. SAOG, Ravi Kumar Sundaram, GMS
Holdings Corp., Riordan Communication Ltd., Libra Advisers, Inc., Loretta Loomie
and Target Growth Fund provides that there shall be two classes of Members: the
Voting Members and the Non-voting Members. On any matter requiring a vote,
consent or approval of the Members, the Voting Members shall be the only persons
to whom the matter is required to be submitted, and each shall have one vote.
Except as otherwise provided in the Operating Agreement, or as required by
applicable law, the vote, consent or approval of a majority of the Voting
Members shall constitute the act of Holdings. No Non-voting Member shall have a
voice or vote in any matter, except as specifically provided herein. The
Operating Agreement provides that AW is the sole Voting Member of Holdings.
The Operating Agreement provides that unless otherwise agreed by a
unanimous vote of the Members, there shall be two (2) Managers of Holdings, and
that the initial Managers shall be Christopher Andersen and Rohit K. Phansalkar.
Each Manager shall hold office until his or her death, resignation or retirement
or until his or her successor is elected A Manager need not be a Member.
The Operating Agreement provides for the establishment of capital
accounts and membership percentages, as well as the method of allocations and
distributions of gains and losses of Holdings to Members of Holdings. The
Operating Agreement provides that Holdings may distribute to the Members of
Holdings assets of Holdings as a distribution-in-kind.
A copy of the Operating Agreement is attached hereto as Exhibit 4.
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Item 7. Material to be Filed as Exhibits
Exhibit 1 Certificate of Designations of the Series A
Preferred Stock of Sync Research, Inc.
Exhibit 2 Stock Purchase Agreement, dated May 12, 2000 between
Sync Research, Inc. and Entrada Holdings, LLC
Exhibit 3 Registration Rights Agreement, dated May 12, 2000
between Sync Research, Inc. and Entrada Holdings, LLC.
Exhibit 4 Operating Agreement of Entrada Holdings, LLC, dated
May 12, 2000
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Signature
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
ENTRADA HOLDINGS, LLC
By: /s/ Rohit K. Phansalkar
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Name: Rohit K. Phansalkar
Title: Manager
Dated: May 16, 2000
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CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PREFERRED STOCK
OF
SYNC RESEARCH, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware:
I, William K. Guerry, President and Chief Financial Officer of Sync
Research, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions
of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on May 2, 2000 adopted the following resolution creating a series of
shares of Preferred Stock designated as Series A Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, $0.001 par
value, of the Corporation, to be designated "Series A Preferred Stock",
initially consisting of seven hundred thousand (700,000) shares and to the
extent that the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of the Series A
Preferred Stock are not stated and expressed in the Certificate of
Incorporation, does hereby fix and herein state and express such designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Certificate of Incorporation shall be deemed to
have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Preferred Stock", par value $0.001 per share, and the
number of shares constituting such series shall be seven hundred thousand
(700,000).
Section 2. Dividend Provision. The holders of shares of Series A Preferred
Stock shall be entitled to receive cumulative dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation) on the
Common Stock of the Corporation, at the rate of six percent (6%) per annum,
which initially equals $0.191625 per share (as adjusted for stock splits, stock
dividends, reclassification and the like) per annum on each outstanding share of
Series A Preferred Stock, when and as declared by the Board of Directors or upon
the event of any liquidation, dissolution or winding up of the
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Corporation. Such dividends shall accumulate on each share of Series A Preferred
Stock from and after May 12, 2000, and shall accumulate from day to day, whether
or not earned or declared. Such dividends shall be cumulative so that, except as
provided below, if such dividends in respect of any previous or current dividend
period, at the rate specified above, shall not have been paid the deficiency
shall first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock. Any accumulation of
dividends on the Series A Preferred Stock shall not bear interest. Dividends
that have accumulated with respect to a share of Series A Preferred Stock but
have not been declared shall, upon conversion of such share to Common Stock
except in connection with the Osicom Merger, be deemed declared and payable. No
dividends shall accumulate on any share of Series A Preferred Stock after
conversion of such share to Common Stock.
Section 3. Liquidation; Acquisitions.
(a) Preference. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $3.19375 per share (as adjusted for stock splits, stock
dividends, reclassification and the like) for each share of Series A Preferred
Stock then held by them, plus accumulated but unpaid dividends. Accumulated
dividends on the Series A Preferred Stock shall be deemed to be declared by the
Board of Directors upon an event of liquidation, dissolution or winding up of
the Corporation, but shall not be deemed to be declared by the Board of
Directors upon the Osicom Merger. If, upon the occurrence of such liquidation,
dissolution or winding up of the Corporation, the assets and funds thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) Remaining Assets. Upon the completion of the distribution
required by Section 2(a) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence, if assets remain in the Corporation, the holders of the Common Stock
of the Corporation shall receive all of the remaining assets of the Corporation.
(c) Acquisition Events.
(i) An Acquisition of the Corporation other than the Osicom
Merger shall be deemed to be a liquidation, dissolution or winding up for
purposes of Section 2 and Section 3. The Osicom Merger shall not be treated as a
liquidation, dissolution or winding up for purposes of Section 2 or 3, but shall
instead be treated pursuant to Section 4(b) hereof. For purposes of this
Certificate of Designation, "Acquisition" shall mean (A) the consummation of the
transactions (the "Osicom Merger") contemplated by that certain Agreement and
Plan of Merger by and among the Corporation, Merger Co, a Delaware corporation
and wholly-owned subsidiary of the Corporation, Osicom Technologies, Inc. a
Delaware corporation ("Osicom") and Osicom
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Technologies, Inc., a New Jersey corporation ("Osicom New Jersey"), dated April
10, 2000, as may be amended by the parties thereto (the "Osicom Merger
Agreement"), (B) the sale, conveyance or disposal, of all or substantially all
of the Corporation's property or business, (C) the Corporation's merger into or
consolidation with any other corporation other than a merger effected
exclusively for the purpose of changing the domicile of the Corporation, or (D)
any other transaction or series of related transactions in which the
Corporation's stockholders of record as constituted immediately prior to such
transaction or series of related transactions will, immediately after such
transaction or series of related transactions (by virtue of securities issued as
consideration in the transaction or series of related transactions or otherwise)
hold less than a majority of the voting power of the surviving entity (or its
successor or parent).
Section 4. Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to Section 4(c), each share of Series
A Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $3.19375
by the Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial Conversion Price per share of Series A Preferred Stock shall be
$3.19375. Such initial Conversion Price shall be subject to adjustment as set
forth in Section 4(d).
(b) Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted , without any further action of any party, into
shares of Common Stock at the Conversion Price at the time in effect for such
share immediately upon the earlier of (i) the date specified by the consent or
agreement in writing of the Company and the holders of a majority of the then
outstanding shares of Series A Preferred Stock, or (ii) immediately prior to the
effective time of the Osicom Merger.
(c) Mechanics of Conversion. Subject to Section 4(b), before any
holder of Series A Preferred Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for such series of Preferred Stock, and shall give written notice
to the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, cause the transfer agent to issue and deliver
at such office to such holder of Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of such series of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.
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(d) Conversion Price Adjustments of Preferred Stock for Splits and
Combinations. The Conversion Price of the Series A Preferred Stock shall be
subject to adjustment from time to time as follows:
(i) Stock Splits and Dividends. In the event the
Corporation should at any time or from time to time after the date on which
shares of Series A Preferred Stock are first issued (the "Purchase Date") fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Series A Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
as provided in Section 4(d)(iii) below.
(ii) Reverse Stock Splits. If the number of shares
of Common Stock outstanding at any time after the Purchase Date is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series A Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(iii) The following provisions shall apply for
purposes of this Section 4(d):
(A) The aggregate maximum number of shares of
Common Stock deliverable upon conversion or exercise of Common Stock Equivalents
(assuming the satisfaction of any conditions to convertibility or
exercisability, including, without limitation, the passage of time, but without
taking into account potential antidilution adjustments) shall be deemed to have
been issued at the time such Common Stock Equivalents were issued.
(B) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable to the
Corporation upon conversion or exercise of such Common Stock Equivalents
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Conversion Price of the Series A Preferred Stock, to the
extent in any way affected by or computed using such Common Stock Equivalents,
shall be recomputed to reflect such change, but no further adjustment shall be
made
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<PAGE>
for the actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or exchange of
such securities.
(C) Upon the termination or expiration of the
convertibility or exercisability of any such Common Stock Equivalents, the
Conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such Common Stock Equivalents, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and Common
Stock Equivalents which remain convertible or exercisable) actually issued upon
the conversion or exercise of such Common Stock Equivalents.
(e) Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(i), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than an Acquisition
or a subdivision or combination provided for elsewhere in this Certificate of
Designation), provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of such
Preferred Stock the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of such Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of such Preferred Stock) shall be applicable
after that event and be as nearly equivalent as practicable.
(g) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded down to the
nearest whole share. The number of shares issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred
Stock the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate setting
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forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for the Series A
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of the Series A Preferred Stock.
(h) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or to vote upon
an Acquisition, or in the event of a proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall give notice to each holder
of Series A Preferred Stock of the proposed dividend, distribution, right, or
proposed Acquisition or liquidation, dissolution or winding up.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of such series of Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
such series of Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to the Corporation's Certificate of Incorporation.
(j) Notices. Any notice required by this Certificate of
Designation to be given to the holders of shares of Series A Preferred Stock
shall be deemed given : (i) if delivered personally, on the date of delivery,
(ii) if delivered by confirmed facsimile transmission, on the date of such
confirmation of receipt, (iii) if by overnight express courier, on the business
day after the date of deposit with such courier, and (iv) if by U.S. mail, five
business days after deposit in the United States mail, postage prepaid, and in
each case addressed to each holder of record at his address appearing on the
books of the Corporation.
Section 5. Voting Rights. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with
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holders of Common Stock as a single class on an as-converted basis, with respect
to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Series A Preferred Stock held by each holder could be converted)
shall be rounded down to the next lowest whole number.
Section 6. Status of Converted Stock. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be cancelled and shall not be issuable by the Corporation.
Section 7. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
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IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 11th day of
May, 2000.
------------------------------------------
William K. Guerry, President and
Chief Financial Officer
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May 12, 2000, by
and between Sync Research Inc., a Delaware corporation (the "Company"), and
Entrada Holdings LLC, a New York limited liability company (the "Purchaser").
WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Company, on the terms and subject to the conditions
set forth in this Agreement, shares of the Company's Preferred Stock, par value
$.001 per share (the "Shares") with the rights, preferences and privileges as
shown in the Certificate of Designation of Rights, Preferences and Privileges of
Series A Preferred Stock attached as Exhibit A hereto (the "Certificate of
Designation"); and
WHEREAS, the Company has agreed to effect the registration of the shares
of Common Stock issuable on conversion of the Shares (the "Registrable Shares")
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Rights Agreement of even date herewith by and between the Company
and the Purchaser attached hereto as Exhibit B (the "Registration Rights
Agreement"); and
WHEREAS, the sale of the Shares by the Company to the Purchaser will be
effected in reliance upon an exemption from securities registration in
accordance with Section 4(2) of the Securities Act and the rules and regulations
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained in this Agreement, the Company and the Purchaser hereby agree as
follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction of the conditions set forth herein, the Company agrees to sell at
the Closing (as defined in paragraph 1.2 below), and the Purchaser agrees to
purchase, Seven Hundred Thousand (700,000) Shares at a purchase price per Share
equal to the average closing sale price of the Company's Common Stock as
reported by the Nasdaq National Market for the ten trading days ending on April
28, 2000 (which the parties agree is $3.19375 per Share) or Two Million Two
Hundred Thirty Five Thousand Six Hundred Twenty Five Dollars ($2,235,625) in the
aggregate (the "Purchase Price").
1.2 Closing. Subject to the satisfaction or waiver of the conditions set
forth herein, the closing of the purchase and sale of the Shares hereunder (the
"Closing") will be held simultaneously with the execution and delivery of this
Agreement and will be deemed completed when this Agreement and the other
Transaction Documents (as defined below) have been executed and delivered by the
Company and Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price has been made by the
Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of duly
<PAGE>
executed certificates representing the Shares purchased by the Purchaser at the
Closing. The date on which the Closing occurs is referred to herein as the
"Closing Date".
1.3 Certain Definitions. When used herein, (A) "business day" shall mean
any day on which the New York Stock Exchange and commercial banks in the city of
Los Angeles are open for business, (B) an "affiliate" of a party shall mean any
person or entity controlling, controlled by or under common control with that
party and (C) "control" shall mean, with respect to an entity, the ability to
direct the business, operations or management of such entity, whether through an
equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby makes the following representations and warranties to
the Company and agrees with the Company that, as of the date of this Agreement
and as of the Closing Date:
2.1 Authorization; Enforceability. The Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Shares and to execute and deliver this Agreement. This Agreement
constitutes the Purchaser's valid and legally binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. The Purchaser is an accredited
investor as that term is defined in Rule 501 of Regulation D, and is acquiring
the Shares solely for its own account for investment purposes as a principal and
not with a present view to the public resale or distribution of all or any part
thereof, except pursuant to sales that are exempt from the registration
requirements of the Securities Act or sales registered under the Securities Act;
provided, however that in making such representation, the Purchaser does not
agree to hold the Shares for any minimum or specific term and reserves the right
to sell, transfer or otherwise dispose of the Shares at any time in accordance
with the provisions of this Agreement and with Federal and state securities laws
applicable to such sale, transfer or disposition.
2.3 Information. The Company has provided the Purchaser with information
regarding the business, operations and financial condition of the Company, and
has granted to the Purchaser the opportunity to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees
and agents concerning the Company and materials relating to the terms and
conditions of the purchase and sale of the Shares hereunder.
2.4 Limitations on Disposition. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, the Shares and the Registrable
Shares have not been and are not being registered under the Securities Act and
may not be transferred or resold without registration under the Securities Act
or unless pursuant to an exemption therefrom.
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<PAGE>
2.5 Legend. The Purchaser understands that the certificates representing
the Shares and any Registrable Shares will bear at issuance a restrictive legend
in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may not
be offered or sold unless a registration statement under the
Securities Act and applicable state securities laws shall have
become effective with regard thereto, or an exemption from
registration under the Securities Act and applicable state
securities laws is available in connection with such offer or sale.
The securities are subject to the provisions of a Stock Purchase
Agreement dated May 12, 2000 between the Company and Entrada
Holdings LLC with respect to voting."
Notwithstanding the foregoing, it is agreed that, as long as (A) the
resale or transfer (including without limitation a pledge) of any of the
Registrable Shares is registered pursuant to an effective registration
statement, (B) the Registrable Shares can be sold to the public pursuant to Rule
144 under the Securities Act ("Rule 144") and a registered broker dealer
provides to the Company a customary broker's Rule 144 letter, or (C) the
Registrable Shares are eligible for sale to the public, without limitation as to
the amount of or manner in which the Registrable Shares may be sold, under Rule
144(k) or any successor provision, the Registrable Shares shall be issued
without any legend or other restrictive language and, with respect to
Registrable Shares upon which such legend is stamped, the Company shall issue
new certificates without the first sentence of such legend to the holder upon
request. In addition to the foregoing, in the event that the Shares are
transferred to any transferee other than a member of the Purchaser, the Company
will issue new certificates without the last sentence of such legend.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
the Purchaser and agrees with the Purchaser that, as of the date of this
Agreement and as of the Closing Date, except as disclosed in a document (the
"Disclosure Schedule") delivered to Purchaser prior to the Closing:
3.1 Organization, Good Standing and Qualification. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority to carry on its business as now
conducted. The term "subsidiaries" shall mean (i) Tylink Corporation and (ii)
Sync Research Asia Pacific Limited, the only entities in which the Company has a
voting equity interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate power
and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) all other
agreements, documents, certificates or other instruments executed and delivered
by or on behalf of the Company at any Closing (the instruments described
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in (i), (ii) and (iii) being collectively referred to herein as the "Transaction
Documents") and to issue and sell the Shares to the Purchaser in accordance with
the terms hereof. All corporate action on the part of the Company by its
officers, directors and stockholders necessary for the authorization of the
Certificate of Designation, and necessary for the authorization, execution and
delivery of, and the performance by the Company of its obligations under the
Transaction Documents has been taken, and no further consent or authorization of
the Company, its Board of Directors, its stockholders, any governmental agency
or organization (other than as may be required under the Securities Act and
applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers, Inc. (the "NASD") or otherwise).
3.3 Enforcement. The Transaction Documents and the Osicom Merger Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except as such enforcement may be
limited by (i) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors'
rights generally and (ii) general principles of equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 and (ii) all Current
Reports on Form 8-K required to be filed by the Company with the Commission
since December 31, 1999 (collectively, the "Disclosure Documents"). The Company
is not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date of the filing thereof with the Commission,
conformed, and as of the Closing Date will conform, in all material respects to
the requirements of the Exchange Act, and the rules and regulations thereunder
and such Disclosure Document did not, as of the date of such filing, and will
not, as of the Closing Date, contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that any information set forth in any
Disclosure Document that is a forward-looking statement as defined in Rule
175(c) promulgated by the Commission under the Securities Act shall not be
deemed to contain an untrue statement of material fact as long as such
forward-looking statement was made with a reasonable basis and in good faith.
3.5 Capitalization. The capitalization of the Company as of March 31,
2000, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of Common Stock is set forth in the Disclosure
Schedule. All of such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and non-assessable. No shares of
the capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
created by or through the Company. Except as disclosed in the Disclosure
Schedule, or as contemplated herein, there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights
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convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries.
3.6 Valid Issuance. The Shares and the Registrable Shares are duly
authorized and, when issued, sold and delivered in accordance with the terms of
this Agreement and the Certificate of Designation, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company, (ii) based in part upon the representations of the Purchaser in this
Agreement, will be issued, sold and delivered in compliance with all applicable
Federal and state securities laws and (iii) will be entitled to all of the
rights, preferences and privileges of the holders of the Preferred Stock (and,
upon the conversion of the Shares into Registrable Shares, the Common Stock) of
the Company.
3.7 No Conflict with Other Instruments. The execution, delivery and
performance of this Agreement and the other Transaction Documents, and
consummation of the transactions contemplated hereby and thereby will not result
in (a) a violation of any provision of the Certificate of Incorporation or
by-laws of the Company or its subsidiaries, (b) a violation of any Law (as
defined below) or any judgment, decree, order, regulation or rule of any court
or other Governmental Entity (as defined in Section 5.1.8 hereof) applicable to
the Company or its subsidiaries, or (c) any violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any provision, instrument or contract to which the Company or any
of its subsidiaries is a party or by which any of their assets are subject, or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company or of any of its subsidiaries or the triggering of any
preemptive or anti-dilution rights or rights of first refusal or first offer on
the part of holders of the Company's securities. "Law" shall mean any statute,
ordinance, code, rule, regulation or order enacted, adopted, promulgated,
applied or followed by any Governmental Entity.
3.8 Breach of Contract; Litigation.
3.8.1 The Company is not aware of any breaches in any agreement to
which it is a party, which breach could have a material adverse effect on the
Company and its subsidiaries taken as a whole.
3.8.2 Except as described in the Disclosure Schedule, there is no
material claim or litigation pending, or, to the Company's knowledge, threatened
or contemplated, against the Company or any of its subsidiaries, or against any
officer, director or employee of the Company or any such subsidiary in
connection with such person's employment therewith. Neither the Company nor any
of its subsidiaries is a party to or subject to the provisions of, any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which could reasonably be expected to have a material adverse
effect on the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole.
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3.9 Trading on NASDAQ. The Common Stock is designated for quotation on the
NASDAQ National Market and trading in the Common Stock on such market has not
been suspended. The Company is in full compliance with the continued designation
criteria of the NASDAQ National Market and does not reasonably anticipate that
the Common Stock will be delisted from the NASDAQ National Market, whether by
reason of the transactions contemplated by this Agreement or the other
Transaction Documents and is not aware of any inquiry by or received any notice
from the NASD regarding any failure or alleged failure by the Company to comply
with such requirements which has not been favorably resolved prior to the date
hereof.
3.10 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Shares or (ii) has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under any circumstances that would require
registration of the Shares under the Securities Act.
3.11 Registration Rights. No holders of the Company's Common Stock nor of
any securities convertible or exchangeable into Common Stock nor of other rights
to acquire Common Stock (except stock options under our stock plans) have any
rights to require such Common Stock to be registered under the Securities Act,
whether pursuant to a demand, piggyback or other type of registration right.
4. COVENANTS OF THE COMPANY.
4.1 Corporate Existence. The Company shall, so long as any Purchaser or
any member of the Purchaser beneficially owns any of the Shares, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes.
4.2 Provision of Information. The Company shall provide the Purchaser, as
long as the Purchaser holds any Shares, with copies of its annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy
statements and other materials sent to stockholders, in each such case promptly
after the filing thereof with the Commission.
4.3 Reporting Status. As long as the Purchaser or any member of the
Purchaser beneficially owns any Shares and until the date on which any of the
foregoing may be sold to the public pursuant to Rule 144(k) (or any successor
rule or regulation), (i) the Company shall timely file with the Commission all
reports required to be so filed pursuant to the Exchange Act and (ii) the
Company shall not terminate its status as an issuer required by the Exchange Act
to file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination. The Company agrees to file with the
Commission a Form 8-K describing the terms of the transactions contemplated by
this Agreement and the Registration Rights Agreement, with this Agreement
attached to such Form 8-K as an exhibit thereto, on or before the tenth (10th)
day following the Closing Date in the form required by the Exchange Act.
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4.4 Quotation on NASDAQ. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include the Shares for
quotation on the NASDAQ National Market and (ii) use its best efforts to
maintain the listing of the Shares on such market.
4.5 Blue Sky Filings. In connection with the sale of the Shares to the
Purchaser, the Company will comply with, and make all filings required under,
any state securities law to which the sale of the Shares hereunder is subject.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at Closing. The Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase the Shares, are conditioned upon the fulfillment (or waiver by the
Purchaser) of each of the following events as of the Closing Date:
5.1.1 the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects as of such
date as if made on such date;
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and conditions set forth in
this Agreement that are required to be complied with or performed by the Company
on or before the Closing;
5.1.3 the Company shall have delivered to the Purchaser a
certificate, signed by an officer of the Company, certifying that the conditions
specified in paragraphs 5.1.1, 5.1.2 and 5.1.7 have been fulfilled as of the
Closing;
5.1.4 the Company shall have delivered to the Purchaser a
certificate, signed by the Secretary of the Company, attaching a copy of the
resolutions of the Board of Directors authorizing the transactions contemplated
hereby, and certifying that such resolutions have not been modified or rescinded
since the date of their adoption by the Company's Board of Directors;
5.1.5 the Company shall have delivered a binding instruction letter
and opinion letter to the transfer agent, instructing the transfer agent to
issue a stock certificate representing the Shares being purchased;
5.1.6 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.7 except for the effects of the Company's lower than expected
first quarter revenues, as disclosed in a press release on April 11, 2000, there
shall have been no material adverse changes in the Company's consolidated
business or financial condition since the date of the Company's most recent
audited financial statements contained in the Disclosure Documents;
5.1.8 there shall be no action or proceeding by or before any
federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
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"Governmental Entity") or NASD, pending or threatened, challenging or seeking to
restrain or prohibit the purchase and sale of any of the Shares or any of the
other transactions contemplated by this Agreement or seeking to obtain damages
from either party hereto in connection with the purchase and sale of the Shares
or any of the other transactions contemplated by this Agreement.
5.1.9 there shall be no statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary injunction, permanent
injunction or other order, enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
purchase and sale of the Shares in effect.
5.1.10 the Purchaser shall have received an opinion of the Company's
counsel in form and substance as set forth on Exhibit B.
5.1.11 the Certificate of Designation shall be filed with the office
of the Secretary of State of Delaware and shall be in effect as of the Closing.
5.1.12 the Company shall have delivered to counsel for the Purchaser
a certificate from the Delaware Secretary of State of recent date stating that
the Company is in good standing and has paid all of its franchise taxes and a
bringdown letter stating that the Company continued to be in good standing with
the State of Delaware as of the date of the Closing.
5.2 Conditions to Company's Obligations at Closing. The Company's
obligations at the Closing are conditioned upon the fulfillment (or waiver by
the Company) of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of the Purchaser shall be
true and correct in all material respects as of such date as if made on such
date; and
5.2.2 the Purchaser shall have complied with or performed all of the
agreements, obligations and conditions set forth in this Agreement that are
required to be complied with or performed by the Purchaser on or before the
Closing.
5.2.3 there shall be no action or proceeding by or before any
Governmental Entity or NASD, pending or threatened, challenging or seeking to
restrain or prohibit the purchase and sale of any of the Shares or any of the
other transactions contemplated by this Agreement or seeking to obtain damages
from either party hereto in connection with the purchase and sale of the Shares
or any of the other transactions contemplated by this Agreement.
5.2.4 there shall be no statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary injunction, permanent
injunction or other order, enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
purchase and sale of the Shares in effect.
5.2.5 pursuant to the Agreement and Plan of Merger by and among the
Company, Merger Co, a Delaware corporation and wholly-owned subsidiary of the
Company, Osicom Technologies, Inc., a Delaware corporation ("Osicom") and Osicom
Technologies, Inc., a New Jersey corporation ("Osicom New Jersey"), dated April
10, 2000 (the "Osicom Merger
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Agreement") pursuant to which Merger Co will merge with and into Osicom and
Osicom will become a wholly-owned subsidiary of the Company (the "Osicom
Merger"), the Company shall have obtained the consent of Osicom to this
Agreement and the transactions contemplated hereby, including the issuance of
the Shares.
6. ADDITIONAL COVENANTS
6.1 Commission. At the Closing, the Company shall pay to Andersen Weinroth
Capital Corp., by certified check or wire transfer, a cash fee equal to five
percent (5%) of the aggregate Purchase Price, which the parties agree equals One
Hundred Eleven Thousand Seven Hundred Eighty-One Dollars and Twenty Five Cents
($111,781.25), in connection with the transactions contemplated by this
Agreement.
6.2 Board of Directors Seat. If the Osicom Merger has not closed on or
before August 31, 2000, the Purchaser shall have the right, for so long as the
Purchaser together with its members holds at least 350,000 shares of Series A
Preferred Stock, to designate one member of the Board of Directors of the
Company (and to fill the vacancy of such member in the event of the resignation,
death or removal of such member). The nominee shall be required to complete a
questionnaire in the same form as has been executed by all other directors of
the Company. Subject to the approval of the existing directors upon review of
such questionnaire and any other relevant information, such approval not to be
unreasonably withheld, the existing directors will elect such nominee to the
Board of Directors, and the Company shall include such designee in its proposed
slate of directors for each subsequent annual meeting of stockholders, and such
individual shall receive the same compensation as each other non-employee
director of the Company.
6.3 Conduct of Business by the Company. The Company covenants that, except
(i) as otherwise expressly contemplated by this Agreement or the Osicom Merger
Agreement or (ii) as consented to by the Purchaser, from and after the date of
this Agreement and until the earlier of: (A) the closing of the Osicom Merger,
or (B) August 31, 2000, the Company shall, and shall cause each of its
subsidiaries to:
(a) use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of the Company and its
subsidiaries and pay payables and collect receivables in a manner consistent
with past practice and otherwise operate the Company and its subsidiaries in the
ordinary and regular course of business consistent with past practice; (ii)
maintain the Company's and its subsidiaries' books and records in accordance
with past practices; (iii) keep available the services of the Company's and its
subsidiaries' officers and employees; and (iv) maintain satisfactory
relationships with licensors, suppliers, creditors, distributors, customers and
others having material business relationships with the Company and its
subsidiaries;
(b) notify the Purchaser of any change in the normal course of business or
operations of the Company or its subsidiaries and of any governmental
complaints, investigations or hearings of which the Company or its subsidiaries
is notified (or communications received by the Company or its subsidiaries
indicating that the same may be contemplated), or the institution or
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settlement of litigation or any claim, in each case involving the Company or its
subsidiaries, and to keep Purchaser informed of such events;
(c) comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
(d) not
(i) cause to be issued or sold any shares of capital stock or debt
or equity securities of the Corporation or its subsidiaries, except for (A)
shares issued on the exercise of stock options or (B) the shares to be issued in
connection with the Osicom Merger;
(ii) issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect to the issuance
of any shares of capital stock or debt or equity securities of the Corporation
or its subsidiaries, except in the ordinary course of business pursuant to the
Company's stock plans;
(iii) directly or indirectly cause to be purchased, redeemed or
otherwise acquired or disposed of any shares of capital stock of the Corporation
or its subsidiaries;
(iv) declare, set aside or pay any dividend or other
distribution;
(v) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any securities, other than pursuant
to the Corporation's stock plans and agreements in accordance with their terms
as in effect on the date hereof;
(vi) permit or allow the Corporation or its subsidiaries to borrow
or agree to borrow any funds or incur, whether directly or by way of guarantee,
any obligation for borrowed money, except in an aggregate amount not in excess
of $2.1 million;
(vii) subject any of the assets of the Corporation or any of its
subsidiaries (real, personal or mixed, tangible or intangible) to any
encumbrance or otherwise permit or allow the sale, lease, transfer or
disposition of any assets of the Corporation or its subsidiaries (real, personal
or mixed, tangible or intangible), other than in the ordinary course of business
and consistent with past practice;
(viii) assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other individual, firm or
corporation;
(ix) enter into any new material line of business;
(x) enter into any collective bargaining agreements;
(xi) increase the compensation or fringe benefits of any of the
officers or directors of the Corporation or any of its subsidiaries or, other
than in accordance with past
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practice, effect any material general increase in the compensation or fringe
benefits of the employees of the Corporation or any of its subsidiaries or pay
or agree to pay any pension, retirement allowance, or other benefit not required
by any existing employee benefit plan or agreement to any such officers or
employees, or alter, amend, terminate in whole or in part, or curtail or
permanently discontinue contributions to, any pension plan or any other employee
benefit plan;
(xii) amend the certificate of incorporation, the Certificate of
Designation or by-laws of the Corporation or any of its subsidiaries; or
(xiii) agree to do any of the foregoing.
6.4 Conduct of Business by the Company after August 31, 2000. The Company
covenants that in the event the Osicom Merger has not closed on or before August
31, 2000, except (i) as otherwise expressly contemplated by this Agreement, or
(ii) as consented to by the Purchaser, from and after August 31, 2000 and until
the earlier of: (A) the closing of the Osicom Merger, or (B) the date on which
less than 350,000 shares of Series A Preferred Stock are outstanding, the
Company shall:
(a) notify the Purchaser of any change in the normal course of business or
operations of the Company or its subsidiaries and of any governmental
complaints, investigations or hearings of which the Company or its subsidiaries
is notified (or communications received by the Company or its subsidiaries
indicating that the same may be contemplated), or the institution or settlement
of litigation or any claim, in each case involving the Company or its
subsidiaries, and to keep Purchaser informed of such events;
(b) comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
(c) not
(i) cause to be issued or sold any shares of capital stock or debt
or equity securities of the Company or its subsidiaries, except for (A) shares
issued on the exercise of stock options, (B) the shares to be issued in
connection with the Osicom Merger, or (C) the issuance of shares or securities
exercisable for or convertible into shares in one or a series of transactions
and in an aggregate number of shares not in excess of ten percent (10%) of the
outstanding shares of capital stock (as measured on the date of such issuance)
in any twelve month period (excluding the Shares issued hereunder in the
calculation of any such ten percent limit, but including the Shares issued
hereunder in the calculation of shares outstanding on such date of issuance),
provided however that none of such shares shall rank pari passu with or senior
to the Shares in terms of voting, dividends, conversion or upon liquidation.
(ii) issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect to the issuance
of any shares of capital
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stock or debt or equity securities of the Corporation or its subsidiaries,
except in the ordinary course of business pursuant to the Company's stock plans.
(iii) directly or indirectly cause to be purchased, redeemed or
otherwise acquired or disposed of any shares of capital stock of the Corporation
or its subsidiaries.
(iv) declare, set aside or pay any dividend or other
distribution.
(v) permit or allow the Corporation or its subsidiaries to borrow or
agree to borrow any funds or incur, whether directly or by way of guarantee, any
obligation for borrowed money, other than in an aggregate amount not in excess
of $2.1 million.
(vi) assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other individual, firm or
corporation other than in the ordinary course of business and consistent with
past practice.
(vii) amend the certificate of incorporation, the Certificate of
Designation or by-laws of the Corporation or any of its subsidiaries in a manner
adverse to the holders of Series A Preferred Stock; or
(viii) agree to do any of the foregoing.
6.5 Best Efforts. The Company shall use its best efforts to perform
its obligations under the Osicom Merger Agreement.
6.6 Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser and
its Affiliates (as defined below), and the successors and assigns of all of
them, from, against and in respect of any and all Losses (as defined below)
resulting from, incurred in connection with or arising out of the purchase and
ownership by the Purchaser of the Shares and the Registrable Shares. The party
or parties being indemnified are referred to herein as the "Indemnitee" and the
Company is referred to herein as the "Indemnitor." The term "Affiliate" or
"Affiliated" shall mean a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Purchaser. The term "Loss" or "Losses" shall mean any and all legal
fees and related expenses reasonably incurred by such Indemnitee in connection
with the defense of or any proceeding with respect to any claims, whether
accrued, contingent or otherwise, resulting from or arising out of the purchase
and ownership by the Purchaser of the Shares and the Registrable Shares and in
which Indemnitee is named as a defendant, provided however that "Loss" and
"Losses" shall not mean any judgments, damages or amounts paid in settlement of
any claim.
(b) Any party who receives notice of a potential claim that may, in the
judgment of such party, result in a Loss shall use all reasonable efforts to
provide the parties hereto notice thereof in the manner provided herein,
provided that failure or delay or alleged delay in providing
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such notice shall not adversely affect such party's right to indemnification
hereunder unless such failure materially prejudices Indemnitor's ability to
coordinate the defense of any such claim. In the event that any party shall
incur or suffer any Losses in respect of which indemnification may be sought by
such party hereunder, the Indemnitee shall assert a claim for indemnification by
written notice (a "Notice") to the Indemnitor stating the nature and basis of
such claim in reasonable detail, which Notice shall be given within 30 days of
the filing of the proceeding in which Indemnitee is named as a defendant, but
the failure of the Indemnitee to give the Notice within such time period shall
not relieve the Indemnitor of any liability that the Indemnitor may have to the
Indemnitee, unless such failure materially prejudices Indemnitor's ability to
coordinate the defense of such claim.
(c) The Losses in respect of such claims shall be borne and paid by the
Indemnitor, and the Indemnitor shall pay the Indemnitee, in immediately
available funds, as such Losses are incurred, as evidenced by itemized bills for
Losses to such Indemnitee. The parties agree to cooperate fully with one another
in connection with the defense of any such claims.
(d) The remedies provided for in this Agreement shall not be exclusive of
any other rights or remedies available to one party against the other, either at
law or in equity.
(e) The provisions of this Section 6.6 shall survive the Closing.
7. MISCELLANEOUS.
7.1 Survival; Severability. The representations, warranties, covenants and
indemnities made by the parties herein shall survive the Closing notwithstanding
any due diligence investigation made by or on behalf of the party seeking to
rely thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that in such case the parties shall negotiate in good faith
to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change
the economic benefits of this Agreement to the parties.
7.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assignors any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. The Purchaser may assign its rights and obligations
hereunder, in connection with any private sale or transfer of the Shares in
accordance with the terms hereof, as long as, as a condition precedent to such
transfer, (i) the transferee executes an acknowledgment agreeing to be bound by
the applicable provisions of this Agreement (including but not limited to the
Purchaser's obligations under Section 6.1) in which case the term "Purchaser"
shall be deemed to refer to such transferee as though such transferee were an
original signatory hereto and (ii) the Board of Directors of the Company
reasonably deems that the proposed transferee is not a competitor of the
Company. The Company may not assign its rights or obligations under this
Agreement.
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<PAGE>
7.3 No Reliance. Each party acknowledges that (i) it has such knowledge in
business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
the other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice of
its advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by such party.
7.4 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of California without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the State
of California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.6 Headings. The headings used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
7.7 Notices. Any notice, demand or request required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., California time, on a business day or, if such day is not a business
day, on the next succeeding business day, (ii) on the next business day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed to the parties as follows:
If to the Purchaser:
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Entrada Holdings, LLC
c/o Andersen Weinroth Capital Corp.
1330 Avenue of the Americas
36th Floor
New York, New York 10019
Attn: Rohit Phansalkar
Tel: (212) 842-1606
Fax: (212) 842-1540
With a copy to:
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Attn: Jeffry S. Hoffman
Tel: 212-891-9260
Fax: 212-891-9255
If to the Company:
Sync Research, Inc.
40 Parker
Irvine, CA 92618
Attn: Chief Executive Officer
Tel: 949-588-2070
Fax: 949-460-4481
with a copy to:
Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark A. Medearis
Tel: 650-854-4488
Fax: 650-233-8386
7.8 Expenses. The Company and the Purchaser each shall pay all costs
and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement; provided, however, that the Company
shall reimburse the Purchaser for legitimate and itemized legal fees and
expenses incurred by it in connection with its due diligence investigation of
the Company and the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents in an amount
not to exceed Thirty Thousand Dollars ($30,000).
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7.9 Entire Agreement; Amendments. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the Purchaser and no provision hereof may be waived other than
by a written instrument signed by the party against whom enforcement of any such
waiver is sought.
7.10 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction, other than the commission that is payable by the Company to
Andersen Weinroth Capital Corp. pursuant to Section 6.1. The Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which Purchaser or
any of its officers, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless the Purchaser from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above.
ENTRADA HOLDINGS LLC SYNC RESEARCH INC.
By: By:
----------------------------- ----------------------------
Name: Rohit Phansalkar Name: William K. Guerry
Title: Title: Chief Executive Officer
-------------------
ANDERSEN WEINROTH CAPITAL CORP.
By:
-----------------------------
Name: Rohit Phansalkar
Title:
-------------------
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into this 12th day of May, 2000, by and between Sync Research, Inc., a Delaware
corporation (the "Company") and Entrada Holdings LLC (the "Purchaser").
This Agreement is made pursuant to a Stock Purchase Agreement, dated as of
May__, 2000 (the "Purchase Agreement") between the Company and the Purchaser. In
order to induce the Purchaser to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to closing under the
Purchase Agreement. All defined terms used but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
"Act" means Securities Act of 1933, as amended.
"Commission" means Securities and Exchange Commission.
"Common Stock" means Common Stock, $.001 par value per share, of the
Company.
"Exchange Act" means Securities Exchange Act of 1934, as amended.
"Holders" is defined in Section 2(b) hereof.
"NASD" means National Association of Securities Dealers, Inc.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means prospectus included in the Registration Statement (as
defined herein), as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Transfer Restricted
Securities (as defined herein) covered by the Registration Statement and by all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material which may be incorporated by reference into such
Prospectus.
"Registrable Date" means the earlier of: (i) ninety (90) days after the
closing of the Osicom Merger (as defined in the Purchase Agreement) or (ii) the
first anniversary of the date of this Agreement.
<PAGE>
"Transfer Restricted Securities" means each share of the Company's Common
Stock issued or issuable upon the conversion of the shares of Preferred Stock
issued pursuant to the Purchase Agreement) and any other shares of Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
shares of Common Stock, until each such share (i) has been effectively
registered under the Act, or (ii) is distributed to the public pursuant to Rule
144 under the Act or (iii) may be sold or transferred pursuant to Rule 144(k)(or
any similar provisions then in force) under the Act or otherwise.
"Underwriter" means any underwriter, placement agent, selling broker,
dealer manager, qualified independent underwriter or similar securities industry
professional.
"Underwritten Registration or Underwritten Offering" means an offering in
which securities of the Company are sold to an Underwriter or with the
assistance of such Underwriter for reoffering to the public on a firm commitment
or best efforts basis.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3 REGISTRATION
(a) Registration on Demand.
(i) At any time after the Registrable Date the Purchaser on behalf
of the Holders of the Transfer Restricted Securities shall have the right to
require the Company, by written request, to cause the Transfer Restricted
Securities to be registered with the Commission by filing a Registration
Statement to cover the offer and resale by a Holder from time to time and the
methods of distribution elected by such holder of Transfer Restricted Securities
as set forth in such Registration Statement. Within 10 days after receipt of any
such request, the Company will serve a written notice of such registration
request to all Holders, and the Company will include in such registration all
Transfer Restricted Securities of such Holders with respect to which the Company
has received written requests for inclusion therein within 20 business days
after the delivery such notice. As used herein, "register", "registered" and
"registration" each refer to a registration of the Transfer Restricted
Securities effected by filing with the Commission a Registration Statement in
compliance with the Act and the declaration or ordering by the Commission of
effectiveness of such Registration Statement. "Registration Statement" shall
mean Form S-3 or such other form as may be available to the Company and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
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reference therein. In connection with any registration, the Company will pay for
all registration expenses (as defined in Section 5 hereof) and will pay for its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed.
(ii) A registration will not be deemed to have been effected
pursuant to this Section 3(a) unless it has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of shares of Transfer Restricted
Securities pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the Commission or any other
governmental or administrative agency, or if any court prevents or otherwise
limits the sale of the shares of Common Stock pursuant to the registration at
any time within the time period provided under Section 4(b)(ii)(y), such
registration will be deemed not to have been effected. If (i) a registration
requested pursuant to this Section 3(a) is deemed not to have been effected or
(ii) the registration requested pursuant to this Section 3(a) does not remain
effective for a period of at least the period provided under Section
4(b)(ii)(y), then the Company shall continue to be obligated to effect such
registration pursuant to this Section 3(a).
(b) Incidental Registration. If the Company at any time proposes to
register (other than a registration on Form S-8 or S-4 or any successor or
similar forms) any of its equity securities under the Act, whether or not for
sale for its own account, in a manner which would permit registration of
Transfer Restricted Securities for offer or resale under the Act, it will each
such time use its best efforts to effect the registration under the Act of all
Transfer Restricted Securities held by the Holders; provided, however, that (i)
if such registration involves an Underwritten Offering, the Holders
participating in the Underwritten Offering, if requested by an Underwriter, must
sell their Transfer Restricted Securities to the Underwriters selected by the
Company on the same terms and conditions as apply to the Company; and (ii) if,
(x) at any time after giving written notice of its intention to register any
securities pursuant to this Section 3(b) and (y) prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company shall give written notice to all Holders of Transfer Restricted
Securities and, thereupon, shall be relieved of its obligation to register any
Transfer Restricted Securities in connection with such proposed registration.
Notwithstanding the foregoing, the Holders shall have the absolute right in
their sole discretion not to participate in any Underwritten Offering in the
event that the terms or conditions of such offering are not satisfactory.
(i) If a registration pursuant to Section 3(b) involves an
Underwritten Offering and the managing Underwriter advises the Company in
writing that, in its opinion, the number of equity securities (including all
Transfer Restricted Securities) which the Company, the Holders and any other
Persons intend to include in such registration exceeds the largest number of
securities that can be sold without having an adverse effect on such offering,
including the price at which such securities can be sold, the Company will
include in such registration (x) first, all the securities the Company proposes
to sell for its own account, and (y) second, to the extent
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that the number of securities that the Company proposes to sell for its own
account pursuant to Section 3(b) hereof is less than the number of equity
securities that the Company has been advised can be sold in such offering
without having the adverse effect referred to above, all Transfer Restricted
Securities requested to be included in such registration by the Holders pursuant
to Section 3(b) hereof (provided that if the number of Transfer Restricted
Securities requested to be included in such registration by the Holders pursuant
to Section 3(b) hereof, together with the number of Transfer Restricted
Securities to be included in such registration pursuant to clause (x) of this
Section 3(b)(i), exceeds the number that the Company has been advised can be
sold in such offering without having the adverse effect referred to above, the
number of such Transfer Restricted Securities requested to be included in such
registration by the Holders pursuant to Section 3(b)(i) hereof shall be limited
to such extent and shall be allocated pro rata among all such Holders on the
basis of the relative number of Transfer Restricted Securities then held by such
Holder) and all other Persons having similar registration rights with respect to
the Company's Common Stock.
(ii) In the event of an Underwritten Offering, upon the Company's
request, any Holder will execute and deliver a custody agreement and power of
attorney in form and substance reasonably satisfactory to the Holders with
respect to the Transfer Restricted Securities to be registered pursuant to this
Section 3(b) (a "Custody Agreement and Power of Attorney"). The Custody
Agreement and Power of Attorney will provide, among other things, that the
Holders will deliver to, and deposit in custody with, the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares of Transfer Restricted Securities (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as the
Holder's agent and attorney-in-fact with full power and authority to act under
the Custody Agreement and Power of Attorney on the Holder's behalf with respect
to the matters specified thereon. The Holders agree that they will execute such
other agreements as the Company may reasonably request to further evidence the
provision of this Section 3(b).
(c) No Holder of Transfer Restricted Securities may include any of its
Transfer Restricted Securities in any Registration Statement pursuant to this
Agreement unless such Holder furnishes to the Company in writing, within ten
(10) business days after receipt of a request therefor, such information related
to such Holder as the Company may reasonably request for use in connection with
any Registration Statement or Prospectus or preliminary Prospectus included
therein.
(d) Notwithstanding any other provision of Section 3(a), (A) if the
Company determines in the good faith judgment of the Company's counsel that the
filing of a Registration Statement would require the disclosure of material
information which the Company has a good faith business purpose for preserving
as confidential, the Company shall not be required to commence using its best
efforts to effect a registration pursuant to Section 3(a) until the earlier of
(i) the date upon which such material information is disclosed to the public (it
being understood that nothing herein shall require such disclosure) or ceases to
be material or (ii) 60 days after the Company makes such good faith
determination, (B) the Company shall have the right to defer the initial filing
or the effectiveness of a Registration Statement filed pursuant to Section 3(a)
hereof for a reasonable period of time to permit the Company to have prepared,
to the extent not
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<PAGE>
already available, financial statements for the Company's most recently
completed fiscal period ended at the time that the demand for registration is
received by the Company, only to the extent that the Company, in consultation
with its regularly retained counsel and certified public accountants, determines
in good faith that the inclusion of such financial statements is desirable to
avoid the use of stale financial statements, and (C) the Company shall not be
obligated to effect more than two (2) registrations pursuant to Section 3(a).
The Company may impose stop-transfer instructions with respect to the Transfer
Restricted Securities of the Holders for any period of suspension of
effectiveness of the Registration Statement being filed pursuant to Section
3(a).
SECTION 4. REGISTRATION PROCEDURES
In connection with the Registration Statement, the Company will use its
best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution or disposition thereof, and pursuant thereto the Company
will as expeditiously as possible:
(a) prepare, file and use its best efforts to cause to become effective a
registration statement under the Act regarding the Transfer Restricted
Securities to be offered; provided, however, that before filing a Registration
Statement or any Prospectus, or any amendments or supplements thereto (other
than documents incorporated by reference after the initial filing of the
Registration Statement), the Company will furnish to the Holders and the
Underwriter(s), if any, copies of all such documents proposed to be filed, and
the Company will not file any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which (i) the Underwriter(s), if any,
shall reasonably object or (ii) the Holders of a majority of the Transfer
Restricted Securities to be registered in the Registration Statement shall
reasonably object, in each such case within ten (10) business days after the
receipt thereof. A Holder or Underwriter, if any, shall be deemed to have
reasonably objected to such filing if the Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed contains a
material misstatement or omission, which misstatement or omission is
specifically identified to the Company in writing within such ten (10) business
days;
(b) prepare and file with the Commission such amendments and supplements
to such Registration Statement and the Prospectus used in connection therewith
as may be necessary (i) to prevent the Registration Statement from containing
any material misstatement or omission and (ii) to keep such Registration
Statement effective and to comply with the provisions of the Act with respect to
the disposition of all Transfer Restricted Securities until the later of (x) the
disposition of all of the Transfer Restricted Securities covered by such
Registration Statement or (y) the expiration of three (3) years after such
Registration Statement becomes effective;
(c) use its best efforts to register or qualify all Transfer Restricted
Securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Holders or any Underwriter of such
Transfer Restricted Securities shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable the Holders
or any Underwriter to consummate the disposition in such jurisdictions of its
Transfer Restricted Securities covered by such Registration Statement;
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<PAGE>
(d) advise the Underwriter(s), if any, and selling Holders promptly and,
if requested by such Persons, to confirm such advice in writing, (i) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment thereto, when the same has become effective, (ii) of any request by
the Commission for amendments to the Registration Statement or any amendments or
supplements to the Prospectus or for additional information relating thereto,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, and (iv) of the
existence of any fact and the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or blue sky laws, the Company shall
use its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(e) in the case of any Underwritten Offering, furnish to the Holders and
the Underwriters, addressed to them, (A) an opinion of counsel for the Company,
dated the date of the closing under the underwriting agreement relating to any
Underwritten Offering, and (B) a comfort letter signed by the independent public
accountants who have certified the Company's financial statements included in
such Registration Statement, covering substantially the same matters with
respect to such Registration Statement (and the Prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters, respectively, delivered to
underwriters in underwritten public offerings of securities;
(f) promptly following the filing of any document that is to be
incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement), provide copies of such
document to the Holders;
(g) deliver to each Holder and each of the Underwriter(s), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably request;
the Company consents to the use of the Prospectus and any amendment or
supplement thereto by each of the Holders and each of the Underwriter(s), if
any, in connection with the public offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or supplement
thereto;
(h) comply with all applicable rules and regulations of the Commission,
including Section 11(a) of the Securities Act and Rule 158 of the Securities
Act, and make generally available to its security holders, as soon as
practicable, a consolidated earnings statement (which need not be audited) for
the twelve-month period (i) commencing at the end of any fiscal quarter
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in which Transfer Restricted Securities are sold to Underwriters in a firm or
best efforts Underwritten Offering or (ii) if not sold to Underwriters in such
an offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration Statement;
(i) make all filings required to be made with the NASD and in the
performance of any due diligence investigation by any Underwriter (including any
"qualified independent Underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD);
(j) cooperate with the Holders and the Underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the Underwriter(s),
if any, may request at least two business days prior to any sale or Transfer
Restricted Securities made by such Underwriter(s);
(k) if any fact or event contemplated by clause (d)(iv) above shall exist
or have occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading; and
(l) cause all Transfer Restricted Securities covered by the Registration
Statement to be listed on each securities exchange or quotation system on which
similar securities issued by the Company are then listed, if any;
Each Holder as to which any Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
Each Holder agrees by acquisition of such Transfer Restricted Securities
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 4(d)(iv) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities until such Holder's
receipt of the copies of the supplemented or amended Prospectus, or until it is
advised in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus. If so directed by
the Company, each Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of the Registration
Statement set forth in Section 4(b) hereof shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 4(d) hereof to and including the date when each
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selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus or shall have received the
Advice.
SECTION 5. REGISTRATION EXPENSES
Except as otherwise specifically set forth herein, all expenses incident
to the Company's performance of or compliance with this Agreement will be borne
solely by the Company, regardless whether a Registration Statement becomes
effective, including without limitation:
(i) all registration and filing fees and expenses (including filings
made with the NASD);
(ii) fees and expenses of compliance with federal securities or state
blue sky laws;
(iii) expenses of printing (including, without limitation, expenses of
printing or engraving certificates for the Transfer Restricted Securities in a
form eligible for deposit with Depository Trust Company and of printing
Prospectuses), messenger and delivery service and telephone;
(iv) reasonable fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified public accountants
of the Company (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance);
(vi) fees and expenses associated with any NASD filing required to be made
in connection with the Registration Statement, including, if applicable, the
fees and expenses of any "qualified independent Underwriter" (and its counsel)
that is required to be retained in accordance with the rules and regulations of
the NASD; and
(vii) the Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees of any rating
agency (collectively, the "registration expenses").
The expense of any broker's commission or Underwriters' discount or
commission in connection with the sale of Transfer Restricted Securities shall
be borne by the Holder of such Transfer Restricted Securities.
SECTION 6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder (each
such Holder an "Indemnified Holder") and in the case of an Underwritten
Offering, each Underwriter participating in the distribution (each such
Underwriter an "Indemnified Underwriter"), each officer and director of each
Holder and each person that controls each Indemnified Holder or Indemnified
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and agents, employees, officers and directors or any such
controlling person of any Indemnified Holder or Indemnified Underwriter from and
against any and all losses, claims,
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damages, judgments, liabilities and expenses (including the reasonable fees and
expenses of counsel and other expenses in connection with investigating,
defending or settling any such action or claim) as they are incurred arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary Prospectus or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except (i) the Company shall not be liable to any such Indemnified Holder or
Indemnified Underwriter in any such case insofar as such losses, claims,
damages, judgments, liabilities or expenses arise out of, or are based upon, any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to such Indemnified Holder or Indemnified Underwriter
furnished in writing by such Indemnified Holder or Indemnified Underwriter to
the Company expressly for use therein and (ii) the Company shall not be liable
to any such Indemnified Holder or Indemnified Underwriter under the indemnity
agreement in this Section 6(a) with respect to any preliminary Prospectus to the
extent that any such loss, claim, damage, judgment, liability or expense (x)
arises out of or is based upon an untrue statement or omission in such
prospectus and (y) such untrue statement or omission is corrected in an
amendment or supplement to such prospectus, and (z) having previously been
furnished by or on behalf of the Company with sufficient copies of such
prospectus as so amended or supplemented, such Indemnified Holder or Indemnified
Underwriter thereafter fails to deliver such prospectus as so amended or
supplemented prior to or concurrently with the sale of a person asserting the
claim from which such loss, claim, damages, judgments, liabilities or expenses
arise.
(b) If any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any
Indemnified Holder or Indemnified Underwriter with respect to which indemnity
may be sought against the Company pursuant to Section 6(a), such Indemnified
Holder or Indemnified Underwriter shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Holder or
Indemnified Underwriter and payment of all fees and expenses; provided, however,
that the omission so to notify the Company shall not relieve the Company from
any liability that they may have to any Indemnified Holder or Indemnified
Underwriter (except to the extent that the Company is materially prejudiced or
otherwise forfeits substantive rights or defenses by reason of such failure). An
Indemnified Holder or Indemnified Underwriter shall have the right to employ
separate counsel in any such action or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Holder or Indemnified Underwriter unless (i) the
Company agrees in writing to pay such fees and expenses, (ii) the Company has
failed promptly to assume the defense and employ counsel satisfactory to the
Indemnified Holder or Indemnified Underwriter or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both the
Indemnified Holder or Indemnified Underwriter, on the one hand, and the Company
and such Indemnified Holder or Indemnified Underwriter shall have been advised
in writing by its counsel that representation of it and the Company by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation has been
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<PAGE>
proposed) due to actual or potential conflicts of interests between them (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Indemnified Holder or Indemnified Underwriter). The
Company shall not be liable for any settlement of any such action effected
without the written consent of the Company, but if settled with the written
consent of the Company, or if there is a final judgment with respect thereto,
the Company agrees to indemnify and hold harmless each Indemnified Holder or
Indemnified Underwriter from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written consent
of each Indemnified Holder or Indemnified Underwriter affected thereby, effect
any settlement of any pending or threatened proceeding in which such Indemnified
Holder or Indemnified Underwriter has sought indemnity hereunder, unless such
settlement includes an unconditional release of such Indemnified Holder or
Indemnified Underwriter from all liability arising out of such action, claim,
litigation or proceeding. For the purposes of this Section 6(b), the term
"conflict of interest" shall mean that there are one or more legal defenses
available to the Indemnified Holder or the Company, as applicable, which
different or additional defenses make joint representation inappropriate.
(c) Each Indemnified Holder and Indemnified Underwriter agrees to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company Indemnified Parties") to the same extent as the
foregoing indemnity from the Company to such Indemnified Holder or Indemnified
Underwriter, but only with respect to information relating to such Indemnified
Holder or Indemnified Underwriter furnished to the Company in writing by such
Indemnified Holder or Indemnified Underwriter, respectively, expressly for use
in the Registration Statement, Prospectus (or any amendment of supplement
thereto), or any preliminary Prospectus. In case any action shall be brought
against any Company Indemnified Party based on the Registration Statement,
Prospectus (or any amendment of supplement), or any preliminary Prospectus and
in respect of which indemnification may be sought against each Indemnified
Holder and Indemnified Underwriter pursuant to this Section 6(c), such
Indemnified Holder and Indemnified Underwriter shall have the rights and duties
given to the Company by Section 6(a) (except that if the Company shall have
assumed the defense thereof, such Indemnified Holder and Indemnified Underwriter
may, but shall not be required to employ separate counsel therein and
participate in the defense thereof and the fees and expenses of such counsel
shall be at the expense of such Indemnified Holder or Indemnified Underwriter)
and the Company Indemnified Parties shall have the rights and duties given to
the Indemnified Holders or Indemnified Underwriters by Section 6(b). In no event
shall the liability of any Indemnified Holder hereunder be greater in amount
than the dollar amount of the net proceeds (after broker's commissions or
underwriters discounts and commissions) received by such Indemnified Holder upon
the sale of the Transfer Restricted Securities giving rise to such
indemnification obligation.
(d) If the indemnification provided for in this Section 6 is unavailable
to any party entitled to indemnification pursuant to Section 6(a) or 6(c), then
such indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, judgments, liabilities and expenses in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and each Indemnified Holder or Indemnified Underwriter on the other in
connection with the
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statements or omissions which resulted in such losses, claims, damages,
judgments, liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and each
Indemnified Holder and Indemnified Underwriter on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
by each Indemnified Holder and Indemnified Underwriter on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. In no event shall the liability
of any Indemnified Holder hereunder be greater in amount than the dollar amount
of the net proceeds (after broker's commissions or underwriters discounts and
commissions) received by such Indemnified Holder upon the sale of the Transfer
Restricted Securities giving rise to such contribution obligation.
(e) The Company and each Indemnified Holder and Indemnified Underwriter
agree that it would not be just and equitable if contribution pursuant to
Section 6(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person found guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not found guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 6
are in addition to any liability that any indemnifying party may otherwise have
to any indemnified party.
SECTION 7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements. In
addition to the foregoing, all Holders agree that in connection with the first
Underwritten Offering following the date hereof, they shall not, to the extent
requested by the Company and the lead Underwriter in such offering, sell or
otherwise transfer or dispose of any Transfer Restricted Securities (other than
(i) sales, transfers or dispositions to donees who agree to be similarly bound
or (ii) sales, transfers or dispositions of Transfer Restricted Securities
included in the registration of the first Underwritten Offering or in any
registration statement previously declared effective) during a reasonable and
customary period of time, not to exceed 180 days, next following the effective
date of the Registration Statement relating to the first Underwritten Offering;
provided, however, that such agreement by the Holders not to dispose of Transfer
Restricted Securities during such period shall apply only if all executive
officers, directors and each stockholder holding at least 5% of the Common Stock
of the Company then
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outstanding and all other persons with registration rights relating to any of
the Company's securities to be registered in such offering (whether or not
pursuant to this Agreement) enter into similar agreements with the Company and
the Underwriters containing the same terms as set forth in this Section 7. In
order to enforce the foregoing covenant contained in the prior sentence, the
Company may impose stop-transfer instructions with respect to the Transfer
Restricted Securities of the Holders until the end of such agreed upon period.
SECTION 8. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company will not on or after the date
of this Agreement enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders or Transfer Restricted Securities hereunder do
not in any way conflict with and are not inconsistent with the rights granted to
the Holders of the Company's securities under any other agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of the Holders holding
a majority of the Transfer Restricted Securities.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), facsimile transmission, or
air courier guaranteeing overnight delivery;
(i) if to a Holder of Transfer Restricted Securities, at the address
set forth on the records of the Company's registrar, with a copy to:
Entrada Holdings LLC
c/o Andersen Weinroth Capital Corp.
1330 Avenue of the Americas, 36th Floor
New York, New York 10019
Attn: Rohit Phansalkar
Tel: 212-842-1605
Fax: 212-842-1540
With a copy to:
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Attn: Jeffry S. Hoffman
Tel: 212-891-9260
Fax: 212-891-9255
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(ii) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section, with a copy to:
Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark A. Medearis
Tel: 650-854-4488
Fax: 650-233-8386
Any notice, demand or request required or permitted to be given by any
party to any other party pursuant to the terms of this Agreement shall be in
writing and shall be deemed given (i) when delivered personally or by verifiable
facsimile transmission (with an original to follow) on or before 5:00 p.m.,
California time, on a business day or, if such day is not a business day, on the
next succeeding business day, (ii) on the next business day after timely
delivery to a nationally-recognized overnight courier and (iii) on the third
business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid).
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder of Transfer Restricted Securities unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder in accordance with the provisions of the Purchase Agreement.
Notwithstanding any assignment by the Purchaser of this Agreement, the Purchaser
shall remain the entity which pursuant to Section 3(a) has the right to require
the Company by written request to cause the Transfer Restricted Securities to be
registered pursuant to the terms of Section 3(a) unless the Purchaser expressly
agrees otherwise in a written instrument executed by the Purchaser.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of California without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the State
of California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit action or
proceeding, any claim that it is nor personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is
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brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
(h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SYNC RESEARCH, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
ENTRADA HOLDINGS LLC
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
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LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENTRADA HOLDINGS LLC
a New York Limited Liability Company
dated as of May __, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSE AND POWERS..................................................1
1.1 Purpose....................................................1
1.2 Powers.....................................................1
ARTICLE II
MEMBERS AND INTERESTS...............................................1
2.1 Members; Voting Rights.....................................1
2.2 Membership Interests.......................................2
2.3 Meetings...................................................2
ARTICLE III
MANAGEMENT OF THE COMPANY...........................................3
3.1 Managers..........................................3
3.2 Number, Term and Election..................................3
3.3 Officers...................................................3
3.4 Meetings...................................................3
3.5 Management Decisions.......................................4
3.6 Management Compensation....................................4
ARTICLE IV
FINANCIAL INTERESTS OF MEMBERS......................................4
4.1 General....................................................4
4.2 Capital Contributions......................................4
4.3 Capital Accounts...........................................5
4.4 Gains and Losses...........................................5
4.5 Participation Percentages..................................5
4.6 Allocations of Gains and Losses............................5
4.7 Distributions..............................................6
4.8 Special In-Kind Distribution Right.........................7
ARTICLE V
TRANSFERS...........................................................7
5.1 General Restrictions.......................................7
5.2 Prohibited Transfers.......................................7
5.3 Permissible Transfers......................................7
5.4 Involuntary Transfers......................................8
5.5 Effect of Transfers........................................8
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ARTICLE VI
TERM AND TERMINATION OF THE COMPANY.................................9
6.1 Term of the Company........................................9
6.2 Events of Dissolution......................................9
6.3 Conclusion of Affairs......................................9
6.4 Liquidating Distributions..................................9
6.5 Termination...............................................10
ARTICLE VII
GENERAL AND ADMINISTRATIVE PROVISIONS..............................10
7.1 Principal Office..........................................10
7.2 Indemnification...........................................10
7.3 Fiscal Year...............................................10
7.4 Books and Records.........................................10
7.5 Reports...................................................10
7.6 Notices...................................................10
7.7 Headings..................................................11
7.8 Gender; Number............................................11
7.9 Amendments................................................11
7.10 Attorneys' Fees...........................................11
7.11 Entire Agreement..........................................11
7.12 Counterparts..............................................11
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LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENTRADA HOLDINGS LLC
a New York Limited Liability Company
This Limited Liability Company Operating Agreement (this
"Agreement") of Entrada Holdings LLC (the "Company"), dated as of May __, 2000,
is adopted and agreed to by the parties identified in Section 2.1(b) hereof and
each of the other persons who, from time to time may be admitted as a member of
the Company (collectively, the "Members").
ARTICLE I
PURPOSE AND POWERS
1.1 Purpose. The Company has been organized to invest in the preferred
stock, common stock, debt, warrants and/or other ownership interests
(collectively, the "Securities") of Sync Research, Inc., to realize the income
and gains to be derived therefrom for the mutual benefit of the Members and to
engage in any other lawful business activity related or incident thereto.
1.2 Powers. The Company shall have the power and authority to enter
into, make and perform all contracts, agreements and undertakings, and to do any
and all acts and things necessary, appropriate, incidental or convenient to the
accomplishment of its purposes and for the protection and benefit of the
Company.
ARTICLE II
MEMBERS AND INTERESTS
2.1 Members; Voting Rights.
(a) There shall be two classes of Members: the Voting Members
and the Non-voting Members. On any matter requiring a vote, consent or approval
of the Members, the Voting Members shall be the only persons to whom the matter
is required to be submitted, and each shall have one vote. Except as otherwise
provided herein, or as required by applicable law, the vote, consent or approval
of a majority of the Voting Members shall constitute the act of the Company. No
Non-voting Member shall have a voice or vote in any matter, except as
specifically provided herein.
(b) The Members of the Company are Andersen, Weinroth & Co.,
L.P. ("Andersen Weinroth"), which shall be a Voting Member, and each of the
other persons who has delivered a duly executed subscription agreement to the
Company (which agreement has been
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accepted by the Company) (a "Subscription Agreement") together with a duly
executed signature page to this Agreement, who shall be Non-Voting Members.
2.2 Membership Interests. Each Member's ownership interest in the
Company is herein referred to generally as a "Membership Interest." The
respective rights of each Member to share in the capital of the Company, either
by way of distributions or on liquidation, will be determined by reference to
the Capital Account (as defined herein) of such Member; and each Member's
interest in the profits and losses of the Company shall be established as
provided herein. Each Member shall have the rights and powers set forth in this
Agreement. Andersen Weinroth shall have the ability to assign all or any portion
of its Membership Interest to any of its affiliates.
2.3 Meetings.
(a) The Members shall have a regular annual meeting each year
beginning in 2000, on October 15 or such other date established by the Managers,
for the purpose of electing Managers and conducting such other business as may
properly come before the meeting. Special meetings of the Members may be called
by the Managers.
(b) Written notice stating the place, day and hour of each
meeting of Members and the general purpose or purposes for which the meeting is
called shall be given not less than seven (7) nor more than thirty (30) days
before the date of the meeting to each Member, including the Non-voting Members.
(c) A Member may waive any notice required by law or this
Agreement, before or after the date and time of the meeting that is the subject
of such notice. Except as provided in the next sentence, the waiver shall be in
writing, signed by the Member entitled to the notice and delivered to the
Managers for inclusion in the Company's minutes or records. A Member's
attendance at or participation in a meeting waives any required notice to such
Member of the meeting unless the Member, at the beginning of the meeting or
promptly upon such Member's arrival, objects to the transaction of any business
at such meeting on the ground that such meeting is not lawfully called or
convened. A Member may participate in a meeting in person or by proxy.
(d) Any vote, consent or approval of the Members may be
accomplished by written consent in lieu of a meeting signed by Members
constituting the required vote for the action so taken.
(e) Members may participate in a regular or special meeting
by, or conduct the meeting through, the use of any means of communication by
which all Members participating may simultaneously hear each other during the
meeting. Any Member who participates in a meeting in this manner is deemed to be
present in person at the meeting, except where a Member
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participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III
MANAGEMENT OF THE COMPANY
3.1 Managers. Except as otherwise limited by this Agreement or
applicable law, all powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, the Company's Managers (which term shall be synonymous with
the term "managers" as used in the New York Limited Liability Company Law).
3.2 Number, Term and Election. Unless otherwise agreed by a unanimous
vote of the Members, there shall be two (2) Managers of the Company. The initial
Managers shall be Christopher Andersen and Rohit K. Phansalkar . Each Manager
shall hold office until his or her death, resignation or retirement or until his
or her successor is elected. A Manager need not be a Member of the Company.
3.3 Officers. The Managers may appoint such officers who shall have
such power and authority as may be specified in a resolution of the Managers.
Officers shall serve at the pleasure of the Managers.
3.4 Meetings.
(a) An annual meeting of the Managers shall be held
immediately following each annual meeting of Members for the purpose of
appointing officers, if any, and carrying on such other business as may properly
come before the meeting.
(b) Special meetings of the Managers may be called by any
Manager.
(c) Notices of meetings of the Manager shall be given to each
Manager not less than twenty four (24) hours before the meeting. Any such notice
shall set forth the time and place of the meeting.
(d) A Manager may waive any notice required by law or this
Agreement before or after the date and time stated in the notice and such waiver
shall be equivalent to the giving of such notice. The waiver shall be in
writing, signed by the Manager entitled to the notice and filed with the
Company's minutes or records; provided that a Manager's attendance at or
participation in a meeting waives any required notice to him, her or it of the
meeting.
(e) A quorum for the transaction of business at a meeting of
the Managers shall consist of all of the Managers.
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(f) Any or all Managers may participate in a regular or
special meeting by, or conduct the meeting through, the use of any means of
communication by which all Managers participating may simultaneously hear each
other during the meeting. A Manager participating in a meeting in this manner is
deemed to be present in person at the meeting.
(g) Any action of the Company that may be authorized by the
Managers at a meeting may be authorized by written consent in lieu of meeting of
the Managers signed by Managers constituting the required vote for the action so
taken, and any such consent shall be filed with the Company's minutes or
records.
3.5 Management Decisions.
(a) Except to the extent that the Managers agree to delegate
the authority with respect to specified matters, all decisions shall be made by
a unanimous vote of the Managers.
(b) Any disbursement of funds of the Company will require such
signatures as may be determined by the Managers.
3.6 Management Compensation. The Company shall pay the Managers as
compensation for their services to the Company, an amount determined by the
Members; and the Managers shall be entitled to reimbursement for all reasonable
expenses incurred on the Company's behalf.
ARTICLE IV
FINANCIAL INTERESTS OF MEMBERS
4.1 General. The Company has been organized with the intention that it
qualify for taxation as a partnership for U.S. federal income tax purposes. The
Members acknowledge that the provisions of Subchapter K of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Treasury Regulations (the
"Regulations") promulgated thereunder will apply to the Company, and intend that
the allocations of taxable income and loss, distributions to the Members and
maintenance of capital accounts all conform to the requirements of the Code and
the applicable Regulations.
4.2 Capital Contributions.
(a) Each Non-Voting Member shall make capital contributions
(the "Capital Contributions") to the Company provided for in the Subscription
Agreement executed by such Member.
(b) To the extent expenses are incurred by the Company in
excess of cash reserves available for the payment thereof, the Managers may call
upon the Members to fund such expenses. Within ten (10) days after receiving a
written call notice from the Managers, each
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Member shall contribute his pro rata share of the expense deficiency, which may
include up to a $10,000 reserve for projected expenses.
4.3 Capital Accounts.
(a) A separate capital account ("Capital Account") shall be
established and maintained for each Member on the books of the Company which
will reflect the Capital Contributions, distributions and share of profits and
losses of the Company of the Member in accordance with the Regulations.
(b) No Member shall be entitled to receive interest on his
Capital Contributions.
(c) No Member shall be entitled to withdraw all or any part of
his Capital Account.
(d) Loans or advances by any Member to the Company shall not
be considered Capital Contributions and shall not increase the Capital Account
of the lending or advancing Member.
(e) Except as provided in Section 4.2 above, no Member shall
be required under any circumstances to contribute or lend any additional money
or property to the Company.
4.4 Gains and Losses. For purposes hereof, "Gains" means income and
gains, and "Losses" means losses, in each case as determined for federal income
tax purposes. "Cumulative Gain" means the excess of the sum of realized Gains of
the Company over the sum of realized Losses of the Company from the date hereof
to the date of determination; and "Cumulative Loss" means the excess of the sum
of realized Losses of the Company over the sum of realized Gains of the Company
from the date hereof to the date of determination.
4.5 Participation Percentages. Each Member shall have a "Participation
Percentage" which shall be determined by dividing the sum of such Member's
Capital Contributions by the sum of the Capital Contributions of all Members.
4.6 Allocations of Gains and Losses.
(a) Except as provided in the following paragraphs of this
Section 4.6, Gains and Losses shall be allocated to the Members in accordance
with their Participation Percentages.
(b) If the Company does not have Cumulative Loss, 20% of the
Gain otherwise allocable to the Members under paragraph (a) shall be allocated
to Andersen Weinroth.
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(c) If the Company has Cumulative Gain, 20% of the Loss
otherwise allocable to the Members under paragraph (a) shall be allocated to
Andersen Weinroth until such Cumulative Gain is eliminated.
(d) Notwithstanding the foregoing, Losses shall not be
allocated to any Member if, or to the extent that, such allocation would create
or increase a deficit balance in such Member's Capital Account, taking into
account all subsequent adjustments, allocations and distributions which are
reasonably expected, as described in Regulations ss.1.704-1(b)(2)(ii)(d). Any
Loss, the allocation of which is prohibited by this Section 4.6(d), shall be
allocated among the Members in accordance to their relative interests in the
Company (as determined under Regulations ss.1.704-1(b)(3)). If for any reason a
deficit balance should result in the Capital Account of a Member, in each
subsequent period in which the Company has Gains, such Gains shall be allocated
first to such Member until such deficit balance is reduced to zero.
(e) It is the intention of the provisions of this Agreement
with respect to maintenance of Capital Accounts and allocations of Gains and
Losses and distributions to assure that, over the term of the Company, the
Members bear any Cumulative Loss in accordance with their Capital Contributions
and that Andersen Weinroth share in 20% of any Cumulative Gain which would
otherwise be allocable to the Members based on Participation Percentages. The
provisions of this Agreement shall be construed in accordance with this
intention. Andersen Weinroth shall have the ability to waive the allocation of
all or any portion of such 20% of Cumulative Gain with respect to any Member.
4.7 Distributions.
(a) Until such time as amounts equal to the Capital
Contributions of the Members have been repaid to the Members, distributions to
the Members shall be made from time to time in the discretion of the Managers
pro rata among the Members in accordance with Participation Percentages.
Thereafter, the Managers may from time to time make distributions to or among
the Members pro rata in accordance with Capital Accounts, provided, that in no
event shall distributions be made which would result in any Member having, as
the result thereof, a negative balance in his Capital Account.
(b) The Managers may distribute cash or, in their discretion,
Securities; provided that no distribution of Securities shall be made except
with the consent of the Member receiving such distribution; and, in the case of
any such in-kind distribution, the Securities shall be marked-to-market and the
unrealized gains or losses shall be reflected in the Capital Accounts of the
Members in order to assure the proper accounting for the allocations to be made
pursuant to Section 4.6.
(c) Rights with respect to any Securities distributed pursuant
hereto shall remain subject to the provisions of, and agreements of the Members
contained in, the Subscription Agreements.
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4.8 Special In-Kind Distribution Right. Notwithstanding the provisions
of Sections 4.6 and 4.7 of this Agreement, upon notice to the Members that a
distribution is to be made pursuant to this Section 4.8, the Managers may, in
their discretion but subject to applicable securities laws and provided that the
Securities at the time of distribution have a fair value in excess of cost,
distribute to the Members in accordance with their Participation Percentages 79%
of the Securities acquired by the Company. Such distribution shall have the
following consequences: (i) Andersen Weinroth shall receive no allocation of the
unrealized Gain inherent in the Securities so distributed; (ii) such
distribution shall be accounted for as a return of 79% of the Capital
Contributions of the Members; and (iii) in lieu of the allocation provisions of
Sections 4.6(b), 4.6(c) and 4.6(e), Gain and Loss shall thereafter be allocated
as provided in the following sentence. Upon any sale, exchange or other
disposition by the Company of the Securities retained by the Company following
the distribution provided for in this section, if the Company does not have
Cumulative Loss, Gain shall be allocated 95.24% to Andersen Weinroth, and 4.76%
to the Members in accordance with their Participation Percentages; and if the
Company has Cumulative Gain, Loss shall be allocated 95.24% to Andersen Weinroth
and 4.76% to the Members in accordance with their Participation Percentages
until such Cumulative Gain is eliminated.
ARTICLE V
TRANSFERS
5.1 General Restrictions.
(a) For so long as this Agreement shall remain in effect, no
Member may directly or indirectly (including by operation of law) offer for
sale, sell, assign, transfer, pledge, encumber, or otherwise dispose of, or
subject to a security interest, any Interest or any interest therein whether now
owned or hereafter acquired (each of the above-described actions being referred
to herein as a "Transfer") except in strict compliance with the provisions of
this Agreement.
(b) Interests shall be subject to such restrictions on
Transfer as are required to ensure compliance with the Securities Act, and any
other applicable securities laws.
5.2 Prohibited Transfers. Except as otherwise required by law, any
Transfer of Interest in violation of this Agreement (a "Prohibited Transfer")
shall be null and void. The Company shall not record any Prohibited Transfer on
its books and shall not recognize any equitable or other claim to, or any
interest in, any Interest that is the subject of a Prohibited Transfer on the
part of any person other than the Member that attempted to Transfer the Interest
in violation of this Agreement.
5.3 Permissible Transfers. Notwithstanding any provision to the
contrary contained in this Agreement, a Member may transfer his Interest (each,
a "Permitted Transfer" and the
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transferee, a "Permissible Transferee") to (a) his spouse or any lineal ancestor
or descendant of such Member, (b) any person receiving such Interest from such
Member or a Permissible Transferee of such Member, at such Member's or
Permissible Transferee's death pursuant to a will or the laws of intestate
succession, (c) any trust established for the benefit of any of the foregoing,
(d) any corporation or other entity directly or indirectly wholly owned by a
Member or which directly or indirectly wholly owns a Member or to any one or
more other corporations or other entities that are directly or indirectly wholly
owned by any such corporation or other entity, or (e) another Member.
5.4 Involuntary Transfers. If, at any time, there shall be an
Involuntary Transfer (as defined herein) of any Interest held by a Member, the
transferee of such Interests shall take and hold such Interests subject to this
Agreement. For purposes of this Agreement, the term "Involuntary Transfer" shall
mean any Transfer by or in which any Member shall be deprived or divested of any
right, title or interest in or to any Interests, including, without limitation,
any levy or execution, transfer in connection with bankruptcy, insolvency or
similar proceedings or any transfer to a public officer or agency pursuant to
any abandoned property or escheat law; provided, however, that notwithstanding
the foregoing the term "Involuntary Transfer" shall not include any Permitted
Transfer.
5.5 Effect of Transfers.
(a) Except as provided in paragraph (b) below, (i) any
Transfer of a Membership Interest by a person (the "Transferor") shall be
effective only to give the transferee (the "Transferee") the right to the share
of allocations and distributions to which the Transferor would otherwise be
entitled, and no Transferee of any Interest shall be admitted as a Member, and
(ii) the Transferee shall have no right to vote on or consent to any matter
submitted to the Members or otherwise participate in the management of the
business and affairs of the Company.
(b) A Transferee of any Interest shall, upon such Transfer, be
admitted as a Member with all the rights and powers of his Transferor if all of
the Managers consent in writing to the admission of the Transferee as a Member.
(c) The Managers may, in their discretion, charge a reasonable
fee to cover the expenses incurred by the Company in connection with or as a
consequence of the Transfer of all or part of a Membership Interest.
(d) The Company, the Managers, each Member and any other
person or persons having business with the Company, need deal only with holders
of the Interest who are admitted as Members of the Company, and shall not be
required to deal with any Transferee who has not been admitted as a Member.
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ARTICLE VI
TERM AND TERMINATION OF THE COMPANY
6.1 Term of the Company. The term of the Company commenced upon the
filing of the articles of organization with the Secretary of State of New York
on April 26, 2000. The Company shall have perpetual existence from the date of
formation unless the Company is dissolved and terminated as provided in this
Agreement.
6.2 Events of Dissolution. The Company shall be dissolved upon the
occurrence of any of the following events:
(a) The unanimous determination of the Managers to dissolve
the Company;
(b) The vote of the Members to dissolve the Company;
(c) The sale of all or substantially all of the business and
assets of the Company; and
(d) As otherwise required by the New York Limited Liability
Company Law.
6.3 Conclusion of Affairs. In the event of dissolution of the Company
for any reason, the Managers, or if no Managers remain, the Members, by majority
vote, shall appoint a person (the "Liquidator"), who may but need not be a
Manager and/or Member, and the Liquidator shall proceed, as soon as reasonably
practicable, to wind up the affairs of the Company. The Members (and their
successors in interest) shall continue to share in allocations of income and
loss and distributions during the period of winding up in the same manner as
before the dissolution. The Liquidator shall have reasonable discretion to
determine the time, manner and terms of any sale or sales of Company property
pursuant to such winding up, having due regard to the activity and the condition
of the Company and relevant market and financial and economic conditions, and
consistent with his obligations to the Members.
6.4 Liquidating Distributions. After paying or providing for the
payment of all debts and liabilities of the Company and all expenses of winding
up, and subject to the right of the Liquidator to set up such reserves as it may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company, the proceeds of the liquidation, and any other
remaining assets of the Company, shall be distributed to or for the benefit of
the Members (and their successors in interest) in accordance with their
respective Capital Accounts. No Member shall have any right to demand or receive
property other than cash upon dissolution and winding up of the Company;
provided, however, the Liquidator shall have the right and power to distribute
assets in kind (whether to some or all of the persons entitled to such
distributions), valued at the then estimated fair market value of such assets,
as a liquidating distribution to the Members (and their successors in interest).
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6.5 Termination. Within a reasonable time following the completion of
the winding up of the Company, the Liquidator shall supply to each Member a
statement which shall set forth the assets and the liabilities of the Company as
of the date of complete winding up and each Member's portion of the
distributions pursuant to this Agreement. Upon completion of the winding up of
the Company and the distribution of all Company assets, the Company shall
terminate, and the Liquidator shall execute and file a certificate of
cancellation of the Company with the Secretary of State of New York, and shall
take all other action necessary to effectuate the dissolution and termination of
the Company.
ARTICLE VII
GENERAL AND ADMINISTRATIVE PROVISIONS
7.1 Principal Office. The principal office of the Company shall be at
such location or locations as may be determined by the Managers from time to
time.
7.2 Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless, and may advance expenses to, any
Member or Manager (collectively, the "Indemnitees"), from and against any and
all claims and demands whatsoever arising out of the business and affairs of the
Company; provided, however, that no indemnification may be made to or on behalf
of any Indemnitee if a judgment or other final adjudication adverse to such
Indemnitee establishes (a) that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (b) that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled. The provision of
this section shall continue to afford protection to each Indemnitee regardless
of whether such Indemnitee remains a Member, Manager, employee or agent of the
Company.
7.3 Fiscal Year. The fiscal year of the Company shall end on the thirty
first of December.
7.4 Books and Records. At all times during the term of the Company, the
Managers shall keep, or cause to be kept at the Company's principal office, the
books and records of the Company.
7.5 Reports. As soon as practicable following the end of each fiscal
year, the Company shall provide each Member a financial report of the results of
operations, including audited or unaudited financial statements, as determined
by the Managers.
7.6 Notices. Any notice to be given under this Agreement may be given
either personally or by mail, telephone, telegraph, teletype, telecopy or other
form of wire or wireless communication, or by overnight courier. If mailed,
notice shall be deemed to be effective three (3) days after deposited in
registered or certified mail with postage thereon prepaid addressed if to a
Member at its address as it appears on the signature page to this Agreement (or
at such other address for any party as such party shall notify the other
parties), and if to the Company at its
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principal office. If given in any other manner, such notice shall be deemed to
be effective (i) when given personally, (ii) when given by telephone, teletype,
telecopy or other form of wire or wireless communication (if followed by a copy
delivered by registered or certified mail) or (iii) one (1) day after given to
an overnight courier to be delivered.
7.7 Headings. The headings of the sections hereof are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
7.8 Gender; Number. Where the context so requires, the masculine gender
shall be construed to include the feminine, a corporation, a trust or other
entity, and the singular shall be construed to include the plural and the plural
the singular.
7.9 Amendments. This Agreement may be modified or amended with the
consent of Members holding two-thirds of the Membership Interests; provided,
that, except as otherwise specifically provided herein, no amendment may modify
the economic interest of a Member without such Member's consent. Notwithstanding
the foregoing, the Managers may amend the Agreement as necessary to effect the
issuance of new Interests, including interests which have priority over existing
Interests, and the admission of new Members.
7.10 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
7.11 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto.
7.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned has affixed its signature
signifying its adoption of this Limited Liability Company Operating Agreement.
MEMBER:
-----------------------------------
(Print Name)
By:
--------------------------------
Name:
Title:
Address:
---------------------------
---------------------------
Telephone:
-------------------------
Telecopy:
--------------------------
Tax I.D. Number:
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