<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ,
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SYNC RESEARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3577 33-0676350
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
12 MORGAN
IRVINE, CALIFORNIA 92618
(949) 588-2070
(Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
WILLIAM K. GUERRY
SYNC RESEARCH, INC.
12 MORGAN
IRVINE, CALIFORNIA 92618
(949) 588-2070
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
BLASE P. DILLINGHAM, ESQ.
GLENN M. HAMMOND, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE, LLP
777 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA 90017
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger of a subsidiary of the
Registrant with and into Osicom Technologies, Inc., a Delaware corporation, as
described in the Agreement and Plan of Merger dated as of April 10, 2000.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
share............................... 4,300,000(1) N/A $333.33 $0.09
</TABLE>
(1) The maximum number of shares of Sync common stock issuable in connection
with the merger, based on the sum of (a) 3,531,007 shares of Sync common
stock outstanding on May 12, 2000, and (b) 700,000 shares of Sync Series A
convertible preferred stock outstanding on May 12, 2000.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(2) under the
Securities Act, the proposed maximum aggregate offering price of the
registrant's common stock was calculated in accordance with Rule 457(f)(2)
under the Securities Act as one-third of the par value of the Osicom
securities being received in the transaction.
(3) This fee has been calculated pursuant to Section 6(b) of the Securities Act
as .0264 of one percent of $333.33.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[SYNC LOGO]
SYNC RESEARCH, INC.
Dear Stockholder:
As most of you are aware, Sync has entered into an agreement with Osicom
Technologies, Inc., (doing business as Entrada Networks and referred to herein
as "Entrada" or "Osicom"), a Delaware corporation and wholly-owned subsidiary of
Osicom Technologies, Inc, a New Jersey corporation that is publicly held
(Nasdaq: FIBR) (referred to herein as "Parent"). As a result of this pending
transaction, we have delayed our annual meeting of stockholders in order to
incorporate this very important matter. Our meeting is scheduled to be held at
local time, on Monday, August 14, 2000, at .
We cannot complete the merger unless the holders of a majority of the shares
of Sync common stock voting at the meeting vote in person or by proxy to
authorize the issuance of shares of Sync common stock under the merger
agreement. Only stockholders who hold shares of Sync common stock at the close
of business on Friday, June 30, 2000 will be entitled to vote at the annual
meeting. The Sync board of directors has unanimously approved the merger
agreement and recommends that you vote FOR the proposal to issue shares of Sync
common stock under the merger agreement so that the merger transaction may be
completed.
We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition, the merger represents
a significant business opportunity to enter into the emerging and rapidly
growing market for data storage systems (a.k.a. storage area networks or SANs).
Entrada has already begun the implementation of a strategy for the SAN market
and has SAN products currently in development. We believe that the complementary
technologies, combined resources, expected synergies, experience and market
position of Sync and Entrada, with established relationships with key original
equipment manufacturers and large enterprise customers, create a unique platform
for growth and significant long-term stockholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully developing
communications technology companies. For example, NETsilicon, Inc., a company
acquired for $5 million by Parent in 1996, has a market capitalization as of May
17, 2000 of more than $265 million after Parent helped it develop a new business
model. Another subsidiary of Parent, Sorrento Networks, has been rebuilt by
Parent from a maker of relatively slow-growth video networking products into a
pioneer in the field of all-optical networking products for metropolitan or
intra-city networks, a market with substantial opportunities for growth.
The proposed transaction involves the issuance of Sync common stock to
Parent for all of the outstanding common stock of Entrada. After the merger,
Sync will own all of the outstanding common stock of Entrada, and Parent will
own 50% of the outstanding Sync common stock. Details of the proposed merger,
important information concerning Sync and Entrada, and information concerning
other important proposals to be considered at the special meeting appear in the
accompanying proxy statement/prospectus. We urge you to give this material your
careful and dedicated consideration.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" COMMENCING ON PAGE 15 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
<PAGE>
All shareholders are cordially invited to attend our annual meeting in
person. However, whether or not you plan to attend the meeting, please complete,
sign and date the enclosed proxy and return it promptly to us in the enclosed
postage-prepaid envelope. It is very important that your shares be represented
and voted at the annual meeting. Your prompt cooperation is greatly appreciated.
Sincerely,
Gregorio Reyes
CHAIRMAN OF THE BOARD
2
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Sync from documents that are not included in or
delivered with this proxy statement/prospectus. This information is available to
you without charge upon your written or oral request. You can obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from Sync at the following address and telephone
number:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
If you would like to request documents, please do so by July 15, 2000 in
order to receive them before the Sync annual meeting. See "Where You Can Find
More Information" (page 99).
3
<PAGE>
SYNC RESEARCH, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 2000
------------------------
To the Stockholders of Sync Research, Inc.:
We will hold an annual meeting of the stockholders of Sync Research, Inc. on
Monday, August 14, 2000, at local time at , to
consider and vote upon the following proposals:
1. To authorize the issuance of shares of Sync common stock under a
merger agreement among Sync, a wholly-owned subsidiary of Sync, Osicom
Technologies, Inc., doing business as Entrada Networks ("Entrada" or
"Osicom"), and the parent of Entrada. After the merger, Sync will own all of
the outstanding common stock of Entrada, and the parent of Entrada will own
50% of the outstanding Sync common stock;
2. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
3. To amend the 1995 Employee Stock Purchase Plan to increase the
number of shares reserved for issuance thereunder by an additional 100,000
shares;
4. To ratify the appointment of Ernst & Young LLP as Sync's independent
auditors for the fiscal year ending December 31, 2000; and
5. To transact such other business as may properly come before the
meeting or any postponements or adjournments of it by the Sync board of
directors.
Only holders of record of shares of Sync common stock at the close of
business on Friday, June 30, 2000, the record date for the annual meeting, are
entitled to notice of, and to vote at, the annual meeting and any adjournments
or postponements of it. We cannot complete the merger unless the holders of a
majority of the shares of Sync common stock voting at the meeting in person or
by proxy vote to authorize the issuance of shares of Sync common stock under the
merger agreement.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX A.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope.
By Order of the Board of Directors,
--------------------------------------
William K. Guerry
SECRETARY
Irvine, California
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Companies............................................... 4
General..................................................... 4
The Sync Annual Meeting..................................... 6
The Merger And The Merger Agreement......................... 6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA AND SUMMARY
UNAUDITED PRO FORMA INFORMATION........................... 9
COMPARATIVE PER SHARE DATA.................................. 13
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY........... 14
RISK FACTORS................................................ 15
Risks Related to the Merger................................. 15
Risks Related to the Combined Companies' Business........... 18
Risks Related to the Combined Companies' Industry........... 22
THE SYNC ANNUAL MEETING..................................... 26
Date, Time and Place........................................ 26
Purpose of Annual Meeting................................... 26
Record Date; Voting Power; Quorum........................... 26
Votes Required.............................................. 27
Voting By Sync Directors And Executive Officers............. 27
Voting of Proxies........................................... 27
Revocability of Proxies..................................... 27
Solicitation of Proxies..................................... 28
THE MERGER.................................................. 29
Ownership of Sync and Entrada Following the Merger; Stock
Options................................................... 29
Background to the Merger.................................... 29
Reasons for the Merger and Board of Directors
Recommendation............................................ 31
Fairness Opinion of Financial Advisor....................... 32
Private Placement Financing; Bring-Down of Alliant
Opinion................................................... 37
Interests of Sync Directors and Management in the Merger.... 37
Accounting Treatment........................................ 38
Appraisal Rights............................................ 38
Form of the Merger; Name Change............................. 39
Merger Consideration........................................ 39
Conversion of Shares........................................ 39
Effective Time of the Merger................................ 39
Stock Exchange Listing of Sync Common Stock................. 39
Material United States Federal Income Tax Consequences of
the Merger................................................ 39
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Regulatory Matters.......................................... 40
Resale of Sync Common Stock................................. 40
THE MERGER AGREEMENT........................................ 41
Conditions to the Completion of the Merger.................. 41
No Solicitation............................................. 42
Termination................................................. 42
Conduct of Entrada's Business Prior to the Merger........... 43
Conduct of Sync's Business Prior to the Merger.............. 45
Amendment; Waiver........................................... 47
Fees and Expenses........................................... 47
Representations and Warranties.............................. 47
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY........... 49
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 50
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET.... 51
SYNC RESEARCH, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET................................ 52
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS................................................ 55
SYNC RESEARCH, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS...................... 56
BUSINESS OF ENTRADA......................................... 57
Description of Business..................................... 57
Entrada's Strategic Plan.................................... 57
Markets for Entrada's Products.............................. 57
Entrada's Product Development Approach...................... 58
Products.................................................... 59
Sales and Marketing......................................... 60
Customers and Markets....................................... 60
Customer Service and Support................................ 61
Research and Development.................................... 61
Manufacturing and Quality................................... 62
Availability of Raw Materials............................... 62
Patents, Trademarks and Licenses............................ 62
Seasonality................................................. 63
Working Capital Practices................................... 63
Backlog..................................................... 63
Competition................................................. 63
Environmental Compliance.................................... 64
Employees................................................... 64
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
ENTRADA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 65
Results of Operations: Comparison of the Years Ended
January 31, 2000 and January 31, 1999..................... 65
Results of Operations: Comparison of the Years Ended
January 31, 1999 and January 31, 1998..................... 66
Liquidity and Capital Resources............................. 66
Year 2000 Compliance........................................ 67
Effects of Inflation and Currency Exchange Rate............. 67
Impact of Recent Accounting Pronouncements.................. 68
EXPERTS..................................................... 68
LEGAL MATTERS............................................... 68
DEADLINE FOR RECEIPT OF FUTURE STOCKHOLDER PROPOSALS........ 68
OTHER ANNUAL MEETING PROPOSALS.............................. 69
Proposal No. 2: Election Of Directors....................... 69
Potential New Directors..................................... 71
Proposal No. 3: Approval of Amendment to the 1995 Employee
Stock Purchase Plan....................................... 72
Proposal No. 4: Approval of Independent Auditors............ 76
Possible Stockholder Proposal............................... 77
OTHER MATTERS............................................... 77
INFORMATION CONCERNING SYNC................................. 77
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/
PROSPECTUS................................................ 78
TRADEMARKS.................................................. 78
WHERE YOU CAN FIND MORE INFORMATION......................... 79
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION............ 80
INDEX TO ENTRADA FINANCIAL STATEMENTS....................... F-1
Index To Entrada Financial Statements..................... F-1
Report of Independent Certified Public Accountants........ F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Stockholder's Equity (Deficit).............. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
ANNEX A AGREEMENT AND PLAN OF MERGER
ANNEX B OPINION OF FINANCIAL ADVISOR TO SYNC
ANNEX C BRING-DOWN OPINION OF FINANCIAL ADVISOR TO SYNC
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY IS SYNC PROPOSING TO ENTER INTO THIS MERGER?
A. We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition, the merger
represents a significant business opportunity to enter into the emerging and
rapidly growing market for data storage systems (a.k.a. Storage Area
Networks or SANs). Entrada has already begun the implementation of a
strategy for the SAN market and has SAN products currently in development.
We believe that the complementary technologies, combined resources, expected
synergies, experience and market position of Sync and Entrada, with
established relationships with key original equipment manufacturers and
large enterprise customers, create a unique platform for growth and
significant long-term stockholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully
developing communications technology companies. For example, Parent's
networking system-on-silicon subsidiary, NETsilicon, Inc., was acquired by
Parent in 1996 for $5 million. As of May 17, 2000, after Parent helped it
develop a new business model, and after a September 1999 spinoff via an
initial public offering, NETsilicon has a market capitalization of more than
$265 million. Parent's other major subsidiary is Sorrento Networks, which
Parent has rebuilt from a maker of relatively slow-growth video networking
products into a pioneer in the field of all-optical networking products for
metropolitan or intra-city networks, a market with substantial opportunities
for growth.
Q. WHAT WILL THE PARENT OF ENTRADA RECEIVE IN THE MERGER?
A. In the merger, the parent of Entrada (which we will refer to as "Parent"
throughout this proxy statement/prospectus), which is the sole holder of
Entrada common stock, will receive a number of shares of Sync common stock
equal to 50% of the outstanding Sync common stock after the merger.
Q. HOW WILL THE MERGER BE ACCOMPLISHED, AND WHAT WILL BE ITS IMPACT ON THE
COMPANIES?
A. The respective boards of directors of Sync, Entrada and Parent have each
approved the merger. If the Sync stockholders authorize the issuance of Sync
common stock under the merger agreement at the annual meeting, then Entrada
will merge with a wholly-owned subsidiary of Sync, with Entrada remaining as
the surviving entity. Upon completion of the merger, Sync will own 100% of
Entrada, and the Parent will own 50% of Sync. In addition, Sync will change
its name to Entrada Networks, Inc. upon completion of the merger. Throughout
this proxy statement/prospectus, the term "the combined companies" refers to
Sync and Entrada following the merger.
Q. WILL SYNC STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A. No. Sync stockholders will continue to hold the Sync shares they currently
own.
Q. WHO WILL MANAGE SYNC FOLLOWING THE MERGER?
A. The Chief Executive Officer of Sync following the merger will be Dr. Kanwar
J.S. Chadha, who is currently the President of Entrada. William K. Guerry,
currently the Chief Executive Officer, President and Chief Financial Officer
of Sync, will be the Chief Operating Officer, Chief Financial Officer and
Vice President-Finance and Administration of Sync following the merger.
Anand Mehta, currently the Chief Technology Officer and Vice
President-Engineering of Entrada, will be the Chief Technology Officer and
Vice President-Engineering of Sync following the merger. Arthur Trakas,
currently the Executive Vice President-Sales and Marketing of Parent and
Entrada, will be the Executive Vice President-Sales and Marketing of Sync
following the merger. Assuming that at the annual meeting the Sync
stockholders authorize the issuance of Sync common stock under the merger
agreement and elect the slate of directors that the Sync board of directors
has nominated,
1
<PAGE>
Mr. Guerry and William J. Schroeder will step down as directors of Sync and
the board of directors of Sync following the merger will consist of Gregorio
Reyes, currently the Chairman of Sync's board of directors, Dr. Chadha,
Charles A. Haggerty, currently a director of Sync, Leonard N. Hecht,
currently a director of Parent, and Rohit Phansalkar, currently a director
of Parent and a partner of Andersen Weinroth & Co. LP, affiliates of which
own all of the outstanding Series A Preferred Stock of Sync and are
stockholders of Parent. For more information, see "Other Annual Meeting
Proposals--Proposal No. 2: Election Of Directors."
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We are working to complete the merger as quickly as possible. We expect to
complete the merger by August 31, 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO SYNC STOCKHOLDERS?
A. The merger will not have any tax consequences for Sync stockholders. For more
information, see "Material Federal Income Tax Consequences of the Merger."
Q: WHEN AND WHERE IS THE SYNC STOCKHOLDER MEETING?
A. The annual meeting will take place at local time, on Monday,
August 14, 2000, at . You may attend the annual
meeting and vote your shares in person, rather than signing and mailing your
proxy.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement/ prospectus, please complete and sign your proxy and return
it in the enclosed return envelope as soon as possible, so that your shares
may be represented at the annual meeting. If you sign and send in your proxy
and do not indicate how you want to vote, we will count your proxy as a vote
in favor of adoption of the merger agreement. In order to assure that your
vote is obtained, please vote your proxy as instructed on your proxy card
even if you currently plan to attend the annual meeting in person.
Q. DOES SYNC'S BOARD RECOMMEND VOTING IN FAVOR OF THE MERGER?
A. Yes. After careful consideration, the board of directors of Sync unanimously
recommends voting in favor of authorizing the issuance of shares of Sync
common stock under the merger agreement.
Q. ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
MERGER?
A. Yes. There are risks and uncertainties because Sync and Entrada are in a
highly competitive and rapidly evolving industry. In evaluating the merger,
you should carefully consider these and other factors discussed in the
section entitled "Risk Factors" on page 15 of this proxy statement/
prospectus.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at the
annual meeting. You can do this three different ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy card. Sync stockholders choosing either
of these options should send their revocation letter or new proxy card to
the Sync corporate secretary at the address provided below. The third way
you may change your vote is to attend the annual meeting and vote in person.
Simply attending the meeting, however, will not revoke your proxy. If you
have instructed a broker to vote your shares, you must follow the directions
provided by your broker to change those instructions.
2
<PAGE>
Q: IF MY SYNC SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A. Your broker will vote your Sync shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, unless you appear in person at
the annual meeting with a legal, valid proxy from the record holder.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should
contact:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD CAREFULLY READ THIS
ENTIRE PROXY STATEMENT/ PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 104. WE HAVE
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE COMPANIES
SYNC RESEARCH, INC. Sync develops, manufactures, markets, supports and
provides wide-area network access and management products and services designed
to economically and reliably support business critical applications across
carrier provided packetized transmission services, such as frame relay. Sync
follows a sales strategy relying primarily on a direct sales force and
leveraging resellers, distributors and carriers as delivery channels for its
products.
As used in this proxy statement/prospectus, the term "Sync" refers to Sync
Research, Inc. and its subsidiaries, unless the context otherwise requires. Sync
was incorporated in California in September 1981 and was reincorporated in
Delaware in September 1995. Sync's principal executive offices are located at 12
Morgan, Irvine, California 92618 and its telephone number is (949) 588-2070.
OSICOM TECHNOLOGIES, INC., doing business as Entrada Networks. Entrada,
based in Annapolis Junction, Maryland, designs, manufactures and markets
products that provide access to and enhance the performance of data and
telecommunications networks, and is currently developing products that provide
connectivity for storage networks. Many of Entrada's products are incorporated
into the remote access and other server products of original equipment
manufacturers ("OEMs"). In addition, certain of Entrada's products are deployed
by telecommunications network operators, applications service providers,
internet service providers, and the operators of corporate local area and wide
area networks for the purpose of providing access to and transport within their
networks.
As used in this proxy statement/prospectus, the terms "Osicom" and "Entrada"
both refer to Osicom Technologies, Inc., a Delaware corporation, unless the
context otherwise requires. Entrada was incorporated in Delaware in 1972.
Entrada's principal executive offices are located at 9020 Junction Drive,
Annapolis Junction, Maryland 20701 and its telephone number is (301) 317-7710.
As used in this proxy statement/prospectus, the term "the combined
companies" refers to both Sync and Entrada following the completion of the
merger.
GENERAL
SYNC'S BOARD RECOMMENDATION TO STOCKHOLDERS (PAGE 31)
The Sync board of directors believes that the merger is fair to you and in
your best interest and unanimously recommends that you vote "for" the proposal
to authorize the issuance of Sync common stock under the merger agreement for
completion of the merger. To review the background and reasons for the merger in
greater detail, as well as certain risks related to the merger, see pages 15 and
36.
OWNERSHIP OF SYNC AND ENTRADA FOLLOWING THE MERGER; STOCK OPTIONS (PAGE 29)
Immediately following the merger, (i) Sync will own 100% of Entrada, and
(ii) Parent will own 50% of Sync. In addition, certain employees of Entrada will
be granted options to purchase shares of Sync's common stock which, in the
aggregate, shall equal the number of shares of Sync common stock issuable upon
the exercise of all of the outstanding Sync options at the time of the merger.
4
<PAGE>
REASONS FOR THE MERGER (PAGE 31)
We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition the merger represents a
significant business opportunity to enter into the emerging and rapidly growing
market for data storage systems (a.k.a. Storage Area Networks or SANs). Entrada
has already begun the implementation of a strategy for the SAN market and has
SAN products currently in development. We believe that the complementary
technologies, combined resources, expected synergies, experience and market
position of Sync and Entrada, with established relationships with key original
equipment manufacturers and large enterprise customers, create a unique platform
for growth and significant long-term shareholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully developing
communications technology companies. For example, Parent's networking
system-on-silicon subsidiary, NETsilicon, Inc., was acquired by Parent in 1996
for $5 million. As of May 17, 2000, after Parent helped it develop a new
business model, and after a September 1999 spinoff via an initial public
offering, NETsilicon has a market capitalization of more than $265 million.
Parent's other major subsidiary is Sorrento Networks, which Parent has rebuilt
from a maker of relatively slow-growth video networking products into a pioneer
in the field of all-optical networking products for metropolitan or intra-city
networks, a market with substantial opportunities for growth.
The merger will strengthen the capabilities of Sync and Entrada to compete
in the very competitive networking market. The combined companies will be able
to (i) provide customers with a more comprehensive set of networking solutions
by expanding each company's product offerings, technologies and customer bases
in the remote access and wide area network areas; (ii) increase each company's
ability to successfully develop products for new high growth technologies and
markets, including storage networking; (iii) increase the overall size and scope
of each company's operations; and (iv) expand each company's distribution
channels. The Sync board of directors believes that the combination with Entrada
will assist Sync in strengthening its ability to effectively compete in the
market and improve the overall financial results of Sync. The Sync board of
directors also believes that the technologies, product lines and fundamental
business and operating strategies of Sync and Entrada are complementary and
consistent, and that Sync and Entrada together can provide a greater range of
products and superior market coverage compared to each as a stand-alone
business. In addition, the Sync board of directors believes that a combination
of the two companies provides greater potential for enhanced stockholder value
than does the continuation of Sync's operations in its present form or any of
the alternative business strategies that it considered.
APPRAISAL RIGHTS (PAGE 38)
Holders of Sync common stock are not entitled to dissenters' appraisal
rights under Delaware law in connection with the merger.
INTERESTS OF SYNC DIRECTORS AND MANAGEMENT IN THE MERGER (PAGE 37)
In considering the Sync board's recommendation that you vote in favor of the
merger, you should be aware that some officers and directors of Sync have
interests in the merger that are different from, or in addition to, the
interests of Sync stockholders. Please refer to page for more information.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 39)
For United States federal income tax purposes, regardless of whether the
merger will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, no gain or loss will be recognized by Sync or the
Sync stockholders as a result of the merger.
5
<PAGE>
FAIRNESS OPINION OF FINANCIAL ADVISOR (PAGE 32)
In deciding to approve the issuance of shares of Sync common stock under the
merger, the Sync board of directors considered the opinion, as of the date of
the merger agreement, of its financial advisor, Alliant Partners, as to the
fairness of the exchange ratio in the merger to Sync stockholders from a
financial point of view. This opinion is attached as Annex B to this proxy
statement/prospectus and sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion. WE
ENCOURAGE STOCKHOLDERS TO READ THIS OPINION CAREFULLY. THIS OPINION IS DIRECTED
TO THE BOARD OF DIRECTORS AND IS NOT A RECOMMENDATION TO STOCKHOLDERS WITH
RESPECT TO ANY MATTER RELATING TO THE MERGER. THE OPINION SPEAKS ONLY AS OF ITS
DATE OF ISSUANCE AND THE FINANCIAL ADVISOR OF SYNC IS UNDER NO OBLIGATION TO
CONFIRM ITS OPINION AS OF A LATER DATE. FURTHER, THE BOARD OF DIRECTORS MAY NOT
NECESSARILY REQUEST THAT ITS FINANCIAL ADVISOR CONFIRM ITS OPINION AS OF A LATER
DATE.
THE SYNC ANNUAL MEETING (PAGE 26)
The Sync annual meeting will be held at , at [a.m./p.m.],
local time, on Monday, August 14, 2000. At the Sync annual meeting, Sync
stockholders will be asked to adopt the merger agreement, as well as to vote
upon other proposals of the board of directors as described in this proxy
statement/prospectus. This proxy statement/prospectus is being furnished to you
in connection with the solicitation by the Sync board of directors of proxies
for use in voting at the annual meeting.
RECORD DATE; VOTING POWER
You are entitled to vote at the annual meeting if you owned shares of Sync
as of the close of business on Friday, June 30, 2000, which is the record date.
On the record date, there were shares of Sync common stock
entitled to vote at the Sync annual meeting. Sync stockholders will have one
vote for each share of Sync common stock they owned on the record date.
VOTES REQUIRED
In order to consummate the merger, a majority of the shares of Sync common
stock present in person or by proxy at the meeting must vote in favor of
adopting the merger agreement. A plurality of votes cast is required to elect
directors. Approval of the amendment to the 1995 Employee Stock Purchase Plan,
as well as approval of Ernst & Young LLP as Sync's independent auditors, require
the affirmative vote of at least a majority of the shares of Sync common stock
present in person or by proxy at the meeting.
VOTING BY DIRECTORS AND EXECUTIVE OFFICERS
On the record date, directors and executive officers of Sync and their
affiliates owned and were entitled to vote shares of Sync common
stock, or approximately % of the shares of Sync common stock outstanding on
the record date. The directors and executive officers of Sync have indicated
that they intend to vote the Sync common stock owned by them "for" adoption of
the merger agreement.
THE MERGER AND THE MERGER AGREEMENT
THE MERGER AGREEMENT IS ATTACHED TO THIS PROXY STATEMENT/ PROSPECTUS AS
ANNEX A. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT CAREFULLY. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE MERGER.
6
<PAGE>
MERGER CONSIDERATION (PAGE 39)
At the closing of the merger, Sync will issue shares of Sync common stock to
Parent in exchange for all of the outstanding common stock of Entrada. The
exchange ratio was determined through arm's-length negotiations between Sync and
Parent. After the merger, Sync will own all of the outstanding common stock of
Entrada, and Parent will own 50% of the outstanding Sync common stock.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE 41)
The respective obligations of Sync and Parent to effect the merger are
subject to the satisfaction of certain conditions, including, but not limited
to, obtaining requisite Sync stockholder and regulatory approvals, the approval
for quotation on The Nasdaq National Market of the Sync common stock to be
issued pursuant to the merger, the absence of any injunction prohibiting
consummation of the merger, and the accuracy of the representations and
warranties contained in the merger agreement.
Each of the conditions to the merger may be waived by the company entitled
to assert the condition.
TERMINATION OF THE MERGER AGREEMENT AND TERMINATION FEE (PAGE 42)
Sync and Parent can mutually agree to terminate the merger agreement without
completing the merger. Either Sync or Parent can terminate the merger agreement
by written notice if the merger is not completed by August 31, 2000, or if any
court or governmental authority prohibits the transactions contemplated by the
merger agreement and such prohibition is final and nonappealable. Additionally,
if Sync receives a non-solicited proposal from another company to acquire or
merge with Sync that Sync's board of directors considers to be superior to the
proposed transaction with Entrada, then Sync may terminate the merger agreement
upon agreement to pay Parent a termination fee of $1,000,000. Likewise, if
Parent receives a non-solicited proposal from another company to acquire or
merge with Entrada that Parent's board of directors considers to be superior to
the proposed merger with Sync, then Parent may terminate the merger agreement
upon agreement to pay Sync a termination fee of $1,000,000. If the stockholders
of Sync vote not to authorize the issuance of Sync common stock for completion
of the merger, then Sync will be required to pay Parent a fee of $250,000 within
thirty (30) days of such stockholder vote.
WHEN THE MERGER TAKES EFFECT (PAGE 39)
The merger will become effective when all necessary documentation has been
filed with the Delaware Secretary of State. Such documentation will be filed
promptly upon satisfaction or waiver of each of the conditions provided in the
merger agreement.
CONVERSION OF SHARES (PAGE 39)
After completion of the merger, Parent will no longer have any rights as a
stockholder of Entrada. Once the merger is effective, Parent will surrender its
Entrada stock certificates and in turn will receive Sync stock certificates from
the transfer agent as quickly as is feasible.
REGULATORY MATTERS (PAGE 40)
Certain aspects of the merger will require notifications to, and/or
approvals from, certain United States authorities. Sync and Entrada believe that
all material notifications, filings and approvals have been made or obtained, or
will be made or obtained prior to the effective date of the merger, as the case
may be. See "The Merger Agreement--Conditions to the Completion of the Merger."
7
<PAGE>
ACCOUNTING TREATMENT (PAGE 38)
The merger will be accounted for as an acquisition of Sync by Entrada under
the "purchase" method of accounting in accordance with generally accepted
accounting principles.
RESALE OF SYNC COMMON STOCK (PAGE 40)
All shares of Sync common stock received by Parent in the merger will be
freely transferable, except that Parent shall be deemed to be an "affiliate" (as
such term is defined under the Securities Act) of Sync and, accordingly, such
shares may be resold by Parent only in transactions permitted by the resale
provisions of Rules 144 promulgated under the Securities Act or as otherwise
permitted under the Securities Act.
8
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
AND SUMMARY UNAUDITED PRO FORMA INFORMATION
The following selected historical financial data of Sync for the three years
ended December 31, 1999, 1998 and 1997 and as of December 31, 1999 and 1998 has
been derived from the audited historical financial statements incorporated by
reference herein and should be read in conjunction with such consolidated
financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations. The statement of
operations data for the years ended December 31, 1996 and 1995 have been derived
from audited financial statements not included in this proxy
statement/prospectus. The selected financial data of Sync for the three months
ended March 31, 2000 and 1999 has been derived from Sync's unaudited financial
statements which have been incorporated by reference from Sync's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 filed with the
Securities and Exchange Commission. These interim operating results are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
The following selected historical financial data of Entrada for the three
years ended January 31, 2000, 1999 and 1998 and as of January 31, 2000 and 1999
has been derived from the audited historical financial statements included
elsewhere herein and should be read in conjunction with such consolidated
financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations. The statement of
operations data for the years ended January 31, 1997 and 1996 have derived from
audited financial statements not included in this proxy statement/prospectus.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the merger had been consummated, nor is it necessarily
indicative of future operating results or financial position.
9
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA--SYNC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $ 3,150 $ 5,106 $18,152 $ 24,702 $ 23,256 $ 36,346 $34,933
Cost of sales...................... 1,916 2,851 9,905 15,850 14,724 19,995 17,584
------- ------- ------- -------- -------- -------- -------
Gross profit....................... 1,234 2,255 8,247 8,852 8,532 16,351 17,349
Operating expenses:
Research and development......... 1,062 1,715 5,503 7,420 7,195 7,687 5,636
Selling and marketing............ 859 1,796 5,136 11,851 14,318 14,484 11,248
General and administrative....... 551 614 2,284 3,048 3,741 5,795 2,871
Non-recurring charges............ -- -- -- 2,852 1,241 -- --
------- ------- ------- -------- -------- -------- -------
Total operating expenses......... 2,472 4,125 12,923 25,171 26,495 27,966 19,755
------- ------- ------- -------- -------- -------- -------
Operating loss..................... (1,238) (1,870) (4,676) (16,319) (17,963) (11,615) (2,406)
Interest income, net............... 114 135 408 875 1,455 2,184 461
------- ------- ------- -------- -------- -------- -------
Loss before income taxes........... (1,124) (1,735) (4,268) (15,444) (16,508) (9,431) (1,945)
Provision for income taxes......... 1 -- 6 2 -- 2 45
------- ------- ------- -------- -------- -------- -------
Net loss........................... $(1,125) $(1,735) $(4,274) $(15,446) $(16,508) $ (9,433) $(1,990)
======= ======= ======= ======== ======== ======== =======
Basic and diluted net loss per
share............................ $ (0.32) $ (0.50) $ (1.22) $ (4.44) $ (4.81) $ (3.04) $ (2.31)
======= ======= ======= ======== ======== ======== =======
Shares used in computing net loss
per share........................ 3,516 3,505 3,493 3,479 3,434 3,258 1,364
======= ======= ======= ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH
31, AS OF DECEMBER 31,
-------- ----------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 7,696 $ 8,632 $ 14,135 $ 21,734 $ 35,874 $50,633
Working capital........................... 10,665 11,611 14,337 28,718 44,336 58,260
Total assets.............................. 16,839 19,197 26,791 38,495 55,692 66,672
Capitalized lease obligations, less
current maturities...................... 9 7 60 111 146 398
Mandatorily redeemable preferred stock.... -- -- -- -- -- 5,591
Total stockholders' equity................ 12,225 13,291 17,571 32,818 48,803 54,862
</TABLE>
10
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--ENTRADA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 1, 1996 MAY 1, YEARS ENDED
YEARS ENDED JANUARY 31, TO 1996 TO APRIL 30,
------------------------------ JANUARY 31, JUNE 30, -------------------
2000 1999 1998 1997(1) 1996 1996 1995
-------- -------- -------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 28,771 $ 29,007 $30,624 $14,884 $ 5,174 $25,731 $30,627
Cost of sales.................... 17,498 16,043 17,061 8,545 2,930 17,795 20,159
-------- -------- ------- ------- ------- ------- -------
Gross profit..................... 11,273 12,964 13,563 6,339 2,244 7,936 10,468
Operating expenses:
Research and development....... 6,223 5,503 3,546 1,128 450 2,874 2,790
Selling and marketing.......... 5,647 8,329 8,974 3,374 1,003 7,000 10,037
General and administrative..... 2,177 2,270 3,611 1,219 183 1,800 2,004
Non-recurring charges.......... -- -- 3,873 6,877 -- -- --
-------- -------- ------- ------- ------- ------- -------
Total operating expenses....... 14,047 16,102 20,004 12,598 1,636 11,674 14,831
-------- -------- ------- ------- ------- ------- -------
Loss from operations............. (2,774) (3,138) (6,441) (6,259) 608 (3,738) (4,363)
Interest expense, net............ 613 578 513 152 63 413 148
-------- -------- ------- ------- ------- ------- -------
Loss before income taxes......... (3,387) (3,716) (6,954) (6,411) 545 (4,151) (4,511)
Income taxes..................... -- -- -- -- 7 1 17
-------- -------- ------- ------- ------- ------- -------
Net loss......................... $ (3,387) $ (3,716) $(6,954) $(6,411) $ 538 $(4,152) $(4,528)
======== ======== ======= ======= ======= ======= =======
Net loss per share, basic and
diluted........................ $ (3,387) $ (3,716) $(6,954) $(6,411) $ 538 $(4,152) $(4,528)
======== ======== ======= ======= ======= ======= =======
Shares used in computing net loss
per share, basic and diluted... 1 1 1 1 1 1 1
======== ======== ======= ======= ======= ======= =======
<CAPTION>
AS OF JANUARY 31, AS OF AS OF APRIL 30,
---------------------------------------------- JUNE 30, -------------------
2000 1999 1998 1997 1996 1996 1995
-------- -------- -------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 112 $ 198 $ 246 $ 20 $ 228 $ 511 $ (10)
Working capital.................. 4,209 1,066 108 1,276 4,094 1,903 4,035
Total assets..................... 16,544 16,750 16,381 13,260 11,654 11,243 14,778
Long-term debt, less current
portion........................ 302 154 -- -- -- -- --
Amount due to Parent............. 21,769 17,337 11,878 7,287 1,400 1,400 --
Total stockholders' equity
(deficit)...................... (14,706) (11,319) (7,603) 649 1,971 1,726 5,878
</TABLE>
- ------------------------
(1) Entrada was acquired by Parent on July 1, 1996.
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)(1)
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31, 2000
----------------
<S> <C>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.............................................. $46,923
Loss from operations...................................... (7,336)
Net loss.................................................. (7,547)
Net loss per share........................................ (0.90)
Number of shares used to compute net loss per share....... 8,424
</TABLE>
<TABLE>
<CAPTION>
AS OF
JANUARY 31, 2000
----------------
<S> <C>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Cash...................................................... $10,805
Working capital........................................... 16,981
Total assets.............................................. 37,459
Long-term debt............................................ 309
Total stockholders' equity................................ 21,172
</TABLE>
- ------------------------
(1) The pro forma consolidated financial information for Sync and Entrada
reflects the issuance of 4,231,007 shares of Sync common stock for all of
the issued and outstanding Entrada shares in connection with the merger and
reflects the issuance of 700,000 shares of common stock upon the conversion
of all of Sync's outstanding Series A Preferred Stock, which was issued in
May 2000 to an affiliate of a stockholder of Parent for net proceeds of
approximately $2.1 million.
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Sync and
Entrada and combined per share data on an unaudited pro forma basis after giving
effect to the merger on a purchase accounting basis assuming 4,231,007 shares of
Sync common stock are issued in the merger in exchange for all of the Entrada
common stock outstanding and reflecting the issuance of 700,000 shares of common
stock upon the conversion of all of the outstanding Series A preferred stock.
The information set forth below should be read in conjunction with the selected
historical consolidated financial data, the unaudited pro forma combined
condensed financial information and the historical financial statements of Sync
and Entrada included in this proxy statement/prospectus. The unaudited pro forma
combined condensed financial information is not necessarily indicative of the
operating results that would have been achieved had the transaction been
effected as of the beginning of the periods presented and should not be
construed as representative of future results of operations. The merger is
expected to be accounted for as a reverse acquisition of Sync by Entrada.
Neither Sync nor Entrada has ever declared or paid cash dividends on its
respective shares of capital stock.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Per share amounts:
Historical-Sync:
Net loss.................................................. $ (1.22)
Book value (at period end)................................ 3.79
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31, 2000
----------------
<S> <C>
Historical-Entrada:
Net loss.................................................. $ (3,387)
Book value (at period end)................................ (14,706)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31, 2000
----------------
<S> <C>
Per Sync share:
Net loss.................................................. $ (0.90)
Book value................................................ 2.50
Per equivalent Entrada share:
Net loss.................................................. $(3,808)
Book value................................................ 10,586
</TABLE>
13
<PAGE>
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
Sync's common stock is listed on the Nasdaq Stock Market and trades under
the symbol SYNX. The following table presents the high and low closing sale
prices for Sync's common stock as reported in the Nasdaq National Market for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1999
Q1........................................................ $ 6.56 $ 2.97
Q2........................................................ 3.59 1.87
Q3........................................................ 2.75 1.94
Q4........................................................ 3.25 2.19
1998
Q1........................................................ 19.38 11.71
Q2........................................................ 20.31 10.44
Q3........................................................ 19.38 6.88
Q4........................................................ 7.81 3.56
</TABLE>
On April 10, 2000, the last trading day prior to the announcement by Sync
and Entrada that they had reached an agreement concerning the merger, the
closing sales price of Sync common stock as reported on the Nasdaq National
Market was $3.125 per share. The equivalent per share value of Entrada common
stock as of such date was approximately $13,222. On May 12, 2000, the closing
sale price of Sync common stock as reported on the Nasdaq National Market was
$3.50 per share. Based on the May 12, 2000, closing sale price of Sync common
stock, the equivalent per share value of Entrada common stock as of such date
was approximately $14,808.
As of May 4, 2000, there were 213 stockholders of record of Sync common
stock, and Sync believes there were approximately 2,936 beneficial owners of
Sync common stock.
Following the merger, Sync common stock will continue to be traded on the
Nasdaq National Market. Sync is in the process of applying for a new trading
symbol to take effect upon the consummation of the merger.
Neither Sync nor Entrada has ever paid cash dividends on its capital stock.
Any future determination to pay cash dividends will be at the discretion of the
board of directors and will be dependent upon the combined companies' financial
condition, results of operations, capital requirements and such other factors as
the board of directors deems relevant.
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ PROSPECTUS, SYNC STOCKHOLDERS SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO VOTE FOR THE MERGER. THE
OCCURRENCE OF ANY OF THE RISKS DESCRIBED BELOW OR INCORPORATED BY REFERENCE
HEREIN COULD MATERIALLY ADVERSELY AFFECT THE BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATION OF SYNC.
RISKS RELATED TO THE MERGER
SYNC AND ENTRADA MAY BE UNABLE TO SUCCESSFULLY INTEGRATE THEIR OPERATIONS
AND REALIZE THE COST SAVINGS THAT WE ANTICIPATE.
The success of the merger depends in substantial part on the ability of Sync
and Entrada to integrate their respective operations in an efficient and
effective manner. The integration of Entrada's operations into Sync following
the merger will require the dedication of management resources in order to
achieve the anticipated operating efficiencies of the merger which may
temporarily distract attention from day to day business operations of the
combined companies. The difficulties of combining the Entrada operations into
Sync are exacerbated by the necessity of coordinating geographically separated
organizations, integrating personnel with disparate business backgrounds and
combining different corporate cultures. No assurance can be given that
difficulties encountered in integrating the operations of Entrada into Sync will
be overcome or that the benefits expected from such integration will be
realized. The inability of management to successfully integrate the operations
of the two companies could have a material adverse effect on the business,
results of operations and financial condition of the combined companies. In
addition, as commonly occurs with mergers of technology companies, aggressive
competitors may undertake initiatives to attract customers and to recruit key
employees, which could have a material adverse effect on the business, results
of operations and financial condition of Sync.
THE COMBINED COMPANIES WILL INCUR SUBSTANTIAL EXPENSES AND RESTRUCTURING
CHARGES IN CONNECTION WITH THE MERGER.
Sync and Entrada expect to incur certain expenses in connection with the
restructuring and consolidation of the operations of the combined companies
including, but not limited to, costs related to the closure and elimination of
duplicate leased facilities and write-offs of related fixed assets, write-offs
of discontinued products, and severance costs. Sync and Entrada anticipate that
the integration activities will ultimately result in increased efficiencies and
lower operating costs. These activities have not been formalized, and therefore
the expenses and related efficiency cost savings are not currently estimable
with a reasonable degree of accuracy. Although Sync and Entrada expect that the
elimination of duplicative expenses as well as other efficiencies related to the
integration of the businesses may offset additional expenses over time, there
can be no assurance that such net benefit will be achieved in the near term, or
at all.
Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have been
included in the estimated purchase price reflected in the pro forma condensed
consolidated balance sheet.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for investment
banking, filings with regulatory agencies, legal, accounting, financial printing
and other related costs. These transaction costs will be expensed as they are
incurred by Sync and have been reflected in the pro forma condensed consolidated
balance sheet.
15
<PAGE>
THE MERGER MAY ADVERSELY IMPACT THE BUYING PATTERNS OF THE CUSTOMERS OF THE
COMBINED COMPANIES.
There is no assurance that resellers and current and potential end-users of
Sync and Entrada products will continue their current buying patterns without
regard to the announced merger. Certain customers may defer purchasing decisions
as they evaluate the combined companies' future product strategy and consider
product offerings of competitors. If substantial numbers of customers decide to
defer or cancel such purchases, such deferrals or cancellations could have a
material adverse effect on the business, results of operations and financial
condition of the combined companies.
SYNC AND ENTRADA MAY NOT BE ABLE TO OBTAIN THIRD PARTY CONSENTS IN
CONNECTION WITH THE MERGER.
Sync and Entrada each have contracts with many suppliers, customers and
other business partners relating to, among other things, certain intellectual
property rights. Some of these contracts require Sync and Entrada to obtain the
consent, waiver or approval of these other parties in connection with the
merger. If consent, waiver or approval cannot be obtained, Sync and Entrada may
lose the right to use intellectual property that is necessary for their
respective businesses. Sync and Entrada have agreed to use commercially
reasonable efforts to secure the necessary consents, waivers and approvals.
However, Sync and Entrada may not be able to obtain all of the necessary
consents, waivers and approvals, which could have a material adverse effect on
the business, results of operations and financial condition of the combined
companies.
OBTAINING REQUIRED GOVERNMENT APPROVALS AND SATISFYING CLOSING CONDITIONS
MAY DELAY OR PREVENT COMPLETION OF THE MERGER.
Completion of the merger is conditioned upon the receipt of all material
governmental authorizations, consents, orders and approvals, including the
expiration or termination of the applicable waiting periods, and any extension
of the waiting periods, under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended. Sync and Entrada intend to vigorously pursue all required
approvals. The requirement for these approvals could delay the completion of the
merger for a significant period of time after Sync stockholders have approved
the proposals relating to the merger at the annual meeting. No assurance can be
given, however, that these approvals will be obtained or that the required
conditions to closing will be satisfied and, if all such approvals are obtained
and the conditions are satisfied, no assurance can be given as to the terms,
conditions and timing thereof.
SYNC'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT THE MERGER.
The directors and officers of Sync have certain interests in the merger and
participate in certain arrangements that are different from, or are in addition
to those of Sync stockholders generally. These interests and arrangements
include:
- all executive officers of Sync are parties to agreements that provide for
the partial vesting of any unvested options upon a change in control and
certain severance benefits if such executive officer is terminated
following a corporate transaction such as the merger
- Mr. Gregorio Reyes, the current Chairman of the Sync board of directors,
will remain as a director of Sync following the merger, and certain
current executive officers of Sync will remain as executives of Sync
following the merger
- Mr. Reyes is party to an agreement that provides for the full vesting of
any unvested options upon a change in control and certain severance
benefits if he is terminated following a corporate transaction such as the
merger.
16
<PAGE>
THE VALUE OF SYNC STOCKHOLDERS' HOLDINGS IN SYNC MAY BE DIMINISHED AS A
RESULT OF THE MERGER.
Although the companies believe that beneficial synergies will result from
the merger, there can be no assurance that the combining of the two companies'
businesses, even if achieved in an efficient, effective and timely manner, will
result in combined results of operations and financial condition superior to
what would have been achieved by each company independently, or as to the period
of time required to achieve such result. The issuance of Sync common stock in
connection with the merger may have the effect of reducing Sync's net income per
share from levels otherwise expected and could reduce the market price of the
Sync common stock unless revenue growth or cost savings and other business
synergies sufficient to offset the effect of such issuance can be achieved. As a
consequence of the merger, Sync stockholders will lose the chance to invest in
the development and exploitation of Sync's products on a stand-alone basis.
Additionally, Sync following the merger will have different management than
Sync's current management, and consequently the management of Sync following the
merger may make strategic and operational decisions that differ from those of
Sync's current management.
THE NUMBER OF SYNC SHARES OF COMMON STOCK THAT ARE TO BE EXCHANGED FOR ALL
OF THE SHARES OF ENTRADA COMMON STOCK IS FIXED.
Under the terms of the merger agreement, the outstanding shares of Entrada
common stock issued and outstanding at the closing will be converted into the
right to receive shares of Sync common stock. The merger agreement does not
contain any provisions for adjustment of the exchange amount or termination of
the merger agreement based solely on fluctuations in the price of Sync common
stock. The price of Sync common stock at the closing of the merger may vary from
its prices on the date of this proxy statement/prospectus and on the date of the
annual meeting. These prices may vary because of changes in the business,
operations or prospects of Sync, market assessments of the likelihood that the
merger will be completed, the timing of the completion of the merger, the
prospects of post-merger operations, regulatory considerations, general market
and economic conditions and other factors. Because the date that the merger is
completed will be later than the date of the annual meeting, the price of Sync
common stock on the date of the annual meeting may not be indicative of its
price on the date the merger is completed. We urge Sync stockholders to obtain
current market quotations for Sync common stock.
SYNC CANNOT ASSURE YOU THAT ITS STOCK PRICE WILL NOT DECLINE AFTER THE
MERGER.
Factors such as announcements of technological innovations or the
introduction of new products by the combined companies or their competitors, as
well as market conditions in the technology sector, may have a significant
effect on the market price of Sync's common stock following the merger. Further,
the stock market has experienced volatility which has particularly affected the
market prices of equity securities of many high technology companies and which
often has been unrelated to the operating performance of such companies. These
market fluctuations may have an adverse effect on the price of Sync's common
stock following the merger.
THE COMBINED COMPANIES MAY FACE INCREASED CREDIT RISKS AS A RESULT OF THE
MERGER.
Entrada distributes a significant portion of its products through third
party distributors, resellers and original equipment manufacturers ("OEMs"). Due
to the consolidation in the distribution and reseller channels and Entrada's
reliance upon these channels, Entrada has experienced an increased concentration
of credit risks. While Sync and Entrada have each continuously monitored and
managed these risks, financial difficulties on the part of one or more of their
respective significant distributors, resellers or OEM partners may have a
material adverse effect on the combined companies.
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RISKS RELATED TO THE COMBINED COMPANIES' BUSINESS
SYNC AND ENTRADA HAVE INCURRED CONSISTENT OPERATING LOSSES AND THE COMBINED
COMPANIES MAY CONTINUE TO INCUR SIGNIFICANT NET LOSSES AND NEGATIVE CASH FLOWS
IN THE FUTURE, AND THE COMBINED COMPANIES MAY NEVER BE PROFITABLE.
Sync has experienced operating losses since inception and has never been
profitable. In recent years, Sync has experienced operating losses of
$18.0 million in 1997, $16.3 million in 1998 and $4.7 million in 1999. As of
December 31, 1999, Sync had an accumulated deficit of approximately
$58.7 million. Entrada experienced operating losses of $6.4 million in fiscal
1998, $3.1 million in fiscal 1999 and $2.8 million in fiscal 2000, and has not
achieved operating profitability. As of January 31, 2000, Entrada had an
accumulated deficit of approximately $20.5 million. Both Sync and Entrada have
experienced, and may in the future experience, significant fluctuations in
revenues and operating results from quarter to quarter and from year to year due
to a combination of factors. Factors that have caused, or may cause, revenues
and operating results to vary significantly from period to period include:
- the timing of significant orders;
- the relatively long length of the sales cycles for certain products;
- the market conditions, competition and pricing in the networking industry;
- the timing of capital expenditures by target market customers;
- the success in developing, introducing and shipping new products;
- new product introductions by competitors;
- production or quality problems;
- changes in material costs;
- disruption in sources of supply;
- changes in foreign currency exchange rates; and
- general economic conditions.
In addition, revenues and gross margins may fluctuate due to the mix of
distribution channels employed and the mix of products sold. For example, Sync
generally realizes a higher gross margin on direct sales than on sales through
its channel partners and other resellers. Accordingly, if channel partners and
other resellers account for a large percentage of the combined companies' net
revenues, gross profit as a percentage of net revenues may decline.
The combined companies' future revenues are difficult to predict. Revenues
and operating results in any quarter depend on the volume and timing of, and the
ability to fulfill, orders received within the quarter. Sales of many of Sync's
and Entrada's products typically involve a sales cycle of several months or over
a year from the point of initial customer contact until receipt of the first
system order, and, in addition, Sync and Entrada have in the past encountered,
and may in the future encounter, delays between initial orders and network-wide
deployment. There can be no assurance that average sales cycles will not
increase in future periods. Significant portions of the combined companies'
expenses are relatively fixed. If sales are below expectations in any given
period, the adverse effect of a shortfall in sales on the combined companies'
operating results may be magnified by their inability to adjust spending to
compensate for such shortfall. Sync and Entrada have in the past and may in the
future reduce prices or increase spending to respond to competition or to pursue
new product or market opportunities. Accordingly, there can be no assurance that
the combined companies will be able to attain or sustain profitability on a
quarterly or an annual basis. In addition, if the combined companies'
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operating results fall below the expectations of public market analysts and
investors, the price of the Sync's common stock would likely be materially and
adversely affected.
IF THE COMBINED COMPANIES FAIL TO MANAGE EXPANSION EFFECTIVELY, THEY MAY NOT
BE ABLE TO SUCCESSFULLY MANAGE THEIR BUSINESS, WHICH COULD CAUSE THE COMBINED
COMPANIES TO FAIL TO MEET CUSTOMER DEMAND OR TO ATTRACT NEW CUSTOMERS.
Neither Sync nor Entrada has had significant experience in managing issues
related to the expansion of their respective operations, which may place
significant demands on the combined companies' administrative, operational and
financial resources. To manage future growth, if any, the combined companies
must:
- implement additional management information systems
- improve their operating, administrative, financial and accounting systems,
procedures and controls
- attract, train and retain new employees
- maintain close coordination among their executive, engineering,
professional services, accounting, finance, marketing, sales and
operations organizations.
There can be no assurance that the combined companies will be able to
perform such actions successfully. The combined companies intend to continue to
invest in improving their financial systems and controls in connection with
higher levels of operations. In the future, the combined companies may make
additional acquisitions of complementary companies, products or technologies.
Managing acquired businesses entails numerous operational and financial risks,
including difficulties in assimilating acquired operations, diversion of
management's attention to other business concerns, amortization of acquired
intangible assets and potential loss of key employees or customers of acquired
operations. There can be no assurance that the combined companies will be able
to effectively achieve growth, or manage any such growth, and failure to do so
could have a material adverse effect on the combined companies' operating
results.
THE COMBINED COMPANIES WILL DEPEND ON THIRD PARTY LICENSES FOR THEIR
PRODUCTS.
Sync and Entrada rely on certain software technology which is licensed from
third parties and used in Sync's and Entrada's products to perform key functions
and provide additional functionality. Because the combined companies' products
will incorporate software developed and maintained by third parties, the
combined companies will be, to a certain extent, dependent upon such third
parties' ability to maintain or enhance their current products, to develop new
products on a timely and cost-effective basis, and to respond to emerging
industry standards and other technological changes. Further, these third-party
technology licenses may not always be available to the combined companies on
commercially reasonable terms or at all. If the combined companies' agreements
with third-party vendors are not renewed or the third-party software fails to
address the needs of the combined companies' software products, the combined
companies would be required to find alternative software products or
technologies of equal performance or functionality. Sync and Entrada cannot
assure that they would be able to replace the functionality provided by
third-party software if the combined companies lost the license to this
software, if it became obsolete or incompatible with future versions of the
combined companies' products, or if the software otherwise was not adequately
maintained or updated.
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THE COMBINED COMPANIES WILL DEPEND ON CONTINUED DEMAND FOR THEIR PRODUCTS BY
ORIGINAL EQUIPMENT MANUFACTURERS AND OTHER RESELLERS.
Sync and Entrada have OEM relationships with a number of companies that
provide network access hardware. Agreements with OEM customers provide for
Sync's and Entrada's software products to be bundled with the OEM's hardware
products when sold. The cost, if any, of integrating software is assumed by the
OEM. These agreements may provide for a license fee to be paid to Sync or
Entrada. The license fee may be a royalty based upon unit sales, a flat fee or a
fee for a certain time period. Sync and Entrada cannot assure you that OEM
customers will accurately report license fees or have the ability to pay them.
Each of the combined companies' distributors and resellers will be able to cease
marketing the combined companies' products with limited notice and with little
or no penalty. Other risks include whether the OEMs will:
- give sufficient priority to marketing the combined companies' products
- continue to offer the combined companies' products at all
- elect instead to bundle software products of the combined
companies'competitors.
In 1999, 1998 and 1997, OEM revenue represented approximately 6%, 19% and 25%,
respectively, of Sync's total net revenue. In fiscal 2000, 1999 and 1998, OEM
revenue represented approximately 46%, 26% and 21%, respectively, of Entrada's
total net revenue. In the past several years, Sync has seen a significant
reduction in revenue from certain OEM customers and the combined companies may
not be able to replace the revenue generated from those relationships.
THE COMBINED COMPANIES WILL RELY ON THIRD PARTY MANUFACTURERS TO PRODUCE
THEIR PRODUCTS, AND THEIR REPUTATION AND RESULTS OF OPERATIONS COULD BE
ADVERSELY AFFECTED BY THE COMBINED COMPANIES INABILITY TO CONTROL THEIR
OPERATIONS.
The combined companies' manufacturing operations will consist primarily of
materials planning and procurement, light assembly, system integration, testing
and quality assurance. Sync and Entrada have entered into arrangements with
contract manufacturers to outsource substantial portions of their respective
board level procurement, assembly and system test operations, and Sync and
Entrada expect to expand the use of such outsource arrangements in the future.
The combined companies' reliance on third party manufacturers will expose them
to the following risks outside their control:
- unexpected increases in manufacturing costs;
- interruptions in shipments if any manufacturer is unable to complete
production;
- inability to control quality of finished products;
- inability to control delivery schedules;
- unpredictability of manufacturing yield;
- potential lack of adequate capacity; and
- potential inability to secure adequate volumes of components.
The inability of the combined companies' contract manufacturers to provide
the combined companies with adequate supplies of high quality products could
have a material adverse effect upon the combined companies' business, operating
results and financial condition. The loss of any of the combined companies'
contract manufacturers could cause a delay in the combined companies' ability to
fulfill orders while the combined companies identify a replacement manufacturer.
Such an event could have a material adverse effect on the combined companies'
business, operating results and financial condition.
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The combined companies' manufacturing procedures may in certain instances
create a risk of excess or inadequate inventory if orders do not match
forecasts. Any manufacturing delays, excess manufacturing capacity or
inventories or inability to increase manufacturing capacity, if required, could
have a material adverse effect on the combined companies' business, operating
results and financial condition.
THE COMBINED COMPANIES WILL BE DEPENDENT ON SUPPLIERS, MANY OF WHICH WILL BE
THE SOLE SOURCE FOR THEIR COMPONENTS, AND THEIR PRODUCTION WOULD BE SERIOUSLY
HARMED IF THESE SUPPLIERS ARE NOT ABLE TO MEET THE COMBINED COMPANIES' DEMAND
AND ALTERNATIVE SOURCES ARE NOT AVAILABLE.
Certain key components used in the manufacture of Sync's and Entrada's
products are currently purchased only from single or limited sources. At
present, single-sourced components include programmable integrated circuits,
selected other integrated circuits and cables, custom-molded plastics and
custom-tooled sheet metal, and limited-sourced components include flash
memories, printed circuit boards and selected integrated circuits. Sync and
Entrada generally rely upon contract manufacturers to buy component parts that
are incorporated into board assemblies. Sync and Entrada each directly buys
final assembly parts, such as plastics and metal covers, cables and other parts
used in final configurations. The combined companies generally will not have
long-term agreements with any of these single or limited sources of supply. Any
loss of a supplier, increase in lead times, cost increases, component supply
interruption, or the inability of the combined companies to procure these
components from alternate sources at acceptable prices and within a reasonable
time, could have a material adverse effect upon the combined companies'
business, operating results and financial condition. If orders do not match
forecasts, the combined companies may have excess or inadequate inventory of
certain materials and components, and suppliers may demand longer lead times,
higher prices or termination of contracts. From time to time Sync and Entrada
have experienced shortages of certain components and have paid above-market
prices to acquire such components on an accelerated basis or have experienced
delays in fulfilling orders while waiting to obtain the necessary components.
Such shortages may occur in the future and could have a material adverse effect
on the combined companies' business, operating results and financial condition.
THE COMBINED COMPANIES WILL HAVE POTENTIAL SEVERANCE PAYMENT LIABILITIES.
Sync's executive officers have entered into employment agreements under
which such persons will be entitled to receive severance payments in certain
circumstances, including following any termination of their employment within
one year following a "change in control" of Sync, including the change in
control that will be deemed to result from the consummation of the merger.
Assuming the termination of the employment of all of the Sync executive officers
immediately following the consummation of the merger, the combined companies'
aggregate liabilities under such severance provisions could be as much as
approximately $800,000. Due to the nature of these termination rights, some or
all of these severance payments may not be includable in the merger reserve and,
therefore, could adversely impact earnings in any subsequent quarters in which
the rights are exercised.
THERE IS NO ASSURANCE THAT SYNC WILL CONTINUE TO MEET THE REQUIREMENTS FOR
CONTINUED LISTING ON THE NASDAQ NATIONAL MARKET.
Sync's common stock is listed and traded on the Nasdaq National Market. On
January 4, 1999, Sync received a letter from Nasdaq notifying it of its failure
to maintain a closing bid price of greater than $1.00 in accordance with the
Nasdaq listing requirements. In order to comply with the Nasdaq listing
requirements, Sync implemented a 1 for 5 reverse stock split on June 28, 1999.
As a result of the reverse stock split, Sync maintained its stock price above
the $1 per share minimum level, and accordingly, was informed by Nasdaq that it
had met the requirements for continued listing. However,
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there can be no assurance that Sync will meet the minimum closing bid price or
any other Nasdaq listing requirements on an ongoing basis.
SYNC'S AND ENTRADA'S CHARTER DOCUMENTS, AND CERTAIN BENEFIT PLANS AND OTHER
AGREEMENTS, WILL CONTAIN ANTI-TAKEOVER PROVISIONS.
Sync and Entrada are currently, and following the merger will continue to
be, subject to the provisions of Section 203 of the Delaware General Corporation
Law, an anti-takeover law. In addition, certain provisions of Sync's and
Entrada's charter documents, including provisions eliminating cumulative voting,
eliminating the ability of stockholders to call meetings or to take actions by
written consent and limiting the ability of stockholders to raise matters at a
meeting of stockholders without giving advance notice, may have the effect of
delaying or preventing a change in control or management of Sync and Entrada,
which could have an adverse effect on the market price of Sync's common stock.
Certain of Sync's and Entrada's stock option and purchase plans and agreements
will provide for assumption of such plans, or, alternatively, immediate vesting
upon a change of control or similar event. In addition, Sync and Entrada have
entered into severance agreements with their respective officers, pursuant to
which such officers are entitled to defined severance payments if they are
actually or constructively terminated within specified time periods following a
change of control. The board of directors of Sync currently has, and following
the merger will continue to have, authority to issue up to 2,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of these shares without any further vote or action by
the stockholders. The rights of the holders of the common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of Sync and
Entrada, thereby delaying, deferring or preventing a change in control.
Furthermore, such preferred stock may have other rights, including economic
rights senior to the common stock, and as a result, the issuance of such
preferred stock could have a material adverse effect on the market value of the
common stock. Sync and Entrada have no present plan to issue shares of preferred
stock.
RISKS RELATED TO THE COMBINED COMPANIES' INDUSTRY
THE NETWORK ACCESS MARKET IS HIGHLY COMPETITIVE, AND THE COMBINED COMPANIES
WILL FACE RISKS ASSOCIATED WITH RAPIDLY CHANGING TECHNOLOGY, EVOLVING INDUSTRY
STANDARDS AND FREQUENT NEW PRODUCT INTRODUCTIONS.
The market for communications products is intensely competitive and subject
to rapid technological change and emerging industry standards, with frequent new
product introductions and enhancements, and constant pressure to reduce prices.
Increased competition may force us to lower our prices, experience decreased
gross margins or lose market acceptance. Sync believes that the principal
competitive factors in the combined companies' market include:
- expertise and familiarity with systems network architecture (SNA) networks
and protocols
- expertise and knowledge with mission-critical network solutions
- product performance, features, functionality and reliability
- price and overall cost of ownership
- timeliness of new product introductions
- adoption of emerging industry standards
- service and support.
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Sync's and Entrada's current competitors include internetworking companies
such as Cisco Systems, Inc., Lucent Technologies, Inc., Netopia, Inc., Nortel
Networks Corp. Hldg., and Intel Corporation, frame relay access device ("FRAD")
providers such as Hypercom Network Systems, Motorola Information Systems Group,
and Cabletron Systems, Inc., and circuit management and digital transmission
providers such as Visual Networks, Inc., NetScout, Quick Eagle Networks, Racal
Datacom, Inc., ADC Telecommunications, Inc., Verilink Corporation, AT&T Paradyne
and Adtran, Inc., among others. Regarding the market for storage area networking
products, Entrada expects that its competitors will include JNI Corporation,
Emulex Corporation, Brocade Communications Systems, Inc., Interphase
Corporation, Gadzoox Networks, Inc. and others. In the LAN adapter area, Entrada
competes with 3Com Corporation, Adaptec, Inc., Alteon WebSystems, Inc., Intel
Corporation, Interphase Corporation, Sun Microsystems, Inc., RAMiX Inc., SBS
Technologies, Inc., VMIC, ZYNX Corporation and others. In the WAN adapter area,
Entrada competes with Ariel, Corporation Digi International, Inc., Eicon
Technology, Interphase Corporation, Brooktrout Inc., Patriot Scientific
Corporation, Performance Technologies Incorporated, Pika Technologies Inc., SDL
Communications, Inc. and others. In the remote access area, Entrada competes
with Lucent Technologies, Inc. Cisco Systems, Inc. 3Com Corporation, LM Ericsson
Telephone Company, Intel Corporation, Nbase-Xyplex, Nortel Networks Corp. Hlgd.,
Perle Systems Limited, General DataComm Inds. Inc., Cabletron Systems, Inc.,
Assured Access Technologies, Inc. and others. Potential competitors of the
combined companies include other internetworking and WAN access and transmission
companies, frame relay switch providers, and the combined companies' channel
partners.
The combined companies face the following challenges from their competitors:
- Certain of these competitors have announced products and intentions to
enter the frame relay access or circuit management market
- Many of these current and potential competitors have longer operating
histories and greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base
- Certain of these competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or may be able
to devote greater resources to the development, promotion, sale and
support of their products
- Many of these competitors have long-standing customer relationships with
large enterprises that are part of the combined companies' target market,
and these relationships may make it more difficult to complete sales of
the combined companies' products to these enterprises
- Certain of Sync's channel partners have in the past developed competitive
products and terminated their relationships with Sync, and such
developments could occur in the future with respect to the combined
companies.
As a consequence of all these factors, the combined companies may face
increased competition, particularly in the frame relay market. Increased
competition could result in significant price competition, reduced profit
margins or loss of market share, any of which could have a material adverse
effect on the combined companies' business, operating results and financial
condition. There can be no assurance that the combined companies will be able to
compete successfully in the future.
THE COMBINED COMPANIES WILL DEPEND ON KEY PERSONNEL AND WILL FACE RISKS
ASSOCIATED WITH THE HIRING, RETENTION AND INTEGRATION OF SUFFICIENT QUALIFIED
PERSONNEL.
The success of the combined companies after the merger depends in part upon
the retention of key employees of Sync and Entrada. In addition, the combined
companies' future success also depends in large part upon their ability to
attract highly skilled engineering, managerial, sales and marketing personnel.
Competition for qualified personnel in the networking industry is very intense,
especially
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with respect to sales and engineering personnel. Stock options, which generally
become exercisable only over a period of several years of employment, serve as
an important incentive for retaining key employees. The stock options held by
most Entrada optionees will terminate. Sync intends to issue options to purchase
Sync common stock to these optionees. During 1999, Sync and Entrada encountered
significant personnel turnover in research and development, sales and other
functional areas and experienced significant turnover in the composition of its
executive officers. Such turnover has affected its ability to successfully
develop new products and generate additional business. The loss of the services
of any of key personnel or the failure to attract or retain qualified personnel
in the future could have a material adverse effect on the combined companies'
business, operating results or financial condition.
IF THIRD PARTIES INFRINGE THE COMBINED COMPANIES' INTELLECTUAL PROPERTY AND
PROPRIETARY TECHNOLOGY, THE COMBINED COMPANIES MAY EXPEND SIGNIFICANT RESOURCES
ENFORCING THEIR RIGHTS OR SUFFER COMPETITIVE INJURY.
The combined companies' future success depends, in part, upon their
proprietary technology. Sync does not hold any patents and currently relies on a
combination of contractual rights, trade secrets and copyright laws to establish
and protect its proprietary rights on its products. Entrada owns approximately
nine patents, but such patents are not anticipated to be material to the
business of the combined companies. There can be no assurance that the steps
taken by the combined companies to protect their intellectual property will be
adequate to prevent misappropriation of their technology or that their
competitors will not independently develop technologies that are substantially
equivalent or superior to combined companies' technology. In the event that
protective measures are not successful, combined companies' business, operating
results and financial condition could be materially and adversely affected. In
addition, the laws of some foreign countries will not protect the combined
companies' proprietary rights to the same extent as do the laws of the United
States.
THIRD PARTIES MAY CLAIM IN THE FUTURE THAT THE COMBINED COMPANIES ARE
INFRINGING THE INTELLECTUAL PROPERTY OF SUCH THIRD PARTIES, AND THE COMBINED
COMPANIES COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE
PREVENTED FROM SELLING PRODUCTS IF ANY SUCH CLAIMS ARE SUCCESSFUL.
The combined companies will be subject to the risk of adverse claims and
litigation alleging infringement of intellectual property rights of others.
There can be no assurance that third parties will not assert infringement claims
in the future with respect to Sync's and Entrada's current or future products or
that any such claims will not require the combined companies to enter into
license arrangements or result in litigation, regardless of the merits of such
claims. No assurance can be given that any necessary licenses will be available
or that, if available, such licenses can be obtained on commercially reasonable
terms. Should litigation with respect to any such claims commence, such
litigation could be expensive and time-consuming and could have a material
adverse effect on the combined companies' business, operating results and
financial condition regardless of the outcome of such litigation.
PRODUCT DEFECTS MAY HARM THE COMBINED COMPANIES' BUSINESS.
Products as complex as those to be offered by the combined companies may
contain undetected software or hardware errors. Such errors have occurred in the
past with respect to products offered by Sync and Entrada, and there can be no
assurance that, despite testing by the combined companies and customers, errors
will not be found after commencement of commercial shipments. Moreover, there
can be no assurance that once detected, such errors can be corrected in a timely
manner, if at all. Software errors may take several months to correct, if they
can be corrected at all, and hardware errors may take even longer to rectify.
The occurrence of such software or hardware errors, as well as any delay in
correcting them, could result in the delay or loss of market acceptance of the
combined
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companies' products, additional warranty expense, diversion of engineering and
other resources from the combined companies' product development efforts or the
loss of credibility with the combined companies' end-user customers, channel
partners and other resellers, any of which could have a material adverse effect
on the combined companies' business, operating results and financial condition.
THE COMBINED COMPANIES MAY FACE RISKS ASSOCIATED WITH THE CONSOLIDATION OF
THE NETWORK ACCESS BUSINESS INDUSTRY.
Certain of Sync's and Entrada's major competitors have been engaged in
merger and acquisition transactions. Such consolidations by competitors are
likely to create entities with increased market shares, customer bases,
technology and marketing expertise, sales force size, or proprietary technology
in product markets in which the combined companies will compete. These
developments may adversely affect the combined companies' ability to compete.
THE COMBINED COMPANIES' FINANCIAL CONDITION MAY BE ADVERSELY IMPACTED BY A
DECLINE IN GENERAL ECONOMIC CONDITIONS.
Demand for the combined companies' products will depend in large part on the
overall demand for communications and networking products, which has in the past
and may in the future fluctuate significantly based on numerous factors,
including capital spending levels and general economic conditions. There can be
no assurance that the combined companies will not experience a decline in demand
for their products due to general economic conditions. Any such decline could
have a material adverse effect on the combined companies' business, operating
results and financial condition.
THE COMBINED COMPANIES MAY FACE RISKS ASSOCIATED WITH TARIFF AND REGULATORY
MATTERS.
Rates for public telecommunications services, including features and
capacity of such services, are governed by tariffs determined by carriers and
subject to regulatory approval. Future changes in these tariffs could have a
material adverse effect on the combined companies' business. For example, should
tariffs for frame relay services increase relative to tariffs for dedicated
leased lines, the cost-effectiveness of the combined companies' products could
be reduced, which could have a material adverse effect on the combined
companies' business, operating results and financial condition. In addition, the
combined companies' products must meet industry standards and receive
certification for connection to certain public telecommunications networks prior
to their sale. In the United States, the combined companies' products must
comply with various regulations defined by the Federal Communications Commission
and Underwriters Laboratories. Internationally, the combined companies' products
must comply with standards established by the various European Community
telecommunications authorities. In addition, carriers require that equipment
connected to their networks comply with their own standards. Any future
inability to obtain on a timely basis or retain domestic or foreign regulatory
approvals or certifications or to comply with existing or evolving industry
standards could have a material adverse effect on the combined companies'
business, operating results and financial condition.
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THE SYNC ANNUAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of Sync as
part of the solicitation of proxies by the Sync board of directors for use at
the annual meeting.
DATE, TIME AND PLACE
The Sync annual meeting will be held at , at [a.m./p.m.],
local time, on Monday, August 14, 2000.
PURPOSE OF ANNUAL MEETING
At the Sync annual meeting, we are asking holders of Sync common stock to
adopt the following proposals:
1. To authorize the issuance of shares of Sync common stock under the
merger agreement for completion of the merger. The Sync board of directors
has determined that the merger is fair to, and in the best interests of,
Sync stockholders, has approved the merger and the issuance of shares of
Sync common stock under the merger agreement, and recommends that Sync
stockholders vote "for" authorization of the issuance of shares of Sync
common stock under the merger agreement;
2. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
3. To amend the 1995 Employee Stock Purchase Plan to increase the
number of shares reserved for issuance thereunder by an additional 100,000
shares;
4. To ratify the appointment of Ernst & Young LLP as Sync's independent
auditors for the fiscal year ending December 31, 2000; and
5. To transact such other business as may properly be brought before
the annual meeting or any postponements or adjournments of it by the Sync
board of directors.
RECORD DATE; VOTING POWER; QUORUM
Only holders of record of Sync common stock at the close of business on
Friday, June 30, 2000, the record date, are entitled to notice of and to vote at
the annual meeting. On the record date, shares of Sync common stock
were issued and outstanding. Sync stockholders will have one vote for each share
of Sync common stock they owned on the record date. A quorum is present at the
annual meeting if a majority of the shares of Sync common stock issued and
outstanding and entitled to vote on the record date are represented in person or
by proxy. For purposes of the quorum and the discussion below under "Votes
Required" regarding the vote necessary to adopt each stockholder proposal,
stockholders of record who are present at the meeting in person or by proxy and
who abstain, including brokers holding customers' shares of record who cause
abstentions to be recorded at the meeting, are considered stockholders who are
present and entitled to vote and they count toward the quorum. In the event that
a quorum is not present at the annual meeting, it is expected that the meeting
will be adjourned or postponed to solicit additional proxies. Holders of record
of Sync common stock on the record date are entitled to one vote per share at
the annual meeting for each of the proposals to be voted on.
Brokers holding shares of record for customers generally are not entitled to
vote on certain matters unless they receive voting instructions from their
customers. As used in this proxy statement/ prospectus, "uninstructed shares"
means shares held by a broker who has not received instructions from its
customers on such matters and the broker has so notified Sync on a proxy form in
accordance with industry practice or has otherwise advised Sync that it lacks
voting authority. As used in this proxy
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statement/prospectus, "broker non-votes" means the votes that could have been
cast on the matter in question by brokers with respect to uninstructed shares if
the brokers had received their customers' instructions.
VOTES REQUIRED
Approval of the proposal to authorize the issuance of Sync common stock for
completion of the merger requires the affirmative vote of at least a majority of
the shares present in person or by proxy at the meeting and entitled to vote.
Uninstructed shares may not be voted on this matter, and therefore broker
non-votes do not affect the outcome. Abstentions have the effect of negative
votes.
Directors are elected by a plurality and the four (4) nominees who receive
the most votes will be elected. Abstentions and broker non-votes will not be
taken into account in determining the outcome of the election.
Approval of the amendment to the 1995 Employee Stock Purchase Plan requires
the affirmative vote of at least a majority of the shares present in person or
by proxy at the meeting and entitled to vote. Uninstructed shares are entitled
to vote on this matter. Therefore, abstentions and broker non-votes have the
effect of negative votes.
Approval of Ernst & Young LLP as Sync's independent auditors requires the
affirmative vote of at least a majority of the shares present in person or by
proxy at the meeting and entitled to vote. Uninstructed shares are entitled to
vote on this matter. Therefore, abstentions and broker non-votes have the effect
of negative votes.
VOTING BY SYNC DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on the record date, directors and executive
officers of Sync and their affiliates owned and were entitled to vote
shares of Sync common stock, which represented approximately % of
the shares of Sync common stock outstanding on that date. Each Sync director and
executive officer has indicated his or her present intention to vote, or cause
to be voted, the Sync common stock owned by him or her "for" adoption of the
merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
annual meeting will be voted at the annual meeting in the manner specified by
the holders. Properly executed proxies that do not contain voting instructions
will be voted "for" adoption of the merger agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the annual meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Other than the matter described under the heading "Possible Stockholder
Proposal," Sync is not aware of, and does not expect that, any matters other
than the proposals described in this proxy statement/prospectus will be brought
before the annual meeting. If, however, the Sync board of directors properly
presents other matters, the persons named as proxies will vote in accordance
with their judgment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the annual meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary of
Sync a duly executed revocation of proxy, by submitting a duly executed
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proxy to the Secretary of Sync bearing a later date or by appearing at the
annual meeting and voting in person. Attendance at the annual meeting will not
itself constitute revocation of a proxy.
SOLICITATION OF PROXIES
Sync will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Sync and its subsidiaries may solicit proxies from stockholders by
telephone or other electronic means or in person. Sync will cause brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of stock held of record by such persons. Sync
will reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in doing so.
MacKenzie Partners will assist in the solicitation of proxies by Sync. Sync
will pay MacKenzie Partners an estimated fee of $25,000, plus reimbursement of
certain out-of-pocket expenses, and will indemnify MacKenzie Partners against
any losses arising out of MacKenzie Partners' proxy soliciting services on
behalf of Sync.
THE MATTERS TO BE CONSIDERED AT THE SYNC ANNUAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF SYNC. ACCORDINGLY, STOCKHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE MERGER
The following discussion summarizes the material terms of the merger and the
merger agreement. Stockholders should read carefully the merger agreement, which
is attached as Annex A to this proxy statement/prospectus.
OWNERSHIP OF SYNC AND ENTRADA FOLLOWING THE MERGER; STOCK OPTIONS
Immediately following the merger, (i) Sync will own 100% of the issued and
outstanding shares of Entrada common stock, and (ii) Parent will own 50% of the
issued and outstanding shares of Sync common stock. In addition, certain
employees of Entrada will be granted options to purchase shares of Sync common
stock which, in the aggregate, shall equal the number of shares of Sync common
stock issuable upon the exercise of all of the outstanding Sync options at the
time of the merger.
BACKGROUND TO THE MERGER
Business combinations have been a significant part of the networking
industry. From time to time, Sync has developed various corporate development
programs to review and evaluate potential business combinations, corporate
acquisition opportunities, strategic alliances, joint development programs and
other strategic transactions involving other participants in the networking,
communications and computer industries and related industries, with the aim of
obtaining and developing access to complementary technologies, products and
distribution channels. Over the past two years, Sync has actively searched for a
desirable business combination in an effort to maximize value to it
stockholders.
On May 27, 1999, as part of Sync's corporate development efforts, Sync's
president and chief executive officer, Dick Martin, and chairman of the board,
Gregorio Reyes, met with a representative of Alliant Partners and discussed
various strategic alternatives for Sync. On June 7, 1999, Sync engaged Alliant
Partners to search for strategic alternatives for Sync.
Upon commencing the assignment, Alliant prepared a package of information
regarding Sync, as well as a prospect list of thirty-one potential merger
partners. Contacts were made with each of these thirty-one companies over the
subsequent thirty day period. Of the thirty-one companies contacted, eleven
requested that Alliant provide additional information regarding Sync. Meetings
were subsequently held with five of the target companies during the months of
July and August.
During the month of July 1999, Sync senior management met with Par Chadha,
chairman, president and chief executive officer of Parent, and Leonard Hecht, a
director of Parent, to discuss the possibility of a business combination between
the two companies. In connection with such meeting, Sync and Parent signed a
non-disclosure agreement.
On July 27, 1999, the Sync board of directors held a regular meeting. During
that meeting, the Sync board and management discussed various strategic issues
and the status of Sync's operations. In addition, the Sync board received a
status report from Alliant Partners on its progress to find a suitable strategic
alternative for Sync.
During the months of July and August, 1999, no further meetings with
additional prospects were scheduled, and all of the prospects except Entrada
indicated that they did not have any interest in proceeding with a transaction.
While Entrada did indicate some interest in a transaction with Sync,
representatives of Entrada indicated that they were not open to the idea of an
outright acquisition.
On August 28, 1999, Alliant reported to senior management of Sync that it
appeared unlikely that a transaction could be consummated with a larger company
that would provide liquidity to Sync's stockholders, or other usual and
customary benefits such as a premium to market. Based on market conditions,
Alliant recommended that discussions be held with Entrada, while an additional
thirteen
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prospects, consisting of large networking companies, were contacted regarding a
potential business combination with Sync.
On October 20, 1999, members of Sync's senior management and board of
directors met with members of Parent's senior management and board to discuss
whether a strategic combination of Sync and Entrada or other alternative would
be feasible and the possible framework for such a transaction.
On November 1, 1999, Mr. Reyes and Mr. Guerry met with Mr. Par Chadha and
other representatives of Entrada to conduct further discussions regarding the
framework and structure for such a strategic combination of the two companies.
It was mutually agreed that Sync's board would formally consider a merger of
Sync and Entrada at its next board meeting.
On November 15-16, 1999, members of Sync's executive management met with
Mr. Par Chadha and representatives of Entrada and Entrada's parent to review all
significant aspects of Entrada's operations including, but not limited to,
research and development projects, sales channels and customer relationships,
financial statements, product offerings and personnel.
During the months of September, October and November 1999, Alliant made
contact with the other thirteen prospects previously identified and was unable
to generate any interest in a transaction for Sync that would provide either
cash or a highly liquid security for Sync's stockholders.
On December 16, 1999, the Sync board of directors held a regular meeting.
During that meeting, the Sync board, its management and representatives of
Alliant Partners discussed the general terms of the proposed merger and the
assessment of Sync's management of Entrada's network access business. At that
meeting, it was determined that the terms of the proposed merger were not
acceptable and Alliant, accordingly, informed Parent that Sync was not
interested in completing the merger as proposed. The board, however, indicated
its agreement that a merger with an acceptable valuation should be considered.
On January 14, 2000, the president and chief executive officer of Parent
called Alliant Partners to reengage in further discussions with revised terms
and an acceptable valuation. Based on a series of discussions between
representatives of Alliant Partners and Parent, an agreement in principal was
reached to pursue a transaction between Sync and Entrada on a basis under which
the current Sync stockholders would own 50% of Sync following the proposed
merger.
Even after the agreement in principal was reached, Alliant continued to
explore alternative transactions, but was unable to identify any prospective
merger partner other than Entrada.
Between February 1, 2000 and April 9, 2000, the parties and their respective
financial and legal advisors conducted intensive on- and off-site due diligence
reviews and held numerous meetings and discussions regarding possible terms and
structures for the proposed combination. As part of their due diligence, each
party reviewed public and non-public documents and information of the other
party and heard presentations by representatives of the other party.
On February 11, 2000, a draft of the merger agreement was provided by
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP legal counsel for Parent, to
Sync. From February 11 through April 10, 2000 representatives of Sync and Parent
and their respective legal advisors held numerous meetings and discussions
regarding the terms of the proposed combination.
On March 22, 2000, senior management of Sync met with personnel of Parent to
discuss the sales outlook for Sync and Entrada, respectively.
On April 7, 2000 and April 10, 2000 the Sync board of directors met to
review the proposed transaction and alternative business strategies. At the
meeting, Sync management, Alliant Partners and Orrick, Herrington, & Sutcliffe,
LLP each made presentations to the Sync board, and copies of the draft merger
agreement and other pertinent information were distributed to the Sync board.
After
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discussing the terms of the proposed transaction, the Sync board voted at the
April 10 meeting to give approval to the combination of Sync and Entrada on the
terms set forth in the then current draft of the merger agreement.
On April 11, 2000, following the execution and delivery of the merger
agreement, Sync and Parent issued a joint press release announcing the merger.
REASONS FOR THE MERGER AND BOARD OF DIRECTORS RECOMMENDATION
REASONS FOR THE MERGER. In reaching its decision to approve the merger
agreement and the merger and to recommend that Sync stockholders approve the
issuance of shares of Sync common stock in connection with the merger, the Sync
board of directors consulted with its management team and advisors and
independently considered the proposed merger agreement and the transactions
contemplated by the merger agreement. The following discussion of the factors
considered by the Sync board of directors in making its decision is not intended
to be exhaustive but includes all material factors considered by the Sync board
of directors.
The Sync board of directors considered the following factors as reasons that
the merger will be beneficial to Sync and its stockholders:
- the opportunity to enter into the emerging and rapidly growing market for
storage area networking for which Entrada has already begun development of
product offerings
- the anticipated contributions of Parent, which has past experience in
working with developing high technology companies
- the complementary nature of Sync's and Entrada's technologies and product
offerings across a range of products and possible synergies from combining
Sync and Entrada
- the opportunity for Sync to distribute its products through Entrada's more
established reseller and distribution channels and through its stronger
presence in the OEM market
- the potential of the combined companies to deliver more complete network
access solutions to customers across the local and wide area networks, and
to develop products in new high growth technologies and markets, including
storage networking, with enhanced network manageability and reduced costs
- the potential of the combined companies to achieve operational
efficiencies and other synergies including improved manufacturing capacity
utilization, procurement savings, corporate overhead reductions and other
cost savings
- the terms and conditions of the merger agreement, including the ability of
the Sync board of directors to consider other nonsolicited strategic
transaction proposals prior to the closing of the merger
- detailed financial analysis and pro forma and other information with
respect to the companies presented by Alliant Partners to the Sync board
of directors, including Alliant Partner's opinion that the consideration
to be received by Sync stockholders pursuant to the exchange ratio in the
merger is fair to the Sync stockholders from a financial point of view.
In the course of deliberations, the Sync board of directors also considered
a number of additional factors relevant to the merger, including:
- information relating to the business, assets, management, competitive
position, financial performance and condition, technology, trading
performance and prospects of each of Sync and Entrada before and after
giving effect to the merger
- current industry, market and economic conditions
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- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations, are reasonable
- the prospects of Sync if it were to continue as an independent company
- the potential for other third parties to enter into strategic
relationships with or to acquire Sync
- the impact of the merger on Sync's and Entrada's customers, suppliers and
employees
- reports from Sync management and from legal and financial advisors as to
the results of their due diligence investigations of Entrada
- the likelihood that the merger would be completed.
The Sync board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized
- the possibility that the merger might not be consummated
- the risk that the issuance of Sync common stock in the merger could be
dilutive to current Sync stockholders
- the effect of the public announcement of the merger on (a) demand for the
products and services of Sync, its customer relations, its operating
results and its stock price, and (b) the ability of Sync to attract and
retain key management, account managers, network engineers and other
personnel
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
from the merger
- the risk that despite the efforts of the combined companies, key
management and other personnel might not remain employed by the combined
companies
- risks associated with fluctuations in Sync's stock price prior to the
closing of the merger
- various other risks.
The foregoing discussion is not exhaustive of all factors considered by
Sync's board of directors. The Sync board of directors believed that certain
risks were unlikely to occur, that Sync could avoid or mitigate others, and
that, overall, these risks were outweighed by the potential benefits of the
merger.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger, the Sync board of directors
did not find it practicable to and did not quantify or otherwise assign relative
weight to the specific factors considered in reaching its determination. In
addition, individual members of the Sync board of directors may have given
different weight to different factors.
RECOMMENDATION OF THE SYNC BOARD OF DIRECTORS. After careful consideration,
the Sync board of directors has unanimously determined that the terms of the
merger agreement and the merger are fair to, and in the best interests of, the
stockholders of Sync and has approved the merger agreement and the merger. The
Sync board of directors recommends that the stockholders of Sync vote "for" the
proposal to authorize the issuance of Sync common stock under the merger
agreement for completion of the merger.
FAIRNESS OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated June 7, 1999, Sync retained Alliant
Partners to render an opinion regarding the fairness, from a financial point of
view, of the merger to the Sync stockholders.
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On April 10, 2000, in a 5:00 a.m. PST conference call, the Sync board of
directors met and approved the merger. At this meeting and during the previous
board meeting on Friday, April 7, 2000, Alliant Partners delivered to the Sync
Research board of directors its opinion by teleconference (the "Alliant
Opinion") that as of April 10, 2000, and based on the matters described therein,
the transaction was fair, from a financial point of view, to the Sync
stockholders. Alliant Partners noted that its presentation on the financial
terms of the merger was based on the closing stock prices and general market
conditions as of April 7, 2000. No limitations were imposed by Sync on the scope
of Alliant Partners' investigations or the procedures to be followed by Alliant
Partners in rendering the Alliant Opinion. The exchange ratio was determined
through negotiations between the management of Sync and Parent. In furnishing
the Alliant Opinion, Alliant Partners was not engaged as an agent or fiduciary
of Sync's stockholders or any other third party.
The full text of the Alliant Opinion, which sets forth, among other things,
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Annex B and is incorporated herein by reference.
STOCKHOLDERS OF SYNC ARE URGED TO READ THE ALLIANT OPINION IN ITS ENTIRETY. THE
ALLIANT OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE SYNC BOARD OF
DIRECTORS IN ITS CONSIDERATION OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO STOCKHOLDERS OF SYNC AS TO HOW THEY SHOULD VOTE AT THE ANNUAL
MEETING IN CONNECTION WITH THE MERGER. The Alliant Opinion does not address the
relative merits of the merger and any other transactions or business strategies
discussed by the Sync board of directors as alternatives to the merger agreement
or, except with respect to the fairness of the exchange ratio, from a financial
point of view, to the holders of Sync common stock, the underlying business
decision of the Sync board to proceed with or effect the merger. The summary of
the Alliant Opinion set forth in this proxy statement/prospectus is qualified in
its entirety by reference to the full text of the Alliant Opinion.
In connection with the preparation of the Alliant Opinion, Alliant Partners,
among other things, engaged in the following activities: reviewed the terms of
the Agreement and Plan of Merger dated April 10, 2000 and the associated
exhibits thereto; reviewed the Sync Form 10-K for the fiscal years ended
December 1998 and 1999, including the audited financial statements included
therein; reviewed certain internal financial and operating information relating
to Sync prepared by Sync management; participated in discussions with Sync
management concerning the operations, business strategy, financial performance
and prospects for Sync; reviewed the recent reported closing prices and trading
activity for Sync common stock; compared certain aspects of the financial
performance and business strategy of Sync and Entrada with comparable public
companies; analyzed available information, both public and private, concerning
other mergers and acquisitions comparable in whole or in part to the merger;
reviewed Form 10-Q for the period ending October 31, 1999, Forms 10-K for 1998,
1997 and 1996, and several Forms 8-K of Parent; participated in discussions with
management of Parent concerning the operations, business strategy, financial
performance and prospects for Entrada and its strategic rationale for the
merger; reviewed the recent reported closing prices and trading activity for the
common stock of Parent; reviewed recent equity analyst reports covering
Entrada's business sector and Parent; considered the effect of the merger on the
future financial performance of the consolidated entity; participated in
discussions related to the merger among Parent, Sync, and their respective
financial and legal advisors; and conducted other financial studies, analyses
and investigations as Alliant Partners deemed appropriate for purposes of
rendering the Alliant Opinion.
In conducting its review and rendering the Alliant Opinion, Alliant Partners
relied upon and assumed the accuracy and completeness of the financial
statements and other information provided by Sync and Parent or otherwise made
available to Alliant Partners and did not assume responsibility independently to
verify such information. Alliant Partners further relied upon the assurances of
Parent's and Sync's management that the information provided was prepared on a
reasonable basis in accordance with industry practice, that with respect to
financial planning data, the information provided reflected the best currently
available estimates and good faith judgments of Parent's and Sync's
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management as to the expected future financial performance of Sync and Entrada,
and that such parties were not aware of any information or facts that would make
the information provided to Alliant Partners incomplete or misleading. Without
limiting the generality of the foregoing, for the purpose of the Alliant
Opinion, Alliant Partners assumed that neither Sync nor Entrada was a party to
any pending transaction, including external financing, recapitalizations,
acquisitions or merger discussions, other than the merger or in the ordinary
course of business. Alliant Partners also assumed that the merger would be free
of Federal tax to the Sync stockholders.
In arriving at the Alliant Opinion, Alliant Partners did not perform any
appraisals or valuations of specific assets or liabilities of Sync or Entrada
and was not furnished with any such appraisals or valuations.
Without limiting the generality of the foregoing, Alliant Partners did not
undertake any independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities, to which Sync,
Entrada, Parent or any of their respective affiliates was a party or may be
subject and, at Sync's direction and with its consent, the Alliant Opinion made
no assumption concerning, and therefore did not consider, the possible assertion
of claims, outcomes or damages arising out of any such matters. Although
developments following the date of the Alliant Opinion may affect the Alliant
Opinion, Alliant Partners assumed no obligation to update, revise or reaffirm
the Alliant Opinion.
Following is a summary explanation of the various sources of information and
valuation methodologies employed by Alliant Partners in conjunction with
rendering its opinion to the Sync board of directors.
COMPARABLE COMPANY ANALYSIS
Alliant Partners compared certain financial information and valuation ratios
relating to Entrada to corresponding publicly available data and ratios from a
group of selected publicly traded companies deemed comparable to Entrada. The
comparable companies selected included twenty-two publicly traded companies in
the business of telecommunications and networking. The following financial
information was reviewed by Alliant Partners for each selected company:
Enterprise Value, calculated as the market capitalization of the selected
company, plus such company's debt, less such company's cash; Trailing Twelve
Months revenue, calculated as the most recent four quarters revenue as filed
with the Securities and Exchange Commission; Calendar Year 1999 Revenue; Prior
Year Revenue Growth Rate; and Current Year Revenue Growth Rate. The companies
assessed by Alliant Partners included: 3Com Corporation, ACT Networks Inc., ADC
Telecommunications, ADTRAN Inc., Asante Technologies Inc., Cabletron
Systems Inc., Cisco Systems Inc., Digi International, General DataComm
Industries, Harris Corporation, Hypercom Corporation, Interphase Corporation,
Larscom Incorporated, Lucent Technologies Inc., Motorola Inc., Newbridge
Networks Corp., Nortel Networks Corp., Paradyne Networks Inc., Verilink
Corporation, Visual Networks Inc., Westell Technologies Inc. and Xircom Inc.
The comparable companies had an Enterprise Value/TTM Revenue ratio range of
.5x to 35x with a weighted narrow average (narrow average excludes the highest
and lowest estimates) of 4.3x; Enterprise Value/TTM Earnings (where positive)
ratio range of 10.8x to 206x with a weighted narrow average of 79x; (Enterprise
Value/1 million)/Headcount ratio range of .2x to 20x with a weighted narrow
average of 1.2x. After making certain adjustments for differences in liquidity,
performance and size, this analysis yielded an implied Entrada equity value of
$32.1 million.
No company utilized as a comparison in the Comparable Company Analysis is
identical to Entrada or Sync. In evaluating the comparable companies, Alliant
Partners made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Entrada or Sync.
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COMPARABLE TRANSACTION ANALYSIS
Alliant Partners reviewed twenty-three comparable merger and acquisition
transactions from November 1998 through April 2000, which involve sellers
sharing many characteristics with Entrada including revenue size, products
offered and business model. These comparable transactions of companies in the
telecommunications and networking sectors are: ADC Telecommunications, Inc.'s
acquisition of PairGain Technologies, Inc.; Lucent Technologies Inc.'s
acquisition of Ortel Corp.; Cisco Systems Inc.'s acquisition of Pirelli Optical
Systems; Westell Technologies Inc.'s acquisition of Teltrend, Inc.; Cisco
Systems Inc.'s acquisition of Aironet Wireless Communications Inc.; Zhone
Technologies Inc.'s acquisition of Premisys Communications, Inc.; Alcatel SA's
acquisition of Genesys Telecommunications Laboratories Inc.; Motorola Inc.'s
acquisition of General Instrument Corp.; DLZ Corp.'s acquisition of Digital Link
Corp. (Quick Eagle Networks); Cisco Systems Inc.'s acquisition of Monterey
Networks; Nortel Networks Corp.'s acquisition of Periphonics Corp.; Lucent
Technologies Inc.'s acquisition of Excel Switching Corp.; Lucent
Technologies Inc.'s acquisition of Nexabit Networks Inc.; Newbridge Networks
Corp.'s acquisition of Stanford Telecommunications Inc.; ADC
Telecommunications Inc.'s acquisition of Saville Systems; Alcatel SA's
acquisition of XYLAN Corp.; 3COM Corp.'s acquisition of NBX Corp.; Verilink
Corp.'s acquisition of TXPORT, Inc.; Lucent Technologies Inc.'s acquisition of
Agere, Inc.; Cisco Systems Inc.'s acquisition of Altiga Networks; Cisco
Systems Inc.'s acquisition of Compatible Systems Corp.; Efficient Networks'
acquisition of FlowPoint Corporation; and Cisco Systems Inc.'s acquisition of
Tasmania Network Systems Inc.
The Price/Revenue multiples of the twenty-three transactions range from .27x
to 55x with a weighted average of 12x. The Price/Earnings ratio ranged
from--506x to 339x, with a narrow average of 13x. This was not a meaningful
multiple as Entrada had negative earnings. The Price/Headcount multiple ranged
from .05x to 19x, with the narrow average of 3x. The Comparable Transaction
Analysis yielded an implied Entrada equity value of $87.2 million.
Estimated multiples paid in the comparable transactions were based on
information obtained from public filings, public company disclosures, press
releases, industry and popular press reports, research reports, databases and
other sources. No company, transaction or business used in the Comparable
Company Analysis or Comparable Transaction Analysis as a comparison is identical
to Entrada or the merger. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading and other values of the comparable companies, comparable transactions or
the business segment, company or transactions to which they are being compared.
COMPARISON OF ENTRADA WITH SYNC RESEARCH
Alliant Partners evaluated Sync and Entrada in terms of business strategy,
business performance and various financial metrics to determine the relative
value of each if the two companies were combined as one entity. Financial
metrics included a comparison of revenues, EBIT, earnings, various margins,
assets, fixed assets, investment, employees, and growth rates. Based on this
analysis, Alliant Partners concluded that Entrada would represent on average a
49% share of the combined companies.
ENTRADA AS A PERCENTAGE OF FIBR MARKET VALUATION
In this analysis, Alliant Partners evaluated Entrada to determine its
percentage of the market valuation of Parent (NASDAQ: FIBR). In the months
preceding the transaction, Parent had seen its share price rise at an
exceptional rate, mainly due to the market appetite for Optical Networking
companies. To determine Entrada's share of the valuation of Parent, Alliant
Partners used a 20 day average share price of $105.51, (dates from March 13
through April 7, 2000) which translated to a market capitalization of
$1,052.59 million.
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In determining the value of Entrada, Alliant Partners used three methods:
estimates from public investment research; percentage of revenues, based on the
Parent's management revenue estimates and industry growth rates; and a
conservative estimate of 1 X estimated fiscal year 2000 revenues. This analysis
produced an average value for Entrada of $37.1 million.
CONCLUSION
While the foregoing summary describes certain analyses and factors that
Alliant Partners deemed material in its presentation to the Sync board of
directors, it is not a comprehensive description of all analyses and factors
considered by Alliant Partners. The preparation of a fairness opinion is a
complex process that involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Alliant Partners believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all analyses and factors,
would create an incomplete view of the evaluation process underlying the Alliant
Opinion. Several analytical methodologies were employed and no one method of
analysis should be regarded as critical to the overall conclusion reached by
Alliant Partners. Each analytical technique has inherent strengths and
weaknesses, and the nature of the available information may further affect the
value of particular techniques. The conclusions reached by Alliant Partners are
based on all analyses and factors taken as a whole and also on application of
Alliant Partners' own experience and judgment. Such conclusions may involve
significant elements of subjective judgment and qualitative analysis. Alliant
Partners therefore gives no opinion as to the value or merit standing alone of
any one or more parts of the analysis it performed. In performing its analyses,
Alliant Partners considered general economic, market and financial conditions
and other matters, many of which are beyond the control of Sync and Entrada. The
analyses performed by Alliant Partners are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
those suggested by such analyses. Accordingly, analyses relating to the value of
a business do not purport to be appraisals or to reflect the prices at which the
business actually may be purchased. Furthermore, no opinion is being expressed
as to the prices at which shares of Sync common stock may trade at any future
time.
Pursuant to an engagement letter dated June 7, 1999, Alliant Partners
received a fee of $100,000 for the fairness opinion rendered to the Sync board
or directors. Sync has also agreed to reimburse Alliant Partners for its out of
pocket expenses and to indemnify and hold harmless Alliant Partners and its
affiliates and any person, director, employee or agent acting on behalf of
Alliant Partners or any of its affiliates, or any person controlling Alliant
Partners or its affiliates, for certain losses, claims, damages, expenses and
liabilities relating to or arising out of services provided by Alliant Partners
as financial advisor to Sync. The terms of the fee arrangement with Alliant
Partners, which Sync and Alliant partners believe are customary in transactions
of this nature, were negotiated at arm's length between Sync and Alliant
Partners, and the Sync board was aware of such fee arrangements.
Alliant Partners was retained based on Alliant Partners' experience as a
financial advisor in connection with mergers and acquisitions and in securities
valuations generally, as well as Alliant Partners' investment banking
relationship and familiarity with Sync. Alliant Partners has provided financial
advisory and investment banking services to Sync in the past.
As part of its investment banking business, Alliant Partners is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, sales and divestitures, joint ventures and strategic
partnerships, private financings and other specialized studies.
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PRIVATE PLACEMENT FINANCING; BRING-DOWN OF ALLIANT OPINION
Subsequent to the issuance of the initial fairness opinion by Alliant
Partners, Sync closed a private placement financing on May 12, 2000, in which
Entrada Holdings LLC ("Entrada Holdings"), purchased 700,000 shares of Series A
Preferred Stock from Sync for approximately $3.19 per share, which was the
average closing sale price of Sync stock for the ten days ended April 28, 2000.
An affiliate of Entrada Holdings is a shareholder of Parent. Sync raised a total
of $2,235,625 in cash in the private placement. The shares of Series A Preferred
Stock are convertible into shares of Sync common stock on a one-for-one basis,
and will be automatically converted into shares of Sync common stock on the
closing of the merger. Entrada Holdings may request that Sync register the
shares of Sync common stock issuable on the conversion of the Series A Preferred
Stock on a Form S-3 registration statement for resale in the public market at
any time after the earlier of: (i) ninety (90) days after the closing of the
merger, or (ii) May 12, 2001. If the merger has not closed by a specified date,
Entrada Holdings will receive certain protective provisions, including the right
to designate one member to Sync's board of directors for so long as a specified
percentage of the shares of Series A Preferred Stock are outstanding. In
connection with the private placement, Sync paid a fee equal to five percent
(5%) of the aggregate purchase price to Andersen Weinroth Capital Corp., an
investment firm affiliated with Entrada Holdings.
After careful consideration, the management of Sync has determined that,
notwithstanding the fact that the merger consideration payable by Sync to Parent
will increase by an additional 700,000 shares of Sync common stock as a result
of the private placement, the terms of the merger agreement and the merger
remain fair to, and in the best interests of, the stockholders of Sync. Alliant
Partners has provided Sync with an updated opinion, subsequent to the closing of
the private placement financing, to supplement its initial opinion regarding the
fairness, from a financial point of view, of the merger to the Sync
stockholders. Alliant Partners delivered to the Sync board of directors its
opinion dated , 2000 (the "Bring-Down Alliant Opinion"), confirming
that the private placement financing described above does not impact the
conclusion that the merger transaction is fair, from a financial point of view,
to the Sync stockholders. The full text of the Bring-Down Alliant Opinion is
attached hereto as Annex C and is incorporated herein by reference. STOCKHOLDERS
OF SYNC ARE URGED TO READ THE BRING-DOWN ALLIANT OPINION IN ITS ENTIRETY. THE
BRING-DOWN ALLIANT OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE SYNC
BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO STOCKHOLDERS OF
SYNC AS TO HOW THEY SHOULD VOTE AT THE ANNUAL MEETING IN CONNECTION WITH THE
MERGER. The summary of the Bring-Down Alliant Opinion set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the Bring-Down Alliant Opinion.
INTERESTS OF SYNC DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the Sync board of directors in favor of
the merger, stockholders of Sync should be aware that members of the Sync board
of directors and executive officers of Sync have interests in the merger that
are different from, or in addition to, the interests of stockholders of Sync.
Such interests relate to or arise from, among other things:
- all executive officers of Sync are parties to agreements that provide for
the partial vesting of any unvested options upon a change in control and
certain severance benefits if such executive officer is terminated
following a corporate transaction such as the merger
- Mr. Gregorio Reyes, the current Chairman of the Sync board of directors,
will remain as a director of Sync following the merger, and certain
current executive officers of Sync will remain as executives of Sync
following the merger
- Mr. Reyes is party to an agreement that provides for the full vesting of
any unvested options upon a change in control and certain severance
benefits if he is terminated following a corporate transaction such as the
merger.
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Each of these additional interests are described below, to the extent
material, and except as described below these individuals have, to the knowledge
of Sync and Entrada, no material interest in the merger apart from those of
stockholders generally. The Sync board of directors was aware of, and considered
the interests of, their directors and executive officers in approving the merger
agreement and the merger.
BOARD OF DIRECTORS. Upon consummation of the merger, the board of directors
of Sync intends to increase the number of directors who sit on the board from
four to five, and to appoint Dr. Kanwar J.S. Chadha, currently the President of
Entrada and the intended Chief Executive Officer of Sync following the merger,
to fill such created vacancy. Further, it is the present intention of Sync and
Entrada to have Messrs. Guerry and Schroeder step down from the board upon
consummation of the merger, and be replaced by Leonard N. Hecht, currently a
director of Parent, and Rohit Phansalkar, currently a director of Parent and a
partner of Andersen Weinroth & Co. LP, affiliates of which own all of the
outstanding Series A Preferred Stock of Sync and are stockholders of Parent.
Therefore, assuming that the Sync stockholders authorize the issuance of Sync
common stock under the merger agreement for completion of the merger and elect
the slate of directors that the Sync board of directors has nominated, the board
of directors of Sync following the merger will consist of Gregorio Reyes,
currently the Chairman of Sync's board of directors, Dr. Chadha, Charles A.
Haggerty, currently a director of Sync, Mr. Hecht and Mr. Phansalkar.
EXECUTIVE OFFICERS. The Chief Executive Officer of Sync following the
merger will be Dr. Kanwar J.S. Chadha, who is currently the President of
Entrada. William K. Guerry, currently the Chief Executive Officer, President and
Chief Financial Officer of Sync, will be the Chief Operating Officer, Chief
Financial Officer and Vice President-Finance and Administration of Sync
following the merger. Anand Mehta, currently the Chief Technology Officer and
Vice President-Engineering of Entrada, will be the Chief Technology Officer and
Vice President-Engineering of Sync following the merger. Arthur Trakas,
currently the Executive Vice President-Sales and Marketing of Parent and
Entrada, will be the Vice President-Sales and Marketing of Sync following the
merger.
CHANGE IN CONTROL AGREEMENTS. Sync has entered into change in control
agreements with all of the executive officers and the Chairman of the board of
Sync. Pursuant to these agreements, 50% (100% in the case of Mr. Reyes) of each
officer's unvested options will become fully vested as a result of the merger.
In addition, if the employment of any officer is terminated within one year of
the merger other than for cause, the officer will become entitled to
- an amount equal to 100% of his annual salary, payable monthly for twelve
months (twenty-four months in the case of the Chief Executive Officer)
following the date of termination
- continued health, dental and life insurance coverage for twelve months
- have all remaining unvested Sync stock options vest at the same monthly
rate as prior to the merger and in accordance with the applicable stock
option plan.
ACCOUNTING TREATMENT
The merger will be accounted for as an acquisition of Sync by Entrada under
the "purchase" method of accounting in accordance with generally accepted
accounting principles.
APPRAISAL RIGHTS
Holders of Sync common stock are not entitled to dissenters' appraisal
rights under Section 262 of the Delaware General Corporation Law with respect to
the merger or the proposals to be considered at the Sync annual meeting.
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FORM OF THE MERGER; NAME CHANGE
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, Sync Research
Acquisition Corp., a wholly-owned subsidiary of Sync formed for the purpose of
the merger which is a party to the merger agreement, will merge with and into
Entrada. Entrada will survive the merger as a wholly owned Delaware subsidiary
of Sync, and Sync will continue under the name "Entrada Networks, Inc."
MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of Entrada
common stock will be converted into the right to receive shares of Sync common
stock, except that treasury stock and stock held by Entrada or any subsidiary of
Entrada will be canceled. As of the effective time of the merger, all shares of
Entrada common stock will no longer be outstanding and will automatically be
canceled and will cease to exist and each holder of a certificate representing
any shares of Entrada common stock will cease to have any rights as a
stockholder except the right to receive Sync common stock in the merger. The
exchange ratio was determined through arm's-length negotiations between Sync and
Entrada.
CONVERSION OF SHARES
The conversion of Entrada common stock into the right to receive Sync common
stock will occur automatically at the effective time of the merger. After the
effective time of the merger, each certificate that previously represented
shares of Entrada common stock will represent only the right to receive the Sync
common stock into which such shares were converted in the merger. All shares of
Sync common stock issued upon conversion of shares of Entrada common stock will
be issued in full satisfaction of all rights relating to such shares of Entrada
common stock.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State or such later time as is agreed upon
by Sync and Entrada and specified in the certificate of merger. The filing of
the certificate of merger will occur as soon as practicable, but no later than
the second business day, after satisfaction or waiver of the conditions to the
completion of the merger described in the merger agreement unless another date
is agreed to in writing by Sync and Entrada.
STOCK EXCHANGE LISTING OF SYNC COMMON STOCK
It is a condition to the completion of the merger that Sync common stock
issuable to Parent in the merger be approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following are the material United States federal income tax consequences
of the merger to Sync and the Sync stockholders. The following discussion is
based on and subject to the Internal Revenue Code of 1986, its legislative
history, applicable Treasury regulations, administrative rulings and court
decisions currently in effect, all of which are subject to change at any time,
possibly with retroactive effect. For United States federal income tax purposes,
regardless of whether the merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, no gain or loss will be
recognized by Sync or the Sync stockholders as a result of the merger.
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REGULATORY MATTERS
UNITED STATES ANTITRUST. Under the Hart-Scott-Rodino Act and related rules,
certain transactions, including the merger, may not be completed unless certain
waiting period requirements have been satisfied. Sync and Entrada each intend to
file soon a Notification and Report Form with the Antitrust Division of the
Department of Justice and the Federal Trade Commission, and expect the waiting
period to expire approximately thirty (30) days after such date of filing,
unless earlier terminated, or extended by a "second request" for additional
information and materials by the Antitrust Division or the Federal Trade
Commission. At any time before or after the effective time of the merger, the
Antitrust Division, the Federal Trade Commission or others could take action
under the antitrust laws, including seeking to prevent the merger, to rescind
the merger or to conditionally approve the merger upon the divestiture of
substantial assets of Sync or Entrada. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
GENERAL. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:
- Sync or Entrada will be able to satisfy or comply with such conditions
- compliance or non-compliance will not have adverse consequences for Sync
after completion of the merger
- the required regulatory approvals will be obtained within the time frame
contemplated by Sync and Entrada and referred to in this proxy
statement/prospectus or on terms that will be satisfactory to Sync and
Entrada.
See "The Merger Agreement--Conditions to the Completion of the Merger."
RESALE OF SYNC COMMON STOCK
Sync common stock issued in the merger to Parent will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except that,
because Parent is an "affiliate" of Sync under the Securities Act, the Sync
common stock issued to Parent as a result of the merger may be resold by Parent
only in transactions permitted by the resale provisions of Rule 144 under the
Securities Act or as otherwise permitted under the Securities Act. An affiliate
is defined generally as including, without limitation, directors, certain
executive officers and beneficial owners of 10% or more of a class of common
stock of a company.
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THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT. STOCKHOLDERS SHOULD READ CAREFULLY THE MERGER AGREEMENT, A COPY WHICH
IS ATTACHED AS ANNEX A TO THIS PROXY STATEMENT/ PROSPECTUS.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each party's obligation to effect the merger is subject to the satisfaction
or waiver of various conditions which include, in addition to other customary
closing conditions, the following:
- holders of a majority of the voting power of all outstanding shares of
Sync common stock having adopted the merger agreement
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Act having expired or been terminated
- no injunction, writ, preliminary restraining order or other order in
effect of any nature issued by a United States federal or state court or
governmental authority of competent jurisdiction being in effect that
would prevent the completion of the merger
- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, having become effective under the
Securities Act and not being the subject of any stop order or proceedings
seeking a stop order
- the shares of Sync common stock issuable to Parent in the merger having
been approved for listing on the Nasdaq National Market, subject to
official notice of issuance
- the representations and warranties of the other party set forth in the
merger agreement being true and correct as of the date of the merger
agreement and as of the date on which the merger is to be completed as
though made on and as of the date on which the merger is to be completed,
or, if such representations and warranties expressly relate to an earlier
date, then as of such date
- the other party to the merger agreement having performed and complied in
all material respects with all agreements and obligations required to be
so performed and complied with by it under the merger agreement on or
prior to the date on which the merger is to be completed
- the other party having obtained all material orders, consents, approvals,
permits, authorizations, notices, declarations, filings, applications,
qualifications and registrations necessary to complete the merger or
continue the business of the combined companies after the merger
Sync can provide no assurance that all of the conditions precedent to the
merger will be satisfied or waived by the party permitted to do so. Sync cannot
at this point determine whether it would resolicit proxies in the event that it
decides to waive any of the items listed above. This decision would depend upon
the facts and circumstances leading to Sync's decision to complete the merger
and whether Sync believes there has been a material change in the terms of the
merger and its effect on Sync stockholders. In making its determination, Sync
would consider, among other factors, the reasons for the waiver, the effect of
the waiver on the terms of the merger, whether the requirement being waived was
necessary in order to make the deal fair to the stockholders from a financial
point of view, the availability of alternative transactions and the prospects of
Sync as an independent entity. If Sync determines that a waiver of a condition
would materially change the terms of the merger, including the expected
qualification of the merger as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, it will resolicit proxies.
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NO SOLICITATION
The merger agreement provides that Sync, Parent and its subsidiaries, and
the officers, directors, employees or other agents of Sync, Parent and its
subsidiaries, will not, directly or indirectly:
- take any action to solicit, initiate or encourage any takeover proposal,
as described below
- engage in negotiations with, or disclose any nonpublic information
relating to Sync or Entrada to, or afford access to the properties, books
or records of Sync or Entrada to, any person that has advised Sync,
Entrada or Parent that it may be considering making, or that has made, a
takeover proposal.
The merger agreement further provides that the term "takeover proposal"
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving Sync or Entrada, or the acquisition of any
significant equity interest in, or a significant portion of the assets of, Sync
or Entrada, other than the merger contemplated by the merger agreement.
Notwithstanding the restrictions described above, if an unsolicited takeover
proposal, or an unsolicited written expression of interest that can reasonably
be expected to lead to a takeover proposal, shall be received by the board of
directors of Sync or Parent, then, to the extent the board of directors of such
company believes in good faith (after consultation with its financial advisor)
that such takeover proposal would, if accepted, result in a transaction more
favorable to such company's stockholders from a financial point of view than the
merger contemplated by the merger agreement (any such more favorable takeover
proposal being referred to in the merger agreement as a "superior proposal"),
and the board of directors of such company determines in good faith after
consultation with outside legal counsel that it is necessary for such board of
directors to evaluate the superior proposal in order to comply with its
fiduciary duties to stockholders, such company and its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives retained by it may provide relevant information and take
such other actions as are consistent with the fiduciary obligations of its board
of directors, and such actions shall not violate the merger agreement; PROVIDED,
HOWEVER, that Sync and Parent shall not, and shall not permit any of their
respective officers, directors, employees or other representatives to, agree to
or endorse any takeover proposal regarding Sync or Entrada unless Sync or Parent
shall have
- terminated the merger agreement; and
- agreed to pay to the other party, without interest, the sum of $1,000,000
no later than thirty days after the closing of the transaction resulting
from the superior proposal.
Each of Sync and Parent will promptly notify the other after receipt of any
takeover proposal or any notice that any person is considering making a takeover
proposal or any request for nonpublic information relating to Sync or Entrada or
for access to the properties, books or records of Sync or Entrada by any person
that has advised Sync or Parent that it may be considering making, or that has
made, a takeover proposal and will keep Sync or Parent, as applicable, fully
informed of the status and details of any such takeover proposal notice or
request.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger:
- by the mutual consent of Sync and Parent
- by Sync, if the merger has not been completed by August 31, 2000, unless
the failure of the merger to occur is due to (i) a material breach by Sync
of any of its representations or warranties contained in the merger
agreement, or (ii) the breach or failure of Sync to comply in
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all material respects with the agreements and covenants contained in the
merger agreement to be performed by Sync by August 31, 2000
- by Parent, if the merger has not been completed by August 31, 2000, unless
the failure of the merger to occur is due to (i) a material breach by
Entrada or Parent of any of their representations or warranties contained
in the merger agreement, or (ii) the breach or failure of Entrada or
Parent to comply in all material respects with the agreements and
covenants contained in the merger agreement to be performed by Entrada or
Parent by August 31, 2000
- by either Sync or Parent, if any court or governmental authority of
competent jurisdiction shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
merger and such order, decree or ruling or other action shall have become
final and nonappealable
- by either Sync or Parent, upon (i) receipt of an unsolicited proposal that
its board of directors determines in good faith to be superior to the
merger and (ii) agreement to pay to the other party, without interest, the
sum of $1,000,000 no later than thirty days after the closing of the
transaction resulting from the superior proposal
- by Sync, if the stockholders of Sync vote not to authorize the issuance of
Sync common stock for completion of the merger, provided that Sync pays
Parent a fee of $250,000 within thirty (30) days of such stockholder vote.
In the event of the termination of the merger agreement and the abandonment
of the merger by Sync or Parent, written notice of such termination must be
given to the other parties.
CONDUCT OF ENTRADA'S BUSINESS PRIOR TO THE MERGER
Under the merger agreement, Entrada and Parent have agreed that, except
(i) as otherwise expressly provided in the merger agreement or (ii) as consented
to by Sync in writing, from the date of the merger agreement and until the
effective time of the merger Parent and Entrada shall, and shall cause each of
its subsidiaries to:
- use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Entrada and its
subsidiaries and pay payables and collect receivables in a manner
consistent with past practice and otherwise operate Entrada and its
subsidiaries in the ordinary and regular course of business consistent
with past practice; (ii) maintain Entrada's and its subsidiaries' books
and records in accordance with past practices; (iii) keep available the
services of Entrada'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 Entrada and its subsidiaries
- notify Sync of any change in the normal course of business or operations
of Entrada or its subsidiaries and of any governmental complaints,
investigations or hearings of which Entrada or its subsidiaries is
notified (or communications received by Entrada or its subsidiaries
indicating that the same may be contemplated), or the institution or
settlement of litigation or any claim, in each case involving Entrada or
its subsidiaries, and to keep Sync informed of such events;
- comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
In addition, under the merger agreement Entrada and Parent have agreed that,
except (i) as otherwise expressly provided in the merger agreement or (ii) as
consented to by Sync in writing, from
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and after the date of the merger agreement and until the effective time of the
merger, neither Parent, Entrada nor any subsidiaries thereof shall:
- cause to be issued or sold any shares of capital stock or debt or equity
securities of Entrada or its subsidiaries or Entrada capital stock
equivalents or issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect thereto
- directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Entrada or its
subsidiaries
- declare, set aside or pay any dividend or other distribution
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or any Entrada
capital stock equivalents, other than pursuant to Entrada stock option
plans in accordance with their terms as in effect on the date hereof
- permit or allow Entrada 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 the ordinary course of
business and consistent with past practice
- subject any of the assets of Entrada 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
Entrada or its subsidiaries (real, personal or mixed, tangible or
intangible), other than in the ordinary course of business and consistent
with past practice
- assume, guarantee, or otherwise become responsible for the obligations of,
or make any loans or advances to, any other individual, firm or
corporation
- waive or release any rights of material value, or cancel, compromise,
release or assign any material indebtedness owed to Entrada or its
subsidiaries or any material claims held by Entrada or its subsidiaries
- except for capital expenditures not to exceed $5,000, make any investment
or expenditure of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise
- enter into any new material line of business
- cancel or terminate any insurance policy naming Entrada or its
subsidiaries as a beneficiary or a loss payable payee
- enter into any collective bargaining agreements
- increase the compensation or fringe benefits of any of the officers or
directors of Entrada or any of its subsidiaries or, other than in
accordance with past practice, effect any material general increase in the
compensation or fringe benefits of the employees of Entrada 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 any
bonus to any such officers or employees, commit Entrada or any of its
subsidiaries to any employment agreement or employee benefit plan with or
for the benefit of any of Entrada's or its subsidiaries' officers or
employees or any other person, 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
- except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting practices or
principles used by Entrada or its subsidiaries
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- enter into or terminate any license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement, or any
contract, agreement or transaction involving a total remaining commitment
of at least $25,000
- except as may be required by law, make any material tax election, make or
change any method of accounting with respect to taxes, file any amended
tax returns that may have a material adverse effect on the tax position of
Entrada or any of its subsidiaries or settle or compromise any material
federal, state, local or foreign tax liability
- enter into any "non-compete" or similar agreement
- amend the certificate of incorporation or bylaws of Entrada or any of its
subsidiaries
- take any action with knowledge that such action would reasonably be
expected to result in any of Sync's conditions to closing, as described in
the merger agreement, not being satisfied
- agree to do any of the foregoing.
CONDUCT OF SYNC'S BUSINESS PRIOR TO THE MERGER
Under the merger agreement, Sync has agreed that, except (i) as otherwise
expressly provided in the merger agreement or (ii) as consented to by Entrada in
writing, from the date of the merger agreement and until the effective time of
the merger Sync shall, and shall cause each of its subsidiaries to:
- use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Sync and its
subsidiaries and pay payables and collect receivables in a manner
consistent with past practice and otherwise operate Sync and its
subsidiaries in the ordinary and regular course of business consistent
with past practice; (ii) maintain Sync's and its subsidiaries' books and
records in accordance with past practices; (iii) keep available the
services of Sync'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 Sync and its subsidiaries
- notify Entrada of any change in the normal course of business or
operations of Sync or its subsidiaries and of any governmental complaints,
investigations or hearings of which Sync or its subsidiaries is notified
(or communications received by Sync or its subsidiaries indicating that
the same may be contemplated), or the institution or settlement of
litigation or any claim, in each case involving Sync or its subsidiaries,
and to keep Entrada informed of such events
- comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
In addition, under the merger agreement Sync has agreed that, except (i) as
otherwise expressly provided in the merger agreement or (ii) as consented to by
Entrada in writing, from and after the date of the merger agreement and until
the effective time of the merger, neither Sync nor any of its subsidiaries
shall:
- cause to be issued or sold any shares of capital stock or debt or equity
securities of Sync or its subsidiaries or Sync capital stock equivalents,
except for the exercise of outstanding stock options, or issue, grant or
enter into any options, warrants, rights, subscription agreements or
commitments of any kind with respect thereto, except in the ordinary
course to non-executive employees of Sync
- directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Sync or its
subsidiaries
45
<PAGE>
- declare, set aside or pay any dividend or other distribution
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or any Sync
capital stock equivalents, other than pursuant to Sync stock option plans
in accordance with their terms as in effect on the date hereof
- permit or allow Sync 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 the ordinary course of business and
consistent with past practice
- subject any of the assets of Sync 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
Sync or its subsidiaries (real, personal or mixed, tangible or
intangible), other than in the ordinary course of business and consistent
with past practice
- assume, guarantee, or otherwise become responsible for the obligations of,
or make any loans or advances to, any other individual, firm or
corporation
- waive or release any rights of material value, or cancel, compromise,
release or assign any material indebtedness owed to Sync or its
subsidiaries or any material claims held by Sync or its subsidiaries
- except for (i) capital expenditures in the ordinary course of business and
(ii) capital expenditures not to exceed $5,000, make any investment or
expenditure of a capital nature either by purchase of stock or securities,
contributions to capital, property transfer or otherwise
- enter into any new material line of business
- cancel or terminate any insurance policy naming Sync or its subsidiaries
as a beneficiary or a loss payable payee
- enter into any collective bargaining agreements
- increase the compensation or fringe benefits of any of the officers or
directors of Sync or any of its subsidiaries or, other than in accordance
with past practice, effect any material general increase in the
compensation or fringe benefits of the employees of Sync 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 to any
such officers or employees, commit Sync or any of its subsidiaries to any
employment agreement or employee benefit plan with or for the benefit of
any of Sync's or its subsidiaries' officers or employees or any other
person, 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
- except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting practices or
principles used by Sync or its subsidiaries
- enter into or terminate any license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement, or any
contract, agreement or transaction involving a total remaining commitment
of at least $25,000
- except as may be required by law, make any material tax election, make or
change any method of accounting with respect to taxes, file any amended
tax returns that may have a material adverse effect on the tax position of
Sync or any of its subsidiaries or settle or compromise any material
federal, state, local or foreign tax liability
- enter into any "non-compete" or similar agreement
- amend the certificate of incorporation or bylaws of Sync or any of its
subsidiaries
46
<PAGE>
- take any action with knowledge that such action would reasonably be
expected to result in any of Entrada's conditions to closing, as described
in the merger agreement, not being satisfied
- agree to do any of the foregoing.
AMENDMENT; WAIVER
Subject to applicable law
- the merger agreement may be amended by the parties in writing at any time,
except that after the merger agreement has been adopted by the
stockholders of Sync, no amendment may be entered into which requires
further approval by Sync stockholders unless such further approval is
obtained
- at any time prior to the effective time of the merger, a party may, by
written instrument signed on behalf of such party, waive inaccuracies in
representations and warranties of any other party contained in the merger
agreement or in any related document and except as provided in the merger
agreement, waive compliance by any other party with any agreements or
conditions in the merger agreement.
Under Section 251(d) of the Delaware General Corporation Law, no amendment
to the merger agreement made after the adoption of the merger agreement by the
stockholders of Sync may, without further stockholder approval, alter or change
the amount or kind of shares, securities, cash, property and/or rights to be
received by Sync stockholders in the merger, or alter or change any terms and
conditions of the merger agreement if such alteration or change would adversely
affect the holders of any class or series of stock of Sync.
FEES AND EXPENSES
Whether or not the merger is completed, all fees and expenses incurred in
connection with the merger and the merger agreement will be paid by the party
incurring such fees or expenses, except as otherwise provided in the merger
agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by
Sync and Entrada relating to, among other things:
- corporate organization and similar corporate matters
- capital structure
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters
- financial statements
- no undisclosed liabilities
- compliance with applicable laws and required consents, approvals, orders
and authorizations of governmental authorities relating to the merger
agreement
- outstanding and pending material litigation
- good and valid title to assets
- absence of material changes or events
- filing of tax returns and payment of taxes
47
<PAGE>
- absence of changes in benefit plans, and matters relating to the Employee
Retirement Income Security Act
- labor relations
- intellectual property
- material contracts
- environmental matters
- insurance policies and any pending claims under such policies
- material customers and suppliers
- title to properties
- Investment Company Act status
- product liability claims
- financial books and records
- engagement and payment of fees of brokers, investment bankers, finders and
financial advisors
- documents filed by Sync with the Securities and Exchange Commission and
the accuracy of information contained in such documents
48
<PAGE>
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
Sync's common stock is listed on the Nasdaq Stock Market and trades under
the symbol SYNX. The following table presents the high and low closing sale
prices for Sync's common stock as reported in the Nasdaq National Market for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1999
Q1........................................................ $ 6.56 $ 2.97
Q2........................................................ 3.59 1.87
Q3........................................................ 2.75 1.94
Q4........................................................ 3.25 2.19
1998
Q1........................................................ 19.38 11.71
Q2........................................................ 20.31 10.44
Q3........................................................ 19.38 6.88
Q4........................................................ 7.81 3.56
</TABLE>
On April 10, 2000, the last trading day prior to the announcement by Sync
and Entrada that they had reached an agreement concerning the merger, the
closing sales price of Sync common stock as reported on the Nasdaq National
Market was $3.125 per share. The equivalent per share value of Entrada common
stock as of such date was approximately $13,222. On May 12, 2000, the closing
sale price of Sync common stock as reported on the Nasdaq National Market was
$3.50 per share. Based on the May 12, 2000, closing sale price of Sync common
stock, the equivalent per share value of Entrada common stock as of such date
was approximately $14,808.
As of May 4, 2000, there were 213 stockholders of record of Sync common
stock, and Sync believes there were approximately 2,936 beneficial owners of
Sync common stock.
Following the merger, Sync common stock will continue to be traded on the
Nasdaq National Market. Sync is in the process of applying for a new trading
symbol to take effect upon the consummation of the merger.
Neither Sync nor Entrada has ever paid cash dividends on its capital stock.
Sync's bank line of credit prohibits Sync from paying cash dividends without the
bank's prior written consent. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will be dependent upon
the combined companies' financial condition, results of operations, capital
requirements and such other factors as the board of directors deems relevant.
49
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements assume the transaction between Sync and Entrada will be accounted for
as an acquisition of Sync by Entrada and are based upon the respective
historical financial statements and notes thereto of Entrada, which are included
in this proxy statement/prospectus, and the historical financial statements and
notes thereto of Sync, which are incorporated by reference in this proxy
statement/prospectus. The following Pro Forma Condensed Consolidated Statement
of Operations for the fiscal year ended January 31, 2000 present unaudited pro
forma operating results for Entrada as if the transaction between Entrada and
Sync had occurred as of the beginning of the period presented. The following Pro
Forma Condensed Consolidated Balance Sheet presents the unaudited pro forma
financial condition of Entrada as if the merger and Sync's May 12, 2000
Series A preferred stock private placement had occurred as of January 31, 2000.
The unaudited pro forma adjustments are described in the accompanying notes. The
carrying values of Sync's net assets are assumed to equal their fair values for
purposes of these unaudited pro forma financial statements, unless indicated
otherwise in the accompanying notes. These values are subject to revision.
However, Sync management believes that any resulting adjustments will not have a
material effect on the financial position or results of operations.
The unaudited pro forma financial information presented does not consider
any future events which may occur after the merger. The unaudited pro forma
financial information presented does not attempt to quantify any operating
expense synergies or cost reductions of the consolidated operations of Sync and
Entrada that may be realized after the merger. The unaudited pro forma financial
information does not consider the incremental expense, capital or conversion
costs which may be incurred as a result of the merger.
THE UNAUDITED PRO FORMA FINANCIAL INFORMATION IS PRESENTED FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS OR
FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE MERGER BEEN CONSUMMATED AT
THE DATES INDICATED, NOR IS IT NECESSARILY INDICATIVE OF FUTURE OPERATING
RESULTS OR FINANCIAL POSITION OF THE CONSOLIDATED COMPANIES FOLLOWING THE
MERGER.
These unaudited pro forma condensed consolidated financial statements should
be read in conjunction with, the historical consolidated financial statements
and the related notes thereto of Sync and Entrada.
50
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- --------------------------
SYNC RESEARCH, INC. ENTRADA
AS OF AS OF
DECEMBER 31, JANUARY 31,
1999 2000 ADJUSTMENTS CONSOLIDATED
------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents............... $ 8,632 $ 112 $ 2,061 $10,805
Accounts receivable, net................ 3,173 5,919 -- 9,092
Due from affiliate...................... -- 753 -- 753
Inventories, net........................ 5,140 6,041 -- 11,181
Prepaid expenses and other current
assets................................ 565 563 -- 1,128
------- ------- ------- -------
Total current assets.................. 17,510 13,388 2,061 32,959
Furniture, fixtures and equipment, net.... 1,632 1,384 (343) 2,673
Other assets.............................. 55 1,772 -- 1,827
------- ------- ------- -------
Total assets.............................. $19,197 $16,544 $ 1,718 $37,459
======= ======= ======= =======
Current Liabilities
Accounts payable........................ $ 1,769 $ 4,381 $ 900 $ 7,050
Accrued compensation and benefits....... 736 745 -- 1,481
Deferred revenue and customer
deposits.............................. 3,048 317 -- 3,365
Other accrued liabilities............... 297 1,160 -- 1,457
Short-term debt......................... -- 2,264 -- 2,264
Current portion of capitalized lease
obligations........................... 49 312 361
------- ------- ------- -------
Total current liabilities............. 5,899 9,179 900 15,978
Capitalized lease obligations and
long-term debt.......................... 7 302 -- 309
Amount due to Parent...................... -- 21,769 (21,769) --
Stockholders' Equity
Common stock............................ 4 1 3 8
Additional paid-in capital.............. 71,958 5,761 (35,387) 42,332
Accumulated deficit..................... (58,671) (20,468) 57,971 (21,168)
------- ------- ------- -------
Total stockholders' equity
(deficit)........................... 13,291 (14,706) 22,587 21,172
------- ------- ------- -------
Total liabilites and stockholders' equity
(defict)................................ $19,197 $16,544 $ 1,718 $37,459
======= ======= ======= =======
</TABLE>
See accompanying notes.
51
<PAGE>
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
On April 10, 2000, Sync, Sync Research Acquisition Corp., a wholly-owned
subsidiary of Sync, Osicom Technologies, Inc., a New Jersey corporation
("Parent"), and Osicom Technologies, Inc., doing business as Entrada Networks, a
Delaware corporation and wholly-owned subsidiary of Parent ("Entrada" or
"Osicom"), entered into an Agreement and Plan of Merger (the "Agreement"). The
merger is expected to be accounted for as an acquisition of Sync by Entrada
using the purchase method of accounting.
A. ACCOUNTING PERIODS
The unaudited pro forma condensed consolidated financial statements include
the results of operations and financial position of Entrada and Sync for the
years ended and as of January 31, 2000 and December 31, 1999, respectively and
were derived from audited financial statements as of and for the fiscal year
ended January 31, 2000 and December 31, 1999, respectively.
52
<PAGE>
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
B. PRO FORMA ADJUSTMENTS
The following table reflects a detailed breakdown of the pro forma
adjustments in the Unaudited Pro Forma Condensed Consolidated Balance Sheet:
UNAUDITED PRO FORMA ADJUSTMENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
PRIVATE TRANSACTION
PLACEMENT(A) MERGER(B) COSTS(C) TOTAL
------------ --------- ----------- --------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents....................... $2,061 $ -- $ -- $ 2,061
Accounts receivable, net........................ -- -- -- --
Due from affiliate.............................. -- -- -- --
Inventories, net................................ -- -- -- --
Prepaid expenses and other current assets....... -- -- -- --
------ -------- ----- --------
2,061 -- -- 2,061
Furniture, fixtures and equipment, net............ -- (543) 200 (343)
Other assets...................................... -- -- -- --
------ -------- ----- --------
Total assets...................................... $2,061 $ (543) $ 200 $ 1,718
====== ======== ===== ========
Current Liabilities
Accounts payable................................ $ -- $ -- $ 900 900
Accrued compensation and benefits............... -- -- -- --
Deferred revenue and customer deposits.......... -- -- -- --
Other accrued liabilities....................... -- -- -- --
Short-term debt................................. -- -- -- --
Facility consolidation and severance............ -- -- -- --
Current portion of capitalized lease
obligations................................... -- -- -- --
------ -------- ----- --------
-- -- 900 900
Capitalized lease obligations and long-term
debt............................................ -- -- -- --
Amount due to Parent.............................. -- (21,769) -- (21,769)
Stockholders' Equity
Common stock.................................... 2 1 -- 3
Additional paid-in capital...................... 2,059 (37,446) -- (35,387)
Accumulated deficit............................. -- 58,671 (700) 57,971
------ -------- ----- --------
Total stockholders' equity (deficit).......... 2,061 21,226 (700) 22,587
------ -------- ----- --------
Total liabilities and stockholders' equity
(deficit)....................................... $2,061 $ (543) $ 200 $ 1,718
====== ======== ===== ========
</TABLE>
- ------------------------
(a) On May 12, 2000, Sync completed a private placement of newly issued
Series A Preferred Stock for an aggregate price of $2,235,625. All such
shares will be automatically converted into Sync common stock upon the
completion of the merger. Accordingly, the private placement, net of
offering costs estimated to be approximately $175,000, has been reflected in
the accompanying pro forma condensed consolidated balance sheet as if the
transaction occurred at January 31, 2000.
53
<PAGE>
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
B. PRO FORMA ADJUSTMENTS (CONTINUED)
(b) The Agreement specifies that all of Entrada's outstanding common stock will
be cancelled in exchange for shares of Sync common stock. The number of
shares of Sync common stock to be issued in exchange for Entrada's
outstanding common stock will equal the amount of shares of Sync common
stock outstanding at closing. Based upon the number of shares outstanding on
May 12, 2000, the date of the completion of the private placement discussed
in footnote (a), the number of shares to be issued in connection with the
merger would have been 4,231,007. The pro forma condensed consolidated
balance sheet reflects the allocation of approximately $14.8 million to
Sync's assets and liabilities based upon a value of $3.50 per share, the
closing price of Sync's common stock on the Nasdaq National Market on
May 12, 2000. The excess of the net book value of Sync's net assets as of
the pro forma balance sheet date over such purchase price, approximately
$0.5 million, has been reported as a reduction in the carrying value of
furniture, fixtures and equipment.
In connection with the merger, the outstanding intercompany payable from
Entrada to Parent will be contributed by Parent as an equity contribution.
This contribution has been reflected in the accompanying pro forma condensed
consolidated balance sheet.
(c) Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have
been included in the estimated purchase price reflected in the pro forma
condensed consolidated balance sheet.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for
investment banking, filings with regulatory agencies, legal, accounting,
financial printing and other related costs. These transaction costs will be
expensed within the twelve month period following January 31, 2000 as they
are incurred by Sync and have been reflected as a liability in the pro forma
condensed consolidated balance sheet.
(d) Sync and Entrada expect to incur certain expenses in connection with the
restructuring and consolidation of the operations of the consolidated
companies including, but not limited to, costs related to the closure and
elimination of duplicate leased facilities and write-offs of related fixed
assets, write-off of discontinued products, and severance costs. Sync and
Entrada anticipate that the ultimate integration activities will result in
increased efficiencies and lower operating costs. These activities have not
been formalized, therefore, the amount of such expenses is not currently
estimable with a reasonable degree of accuracy. Accordingly, no liability
for these expenses has been included in the unaudited pro forma condensed
consolidated balance sheet.
54
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- --------------------------
SYNC RESEARCH ENTRADA
YEAR ENDED YEAR ENDED
DECEMBER 31, JANUARY 31,
1999 2000 ADJUSTMENTS CONSOLIDATED
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales..................................... $18,152 $28,771 $ -- $46,923
Cost of sales................................. 9,905 17,498 -- 27,403
------- ------- ----- -------
Gross profit................................ 8,247 11,273 -- 19,520
Research and development...................... 5,503 6,223 -- 11,726
Selling and marketing......................... 5,136 5,647 -- 10,783
General and administrative.................... 2,284 2,177 (114) 4,347
------- ------- ----- -------
Total operating expenses.................... 12,923 14,047 (114) 26,856
Loss from operations.......................... (4,676) (2,774) 114 (7,336)
Other income (expense)........................ 408 (613) -- (205)
------- ------- ----- -------
Loss before income taxes.................... (4,268) (3,387) 114 (7,541)
------- ------- ----- -------
Provision for income taxes.................... 6 -- -- 6
------- ------- ----- -------
Net loss...................................... $(4,274) $(3,387) $ 114 $(7,547)
======= ======= ===== =======
Net loss per share, basic and diluted......... $ (1.22) $ (0.90)
======= =======
Shares used in computation of net loss per
share, basic and diluted.................... 3,493 8,424
</TABLE>
See accompanying notes.
55
<PAGE>
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
On April 10, 2000, Sync, Sync Research Acquisition Corp., a wholly-owned
subsidiary of Sync, Osicom Technologies, Inc., a New Jersey corporation
("Parent"), and Osicom Technologies, Inc., doing business as Entrada Networks, a
Delaware corporation and wholly-owned subsidiary of Parent ("Entrada" or
"Osicom"), entered into an Agreement and Plan of Merger (the "Agreement"). The
merger is expected to be accounted for as an acquisition of Sync by Entrada
using the purchase method of accounting.
A. ACCOUNTING PERIODS
The unaudited pro forma condensed consolidated financial statements include
the results of operations and financial position of Entrada and Sync for the
years ended and as of January 31, 2000 and December 31, 1999, respectively and
were derived from audited financial statements as of and for the fiscal year
ended January 31, 2000 and December 31, 1999, respectively.
B. MERGER COSTS
Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have been
included in the purchase price allocation.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for investment
banking, filings with regulatory agencies, legal, accounting, financial printing
and other related costs. These non-recurring transaction costs will be expensed
as they are incurred by Sync and have been excluded from the pro forma condensed
consolidated statement of operations.
Sync and Entrada expect to incur in the twelve months following the closing
of the merger, certain expenses in connection with the restructuring and
consolidation of the operations of the consolidated companies including, but not
limited to, costs related to the closure and elimination of duplicate leased
facilities and write-offs of related fixed assets, write-off of discontinued
products, and severance costs. Sync and Entrada anticipate that the ultimate
integration activities will result in increased efficiencies and lower operating
costs. These activities have not been formalized, therefore, the amount of such
expenses is not currently estimable with a reasonable degree of accuracy.
Accordingly, no estimate of such expense is reflected in the unaudited pro forma
condensed consolidated statement of operations.
C. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the condensed consolidated statement
of operations represent the amortization of a $343,000 reduction to the carrying
value of Sync's long-term assets, utilizing a 3 year estimated remaining useful
life, attributable to the excess of the net identifiable assets and liabilities
over the purchase price of Sync.
D. EARNINGS PER SHARE
The pro forma consolidated weighted average common share amounts reflected
in the unaudited pro forma condensed consolidated statements of operations
represent the aggregate of the historical weighted average common shares of Sync
outstanding during the year ended December 31, 1999 plus 4,231,007 shares
expected to be issued to Parent in connection with the merger, based upon the
number of shares outstanding on May 12, 2000 shares, 700,000 shares of common
stock to be issued in connection with the conversion of Sync's outstanding
Series A preferred stock which Sync issued in May 2000, and the dilutive effect,
if any, of common stock equivalents outstanding as calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share.
56
<PAGE>
BUSINESS OF ENTRADA
DESCRIPTION OF BUSINESS
Entrada, based in Annapolis Junction, Maryland, designs, manufactures and
markets products that provide access to and enhance the performance of data and
telecommunications networks, and is currently developing products that provide
connectivity for storage networks. Many of Entrada's products are incorporated
into the remote access and other server products of original equipment
manufacturers ("OEMs"). In addition, certain of Entrada's products are deployed
by telecommunications network operators, applications service providers,
internet service providers, and the operators of corporate local area and wide
area networks for the purpose of providing access to and transport within their
networks. Entrada was incorporated in Delaware in 1972, and it operates in one
business segment, with primary facilities in Annapolis Junction, Maryland and
Westborough, Massachusetts.
ENTRADA'S STRATEGIC PLAN
- DEVELOP PRODUCTS FOR STORAGE AREA NETWORKS. One of the most rapidly
growing segments of the market for networking equipment is the market for
storage area networks. Storage area networks are used to provide data
warehousing and clustering, remote backup, disaster recovery, near online
storage and a variety of other operations on stored data that are better
performed when that data is archived in locations physically near to
users, or connected to users via optical networks. The industry standard
for transmitting data to and within storage area networks is Fibre
Channel, a protocol or format for transmitting data over copper wire or
fiber optic cable. In 1999, Entrada began developing Fibre Channel
products to address the needs of storage area networks. Entrada's first
Fibre Channel and storage networking products are expected to be available
for sale during the third quarter of calendar 2000. Entrada believes that
it will be able to leverage its experience in data networking in order to
develop and sell Fibre Channel products to the storage area networking
market.
- FOCUS ON LAN CONNECTIVITY PRODUCTS. Entrada's current products include
network interface (or "adapter") cards which allow computers, servers,
load balancers and other devices to connect to a local area network
("LAN"). These network interface cards generally support the widely-
employed Fast Ethernet protocol, and have achieved acceptance among
several of the server and other OEMs to whom Entrada plans to market and
sell its Fibre Channel products. Entrada plans to focus its product
offerings on its LAN adapters while it develops new products for the
storage area networking market.
- FOCUS ON ORIGINAL EQUIPMENT MANUFACTURERS (OEMS). Entrada currently sells
its LAN products directly to OEMs, while its other networking products are
generally sold to end-users through distributors and network systems
integrators. In order to maintain the continuity of its relationships with
its OEMs while it develops its Fibre Channel products, Entrada plans to
continue to focus most of its sales and marketing efforts on the OEM
channel.
MARKETS FOR ENTRADA'S PRODUCTS
Entrada's products address the growing connectivity needs for networked,
high bandwidth data and voice communications. The networking industry has
experienced dramatic growth since the early 1990's as corporations discovered
increasing value in connecting desktop devices through local area networks. The
emergence of the Internet and the cultural movement toward wireless and home
computing in the 1990's further accelerated this trend. Entrada's products
address the demand for connectivity solutions in the traditional data networking
markets and the emerging market for storage area networking. There can be no
assurance that any of the projections cited in the following discussion
regarding the growth of traditional data networking markets or of the storage
area networking market will prove accurate,
57
<PAGE>
and Sync stockholders should not rely on such projections in evaluating the
business of Entrada or the combined companies.
STORAGE AREA NETWORKING MARKET
The technology behind storage area networks is similar to that of LANs and
WANs. Storage area networks are essentially separate local area networks that
consist of servers, storage devices (such as disc drives) and the networking
equipment used to connect and route traffic among them. These devices include
adapters, hubs, switches and routers supporting the Fibre Channel standard.
Storage area networks create a shared storage resource that is readily
available, highly scalable and designed to be easily protected and managed.
While storage area networks are not new, Entrada believes that trends
already under way will move them into the mainstream of distributed networking
and that they will become the standard way of accessing stored information. A
report by Dataquest, an Information Technology ("IT") market research and
consulting firm, projects sales of the networking equipment used to build
storage area networks to reach $1.8 billion by 2002, representing a cumulative
annual growth rate of 88%. Strategic Research, a market research firm
specializing on the storage and network storage markets, projects that storage
area networks will represent approximately 50% of all sales of non-mainframe
storage arrays (such as disc drives) in 2000. In addition, the S.G.
Cowen-Datamation 2000 Computer Systems User Survey, conducted by the securities
and investment banking firm of S.G. Cowen and EarthWeb's datamation.com, a
publication for the IT industry, reported that in 1999, 42% of all enterprises
surveyed were planning to deploy storage area networks.
IDC (International Data Corporation), a provider of analysis and market data
for the IT industry, projects that the amount of disk storage capacity being
shipped by vendors will grow by 86% per year over the next three years, from
116,000 terabytes in 1998 to 1.4 million terabytes in 2002. IDC projects storage
capacity based on the UNIX operating system to grow 76% annually to nearly
460,000 terabytes in 2002 and storage capacity based on the Windows NT operating
system to increase by 114% annually to more than 610,000 terabytes in 2002. The
Yankee Group, a research and consulting firm which focuses on e-business, the
Internet, and enterprise applications, reports that storage is now the biggest
line item in the IT budgets of corporations interviewed.
ENTRADA'S PRODUCT DEVELOPMENT APPROACH
The goal of any storage system is to allow users to retrieve information
quickly, easily and reliably. There are five major capabilities that a storage
solution must provide:
- CONNECTIVITY. Storage systems must provide access to the data and
applications that users need.
- AVAILABILITY AND FAULT TOLERANCE. Storage systems must allow continuous
access to their data, even if one or more components fail.
- PERFORMANCE. Storage systems must provide high performance and be
scalable.
- INTEGRITY. Storage systems must protect their data to ensure its accuracy
and reliability.
- MANAGEABILITY. Network operators must be able to manage their storage
systems using the traditional tools of network management (such as network
management software).
Entrada is designing its storage area networking to be in conformity with
these requirements.
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PRODUCTS
FIBRE CHANNEL PRODUCTS
Entrada's Fibre Channel products under development leverage its skills and
know-how gained from providing LAN and WAN connectivity to traditional data
networks. These products also address the same or similar OEM customer base for
Entrada's LAN products.
Entrada is currently developing two product lines designed to meet the needs
of storage area networks, and it plans to introduce additional product lines in
the future. The first of these products are expected to be available for sale
during the third quarter of calendar 2000. Each of the two product lines under
current development supports the Fibre Channel protocol, which Entrada's believe
will become the standard protocol for storage area networks.
FIBRE CHANNEL HOST BUS ADAPTERS
Entrada is currently developing a family of Fibre Channel Host Bus Adapters
("HBA's") for the storage area networks market. HBA's are installed in servers
and workstations, and provide the interface to the Fibre Channel network in much
the same way as our LAN adapters provide an interface to the Ethernet network.
Entrada expects that its HBA product line will include 1 Gigabit and 2 Gigabit
per second data transfer rate products for a variety of computer bus types.
FIBRE CHANNEL HUBS
Entrada is also developing a family of Fibre Channel hubs, which are used
for insertion and removal of devices on a Fibre Channel loop and for efficient
network management. Entrada plans to offer both entry-level and managed models
in a variety of port configuration options. Entrada expects that its hub product
line will include 1 Gigabit and 2 Gigabit per second data transfer rates
products.
LAN ADAPTERS
In the fiscal year ended January 31, 2000, 52% of Entrada's revenues were
derived from the sale of its line of high performance Local Area Network adapter
cards to OEMs. These adapter cards are used in a variety of products, including
high availability telecommunications equipment, Transmission Control
Protocol/Internet Protocol ("TCP/IP") load balancing routers, and remote access
servers. Entrada's LAN adapters are also used in a variety of industrial control
applications. Entrada's key products in this category consist of 10/100 Fast
Ethernet Adapters in both Peripheral Component Interconnect ("PCI") Bus
Specification and PCI Mezzanine Card ("PMC") form factors or sizes.
SERIES 2400 FAST ETHERNET ADPATERS
The 2404 is a high performance, quad-port 10/100 adapter that provides four
separate Fast Ethernet ports on a single PCI card, extending the local bus with
a PCI-to-PCI bridge and reducing the PCI bus load. The product is based on the
widely-used Intel media access controller ("MAC") and provides 64-bit data
transfer.
SERIES 2350 FAST ETHERNET ADAPTERS
The 2350 PMC adapter provides a single 10/100 port in the convenient PMC
form factor. The PMC form factor allows the card to be used in systems that are
based on both the VME industrial bus standard and the emerging Compact PCI bus
standard. Since drivers can easily be ported between these formats, the cards
can be used commonly by system OEMs.
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SERIES 2450 FAST ETHERNET ADAPTERS
Using the feature rich and power-efficient Intel MAC, both the single-port
2451 and dual-port 2452 adapter offer low-profile RJ-45 front panel connectors
which eliminate the need for transition cables. The 2450 series adapters fully
support IEEE 802.3u and are compatible with PCI-SIG v2.1 and PICMG v2.1.
SERIES 2200 AND 2250 FIBER DISTRIBUTED DATA INTERFACE ("FDDI") ADAPTERS
Entrada provides adapters for high-performance, high-reliability networking
using the FDDI protocol in the PCI (2200) and PMC (2250) form factors. Both
models are offered in single attach station and dual attach station versions,
and are available in a number of media and connector options. Entrada believes
that this product is in the final stages of its marketable life.
GIGABIT ETHERNET ADAPTERS
Entrada is developing a series of LAN Adapters that support the growing
market for Gigabit Ethernet connectivity. The 2500 Series Gigabit Ethernet
Adapters will provide 10/100/1000 Mbps data transmission speeds, which will
offer existing 10/100 customers a convenient migration path to Gigabit Ethernet.
Entrada plans to introduce dual port Gigabit Ethernet PCI adapters and single
port PMC adapters in both copper media (1000-TX) and multimode fiber media
(1000-SX) versions. These products are expected to be available for sale during
the third quarter of calendar 2000.
SALES AND MARKETING
Entrada's sales organization at January 31, 2000 consisted of approximately
28 individuals, including managers, sales representatives, and support
personnel. Entrada's sales organization addresses the needs of customers by
focusing on major accounts and indirect channels. Major accounts includes
telecommunications service providers, internet service providers, government
customers and original equipment manufacturers. Entrada's indirect channels are
comprised of system integrators, distributors, resellers and value added
resellers. Entrada supports its customers by providing product training, regular
mailing of promotional and technical material, telephone and other technical
support.
The goal of Entrada's marketing effort is to identify market dynamics and
translate these dynamics into strategic product development plans. Entrada's
marketing staff identifies product and vertical market segment opportunities and
provides to its sales force the tools, training, and pre-sales support it
requires to exploit the identified opportunities. Entrada's marketing staff also
engages in a number of marketing communication activities, and it participates
in cooperative marketing programs, including advertising, trade shows and
seminars.
CUSTOMERS AND MARKETS
Entrada's customer base is concentrated in the telecommunications and
networking equipment industries. With the exception of two customers, none of
Entrada's customers has accounted for ten percent or more of its net sales. One
customer accounted for 19.4% of net sales for the year ended January 31, 2000
and 1.0% of net sales for the year ended January 31, 1999. This customer
accounted for 4.4% and 2.3% of net receivables at January 31, 2000 and
January 31, 1999, respectively. A second customer accounted for 13.7% of net
sales for the year ended January 31, 2000 and 1.3% of net sales for the year
ended January 31, 1999. This customer accounted for 8.6% and 0% of net
receivables at January 31, 2000 and January 31, 1999, respectively. Two
customers accounted for 39.4% and 9.6% of net receivables, respectively, at
January 31, 2000. These two customers accounted for 29.7% and 10.0% of net
receivables, respectively, at January 31, 1999. A third customer accounted for
18.7% of net sales for the year ended January 31, 2000 and 16.3% of net sales
for the year ended January 31, 1999. This customer accounted for 39.4% and 29.7%
of net receivables at January 31, 2000 and January 31, 1999,
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respectively. Five customers represented 68% and 60% of accounts receivable at
January 31, 2000 and 1999, respectfully.
Entrada's strategy addresses the following three customer profiles:
- ORIGINAL EQUIPMENT MANUFACTURERS. Original Equipment Manufacturers
("OEMs") develop and sell solutions that incorporate Entrada LAN and WAN
products to provide connectivity to networks, including storage area
networks, local area networks and wide area networks. In addition to the
revenues Entrada may achieve directly by having its connectivity solutions
incorporated into the products of major networking OEMs, Entrada believes
that the incorporation of its technology into the products of major
networking OEMs can have an indirect positive impact on the adoption of
Entrada's technology, and therefore the sales of its stand-alone products.
- SERVICE PROVIDERS. These customers provide communication services and
primarily include telecommunication carriers, applications service
providers and internet service providers. Entrada believes that in the
future, these service providers will add data storage to the
telecommunications services they currently offer to their subscribers.
- SYSTEM INTEGRATORS. Networks are frequently provided to enterprises by
system integrators who bring together all of the technology pieces
required to build a network, and who organize those pieces into a logical
architecture. In the frequent instance that the selection of specific
equipment types is made by the system integrator, the system integrator
(and not the enterprise for which the network is being constructed) is the
customer to vendors of network equipment.
CUSTOMER SERVICE AND SUPPORT
Entrada's customer service organization is structured to assist both systems
integrators and its major OEM accounts. In addition to the product design,
integration and troubleshooting support Entrada supplies to its OEM customers,
it generally provides training and sales support to its system integrator
customers.
Post-sales support for all of Entrada's customers includes its product
warranty against defects in material and workmanship. The length of product
warranties varies by product, from 12 months in some instances, to 60 months for
a broad range of products, and up to lifetime warranties for certain selected
products. Telephone technical support programs for hardware and software
generally cover the first 12 months from purchase. On-site support and shared
support agreements are designed to provide a high level of service to fulfill a
broad spectrum of customer needs.
RESEARCH AND DEVELOPMENT
The goal of Entrada's research and development efforts is to achieve
technological advances which will allow it to introduce innovative products to
market. Product introduction is driven by a combination of rapidly evolving
technology and standards, as well as changing customer requirements. Entrada's
marketing staff works closely with its engineering staff, performing continuous
evaluations of customer needs, emerging trends and technical challenges in order
to identify new market opportunities. Entrada's research and development program
focuses on the combining of various proprietary technologies into a single,
common, standards-based platform. Entrada believes that its ability to introduce
new products on a timely basis depends upon its ability to maintain
sophisticated technology research programs while simultaneously focusing on
their practical application to its customers' strategic requirements.
As of January 31, 2000, there were 21 employees and 12 independent
contractors working in Entrada's research and development area. Entrada's
research and development expenditures were
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$6.2 million and $5.5 million for the fiscal years ended January 31, 2000 and
January 31, 1999, respectively.
MANUFACTURING AND QUALITY
Entrada's products are manufactured on an outsourced basis by various
turn-key vendors. Final assembly, test and quality assurance are performed by
Entrada at its Annapolis Junction, Maryland facility.
Entrada believes that its strategy of outsourcing the majority of its
manufacturing activities to third party contract manufacturers enables it to
react quickly to market demand and avoid the significant capital investment that
would be required to establish and maintain full manufacturing facilities.
Entrada is thus able to focus its manufacturing resources on final assembly,
burn-in and final testing to ensure reliability and quality assurance for its
products. Entrada has a quality assurance program in place and continually
evaluates its process to ensure quality practices throughout its organization
and to monitor the performance of its third party vendors.
AVAILABILITY OF RAW MATERIALS
Many of Entrada's products require components which may not be readily
available. These include microprocessors, custom integrated circuits and other
electronic components. To minimize the risks of component or product shortages,
Entrada attempts to maintain multiple supply sources. However, there can be no
assurance that such sources will be adequate to meet Entrada's needs.
PATENTS, TRADEMARKS AND LICENSES
Entrada currently hold nine patents. Although Entrada attempts to protect
its intellectual property rights through patents, trademarks, and copyrights, by
maintaining certain technology as trade secrets and by other measures, Entrada
cannot assure you that any patent, trademark, copyright or other intellectual
property rights owned by Entrada will not be invalidated, circumvented or
challenged; that such intellectual property rights will provide competitive
advantages to Entrada; or that any of Entrada's future patent applications, if
any, will be issued with the scope of the claims sought by Entrada, if at all.
Entrada cannot assure you that others will not develop technologies that are
similar or superior to its technology, or that its competitors will not
duplicate its technology or "design around" the patents that it owns. In
addition, effective patent, copyright and trade secret protection may be
unavailable or limited in certain foreign countries in which Entrada does
business or intends to do business in the future.
Entrada believes that the future success of its business will depend on its
ability to translate the technological expertise and innovation of its personnel
into new and enhanced products. Entrada cannot assure you that the steps taken
by it will prevent misappropriation of its technology. In the future, Entrada
may take legal action to enforce its patents and other intellectual property
rights, to protect its trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could harm its business and operating results.
As is common in Entrada's industry, Entrada has from time to time received
notification from other companies claiming that certain Entrada products may
infringe intellectual property rights held by such companies. Any claim or
litigation, with or without merit, could be costly, time consuming and could
result in a diversion of management's attention, which could harm Entrada's
business. If Entrada were found to be infringing the intellectual property
rights of any third party, it could be subject to liabilities for such
infringement, which could be material, and could be required to seek licenses
from other companies or to refrain from using, manufacturing or selling certain
products or using certain processes. Although holders of patents and other
intellectual property rights often offer licenses to
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their patent or other intellectual property rights, no assurance can be given
that licenses would be offered, that the terms of any offered license would be
acceptable to Entrada or that failure to obtain a license would not cause its
operating results to suffer.
SEASONALITY
Entrada's sales are impacted by the buying patterns of its customers,
including but not limited to cultural and religious holidays in Asia, Europe and
the United States, and other factors.
WORKING CAPITAL PRACTICES
Entrada has historically maintained high levels of inventories to meet the
output requirements of its customers and to ensure an uninterrupted flow of
inputs from its suppliers.
Entrada performs ongoing credit evaluations of each of its customers'
financial condition and it extends unsecured credit related to the sales of
various products. Two customers accounted for 39.4% and 9.6% of net receivables,
respectively, at January 31, 2000. These two customers accounted for 29.7% and
10.0% of net receivables, respectively, at January 31, 1999. Five customers
represented 68% and 60% of accounts receivable at January 31, 2000 and 1999,
respectfully.
BACKLOG
Entrada's backlog on January 31, 2000 was approximately $3.1 million
compared with an approximate backlog of $4.8 million at January 31, 1999.
Entrada includes in its backlog only orders confirmed with a purchase order for
products to be shipped within twelve months to customers with approved credit
status. Because of what has historically been a short time period between its
customers' orders and its shipments of products, and because its customers may
notify it of desired changes in delivery schedules or cancellations of orders
(which are made without significant penalty), Entrada does not believe that its
backlog, as of any particular date, is necessarily an indication of actual net
sales for any future period.
COMPETITION
The markets for Entrada's current and planned products are intensively
competitive, highly fragmented and characterized by rapidly changing technology,
evolving industry standards, price competition and frequent new product
introductions. A number of companies offer products that compete with one or
more of its current or planned products. Entrada's current and prospective
competitors include OEMs, product manufacturers of internet access equipment,
remote access equipment, and LAN, WAN and storage area network equipment.
Regarding the market for storage area networking products, Entrada expects that
its competitors will include JNI Corporation, Emulex Corporation, Brocade
Communications Systems, Inc., Interphase Corporation, Gadzoox Networks, Inc.,
and others. In the LAN adapter area, Entrada competes with 3Com Corporation,
Adaptec, Inc., Alteon Websystems, Inc., Intel Corporation, Interphase
Corporation, Sun Microsystems, Inc., RAMiX Inc., SBS Technologies, Inc., VMIC,
ZYNX Corporation and others. In the WAN adapter area Entrada competes with Ariel
Corporation, Digi International, Inc., Eicon Technology, Interphase,
Corporation, Netaccess/ Brooktrout, Patriot Scientific Corporation, Performance
Technologies, Incorporated, Pika Technologies, Inc., SDL Communications, Inc.
and others. In the remote access area, Entrada competes with Lucent
Technologies, Inc., Cisco Systems, Inc., 3Com Corporation, Ericsson, Intel
Corporation, Nbase-Xyplex, Nortel Networks Corp. Hlgd., Perle Systems Limited,
General DataComm Inds., Inc., Cabletron Systems, Inc., Assured Access
Technologies, Inc. and others. In the market for routers, Entrada competes with
Cisco Systems, Inc., 3Com Corporation, Lucent Technologies Inc., Netopia, Inc.,
Intel Corporation and others. In the market for CSU/DSU's, Entrada competes with
ADC Telecommunications, Inc., Adtran, Inc., Verilink Corporation, Quick Eagle
Networks and others.
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Entrada has experienced, and expects to continue to experience, increased
competition from current and potential competitors, many of whom have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and larger customer based than
Entrada does. In particular, established companies in the telecommunications
equipment or computing industries may seek to expand their product offerings by
designing and selling products using competitive technology that could render
Entrada's products obsolete or have a material adverse effect on its sales. The
markets in which Entrada competes currently are subject to intense competition
and Entrada expects additional price and product competition as other
established and emerging companies enter the markets in which it is competing
and new products and technologies are introduced. Increased competition may
result in further price reductions, reduced gross margins and loss of market
share, any of which could materially and adversely affect its business,
operating results and financial condition. There can be no assurance that
Entrada will be able to compete successfully against current and future
competitors, or that the competitive factors it will face will not have a
material adverse effect on its business, operating results and financial
condition.
ENVIRONMENTAL COMPLIANCE
Entrada's operations are subject to various federal, state and local laws
and regulations with respect to environmental matters. Entrada believes that it
is in material compliance with all such federal, state and local laws and
regulations.
EMPLOYEES
As of January 31, 2000, Entrada employed 129 full-time employees and
independent contractors, including 33 in engineering, 35 in manufacturing and
quality assurance, 43 in sales, customer support and marketing, 17 in
administration, and 1 executive. None of Entrada's employees are represented by
a collective bargaining agreement, and it believes that relations with its
employees are good.
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ENTRADA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31, 2000 AND
JANUARY 31, 1999
NET SALES. Net sales decreased to $28.8 million, or by less than 1%, for
fiscal 2000 from $29.0 million for fiscal 1999. While the sales to OEM's of our
LAN-adapter product lines increased, this increase was offset by the decrease in
the Remote Access and Print Server product lines during fiscal 2000 reflecting
Entrada's shift towards its new generation of products and the planned phase out
of its legacy products.
GROSS PROFIT. Cost of sales consists principally of the costs of
components, subcontract assembly from outside manufacturers, and in-house system
integration, quality control, final testing and configuration costs. Gross
profit decreased to $11.3 million, or 13.0%, for fiscal 2000 from $13.0 million
for fiscal 1999. Gross margin decreased to 39.2% for fiscal 2000 from 44.7% for
fiscal 1999. The gross margin percentage decrease was the result of higher raw
material costs associated with shipments of Entrada's LAN-adapter products and
lower margins on legacy products.
SELLING AND MARKETING. Selling and marketing expenses consist primarily of
employee compensation and related costs, commissions to sales representatives,
tradeshow expenses and travel expenses. Sales and marketing expenses decreased
to $5.6 million, or 19.6% of net sales, for fiscal 2000 from $8.3 million, or
28.7% of net sales for fiscal 1999. During the past fiscal year Entrada
completed a realignment of its sales organization, which resulted in a reduction
in these expenses as well as reduced advertising and promotional expenses for
legacy products.
ENGINEERING, RESEARCH AND DEVELOPMENT. Engineering, research and
development expenses consist primarily of compensation related costs for
engineering personnel, facilities costs, and materials used in the design,
development and support of our technologies as well as amortization of
capitalized software development costs. Engineering, research and development
expenses increased to $6.2 million, or 21.6% of net sales, for fiscal 2000 from
$5.5 million, or 19.0% of net sales, for fiscal 1999. The increase in
engineering, research and development expenses was the result of a $1.8 million
reduction to the net book value of capitalized software development costs caused
by changing market conditions partially offset by cost savings achieved through
the consolidation of Entrada's facilities. Exclusive of the valuation allowance,
engineering research and development expenses for fiscal 2000 were 15.3% of net
sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of employee compensation and related costs, legal and accounting fees,
and allocable occupancy costs. General and administrative expenses decreased to
$2.2 million, or 7.6% of net sales, for fiscal 2000 from $2.3 million, or 7.8%
of net sales, for fiscal 1999. This decrease is the result of cost savings
achieved through the consolidation of Entrada's various facilities as well as
eliminating the 35,000 square feet of unused space leased at our Annapolis
Junction, Maryland facility.
INCOME TAXES. There was no provision for income taxes for fiscal years 2000
and 1999. We have carry forwards of domestic federal net operating losses, which
may be available, in part, to reduce future taxable income in the United States.
However, due to potential adjustments to the net operating loss carry forwards
as provided by the Internal Revenue Code with respect to future ownership
changes, future availability of the tax benefits is not assured. In addition, we
provided a valuation allowance in full for our deferred tax assets as it is our
opinion that it is more likely than not that some portion or all of the assets
will not be realized.
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RESULTS OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31, 1999 AND
JANUARY 31 1998
NET SALES. Net sales decreased to $29.0 million, or 5.3%, for fiscal 1999
from $30.6 million for fiscal 1998. This decrease was primarily the result of a
decline in the sales of Entrada's legacy products which was not fully offset by
introductions of Entrada's new generation of products.
GROSS PROFIT. Gross profit decreased to $13.0 million, or 4.4%, for fiscal
1999 from $13.6 million for fiscal 1998. Gross margin remained relatively
unchanged at 44.7% for fiscal 1999 and 44.3% for fiscal 1998. This decline in
gross profit is comparable to the decline in net sales.
SELLING AND MARKETING. Sales and marketing expenses decreased to
$8.3 million, or 28.7% of net sales, for fiscal 1999 from $9.0 million, or 29.3%
of net sales for fiscal 1998. This decrease was primarily the result of the
mid-fiscal year 1998 closure of the Santa Barbara, California facility.
ENGINEERING, RESEARCH AND DEVELOPMENT. Engineering, research and
development expenses increased to $5.5 million, or 19.0% of net sales, for
fiscal 1999 from $3.5 million, or 11.6% of net sales, for fiscal 1998. The
increase in engineering, research and development expenses was the result of
increased expenditures associated with continuing development of Entrada's
existing products and future technologies.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
to $2.3 million, or 7.8% of net sales, for fiscal 1999 from $3.6 million, or
11.8% of net sales, for fiscal 1998. This decrease is the result of cost savings
achieved through the consolidation of Entrada's various facilities as well as
other cost reduction programs implemented mid-fiscal year 1998.
OTHER OPERATING EXPENSES. Other operating expenses consist of
acquisition-related charges including amortization of purchased technology and
valuation allowances recorded against purchased technology. During fiscal 1998
other operating expenses including amortization of $123,000 and a valuation
allowance of $3.8 million. Certain of Entrada's products, primarily LAN related
items, were not competitive in the market for such products as the technology
desired by customers could not be cost-effectively added to such products.
Entrada re-aligned its resources to focus on providing integrated networking and
bandwidth aggregation products desired by customers. Accordingly, Entrada
recorded a valuation allowance against purchased technology that had no future
alternative use.
INCOME TAXES. There was no provision for income taxes for fiscal years 1999
and 1998. We have carry forwards of domestic federal net operating losses, which
may be available, in part, to reduce future taxable income in the United States.
However, due to potential adjustments to the net operating loss carry forwards
as provided by the Internal Revenue Code with respect to future ownership
changes, future availability of the tax benefits is not assured. In addition, we
provided a valuation allowance in full for our deferred tax assets as it is our
opinion that it is more likely than not that some portion or all of the assets
will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
Entrada finances its operations through a combination of debt and
non-interest bearing advances from its parent. At January 31, 2000, Entrada's
working capital was $4.2 million including $112,000 in cash.
Operating activities provided cash flows of $134,000 during fiscal 2000 as
compared to a cash flow deficit of $2.8 million during fiscal 1999. The decrease
in cash flows used in operations reflects a substantial decline in our net loss,
after adjustment for non-cash expenses including depreciation, amortization,
reserves and valuation allowances, partially offset by fiscal 2000 investments
in inventory. During fiscal 1999 the operating cash flow deficit reflected an
increase in accounts receivable including amounts due from affiliates, a decline
in accounts payable and a decline in accrued expenses. Entrada's operating cash
flow deficit for fiscal 1998 of $3.7 million reflects a greater net loss, after
adjustment for
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non-cash operating expenses, as well as substantial increases in accounts
receivable and inventories offset, in part, by increases in current liabilities.
Our standard payment terms are net 30 days. Receivables from distribution
customers have frequently taken longer to collect.
Entrada's investing activities consist of purchases of property and
equipment and software development costs. During fiscal 2000 Entrada purchased
equipment of $239,000 and invested $318,000 in software development as compared
with fiscal 1999 equipment purchases of $567,000 and software development of
$1.3 million. Investing activities during fiscal 1998 were comparable to those
of fiscal 1999.
Entrada's financing activities during fiscal 2000 provided cash flows of
$337,000 which consisted of $2.3 million of non-interest bearing advances from
Osicom partially offset by net repayments of short and long term debt of
$1.9 million. During fiscal 1999 financing activities provided cash flows of
$4.6 million which consisted primarily of non-interest bearing advances from
Osicom. During fiscal 1998 financing activities provided cash flows of
$5.9 million which consisted of $3.2 million in advances from Osicom with the
remaining amounts received from short and long term financing.
At January 31, 2000 the balance due Osicom was $21.8 million. The merger
agreement entered into by Osicom provides that amounts owed by Entrada to Osicom
at closing will be contributed to the capital of Entrada and no remaining debt
will be outstanding to Osicom after the merge.
Entrada has a $7.0 million line of credit provided by Coast Business Credit,
a division of Southern Pacific Bank, an asset-based lender. Outstanding
short-term borrowings against this line of credit were $2.3 million at
January 31, 2000. This credit line is collateralized by accounts receivable,
inventory and equipment.
YEAR 2000 COMPLIANCE
We have not experienced any year 2000 compliance problems to date and we
believe our products are year 2000 compliant. We are not aware that any of our
customers, vendors or contract manufacturers that have experienced any such
problems to date. It is possible that yet undiscovered problems could severely
disrupt our operations and would adversely affect our business if not properly
addressed.
EFFECTS OF INFLATION AND CURRENCY EXCHANGE RATES
We are exposed to financial market risks, including changes in interest
rates and foreign currency rates. Our exposure to interest rate risk is the
result of our need for periodic additional financing for our large operating
losses and capital expenditures associated with establishing and expanding our
operations. The interest rate that we will be able to obtain on debt financing
will depend on market conditions at that time, and may differ from the rates we
have secured on our current debt. Additionally, the interest rates charged by
our present lender adjusts on the basis of the lenders' prime rate.
We believe that the relatively moderate rate of inflation in the United
States over the past few years and the relatively stable interest rates incurred
on short-term financing have not had a significant impact on our sales,
operating results or prices of raw materials. There can be no assurance,
however, that inflation or an upward trend in short-term interest rates will not
have a material adverse effect on our operating results in the future should we
require debt financing in the future.
All of our sales and expenses have been denominated in U.S. dollars and to
date our business has not been significantly affected by currency fluctuations.
However, we conduct business in several different countries and thus
fluctuations in currency exchange rates could cause our products to become
relatively more expensive in particular countries, leading to a reduction in
sales in that country.
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In addition, inflation in such countries could increase our expenses. In the
future, we may engage in foreign currency denominated sales or pay material
amounts of expenses in foreign currencies and, in such event, may experience
gains and losses due to currency fluctuations. Our operating results could be
adversely affected by such fluctuations.
We do not hold or issue derivative, derivative commodity instruments or
other financial instruments for trading purposes. Investments held for other
than trading purposes do not impose a material market risk.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for financial
statements with fiscal quarters of all fiscal years beginning after June 15,
2000. The Accounting Standards Executive Committee issued Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-up
Activities," effective in the current or future periods. The adoption or future
adoption of these standards has had or will have no material effects, if any, on
our financial position or results of operations.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual report on form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
The financial statements of Entrada at January 31, 2000 and 1999, and for
each of the three years in the period ended January 31, 2000, included in this
proxy statement/prospectus, have been audited by BDO Seidman, LLP, independent
auditors, as set forth in their report which is included in this proxy
statement/prospectus and have been so included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, is acting as
counsel for Sync in connection with certain legal matters relating to the merger
and the transactions contemplated thereby.
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, Woodbridge, New Jersey,
is acting as counsel for Entrada in connection with certain legal matters
relating to the merger and the transactions contemplated thereby.
DEADLINE FOR RECEIPT OF FUTURE STOCKHOLDER PROPOSALS
Proposals of Sync stockholders that are intended to be presented by such
stockholders at Sync's 2001 Annual Meeting of Stockholders must be received by
Sync no later than [anniversary date of this year's proxy mailing minus
120 days] in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. If Sync is not notified of
a stockholder proposal on or after May 14, 2001 and before July 25, 2001 in
writing of a proposal for the 2001 annual meeting as provided in Sync's Bylaws,
the management of Sync may exclude the matter from consideration at the annual
meeting. In addition, if Sync is not notified by [anniversary date of this
year's proxy mailing minus 45 days] of a stockholder proposal, the proxies held
by management of Sync provide discretionary authority to vote against such
stockholder's proposal, even though such proposal is not discussed in the proxy
statement.
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OTHER ANNUAL MEETING PROPOSALS
This section relates specifically to Sync's other annual meeting proposals
and related matters and not to matters relating to the proposed Sync/Entrada
merger discussed elsewhere in this proxy statement/prospectus. As of the date of
this proxy statement/prospectus, the Sync board of directors knows of no other
matters that will be presented for consideration at the annual meeting other
than as described in this proxy statement/prospectus.
PROPOSAL NO. 2: ELECTION OF DIRECTORS
NOMINEES
In October 1999, the board of directors amended Sync's bylaws to increase
the number of persons who sit on the board of directors from three to four. The
board of directors subsequently elected Mr. William K. Guerry, the President and
Chief Executive Officer of Sync, to the board to fill the newly created vacancy
and Mr. Guerry is standing for election at the annual meeting. There are
currently three other members standing for election.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the nominees named below, regardless of whether any other
names are placed in nomination by anyone other than one of the proxy holders. In
the event that any such nominee is unable or declines to serve as a director at
the time of the annual meeting, the proxy holders will vote in their discretion
for a substitute nominee. It is not expected that any nominee will be
unavailable. The term of office of each person elected as a director will
continue until the next annual meeting or until his successor has been elected
and qualified.
The names of the nominees, their ages as of May 12, 2000, and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------- -------- ------------------------------------------- --------------
<S> <C> <C> <C>
Gregorio Reyes....................... 59 Chairman of the Board of Directors of Sync 1995
William K. Guerry.................... 35 President, Chief Executive Officer and 1999
Chief Financial Officer of Sync
Charles A. Haggerty.................. 58 Former Chairman, President and Chief 1995
Executive Officer of Western Digital Corp.
William J. Schroeder................. 55 President and Chief Executive Officer of 1998
CYBERIQ Systems, Inc.
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
MR. REYES has served as Chairman of Sync's board of directors since
January 1995 and from October 1997 to May 1998 in the Office of the Chief
Executive Officer of Sync. From 1990 to August 1994, he served as Chairman and
Chief Executive Officer of Sunward Technologies, Inc., a provider of rigid disk
magnetic recording head products for the data storage industry. Previously, he
was Chairman and Chief Executive Officer of American Semiconductor Equipment
Technologies, a wafer stepper company. Mr. Reyes currently also serves as a
director of C-Cube Microsystems, Inc. and several privately-held companies.
Mr. Reyes received a B.S. in Mechanical Engineering from Rensselaer Polytechnic
Institute and a M.S. in Management from the Stevens Institute of Technology.
MR. GUERRY has served as Sync's President and Chief Executive Officer and as
a Director of Sync since October 1999 and as Sync's Vice President of Finance
and Administration, Secretary and Chief Financial Officer since June 1997. From
January 1987 to June 1997, Mr. Guerry held various positions, including Audit
Senior Manager, with Ernst & Young LLP. Mr. Guerry received his B.S. in
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Accounting from California State Polytechnic University, Pomona. Mr. Guerry is a
Certified Public Accountant in the State of California and is a member of the
California Society of Certified Public Accountants.
MR. HAGGERTY has served as a member of Sync's board of directors since
June 1995. He served as Chairman, President and Chief Executive Officer of
Western Digital Corp., a manufacturer of disk drives, from July 1992 to
January 2000. He currently serves as the Chairman of the board of directors of
Western Digital. From June 1992 through June 1993, Mr. Haggerty served as
President and Chief Operating Officer of Western Digital. Mr. Haggerty also
serves as a director of Pentair, Inc., Beckman Coulter Inc. and Vixel Inc. He
received a B.A. in Business and Social Science from the University of St.
Thomas.
MR. SCHROEDER has served as a member of Sync's board of directors since
April 1998. Since February 2000, Mr. Schroeder has served as President and Chief
Executive Officer of CYBERIQ Systems, Inc., a developer of Internet traffic and
content management appliances. Mr. Schroeder served as President and Chief
Executive Officer and Director of Diamond Multimedia Systems, Inc., a supplier
of multi-media peripherals, from May 1994 to September 1999. Mr. Schroeder was
employed by Conner Peripherals, Inc., a manufacturer and distributor of hard
drives, from 1986 to 1994, initially as President and, from 1989, as Vice
Chairman of the board of directors. He was also President of Conner's New
Products Group from 1989 to 1990, President of Archive Corporation (a Conner
subsidiary) from January 1993 to November 1993, and CEO of Arcada
Software, Inc. (a Conner subsidiary) from November 1993 to May 1994.
Mr. Schroeder is also a director of Xircom, Inc. and CNF Transportation Inc. He
received his M.B.A. from Harvard University and M.S.E.E. and B.E.E. from
Marquette University.
BOARD MEETINGS AND COMMITTEES
The board of directors held a total of seven (7) meetings during the fiscal
year ended December 31, 1999. The board of directors has an Audit Committee and
a Compensation Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
During 1999, the Audit Committee of the board of directors consisted of
Charles A. Haggerty and William J. Schroeder, both of whom were non-employee
directors of Sync. The Audit Committee participated in several meetings during
1999, including meetings with Sync's management to review audited and interim
financial statements, independent auditor findings, accounting policies and
adequacy of internal controls.
During 1999, the Compensation Committee of the board of directors consisted
of Charles Haggerty and William J. Schroeder, both of whom were non-employee
directors. The Compensation Committee participated in several meetings during
1999. The Compensation Committee, in conjunction with the board of directors,
establishes salaries, incentives and other forms of compensation for directors,
officers and other employees, administers the various incentive compensation and
benefit plans (including Sync's stock purchase and stock option plans) and
recommends policies relating to such plans. The Compensation Committee has
exclusive authority to award grants of options or restricted stock to executive
officers of Sync, pursuant to the 1991 Stock Plan and the 1995 Employee Stock
Purchase Plan.
During 1999, no incumbent director attended fewer than 75% of the aggregate
number of meetings of the board of directors and of the committees of the board
of directors on which he serves.
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COMPENSATION OF DIRECTORS
Mr. Reyes, the Chairman of the board of directors, earned $68,000 ($6,000
per month through October 1999 and $4000 per month thereafter) during 1999
pursuant to a consulting agreement with Sync. Non-employee directors are paid a
fee of $5,000 per quarter plus $1,000 for each full meeting of the board of
directors attended by such director. Directors are reimbursed for out-of-pocket
travel expenses associated with their attendance at board meetings. Non-employee
directors of Sync will automatically be granted options to purchase shares of
Sync common stock pursuant to the terms of the 1995 Directors' Stock Option Plan
(the "Directors' Plan"). Under the Directors' Plan, each non-employee director
who is elected to the board will receive an option to purchase 8,000 shares of
common stock on the date on which he or she first becomes a non-employee
director. In addition, on the date of each annual stockholders meeting, each
non-employee director, will be granted an additional option to purchase 2,000
shares of common stock if, on such date, he or she has served on the board for
at least six months and remains a director as of the date of such meeting. Each
option becomes exercisable at the rate of 25% of the total number of shares
subject to such option on the first anniversary of the grant date, and 1/48(th)
of the total number shares at the end of each month thereafter. Options granted
under the Directors' Plan have an exercise price equal to the fair market value
of Sync common stock on the date of grant and a term of ten years.
Messrs. Haggerty and Schroeder each received options to purchase 2,000 shares
pursuant to the Directors' Plan in 1999. Subject to his election to the board of
directors by the stockholders at the annual meeting, Mr. Haggerty will be
automatically granted an option to purchase 2,000 shares of common stock on the
date of the annual meeting. Subject to the authorization by the stockholders at
the annual meeting of the issuance of Sync common stock under the merger
agreement, Mr. Schroeder will not receive an option to purchase 2,000 shares of
common stock on the date of the annual meeting, as he will resign from the board
following the merger. There are no family relationships among the directors or
executive officers of Sync.
POTENTIAL NEW DIRECTORS
If the Sync stockholders authorize the issuance of Sync common stock
pursuant to the merger agreement for completion of the merger, the board of
directors of Sync following the merger intends to increase the number of
directors who sit on the board from four to five, and to appoint Kanwar J.S.
Chadha, currently the President of Entrada and the intended Chief Executive
Officer of Sync following the merger, to fill such created vacancy. Further, it
is the present intention of Sync and Entrada to have Messrs. Guerry and
Schroeder step down from the board upon consummation of the merger, and be
replaced by Leonard N. Hecht, currently a director of Parent, and Rohit
Phansalkar, currently a director of Parent and a partner of Andersen Weinroth &
Co. LP, affiliates of which own all of the outstanding Series A Preferred Stock
of Sync and are stockholders of Parent. Therefore, assuming that the Sync
stockholders authorize the issuance of Sync common stock under the merger
agreement for completion of the merger and elect the slate of directors that the
Sync board of directors has nominated, the board of directors of Sync following
the merger will consist of Gregorio Reyes, currently the Chairman of Sync's
board of directors, Dr. Chadha, Charles A. Haggerty, currently a director of
Sync, Mr. Hecht and Mr. Phansalkar.
DR. CHADHA has served as the President of Entrada since April 2000. He is a
co-founder of WaterBazaar.com e-portal, currently under development, that will
provide buyers and suppliers of water purification products worldwide an
electronic exchange through which to conduct e-commerce. Dr. Chadha is also a
founding member of ERPL, Inc., an Internet firm that specializes in the
development of embedded software systems, enterprise and manufacturing resource
planning software systems, and that provides business to business e-marketplace
systems solutions & development. Dr. Chadha has also been active in the
commercial graphic arts industries. Dr. Chadha joined AT&T Bell Laboratories in
February 1973 as a Member of Technical Staff and served as a systems engineer &
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principal software designer for the AMPS trial system. As a Supervisor at AT&T
Bell Laboratories from August 1977 to August 1980, Dr. Chadha was responsible
for the development of various software systems. As a Department Head at AT&T
Bell Laboratories from August 1980 to January 1987, Dr. Chadha managed the
development of cellular technologies, MERLIN phone system, Applications
Processor, Videotex system, and System 25 PBX. Dr. Chadha holds a B.E. (Hons) in
Electrical Engineering from Thapar Institute of Technology, Punjab, India, a
M.A.Sc. in Control Systems from the University of Toronto, Ontario, Canada, and
a Ph.D. in Systems Engineering from Case Western Reserve University, Cleveland,
Ohio.
LEONARD N. HECHT has served as a director of Parent since June 1996. Since
1994, he has been President of Chrysalis Capital Group, an investment banking
company that he founded, specializing in mergers, acquisitions and financing.
From 1987 to 1993, Mr. Hecht was Managing Director of the Investment Banking
Group and head of the Technology Assessment Group of Houlihan Lokey Howard &
Zukin, a financial advisory firm. From 1984 to 1987, Mr. Hecht was the Vice
Chairman of the board of directors and Chief Executive Officer of Quantech
Electronics Corp., a diversified publicly held electronics company. Prior to
joining Quantech, Mr. Hecht was a founding principal of Xerox Development
Corporation, a wholly owned subsidiary of the Xerox Corporation. Xerox
Development Corporation was active in strategic planning, mergers and
acquisition, divestitures, licensing, joint ventures and venture investing for
the Xerox Corporation.
ROHIT PHANSALKAR has served as a director of Parent since December 1999.
Since February 1998, he has been a partner of Andersen Weinroth & Co. LP,
affiliates of which own all of the outstanding Series A Preferred Stock of Sync
and are stockholders of Parent. Prior to joining Andersen Weinroth,
Mr. Phansalkar was the co-founder, Vice Chairman and Chief Executive Officer of
Newbridge Capital, a firm dedicated to making private equity investments in
India. From 1993 to 1996 Mr. Phansalkar was a Managing Director of
Oppenheimer & Co., where he was the head of the Energy Finance Group. From 1985
to 1993 Mr. Phansalkar was a Managing Director of Bear Stearns & Co. Prior
thereto, he was the co-head of the Energy Finance Group at Shearson American
Express. Mr. Phansalkar also serves as a director of Zip Global Networks.
Mr. Phansalkar received a B.S. in Engineering from Michigan Technological
University and an M.B.A. from Harvard Graduate School of Business.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The four nominees receiving the highest number of affirmative votes of
shares of Sync's common stock present at the annual meeting in person or by
proxy and entitled to vote shall be elected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED ABOVE TO SERVE AS DIRECTORS FOR THE ENSUING YEAR AND
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
PROPOSAL NO. 3: APPROVAL OF AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
At the annual meeting, stockholders are being asked to approve an amendment
to the 1995 Employee Stock Purchase Plan to increase the number of shares of
common stock reserved for issuance thereunder by 100,000 shares to an aggregate
of 140,000 shares, for which stockholder approval is being requested.
GENERAL
Sync's 1995 Employee Stock Purchase Plan was adopted by the board of
directors in August 1995 and was approved by Sync's stockholders in
November 1995. On May 9, 2000 the board of directors approved an amendment to
increase the number of shares reserved for issuance under the 1995
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Employee Stock Purchase Plan by 100,000 shares to a total of 140,000 shares, for
which stockholder approval is being requested.
The 1995 Employee Stock Purchase Plan, as amended, provides for the granting
to employees (including officers and employee directors) of stock purchase
rights within the meaning of Section 423 of the Internal Revenue Code of 1986,
as amended. See "United States Federal Income Tax Information" below for
information concerning the tax treatment of incentive stock purchase rights.
As of May 3, 2000, 40,000 shares had been issued under the 1995 Employee
Stock Purchase Plan and no shares remained available for future purchase.
The 1995 Employee Stock Purchase Plan is not a qualified deferred
compensation plan under Section 401(a) of the Internal Revenue Code, and is not
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended.
The board of directors believes that in order to afford eligible individuals
whose present and potential contributions are important to the continued success
of Sync an opportunity to acquire a proprietary interest in Sync and to enable
Sync to continue to attract and retain the best available talent for the
successful conduct of its business in a competitive marketplace, it is necessary
to amend the 1995 Employee Stock Purchase Plan to reserve an additional 100,000
shares of common stock for issuance thereunder. The increase sought at the
annual meeting is expected to provide sufficient additional stock to continue
Sync's policy of using equity incentives to attract and retain the services of
key individuals essential to Sync's long-term success.
PURPOSE
The purpose of the 1995 Employee Stock Purchase Plan is to provide employees
of Sync the opportunity to purchase Sync common stock.
ADMINISTRATION
The board of directors, or a committee named by the board of directors,
shall supervise and administer the 1995 Employee Stock Purchase Plan and shall
have full power to adopt, amend and rescind any rules deemed desirable and
appropriate for, and not inconsistent with, the administration of the 1995
Employee Stock Purchase Plan, to construe and interpret the 1995 Employee Stock
Purchase Plan, and to make all other determinations necessary or advisable for
the administration of the 1995 Employee Stock Purchase Plan. The composition of
the committee shall be in accordance with the requirements to obtain or retain
any available exemption from the operation of Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 promulgated thereunder.
ELIGIBILITY
Any person who is an employee of Sync shall be eligible to participate in
the 1995 Employee Stock Purchase Plan, subject to the limitations imposed by
Section 423(b) of the Internal Revenue Code. Any provisions of the 1995 Employee
Stock Purchase Plan to the contrary notwithstanding, no employee shall be
granted an option under the 1995 Employee Stock Purchase Plan (i) if,
immediately after the grant, such employee (or any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Internal
Revenue Code) would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of Sync or of any subsidiary of Sync, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of Sync and its
subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
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OFFERING PERIODS; PARTICIPATION
The 1995 Employee Stock Purchase Plan shall be implemented by a series of
offering periods, with new offering periods commencing on or about February 1
and August 1 of each year (or at such other time or times as may be determined
by the board of directors). An eligible employee may become a participant in the
1995 Employee Stock Purchase Plan by completing a subscription agreement on the
form provided by Sync and filing it with the payroll office prior to the
applicable offering date of each offering period.
METHOD OF PAYMENT OF CONTRIBUTIONS
The participant shall elect to have payroll deductions made on each payday
during the offering period in an amount not less than one percent (1%) and not
more than five percent (5%) of such participant's compensation on each such
payday. All payroll deductions made by a participant shall be credited to his or
her account under the 1995 Employee Stock Purchase Plan. A participant may not
make any additional payments into such account. A participant, on one occasion
only during the offering period, may decrease the rate of his or her
contributions during the offering period by completing and filing with Sync a
new subscription agreement. Notwithstanding the foregoing, to the extent
necessary to comply with the Internal Revenue Code and the eligibility
requirements under the 1995 Employee Stock Purchase Plan, a participant's
payroll deductions may be decreased to 0% at such time during any offering
period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such offering
period and any other offering period ending within the same calendar year equals
or exceeds $21,250.
GRANT OF OPTION
On the commencement date of each offering period, each eligible employee
participating in such offering period shall be granted an option to purchase on
the exercise date a number of shares of Sync common stock determined by dividing
such employee's contributions accumulated prior to such exercise date by the
lower of (i) eighty-five percent (85%) of the fair market value of a share of
Sync common stock on the offering date, or (ii) eighty-five percent (85%) of the
fair market value of a share of Sync common stock on the exercise date. The
maximum number of shares an employee may purchase during each offering period
shall be determined at the offering date by dividing $12,500 by the fair market
value of a share of Sync common stock on the offering date.
The fair market value of Sync common stock on a given date shall be
determined by the board of directors in its discretion based on the closing
price of Sync common stock for such date, as reported by the National
Association of Securities Dealers Automated Quotation (Nasdaq) National Market
or, if such price is not reported, the mean of the bid and asked prices per
share of Sync common stock as reported by Nasdaq.
EXERCISE OF OPTION
Unless a participant withdraws from the 1995 Employee Stock Purchase Plan,
his or her option for the purchase of shares will be exercised automatically on
the exercise date of the offering period, and the maximum number of full shares
subject to the option will be purchased at the applicable option price with the
accumulated contributions in his or her account. The shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the exercise date. During his or her lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or her.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participant may withdraw all but not less than all of the contributions
credited to his or her account under the 1995 Employee Stock Purchase Plan at
any time prior to the exercise date of the
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offering period by giving written notice to Sync. All of the participant's
contributions credited to his or her account will be paid to him or her promptly
after receipt of his or her notice of withdrawal and his or her option for the
current period will be automatically terminated, and no further contributions
for the purchase of shares will be made during the offering period.
Upon termination of the participant as a Sync employee prior to the exercise
date of the offering period for any reason, including retirement or death, the
contributions credited to his or her account will be returned to him or her or,
in the case of his or her death, to the person or persons entitled previously
designated by the participant, and his or her option will be automatically
terminated. In the event an employee fails to remain in continuous status as an
employee of Sync for at least twenty (20) hours per week during the offering
period in which the employee is a participant, he or she will be deemed to have
elected to withdraw from the 1995 Employee Stock Purchase Plan and the
contributions credited to his or her account will be returned to him or her and
his or her option terminated.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTIONS
CHANGES IN CAPITALIZATION. If any change is made in the shares subject to
the 1995 Employee Stock Purchase Plan or subject to any option granted under the
1995 Employee Stock Purchase Plan, through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise, the board of directors shall
make appropriate adjustments as to the maximum number of shares subject to the
1995 Employee Stock Purchase Plan, the number of shares covered by any option
grant, the maximum number of shares issuable to employees, and the number of
shares and price per share covered by outstanding options.
CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of Sync, the offering period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the board. In
the event of a proposed sale of all or substantially all of the assets of Sync,
or the merger of Sync with or into another corporation, each option under the
1995 Employee Stock Purchase Plan shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
offering period then in progress by setting a new exercise date. If the board
shortens the offering period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the board shall notify
each participant in writing, at least ten (10) days prior to the new exercise
date, that the exercise date for his or her option has been changed to the new
exercise date and that his or her option will be exercised automatically on the
new exercise date, unless prior to such date he or she has withdrawn from the
offering.
AMENDMENT OR TERMINATION
The board of directors may at any time terminate or amend the 1995 Employee
Stock Purchase Plan. Except as otherwise provided in the plan, no such
termination may affect options previously granted, nor may an amendment make any
change in any option theretofore granted which adversely affects the rights of
any participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or with Section 423 of the Code, Sync shall obtain
stockholder approval in such a manner and to such a degree as so required.
Without stockholder consent and without regard to whether any participant rights
may be considered to have been adversely affected, the board (or its committee)
shall be entitled to change the offering periods, limit the frequency and/or
number of changes in the amount withheld during an offering period, establish
the exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in Sync's processing of
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properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Sync common stock for each participant
properly correspond with amounts withheld from the participant's compensation,
and establish such other limitations or procedures as the board (or its
committee) determines in its sole discretion advisable which are consistent with
the 1995 Employee Stock Purchase Plan.
FEDERAL INCOME TAX ASPECTS OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The following is a brief summary of the United States federal income tax
consequences of transactions under the 1995 Employee Stock Purchase Plan based
on federal income tax laws in effect as of the date of this proxy statement
(which laws could change at any time hereafter). This summary is not intended to
be exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or other country
in which an optionee may reside. This summary does not purport to be complete.
Sync advises all participants to consult their own tax advisors concerning tax
implications of option grants and exercises, and the disposition of shares
acquired upon such exercises, under the 1995 Employee Stock Purchase Plan.
The 1995 Employee Stock Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under the provisions of Sections
421 and 423 of the Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares. Upon
disposition of the shares, the participant will generally be subject to tax, and
the amount of the tax will depend upon how long the participant has held the
shares. If the shares have been held by the participant for more than two years
after the date of option grant and one year after the date of purchase, the
participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such disposition
over the purchase price, or (b) an amount equal to 15% of the fair market value
of the shares as of the first day of the offering period. Any additional gain
will be treated as long-term capital gain, taxed at a maximum rate of 20% if the
shares are held for more than one year after the date of purchase. If the shares
are disposed of before the expiration of these holding periods, the excess of
the fair market value of the shares on the exercise date over the option price
will be treated as ordinary income, and any further gain or loss on such
disposition will be long-term or short-term capital gain or loss, depending on
whether or not the shares are disposed of more than one year after the date of
purchase. Sync is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
reported by participants upon disposition of shares prior to the expiration of
the holding periods described above.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Sync
common stock present at the annual meeting in person or by proxy and entitled to
vote is required to approve the amendment to the 1995 Employee Stock Purchase
Plan to reserve an additional 100,000 shares of common stock for issuance
thereunder.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN TO RESERVE AN ADDITIONAL
100,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 4: APPROVAL OF INDEPENDENT AUDITORS
The board of directors has appointed the firm of Ernst & Young LLP,
independent auditors, to audit the financial statements of Sync for the fiscal
year ending December 31, 2000, and recommends that stockholders vote for
ratification of this appointment. In the event the stockholders do not ratify
such appointment, the board of directors will reconsider its selection.
Representatives of Ernst &
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Young LLP are expected to be present at the annual meeting with the opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the shares of Sync's
common stock present at the annual meeting in person or by proxy and entitled to
vote is required for approval of the ratification of the appointment of Ernst &
Young LLP as Sync's independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
ERNST & YOUNG LLP AS SYNC'S INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 2000.
POSSIBLE STOCKHOLDER PROPOSAL
In a letter dated April 11, 2000, Sync has been informed by one of its
stockholders, Steel Partners II, L.P. ("Steel"), beneficial owner of
approximately 747,080 shares of Sync common stock as of the date of the proxy
statement/prospectus, of Steel's intention to nominate Warren G. Lichtenstein,
James R. Henderson, Robert B. Frankfurt and Steven Wolosky as nominees to be
elected to Sync's board of directors. Sync and Entrada oppose the election of
any individuals to Sync's board of directors other than those individuals
nominated by the Sync board of directors as set forth in this proxy statement/
prospectus.
OTHER MATTERS
Other than the matter described under the heading "Possible Stockholder
Proposal," the board of directors knows of no other matters to be submitted to
the meeting. If any other matters properly come before the meeting, then the
persons named in the enclosed form of proxy will vote the shares they represent
in such manner as the board may recommend.
INFORMATION CONCERNING SYNC
Additional information concerning:
- the business of Sync
- Sync management's discussion and analysis of financial condition and
results of operation
- directors and executive officers
- executive compensation
- principal stockholders
- certain relationships and related transactions
- and other related matters concerning Sync
is included or incorporated by reference in Sync's annual report on Form 10-K
for the year ended December 31, 1999. As described below, Sync's annual report
on Form 10-K, as well as other documents that have been filed by Sync with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement/prospectus.
77
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
All documents filed by Sync pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, after the date hereof and before the date
of the Sync annual meeting, are incorporated by reference into and are to be a
part of this proxy statement/prospectus from the date of filing of those
documents. The following documents, which have been filed by Sync with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement/prospectus:
- Sync's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, a copy of which is being delivered to all holders of Sync common
stock in conjunction with this proxy statement/prospectus;
- Sync's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Sync's Current Reports on Form 8-K filed on April 18, 2000 and May [ ],
2000; and
- Sync's Registration Statement on Form 8-A (which describes Sync's common
stock), filed on October 10, 1995 and November 4, 1995.
Sync has not authorized anyone to provide you with information that is
different from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated , 2000. You should not assume that the
information contained in the prospectus/ proxy statement is accurate as of any
other date, and neither the mailing of this proxy statement/prospectus to
stockholders nor the issuance of Sync common stock in the merger should create
any implication to the contrary.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference will be deemed to be modified or superseded for
purposes of this proxy statement/prospectus to the extent that a statement
contained herein or any other subsequently filed document that is deemed to be
incorporated herein by reference modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this proxy statement/prospectus.
TRADEMARKS
The Sync logo is a registered trademark of Sync. Sync, Sync Research,
Tylink, Avanti, FrameNode, ConversionNode, ControlSight, Pro-Act, Sync/Manager,
Syncview, and Tyview are registered trademarks or trademarks of Sync.
The Entrada logo is a registered trademark of Entrada. Entrada, Snmptalk,
Routermate, and IQX-200 are registered trademarks or trademarks of Entrada.
This proxy statement/prospectus also includes trade names and trademarks of
companies other than Sync or Entrada. The use of any such third party trade name
or trademark herein is in editorial fashion only, and to the benefit of the
owner thereof, with no intention of commercial use or infringement of such trade
name or trademark.
78
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Sync files reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of Sync's reports, proxy statements
and other information may be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13(th) Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Reports, proxy statements and other information concerning Sync may be
inspected at:
The National Association of
Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at
l-800-SEC-0330. The Securities and Exchange Commission maintains a website that
contains reports, proxy statements and other information regarding each of us.
The address of the Securities and Exchange Commission website is
http://www.sec.gov.
Sync has filed a registration statement on Form S-4 under the Securities Act
of 1933 with the Securities and Exchange Commission with respect to Sync's
common stock to be issued to Parent in the merger. This proxy
statement/prospectus constitutes the proxy statement/prospectus of Sync filed as
part of the registration statement. This proxy statement/prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted in accordance with the
rules and regulations of the Securities and Exchange Commission. The
registration statement and its exhibits are available for inspection and copying
as set forth above.
The documents incorporated by reference into this proxy statement/prospectus
are available from us upon request. We will provide a copy of any and all of the
information that is incorporated by reference in this proxy statement/prospectus
(not including exhibits to the information unless those exhibits are
specifically incorporated by reference into this proxy statement/prospectus) to
any person, without charge, upon written or oral request. ANY REQUEST FOR
DOCUMENTS SHOULD BE MADE BY JULY 15, 2000 TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS.
If you have any questions about the merger, please contact our Investor
Relations department as follows:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
79
<PAGE>
INFORMATION SET FORTH OR INCORPORATED INTO THIS PROXY STATEMENT/PROSPECTUS BY
REFERENCE OR IN OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO
SYNC AND ITS SUBSIDIARIES WAS PROVIDED BY SYNC AND THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO ENTRADA WAS PROVIDED BY ENTRADA.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus contains forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to our financial condition, results of operations and
business, and on the expected impact of the merger on Sync's financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. These risks and uncertainties include:
- the possibility that the merger will not be consummated
- the possibility that the anticipated benefits from the merger cannot be
fully realized
- the possibility that costs or difficulties related to the integration of
our businesses are greater than expected
- our dependence on the timely development, introduction and customer
acceptance of new products
- the impact of competition on revenues and margins
- rapidly changing technology and shifting demand requirements
- other risks and uncertainties, including the risks and uncertainties
involved in obtaining new customers, the impact of competitive services,
products and prices, the unsettled conditions in the high-technology
business and the ability to attract and retain key personnel
- other risk factors as may be detailed from time to time in Sync's and
Entrada's public announcements and filings with the Securities and
Exchange Commission.
In evaluating the merger, you should carefully consider the discussion of
these and other factors in the section entitled "Risk Factors" on page 15 of
this proxy statement/prospectus.
80
<PAGE>
INDEX TO ENTRADA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholder's Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder of
Osicom Technologies, Inc.
We have audited the accompanying balance sheets of Osicom
Technologies, Inc. (a Delaware corporation, f/k/a Cray Communications, Inc.,
doing business as Entrada Networks) ("Entrada"), a wholly-owned subsidiary of
Osicom Technologies, Inc. (a New Jersey corporation), as of January 31, 2000 and
1999 and the related statements of operations, stockholder's deficit, and cash
flows for each of the years ended January 31, 2000, 1999 and 1998. These
financial statements are the responsibility of Entrada's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Entrada as of January 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the years ended January 31, 2000, 1999 and 1998 in conformity with generally
accepted accounting principles.
/s/ BDO SEIDMAN LLP
--------------------------------------
BDO Seidman LLP
Los Angeles, California
March 23, 2000
F-2
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31, 2000 JANUARY 31, 1999
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 112 $ 198
Accounts receivable, net (Notes D and P).................. 5,919 6,328
Inventory, net (Notes B, D and P)......................... 6,041 4,493
Due from affiliates (Note K).............................. 753 475
Prepaid expenses and other current assets................. 563 150
-------- --------
TOTAL CURRENT ASSETS.................................... 13,388 11,644
PROPERTY AND EQUIPMENT, NET (Notes C, D and E).............. 1,384 790
OTHER ASSETS
Capitalized software, net (Note B)........................ 1,772 4,316
-------- --------
TOTAL ASSETS................................................ $ 16,544 $ 16,750
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Short-term debt (Note D).................................. $ 2,264 $ 4,550
Current maturities of long-term debt (Note E)............. 312 121
Accounts payable.......................................... 4,381 3,458
Due to affiliates (Note K)................................ 0 186
Deferred revenue.......................................... 317 785
Accrued liabilities....................................... 1,905 1,478
-------- --------
TOTAL CURRENT LIABILITIES............................... 9,179 10,578
Long-term debt and capital lease obligations................ 302 154
Due to parent company (Note K).............................. 21,769 17,337
-------- --------
TOTAL LIABILITIES....................................... 31,250 28,069
STOCKHOLDER'S EQUITY (DEFICIT) (Note H)
Common stock--Class A, $1.00 par value, 41 shares
authorized, 1 shares issued and outstanding; Class B,
$1.00 par value, 9 shares authorized, none issued or
outstanding............................................. 1 1
Additional paid in capital................................ 5,761 5,761
Accumulated deficit....................................... (20,468) (17,081)
-------- --------
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)........................ (14,706) (11,319)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)........ $ 16,544 $ 16,750
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net Sales................................................... $28,771 $29,007 $30,624
Cost of Sales............................................... 17,498 16,043 17,061
------- ------- -------
Gross Profit............................................ 11,273 12,964 13,563
------- ------- -------
Selling and marketing....................................... 5,647 8,329 8,974
Engineering, research and development....................... 6,223 5,503 3,546
General and administrative.................................. 2,177 2,270 3,611
Other operating expenses (Note B)........................... -- -- 3,873
------- ------- -------
Total operating expenses................................ 14,047 16,102 20,004
------- ------- -------
Loss from operations........................................ (2,774) (3,138) (6,441)
Interest expense............................................ (613) (578) (513)
------- ------- -------
Loss before income taxes.................................... (3,387) (3,716) (6,954)
Provision for income taxes (Note I)......................... -- -- --
------- ------- -------
Net loss.................................................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Income (loss) per share (Note J):
Basic
Weighted average common shares outstanding.............. 1 1 1
Basic net loss per share................................ $(3,387) $(3,716) $(6,954)
======= ======= =======
Diluted
Weighted average common shares outstanding.............. 1 1 1
Diluted net loss per share.............................. $(3,387) $(3,716) $(6,954)
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
-------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31, 1997................. 1 $1 $5,761 $ (6,411) $ (649)
Net loss.................................... (6,954) (6,954)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 1998................. 1 1 5,761 (13,365) (7,603)
Net loss.................................... (3,716) (3,716)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 1999................. 1 1 5,761 (17,081) (11,319)
Net loss.................................... (3,387) (3,387)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 2000................. 1 $1 $5,761 $(20,468) $(14,706)
== == ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(3,387) $(3,716) $(6,954)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,796 1,501 772
Accounts receivable and inventory reserves.............. 979 1,826 1,280
Intangible asset valuation allowance (Note B)........... 1,818 -- 3,750
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.............. 366 (1,528) (1,132)
Increase in due from affiliates......................... (278) (457) (18)
(Increase) decrease in inventories...................... (1,442) 588 (4,203)
(Increase) decrease in other current assets............. (413) 95 (19)
Increase (decrease) in accounts payable................. 923 (490) 1,944
Increase (decrease) in due to affiliates................ (186) 159 28
Increase (decrease) in accrued expenses................. 426 (812) 712
Increase (decrease) in other current liabilities........ (468) 74 161
------- ------- -------
NET CASH USED IN OPERATING ACTIVITIES................... 134 (2,760) (3,679)
------- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment........................ (239) (567) (654)
Software development costs................................ (318) (1,297) (1,324)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES................... (557) (1,864) (1,978)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from parent company.............................. 2,285 4,882 3,243
Proceeds from short-term debt, net of repayments (Note
D)...................................................... (2,286) (476) 2,539
Proceeds from long-term debt (Note E)..................... 600 285 126
Repayment of long-term debt (Note E)...................... (262) (115) (25)
------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... 337 4,576 5,883
------- ------- -------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS............. (86) (48) 226
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD.............. 198 246 20
------- ------- -------
CASH AND CASH EQUIVALENTS--END OF PERIOD.................... $ 112 $ 198 $ 246
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
']
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Entrada Networks (the "Company," "We," "Our," or "Us") designs,
manufactures, and markets products that provide access to and enhance the
performance of data and telecommunications networks, and is currently developing
products that provide connectivity for storage networks. Many of our products
are incorporated into the remote access and other server products of original
equipment manufacturers ("OEMs"). In addition, certain of our products are
deployed by telecommunications network operators, applications service
providers, internet service providers, and the operators of corporate local area
and wide area networks for the purpose of providing access to and transport
within their networks. We have our facility in Annapolis Junction, Maryland. In
addition, we have various sales offices located in the United States. We market
and sell our products and services directly to end users as well as through a
broad array of channels including system integrators, worldwide distributors,
value added resellers, original equipment manufacturers ("OEM's"),
telecommunication service providers and governmental agencies.
The accompanying financial statements are the responsibility of the
management of the Company.
A. THE COMPANY AND BASIS OF PRESENTATION
The Company, incorporated in Delaware in 1972, became a wholly owned
subsidiary of Osicom Technologies, Inc. ("Osicom" or "Parent") effective
June 30, 1996 in a transaction accounted for as a purchase in which the book
values of our assets and liabilities were adjusted to reflect their then market
value. During the periods covered by the financial statements, we operated as an
integral part of Osicom's overall operations and separate financial statements
were not prepared. These financial statements have been prepared from Osicom's
historical accounting records. The statements of operations may not be
indicative of the results of operations that would have resulted had we operated
as a stand-alone entity.
General and administrative expenses include, in addition to amounts incurred
by us, an amount that management considers to be a reasonable allocation of
general corporate expenses. Management and administrative salaries are allocated
based upon estimated time; all other allocations of general corporate expenses
were based upon specific identification of the relationship of our operations to
the total operations of Osicom. Management believes that such allocated general
expenses are representative of the expenses we will incur as a separate public
company, however, actual expenses may be higher or lower. Included in general
and administrative expenses are $220, $182 and $160 of allocated corporate
expenses for the fiscal years 2000, 1999, and 1998, respectively.
On April 11, 2000, Osicom entered into an agreement with Sync
Research, Inc. ("Sync"), a Nasdaq listed company, to exchange 100% of our
outstanding stock for a 50% interest in the merged corporation to be known as
Entrada Networks, Inc. The merger is subject to the approval of Sync's
shareholders and is expected to occur prior to September 2000.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires us to make estimates that
affect the reported amounts of assets, liabilities, revenues and expenses, the
disclosure of contingent assets and liabilities and the values of purchased
assets. Actual results could differ from these estimates.
F-7
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE--In the normal course of business, we extend unsecured
credit to our customers related to the sales of various products. Typically
credit terms require payment within thirty days from the date of shipment. We
evaluate and monitor the creditworthiness of each customer on a case-by-case
basis.
ALLOWANCE FOR DOUBTFUL ACCOUNTS--We provide an allowance for doubtful
accounts based on our continuing evaluation of our customers' credit risk. We
generally do not require collateral from our customers.
INVENTORY--Inventory, comprised of raw materials, work in process, finished
goods and spare parts, are stated at the lower of cost (first-in, first-out
method) or market. Inventories at January 31, 2000 and 1999 consist of:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Raw materials............................................. $ 4,740 $ 3,673
Work in process........................................... 1,958 1,361
Spare parts............................................... 141 190
Finished goods............................................ 1,228 807
------- -------
8,067 6,031
Less: Valuation reserve................................... (2,026) (1,538)
------- -------
$ 6,041 $ 4,493
======= =======
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair value of financial instruments
is determined by reference to various market data and other valuation techniques
as appropriate. We believe that there are no material differences between the
recorded book values of our financial instruments and their estimated fair value
PROPERTY AND EQUIPMENT--Property and equipment are recorded at historical
cost. Depreciation and amortization are provided over the estimated useful lives
of the individual assets or the terms of the leases if shorter using accelerated
and straight-line methods. Useful lives for property and equipment range from 3
to 7 years.
Capitalized leases are initially recorded at the present value of the
minimum payments at the inception of the contracts, with an equivalent liability
categorized as appropriate under current or non-current liabilities. Such assets
are depreciated on the same basis as described above. Interest expense, which
represents the difference between the minimum payments and the present value of
the minimum payments at the inception of the lease, is allocated to accounting
periods using a constant rate of interest over the lease.
Property and equipment are reviewed for impairment whenever events or
circumstances indicate that the asset's undiscounted expected cash flows are not
sufficient to recover its carrying amount. We measure impairment loss by
comparing the fair market value, calculated as the present value of expected
future cash flows, to its net book value. Impairment losses, if any, are
recorded currently.
F-8
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPMENT--Software development costs where technological
feasibility has not been established are expensed in the period in which they
occurred, otherwise, development costs that will become an integral part of our
products are deferred in accordance with Statement of Financial Accounting
Standards Nos. 2 and 86. The deferred costs are amortized using the
straight-line method over the remaining estimated economic life of the product
or the ratio that current revenues for the product bear to the total of current
and anticipated future revenues for that product. Amortization expense for the
years ended January 31, 2000, 1999 and 1998 was $1,043, $668 and $7,
respectively, over 3 to 5 years. Accumulated amortization was $727 and $675 as
of January 31, 2000 and 1999, respectively.
The recoverability of capitalized software costs are reviewed on an ongoing
basis primarily based upon projections of discounted future operating cash flows
from each software product line. The excess amount, if any, of the remaining net
book value over the calculated amount is fully reserved. During the quarter
ended January 31, 2000 we recorded a reduction to the net book value of our
capitalized software development costs of $1,818, recorded as engineering
expense, to reflect the decline in the net realizable value of these assets as a
result of changing market conditions.
PURCHASED TECHNOLOGY--Technology assets were recorded in connection with
Osicom's acquisition during the year ended January 31, 1997. The discounted
projected future cash flow from proven technology and software were capitalized
and amortized over their remaining estimated economic life (7 years) using the
straight-line method.
We assess the recoverability of purchased technology primarily by
determining whether the amortization of the net book value of purchased
technology over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of the impairment, if
any, of the net book value of the excess cost over net assets acquired is
measured by determining the fair value of these assets primarily based on
projected discounted future operating cash flows from the purchased technologies
using a discount rate commensurate with our cost of capital. During the quarter
ended July 31, 1997, we recorded reductions to the net book value of purchased
technology of $3,750 to reflect the decline in the fair value of these assets as
the result of changing market conditions. This reduction has been included in
Other operating expenses.
RESEARCH AND DEVELOPMENT--We expense research and development costs as
incurred in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 2, "Accounting for Research and Development Costs". Research and development
costs are costs associated with products or processes for which technological
feasibility has not been proven and future benefits are uncertain. In-process
research and development purchased by us includes the value of products and
processes in the development stage and have not reached technological
feasibility; this amount is expensed at the date of purchase.
REVENUE RECOGNITION--We generally recognize product revenue when the
products are shipped, all substantial contractual obligations, if any, have been
satisfied, and the collection of the resulting receivable is reasonably assured.
Revenue from installation is recognized as the services are performed to the
extent of the direct costs incurred. To date, installation revenue has not been
material. Revenue
F-9
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
from service obligations, if any, is deferred and recognized over the life of
the contract. Inventory or demonstration equipment shipped to potential
customers for field trials is not recorded as revenue. We accrue for warranty
costs, sales returns and other allowances at the time of shipment. Although our
products contain a software component, the software is not sold separately and
we are not contractually obligated to provide software upgrades to our
customers.
WARRANTY AND CUSTOMER SUPPORT--We typically warrant our products against
defects in materials and workmanship for a period of one to five years from the
date of sale and a provision for estimated future warranty and customer support
costs is recorded when revenue is recognized. To date, warranty and customer
support costs have not been material.
INCOME TAXES--Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." The
statement employs an asset and liability approach for financial accounting and
reporting of deferred income taxes generally allowing for recognition of
deferred tax assets in the current period for future benefit of net operating
loss and research credit carryforwards as well as items for which expenses have
been recognized for financial statement purposes but will be deductible in
future periods. A valuation allowance is recognized, if on the weight of
available evidence it is more likely than not that some portion or all of the
deferred tax assets will not be realized. (See Note I).
ADVERTISING--We expense advertising expenditures as incurred. Advertising
expenses consist of allowances given to customers as well as direct
expenditures. Advertising expenses for fiscal 2000, 1999 and 1998 were $11,
$536, and $290, respectively.
INCOME AND LOSS PER COMMON SHARE--Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," requires dual presentation of
basic and diluted earnings per share ("EPS") on the face of the income
statement. It also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation. (See Note M). Basic income and loss per common share is computed by
dividing net income or loss available to common shareholders by the weighted
average number of common shares outstanding during each period presented.
Diluted EPS is based on the weighted average number of common shares outstanding
as well as dilutive potential common shares, which in our case was none.
Potential common shares would not be included in the diluted loss per share
computation for fiscal 2000, 1999 and 1998 as they would be anti-dilutive.
DERIVATIVE INSTRUMENTS--SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," is effective for financial statements with fiscal
quarters of all fiscal years beginning after June 15, 2000. The statement
establishes standards for accounting for derivatives and hedging instruments of
which we currently have none. We do not expect the adoption of SFAS No. 133 to
have a material effect, if any, on our financial position or results of
operations.
COMPUTER SOFTWARE FOR INTERNAL USE--The Accounting Standards Executive
Committee issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," is effective for
financial statements with fiscal years beginning after
F-10
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 15, 1998. The SOP provides guidance on accounting for the costs of
computer software developed or obtained for internal use. The SOP requires that
we continue to capitalize certain costs of software developed for internal use
once certain criteria are met. The adoption of SOP 98-1 had no effect on our
financial position or results of operations.
START-UP COSTS--Statement of Opinion 98-5, "Reporting on the Costs of
Start-up Activities," is effective for financial statements for fiscal years
beginning after December 31, 1998. The SOP provides guidance and examples of the
types of expenses associated with one-time (start-up) activities which under
this SOP must be expensed as incurred. The adoption of SOP 98-5 had no effect on
our financial position or results of operations.
C. PROPERTY AND EQUIPMENT
Property and equipment of the Company consisted of the following components
as of January 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Manufacturing, engineering and plant equipment and
software.............................................. $ 14,674 $ 14,023
Office furniture and fixtures........................... 916 949
Leasehold and building improvements..................... 459 233
-------- --------
Total property and equipment.......................... 16,049 15,205
Less: Accumulated depreciation.......................... (14,665) (14,415)
-------- --------
Net book value........................................ $ 1,384 $ 790
======== ========
</TABLE>
Depreciation expense for fiscal 2000, 1999 and 1998 was $751, $834 and $642,
respectively.
D. SHORT TERM DEBT
Short term debt at January 31, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Floating interest rate loan (2.5% over lender's prime rate)
secured by all of our tangible assets; weighted average
interest rate for the year ended January 31, 2000 was
13.4%..................................................... $2,264 $4,550
====== ======
</TABLE>
We have a $7,000 line of credit collateralized by substantially all our
assets including accounts receivable, inventory and property and equipment and a
guarantee by our parent. Advances are limited to 75% of eligible receivables and
30% of eligible inventory. The loan bears interest at 2.5% over the lender's
prime rate but not less than 8%; the interest rate on the line of credit was
11.0% at January 31, 2000. The agreement automatically renews for successive one
year terms on a continuous basis at February 1(st) of each year unless
terminated by written notice of either party or by default. The highest amount
outstanding was $5,283 and $4,730 during fiscal years 2000 and 1999,
respectively. The average amount outstanding was $4,156 and $4,059 during fiscal
years 2000 and 1999, respectively.
We are in compliance with our debt covenants at January 31, 2000.
F-11
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
E. LONG TERM DEBT
Long term debt at January 31, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Floating interest rate term loans (2.5% over Coast's prime
rate) secured by machinery and equipment; interest rate
for year ended January 31, 2000 was 11.0%................. $345 $ --
Obligations under finance leases (See Note F)............... 269 275
---- ----
614 275
Less: Current portion....................................... 312 121
---- ----
$302 $154
==== ====
</TABLE>
Long term debt including capitalized leases at January 31, 2000 is payable
by year as follows:
<TABLE>
<S> <C>
2001.. $312
2002.. 259
2003.. 43
----
$614
====
</TABLE>
F. LEASES AND OTHER COMMITMENTS
Rental expense under operating leases was $672, $1,147 and $1,031 for fiscal
2000, 1999, and 1998, respectively. The table below sets forth minimum payments
under capital and operating leases with remaining terms in excess of one year,
at January 31, 2000:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
2001....................................................... $172 $ 561
2002....................................................... 102 546
2003....................................................... 21 480
2004....................................................... -- 840
---- ------
295 $2,427
------
Less: Amount representing interest......................... (26)
----
Present value of minimum annual rentals.................... $269
====
</TABLE>
The net book value of equipment under capital leases was $331 and $269 at
January 31, 2000 and 1999, respectively.
G. LITIGATION
We are involved in various other legal proceedings and claims incidental to
the normal conduct of our business. Although it is impossible to predict the
outcome of any outstanding legal proceedings, we
F-12
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
G. LITIGATION (CONTINUED)
believe that such legal proceedings and claims, individually and in the
aggregate, are not likely to have a material effect on our financial position,
the results of operations or cash flows.
H. STOCKHOLDERS' EQUITY
We are authorized to issue the following shares of stock:
41,000 shares of Common Stock--Class A ($1.00 par value)
9,000 shares of Common Stock--Class B ($1.00 par value)
The Class B common stock is convertible on a one-for-one basis into Class A
common stock. The holders of Class A shares may elect eight directors separately
as a class while the holders of Class B shares may elect two directors
separately as a class. In any other matter voted upon by the shareholders, each
share of Class B has a 1/3 vote. The remaining rights, privileges of the two
classes of common stock are identical, including dividend and dissolution
rights.
I. INCOME TAXES
Our provisions for taxes on income for the years ended January 31, 2000,
1999 and 1998 consist of:
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Current.................................................... $ -- $ -- $ --
Deferred................................................... -- -- --
--------- --------- ---------
Total...................................................... $ -- $ -- $ --
========= ========= =========
</TABLE>
Our operations generate permanent and temporary differences for
depreciation, amortization, and valuation allowances. We have recorded a 100%
valuation allowance against our deferred tax assets, including net operating
loss and research credit carryforwards, in accordance with the provisions of
Statement of Financial Accounting Standards No. 109. Such allowance is
recognized if, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Tax loss carryforwards.................................. $ 8,604 $ 8,297
Valuation allowances.................................... 990 859
Other................................................... 172 221
------- -------
Gross deferred tax assets............................. 9,766 9,377
Less: valuation allowance............................... (8,737) (8,021)
------- -------
Deferred tax asset.................................... 1,029 1,356
------- -------
Deferred tax liabilities:
Depreciation.......................................... 320 400
Software development costs............................ 709 956
------- -------
Deferred tax liabilities.............................. 1,029 1,356
------- -------
Net deferred tax liability................................ $ -- $ --
======= =======
</TABLE>
F-13
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
I. INCOME TAXES (CONTINUED)
At January 31, 2000, we have federal net operating losses which may be
available to reduce future taxable income. Among potential adjustments which may
reduce available loss carryforwards, the Internal Revenue Code of 1986, as
amended, (IRC), reduces the extent to which net operating loss carryforwards may
be utilized in the event there has been an "ownership change" of a company as
defined by applicable IRC provisions. We believe that the acquisition of 100% of
our outstanding stock in September, 1996 by Osicom resulted in such an ownership
change, and we intend to analyze the impact of this transfer on the continued
availability, for tax purposes, of our net operating losses incurred through
January 31, 2000. Further ownership changes in the future, as defined by the
IRC, may reduce the extent to which any net operating losses may be utilized.
These NOL carryforwards expire as follows:
<TABLE>
<S> <C>
2007........................................................ $ 2,840
2008........................................................ 1,888
2009........................................................ 2,270
2010........................................................ 3,034
2011........................................................ 2,477
2018........................................................ 3,855
2019........................................................ 5,715
2020........................................................ 1,785
-------
$23,864
=======
</TABLE>
The reconciliation between income tax expense and a theoretical United
States tax computed by applying a rate of 35% for the years ended January 31,
2000, 1999 and 1998, is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Loss before income taxes.......................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Theoretical tax (benefit) at 35%.................. $(1,185) $(1,301) $(2,434)
Impact of purchase accounting..................... -- -- 1,365
Change in valuation allowance..................... 1,185 1,301 1,069
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
J. EARNINGS PER SHARE CALCULATION
We incurred a net loss for fiscal years 2000, 1999 and 1998. Accordingly,
dilutive potential common shares which we have none would not be included in the
calculation of earnings per share because their
F-14
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
J. EARNINGS PER SHARE CALCULATION (CONTINUED)
effect would be antidilutive. The following data show the amounts used in
computing basic and diluted earnings per share.
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss.......................................... $(3,387) $(3,716) $(6,954)
Adjustments....................................... -- -- --
------- ------- -------
Net loss available to common shareholder used in
basic and diluted EPS........................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Average number of common shares used in basic and
diluted EPS..................................... 1,000 1,000 1,000
======= ======= =======
</TABLE>
We have no stock option plans, however many of our employees hold options
granted under our parent's stock option plans. All options were granted at not
less than fair market value on the date of grant. Under these plans, options
generally vest over a two-year to four-year period from the date of grant.
K. RELATED PARTY TRANSACTIONS
From time to time we have received non-interest bearing advances from our
parent, including payment of various expense on our behalf and transfer of
assets from other subsidiaries of our parent which are used in our business. The
balance due our parent, included in non-current liabilities in the accompanying
financial statements, was $21,769 and $17,337 at January 31, 2000 and 1999,
respectively. The merger agreement entered into by our parent provides that the
balance due at closing will be contributed to our capital and we will have no
remaining debt outstanding due our parent.
We manufacture assemblies for the Optical Networking business of our parent,
purchase components for as well as purchase assemblies from our parent's former
subsidiary located in Hong Kong, and purchased inventory from as well as
reimbursed engineering, occupancy and manufacturing support expenses to our
parent's former subsidiary, NETsilicon, Inc. The following data show the amounts
of these transactions with our affiliates.
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Sales to Optical Networking.......................... $ 735 $ 506 $110
Component sales to foreign affiliate................. 1,678 38 7
Purchases from foreign affiliate..................... 1,714 1,017 510
Purchases from NETsilicon, Inc....................... 564 953 --
Expenses reimbursed to NETsilicon, Inc............... 593 854 --
</TABLE>
F-15
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
K. RELATED PARTY TRANSACTIONS (CONTINUED)
Balances due to and from our affiliates, included in current liabilities and
assets in the accompany financial statements, at January 31, 1999 and 2000
consist of:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Due from Optical Networking................................. $427 $475
Due from foreign affiliate.................................. 326 --
---- ----
Due from affiliates....................................... $753 $475
==== ====
Due to foreign affiliate.................................... $ -- $186
---- ----
Due to affiliates......................................... $ -- $186
==== ====
</TABLE>
L. SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest expense and taxes paid approximated the related expenses for the
years ended January 31, 2000, 1999 and 1998.
Assets transferred to us from our affiliates neither provided nor used cash.
Accordingly, assets with net book values of $2,147, $577 and $1,348 were
excluded from the statements of cash flows for fiscal 2000, 1999 and 1998,
respectively.
M. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to concentrations of
credit risk consist primarily of temporary cash investments and trade
receivables. As regards the former, we place its temporary cash investments with
high credit financial institutions and limits, by policy, the amount of credit
exposure to any one institution. No accounts at a single bank accounted for more
than 10% of current assets.
Concentrations of credit risk with respect to trade receivables are limited
because there is a large number of customers in our customer base spread across
many industries and geographic areas. Three customers each accounted for 19.4%,
18.7%, and 13.7% of fiscal 2000 net sales. One customer accounted for 16.3% of
fiscal 1999 net sales. One customer accounted for 16.1% of fiscal 1998 net
sales. At January 31, 2000 one customer accounted for 39.4% of net receivables.
At January 31, 1999 one customer accounted for 29.7% of net receivables.
N. SUBSEQUENT EVENTS
On April 11, 2000, Osicom entered into an agreement with Sync
Research, Inc. ("Sync"), a Nasdaq listed company, to exchange 100% of our
outstanding stock for a 50% interest in the merged corporation to be known as
Entrada Networks, Inc. The merger is subject to the approval of Sync's
shareholders and is expected to occur prior to September 2000. The merger
agreement provides that the balance due Osicom at closing will be contributed to
our capital and we will have no remaining debt outstanding due Osicom. Sync
develops, manufactures, markets and sells frame relay circuit management
solutions, multi-service frame relay access and routing solutions, and a series
of digital transmission products.
F-16
<PAGE>
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
O. SEGMENT INFORMATION
We operate in one business segment. Enterprise wide information regarding
our geographical concentrations is as follows. Export sales and certain income
and expense items are reported in the geographic area where the final sales to
customers are made, rather than where the transaction originates.
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States.................................. $27,827 $27,516 $29,840
Europe......................................... 510 1,010 582
Asia........................................... 78 195 128
Other.......................................... 356 286 74
Inter-area eliminations........................ -- -- --
------- ------- -------
Total net sales.............................. $28,771 $29,007 $30,624
======= ======= =======
</TABLE>
P. VALUATION AND QUALIFYING ACCOUNTS
Changes in the inventory valuation reserve were as follows:
<TABLE>
<S> <C>
Balance at February 1, 1997................................. $ 3,582
Additions charged to costs and expenses................... 1,100
Amounts used during year.................................. (1,533)
-------
Balance at January 31, 1998................................. 3,149
Additions charged to costs and expenses................... 1,416
Amounts used during year.................................. (3,027)
-------
Balance at January 31, 1999................................. 1,538
Additions charged to costs and expenses................... 936
Amounts used during year.................................. (448)
-------
Balance at January 31, 2000................................. $ 2,026
=======
</TABLE>
Changes in the accounts receivable valuation reserve were as follows:
<TABLE>
<S> <C>
Balance at February 1, 1997................................. $ 352
Additions charged to costs and expenses................... 180
Amounts used during year.................................. (62)
-----
Balance at January 31, 1998................................. 470
Additions charged to costs and expenses................... 410
Amounts used during year.................................. (270)
-----
Balance at January 31, 1999................................. 610
Additions charged to costs and expenses................... 43
Amounts used during year.................................. (204)
-----
Balance at January 31, 2000................................. $ 449
=====
</TABLE>
F-17
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNC RESEARCH, INC.,
A DELAWARE CORPORATION
MERGER CO,
A DELAWARE CORPORATION
OSICOM TECHNOLOGIES, INC.,
A NEW JERSEY CORPORATION
AND
OSICOM TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
DATED AS OF
APRIL 10, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
ARTICLE I THE MERGER.................................................. A-1
1.1 The Merger.................................................. A-1
1.2 Closing..................................................... A-1
1.3 Effective Time.............................................. A-1
1.4 Certificate of Incorporation; By-laws....................... A-2
1.5 Officers and Directors...................................... A-2
1.6 Sync........................................................ A-2
1.7 Additional Matters.......................................... A-2
1.8 Lucent...................................................... A-2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS................................................ A-2
2.1 Effect on Capital Stock..................................... A-2
2.2 Exchange Procedures......................................... A-3
2.3 Stock Transfer Books........................................ A-3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND
OSICOM...................................................... A-3
3.1 Corporate Organization...................................... A-3
3.2 Capitalization.............................................. A-4
3.3 Authorization, Etc.......................................... A-4
3.4 Financial Statements........................................ A-5
3.5 No Undisclosed Liabilities.................................. A-5
3.6 No Approvals or Conflicts................................... A-5
3.7 Compliance with Law; Governmental Authorizations............ A-5
3.8 Litigation.................................................. A-5
3.9 Assets...................................................... A-6
3.10 Absence of Certain Changes.................................. A-6
3.11 Taxes....................................................... A-6
3.12 Employee Benefits........................................... A-7
3.13 Labor Relations............................................. A-9
3.14 Patents, Trademarks, Trade Names, Etc....................... A-9
3.15 Contracts................................................... A-9
3.16 Environmental Matters....................................... A-10
3.17 Insurance................................................... A-11
3.18 Material Customers and Suppliers............................ A-11
3.19 Real Property............................................... A-11
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
3.20 Investment Company Act Status............................... A-12
3.21 Product Liability........................................... A-12
3.22 Books and Records........................................... A-12
3.23 No Brokers' or Other Fees................................... A-13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SYNC...................... A-13
4.1 Corporate Organization...................................... A-13
4.2 Capitalization.............................................. A-13
4.3 Authorization, Etc.......................................... A-14
4.4 Financial Statements........................................ A-14
4.5 No Undisclosed Liabilities.................................. A-14
4.6 No Approvals or Conflicts................................... A-14
4.7 Compliance with Law; Governmental Authorizations............ A-14
4.8 Litigation.................................................. A-15
4.9 Assets...................................................... A-15
4.10 Absence of Certain Changes.................................. A-15
4.11 Taxes....................................................... A-15
4.12 Employee Benefits........................................... A-16
4.13 Labor Relations............................................. A-17
4.14 Patents, Trademarks, Trade Names, Etc....................... A-17
4.15 Contracts................................................... A-18
4.16 Environmental Matters....................................... A-18
4.17 Insurance................................................... A-19
4.18 Material Customers and Suppliers............................ A-19
4.19 Real Property............................................... A-19
4.20 Investment Company Act Status............................... A-20
4.21 Product Liability........................................... A-20
4.22 Books and Records........................................... A-21
4.23 No Brokers' or Other Fees................................... A-21
4.24 Sync Reports................................................ A-21
4.25 NASDAQ...................................................... A-21
ARTICLE V COVENANTS AND AGREEMENTS.................................... A-21
5.1 Conduct of Business by Osicom............................... A-21
5.2 Conduct of Business by Sync................................. A-22
5.3 Access to Books and Records; Cooperation.................... A-24
5.4 Filings and Consents........................................ A-24
5.5 No Solicitation............................................. A-24
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
5.6 Proxy; Registration Statement............................... A-25
5.7 Shareholders' Meeting....................................... A-25
5.8 Listing..................................................... A-25
5.9 Covenant to Satisfy Conditions.............................. A-26
5.10 Best Efforts and Further Assurances......................... A-26
ARTICLE VI CONDITIONS TO OSICOM'S OBLIGATIONS.......................... A-26
6.1 Representations and Warranties.............................. A-26
6.2 Performance................................................. A-26
6.3 Officer's Certificate....................................... A-26
6.4 HSR Act..................................................... A-26
6.5 Shareholder Approval........................................ A-26
6.6 Registration Statement...................................... A-26
6.7 Nasdaq...................................................... A-26
6.8 Injunctions................................................. A-26
6.9 Consents.................................................... A-26
6.10 Non-Competition Agreement................................... A-27
ARTICLE VII CONDITIONS TO SYNC'S OBLIGATION............................. A-27
7.1 Representations and Warranties.............................. A-27
7.2 Performance................................................. A-27
7.3 Officer's Certificate....................................... A-27
7.4 HSR Act..................................................... A-27
7.5 Shareholder Approval........................................ A-27
7.6 Registration Statement...................................... A-27
7.7 Injunctions................................................. A-27
7.8 Consents.................................................... A-27
7.9 Non-Competition Agreement................................... A-27
ARTICLE VIII TERMINATION................................................. A-28
8.1 Termination................................................. A-28
8.2 Procedure and Effect of Termination......................... A-28
ARTICLE IX INDEMNIFICATION............................................. A-28
9.1 Indemnification............................................. A-28
ARTICLE X MISCELLANEOUS............................................... A-30
10.1 Survival of Representations, Warranties and Agreements...... A-30
10.2 Fees and Expenses........................................... A-30
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
10.3 Governing Law............................................... A-30
10.4 Amendment................................................... A-31
10.5 No Assignment............................................... A-31
10.6 Waiver...................................................... A-31
10.7 Notices..................................................... A-31
10.8 Complete Agreement.......................................... A-32
10.9 Counterparts................................................ A-32
10.10 Publicity................................................... A-32
10.11 Headings.................................................... A-32
10.12 Severability................................................ A-32
10.13 Third Parties............................................... A-33
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.............. A-33
10.15 WAIVER OF JURY TRIAL........................................ A-33
10.16 Definitions................................................. A-34
10.17 Effective Date.............................................. A-34
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of April 10,
2000 and effective when indicated in Section 10.17 below, is entered into by and
among Sync Research, Inc., a Delaware corporation ("Sync"), Merger Co, a
Delaware corporation and a wholly owned Subsidiary of Sync ("Merger Co"), Osicom
Technologies, Inc., a New Jersey corporation (the "Shareholder") and Osicom
Technologies, Inc., a Delaware corporation and a wholly owned Subsidiary of the
Shareholder ("Osicom").
R E C I T A L S:
WHEREAS, the respective Boards of Directors of Sync, Osicom, the Shareholder
and Merger Co have approved the merger of Merger Co into Osicom (the "Merger"),
subject to the terms and conditions of this Agreement, whereby each outstanding
share of common stock, $1.00 par value per share (the "Osicom Common Stock") of
Osicom will be converted into the right to receive shares of common stock, par
value $.001 per share, of Sync (the "Sync Common Stock") as provided herein;
WHEREAS, Sync, Merger Co, the Shareholder and Osicom desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
provisions, agreements and covenants contained herein, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Merger Co shall be merged with and into Osicom at the Effective Time
(as hereinafter defined). Following the Merger, the separate corporate existence
of Merger Co shall cease and Osicom shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to all rights, privileges,
powers, franchises, assets, liabilities and obligations of Osicom and Merger Co
in accordance with the provisions of the DGCL.
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to the
provisions of Article VIII, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., on a date to be specified by the parties, which date shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Articles VI and VII (the "Closing Date"), at the offices
of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, 99 Wood Avenue South,
Woodbridge, New Jersey, or such other place, time and date as the parties may
agree. Subject to the provisions of this Agreement, a certificate of merger
shall be duly prepared, executed and acknowledged by the Surviving Corporation
and thereafter delivered for filing and recordation with the Secretary of State
of the State of Delaware in accordance with the DGCL on the Closing Date.
1.3 EFFECTIVE TIME. The Merger shall become effective at the time of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or at such later time as shall be agreed by Osicom and Sync and as
shall be set forth in such certificate) in accordance with the DGCL (the date
and time the Merger becomes effective being the "Effective Time").
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1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective Time and
without any further action on the part of Osicom and Merger Co, (i) the
certificate of incorporation of Osicom as in effect immediately prior to the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, (ii) the by-laws of Osicom shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law and (iii) the Merger shall, from and after the Effective Time,
have all the effects provided by applicable law, including the DGCL.
1.5 OFFICERS AND DIRECTORS. The officers and directors of Osicom at the
Effective Time shall be the officers and directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation.
1.6 SYNC. At the Closing, the name of Sync will be changed to Entrada
Networks, Inc., or such other name as Sync and the Shareholder may mutually
agree, and the Board of Directors of Sync will consist of the Chief Executive
Officer of Sync, Greg Reyes and three (3) individuals selected by the mutual
agreement of Sync and the Shareholder.
1.7 ADDITIONAL MATTERS. At the Closing, (a) any indebtedness owed by
Osicom to the Shareholder, or any other affiliates of the Shareholder, will be
contributed to the capital of Osicom; (b) the Shareholder shall agree to
indemnify and hold Osicom, Sync, Merger Co and the Surviving Corporation
harmless against any liability arising after the Effective Date from (i) the
early termination by Osicom of its real estate lease for property located in
Aurora, Illinois (ii) the termination of the Case Defined Benefit Plan
previously maintained by Osicom and (iii) the late filing of Osicom's tax
returns; (c) Osicom will use its best efforts to cause those employees of Osicom
listed on Section 1.7 of the Disclosure Schedule to enter into employment
agreements with the Surviving Corporation having such terms and conditions as
are mutually agreed upon by Osicom and Sync; and (d) the Shareholder will enter
into an agreement with Sync and the Surviving Corporation, in such form and
substance as Sync and the Shareholder may mutually agree.
1.8 LUCENT. The Shareholder agrees to be responsible for and pay any
royalties or similar payments due from Osicom to Lucent Technologies, Inc. and
its Affiliates for all periods prior to the Closing Date up to an aggregate of
$500,000. Any additional royalties or similar payments due to Lucent in excess
of $500,000 shall be paid by the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Osicom
Common Stock or any shares of common stock, par value $.01 per share ("Merger Co
Common Stock"), of Merger Co:
(a) CAPITAL STOCK OF MERGER CO. Each share of Merger Co Common Stock
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Surviving Corporation Common Stock. Each stock certificate of Merger Co
evidencing shares of Merger Co Common Stock shall thereafter evidence
ownership of shares of Surviving Corporation Common Stock.
(b) CANCELLATION OF TREASURY STOCK. Each share of Osicom Common Stock
that is owned by Osicom or any Subsidiary (as defined in Section 10.16) of
Osicom shall automatically be canceled and retired and shall cease to exist,
and no Sync Common Stock, Surviving Corporation Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
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(c) CONVERSION OF OSICOM COMMON STOCK. Other than shares to be
canceled pursuant to Section 2.1(b), the outstanding shares of Osicom Common
Stock shall be converted into the right to receive that number of validly
issued, fully paid and nonassessable shares of Sync Common Stock that is
equal to the number of shares of Sync Common Stock outstanding on the
Closing Date (the "Merger Consideration"). The parties intend that
immediately following the Merger, the Shareholder will own fifty percent
(50%) of the outstanding Sync Common Stock. In addition, Sync, promptly
after the Effective Time, shall issue options to purchase its Common Stock
to Osicom employees in an amount equal to the number of shares of Sync
Common Stock issuable pursuant to the stock options and convertible and
exchangeable securities listed on Schedule 4.2(a) of the Disclosure
Schedule, which Schedule shall be updated as of the Closing Date for
purposes of this computation. Such options will not affect the Merger
Consideration calculation.
2.2 EXCHANGE PROCEDURES. At the Closing, the Shareholder shall surrender
to Sync the share certificate(s) (the "Osicom Certificate") representing all of
the outstanding shares of Osicom Common Stock. The Osicom Certificate so
surrendered shall forthwith be canceled. As soon as reasonably practicable after
the Effective Time, the Shareholder shall, upon surrender to Sync of the Osicom
Certificate, together with such other documents as may be reasonably required by
Sync, be entitled to a share certificate(s) representing the number of shares of
Sync Common Stock into which the aggregate number of shares of Osicom Common
Stock shall have been converted pursuant to this Agreement. Each such share
certificate of Sync Common Stock issued to each holder will bear the following
legend on the face thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO A
REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.
2.3 STOCK TRANSFER BOOKS. At the close of business, eastern standard time,
on the day the Effective Time occurs, the stock transfer books of Osicom shall
be transferred to Sync and there shall be no further registration of transfers
of shares by Osicom of Osicom Common Stock thereafter on the records of Osicom.
From and after the Effective Time, the Shareholder shall cease to have any
rights with respect to such shares of Osicom Common Stock formerly represented
by the Osicom Certificate surrendered pursuant to Section 2.2, except as
otherwise provided herein or by law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND OSICOM
The Shareholder and Osicom hereby represent and warrant to Sync as follows:
3.1 CORPORATE ORGANIZATION. Osicom, and each Subsidiary of Osicom, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Osicom and each of its Subsidiaries has full corporate
power and authority to own their respective assets and to carry on their
respective businesses as now being conducted and are duly qualified or licensed
to do business as foreign corporations in good standing in the jurisdictions in
which the ownership of their respective property or the conduct of their
respective businesses requires such qualification or license, except
jurisdictions in which the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 10.16) on Osicom. Section 3.1 of the Disclosure Scheduleattached hereto
lists by name each of Osicom and the Subsidiaries of Osicom, each jurisdiction
in which each entity is qualified or authorized to do business and its
capitalization
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(including the identity of each stockholder and the number of shares held by
each). Osicom has delivered to Sync complete and correct copies of the
certificate of incorporation and all amendments thereto, the by-laws as
presently in effect, and the minute books and stock transfer records of Osicom
and each of its Subsidiaries.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Osicom consists of 50,000 shares of
Class A Common Stock, par value $1.00 per share (the "Osicom Common Stock")
of which 1,000 shares are issued and outstanding as of the date hereof and
9,000 shares of Class B Common Stock, none of which are outstanding as of
the date hereof. The Shareholder owns all of the shares of Osicom Common
Stock issued and outstanding as of the date hereof. No other shares of any
other class or series of capital stock of Osicom or securities exercisable
or convertible into or exchangeable for capital stock of Osicom ("Osicom
Capital Stock Equivalents") were authorized, issued or outstanding as of
January 31, 2000. Since January 31, 2000, there have been no issuances of
Osicom Common Stock or Osicom Capital Stock Equivalents. There are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares, whether issued or unissued, of capital
stock of Osicom or Osicom Capital Stock Equivalents, including any rights of
issuance, conversion or exchange under any outstanding securities or other
instruments, other than restrictions imposed by Federal and state securities
laws. All of the shares of Osicom Common Stock are duly authorized, validly
issued and outstanding and fully paid, nonassessable and free and clear of
all pledges, mortgages, claims, options, rights of first refusal, liens,
charges, encumbrances, security interests and limitations of voting rights
of any kind or nature whatsoever ("Encumbrances"). Neither Osicom nor any of
its Subsidiaries has any outstanding debt securities or other indebtedness
or guarantees, except as specifically disclosed in the Osicom Financial
Statements (as defined in Section 3.4).
(b) Section 3.2(b) of the Disclosure Schedule contains a complete and
correct list of all direct or indirect Subsidiaries of Osicom and the amount
of capital stock or other equity interests owned by Osicom and its
Subsidiaries in such Subsidiaries. All the outstanding shares of capital
stock of each of the Subsidiaries of Osicom have been duly authorized,
validly issued and are fully paid and non-assessable and, except as set
forth in Section 3.2(b) of the Disclosure Schedule, are owned (of record and
beneficially) by Osicom designed in Section 3.2(b) of the Disclosure
Schedule, free and clear of all Encumbrances. Except for the Subsidiaries
set forth in Section 3.2(b) of the Disclosure Schedule, neither Osicom nor
any of its Subsidiaries owns or has any option or right to acquire, directly
or indirectly, any capital stock or other equity securities of, or has any
direct or indirect equity or ownership interest or debt investment in, any
corporation, association, partnership, joint venture or other business.
3.3 AUTHORIZATION, ETC. Each of the Shareholder and Osicom has full power
and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Shareholder and
of Osicom and no other corporate proceedings on the part of Osicom, the
Shareholder or their respective stockholders are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, the filing of the Certificate of Merger as required by
the DGCL). This Agreement has been duly and validly executed by Osicom and the
Shareholder and, assuming this Agreement constitutes the legal, valid and
binding agreement of the other parties hereto, constitutes a legal, valid and
binding agreement of Osicom and the Shareholder, enforceable against each of
them in accordance with its terms, except that (i) the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(ii) the remedy of specific performance and
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injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.4 FINANCIAL STATEMENTS. Osicom has previously delivered to Sync (i) the
audited balance sheet of Osicom and its Subsidiaries as of January 31, 2000 (the
"Osicom Balance Sheet") and the related audited statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and the
notes thereto, and the related unaudited statements of income, stockholders'
equity and cash flows for the year then ended, and the notes thereto
(collectively the "Osicom Financial Statements"). The Osicom Financial
Statements present fairly the assets, liabilities, financial position, results
of operations and cash flows of Osicom and its Subsidiaries as of the dates and
for the periods indicated, and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied by
Osicom.
3.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 3.5 of the
Disclosure Schedule, neither Osicom nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected on or reserved against the Osicom Balance Sheet or the
Osicom Interim Balance Sheet and current liabilities incurred in the ordinary
course of business and consistent with past practice since the respective dates
thereof.
3.6 NO APPROVALS OR CONFLICTS. Except as set forth in Section 3.6 of the
Disclosure Schedule, the execution, delivery and performance by Osicom and the
Shareholder of this Agreement and the consummation by Osicom and the Shareholder
of the transactions contemplated hereby will not (i) violate, conflict with or
result in a breach by Osicom of any provision of the certificate of
incorporation or by-laws of Osicom or any of its Subsidiaries, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
by Osicom or any of its Subsidiaries (or an event which, with notice or lapse of
time or both, would constitute a default) or give rise to any right of
termination, cancellation or acceleration under, or result in the creation of
any Encumbrance upon any of the properties of Osicom or any of its Subsidiaries
under, any Osicom Contract (as defined in Section 3.15), (iii) violate or result
in a breach of any order, injunction, judgment, ruling, law or regulation of any
court or governmental authority applicable to Osicom, any of its Subsidiaries,
or any of their respective properties or except for those required under or in
relation to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
require any order, consent, approval or authorization of, or notice to, or
declaration, filing, application, qualification or registration with, any
governmental or regulatory authority, excluding from the foregoing clauses
(ii) and (iii) above, such violations, conflicts and breaches which,
individually or in the aggregate, would not have a Material Adverse Effect on
Osicom or prevent or delay the consummation of the transactions contemplated
hereby.
3.7 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Neither Osicom nor
any of its Subsidiaries is in violation of any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
the property or business of Osicom or any such Subsidiary. Osicom and each of
its Subsidiaries have all material licenses, permits and other governmental
authorizations reasonably necessary to conduct their respective businesses as
currently conducted and such licenses, permits and authorizations are valid and
in full force and effect.
3.8 LITIGATION. Except as set forth in Section 3.8 of the Disclosure
Schedule, there are no claims, suits, actions, proceedings or investigations
(collectively, "Claims") pending or, to the best knowledge of Osicom or the
Shareholder, threatened against Osicom, any of its Subsidiaries, or the
transactions contemplated by this Agreement before any arbitrator, court or
governmental or regulatory authority or body, which, if decided unfavorably to
Osicom or such Subsidiary, would have a Material Adverse Effect on Osicom.
Except as set forth in Section 3.8 of the Disclosure Schedule, neither Osicom
nor any of its Subsidiaries nor any of their respective assets is subject to any
decree, order or judgment which would have a Material Adverse Effect on Osicom.
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3.9 ASSETS.
(a) Except as set forth in Section 3.6(a) of the Disclosure Schedule, on
January 31, 2000, Osicom and each of its Subsidiaries had and, except with
respect to assets disposed of or acquired in the ordinary course of business
and consistent with past practice since such date, Osicom and each of its
Subsidiaries now has, good and valid title to, or holds by valid and
existing lease or license, all the assets reflected as assets of Osicom and
its Subsidiaries on the Osicom Balance Sheet or which would have been
reflected on the Osicom Balance Sheet if acquired prior to such date, free
and clear of all Encumbrances except for: Encumbrances which secure
indebtedness or obligations which are properly reflected on the Osicom
Balance Sheet and Permitted Liens (as defined in Section 10.16). Except as
set forth in Section 3.9(a) of the Disclosure Schedule, Osicom and its
Subsidiaries own, or have valid leasehold interests in, all material assets,
tangible and intangible, necessary for the operation or conduct of Osicom's
and such Subsidiary's business as conducted prior to and through the Closing
Date (the "Osicom Assets"), and all such assets are in reasonably good
maintenance, operating condition and repair, normal wear and tear excepted,
other than machinery and equipment under repair or out of service in the
ordinary course of Osicom's or such Subsidiary's business. The Osicom Assets
include, without limitation, all right, title and interest to the hubs,
switches, LAN adapters, FDDI, VME boards, stand alone print servers,
Nethopper and all other network access business assets, and all associated
know-how and proprietary information related thereto, that (i) are necessary
for Sync to operate Osicom's business in the manner in which Osicom has
operated the same, and (ii) were owned by the Shareholder or any of its
Subsidiaries as of January 31, 2000.
(b) Except as set forth in Section 3.9 of the Disclosure Schedule, no
licenses or other consents from, or payments to, any other person, entity or
governmental authority are or will be necessary for Sync to operate Osicom's
business and use the Osicom Assets in the manner in which Osicom has
operated the same, and no such person, entity or authority has made any
claim to the contrary. No person or entity other than Osicom and its
Subsidiaries has any right or interest in the Osicom Assets, including the
right to grant interests in the Osicom Assets to third parties, except as
set forth in Section 3.9(b) of the Disclosure Schedule, and there exists no
restriction on the use or transfer of the Osicom Assets.
(c) Except as provided in Section 3.9(c) of the Disclosure Schedule, no
restrictions will exist on Sync's right to sell, resell, license or
sublicense any of the Osicom Assets or engage in Osicom's business, nor will
any such restrictions be imposed on Sync as a consequence of the
transactions contemplated by this Agreement or by any agreement referenced
in this Agreement.
3.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 3.10 of
the Disclosure Schedule, since January 31, 2000, the business of Osicom and each
of its Subsidiaries has been conducted only in the ordinary course and
consistent with past practice in all material respects, there has not been any
event or development prior to the date hereof which, if it had occurred or
existed after the date hereof, would be a violation of Section 5.1(c), and there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Osicom.
3.11 TAXES. Except as disclosed on the Disclosure Schedule, Osicom and
each of its Subsidiaries has filed or caused to be filed all Tax Returns
(including estimated Tax Returns) required to be filed by Osicom and each such
Subsidiary. Except as disclosed on the Disclosure Schedule, All Tax Returns are
complete and accurate in all material respects and all Taxes required to be
shown on such Tax Returns or otherwise due or payable and all additional
assessments of any such Taxes received prior to the date hereof have been paid
in full on the due date for payment thereof. Neither Osicom nor any of its
Subsidiaries is required to file any income or franchise tax returns in any
jurisdiction other than the United States and the States of Arizona, California,
Colorado, Connecticut, Denver, Delaware, Florida,
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Illinois, Kansas, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and
Washington and the City of Denver and the District of Columbia. The amounts set
up as accruals for Taxes on the Osicom Financial Statements are sufficient for
the payment of all Taxes of Osicom and each of its Subsidiaries, whether or not
disputed, for all periods ended on and prior to the respective dates thereof. In
addition, the amounts set up as accruals for Taxes on the financial books of
Osicom and each of its Subsidiaries on the date hereof are and will be
sufficient for the payment of all Taxes of Osicom and each such Subsidiary,
whether or not disputed, for all periods ended on and prior to the Closing Date.
Except as disclosed in Section 3.11 of the Disclosure Schedule, the United
States Federal, state and local income tax returns of Osicom and each of its
Subsidiaries have been audited by the Internal Revenue Service or other Tax
Authority or are closed and there are no proceedings or claims relating thereto
or any facts that could give rise to the reopening thereof. Except as disclosed
on the Disclosure Schedule, no deficiency in the payment of Taxes by Osicom or
any of its Subsidiaries for any period has been asserted or, to the best
knowledge of Osicom or the Shareholder, threatened against Osicom or any of its
Subsidiaries by any Tax Authority and remains unsettled as of the date of this
Agreement. Except as disclosed on the Disclosure Schedule, all Taxes required to
be withheld, collected or deposited by Osicom or any of its Subsidiaries have
been timely withheld, collected or deposited and, to the extent required, have
been paid to the relevant Tax Authorities. Except as disclosed on the Disclosure
Schedule, neither Osicom nor any of its Subsidiaries owe any amount pursuant to
any written or unwritten Tax sharing agreement or arrangement, or will have any
liability after the date hereof in respect of any written or unwritten Tax
sharing agreement or arrangement executed or agreed prior to the date hereof.
Except as disclosed on the Disclosure Schedule, there are no Tax liens on any of
the assets of Osicom or any of its Subsidiaries, other than liens for current
Taxes which are not yet due or payable. Except as set forth in Section 3.11 of
the Disclosure Schedule, neither Osicom nor any of its Subsidiaries has made any
agreement, waiver or other arrangement providing for an extension of time with
respect to the assessment or collection of any Tax against Osicom or any such
Subsidiary. Neither Osicom nor any of its Subsidiaries has been, or will be,
subject to Tax under Section 1374 or Section 1375 of the Code for any taxable
year ending on or prior to the Closing Date. Neither Osicom nor any of its
Subsidiaries has filed a consent with the Internal Revenue Service pursuant to
Section 341(f) of the Code or with any other Tax Authority to any similar effect
or made an election under Section 338 of the Code other than as provided for in
the terms of this Agreement.
For purposes of this Agreement, the term "Tax" or "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States Federal, state, local or foreign Tax Authority, including, but not
limited to, income, service, leasing, occupation, excise, property, sales and
use, transfer, franchise, payroll, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto.
For purposes of this Agreement, the term "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any Tax Authority
with respect to Taxes.
For purposes of this Agreement, the term "Tax Authority" shall mean the
Internal Revenue Service and any similar state, local or foreign authority
having jurisdiction over Taxes.
3.12 EMPLOYEE BENEFITS.
(a) Section 3.12 of the Disclosure Schedule contains a true and complete
list of each "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, multi-employer plans within the meaning of
ERISA Section 3(37)), stock purchase, stock option, stock bonus, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other
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arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of
the transaction contemplated by this Agreement or otherwise), whether formal
or informal, oral or written, legally binding or not, under which any
employee or former employee of Osicom or any of its Subsidiaries has any
present or future right to benefits and under which Osicom or any of its
Subsidiaries may have any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively
referred to as the "Osicom Plans."
(b) With respect to each Osicom Plan, Osicom has delivered to Sync a
current, accurate and complete copy (or, to the extent no such copy exists,
an accurate written description) thereof and, to the extent applicable: Any
related trust agreement or other funding instrument; the most recent
determination letter, if the Osicom Plan is intended to qualify under Code
Section 401(a); any summary plan description and other written
communications (or a written description of any oral communications) by
Osicom or any of its Subsidiaries to their respective employees concerning
the extent of the benefits provided under an Osicom Plan; and, for the three
most recent years, (1) the Form 5500 and attached schedules, (2) audited
financial statements, (3) actuarial valuation reports and (4) attorney's
responses to an auditors' requests for information.
(c) No Osicom Plan is subject to Title IV of ERISA, and neither Osicom
nor any member of its Controlled Group has ever contributed to, sponsored,
or been obligated to contribute to any plan subject to Title IV of ERISA.
(d) (i) Each Osicom Plan has been established and administered in
accordance with its terms and with the applicable provisions of ERISA, the
Code and other applicable laws, rules and regulations; (ii) no event has
occurred and no condition exists that would subject Osicom or its
Subsidiaries either directly or by reason of its affiliation with any member
of its "Controlled Group" (defined as any organization which is a member of
a controlled group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o)), to any Tax, fine, lien or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (iii) each
Osicom Plan which is intended to be qualified within the meaning of Code
Section 401(a) is so qualified and has received a favorable determination
letter pursuant to the Tax Reform Act of 1986 and subsequent legislation as
to its qualification, and nothing has occurred, whether by action or failure
to act, that could reasonably be expected to cause the loss of such
qualification; (iv) for each Osicom Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form 5500 since the date thereof; (v) no Osicom
Plan provides retiree welfare benefits and neither Osicom nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits
other than as required by Section 4980B of the Code; and (vi) neither Osicom
nor any member of its Controlled Group has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described
in Sections 4069 or 4212(c) of ERISA.
(e) With respect to any Osicom Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or, to the best knowledge of Osicom or the Shareholder, threatened, and
(ii) no facts or circumstances exist that could reasonably be expected to
give rise to any such actions, suits or claims.
(f) Except as set forth in Section 3.12 of the Disclosure Schedule, no
Osicom Plan exists that could result in the payment to any present or former
employee of Osicom or any of its Subsidiaries of any money or other property
or accelerate or provide any other rights or benefits to any present or
former employee or other service provider of Osicom or any of its
Subsidiaries as a result of the transactions contemplated by this Agreement.
There is no contract, plan or arrangement (written or otherwise) covering
any employee or other service provider or former employee or service
provider of Osicom or any of its Subsidiaries that, individually or
collectively,
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could give rise to the payment of any amount that would not be deductible
pursuant to the terms of the Code.
3.13 LABOR RELATIONS. Since January 1, 1998, neither Osicom nor any of its
Subsidiaries has been or is a party to any collective bargaining or other labor
agreement. Except as set forth in Section 3.13 of the Disclosure Schedule, there
is no unfair labor practice charge or complaint pending or, to the best
knowledge of Osicom or the Shareholder, threatened against or otherwise
affecting Osicom or any of its Subsidiaries which, if adversely determined,
would reasonably be likely to result in a liability having a Material Adverse
Effect on Osicom; there is no labor strike, slowdown, work stoppage, or lockout
in effect, or, to the best knowledge of Osicom and the Shareholder, threatened
against or otherwise affecting Osicom or any of its Subsidiaries, and neither
Osicom nor any of its Subsidiaries has experienced any such labor controversy
within the past three years; neither Osicom nor any of its Subsidiaries is a
party to, or otherwise bound by, any consent decree with, or citation by, any
governmental authority relating to employees or employment practices; and Osicom
and each of its Subsidiaries is in compliance with their obligations pursuant to
the Worker Adjustment and Retraining Notification Act of 1988 ("WARN Act"), and
all other notification and bargaining obligations arising under any collective
bargaining agreement, statute or otherwise. To the best knowledge of Osicom and
the Shareholder, there is no effort to organize employees of Osicom or any of
its Subsidiaries which is pending or threatened.
3.14 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 3.14 of the Disclosure
Schedule contains a true and complete list of all patents, trademarks, trade
names, copyrights and pending applications therefor (collectively, the "Osicom
Intellectual Property") used or owned by Osicom and each of its Subsidiaries and
a list of all licenses and other agreements (collectively, the "Osicom License
Agreements") relating thereto. Except as set forth in Section 3.14 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Osicom
Intellectual Property or the Osicom License Agreements, (ii) all Osicom
Intellectual Property and Osicom License Agreements are valid, in good standing
and free and clear of liens or other security interests, (iii) neither Osicom
nor any of its Subsidiaries has received written or, to the best knowledge of
Osicom or the Shareholder, oral, notice of any claims by any person to the use
of any such Osicom Intellectual Property, or challenging or questioning the
validity or effectiveness of any such Osicom License Agreement, and (iv) to the
knowledge of Osicom and the Shareholder, no other person is interfering with,
infringing upon, misappropriating or otherwise coming into conflict with any of
the Osicom Intellectual Property.
3.15 CONTRACTS. The contracts and agreements listed in Section 3.15 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of Osicom and each of
its Subsidiaries (the "Osicom Contracts"). Complete copies (or, if oral, written
summaries) of each Osicom Contract have been made available to Sync, including,
without limitation, all of the following Osicom Contracts: (i) any indenture,
note, mortgage, installment obligation, or other instrument for or relating to
any borrowing of money; (ii) any guaranty of any obligation; (iii) any
agreement, contract, commitment or arrangement containing any covenant limiting
the ability of Osicom or any of its Subsidiaries to engage in any line of
business or to compete with any business or person; (iv) any agreement,
contract, commitment or arrangement relating to capital expenditures with
respect to Osicom or any of its Subsidiaries and involving future payments which
exceed $25,000 in any 12-month period; (v) any agreement, contract, commitment
or arrangement relating to the acquisition of assets or any capital stock of any
business enterprise which has not been consummated; (vi) any real property
lease; (vii) any contract, commitment, agreement or arrangement which requires
payments in excess of $25,000 in any 12-month period, to the extent such
contract, commitment, agreement or arrangement is not terminable within 30 days
without payment of premium or penalty; (viii) any license agreement; (ix) any
joint venture, partnership or other agreement for the joint performance of work
or services; (x) each power of attorney that is effective and outstanding;
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(xi) any agreement entered into other than in the ordinary course of business
containing or providing for an express undertaking by Osicom or any of its
Subsidiaries to be responsible for consequential damages and (xii) any contract,
commitment, agreement or arrangement with any director, stockholder or Affiliate
(as defined in Section 10.16) of Osicom or any of its Subsidiaries. Each Osicom
Contract is in full force and effect, and is a legal, valid and binding
obligation of Osicom or such Subsidiary and each of the other parties thereto,
enforceable in accordance with its terms, except that (x) enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(y) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. No condition
exists or event has occurred which (whether with or without notice or lapse of
time or both, or the happening or occurrence of any other event) would
constitute a default by Osicom, any of its Subsidiaries, or, to the best
knowledge of Osicom and the Shareholder, any other party thereto under, or
result in a right in termination of, any Osicom Contract, by any other party
thereto. To the best knowledge of Osicom and the Shareholder, no party to any
Osicom Contract intends (x) to terminate such Osicom Contract or materially
amend the terms thereof, (y) to refuse to renew such Osicom Contract upon
expiration thereof or (z) to renew such Osicom Contract upon expiration thereof
on terms and conditions which are materially more onerous to Osicom or such
Subsidiary than those pertaining to such existing Osicom Contract.
3.16 ENVIRONMENTAL MATTERS. Except as to matters which would not be
expected to result, individually or in the aggregate, in a Material Adverse
Effect on Osicom, or as set forth in Section 3.16 of the Disclosure Schedule,
(i) neither Osicom nor any of its Subsidiaries has received any notice alleging
the material violation of, or any material actual or potential liability
relating to, any applicable foreign, federal, state or local statutes, laws,
regulations, rules, decrees, orders, judgments, ordinances, or common law
related to the protection of human health or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, the Emergency Planning and Community Right-To-Know Act, the Solid Waste
Disposal Act, the Resource Conservation and Recovery Act, the Clean Air Act, the
Water Pollution Control Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act, and the Occupational Safety and Health Act, each
as amended and supplemented, and any regulations promulgated pursuant to such
laws, and any similar state or local statutes or regulations but excluding
workers compensation or similar laws ("Environmental Laws"), which violation has
not been resolved and, to the best knowledge of Osicom and the Shareholder, no
such notice is threatened or otherwise expected, (ii) to the best knowledge of
Osicom and the Shareholder, Osicom and each of its Subsidiaries is and has been
in material compliance with all applicable Environmental Laws and there is no
condition that could prevent or materially interfere with such compliance in the
future, (iii) Osicom and each of its Subsidiaries has obtained and is and has
been in material compliance with all required governmental environmental
permits, registrations and authorizations with respect to the business of Osicom
and each of its Subsidiaries as currently conducted, (iv) to the best knowledge
of Osicom and the Shareholder, no hazardous waste, substance, material, or
chemical, including, without limitation, petroleum and petroleum products,
polychlorinated biphenyls, asbestos and any other material regulated under, or
that can result in liability under, applicable Environmental Laws ("Hazardous
Material"), has been transported, stored, treated, arranged to be disposed of or
disposed of by Osicom or any of its Subsidiaries on or from the real estate
owned, operated or otherwise used by Osicom or any of its Subsidiaries or at any
other location, except in compliance with, or as otherwise would not result in
material liability under all applicable Environmental Laws, (v) except for
successor liability as an owner of real property, neither Osicom nor any of its
Subsidiaries has assumed, contractually or by operation of law, any liabilities,
potential liabilities or obligations of any other person or entity under any
applicable Environmental Laws, (vi) neither Osicom nor any of its Subsidiaries
has entered into, agreed to, or is subject to any judgment, decree, order or
other similar requirement of any
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governmental authority under any Environmental Laws, (vii) to the best knowledge
of Osicom and the Shareholder, there are no (w) underground or aboveground
storage tanks, (x) surface impoundments, (y) landfills or (z) sewer or septic
systems currently or formerly present at or about any of the properties or
facilities currently or formerly owned, operated or otherwise used by Osicom or
any of its Subsidiaries that could result in material liability to Osicom or any
such Subsidiary under any applicable Environmental Laws, and (viii) to the best
knowledge of Osicom and the Shareholder, there are no actions, activities,
events, conditions or circumstances occurring or existing, including without
limitation the release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that can reasonably be
expected to result in any material liability or obligation of Osicom or any of
its Subsidiaries under or relating to any Environmental Laws.
3.17 INSURANCE. Section 3.17 of the Disclosure Schedule lists all
insurance policies of Osicom and each of its Subsidiaries covering the assets,
employees and operations of Osicom and each of its Subsidiaries as of the date
hereof and any pending claims under such policies. All such policies are in full
force and effect, all premiums due thereon have been paid by Osicom or such
Subsidiary and Osicom and each of its Subsidiaries has complied in all material
respects with the provisions of such policies and has not received any notice
from any of its insurance brokers or carriers that any insurance policy is no
longer in full force or effect or that such broker or carrier will not be
willing or able to renew their existing coverage and perform its obligations
thereunder. All such policies shall continue in full force and effect following
the consummation of the transactions contemplated by this Agreement.
3.18 MATERIAL CUSTOMERS AND SUPPLIERS. Section 3.18 of the Disclosure
Schedule sets forth the names of the ten suppliers of Osicom and its
Subsidiaries whom Osicom and its Subsidiaries paid the greatest sum of money in
respect of products, services and materials sold to Osicom and its Subsidiaries
and the ten customers of Osicom and its Subsidiaries from whom Osicom and its
Subsidiaries received the greatest sum of money in respect of products or
services provided by Osicom and its Subsidiaries between February 1, 1999 and
January 31, 2000.
3.19 REAL PROPERTY.
(a) The real property listed in Section 3.19(a) of the Disclosure
Schedule constitutes all of the real property that any of Osicom and its
Subsidiaries owns as of the date hereof (the "Osicom Owned Real Property").
Except as set forth in Section 3.19(a) of the Disclosure Schedule, with
respect to each such parcel of Osicom Owned Real Property the identified
owner has good and marketable fee simple title to the parcel of real
property, free and clear of any Encumbrance (other than Permitted Liens).
(b) The leases listed in Section 3.15 of the Disclosure Schedule
constitute all the real property leases which are used in the conduct of the
business of Osicom and its Subsidiaries as it is presently being conducted
and/or to which Osicom or its Subsidiaries is a party (the "Osicom Leases"
and, such property, "Osicom Leased Property"; the Osicom Leased Property,
together with the Osicom Owned Real Property, the "Osicom Real Property").
The Osicom Real Property is all of the real property which is used for the
conduct of the business of Osicom and its Subsidiaries as is presently
conducted.
(c) Since January 31, 2000, neither Osicom nor any of its Subsidiaries
has sold, assigned, transferred or otherwise disposed of, or granted any
security interest in or lien on, any Osicom Owned Real Property or any
Osicom Lease. With respect to each Osicom Lease, all accrued and payable
rents required by each Osicom Lease to be paid by Osicom or any of its
Subsidiaries have been paid or adequate provision for such payment has been
made, no written notice of default or termination has been given or received
by Osicom or any of its Subsidiaries, and no material event of default has
occurred, no condition exists and no event has occurred that, with the
giving of notice or the lapse of time, would become a material default or
permit early termination, under any Osicom Lease, and (iii) Osicom has, and
immediately after the Closing, will have, good, valid
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and enforceable title to the leasehold estate in the Osicom Leased Property,
free and clear of any Encumbrance (other than Permitted Liens). Except as
set forth in Section 3.19(c) of the Disclosure Schedule, no third party
consent or approval under any Osicom Lease is required for the consummation
of the transactions contemplated herein.
(d) Osicom has obtained all easements and rights of way required from
all governmental jurisdictions or from private parties for the normal use
and operation of the business on the Osicom Owned Real Property as
heretofore conducted.
(e) There is no pending or, to Osicom's knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting
any of the Osicom Real Property and Osicom has not received any written
notice of any of the same.
(f) Each Osicom Owned Real Property and, to Osicom's knowledge, each
Osicom Leased Property and all buildings, structures, fixtures and
improvements on each Osicom Owned Real Property and, to Osicom's knowledge,
each Osicom Leased Property, and all use of any thereof by Osicom or its
subsidiaries, conform with all applicable building, zoning, subdivision,
land use, fire and other laws pertaining to or affecting real property,
except where the failure to so conform would not have a Material Adverse
Effect on Osicom. Each occupied Osicom Owned Real Property and, to Osicom's
knowledge, each occupied Osicom Leased Property is occupied under a valid
and existing certificate of occupancy for such Osicom Real Property. Osicom
has taken all corrective action indicated in all written notices or orders
to Osicom to correct violations of laws issued by any governmental authority
having jurisdiction against or affecting the Osicom Real Property. The
Osicom Real Property is not in violation of any restrictive covenant,
condition, restriction or limitation which would have a Material Adverse
Effect on Osicom or a material adverse effect on the use thereof as
currently utilized.
(g) No Osicom Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Osicom to convey or use it as currently operated.
(h) All Osicom Real Property and the improvements thereon are supplied
with the utilities necessary for the operation of such facilities as
currently operated.
(i) Osicom has not received written notice of any special assessment
relating to any Osicom Real Property or any portion thereof, and, to
Osicom's knowledge, there are no pending or threatened special assessments.
(j) Osicom has furnished Sync with all non-privileged environmental,
engineering or other studies or reports prepared for Osicom or its
subsidiaries since January 1, 1995 which primarily deal with the ownership,
operation, maintenance or management of the Osicom Real Property.
3.20 INVESTMENT COMPANY ACT STATUS. Neither Osicom nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940.
3.21 PRODUCT LIABILITY. Except as set forth in Section 3.21 of the
Disclosure Schedule, neither Osicom nor any of its Subsidiaries has received
written notice of any claim or threatened claim against Osicom or any such
Subsidiary for product liability, nor, to the best knowledge of Osicom and the
Shareholder, has Osicom or any of its Subsidiaries received oral notice of any
claim or threatened claim against Osicom or any of its Subsidiaries for product
liability.
3.22 BOOKS AND RECORDS. The financial books and records pertaining to the
business of Osicom and its Subsidiaries are complete and correct in all material
respects, have been maintained in accordance with good business practice, and
reflect the basis for the financial condition and results of operations of
Osicom set forth in the Osicom Financial Statements referred to in Section 3.4
hereto.
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3.23 NO BROKERS' OR OTHER FEES. No broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Shareholder or Osicom or any of its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SYNC
SYNC HEREBY REPRESENTS AND WARRANTS TO OSICOM AS FOLLOWS:
4.1 CORPORATE ORGANIZATION. Sync, and each Subsidiary of Sync, is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Sync and each of its Subsidiaries has
full corporate power and authority to own their respective assets and to carry
on their respective businesses as now being conducted and are duly qualified or
licensed to do business as foreign corporations in good standing in the
jurisdictions in which the ownership of their respective property or the conduct
of their respective businesses requires such qualification or license, except
jurisdictions in which the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect on Sync. Sync
has delivered to Osicom complete and correct copies of the certificate of
incorporation and all amendments thereto, the by-laws as presently in effect,
and the minute books and stock transfer records of Sync and each of its
Subsidiaries.
4.2 CAPITALIZATION.
(a) The authorized capital stock of Sync consists of 50,000,000 shares
of Sync Common Stock, of which 3,531,007 shares of Sync Common Stock (the
"Sync Shares") were outstanding as of March 31, 2000, and 754,280 shares of
Sync Common Stock were reserved for issuance upon exercise of options
outstanding as of March 31, 2000, and 2,000,000 shares of Sync Preferred
Stock, par value $.001 per share, of which no shares were outstanding as of
March 31, 2000. No other shares of any other class or series of capital
stock of Sync or securities exercisable or convertible into or exchangeable
for capital stock of Sync ("Sync Capital Stock Equivalents") were
authorized, issued or outstanding as of March 31, 2000. Since March 31,
2000, there have been no issuances of Sync Common Stock or Sync Capital
Stock Equivalents other than (i) issuances of shares of Sync Common Stock
upon exercise of options outstanding on March 31, 2000 and (ii) issuance of
shares of Sync Common Stock under Sync's Employee Stock Purchase Plan.
Except as set forth in Section 4.2(a) of the Disclosure Schedule, there are
no subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares, whether issued or unissued, of capital
stock of Sync or Sync Capital Stock Equivalents, including any rights of
issuance, conversion or exchange under any outstanding securities or other
instruments, other than restrictions imposed by Federal and state securities
laws. All of the Sync Shares are, and any shares of Sync Common Stock to be
issued upon exercise of outstanding options will be, duly authorized,
validly issued and outstanding and fully paid, nonassessable and free and
clear of all Encumbrances. Neither Sync nor any of its Subsidiaries has any
outstanding debt securities or other indebtedness or guarantees, except as
specifically disclosed in the Sync Financial Statements (as defined in
Section 4.4).
(b) Section 4.2(b) of the Disclosure Schedule contains a complete and
correct list of all direct or indirect Subsidiaries of Sync and the amount
of capital stock or other equity interests owned by Sync and its
Subsidiaries in such Subsidiaries. All the outstanding shares of capital
stock of each of the Subsidiaries of Sync have been duly authorized, validly
issued and are fully paid and non-assessable and, except as set forth in
Section 4.2(b) of the Disclosure Schedule, are owned (of record and
beneficially) by Sync or by another Subsidiary of Sync, free and clear of
all Encumbrances. Except for the Subsidiaries set forth in Section 4.2(b) of
the Disclosure Schedule, neither Sync nor any of its Subsidiaries owns or
has any option or right to acquire, directly or indirectly, any capital
stock or other equity securities of, or has any direct or indirect equity or
ownership interest or debt investment in, any corporation, association,
partnership, joint venture or other business.
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4.3 AUTHORIZATION, ETC. Each of Sync and Merger Co has full power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Sync and Merger Co
(other than the approval of this Agreement by the holders of a majority of the
outstanding shares of Sync Common Stock) and no other corporate proceedings on
the part of Sync, Merger Co or their respective stockholders are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than, with respect to the Merger, the filing of the Certificate of Merger
as required by the DGCL). This Agreement has been duly and validly executed by
each of Sync and Merger Co and, assuming this Agreement constitutes the legal,
valid and binding agreement of the other parties hereto, constitutes a legal,
valid and binding agreement of each of Sync and Merger Co, enforceable against
each of Sync and Merger Co in accordance with its terms, except that (i) the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
4.4 FINANCIAL STATEMENTS. Sync has previously delivered to Osicom (i) the
audited balance sheet of Sync and its Subsidiaries as of December 31, 1999 and
the related audited statements of income, stockholders' equity and cash flows
for the fiscal year then ended, and the notes thereto (the "Sync Financial
Statements"). The Sync Financial Statements present fairly the assets,
liabilities, financial position, results of operations and cash flows of Sync
and its Subsidiaries as of the dates and for the periods indicated, and have
been prepared in accordance with GAAP consistently applied by Sync.
4.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.5 of the
Disclosure Schedule, neither Sync nor any of its Subsidiaries has any
liabilities or obligations, whether accrued, absolute, contingent, matured or
unmatured, that are required to be reflected, accrued or reserved for in an
audited balance sheet of Sync or such Subsidiary or the notes thereto prepared
in accordance with GAAP, other than (i) liabilities and obligations that are
reflected, accrued or reserved for in the balance sheet as of December 31, 1999
included in the Sync Financial Statements (the "Sync Balance Sheet"),
(ii) liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date of the Sync Balance Sheet and
(iii) liabilities and obligations which in the aggregate would not have a
Material Adverse Effect on Sync.
4.6 NO APPROVALS OR CONFLICTS. Except as set forth in Section 4.6 of the
Disclosure Schedule, the execution, delivery and performance by Sync and Merger
Co of this Agreement and the consummation by Sync and Merger Co of the
transactions contemplated hereby will not violate, conflict with or result in a
breach by Sync or any of its Subsidiaries of any provision of the certificate of
incorporation or by-laws of Sync or any of its Subsidiaries, violate, conflict
with or result in a breach of any provision of, or constitute a default by Sync
or any of its Subsidiaries (or an event which, with notice or lapse of time or
both, would constitute a default) or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any Encumbrance
upon any of the properties of Sync or any of its Subsidiaries under, any Sync
Contract (as defined in Section 4.15), violate or result in a breach of any
order, injunction, judgment, ruling, law or regulation of any court or
governmental authority applicable to Sync, any of its Subsidiaries, or any of
their respective properties or except for those required under or in relation to
the HSR Act, require any order, consent, approval or authorization of, or notice
to, or declaration, filing, application, qualification or registration with, any
governmental or regulatory authority, excluding such violations, conflicts and
breaches which, individually or in the aggregate, would not have a Material
Adverse Effect on Sync or prevent or delay the consummation of the transactions
contemplated hereby.
4.7 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Neither Sync nor any
of its Subsidiaries is in violation of any order, injunction, judgment, ruling,
law or regulation of any court or governmental
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authority applicable to the property or business of Sync or any such Subsidiary.
Sync and each of its Subsidiaries have all material licenses, permits and other
governmental authorizations reasonably necessary to conduct their respective
businesses as currently conducted and such licenses, permits and authorizations
are valid and in full force and effect.
4.8 LITIGATION. Except as set forth in Section 4.8 of the Disclosure
Schedule, there are no Claims pending or, to the best knowledge of Sync,
threatened against Sync, any of its Subsidiaries, or the transactions
contemplated by this Agreement before any arbitrator, court or governmental or
regulatory authority or body, which, if decided unfavorably to Sync or such
Subsidiary, would have a Material Adverse Effect on Sync. Except as set forth in
Section 4.8 of the Disclosure Schedule, neither Sync nor any of its Subsidiaries
nor any of their respective assets is subject to any decree, order or judgment
which would have a Material Adverse Effect on Sync.
4.9 ASSETS. Except as set forth in Section 4.9 of the Disclosure Schedule,
on December 31, 1999, Sync and each of its Subsidiaries had and, except with
respect to assets disposed of or acquired in the ordinary course of business and
consistent with past practice since such date, Sync and each of its Subsidiaries
now has, good and valid title to, or holds by valid and existing lease or
license, all the assets reflected as assets of Sync and its Subsidiaries on the
balance sheet as of December 31, 1999 included in the Sync Financial Statements
(the "1999 Sync Balance Sheet") or which would have been reflected on the 1999
Sync Balance Sheet if acquired prior to such date, free and clear of
Encumbrances except for: Encumbrances which secure indebtedness or obligations
which are properly reflected on the 1999 Sync Balance Sheet and Permitted Liens.
Except as set forth in Section 4.9 of the Disclosure Schedule, Sync and its
Subsidiaries own, or have valid leasehold interests in, all material tangible
assets necessary for the operation or conduct of Sync's or such Subsidiary's
business as currently conducted and all such assets are in reasonably good
maintenance, operating condition and repair, normal wear and tear excepted,
other than machinery and equipment under repair or out of service in the
ordinary course of Sync's or such Subsidiary's business.
4.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 4.10 of
the Disclosure Schedule, since December 31, 1999, the business of Sync and each
of its Subsidiaries has been conducted only in the ordinary course and
consistent with past practice in all material respects, there has not been any
event or development prior to the date hereof which, if it had occurred or
existed after the date hereof, would be a violation of Section 5.2(c), and there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Sync.
4.11 TAXES. Sync and each of its Subsidiaries has filed or caused to be
filed all Tax Returns (including estimated Tax Returns) required to be filed by
Sync and each such Subsidiary. To the best knowledge of Sync, all Tax Returns
are complete and accurate in all material respects. All Taxes required to be
shown on such Tax Returns or otherwise due or payable and all additional
assessments of any such Taxes received prior to the date hereof have been paid
in full on the due date for payment thereof. Neither Sync nor any of its
Subsidiaries is required to file any income or franchise tax returns in any
jurisdiction other than the United States and the States of Arizona, Delaware,
Colorado, Connecticut, Florida, Georgia, Illinois, California, Maryland,
Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Ohio,
Oklahoma, Pennsylvania, Rhode Island, Texas and Virginia. The amounts set up as
accruals for Taxes on the Sync Financial Statements are sufficient for the
payment of all Taxes of Sync and each of its Subsidiaries, whether or not
disputed, for all periods ended on and prior to the respective dates thereof. In
addition, the amounts set up as accruals for Taxes on the financial books of
Sync and each of its Subsidiaries on the date hereof are and will be sufficient
for the payment of all Taxes of Sync and each such Subsidiary, whether or not
disputed, for all periods ended on and prior to the Closing Date. Except as
disclosed in Section 4.11 of the Disclosure Schedule, the United States Federal,
California and Massachusetts income tax returns of Sync and each of its
Subsidiaries have been audited by the Internal Revenue Service or other Tax
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Authority or are closed and, to the best knowledge of Sync, there are no
proceedings or claims relating thereto or any facts that could give rise to the
reopening thereof or in connection with any other state or local income tax
returns. No deficiency in the payment of Taxes by Sync or any of its
Subsidiaries for any period has been asserted or, to the best knowledge of Sync,
threatened against Sync or any of its Subsidiaries by any Tax Authority and
remains unsettled as of the date of this Agreement. All Taxes required to be
withheld, collected or deposited by Sync or any of its Subsidiaries have been
timely withheld, collected or deposited and, to the extent required, have been
paid to the relevant Tax Authorities. Neither Sync nor any of its Subsidiaries
owe any amount pursuant to any written or unwritten Tax sharing agreement or
arrangement, or will have any liability after the date hereof in respect of any
written or unwritten Tax sharing agreement or arrangement executed or agreed
prior to the date hereof. There are no Tax liens on any of the assets of Sync or
any of its Subsidiaries, other than liens for current Taxes which are not yet
due or payable. Except as set forth in Section 4.11 of the Disclosure Schedule,
neither Sync nor any of its Subsidiaries has made any agreement, waiver or other
arrangement providing for an extension of time with respect to the assessment or
collection of any Tax against Sync or any such Subsidiary. Neither Sync nor any
of its Subsidiaries has been, or will be, subject to Tax under Section 1374 or
Section 1375 of the Code for any taxable year ending on or prior to the Closing
Date. Neither Sync nor any of its Subsidiaries has filed a consent with the
Internal Revenue Service pursuant to Section 341(f) of the Code or with any
other Tax Authority to any similar effect or made an election under Section 338
of the Code other than as provided for in the terms of this Agreement.
4.12 EMPLOYEE BENEFITS.
(a) Section 4.12 of the Disclosure Schedule contains a true and complete
list of each "employee benefit plan" (within the meaning of Section 3(3) of
ERISA, including, without limitation, multiemployer plans within the meaning
of ERISA Section 3(37)), stock purchase, stock option, stock bonus,
severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether
or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated
by this Agreement or otherwise), whether formal or informal, oral or
written, legally binding or not, under which any employee or former employee
of Sync or any of its Subsidiaries has any present or future right to
benefits and under which Sync or any of its Subsidiaries may have any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Sync Plans."
(b) With respect to each Sync Plan, Sync has delivered to Osicom a
current, accurate and complete copy (or, to the extent no such copy exists,
an accurate description) thereof and, to the extent applicable: any related
trust agreement or other funding instrument; the most recent determination
letter, if the Sync Plan is intended to qualify under Code Section 401(a);
any summary plan description and other written communications (or a
description of any oral communications) by Sync or any of its Subsidiaries
to their respective employees concerning the extent of the benefits provided
under a Sync Plan; and, for the three most recent years, (A) the Form 5500
and attached schedules, (B) audited financial statements, (C) actuarial
valuation reports and (D) attorney's response to an auditor's request for
information.
(c) No Sync Plan is subject to Title IV of ERISA, and neither Sync nor
any member of its Controlled Group has ever contributed to, sponsored, or
been obligated to contribute to any plan subject to Title IV of ERISA.
(d) (i) Each Sync Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations;
(ii) no event has occurred and no condition exists that would subject Sync
or
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its Subsidiaries either directly or by reason of its affiliation with any
member of its "Controlled Group" (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any Tax, fine, lien or penalty imposed
by ERISA, the Code or other applicable laws, rules and regulations;
(iii) each Sync Plan which is intended to be qualified within the meaning of
Code Section 401(a) is so qualified and has received a favorable
determination letter pursuant to the Tax Reform Act of 1986 and subsequent
legislation as to its qualification, and nothing has occurred, whether by
action or failure to act, that could reasonably be expected to cause the
loss of such qualification; (iv) for each Sync Plan with respect to which a
Form 5500 has been filed, no material change has occurred with respect to
the matters covered by the most recent Form 5500 since the date thereof;
(v) except as set forth on Section 4.12 of the Disclosure Schedule, no Sync
Plan provides retiree welfare benefits and neither Sync nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits
other than as required by Section 4980B of the Code; and (vi) neither Sync
nor any member of its Controlled Group has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described
in Sections 4069 or 4212(c) of ERISA.
(e) With respect to any Sync Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or, to the knowledge of Sync, threatened, and (ii) no facts or circumstances
exist that could reasonably be expected to give rise to any such actions,
suits or claims.
(f) Except as set forth in Section 4.12 of the Disclosure Schedule, no
Sync Plan exists that could result in the payment to any present or former
employee of Sync or any of its Subsidiaries of any money or other property
or accelerate or provide any other rights or benefits to any present or
former employee or other service provider of Sync or any of its Subsidiaries
as a result of the transactions contemplated by this Agreement. There is no
contract, plan or arrangement (written or otherwise) covering any employee
or other service provider or former employee or other service provider of
Sync or any of its Subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant
to the terms of Section 280G of the Code.
4.13 LABOR RELATIONS. Except as set forth in Section 4.13 of the
Disclosure Schedule, there is no unfair labor practice charge or complaint
pending or, to the best knowledge of Sync, threatened against or otherwise
affecting Sync or any of its Subsidiaries which, if adversely determined, would
reasonably be likely to result in a liability having a Material Adverse Effect
on Sync; there is no labor strike, slowdown, work stoppage, or lockout in
effect, or, to the best knowledge of Sync, threatened against or otherwise
affecting Sync or any of its Subsidiaries, and neither Sync nor any of its
Subsidiaries has experienced any such labor controversy within the past three
years; neither Sync nor any of its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any governmental authority
relating to employees or employment practices; and Sync and each of its
Subsidiaries is in compliance with their obligations pursuant to the WARN Act,
and all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise. To the best knowledge of
Sync, there is no effort to organize employees of Sync or any of its
Subsidiaries which is pending or threatened.
4.14 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 4.14 of the Disclosure
Schedule contains a true and complete list of all patents, trademarks, trade
names, copyrights and pending applications therefor (collectively, the "Sync
Intellectual Property") used or owned by Sync and each of its Subsidiaries and a
list of all licenses and other agreements (collectively, the "Sync License
Agreements") relating thereto. Except as set forth in Section 4.14 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Sync Intellectual
Property or the Sync License Agreements, (ii) all Sync Intellectual Property and
Sync License Agreements are valid, in good standing and free and clear of liens
or other security
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interests, (iii) neither Sync nor any of its Subsidiaries has received written
or, to the best knowledge of Sync, oral, notice of any claims by any person to
the use of any such Sync Intellectual Property, or challenging or questioning
the validity or effectiveness of any such Sync License Agreement, and (iv) to
the knowledge of Sync, no other person is interfering with, infringing upon,
misappropriating or otherwise coming into conflict with any of the Sync
Intellectual Property.
4.15 CONTRACTS. The contracts and agreements listed in Section 4.15 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of Sync and each of
its Subsidiaries (the "Sync Contracts"). Complete copies (or, if oral, written
summaries) of each Sync Contract have been made available to Osicom, including
all of the following Sync Contracts: (i) any indenture, note, mortgage,
installment obligation, or other instrument for or relating to any borrowing of
money; (ii) any guaranty of any obligation; (iii) any agreement, contract,
commitment or arrangement containing any covenant limiting the ability of Sync
or any of its Subsidiaries to engage in any line of business or to compete with
any business or person; (iv) any agreement, contract, commitment or arrangement
relating to capital expenditures with respect to Sync or any of its Subsidiaries
and involving future payments which exceed $25,000 in any 12-month period;
(v) any agreement, contract, commitment or arrangement relating to the
acquisition of assets or any capital stock of any business enterprise which has
not been consummated; (vi) any real property lease; (vii) any contract,
commitment, agreement or arrangement which requires payments in excess of
$25,000 in any 12-month period, to the extent such contract, commitment,
agreement or arrangement is not terminable within 30 days without payment of
premium or penalty; (viii) any license agreement; (ix) any joint venture,
partnership or other agreement for the joint performance of work or services;
(x) each power of attorney that is effective and outstanding; (xi) any agreement
entered into other than in the ordinary course of business containing or
providing for an express undertaking by Sync or its Subsidiaries to be
responsible for consequential damages and (xii) any contract, commitment,
agreement or arrangement with any director, stockholder or Affiliate of Sync or
any of its Subsidiaries. Each Sync Contract is in full force and effect, and is
a legal, valid and binding obligation of Sync or such Subsidiary and, to the
best knowledge of Sync, each of the other parties thereto, enforceable in
accordance with its terms, except that (x) enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (y) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. No condition exists or event has
occurred which (whether with or without notice or lapse of time or both, or the
happening or occurrence of any other event) would constitute a default by Sync,
any of its Subsidiaries, or, to the best knowledge of Sync, any other party
thereto under, or result in a right in termination of, any Sync Contract, by any
other party thereto. To the best knowledge of Sync, no party to any Sync
Contract intends (x) to terminate such Sync Contract or materially amend the
terms thereof, (y) to refuse to renew such Sync Contract upon expiration thereof
or (z) to renew such Sync Contract upon expiration thereof on terms and
conditions which are materially more onerous to Sync or such Subsidiary than
those pertaining to such existing Sync Contract.
4.16 ENVIRONMENTAL MATTERS. Except as to matters which would not be
expected to result, individually or in the aggregate, in a Material Adverse
Effect on Sync, or as set forth in Section 4.16 of the Disclosure Schedule,
(i) neither Sync nor any of its Subsidiaries has received any notice alleging
the material violation of, or any material actual or potential liability
relating to, any applicable Environmental Laws which violation has not been
resolved and, to the best knowledge of Sync, no such notice is threatened or
otherwise expected, (ii) to the best knowledge of Sync, Sync and each of its
Subsidiaries is and has been in material compliance with all applicable
Environmental Laws and, to the best knowledge of Sync, there is no condition
that could prevent or materially interfere with such compliance in the future,
(iii) Sync and each of its Subsidiaries has obtained and is and has been in
material compliance with all required governmental environmental permits,
registrations and
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authorizations with respect to the business of Sync and each of its Subsidiaries
as currently conducted, (iv) to the best knowledge of Sync, no Hazardous
Material has been transported, stored, treated, arranged to be disposed of or
disposed of by Sync or any of its Subsidiaries on or from the real estate owned,
operated or otherwise used by Sync or any of its Subsidiaries or at any other
location, except in compliance with or as otherwise would not result in material
liability under any applicable Environmental Laws, (v) except for successor
liability as owner of real property, neither Sync nor any of its Subsidiaries
has assumed, contractually or by operation of law, any liabilities, potential
liabilities or obligations of any other person or entity under any applicable
Environmental Laws, (vi) neither Sync nor any of its Subsidiaries has entered
into, agreed to, or is subject to any judgment, decree, order or other similar
requirement of any governmental authority under any Environmental Laws,
(vii) to the best knowledge of Sync, there are no (w) underground or aboveground
storage tanks, (x) surface impoundments, (y) landfills or (z) sewer or septic
systems currently or formerly present at or about any of the properties or
facilities currently or, to the best knowledge of Sync, formerly owned, operated
or otherwise used by Sync or any of its Subsidiaries that could result in
material liability to Sync or any such Subsidiary under any applicable
Environmental Laws, and (viii) to the best knowledge of Sync, there are no
actions, activities, events, conditions or circumstances occurring or existing,
including without limitation the release, threatened release, emission,
discharge, generation, treatment, storage or disposal of Hazardous Materials,
that can reasonably expected to result in any material liability or obligation
of Sync or any of its Subsidiaries under or relating to any Environmental Laws.
4.17 INSURANCE. Section 4.17 of the Disclosure Schedule lists all
insurance policies of Sync and each of its Subsidiaries covering the assets,
employees and operations of Sync and each of its Subsidiaries as of the date
hereof and any pending claim under such policies. All such policies are in full
force and effect, all premiums due thereon have been paid by Sync or such
Subsidiary and Sync and each of its Subsidiaries has complied in all material
respects with the provisions of such policies and has not received any notice
from any of its insurance brokers or carriers that such broker or carrier will
not be willing or able to renew their existing coverage.
4.18 MATERIAL CUSTOMERS AND SUPPLIERS. Section 4.18 of the Disclosure
Schedule sets forth the names of the ten suppliers of Sync and its Subsidiaries
whom Sync and its Subsidiaries paid the greatest sum of money in respect of
products, services and materials sold to Sync and its Subsidiaries and the ten
customers of Sync and its Subsidiaries from whom Sync and its Subsidiaries
received the greatest sum of money in respect of products or services provided
by Sync and its Subsidiaries between January 1, 1999 and December 31, 1999.
4.19 REAL PROPERTY.
(a) The real property listed in Section 4.19(a) of the Disclosure
Schedule constitutes all of the real property that any of Sync and its
Subsidiaries owns as of the date hereof (the "Sync Owned Real Property").
Except as set forth in Section 4.19(a) of the Disclosure Schedule, with
respect to each such parcel of Sync Owned Real Property the identified owner
has good and marketable fee simple title to the parcel of real property,
free and clear of any Encumbrance (other than Permitted Liens).
(b) The leases listed in Section 4.15 of the Disclosure Schedule
constitute all the real property leases which are used in the conduct of the
business of Sync and its Subsidiaries as it is presently being conducted
and/or to which Sync or its Subsidiaries is a party (the "Sync Leases," and
such property, "Sync Leased Property"; the Sync Leased Property, together
with the Sync Owned Real Property, the "Sync Real Property"). The Sync Owned
Real Property and the Sync Leased Property is all of the real property which
is used for the conduct of the business of Sync and its Subsidiaries as is
presently conducted.
(c) Since December 31, 1999, neither Sync nor any of its Subsidiaries
has sold, assigned, transferred or otherwise disposed of, or granted any
security interest in or lien on, any Sync Lease.
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With respect to each Sync Lease, all accrued and payable rents required by
each Sync Lease to be paid by Sync or any of its Subsidiaries have been paid
or adequate provision for such payment has been made, no written notice of
default or termination has been given or received by Sync or any of its
Subsidiaries, and, to the best knowledge of Sync, no material event of
default has occurred, no condition exists and no event has occurred that,
with the giving of notice or the lapse of time, would become a material
default or permit early termination, under any Sync Lease, and (iii) Sync
has, and immediately after the Closing, Osicom will have, good, valid and
enforceable title to the leasehold estate in the Sync Leased Property, free
and clear of any Encumbrance (other than Permitted Liens). Except as set
forth in Section 4.19(c) of the Disclosure Schedule, no third party consent
or approval under any Sync Lease is required for the consummation of the
transactions contemplated herein.
(d) Sync has obtained all easements and rights of way required from all
governmental jurisdictions or from private parties for the normal use and
operation of the business on the Sync Owned Real Property as heretofore
conducted.
(e) There is no pending or, to Sync's knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting
any of the Sync Real Property and Sync has not received any written notice
of any of the same.
(f) Each Sync Owned Real Property and, to Sync's knowledge, each Sync
Leased Property and all buildings, structures, fixtures and improvements on
each Sync Owned Real Property and, to Sync's knowledge, each Sync Leased
Property, and all use of any thereof by Sync, conform with all applicable
building, zoning, subdivision, land use, fire and other laws pertaining to
or affecting real property, except where the failure to so conform would not
have a Material Adverse Effect on Sync. Each occupied Sync Owned Real
Property and, to Sync's knowledge, each occupied Sync Leased Property is
occupied under a valid and existing certificate of occupancy for such Sync
Real Property. Sync has taken all corrective action indicated in all written
notices or orders to Sync to correct violations of laws issued by any
governmental authority having jurisdiction against or affecting the Sync
Real Property. The Sync Real Property is not in violation of any restrictive
covenant, condition, restriction or limitation which would have a Material
Adverse Effect on Sync or a material adverse effect on the use thereof as
currently utilized.
(g) No Sync Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Sync to convey or use it as currently operated.
(h) All Sync Real Property and the improvements thereon are supplied
with the utilities necessary for the operation of such facilities as
currently operated.
(i) Sync has not received written notice of any special assessment
relating to any Sync Real Property or any portion thereof, and, to Sync's
knowledge, there are no pending or threatened special assessments.
(j) Sync has not obtained any environmental, engineering or other
studies or reports prepared for Sync since January 1, 1995 which primarily
deal with the ownership, operation, maintenance or management of the Sync
Real Property.
4.20 INVESTMENT COMPANY ACT STATUS. Neither Sync nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940.
4.21 PRODUCT LIABILITY. Except as set forth in Section 4.21 of the
Disclosure Schedule, neither Sync nor any of its Subsidiaries has received
written notice of any claim or threatened claim against Sync or any such
Subsidiary for product liability, nor, to the best knowledge of Sync, has Sync
or any of
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its Subsidiaries received oral notice of any claim or threatened claim against
Sync or any of its Subsidiaries for product liability.
4.22 BOOKS AND RECORDS. The financial books and records pertaining to the
business of Sync and its Subsidiaries are complete and correct in all material
respects, have been maintained in accordance with good business practice, and
reflect the basis for the financial condition and results of operations of Sync
set forth in the Sync Financial Statements referred to in Section 4.4 hereto.
4.23 NO BROKERS' OR OTHER FEES. No broker, finder or investment banker
(other than Alliant Partners) is entitled to any fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Sync or any of its Subsidiaries.
4.24 SYNC REPORTS. Since January 1997, Sync has filed all forms, reports
and documents with the Commission required to be filed by it pursuant to the
federal securities laws and the Commission rules and regulations thereunder (the
"Sync Commission Filings"), and all such forms, reports and documents filed with
the Commission have complied in all material respects with all applicable
requirements of the federal securities laws and the Commission rules and
regulations promulgated thereunder. Sync has made available to Osicom true and
complete copies of all Sync Commission Filings filed by Sync with the Commission
since January 1, 1997. As of their respective dates, the Sync Commission Filings
did not contain any 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.
4.25 NASDAQ. Sync's Common Stock is currently trading on the NASDAQ
National Market and Sync currently satisfies the "maintenance criteria" for
continued trading thereon. Except as set forth in Section 4.25 of the Disclosure
Schedule, Sync has received no notice from NASDAQ of a potential revocation of
its National Market listing, nor is Sync aware of any facts that would form the
basis of such a notice.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS BY OSICOM. The Shareholder and Osicom covenant
that, except (i) as otherwise expressly contemplated by this Agreement or
(ii) as consented to by Sync in writing, from and after the date of this
Agreement and until the Effective Time Osicom 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 Osicom and its
Subsidiaries and pay payables and collect receivables in a manner consistent
with past practice and otherwise operate Osicom and its Subsidiaries in the
ordinary and regular course of business consistent with past practice;
(ii) maintain Osicom's and its Subsidiaries' books and records in accordance
with past practices; (iii) keep available the services of Osicom'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 Osicom and its
Subsidiaries;
(b) notify Sync of any change in the normal course of business or
operations of Osicom or its Subsidiaries and of any governmental complaints,
investigations or hearings of which Osicom or its Subsidiaries is notified
(or communications received by Osicom or its Subsidiaries indicating that
the same may be contemplated), or the institution or settlement of
litigation or any claim, in each case involving Osicom or its Subsidiaries,
and to keep Sync informed of such events;
(c) not (i) cause to be issued or sold any shares of capital stock or
debt or equity securities of Osicom or its Subsidiaries or Osicom Capital
Stock Equivalents or issue, grant or enter into any options, warrants,
rights, subscription agreements or commitments of any kind with respect
thereto;
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(ii) directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Osicom or its
Subsidiaries; (iii) declare, set aside or pay any dividend or other
distribution; (iv) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock or
any Osicom Capital Stock Equivalents, other than pursuant to Osicom Plans in
accordance with their terms as in effect on the date hereof; (v) permit or
allow Osicom 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 the ordinary course of business and consistent with
past practice; (vi) subject any of the assets of Osicom 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 Osicom or its Subsidiaries (real, personal or
mixed, tangible or intangible), other than in the ordinary course of
business and consistent with past practice; (vii) assume, guarantee, or
otherwise become responsible for the obligations of, or make any loans or
advances to, any other individual, firm or corporation; (viii) waive or
release any rights of material value, or cancel, compromise, release or
assign any material indebtedness owed to Osicom or its Subsidiaries or any
material claims held by Osicom or its Subsidiaries; (ix) except for capital
expenditures not to exceed $5,000, make any investment or expenditure of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfer or otherwise; (x) enter into any new material
line of business; (xi) cancel or terminate any insurance policy naming
Osicom or its Subsidiaries as a beneficiary or a loss payable payee;
(xii) enter into any collective bargaining agreements; (xiii) increase the
compensation or fringe benefits of any of the officers or directors of
Osicom or any of its Subsidiaries or, other than in accordance with past
practice, effect any material general increase in the compensation or fringe
benefits of the employees of Osicom 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 any bonus to any such
officers or employees, commit Osicom or any of its Subsidiaries to any
employment agreement or employee benefit plan with or for the benefit of any
of Osicom's or its Subsidiaries' officers or employees or any other person,
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; (xiv) except as may be required as a result of a change in law or in
GAAP, change any of the accounting practices or principles used by Osicom or
its Subsidiaries; (xv) enter into or terminate any license, distributorship,
dealer, sales representative, joint venture, credit or similar agreement, or
any contract, agreement or transaction involving a total remaining
commitment of at least $25,000; (xvi) except as may be required by law, make
any material Tax election, make or change any method of accounting with
respect to Taxes, file any amended Tax Returns that may have a Material
Adverse Effect on the Tax position of Osicom or any of its Subsidiaries or
settle or compromise any material Federal, state, local or foreign Tax
liability; (xvii) enter into any "non-compete" or similar agreement;
(xviii) amend the certificate of incorporation or by-laws of Osicom or any
of its Subsidiaries; (xix) take any action with knowledge that such action
would reasonably be expected to result in any of the conditions contained in
Article VII not being satisfied; (xx) or agree to do any of the foregoing;
and
(d) comply in all material respects with all applicable laws, including,
without limitation, applicable Environmental Laws.
5.2 CONDUCT OF BUSINESS BY SYNC. Sync covenants that, except (i) as
otherwise expressly contemplated by this Agreement or (ii) as consented to by
Osicom in writing, from and after the date of this Agreement and until the
Effective Time Sync 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 Sync and its
Subsidiaries and pay payables and collect receivables in a manner consistent
with past practice and otherwise operate Sync and its Subsidiaries in the
ordinary and regular course of business consistent with past practice;
(ii) maintain Sync's and its
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Subsidiaries' books and records in accordance with past practices;
(iii) keep available the services of Sync'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 Sync and its Subsidiaries;
(b) notify Osicom of any change in the normal course of business or
operations of Sync or its Subsidiaries and of any governmental complaints,
investigations or hearings of which Sync or its Subsidiaries is notified (or
communications received by Sync or its Subsidiaries indicating that the same
may be contemplated), or the institution or settlement of litigation or any
Claim, in each case involving Sync or its Subsidiaries, and to keep Osicom
informed of such events;
(c) not (i) cause to be issued or sold any shares of capital stock or
debt or equity securities of Sync or its Subsidiaries or Sync Capital Stock
Equivalents, except for the exercise of outstanding stock options, or issue,
grant or enter into any options, warrants, rights, subscription agreements
or commitments of any kind with respect thereto, except in the ordinary
course to non-executive employees of Sync; (ii) directly or indirectly cause
to be purchased, redeemed or otherwise acquired or disposed of any shares of
capital stock of Sync or its Subsidiaries; (iii) declare, set aside or pay
any dividend or other distribution; (iv) reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock or any Sync Capital Stock Equivalents, other than
pursuant to Sync Plans in accordance with their terms as in effect on the
date hereof; (v) permit or allow Sync 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 the ordinary course of business
and consistent with past practice; (vi) subject any of the assets of Sync 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 Sync or its Subsidiaries (real, personal or
mixed, tangible or intangible), other than in the ordinary course of
business and consistent with past practice; (vii) assume, guarantee, or
otherwise become responsible for the obligations of, or make any loans or
advances to, any other individual, firm or corporation; (viii) waive or
release any rights of material value, or cancel, compromise, release or
assign any material indebtedness owed to Sync or its Subsidiaries or any
material claims held by Sync or its Subsidiaries; (ix) except for
(A) capital expenditures in the ordinary course of business and (B) capital
expenditures not to exceed $5,000, make any investment or expenditure of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfer or otherwise; (x) enter into any new material
line of business; (xi) cancel or terminate any insurance policy naming Sync
or its Subsidiaries as a beneficiary or a loss payable payee; (xii) enter
into any collective bargaining agreements; (xiii) increase the compensation
or fringe benefits of any of the officers or directors of Sync or any of its
Subsidiaries or, other than in accordance with past practice, effect any
material general increase in the compensation or fringe benefits of the
employees of Sync 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 to any such officers or employees, commit Sync or any
of its Subsidiaries to any employment agreement or employee benefit plan
with or for the benefit of any of Sync's or its Subsidiaries' officers or
employees or any other person, 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; (xiv) except as may be required as
a result of a change in law or in GAAP, change any of the accounting
practices or principles used by Sync or its Subsidiaries; (xv) enter into or
terminate any license, distributorship, dealer, sales representative, joint
venture, credit or similar agreement, or any contract, agreement or
transaction involving a total remaining commitment of at least $25,000;
(xvi) except as may be required by law, make any material Tax election, make
or change any method of accounting with respect to Taxes, file any amended
Tax Returns that may have a Material Adverse Effect on the Tax position of
Sync or any of its Subsidiaries or settle or compromise any material
Federal, state, local or foreign Tax liability; (xvii) enter into any
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"non-compete" or similar agreement; (xviii) amend the certificate of
incorporation or by-laws of Sync or any of its Subsidiaries; (xix) take any
action with knowledge that such action would reasonably be expected to
result in any of the conditions contained in Article VI not being satisfied;
or (xx) agree to do any of the foregoing; and
(d) comply in all material respects with all applicable laws, including,
without limitation, applicable Environmental Laws.
5.3 ACCESS TO BOOKS AND RECORDS; COOPERATION. (a) OSICOM. During the
period commencing on the date hereof and ending on the Closing Date, Osicom will
afford to Sync and its counsel, accountants and other authorized representatives
access, at all reasonable times upon reasonable advance notice, to the officers,
directors, employees, accountants and other advisors and agents, properties,
books, records and contracts of Osicom and its Subsidiaries, and the right to
make copies and extracts from such books, records and contracts, and to furnish
Sync with all financial, operating and other data and information concerning
Osicom and its Subsidiaries as Sync and its advisors may reasonably request.
Sync will hold, and will use its best efforts to cause its representatives to
hold, any such information which is non-public in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement dated April 19, 1999 between Sync and Osicom (the "Confidentiality
Agreement").
(b) SYNC. During the period commencing on the date hereof and ending
on the Closing Date, Sync will afford to Osicom and its counsel, accountants
and other authorized representatives access, at all reasonable times upon
reasonable advance notice, to the officers, directors, employees,
accountants and other advisors and agents, books, records and contracts of
Sync and its Subsidiaries, and the right to make copies and extracts from
such books, records and contracts, and to furnish Osicom with all financial,
operating and other data and information concerning Sync and its
Subsidiaries as Osicom may reasonably request. Osicom will hold, and will
use its best efforts to cause its representatives to hold, any such
information which is non-public in confidence to the extent required by, and
in accordance with, the provisions of the Confidentiality Agreement.
5.4 FILINGS AND CONSENTS. Sync and Osicom shall use all reasonable efforts
to obtain and to cooperate in obtaining any consent, approval, authorization or
order of, and in making any registration or filing with, any governmental agency
or body or other third party required in connection with the execution, delivery
or performance of this Agreement. The parties agree to cause to be made all
appropriate filings under the HSR Act within three business days of the date of
this Agreement and to diligently pursue early termination of the waiting period
under such act.
5.5 NO SOLICITATION. (a) Sync, the Shareholder and its Subsidiaries, and
the officers, directors, employees or other agents of Sync, the Shareholder and
its Subsidiaries, will not, directly or indirectly, (i) take any action to
solicit, initiate or encourage any Takeover Proposal (as defined below) or
(ii) subject to the terms of Section 5.5(b), engage in negotiations with, or
disclose any nonpublic information relating to Sync or Osicom (as applicable)
to, or afford access to the properties, books or records of Sync or Osicom (as
applicable) to, any person that has advised Sync, the Shareholder or Osicom that
it may be considering making, or that has made, a Takeover Proposal. Each of
Sync and the Shareholder will promptly notify the other after receipt of any
Takeover Proposal or any notice that any person is considering making a Takeover
Proposal or any request for nonpublic information relating to Sync or Osicom, as
applicable, or for access to the properties, books or records of Sync or Osicom,
as applicable, by any person that has advised Sync or the Shareholder, as
applicable, that it may be considering making, or that has made, a Takeover
Proposal and will keep the Shareholder or Sync, as applicable, fully informed of
the status and details of any such Takeover Proposal notice or request. For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal for,
or any indication of interest in, a merger or other business combination
involving Sync or Osicom, or the acquisition of any significant equity interest
in, or a significant portion of the assets of, Sync or Osicom, other than the
transactions contemplated by this Agreement.
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(b) Notwithstanding Section 5.5(a), if an unsolicited Takeover Proposal,
or an unsolicited written expression of interest that can reasonably be
expected to lead to a Takeover Proposal, shall be received by the Board of
Directors of Sync or the Shareholder, then, to the extent the Board of
Directors of Sync or the Shareholder, as applicable, believes in good faith
(after consultation with its financial advisor) that such Takeover Proposal
would, if consummated, result in a transaction more favorable to Sync's or
the Shareholder's stockholders, as applicable, from a financial point of
view than the transaction contemplated by this Agreement (any such more
favorable Takeover Proposal being referred to in this Agreement as a
"Superior Proposal"), and the Board of Directors of Sync or the Shareholder,
as applicable, determines in good faith after consultation with outside
legal counsel that it is necessary for such Board of Directors to evaluate
the Superior Proposal in order to comply with its fiduciary duties to
stockholders under applicable law, Sync or the Shareholder, as applicable,
and its officers, directors, employees, investment bankers, financial
advisors, attorneys, accountants and other representatives retained by it
may furnish in connection therewith information and take such other actions
as are consistent with the fiduciary obligations of its Board of Directors,
and such actions shall not be considered a breach of this Section 5.5 or any
other provisions of this Agreement; provided, however, that Sync and the
Shareholder shall not, and shall not permit any of their respective
officers, directors, employees or other representatives to, agree to or
endorse any Takeover Proposal regarding Sync or Osicom, as applicable,
unless Sync or the Shareholder, as applicable, shall have (i) terminated
this Agreement pursuant to Section 8.1(e), and (ii) agreed to pay, without
interest, to the Shareholder or Sync, as applicable, the sum of $1,000,000
(the "Break-up Fee") no later than thirty (30) days after the closing of the
transaction resulting from the Superior Proposal.
5.6 PROXY; REGISTRATION STATEMENT. As soon as practicable after the date
hereof, Sync shall prepare and file with the Commission a proxy statement and
related materials to be furnished by the Company to the holders of Sync Common
Stock in connection with the Merger and the matter referred to in Section 1.6 of
this Agreement (the "Proxy Statement") and a Registration Statement on Form S-4
with respect to the shares of Sync Common Stock to be issued to the Shareholder.
As soon as practicable following receipt of final comments from the staff of the
Commission on the Proxy Statement and the Registration Statement (or advice that
such staff will not review such filing), Sync shall use its best efforts to have
the Registration Statement declared effective by the Commission and to maintain
the effectiveness of such Registration Statement until completion of the Merger.
Promptly after the effectiveness of the Registration Statement, Sync shall mail
the Proxy Statement to all holders of Sync Common Stock. Sync, the Shareholder
and Osicom shall cooperate with each other in the preparation of the Proxy
Statement and the Registration Statement and shall advise the other in writing
if, at any time prior to the Sync Meeting, any such party shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or supplement
the Proxy Statement or the Registration Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law. Notwithstanding the foregoing, each party shall be
responsible for the information and disclosures which it makes or incorporates
by reference in all regulatory filings, the Proxy Statement and the Registration
Statement.
5.7 SHAREHOLDERS' MEETING. Sync shall take all action necessary, in
accordance with applicable law and its Certificate of Incorporation and By-Laws,
to convene a meeting of the holders of the Sync Common Stock (the "Sync
Meeting") as promptly as practicable for the purpose of considering and taking
action required by this Agreement. Except to the extent legally required for the
discharge by the Board of Directors of its fiduciary duties, the Board of
Directors of Sync shall recommend that the holders of the Sync Common Stock vote
in favor of and approve the Merger and adopt this Agreement at the Sync Meeting.
5.8 LISTING. Sync shall use its best efforts to list on the Nasdaq
National Market upon official notice of issuance the Sync Common Stock to be
issued in the Merger.
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5.9 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees to use all
reasonable efforts to insure that the conditions set forth in Article VI and
Article VII, respectively hereof are satisfied, insofar as such matters are
within the control of such party.
5.10 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall at any time execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable, including
without limitation the transfer to Osicom of all right, title and interest in
the Osicom Assets, for effecting completely the consummation of this Agreement
and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO OSICOM'S OBLIGATIONS
The obligation of Osicom to effect the Closing under this Agreement is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless validly waived in writing by Osicom.
6.1 REPRESENTATIONS AND WARRANTIES. (a) Each of the representations and
warranties of Sync set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as if made at and as of
the Closing Date (except, in each case, for those representations and warranties
which address matters only as of a particular date, in which case they shall be
true and correct, or true and correct in all material respects, as applicable,
as of such date).
6.2 PERFORMANCE. Sync shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement to be so
performed or complied with by it prior to the Closing.
6.3 OFFICER'S CERTIFICATE. Sync shall have delivered to Osicom a
certificate, dated as of the Closing Date and executed by the President or a
Senior Vice President of Sync, certifying to the fulfillment of the conditions
specified in Sections 6.1 and 6.2 hereof.
6.4 HSR ACT. All applicable waiting periods under the HSR Act with respect
to the transactions contemplated hereby shall have expired or been terminated.
6.5 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of shareholders of Sync.
6.6 REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
6.7 NASDAQ. The Sync Common Stock issuable pursuant to the Merger shall
have been designated for inclusion in the Nasdaq National Market (the "Nasdaq").
6.8 INJUNCTIONS. On the Closing Date there shall be no injunction, writ,
preliminary restraining order or other order in effect of any nature issued by a
United States Federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
6.9 CONSENTS. All material orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 4.6 of the Disclosure Schedule and necessary
to effect the Closing or continue the business of Osicom after the Closing shall
have been obtained.
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6.10 NON-COMPETITION AGREEMENT. Prior to the Closing, pursuant to
Section 1.7(d), Sync shall have entered into a Non-Competition Agreement with
the Shareholder in such form and substance as Sync and the Shareholder may
mutually agree.
ARTICLE VII
CONDITIONS TO SYNC'S OBLIGATION
The obligation of Sync to effect the Closing under this Agreement is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions, unless validly waived in writing by Sync.
7.1 REPRESENTATIONS AND WARRANTIES. (a) Each of the representations and
warranties of the Shareholder and Osicom set forth in this Agreement that shall
be true and correct as of the date of this Agreement and as of the Closing Date
as if made at and as of the Closing Date, (except, in each case, for those
representations and warranties which address matters only as of a particular
date, in which case they shall be true and correct, or true and correct in all
material respects, as applicable, as of such date).
7.2 PERFORMANCE. The Shareholder and Osicom shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be so performed or complied with by the Shareholder and
Osicom prior to the Closing.
7.3 OFFICER'S CERTIFICATE. The Shareholder and Osicom shall have delivered
to Sync a certificate, dated as of the Closing Date and executed by the
President or a Senior Vice President each of Osicom, certifying to the
fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof.
7.4 HSR ACT. All applicable waiting periods under the HSR Act with respect
to the transactions contemplated hereby shall have expired or been terminated.
7.5 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of shareholders of Sync.
7.6 REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
7.7 INJUNCTIONS. On the Closing Date there shall be no injunction, writ,
preliminary restraining order or other order in effect of any nature issued by a
United States Federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
7.8 CONSENTS. All material orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 3.6 of the Disclosure Schedule and necessary
to effect the Closing or continue the business of Osicom after the Closing shall
have been obtained. Without limiting the foregoing, Coast Business Credit, Inc.
shall have agreed to continue to provide financing to the Surviving Corporation
in the same amount and on the same terms and conditions as it has provided such
financing to Osicom prior to the date of this Agreement.
7.9 NON-COMPETITION AGREEMENT. Prior to the Closing, pursuant to
Section 1.7(d), Sync shall have entered into a Non-Competition Agreement with
the Shareholder in such form and substance as Sync and the Shareholder may
mutually agree.
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ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time:
(a) by the mutual consent of Sync and the Shareholder;
(b) by Sync, if the Closing has not occurred on or before August 31,
2000, unless the failure of such consummation shall be due to any materially
false, inaccurate or misleading representations and warranties of Sync
contained herein or the breach or failure of Sync to comply in all material
respects with the agreements and covenants contained herein to be performed
by Sync on or before August 31, 2000;
(c) by the Shareholder, if the Closing has not occurred on or before
August 31, 2000, unless the failure of such consummation shall be due to any
materially false, inaccurate or misleading representations and warranties of
the Shareholder or Osicom contained herein or the breach or failure of the
Shareholder or Osicom to comply in all material respects with the agreements
and covenants contained herein to be performed by the Shareholder or Osicom
on or before August 31, 2000;
(d) by either Sync or the Shareholder, if any court or governmental
authority of competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree or
ruling or other action shall have become final and nonappealable;
(e) by either Sync or the Shareholder, upon (i) receipt of an
unsolicited proposal that constitutes a Superior Proposal and
(ii) agreement to pay the Break-up Fee; or
(f) by Sync in the event its Shareholders vote not to approve this
Agreement, provided that Sync shall then pay to Osicom a fee of Two Hundred
Fifty Thousand Dollars ($250,000.00) within thirty (30) days of such
shareholder vote.
8.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the termination
of this Agreement and the abandonment of the transactions contemplated hereby by
Sync or the Shareholder pursuant to Section 8.1 hereof, written notice thereof
shall forthwith be given to the other parties. If this Agreement is terminated
and the transactions contemplated by this Agreement are abandoned as provided
herein, no party to this Agreement will have any liability under this Agreement
to any other except (i) that nothing herein shall relieve any party from any
liability for making any false, inaccurate or misleading representations or
warranties, or the breach of any covenants and agreements set forth in this
Agreement and (ii) as contemplated by Section 9.1 and (iii) if applicable,
payment of the Break-up Fee pursuant to Section 5.5(b) or the $250,000.00 fee
pursuant to Section 8.1(f).
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE SHAREHOLDER OF SYNC. Subject to the limits
set forth in this Section 9.1, the Shareholder agrees that from and after
the date hereof the Shareholder shall, indemnify, defend and hold Sync, its
Subsidiaries (including, without limitation, Osicom after the Effective
Date) and their respective officers, directors, partners, stockholders,
employees, agents and representatives (collectively, the "Sync Indemnified
Persons") harmless from and in respect of any and all losses, damages, costs
and reasonable expenses (including, without limitation, reasonable fees and
expenses of counsel) (collectively, "Losses"), that such Sync Indemnified
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Persons or Sync or its Subsidiaries may incur arising out of or due to
(i) any false, inaccurate, or misleading representation or warranty or the
breach of any covenant by the Shareholder or Osicom in the Agreement,
(ii) the termination of the Case Defined Benefit Plan; (iii) the early
termination by Osicom of its real estate lease for property located in
Aurora, Illinois; and (iv) the failure of Osicom to pay any owed Taxes and
to file all required Tax Returns, and all fines and penalties associated
therewith. The matters referred to in clause (i) of this paragraph (a) shall
be subject to indemnification only as to claims made within the period
ending twenty-four (24) months following the Effective Date (except as to
matters referred to in Section 3.16, for which the time limit is the
applicable statute of limitations).
(b) INDEMNIFICATION BY SYNC OF THE SHAREHOLDER. Subject to the limits
set forth in this Section 9.1, Sync agrees that from and after the date
hereof Sync shall, for claims made within the period ending twenty-four
(24) months following the Effective Date (except as to matters referred to
in Section 4.16, for which the time limit is the applicable statute of
limitations) indemnify, defend and hold the Shareholder and its officers,
directors, partners, stockholders, employees, agents and representatives
(collectively, the "Osicom Indemnified Persons" and, together with the Sync
Indemnified Persons, the "Indemnified Persons") harmless from and in respect
of any and all Losses that such Osicom Indemnified Persons may incur arising
out of or due to any false, inaccurate, or misleading representation or
warranty or the breach of any covenant by Sync in the Agreement. The matters
referred to this paragraph (b) shall be subject to indemnification only as
to claims made within the period ending twenty-four (24) months following
the Effective Date (except as to matters referred to in Section 3.16, for
which the time limit is the applicable statute of limitations).
(c) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 9.1(a) or
9.1(b), then Sync or the Shareholder as applicable, shall promptly notify
the Shareholder or Sync, respectively (the "Indemnifying Party"). If such
event involves any claim, or the commencement of any action or proceeding,
by a third person against any of the Indemnified Persons, the Indemnified
Person will give the Indemnifying Party prompt written notice of such claim
or the commencement of such action or proceeding; provided, however, that
the failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that such
failure prejudices the Indemnifying Party hereunder. In case any such action
shall be brought against any party seeking indemnification and the
Indemnified Person shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein or,
following the delivery by the Indemnifying Party to the Indemnified Person
of Indemnified Party's acknowledgment in writing that the relevant Loss is
an indemnified liability hereunder and that the Indemnifying Party, in its
good faith judgment, will be able to pay any award of money damages against
the Indemnified Person in connection with such action, to assume the defense
thereof, with legal counsel reasonably satisfactory to such Indemnified
Person and, after notice from the Indemnified Person to such Indemnified
Person of such election so to assume the defense thereof, the Indemnifying
Party shall not be liable to the party or parties seeking indemnification
hereunder for any legal expenses of other counsel or any other expenses
subsequently incurred by such party or parties in connection with the
defense thereof. The Indemnifying Party and the Indemnified Person agree to
cooperate fully with each other and their respective legal counsel in
connection with the defense, negotiation or settlement of any such action or
asserted liability. The Indemnified Person shall have the right to
participate at his own expense in the defense of such action or asserted
liability. If the Indemnifying Party assumes the defense of an action
(a) no settlement or compromise thereof may be effected (i) by the
Indemnifying Party without the written consent of the Indemnified Person
(which consent shall not be unreasonably withheld or delayed) unless
(x) there is no finding or admission of any violation of law or any
violation of the rights of any person by any Indemnified Person and no
adverse effect on any other claims that may be made
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against any Indemnified Person and (y) all relief provided is paid or
satisfied in full by the Indemnifying Party or (ii) by the Indemnified
Person without the written consent of Indemnifying Party (which consent
shall not be unreasonably withheld or delayed) and (b) the Indemnified
Person may subsequently assume the defense of such action if a court of
competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action and the Indemnifying Party shall bear all
costs and expenses incurred by the Indemnified Party in its defense of such
action, including without limitation, fees and expenses of legal counsel. In
no event shall the Indemnifying Party be liable for any settlement effected
without its written consent
(d) PAYMENT. On each occasion that any Indemnified Person shall be
entitled to indemnification or reimbursement under this Section 9.1, the
Indemnifying Party shall, at each such time, promptly pay by wire transfer,
to the Indemnified Person the aggregate amount of such Loss. To the extent
the Indemnified Person is the Shareholder and/or Osicom and Sync makes a
payment to a third party or incurs defense costs subsequent to the Effective
Date with respect to a matter subject to indemnification hereunder, then the
Loss payable to the Shareholder shall equal the amount of such payment and
costs, which the Surviving Corporation shall pay to the Shareholder. To the
extent that the Indemnified Person is a Sync Indemnified Person, and Sync
makes a payment to a third party or incurs defense costs subsequent to the
Effective Date with respect to a matter subject to indemnification hereunder
by the Shareholder, then the Loss payable to Sync shall equal the amount of
such payment and costs, which the Shareholder shall pay to Sync. If any
Indemnified Person shall be entitled to indemnification under this
Section 9.1, the Indemnifying Party shall reimburse in cash the Indemnified
Person's actual out-of-pocket expenses, if any, arising as a result of
defending against any such claim, action or proceeding.
(e) MINIMUM LIABILITY. Neither party shall have any liability to the
other under this Article IX unless such party's aggregate Losses exceed
$250,000, in which event the Indemnifying Party shall be liable only for all
such Losses above that amount. Neither party shall have any liability under
this Article IX in an amount greater that Sync's market capitalization as of
the date of this Agreement..
ARTICLE X
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time for a period of two
(2) years, except for (a) those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
prior to or at the Effective Time, and (b) those representations concerning
Taxes, which will survive for the statute of limitations period applicable to
the payment of such taxes, and (c) those representations concerning matters
under or relating to any Environmental Laws, which will survive for the statute
of limitations period applicable to such matters.
10.2 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
Osicom and Shareholder shall bear their own expenses and the expenses of their
Affiliates and Sync shall bear its own expenses and the expenses of its
Affiliates in connection with the preparation and negotiation of this Agreement
and the consummation of the transactions contemplated by this Agreement. Each of
Osicom. Shareholder and Sync shall bear the fees and expenses of any broker or
finder retained by such party or parties and their respective Affiliates
(including, in the case of Sync, Merger Co) in connection with the transactions
contemplated herein.
10.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of California applicable to contracts made and to be
performed therein.
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10.4 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by Sync, the Shareholder, Osicom and Merger Co.
10.5 NO ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of Osicom, in the case of assignment by Sync, and
Sync, in the case of any assignment by Osicom or the Shareholder.
Notwithstanding the foregoing, Merger Co may assign, in its sole discretion, any
or all of its rights, interests and obligations under this Agreement to any
direct wholly owned Subsidiary of Sync without the consent of Osicom, but no
such assignment shall relieve Sync or Merger Co of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
10.6 WAIVER. Any of the terms or conditions of this Agreement which may be
lawfully waived may be waived in writing at any time by each party which is
entitled to the benefits thereof. Any waiver of any of the provisions of this
Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
10.7 NOTICES. Any notice, demand, or communication required or permitted
to be given by any provision of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if (a) personally delivered,
(b) mailed by registered or certified first-class mail, prepaid with return
receipt requested, (c) sent by a nationally recognized overnight courier
service, to the recipient at the address below indicated or (d) delivered by
facsimile which is confirmed in writing by sending a copy of such facsimile to
the recipient thereof pursuant to clause (a) or (c) above:
If to Sync or Merger Co:
Sync Research, Inc.
12 Morgan
Irvine, California 92618
Attn: William K. Guerry, President
(949) 460-4481 (telecopier)
(949) 588-2070 (telephone)
With copies to:
Orrick, Harrington & Sutcliffe, LLP
777 South Figueroa Street, Suite 3200
Los Angeles, California 90017
Attn: Blase P. Dillingham, Esq.
(213) 612-2499 (telecopier)
(213) 629-2020 (telephone)
Venture Law Group
2775 and 2800 Sand Hill Road
Menlo Park, California 94025
Attn: Mark Medearies, Esq.
(650) 233-8386 (telecopier)
(650) 854-4488 (telephone)
A-31
<PAGE>
If to the Shareholder or Osicom:
Osicom Technologies, Inc.
2800 28th Street, Suite 100
Santa Monica, California 90405
Attn: President
(310) 581-4032 (telecopier)
(310) 581-4030 (telephone)
With copies to:
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP
Metro Corporate Campus I
99 Wood Avenue South
P.O. Box 5600
Woodbridge, New Jersey 07095
Attn: W. Raymond Felton, Esq.
(732) 549-1881 (telecopier)
(732) 549-5600 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this Agreement will be
deemed to have been given (x) on the date such notice is personally delivered or
delivered by facsimile, (y) four days after the date of mailing if sent by
certified or registered mail or (z) the next succeeding business day after the
date such notice is delivered to the overnight courier service if sent by
overnight courier; provided that in each case notices received after 4:00 p.m.
(local time of the recipient) shall be deemed to have been duly given on the
next business day.
10.8 COMPLETE AGREEMENT. This Agreement and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.10 PUBLICITY. Sync and Osicom will consult with each other and will
mutually agree upon any publication or press release of any nature with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such publication or press release prior to such consultation and agreement
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any securities exchange or any securities exchange
regulation, in which case the party proposing to issue such publication or press
release shall make all reasonable efforts to consult in good faith with the
other party or parties before issuing any such publication or press release and
shall provide a copy thereof to the other party or parties prior to such
issuance.
10.11 HEADINGS. The headings contained in this Agreement are for reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10.12 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or
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<PAGE>
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
10.13 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES HERETO
HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE AREA ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF CALIFORNIA AND
IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO EACH ACCEPT
FOR ITSELF AND HIMSELF, AS THE CASE MAY BE, AND IN CONNECTION WITH ITS OR HIS,
AS THE CASE MAY BE, RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE
OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY NON-APPEALABLE
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. OSICOM DESIGNATES
GIL GOLDBECK AT HIS BUSINESS ADDRESS, 9020 JUNCTION DRIVE, ANNAPOLIS JUNCTION,
MARYLAND 20701 AND SUCH OTHER PERSON AS MAY HEREINAFTER BE SELECTED BY OSICOM
WHO IRREVOCABLY AGREES IN WRITING TO SO SERVE AS AGENT FOR OSICOM TO RECEIVE ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. SYNC DESIGNATES WILLIAM K. GUERRY AT HIS BUSINESS ADDRESS SET FORTH IN
SECTION 10.7 AND SUCH OTHER PERSON AS MAY HEREINAFTER BE SELECTED BY SYNC WHO
IRREVOCABLY AGREES IN WRITING TO SO SERVE AS AGENT FOR SYNC TO RECEIVE ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE PARTIES HERETO, AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS.
10.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, THE
PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE PARTIES
HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT
FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED
A-33
<PAGE>
THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.16 DEFINITIONS. As used in this Agreement:
"AFFILIATE" of a person means a person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
"BEST KNOWLEDGE" means the knowledge of Osicom's or Sync's, as the case may
be, officers, as such knowledge has been obtained in the normal course of its
business or in connection with the preparation of the Disclosure Schedule and
the furnishing of information to Sync or Osicom as contemplated by this
agreement, after having made a reasonable investigation of the accuracy of the
representations and warranties made by Osicom or Sync in this Agreement or in
any document, certificate or other writing furnished by Osicom or Sync to the
other pursuant hereto or in connection therewith.
"MATERIAL ADVERSE EFFECT" means, with respect to any entity, to the extent
not reflected on such entity's Balance Sheet, any liability, obligation,
impairment, restriction, lien, cost, expense, loss, compensation, payment,
reimbursement, damage, judgment or settlement to, of, by or on the business
(including on assets that has such effect on the business), operations, cash
flow, property, assets, prospects or condition (financial or otherwise) of such
entity and its Subsidiaries taken as a whole in the amount of $250,000 or more
for an individual occurrence or $500,000 or more in the aggregate for multiple
occurrences, arising outside the ordinary course of business. "Material Adverse
Effect" includes, without limitation, any effect that impairs the ability of any
of the parties hereto to consummate any transaction contemplated hereby.
"PERMITTED LIENS" means (a) any mechanic's, materialman's or other liens
arising by operation of law in the ordinary course of business consistent with
past practice, (b) liens for Taxes, assessments and other governmental charges
not yet due and payable or which the taxpayer is contesting in good faith
through appropriate proceedings and for which any required reserves have been
established, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, (d) liens arising as a matter of law in the ordinary
course of business, provided that the obligations secured by such liens are not
delinquent or are being contested in good faith, and (e) Encumbrances which,
individually and in the aggregate, do not materially impair the current use or
continued use (in the same manner as they are being used on the date hereof) of
the asset to which they attach.
"SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, of which such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or at least a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
10.17 EFFECTIVE DATE. Notwithstanding anything to the contrary herein,
this Agreement shall become effective only upon the preparation and public
release of a press release, agreed upon by Sync and the Shareholder, announcing
the merger transaction contemplated by this Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of Sync, Merger Co, the Shareholder and Osicom has
caused this Agreement to be executed by its duly authorized officer, in each
case as of the day and year first above written.
SYNC RESEARCH, INC., a Delaware
Corporation
By: /s/ WILLIAM K. GUERRY
Name: William K. Guerry
Title: Chief Executive Officer
MERGER CO, a Delaware Corporation
By: /s/ WILLIAM K. GUERRY
Name: William K. Guerry
Title: Chief Executive Officer
OSICOM TECHNOLOGIES, INC. a New Jersey
corporation
By: /s/ CHRISTOPHER E. SUE
Name: Christopher E. Sue
Title: Vice President of Finance
OSICOM TECHNOLOGIES, INC. a Delaware
corporation
By: /s/ CHRISTOPHER E. SUE
Name: Christopher E. Sue
Title: Treasurer and Secretary
A-35
<PAGE>
ANNEX B
OPINION OF FINANCIAL ADVISOR TO SYNC
[letterhead of Alliant Partners]
April 10, 2000
Board of Directors
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Sync Research, Inc. ("Sync" or the "Company") in
connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Agreement") dated April 10, 2000 by and among
1. Sync Research, Inc. ("Sync"), a Delaware corporation
2. Osicom Technologies, Inc. ("Parent"), a New Jersey corporation
3. Osicom Technologies, Inc., doing business as Entrada Networks ("Entrada"
or "Entrada"), a Delaware Corporation in which reside substantially all
of the assets of the Network Access division of Osicom Technologies Inc.
New Jersey
4. a wholly-owned subsidiary of Sync Research, Inc. (yet to be created),
formed for the purpose of this transaction
and the issuance of common stock, par value $0.001, of Sync (the "Shares")
pursuant thereto. The total consideration to be paid to Parent for Entrada is
equal to the number of shares of Sync Common Stock outstanding at the time of
closing, to be issued at closing. As of April 10, 2000, that number was
3,531,007. The transactions described above are collectively referred to herein
as the "Transaction".
Alliant Partners, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and corporate partnering transactions. We have acted as
financial advisor to Sync in connection with the Transaction and will receive a
fee for our services, including rendering this opinion, a significant portion of
which is contingent upon the consummation of the Transaction.
In arriving at our opinion, we have reviewed the Agreement and all of the
Exhibits and schedules, and have reviewed financial, product and other
information that was furnished to us by Sync and Parent. We also have held
discussions with members of the senior management of Sync and Parent regarding
the historic and current business operations and future risks and prospects of
the Company, including their expectation for certain strategic benefits of the
transaction. As part of these discussions, we also reviewed other transactions
contemplated by the Company over the last twelve months. In addition, we have
compared certain financial and securities data, both historic and projected, of
Entrada with those of various other companies engaged in businesses we
considered comparable with
B-1
<PAGE>
securities which are traded in public markets, analyzed prices paid in certain
other similar business combinations, and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
We have assumed, without independent verification, the accuracy,
completeness and fairness of all of the financial statements, product
information, marketing strategies and other information regarding Entrada that
has been provided to us by Parent and its representatives. We did not make any
independent evaluation of Entrada's assets or intellectual property, nor did we
review any of Parent's corporate records.
Based on the foregoing and such other factors as we deem relevant, we are of
the opinion, as of the date hereof, that the consideration to be paid by Sync in
connection with the Transaction is fair, from a financial point of view, to Sync
and its shareholders.
Sincerely Yours,
/s/ ALLIANT PARTNERS
B-2
<PAGE>
ANNEX C
BRING-DOWN OPINION OF FINANCIAL ADVISOR TO SYNC
[To be filed by amendment.]
C-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director
or officer of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the corporation,
against any expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the corporation against any
liability asserted against the person in any such capacity, or arising out of
the person's status as such, whether or not the corporation would have the power
to indemnify the person against such liability under the provisions of the law.
Article X of the Registrant's Certificate of Incorporation (incorporated by
reference herein) provides for indemnification of directors, officers and other
persons as follows:
"A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
B. The Corporation shall indemnify to fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director, officer or
employee of the Corporation or any predecessor of the Corporation, or serves
or served at any other enterprise as a director, officer or employee at the
request of the Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article X, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article X, shall eliminate or reduce the effect of this Article X in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article X, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision."
II-1
<PAGE>
Article VI of the Registrant's Bylaws (incorporated by reference herein)
provides in pertinent part that:
"INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation
Law of Delaware, indemnify each of its directors and officers against
expenses (including attorneys' fees), judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a
director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
INDEMNIFICATION OF OTHERS. The corporation shall have the power, to the
maximum extent and in the manner permitted by the General Corporation Law of
Delaware, to indemnify each of its employees and agents (other than
directors and officers) against expenses (including attorneys' fees),
judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact
that such person is or was an agent of the corporation. For purposes of this
Section 6.2, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or
agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
the provisions of the General Corporation Law of Delaware."
The Registrant has entered into indemnification agreements with its
directors containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Registrant,
among other things, to indemnify its directors against certain liabilities that
may arise by reason of their status or service as directors (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain director's insurance if available on
reasonable terms.
The Registrant has also obtained directors and officers' liability insurance
covering, subject to certain exceptions, actions taken by the Registrant's
directors and officers in their capacities as such.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
2.01(3) Agreement and Plan of Reorganization, dated April 10, 2000,
by and among the Registrant, Sync Research Acquisition
Corp., Osicom Technologies, Inc., a New Jersey corporation,
and Osicom Technologies, Inc., a Delaware corporation.
3.1(12) Amended and Restated Certificate of Incorporation of
Registrant.
3.3(14) Amended and restated Bylaws of Registrant.
5.01* Form of opinion of Orrick, Herrington & Sutcliffe LLP as to
the legality of the Registrant's Common Stock being
registered hereby.
10.01(1) Form of Indemnification Agreement.
10.02(8) Amended and Restated 1991 Stock Plan (amended as of June 12,
1998) and form of Option Agreement.
10.03(4) Amended 1995 Employee Stock Purchase Plan (amended as of
September 27, 1996) and form of Subscription Agreement.
10.04(8) Amended and Restated 1995 Directors' Option Plan (amended as
of June 12, 1998) and form of Option Agreement.
10.05(1) Amended and Restated Investors' Rights Agreement among the
Registrant and certain security holders of the Registrant,
dated as of April 25, 1994.
10.06(1) Consulting Agreement between the Registrant and Gregorio
Reyes dated January 1995.
10.07(1) 401(k) Plan.
10.08(5) Assumed TyLink Corporation 1994 Equity Incentive Plan.
10.09(4) Form of Severance Agreement between the Registrant and other
executive officers of the Registrant.
10.10(4) Real Estate Lease between TyLink and Thomas J. Flatley d/b/a
The Flatley Company, dated May 14, 1991.
10.11(13) Third Amendment to Lease for 10C Commerce Way, Norton, MA
dated July 28, 1999.
10.12(9) Amended and Restated 1996 Non-Executive Stock Option Plan
(amended as of August 21, 1998).
10.13(7) Letter Agreement dated June 6, 1997 between William K.
Guerry and the Registrant.
10.14(10) Form of Severance Agreement between the Registrant and
Gregorio Reyes, dated October 24, 1997.
10.15(13) Standard Industrial Lease for 12 Morgan, Irvine, CA dated
July 19, 1999.
10.16(14) Form of Amended and Restated Severance Agreement between the
Registrant and William Guerry, dated October 8, 1999.
10.17(15) Stock Purchase Agreement between the Registrant and Entrada
Holdings LLC, dated May 12, 2000.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
10.18(15) Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of the Registrant,
dated May 12, 2000.
10.19(15) Registration Rights Agreement between the Registrant and
Entrada Holdings LLC, dated May 12, 2000.
10.20* Distribution Agreement, dated February 25, 1997, between
Entrada and Ingram Micro, Inc.
10.21* Distribution Agreement, dated March 25, 1997, between
Entrada and Tech Data Product Management, Inc.
10.22* Lease Agreement, dated October 4, 1989, between Case/Datatel
Inc. and Chippewa Limited Partnership.
10.22(a)* First Amendment of Lease Agreement, dated October 19, 1994,
between Chippewa Limited Partnership and Case/Datatel Inc.
10.22(b)* Amendment No. 2 to Lease Agreement, dated April 22, 1999,
between Entrada and Chippewa Limited Partnership.
10.23* Lease Agreement, dated July 1, 1999, between Entrada and
West Park Realty Trust.
10.23(a)* First Amendment to Lease Agreement, dated July 1999, between
Entrada and West Park Realty Trust.
10.24* Supply Agreement, dated May 1, 1998, between Entrada and
NETsilicon, Inc.
10.25* Loan and Security Agreement, dated September 27, 1996,
between Entrada and Coast Business Credit.
10.25(a)* Addendum to Loan and Security Agreement between Entrada and
Coast Business Credit dated January 8, 1999.
10.25(b)* 1st Amendment to Loan and Security Agreement between Entrada
and Coast Business Credit dated April 16, 1999.
10.26* Secured Term Note between Entrada and Coast Business Credit
dated April 16, 1999.
10.27* OEM Agreement, dated December 24, 1997, between Entrada and
Cisco Systems, Inc.
10.27(a)* Amendment No. 1 to OEM Agreement, dated November 20, 1998,
between Entrada and Cisco Systems, Inc.
21.01(10) Subsidiaries of the Registrant.
23.01* Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.01).
23.02* Consent of Ernst & Young LLP, Independent Auditors, with
respect to financial statements of Registrant.
23.03* Consent of BDO Seidman, LLP, Independent Auditors, with
respect to financial statements of Entrada.
24.01* Power of Attorney (included on page II-11).
99.01** Form of Proxy Card to be mailed to holders of Registrant's
common stock.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
II-4
<PAGE>
(1) Incorporated by reference from exhibits filed in response to Item 16(a),
"Exhibits," of the Registrant's Registration Statement on Form S-1, as
amended (File No. 33-06910), which became effective on November 9, 1995.
(2) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(3) Incorporated by reference from Exhibit 2.1 included with the Current Report
on Form 8-K filed April 18, 2000. Exhibits filed in response to Item 6.
(4) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, filed November 14, 1996.
(5) Incorporated by reference from Registrant's Registration Statement on Form
S-8 (No. 333-12315), filed on September 19, 1996.
(6) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, filed August 14, 1997.
(7) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, filed November 14, 1997.
(8) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998, filed August 14, 1998.
(9) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998, filed November 16, 1998.
(10) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
(11) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999, filed May 16, 1999.
(12) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999, filed August 16, 1999.
(13) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, filed November 15, 1999.
(14) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 24, 2000.
(15) Incorporated by reference from exhibits filed with the Registrant's Current
Report on Form 8-K, filed May 19, 2000.
- ------------------------
+ Confidential Treatment Requested.
II-5
<PAGE>
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of any such request, and to send
the incorporated documents by first class mail or other equally prompt
means, including information contained in documents filed after the
effective date of this registration statement through the date of responding
to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this registration statement when
it became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. If a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on , 2000.
SYNC RESEARCH, INC.
By: /s/
-----------------------------------
William K. Guerry
President and Chief Executive
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William K. Guerry as his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President, Chief Executive
Officer (Principal
/s/ Executive Officer) and
- ------------------------------------------- Chief Financial Officer , 2000
William K. Guerry (Principal Financial
Officer) and Director
/s/
- ------------------------------------------- Chairman of the Board of , 2000
Gregorio Reyes Directors
/s/
- ------------------------------------------- Director , 2000
Charles A. Haggerty
/s/
- ------------------------------------------- Director , 2000
William J. Schroeder
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
2.01(3) Agreement and Plan of Reorganization, dated April 10, 2000,
by and among the Registrant, Sync Research Acquisition
Corp., Osicom Technologies, Inc., a New Jersey corporation,
and Osicom Technologies, Inc., a Delaware corporation.
3.1(12) Amended and Restated Certificate of Incorporation of
Registrant.
3.3(14) Amended and restated Bylaws of Registrant.
5.01* Form of opinion of Orrick, Herrington & Sutcliffe LLP as to
the legality of the Registrant's Common Stock being
registered hereby.
10.01(1) Form of Indemnification Agreement.
10.02(8) Amended and Restated 1991 Stock Plan (amended as of June 12,
1998) and form of Option Agreement.
10.03(4) Amended 1995 Employee Stock Purchase Plan (amended as of
September 27, 1996) and form of Subscription Agreement.
10.04(8) Amended and Restated 1995 Directors' Option Plan (amended as
of June 12, 1998) and form of Option Agreement.
10.05(1) Amended and Restated Investors' Rights Agreement among the
Registrant and certain security holders of the Registrant,
dated as of April 25, 1994.
10.06(1) Consulting Agreement between the Registrant and Gregorio
Reyes dated January 1995.
10.07(1) 401(k) Plan.
10.08(5) Assumed TyLink Corporation 1994 Equity Incentive Plan.
10.09(4) Form of Severance Agreement between the Registrant and other
executive officers of the Registrant.
10.10(4) Real Estate Lease between TyLink and Thomas J. Flatley d/b/a
The Flatley Company, dated May 14, 1991.
10.11(13) Third Amendment to Lease for 10C Commerce Way, Norton, MA
dated July 28, 1999.
10.12(9) Amended and Restated 1996 Non-Executive Stock Option Plan
(amended as of August 21, 1998).
10.13(7) Letter Agreement dated June 6, 1997 between William K.
Guerry and the Registrant.
10.14(10) Form of Severance Agreement between the Registrant and
Gregorio Reyes, dated October 24, 1997.
10.15(13) Standard Industrial Lease for 12 Morgan, Irvine, CA dated
July 19, 1999.
10.16(14) Form of Amended and Restated Severance Agreement between the
Registrant and William Guerry, dated October 8, 1999.
10.17(15) Stock Purchase Agreement between the Registrant and Entrada
Holdings LLC, dated May 12, 2000.
10.18(15) Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of the Registrant,
dated May 12, 2000.
10.19(15) Registration Rights Agreement between the Registrant and
Entrada Holdings LLC, dated May 12, 2000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
10.20* Distribution Agreement, dated February 25, 1997, between
Entrada and Ingram Micro, Inc.
10.21* Distribution Agreement, dated March 25, 1997, between
Entrada and Tech Data Product Management, Inc.
10.22* Lease Agreement, dated October 4, 1989, between Case/Datatel
Inc. and Chippewa Limited Partnership.
10.22(a)* First Amendment of Lease Agreement, dated October 19, 1994,
between Chippewa Limited Partnership and Case/Datatel Inc.
10.22(b)* Amendment No. 2 to Lease Agreement, dated April 22, 1999,
between Entrada and Chippewa Limited Partnership.
10.23* Lease Agreement, dated July 1, 1999, between Entrada and
West Park Realty Trust.
10.23(a)* First Amendment to Lease Agreement, dated July 1999, between
Entrada and West Park Realty Trust.
10.24* Supply Agreement, dated May 1, 1998, between Entrada and
NETsilicon, Inc.
10.25* Loan and Security Agreement, dated September 27, 1996,
between Entrada and Coast Business Credit.
10.25(a)* Addendum to Loan and Security Agreement between Entrada and
Coast Business Credit dated January 8, 1999.
10.25(b)* 1st Amendment to Loan and Security Agreement between Entrada
and Coast Business Credit dated April 16, 1999.
10.26* Secured Term Note between Entrada and Coast Business Credit
dated April 16, 1999.
10.27* OEM Agreement, dated December 24, 1997, between Entrada and
Cisco Systems, Inc.
10.27(a)* Amendment No. 1 to OEM Agreement, dated November 20, 1998,
between Entrada and Cisco Systems, Inc.
21.01(10) Subsidiaries of the Registrant.
23.01* Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.01).
23.02* Consent of Ernst & Young LLP, Independent Auditors, with
respect to financial statements of Registrant.
23.03* Consent of BDO Seidman, LLP, Independent Auditors, with
respect to financial statements of Entrada.
24.01* Power of Attorney (included on page II-11).
99.01** Form of Proxy Card to be mailed to holders of Registrant's
common stock.
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from exhibits filed in response to Item 16(a),
"Exhibits," of the Registrant's Registration Statement on Form S-1, as
amended (File No. 33-06910), which became effective on November 9, 1995.
(2) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
<PAGE>
(3) Incorporated by reference from Exhibit 2.1 included with the Current Report
on Form 8-K filed April 18, 2000. Exhibits filed in response to Item 6.
(4) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, filed November 14, 1996.
(5) Incorporated by reference from Registrant's Registration Statement on Form
S-8 (No. 333-12315), filed on September 19, 1996.
(6) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, filed August 14, 1997.
(7) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, filed November 14, 1997.
(8) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998, filed August 14, 1998.
(9) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998, filed November 16, 1998.
(10) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
(11) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999, filed May 16, 1999.
(12) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999, filed August 16, 1999.
(13) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, filed November 15, 1999.
(14) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 24, 2000.
(15) Incorporated by reference from exhibits filed with the Registrant's Current
Report on Form 8-K, filed May 19, 2000.
- ------------------------
+ Confidential Treatment Requested.
<PAGE>
[Orrick, Herrington & Sutcliffe LLP Letterhead]
__________, 2000
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-________)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 (No.
333-______) filed by you with the Securities and Exchange Commission (the
"Commission") on _________, 2000 (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of 4,300,000
shares of your Common Stock (the "Shares"). As your counsel in connection with
this transaction, we have examined the proceedings taken and are familiar with
the proceedings proposed to be taken by you in connection with the issuance of
the Shares.
We have also examined instruments, documents, and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; and
(c) the truth, accuracy, and completeness of the information, representations,
and warranties contained in the records, documents, and certificates we have
reviewed.
Based on such examination, it is our opinion that the Shares when
issued in the manner described in the Registration Statement and the Agreement
and Plan of Merger dated as of April 10, 2000 by and between you, Sync Research
Acquisition Corp., Osicom Technologies, Inc., a New Jersey corporation, and
Osicom Technologies, Inc., a Delaware corporation, will be legally and validly
issued, fully paid and non-assessable.
We are admitted to practice law only in the State of California, and we
express no opinion concerning any laws other than the laws of the State of
California and the federal laws of the United States.
We hereby consent to the use of this opinion as an exhibit to said
Registration Statement, and further consent to the use of our name wherever
appearing in said Registration Statement, including the Prospectus constituting
a part thereof, and in any amendment thereto.
<PAGE>
In giving such consent, we do not consider that we are "experts" within the
meaning of such term as used in the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Very truly yours,
<PAGE>
EXHIBIT 10.20
DISTRIBUTION AGREEMENT
THIS Distribution AGREEMENT ("Agreement") is entered into this 25th day of
February 1997 by and between INGRAM MICRO INC. ("Ingram"), a Delaware
corporation having its principal place of business at 1600 E. St. Andrew Place,
Santa Ana, California 92705, and OSICOM TECHNOLOGIES, INC. ("Vendor"), a
California corporation having its principal place of business at 48507 Milmont
Drive, Fremont, California 94538. The parties desire to and hereby do enter into
a distributor/supplier relationship, the governing term and mutual promises of
which are set out in this Agreement.
1. DISTRIBUTION RIGHTS
1.1 Territory Vendor grants to Ingram, including its affiliates for resale, and
Ingram accepts, the non-exclusive right to distribute worldwide all computer
products produced and for offered by Vendor ("Product") during the term of this
Agreement Ingram shall have the right to purchase, sell and ship to any reseller
within the territory or to Ingram's affiliate, or at Vendor's option Ingram's
affiliate may purchase direct from Vendor.
1.2 Product Vendor agrees to make available and to sell to Ingram such Product
as Ingram shall order from Vendor at the prices and subject to the terms set
forth in this Agreement Ingram shall not be required to purchase any minimum
amount or quantity of the Product
2. TERM AND TERMINATION
2.1 Term. The initial tem of this Agreement is one (1) year. Thereafter the
Agreement will automatically renew for successive one (1) year terms unless it
is earlier terminated.
2.2 Termination
(a) Either party may terminate this Agreement, with or without cause, by
giving thirty (30) days written notice to the other party.
(b) Either party may immediately terminate this Agreement with written
notice if the other party:
(i) materially breaches my term of this Agreement and such breach
continues for thirty (30) business days after written notification
thereof; or
(ii) ceases to conduct business in the normal course, becomes insolvent,
makes a general assignment for the benefit of creditors, suffers or
permits the appointment of a receiver for its business or assets, or
avails itself of or becomes subject to any proceeding under any Bankruptcy
Act or any other federal or state statute relating to insolvency or the
protection of rights of creditors; or
(iii) attempts to assign or otherwise transfer its rights hereunder unless
both have agreed in writing to such assignment or transfer.
3. INGRAM OBLIGATIONS
<PAGE>
3.1 Product Availability Ingram will list Product in its catalog(s) as
appropriate and endeavor to make such Product available to customers.
3.2 Advertising Ingram will advertise and/or promote Product in a commercially
reasonable manner and will transmit as reasonably necessary Product information
and promotional materials to its customers-
3.3 Support Ingram will make its facilities reasonably available for Vendor and
will assist in Product training and support. Ingram will provide reasonable,
general Product technical assistance to its customers, and will direct all other
technical issues directly to Vendor.
3.4 Administration
(a) Upon request Ingram will furnish Vendor with a valid tax exemption
certificate.
(b) Ingram will provide Vendor standard sales-out and inventory reports
via its electronic Bulletin Board System.
(c) Ingram may handle its customers' Product returns by batching them for
return to Vendor at regular intervals.
4. VENDOR OBLIGATIONS
4.1 Shipping/Export
(a) vendor shall ship Product pursuant to Ingram purchase, order(s)
("P.O."). Product shall be Shipped F.O.B. Ingram's designated warehouse with
risk of less or damage to pass to Ingram upon delivery to the warehouse
specified in Ingram P.O.
(b) Ingram requires concurrent with the execution of this Agreement Export
Administration Regulations product classification and supporting documentation:
Certificate of Origin (General Use and/or NAFTA), Export Commodity Control
Number's; (ECCN's), General License and/or Individual Validated License
information and Schedule "B"/Harmonized Numbers. This applies when distribution
rights granted under Section 1.1 are outside the United States for the initial,
Product/s and when additions or changes to these Products occurs.
4.2 Invoicing For each Product shipment to Ingram, Vendor shall issue to Ingram
an invoice showing Ingram's order number, the Product part number, description,
price and any discount. At least monthly, Vendor shall provide Ingram with a
current statement of account, listing all invoices outstanding and any payments
made and credits given since the date of the previous statement.
4.3 Product Availability Vendor agrees to maintain sufficient Product inventory
to fill Ingram's orders. If a shortage of any Product exists Vendor agrees to
allocate its available inventory of such Product to Ingram in proportion to
Ingram's percentage of all of Vendor's customer orders for such Product during
the previous sixty (60) days.
4.4 Product Marking Vendor will clearly mark each unit of Product with the
Product name and computer compatibility. Such packaging will also bear a
machine-readable bar code identifier scannable in standard Uniform Product Code
(UPC) format. The bar code must identify the Product as specified by the Uniform
Code Council (UCC). If the Vendor or Ingram customers' require serial number
tracking the serial number must be clearly marked and bar coded on the
<PAGE>
outside of the individual selling unit. The bar code shall fully comply with all
conditions regarding standard product labeling set forth in Exhibit B in the
then-current Ingram Guide to Bar Code: The Product Label. Vendor may be assessed
a reasonable per unit charge for all Product not in conformance herewith.
4.5 Product Notes Vendor will either within thirty (30) days provide product
note information in accordance with Ingram's specifications noted in Exhibit C
or instruct Ingram to do so in which case a charge per SKU will apply.
4.6 Support
(a) At no charge to Ingram, Vendor shall support Product and any
reasonable Ingram efforts to sell Product. Vendor shall also provide to Ingram,
its employees, and its customers reasonable amounts of sales literature,
advertising materials, and training and support in Product sales.
(b) Vendor shall assume all current and outstanding obligations under the
following Agreements incorporated herein as if fully set forth:
Distribution Agreement dated June 7, 1994 between Ingram Micro and Cray
Communications, Inc.
Distribution Agreement dated November 9, 1993 between Ingram Micro and
Pacific Data Products
4.7 New Product Vendor shall endeavor to notify Ingram at least thirty (30) days
before the date any new product is introduced. Vendor shall make such Product
available for distribution by Ingram no later than the date it is first offered
for sale in the marketplace.
4.8 Insurance Vendor shall carry insurance coverage for Product
liability/completed operations with minimum limits of five million dollars
($5,000.000). Within ten (10) days of full execution of this Agreement, Vendor
shall provide Ingram with a Certificate of Insurance. This Certificate of
Insurance must include: (i) a broad form endorsement naming Ingram as an
additional insured, and (ii) a mandatory thirty (30) day notice to Ingrain of
insurance cancellation.
4.9 Warranties Certification
(a) General Warranty Vendor Represents and warrants that (i) it has good
transferable title to the Products, (ii) the Product will perform in
conformity with specifications and documentation supplied by Vendor, (iii)
the Product or its use does not infringe any patents, copyrights, trademarks,
trade secrets, or any other intellectual property rights, (iv) that there are
no suits or proceedings pending or threatened which allege any infringement
of such proprietary rights, and (v) the Product sales to Ingram do not in any
way constitute violations of any law, ordinance, rule or regulation in the
distribution territory.
(b) Warranty Vendor hereby represents and warrants that any Product offered for
distribution does not contain any obscene, defamatory or libelous matter or
violate any right of publicity or privacy.
(c) End-User Warranty Vendor shall provide a warranty statement with Product
<PAGE>
for end user benefit. This warranty shall commence upon Product delivery to
end-user.
(d) Class B Warranty Vendor hereby represents and warrants that the
Product has been or will be at the time of shipment certified as a Class B
computing device as required by the rules of the U.S.A. Federal Communications
Commission ("FCC Rules").
(e) EU Warranty Vendor further warrants and represents for Products
distributed to the European Union ("EU") that the Products will be accepted
under all EU directives, regulations and the EU country's legislation.
(f) Made in America Certification Vendor by the execution of this
Agreement certifies that it will not label any of its products as being "Made in
America," "Made in U.S.A.," or with similar wording, unless all components or
elements of such Product is in fact made in the United States of America. Vendor
further agrees to defend, indemnify and hold harmless from and against any and
all claims, demands, liabilities, penalties, damages, judgments or expenses
(including attorney's fees and court costs) arising out of or resulting in any
way from Product that does not conform to the Certification.
5. PRICING
5.1 Ingram Pricing The suggested retail price and any Ingram discount for
Product is set out in Exhibit D. Vendor may modify Exhibit D with a minimum of
thirty (30) days advance written notice to Ingram. All Ingram orders for Product
will be billed at the price in effect when the order is placed. Ingram shall
have sole discretion as to selling price of Product to its customers.
5.2 Vendor Pricing Vendor agrees that the prices and terms it offers to Ingram
are now and will continue to be at least as low as those it offers to any of its
customers. If Vendor offers price discounts, promotional discounts or other
special prices to its other customers. Ingram shall also be entitled to
participate in and receive notice of the same no later than Vendor's other
customers.
5.3 International Pricing If Vendor offers a better price outside the U.S. and
Ingram has distribution rights in that territory then the same price shall be
offered to Ingram for Product sales into that territory.
5.4 Price Adjustments If Vendor reduces any Product price, or offers increased
discounts to any customers, Vendor will promptly credit Ingram for the
difference between the original Product price and the reduced Product price for
Ingram's and its customers' Product inventory, including: (i) any Customer
Product in-transit from/to Ingram, (ii) any unshipped orders, and (iii) orders
in-transit to Ingram on the price reduction or increased discount offer date. In
the event that Vendor shall raise the list price of a Product, all orders for
such Product placed prior to the effective date of the price increase shall be
invoiced at the lower price. Vendor shall provide Ingram with thirty (30) days
advance notice of any price increases.
5.5 Payment Terms Ingram's initial order payment terms shall be net
[sixty] [60] days. Subsequent order payment terms shall, be [two] percent [2%]
[10] days, net [forty-five (45)] days. Payment shall be deemed made on the
payment postmark date.
5.6 Right to withhold Notwithstanding any other provision in this Agreement to
the contrary, Ingram shall not be deemed in default if it withholds
<PAGE>
any, specific amount to Vendor because of a legitimate dispute between the
parties as to that specific amount pending the timely resolution of the disputed
amount.
6. MARKETING
6.1 Trademarks Ingram may advertise and promote the Product and/or Vendor, and
may thereby use Vendor's trademarks, service marks and trade names. Neither
party shall acquire any rights in the trademarks, service marks or trade names
of the other.
6.2 Advertising Vendor agrees to cooperate in Ingram's or Ingram's customers'
advertising and promotion of Product and hereby grants Ingram a cooperative
advertising allowance [three] percent [3%] of Product invoice amount for such
advertising featuring Product and/or Vendor. Ingram shall submit advertising to
Vendor for review and approval prior to any initial release, and Vendor shall
not unreasonably withhold or delay such approval. Upon receipt of reasonable
evidence of such advertising expenditures, Vendor agrees to credit the amount
thereof future Ingram purchases.
6.3 Programs
(a) Vendor shall participate in Ingram's current "Imagine" program
marketing program and grants Ingram one point five seven percent (1.57%) of
Product invoice amount for this purpose- The cooperative advertising allowance
granted in Section 61 hereof shall be reduced accordingly by this amount.
Additionally, this program shall be subject to the provisions set forth in
Exhibit E.
(b) Ingram may offer additional marketing program to Vendor including but
not limited to launch programs and reseller pass through opportunities. If
Vendor elects to participate, Vendor agrees to pay such additional funds as may
be required for this purpose.
(c) Vendor may be asked to prepay all marketing activities until a
mutually agreed upon sell through rate is achieved.
6.4 Support Product Vendor shall consign a reasonable amount or demonstration
Product to aid Ingram in its support and promotion of Product. All such
consigned Product will be returned to Vendor upon request.
7. RETURNS
7.1 Stock Balancing Notwithstanding anything herein to the contrary, Ingram may
return throughout the term any Products which are in their original packaging to
Vendor for full credit of the Products' purchase price. Vendor will pay all
freight charges for returned Products.
7.2 Post-Term Termination For one hundred eighty (180) days after the expiration
or earlier termination of this Agreement, Ingram my return to Vendor any Product
for credit against outstanding invoices, or if there are no outstanding invoices
for a cash refund. Any credit or refund due Ingram for returned Product shall be
equal to the Product purchase price plus all freight charges incurred by Ingram
in returning the Product.
7.3 Product Discontinuation Vendor shall give Ingram thirty (30) days' advance
written notice of product discontinuation. Ingram may return all such Product to
Vendor for full credit of Product purchase price plus all freight charges
<PAGE>
incurred by Ingram in returning the Product.
7.4 Defective Product
(a) Ingram may return any Product to Vendor that Ingram or its Customer
finds defective. Vendor shall immediately credit Ingram for the Product purchase
price, plus all freight charges incurred by Ingram in returning the defective
Product-
(b) If any Product is recalled by Vendor because of defects, revisions or
upgrades, Ingram will, at Vendor's request, provide reasonable assistance with
the recall. Vendor will pay Ingram's expenses in connection with such recall.
8. INDEMNIFICATION
8.1 Product Indemnity Vendor shall defend, indemnify, and hold harmless Ingram
from and against any claims, demands, liabilities, or expenses (including
attorney's fees and costs) for any injury or damage, including, but not limited
to, any personal or bodily injury or property damage, arising out of or
resulting in any way from any defect in Products. This duty to indemnify Ingram
shall be in addition to the warranty obligations of Vendor.
8.2 General Indemnity Each party shall indemnify defend and hold the other
harmless from and any and all claims, actions, damages, demands liabilities cost
and expenses, including reasonable attorney's fees and expenses, resulting from
any act or omission of the acting party or its employees under this Agreement,
that causes or results in property damage, personal injury or death.
8.3 Intellectual Properly Rights Indemnity Vendor shall defend, indemnify and
hold Ingram, its resellers and their customers, harmless from and against all
damages and costs incurred by any of them arising from the infringement of any
patent, copyright, trademark, trade secret or other proprietary right by mason
of the manufacture sale, marketing, or use of Product.
8.4 Product Infringement Upon threat of claim of infringement, Vendor may, at
its expense and option (i) procure the right to continue using any part of
Product, (ii) replace the infringing Product with a non-infringing Product of
similar performance, or (iii) modify Product to make it non-infringing. If
Vendor does not so act within ninety (90) days after such claim, Ingram may
return Product to Vendor for a full credit against future purchases or for a
cash refund. at Ingram's option.
8.5 Multi-Media Jiidemn4i Vendor shall defend, indemnify and hold Ingram, its
resellers and their customers, harmless from and against all damages and costs
incurred by any of them to the extent it is based upon a claim *at the Product
either (i) violates a third party's right of publicity and/or right of privacy,
or (ii) contains any obscene, defamatory or libelous matter.
8.6 European Indemnity For products distributed to a country of the EU, the
Vendor accepts full responsibility for, and will indemnify Ingram for, all costs
and damages wising from any non-compliance with any manufacturer-directed EU
decree, regulation or directive.
8.7 Limitation of Liability NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR LOST
PROFITS OF BUSINESS, INDIRECT, CONSEQUENTIAL
<PAGE>
OR PUNITIVE DAMAGES, WHETHER BASED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE), AND WHETHER OR NOT ADVISED OF THE POSSIBILITY Of
SUCH DAMAGES.
THIS LIMITATION IS IN NO WAY WANT TO LIMIT VENDORS LIABILITY FOR PERSONAL
INJURY OR DEATH AS A RESULT OF A DEFECT IN ANY PRODUCT IN THOSE JURISDICTIONS
WHERE THE LAW DOES NOT ALLOW THIS LIMITATION-
9. COMPLIANCE WITH FEDERAL LAWS AND REGULATIONS
9.1 Executive Order 11246 Vendor agrees to include the Equal Employment
Opportunity Clause by reference in every contract, agreement and purchase order
entered into with subcontractors or suppliers as required by 41 CFR 60-1.4.
9.2 Employer Information Report EEO-4/ Written Affirmative Action Program Vendor
agrees that if the value of any contract or purchase order is fifty thousand
dollars ($50,000) or more and the Vendor has fifty (50) or more employees,
Vendor will (i) file an EEO-1 report (Standard Form 100) and comply with and
file such other compliance reports as may be required under Executive Order
11246, as amended, and Rules and Regulations adopted thereunder and (ii) will
develop a written affirmative action compliance program for each of its
establishments as required by Title 41 CFR 60-1-40.
9.3 Veterans Employment Clause Vendor agrees to abide by and comply with the
provisions of the Affirmative Action Clause, 41 CFR 60-250.4.
9.4 Employment of Handicapped Persons Vendor agrees that it will abide by and
comply with the provisions of the Affirmative Action Clause, 41 CFR 60-741 A.
9.5 Small Business Concerns and Small Business Concerns Owned and Controlled by
Socially and Economically Disadvantage Individuals Where a government contract
is expected to exceed five hundred thousand dollars ($500,000), Vendor agrees to
comply with all requirements of P1- 95-507 and regulations promulgated
thereunder. Vendor shall comply with instructions contained in Exhibit F.
9.6 Women-owned Business Concerns Vendor shall comply with instructions
contained in Exhibit F. Where a government contract is expected to exceed five
hundred thousand dollars ($500,000), Vendor agrees to comply with all
requirements of Executive Order 12138 and all regulations promulgated
thereunder.
10. GOVERNMENT PROGRAM
10.1 Partnership America Vendor may, at its sole option, participate in Ingram's
government reseller program in which case the provisions of Exhibit G,
Partnership America, shall apply. A draft copy is provided solely for your
information and review.
11. GENERAL PROVISIONS
11.1 Notices Any notice which either party may desire to give the other party
must be in writing and may be given by (i) personal delivery to an officer of
the party, (ii)
<PAGE>
by mailing the same by registered or certified mail, return receipt requested,
to the party to whom the party is directed at the address of such party as set
forth at the beginning of this Agreement. or such other address as the parties
may hereinafter designate, and (iii) by facsimile or telex communication
subsequently to be confirmed in writing pursuant to item (ii) herein.
11.2 Governing Law This Agreement shall be construed and enforced in accordance
with the laws of the State of California, except that body of law concerning
conflicts of law. The United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement.
11.3 Cooperation Each party agrees to execute and deliver such further documents
and to cooperate as may be necessary to implement and give effect to the
provisions contained herein.
11.4 Force Majeure Neither party shall be liable to the other for any delay or
failure to perform, which results from causes outside its reasonable control.
11.5 Attorneys Fees In the event there is any dispute concerning the terms of
this Agreement or the performance of any party hereto pursuant to the terms of
this Agreement and any party hereto retains counsel for the purpose of enforcing
any of the provisions of this Agreement or asserting the terms of this Agreement
in defense of any suit filed against said party, each party shall be solely
responsible for its own costs and attorney's fees incurred in connection with
the dispute irrespective of whether or not a lawsuit is actually commenced or
prosecuted to conclusion.
11.6 Export Regulations Ingram agrees by the Purchase of Products to conform to,
and abide by, the export laws and regulations of the United States, including
but not limited to, the Export Administration Act of 1979 as amended and its
implementing regulations. Ingram shall include a statement in it's standard
sales terms and conditions that any shipment of Product outside the United
States will require a valid export license. Ingram further agrees to distribute
Product in accordance with the territory as defined in Section 1.1. Whenever a
EU country is specified as Territory under Section 1.1, Territory shall include
all EU countries.
12. AGREEMENT
12.1 Counterparts This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.2 Section Head Section headings in this Agreement are for convenience only,
and shall not be used in construing the Agreement.
12.3 Incorporation of all Exhibits Each and every exhibit referred to
hereinabove and attached hereto is hereby incorporated herein by reference as if
set forth herein in full.
12.4 Severability A judicial determination that any provision of this Agreement
is invalid in whole or in part shall not affect the enforceability of those
provisions found to be valid.
12.5 No Implied Waivers If either party fails to require performance of any duty
hereunder by the other party, such failure shall not affect its right to require
<PAGE>
performance of that or any other duty thereafter. The waiver by either party of
a breach of any provision of this Agreement shall not be a waiver of the
provision itself or a waiver of any breach thereafter, or a waiver of any other
provision herein.
12.6 Binding Effect/Assignment This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, and their respective
representatives, successors and permitted assigns. This Agreement shall not be
assignable by Vendor, without the express written consent of Ingram, which
consent shall not be unreasonably withheld, including to a Person in which it
has merged or which has otherwise succeeded to all or substantially all of such
party's business and assets to which this Agreement pertains and which has
assumed in writing or by operation of law its obligations under this Agreement.
Any attempted assignment in violation of this provision will be void.
12.7 Survival Sections 5.5 (Payment Terms), 5.6 (Right to Withhold), 7.2
(Post-Term Termination) and 8. (Indemnification) shall survive the expiration or
earlier termination of this Agreement.
12.8 End This Agreement constitutes the entire Agreement between the Parties
regarding its subject matter. This Agreement supersedes any and all previous
proposals, representations or statements, oral or written. Any previous
agreements between the parties pertaining to the subject matter of this
Agreement are expressly terminated. The term and conditions of each party's
purchase orders, invoice & acknowledgments/confirmations or similar documents
shall not apply to any order under this Agreement, and any such terms and
conditions on any such document are objected to without need of further notice
or objection. Any modifications to this Agreement must be in writing and signed
by authorized representative of both parties.
12.9 Authorized Representatives Either party's authorized representative for
execution of this Agreement or any amendment hereto shall be president, a
partner, or a duly authorized vice-president of their respective party. The
parties executing this Agreement warrant that they have the requisite authority
to do so.
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.
"Ingram" "Vendor"
Ingram Micro Inc. Osicom Technologies, Inc.
1600 E. St. Andrew Place 48507 Milmont Drive
Santa Ana, California 92705 Freemont, CA 94538
Name: /s/ Miguel Terell Name: /s/ John Hwang
Title: VP, Purchasing Title: President
Date: February 27, 1997 Date: February 26, 1996
*AGREEMENT MUST BE SIGNED BY PRESIDENT OR BY A DULY AUTHORIZED VICE PRESIDENT OR
PARTNER.
EXHIBITS:
<PAGE>
A Vendor Routing Guide (if applicable)
B Guide to Bar Code: The Product Label
C Product Notes
D Product Price List
E "IMAGINE" Program
F Small And Disadvantaged Business Certification
G Partnership America
<PAGE>
EXHIBIT 10.21
DISTRIBUTION AGREEMENT BETWEEN
TECH DATA PRODUCT MANAGEMENT, INC.
AND
OSICOM TECHNOLOGIES, INC.
1/24/97
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of this 25 day of MARCH, 1997 is between TECH DATA
PRODUCT MANAGEMENT, INC., a Florida corporation ("Tech Data"), with its
principal corporate address at 5360 Tech Data Drive, Clearwater, Florida 34620
and OSICOM TECHNOLOGIES, INC., a corporation ("Osicom with its principal
corporate address at 2800 28th Street, Suite 100, Santa Monica, California
90405.
RECITALS
Tech Data desires to purchase certain Products from Osicom from time to time and
Osicom desires to sell certain Products to Tech Data in accordance with the
terms and conditions set forth in this Agreement.
Osicom desires to appoint Tech Data as its non-exclusive distributor to market
Products within the Territory (as hereinafter defined) and Tech Data accepts
such appointment on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained
in this Agreement and other good and valuable consideration, Tech Data and
Osicom hereby agree as follows:
ARTICLE 1. DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
Definitions The following definitions shall apply to this Agreement.
"Customers" of Tech Data shall include dealers, resellers, value added
resellers, mail order resellers and other entities that acquire the Products
from Tech Data.
DOA shall mean Product, or any portion thereof, which fails to operate properly
on initial burn in, boot, or use, as applicable.
"Documentation" shall mean user manuals, training materials, Product
descriptions and specifications, brochures, technical manuals, license
agreements, supporting materials and other printed information relating to the
Products, whether distributed in print, electronic, or video format.
(d) Effective Date shall mean the date on which this Agreement is signed and
dated by a duly authorized representative of Tech Data.
(e) "End Users" shall mean the final retail purchasers or licensees who have
acquired Products for their own use and not for resale, remarketing or
redistribution.
(f) Non-Saleable Products shall mean any Product that has been returned to Tech
Data by its Customers that has had the outside shrink wrapping or other
packaging seal broken; any components of the original package are missing,
damaged or modified; or is otherwise not fit for resale.
(g) "Products" shall mean, individually or collectively as appropriate,
hardware, licensed software, Documentation, supplies, accessories, and other
commodities related to any of the foregoing produced by Osicom, as more
particularly described in Schedule 1.1.g. attached hereto.
(h) "Return Credit' shall mean a credit to Tech Data in an amount equal to the
price paid by Tech Data for Products less any price protection credits but not
including any early payment or prepayment discounts.
(i) "Services" means any warranty, maintenance, advertising, marketing or
technical support and any other services performed or to be performed by Osicom.
<PAGE>
(j) "Territory" shall mean worldwide.
1.2 Term of Agreement The term of this Agreement shall commence on the Effective
Date and, unless terminated by either party as set forth in this Agreement,
shall remain in full force and effect for a term of one (1) year, and will be
automatically renewed for successive one (1) year terms unless prior written
notification of termination is delivered by one of the parties in accordance
with the notice provision of this Agreement.
1.3 Appointment as Distributor Osicom hereby grants to Tech Data the
non-exclusive right to distribute Products within the Territory during the term
of this Agreement. This Agreement does not grant Osicom or Tech Data an
exclusive right to purchase or sell Products and shall not prevent either party
from developing or acquiring other vendors or customers or competing Products.
Tech Data will use commercially reasonable efforts to promote sales of the
Products. Osicom agrees that Tech Data may obtain Products in accordance with
this Agreement for the benefit of its parent, affiliates and subsidiaries of
Tech Data. Said parent, affiliates and subsidiaries of Tech Data shall be
entitled to order Products directly from Osicom pursuant to this Agreement.
ARTICLE II PURCHASE ORDERS
2.1 Issuance and Acceptance of Purchase Order.
(a) This Agreement shall not obligate Tech Data to purchase any Products or
Services except as specifically set forth in a written purchase order.
(b) Tech Data may issue to Osicom one or more purchase orders identifying the
Products Tech Data desires to purchase from Osicom. Notwithstanding any
preprinted terms or conditions on Tech Data 's purchase orders, the terms and
conditions of this Agreement shall apply to and govern all purchase orders
accepted or shipped by Osicom hereunder, except that purchase orders may include
other terms and conditions which are consistent with the terms and conditions of
this Agreement, or which are mutually agreed to in writing by Tech Data and
Osicom. Purchase orders will be placed by Tech Data by fax or electronically
transferred.
(c) A purchase order shall be deemed accepted by Osicom unless Osicom notifies
Tech Data in writing within five (5) days of the date of the purchase order that
Osicom does not accept the purchase order.
2.2 Purchase Order Alterations or Cancellations Prior to shipment of Products,
Osicom shall accept alterations or cancellation to a purchase order in
order to: 336156 change a location for delivery, (ii) modify the quantity
or type of Products to be delivered or (iii) correct typographical or
clerical errors. Tech Data must provide sixty (60) days prior written
notice in order to cancel or alter an order for customized Products,
however, Tech Data may not cancel orders for customized Products after
such time as the Products have been altered to a point where such Products
are no longer capable of resale by Osicom after reasonable efforts.
2.3 Evaluation or Demonstration Purchase Orders. Osicom shall provide to Tech
Data a reasonable number of demonstration or evaluation Products at no charge.
2.4 Product Shortages. If for any reason Osicom's production is not on schedule,
Osicom may allocate available inventory to Tech Data and make shipments based
upon a fair and reasonable percentage allocation among Osicom's customers. Such
allocations shall not impact the calculation of performance rebates.
ARTICLE III. DELIVERY AND ACCEPTANCE OF PRODUCTS
3.1 Acceptance of Products Tech Data shall, after a reasonable time to inspect
each shipment, accept Product (the "Acceptance Date") if the Products and all
necessary documentation delivered to Tech Data are in accordance with the
purchase order. Any Products not ordered or not otherwise in accordance with the
purchase order (e.g. mis-shipments, overshipments) may be returned to Osicom at
Osicom's expense (including without limitation costs of shipment or storage).
Osicom shall refund to Tech Data within ten (10) business days following notice
thereof, all monies paid in respect to such rejected Products. Tech Data shall
not be required to accept partial shipment unless Tech Data agrees prior to
shipment.
<PAGE>
3.2 Title and Risk of Loss. FOB Origin. Title and risk of loss or damage to
Products shall pass to Tech Data at the time the Products are delivered to the
common carrier.
3.3 Transportation of Products. Osicom shall deliver the Products clearly marked
on the Product package with serial number, Product description and machine
readable bar code (employing UPC or other industry standard bar code) to Tech
Data at the location shown and on the delivery date set forth in the applicable
purchase order or as otherwise agreed upon by the parties. Charges for
transportation of the Products shall be paid by Tech Data. Osicom shall use only
those common carriers preapproved by Tech Data or listed in Tech Data's
published routing instructions, unless prior written approval of Tech Data is
received.
ARTICLE IV. RETURNS
4.1 Inventory Adiustment Osicom agrees to accept return of overstocked Products
as determined by Tech Data, in Tech Data's reasonable discretion. Shipments of
Product being returned shall be new, unused and in sealed cartons. Vendor shall
credit Tech Data's account in the amount of the Return Credit.
4.2 Defective Products/Dead on Arrival (DOA) Tech Data shall have the right to
return to Osicom for Return Credit any DOA Product that is returned to Tech Data
within ninety (90) days after the initial delivery date to the End User and any
Product that fails to perform in accordance with Osicom's Product warranty.
Osicom shall bear all costs of shipping and risk of loss of DOA and in-warranty
Products to Osicom's location and back to Tech Data or Tech Data's Customer.
4.3 Obsolete or Outdated Product Tech Data shall have the right to return for
Return Credit, without limitation as to the dollar amount, all Products that
become obsolete or Osicom discontinues or are removed from Osicom's current
price list; provided Tech Data returns such Products within ninety (90) days
after Tech Data receives written notice from Osicom that such Products are
obsolete, superseded by a newer version, discontinued or are removed from
Osicom's price list.
4.4 Miscellaneous Returns.
(a) Bad Box Tech Data shall have the right to return to Osicom for Return Credit
Products which have boxes that are or become damaged.
(b) Non-Saleable Tech Data shall have the right to return to Osicom for Return
Credit NonSaleable Products.
4.5 Condition Precedent to Returns. As a condition precedent to returning
Products, Tech Data shall request and Osicom shall issue a Return Material
Authorization Number RMA in accordance with and subject to Section 8.9 of this
Agreement.
ARTICLE V. PAYMENT TO VENDOR
5.1 Changes, Prices and Fees for Products Charges, prices, quantities and
discounts, if any, for Products shall be determined as set forth in Schedule
1.1.g., or as otherwise mutually agreed upon by the parties in writing, and may
be confirmed at the time of order. In no event shall charges exceed Osicom's
then current established charges. Tech Data shall not be bound by any of
Osicom's suggested prices.
5.2 Payment Except as otherwise set forth in this Agreement, any undisputed sum
due to Osicom pursuant to this Agreement shall be payable as follows: 1%-15, net
30 days after the invoice receipt. Osicom shall invoice Tech Data no earlier
than the applicable shipping date for the Products covered by such invoice.
Products which are shipped from outside the United States, shall not be invoiced
to Tech Data prior to the Products being placed on a common carrier within the
United States for final delivery to Tech Data. The due date for payment shall be
extended during any time the parties have a bona fide dispute concerning such
payment. Notwithstanding anything herein to the contrary, for the initial order
only, payment terms shall be net ninety (90) days and Tech Data may return any
of the Products delivered under the initial order for Return Credit.
Notwithstanding anything contained in the Agreement or in any other agreements
between Tech Data and Osicom, including Osicom's invoices, Tech Data has the
right to delay payment for any Products ordered or received by Tech Data until
Tech Data's sale of the Products.
5.3 Invoices. A "correct" invoice shall contain 336156 Osicom's name and invoice
date, (ii) a reference to the
<PAGE>
purchase order or other authorizing document, (iii) separate descriptions, unit
prices and quantities of the Products actually delivered, (iv) credits (if
applicable), (v) shipping charges (if applicable) (vi) name (where applicable),
title, phone number and complete mailing address as to where payment is to be
sent, and (vii) other substantiating documentation or information as may
reasonably be required by Tech Data from time to time. Notwithstanding any
pre-printed terms or conditions on Osicom's invoices, the terms and conditions
of this Agreement shall apply to and govern all invoices issued by Osicom
hereunder, except that invoices may include other terms and conditions which are
consistent with the terms and conditions of this Agreement, or which are
mutually agreed to in writing by Tech Data and Osicom.
5.4 Taxes. Tech Data shall be responsible for franchise taxes, sales or use
taxes or shall provide Osicom with an appropriate exemption certificate. Osicom
shall be responsible for all other taxes, assessments, permits and fees,.
however designated which are levied upon this Agreement or the Products, except
for taxes based upon Tech Data's income. No taxes of any type shall be added to
invoices without the prior written approval of Tech Data.
5.5 Fair Pricing and Terms. Osicom represents that the prices charged and the
terms offered to Tech Data are and will be at least as beneficial to Tech Data
as those charged or offered by Osicom to any of its other distributors or
customers in the channel. If Osicom offers price discounts, payment discounts,
promotional discounts or other special prices to its other distributors or
customers in the channel, Tech Data shall also be entitled to participate and
receive notice of the same no later than other distributors or customers in the
channel.
5.6 Price Adjustments
(a) Price Increases Osicom shall have the right to increase prices from time to
time, upon written notice to Tech Data not less than thirty (30) days prior to
the effective date of such increase. All orders placed prior to the effective
date of the increase, for shipment within sixty (60) days after the effective
date, shall be invoiced by Osicom at the lower price.
(b) Price Decreases Osicom shall have the right to decrease prices from time to
time, upon written notice to Tech Data not less than thirty (30) days prior to
the effective date of such decrease. Osicom shall grant to Tech Data, its
parent, affiliates and subsidiaries and Tech Data's Customers a price credit for
the full amount of any Osicom price decrease on all Products on order, in
transit and in their inventory on the effective date of such price decrease.
Tech Data and its Customers shall, within sixty (60) days after receiving
written notice of the effective date of the price decrease, provide a list of
all Products for which they claim a credit. Osicom shall have the right to a
reasonable audit at Osicom's expense.
5.7 Advertising
(a) Cooperative Advertising Osicom offers a two percent (2%) co-op program and
may offer additional advertising credits, or other promotional programs or
incentives to Tech Data as it offers to its other distributors or customers.
Tech Data shall have the right, at Tech Data's option, to participate in such
programs. Attached as Schedule 5.7 is a copy of Osicom's co-op policy.
(b) Advertising Support Osicom shall provide at no charge to Tech Data and the
Customers of Tech Data, marketing support, and advertising materials in
connection with the resale of Products as are currently offered or that may be
offered by Osicom. Tech Data reserves the right to charge Osicom for
advertising, marketing and training services.
(c) Launch Funds Prior to receipt of the initial purchase order, Osicom shall
pay Tech Data for all launch funds expenditures to which Osicom and Tech Data
have agreed
ARTICLE VI. WARRANTIES, INDEMNITIES AND OTHER OBLIGATIONS OF VENDOR
6.1 Warranty. Osicom hereby represents and warrants that Osicom has all right,
title, ownership interest and marketing rights necessary to provide the
Products to Tech Data. Osicom further represents and warrants that it has
not entered into any agreements or commitments which are inconsistent with
or in conflict with the rights granted to Tech Data in this Agreement; the
Products are new and shall be free and clear of all liens and
encumbrances; Tech Data and its Customers and End Users shall be entitled
to use the Products without disturbance; the Products have been listed
with Underwriters' Laboratories or other nationally recognized testing
laboratory whenever such listing is required; the Products meet all FCC
requirements; the Products do and will conform to all codes, laws or
regulations; and the Products conform in all respects to the Product
warranties. Osicom agrees that Tech Data shall be entitled to pass through
to Customers of Tech Data and End Users of the Products all Product
warranties granted by Osicom. Tech Data shall have no authority to alter
or extend any
<PAGE>
of the warranties of Osicom expressly contained or referred to in this
Agreement without prior approval of Osicom. Osicom has made express
warranties in this Agreement and in Documentation, promotional and
advertising materials. EXCEPT AS SET FORTH HEREIN OR THEREIN, Osicom
DISCLAIMS ALL WARRANTIES WITH REGARD TO THE PRODUCTS, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. THIS SECTION SHALL SURVIVE TERMINATION OR EXPIRATION
OF THIS AGREEMENT.
6.2 Proprietary Rights Indemnification Osicom hereby represents and warrants
that the Products and the sale and use of the Products do not infringe upon any
copyright, patent, trademark, trade secret or other proprietary or intellectual
property right of any third party, and that there are no suits or proceedings,
pending or threatened alleging any such infringement. Osicom shall indemnify and
hold Tech Data, Tech Data's parent, affiliates and subsidiaries and their
respective, officers, directors, employees and agents harmless from and against
any and. all actions, claims, losses, damages, liabilities, awards, costs and
expenses, which they or any of them incur or become obligated to pay resulting
from or arising out of any breach or. claimed breach of the foregoing warranty.
Tech Data shall inform Osicom of any such suit or proceeding filed against Tech
Data and shall have the right, but not the obligation, to participate in the
defense of any such suit or proceeding at Tech Data's expense. Osicom shall, at
its option and expense, either (i) procure for Tech Data, its Customers and End
Users the right to continue to use the Product as set forth in this Agreement,
or (ii) replace, to the extent Products are available, or modify the Product to
make its use non-infringing while being capable of performing the same function
without degradation of performance. If neither of the foregoing alternatives
336156 or (ii) is reasonably available, Osicom shall accept a return of the
Products from Tech Data, at Osicom's sole cost and expense, and shall refund to
Tech Data the full amount of the price paid by Tech Data for said returned
Products, less any price protection credits, but not including any early payment
or prepayment discounts. Osicom shall have no liability under this Section 6.2
for any infringement based on the use of any Product, if the Product is used in
a manner or with equipment for which it was not reasonably intended. Osicom's
obligations under this Section 6.2 shall survive termination or expiration of
this Agreement.
6.3 Indemnification
(a) Vendor Osicom shall be solely responsible for the design, development,
supply, production and performance of the Products. Osicom agrees to indemnify
and hold Tech Data, its parent, affiliates and subsidiaries and their officers,
directors and employees harmless from and against any and all claims, damages,
costs, expenses (including, but not limited to, reasonable attorney s fees and
costs) or liabilities that may result, in whole or in part, from any warranty or
Product liability claim, or any claim for infringement, or for claims for
violation of any of the warranties contained in this Agreement.
(b) Tech Data Tech Data agrees to indemnify and hold Osicom, its officers,
directors and employees harmless from and against any and all claims, damages,
costs, expenses (including, but not limited to, reasonable attorneys fees and
costs) or liabilities that may result, in whole or in part, from Tech Data's
gross negligence or willful misconduct in the distribution of the Products
pursuant to this Agreement, or for representations or warranties made by Tech
Data related to the Products in excess of the warranties of Osicom.
6.4 Insurance.
(a) The parties shall be responsible for providing Workers Compensation
insurance in the statutory amounts required by the applicable state laws.
(b) Without in any way limiting Osicom's indemnification obligation as set forth
in this Agreement, Osicom shall maintain Commercial General Liability or
Comprehensive General Liability Insurance in such amounts as is reasonable and
standard for the industry. Either policy form should contain the following
coverages: Personal and Advertising Injury, Broad Form Property Damage, Products
and Completed Operations, Contractual Liability, employees as Insured and Fire
Legal Liability.
c) Osicom will provide evidence of the existence of insurance coverages referred
to in this Section 6.4 by certificates of insurance which should also provide
for at least thirty (30) days notice of cancellation, non-renewal or material
change of coverage to Tech Data. The certificates of insurance shall name Tech
Data, its parent, affiliates and subsidiaries as an additional insured for the
limited purpose of claims arising pursuant to this Agreement.
6.5 Limitation of Liability NEITHER PARTY SHALL BE LIABLE TO THE OTHER PURSUANT
TO THIS
<PAGE>
AGREEMENT FOR AMOUNTS REPRESENTING INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL,
OR PUNITIVE DAMAGES OF THE OTHER PARTY ARISING FROM THE PERFORMANCE OR BREACH OF
ANY TERMS OF THIS AGREEMENT.
6.6 ECCN/Export Osicom agrees to provide Tech Data, upon signing this Agreement
and at any time thereafter that Osicom modifies or adds Products distributed or
to be distributed by Tech Data, with the Export Control Classification Number
(ECCN) for each of Osicom's Products, and information as to whether or not any
of such Products are classified under the U.S. Munitions List.
6.7 Financial Statements
Osicom agrees that for the term of this Agreement, Osicom shall provide
financial statements annually and semi annually as follows:
a. Within one hundred and twenty (120) days after the end of Osicom's
fiscal year audited financial statements for the fiscal year prepared by an
independent certified public accountant.
b. Within sixty (60) days after the end of Osicom's second fiscal quarter,
semi-annual unaudited financial statements, prepared by Osicom's authorized
representative. Such financial statements shall include profit and loss
statement, balance sheets and such other accounting data as may be requested by
Tech Data and be acknowledged by Osicom's authorized representative in writing
as true and correct. In addition, Osicom shall provide other financial
information upon reasonable request by Tech Data.
6.8 Vendor Reports. Osicom shall, if requested, render monthly reports to Tech
Data setting forth the separate Products, dollars invoiced for each Product, and
total dollars invoiced to Tech Data for the month, and such other information as
Tech Data may reasonably request.
6.9 Tech Data Reports. Tech Data shall, if requested, render monthly sales out
reports on Tech Data's BBS system. Information provided will include: month and
year sales activity occurred, internal product number (assigned by Tech Data),
written description, state and zip-code of Customers location, unit cost
(distributors cost at quantity 1), quantity and extended cost (cost times
quantity). A monthly inventory report will be provided on a paper format once a
month. Osicom agrees that any such information provided by Tech Data shall be
received and held by Osicom in strict confidence and shall be used solely for
sell through or compensation reporting information and shall not be used for
purposes related to Osicom's direct sales activities.
6.10 Trademark Usage. Tech Data is hereby authorized to use trademarks and
tradenames of Osicom and third parties licensing Osicom, if any, used in
connection with advertising, promoting or distributing the Products. Tech Data
recognizes Osicom or other third parties may have rights or ownership of certain
trademarks, trade names and patents associated with the Products. Tech Data will
act consistent with such rights, and Tech Data shall comply with any reasonable
written guidelines when provided by Osicom or third parties licensing Osicom
related to such trademark or trade name usage. Tech Data will notify Osicom of
any infringement which Tech Data has actual knowledge. Tech Data shall
discontinue use of Osicom's trademarks or trade names upon termination of this
Agreement, except as may be necessary to sell or liquidate any Product remaining
in Tech Data s inventory.
ARTICLE VII TERMINATION; EXPIRATION
7.1 Termination
(a) Termination With or Without Cause: Either party may terminate this
Agreement, without cause, upon giving the other party thirty (30) days prior
written notice. In the event that either party materially or repeatedly defaults
in the performance of any of its duties or obligations set forth in this
Agreement, and such default is not substantially cured within thirty (30) days
after written notice is given to the defaulting party specifying the default,
then the party not in default may, by giving written notice thereof to the
defaulting party, terminate this Agreement or the applicable purchase order
relating to such default as of the date specified in such notice of termination.
(b) Termination for Insolvency or Bankruptcy Either party may immediately
terminate this Agreement and any purchase orders by giving written notice to the
other party in the event of (i) the liquidation or insolvency of the other
party, (ii) the appointment of a receiver or similar officer for the other
party, (iii) an assignment by the other party for the benefit of all or
substantially all of its creditors, (iv) entry by the other party into an
agreement for the composition, extension, or readjustment of all or
substantially all -of its obligations, or (v) the filing of a petition in
bankruptcy by or against a party under any bankruptcy or debtors' law for its
relief or reorganization which is not dismissed within ninety (90) days.
<PAGE>
7.2 Rights Upon Termination or Expiration
(a) Termination or expiration of this Agreement shall not affect Osicom's
right to be paid for undisputed invoices for Products already shipped and
accepted by Tech Data or Tech Data's rights to any credits or payments owed or
accrued to the date of termination or expiration. Tech Data's rights to credits
upon termination or expiration shall include credits against which Tech Data
would, but for termination or expiration, be required under this Agreement to
apply to future purchases.
(b) Osicom shall accept purchase orders from Tech Data for additional Products
which Tech Data is contractually obligated to furnish to its Customers and does
not have in its inventory upon the termination or expiration of this Agreement;
provided Tech Data notifies Osicom of any and all such transactions in writing
within sixty (60) days following the termination or expiration date.
(c) Upon termination or expiration of this Agreement, Tech Data shall
discontinue holding itself out as a distributor of the Products.
7.3 Repurchase of Products Upon Termination or Expiration Upon the effective
date of termination or expiration of this Agreement for any reason, Osicom
agrees to repurchase all Products in Tech Data's inventory or which are returned
to Tech Data within sixty (60) days following the effective date of termination
or expiration. Osicom will repurchase the Products at the original purchase
price, less any deductions for price protection. The repurchase price shall not
be reduced by any deductions or offsets for early pay or prepay discounts. Such
returns shall not reduce or offset any co-op payments or obligations owed to
Tech Data. Tech Data shall submit to Osicom, within sixty-five (65) days after
the termination or expiration date, the quantity of Product that Tech Data will
be returning to Osicom for repurchase. Osicom will issue an RMA to Tech Data for
all such Products; provided, however, that Osicom shall accept returned Products
in accordance with this Section absent an RMA if Osicom fails to issue said RMA
within five (5) business days of Tech Data's request. Osicom shall credit any
outstanding balances owed to Tech Data. If such credit exceeds amounts due from
Tech Data, Osicom shall remit in the form of a check to Tech Data the excess
within ten (10) business days of receipt of the Product. Customized Products
shall not be eligible for repurchase pursuant to this Section.
7.4 Survival of Terms. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or obligations
set forth in this Agreement which (i) the parties have expressly agreed
shall survive any such termination or expiration, or (ii) remain to be
performed or by their nature would be intended to be applicable following
any such termination or expiration. The termination or expiration of this
Agreement shall not affect any of Osicom's warranties, indemnification
obligations or obligations relating to returns, co-op advertising
payments, credits or any other matters set forth in this Agreement that
should survive termination or expiration in order to carry out their
intended purpose, all of which shall survive the termination or expiration
of this Agreement.
ARTICLE VIII. MISCELLANEOUS
8.1 Binding Nature, Assignment, and Subcontractin This Agreement shall be
binding on the partiesand their respective successors and assigns. Neither party
shall have the power to assign this Agreement without the prior written consent
of the other party.
8.2 Counterparts This Agreement may be executed in several counterparts, all of
which taken together shall constitute one single agreement between the parties.
8.3 Headings. The Article and Section headings used in this Agreement are for
reference and convenience only and shall not affect the interpretation of this
Agreement.
8.4 Relationship of Parties Tech Data is performing pursuant to this Agreement
only as an independent contractor. Nothing set forth in this Agreement shall be
construed to create the relationship of principal and agent between Tech Data
and Osicom. Neither party shall act or represent itself, directly or by
implication, as an agent of the other party.
8.5 Confidentiality. Each party acknowledges that in the course of performance
of its obligations pursuant to this Agreement, it may obtain certain information
specifically marked as confidential or proprietary. Each party hereby agrees
that all such information communicated to it by the other party, its parent,
affiliates, subsidiaries, or Customers, whether
<PAGE>
before or after the Effective Date, shall be and was received in strict
confidence, shall be used only for purposes of this Agreement, and shall not be
disclosed without the prior written consent of the other party, except as may be
necessary by reason of legal, accounting or regulatory requirements beyond
either party's reasonable control. The provisions of this Section shall survive
termination or expiration of this Agreement for any reason for a period of one
(1) year after said termination or expiration.
8.6 Arbitration Any disputes arising under this Agreement shall be submitted to
arbitration in accordance with such rules as the parties jointly agree. If the
parties are unable to agree on arbitration procedures, arbitration shall be
conducted where the respondent party is headquartered, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Any such
award shall be final and binding upon both parties.
8.7 Notices, Wherever one party is required or permitted to give notice to the
other party pursuant to this Agreement, such notice shall be deemed given when
actually delivered by hand, by telecopier (if and when immediately confirmed in
writing by any of the other means provided herein ensuring acknowledgment of
receipt thereof for purposes of providing notice of default or termination), via
overnight courier, or when mailed by registered or certified mail, return
receipt requested, postage prepaid, and addressed as follows:
In the case of Osicom: In the Case of Tech Data:
Osicom Technologies, Inc. Tech Data Product Management, Inc.
2800 28th Street 5350 Tech Data Drive
Suite 100 Clearwater, FL 34620
Santa Monica, CA 90405 Attn: Tamra Muir
Attn: John Hwang Vice President of Marketing Operations
President cc: Contracts Administration
Either party may from time to time change its address for notification purposes
by giving the other party written notice of the new address and the date upon
which it will become effective.
8.8 Force Majeure. The term "Force Majeure" shall be defined to include fires or
other casualties or accidents, acts of God, severe weather conditions, strikes
or labor disputes, war or other violence, or any law, order, proclamation,
regulation, ordinance, demand or requirement of any governmental agency.
(a) A party whose performance is prevented, restricted or interfered with
by reason of a Force Majeure condition shall be excused from such performance to
the extent of such Force Majeure condition so long as such party provides the
other party with prompt written notice describing the Force Majeure condition
and immediately continues performance until and to the extent such causes are
removed.
(b) If, due to a Force Majeure condition, the scheduled time of delivery
or performance is or will be delayed for more than ninety (90) days after the
scheduled date, the party not relying upon the Force Majeure condition may
terminate, without liability to the other party, any purchase order or portion
thereof covering the delayed Products.
8.9 Return Material Authorization Numbers. Osicom is required to issue an RMA to
Tech Data within four (4) business days of Tech Data's request; however, if the
RMA is not received by Tech Data within four (4) business days, Osicom shall
accept returned Products absent an RMA.
8.10 Credits to Tech Data. In the event any provision of this Agreement or any
other agreement between Tech Data and Osicom requires that Osicom grant credits
to Tech Data's account, and such credits are not received within thirty (30)
days, all such credits shall become effective immediately upon notice to Osicom.
In such event, Tech Data shall be entitled to deduct any such credits from the
next monies owed to Osicom. In the event credits exceed any balances owed by
Tech Data to Osicom, Osicom shall, upon request from Tech Data, issue a check
payable to Tech Data within ten (10) days of such notice. Credits owed to Tech
Data shall not be reduced by early payment or prepayment discounts. Tech Data
shall have the right to set off against any amounts due to Osicom under this
Agreement or any invoices issued by Osicom related to this Agreement any and all
amounts due to Tech Data from Osicom, whether or not arising under this
Agreement.
8.11 Severability. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void, then both
parties shall be relieved of all obligations arising under such provision, it
being the
<PAGE>
intent and agreement of the parties that this Agreement shall be deemed amended
by modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent.
8.12 Waiver. A waiver by either of the parties of any covenants, conditions or
agreements to be performed by the other party or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or agreement herein contained.
8.13 Remedies All remedies set forth in this Agreement shall be cumulative and
in addition to and not in lieu of any other remedies available to either party
at law, in equity or otherwise, and may be enforced concurrently or from time to
time.
8.14 Entire Agreement This Agreement, including any Exhibits and documents
referred to in this Agreement or attached hereto, constitutes the entire and
exclusive statement of Agreement between the parties with respect to its subject
matter and there are no oral or written representations, understandings or
agreements relating to this Agreement which are not fully expressed herein. The
parties agree that unless otherwise agreed to in writing by the party intended
to be bound, the terms and conditions of this Agreement shall prevail over any
contrary terms in any purchase order, sales acknowledgment, confirmation or any
other document issued by either party affecting the purchase or sale of Products
hereunder.
8.15 Governing Law. This Agreement shall have Florida as its situs and shall be
governed by and construed in accordance with the laws of the State of Florida,
without reference to choice of laws. The parties agree that this Agreement
excludes the application of the 1980 United Nations Convention on Contracts for
the International Sale of Goods, if otherwise applicable.
8.16 Software Licenses. Whenever the Products described in this Agreement shall
include software licenses, Osicom hereby grants to Tech Data a non-exclusive
right to market, demonstrate and distribute the software to Customers of Tech
Data. Tech Data acknowledges that no title or ownership of the proprietary
rights to any software is transferred by virtue of this Agreement
notwithstanding the use of terms such as purchase, sale or the like within this
Agreement.
8.17 Time of Performance. Time is hereby expressly made of the essence with
respect to each and every term and condition of this Agreement.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be signed and
delivered by its duly authorized officer or representative as of the Effective
Date.
Osicom Technologies TECH DATA PR9DUCT MANAGEMENT, INC.
By: /s/ John Hwang By: /s/PEGGY K. CALDWELL
Printed Name John Hwang Printed Name: PEGGY K. CALDWELL
Title: President Title: Senior Vice President
Sales and Marketing
Date: March 20, 1997 Date:
SCHEDULE 5.7
CO-OP GUIDELINES
To increase the effectiveness of advertising and sales promotions Tech Data has
developed the following advertising requirements:
HOW CO-OP IS EARNED:
- - Co-op dollars will be at least two percent (2%) of the purchases made by
Tech Data, net of returns.
- - Co-op dollars will be accrued on a monthly basis.
HOW CO-OP IS SPENT:
<PAGE>
- - Tech Data will obtain Vendors prior approval for all co-op expenditures.
- - Tech Data will be reimbursed for 100% of the cost for ads or promotions
that feature Vendor products.
- - -Co-op dollars will be used within the 12 months immediately following
the month in which they are earned.
HOW CO-OP IS CLAIMED:
- - Claims for co-op will be submitted to vendor within 60 days of the event date.
- - -Claims for co-op will be submitted with a copy of vendor prior approval
and proof of performance.
- - -Payment must be remitted within 30 days of the claim date, or Tech Data
reserves the right to deduct from the next invoice.
CO-OP REPORTING:
- - Vendor will submit a monthly co-op statement outlining (i) co-op earned, (ii)
co-op used and (iii) co-op claims paid.
- -
Accepted:
- -
- - /s/ John Hwang
- -
Name: John Hwang
Title: President
Date: March 20, 1997
<PAGE>
EXHIBIT 10.22
LEASE AGREEMENT
THIS LEASE, made this 4th day of October 1989, between CHIPPEWA LIMITED
PARTNERSHIP, a Maryland Limited Partnership(hereinafter called "Landlord"), and
CASE/Datatel.Inc., a Delaware corporation, (hereinafter called "Tenant"). In
consideration of the premises and the covenants, conditions and rents
hereinafter set forth, it is agreed as follows:
1. PREMISES AND TERM:
A. Landlord does hereby lease, demise and let to Tenant, and Tenant does
hereby lease, take and accept from Landlord, the "Premises", being comprised of
approximately Seventy-Two Thousand Three Hundred and Forty-Two (72,342) leasable
square feet of space located in a one story building known as 9020 Junction
Drive (hereinafter the "Improvements") and 243 free and reserved parking spaces
(hereinafter "Parking") as outlined in red on the building and site plan
attached hereto as Exhibit A which building contains a leasable area of
Ninety-Seven Thousand (97,000)- square feet and is located on all that lot of
ground in Howard County, Maryland more fully described in Exhibit B attached
hereto, containing 6.3 acres of land more or less, together with the right to
use in common with other occupants of said Improvements any access road serving
the Improvements. Tenant shall have the exclusive right to the Parking and
Landlord shall use reasonable efforts to enforce the exclusivity of the Parking.
B. TO HAVE AND TO HOLD the same for a term commencing the later of (a)
completion of Tenant Improvements, as defined in Paragraph 2., satisfactory to
Tenant and Landlord or (b) ninety (90) calendar days from the full execution of
this Lease Agreement (hereinafter the "Commencement Date") and ending five (5)
years and five (5) months after the Commencement Date (hereinafter the
"Termination Date").
2. TENANT IMPROVEMENTS:
Landlord shall install, at Landlord's expense, the tenant improvements
(hereinafter the "Tenant Improvements") in a good and workmanlike manner using
only first-class materials and in compliance
<PAGE>
with Governmental Regulations as defined in Paragraph 16, set forth in both the
Tenant Improvement Specifications attached hereto as Exhibit C-1, the
construction drawings attached hereto as Exhibit C-2, and the landscaping plan
attached hereto as Exhibit C-3.
Notwithstanding anything to the contrary contained in this Lease, the
Landlord shall diligently endeavor to complete (except for punch list items)
satisfactory to the Tenant and the Landlord the so-called "manufacturing area"
designated on the construction drawings attached hereto as Exhibit C-2 (the
"Manufacturing Area") on or before sixty (60) calendar days from the full
execution of this Lease Agreement. Upon completion, the Landlord will notify the
Tenant that a written approval of occupancy from Howard County has been obtained
at which time the Tenant shall have the option to occupy the Manufacturing Area
at any time prior to the Commencement Date. If occupied by the Tenant prior to
the Commencement Date, the Tenant shall pay the pro rata Base Rental and all
other charges specified in this Lease for the period from such occupancy to the
Commencement Date based on the ratio of the leasable square footage of the
Manufacturing Space to the leasable square footage of the Premises which amounts
shall be due and payable on the Commencement Date. All references in this Lease
to the term of this Lease shall include the period from such occupancy to the
Commencement Date.
3. RENT:
Tenant covenants to pay to Landlord at New Castle Corporate Commons, 10
Corporate Circle, Suite 300, New Castle, Delaware 19720 or at such place as
Landlord shall from time to time direct, the basic rent ("Basic Rental") of Five
Hundred Seventy-Eight Thousand Seven Hundred Thirty-Six and No/100 Dollars
($578,736.00) per year during the term of this Lease. Such Basic Rental shall be
payable in equal monthly installments of Forty-Eight Thousand Two Hundred
Twenty-Eight and No/100 Dollars ($48,228.00) each, in advance and without
demand, on the first day of each and every month during the term of this Lease,
commencing on the Commencement Date and at that rate for any fraction of a month
at the beginning of the term of this Lease. It is understood and agreed that the
rental payments f or the first five (5) months after the Commencement Date shall
be waived. In addition, Landlord
<PAGE>
acknowledges that Tenant has previously paid to Landlord the sum of Five
Thousand and No/100 Dollars ($5,000.00) which was applied to the cost of
construction drawings for the Premises, and said amount shall be credited to the
First and Last Month's Rent referenced in Paragraph 5.
A. Tenant covenants to pay when due, without any abatement deduction or
set-off except as provided for in this Paragraph 3., the rent provided for
herein and to pay as additional rent when due all other sums, costs, charges and
expenses payable by Tenant under this Lease, and, in the event of any nonpayment
thereof, such sums shall be collected as rent, and Landlord shall have all the
rights and remedies provided for herein or by law in the case of nonpayment of
rent.
B. Landlord shall not be liable to Tenant if Landlord does not deliver
possession of the Premises to Tenant after ninety (90) calendar days from the
full execution of this Lease Agreement if Landlord is delayed in completing
Tenant Improvements as defined in Paragraph 2 (except for punch list items
referenced in Paragraph 12.A., as a result of:
(1) The performance by any person, firm or corporation (other than
Landlord's contractor) employed at Tenant's request and the completion of work
by said person, firm or corporation;
(2) Delay in delivery of materials, finishes, or installations
requested by Tenant except those set forth in Exhibits C-1, C-2 and C-3, and
other than materials, finishes and installation used as Building Standard items
by Landlord's contractors in the building; and
(3) Any other delay (including, without limitation, delay in
providing necessary approvals or disapprovals required of Tenant) caused by the
action or inaction of Tenant provided Landlord gives Tenant notice and
opportunity to eliminate the cause of the delay; and Tenant shall not be
relieved of its obligations to pay rent as prescribed in Paragraph 3.
If the Commencement Date shall be delayed beyond ninety (90)
calendar days from the full execution of this Lease Agreement due
<PAGE>
to Landlord's failure to deliver possession of the Premises in accordance with
Paragraph 1.B., Tenant shall receive a two (2) day rental allowance for every
one (1) day after such ninety (90) calendar days. In addition to the foregoing,
Tenant shall have the option to terminate this Lease Agreement if Landlord fails
to deliver possession of the Premises after one hundred twenty (120) calendar
days from the full execution of this Lease Agreement by giving written notice to
Landlord, which termination shall take effect upon the giving of such notice.
C. Termination Date. If Tenant occupies the Premises prior to the
Commencement Date, Tenant's occupancy of the Premises shall not advance the
Termination Date of this Lease. Tenant shall pay Base Rental and all other
charges specified in this Lease for the early occupancy period, unless occupied
for the purpose of installing Tenant's fixtures.
4. LATE PAYMENT:
In the event that any payment required by Tenant under the provisions
hereof shall not be paid when due, and after any applicable notice and grace
period Tenant shall, upon demand, pay interest in an amount computed at 12% per
annum of each dollar so overdue until such payment is made, and such interest
shall be deemed "rent" for all purposes under this lease.
5. FIRST AND LAST MONTH'S RENT:
The first and last month's rent in the amount of Ninety-Six Thousand Four
Hundred Fifty-Six and No/100 Dollars ($96,456.00) will accompany this Lease.
Landlord acknowledges that said amount shall be reduced by Five Thousand and
No/100 Dollars ($5,000.00), which represents the credit for Tenant's
contribution to the cost of construction drawings of the Premises as previously
denoted in Paragraph 3.
6. TAXES:
A. Landlord shall pay, prior to delinquency, all real estate taxes,
assessments and charges which are levied, imposed, or assessed upon or against
the leased premises. If Landlord shall fail to pay any
<PAGE>
such taxes, assessments, or charges prior to delinquency, Tenant shall have the
right to pay same and to deduct from any rent which may then or thereafter be
due all amounts expended by Tenant in making such payment. Should aforesaid
taxes exceed in any lease year the amount paid during the Base Year, Tenant
shall pay its proportionate share of such increase. Such proportionate share
shall consist of the relation its space on a leasable square footage basis bears
to the total leasable square footage of the building of which the leased
Premises are a part. The leasable square footage of the Premises comprises
Seventy-Four and 58/100 percent (74.58 %) (hereinafter the "Tenant's Share") of
the total leasable square footage of the building of which the Premises is a
part. Said bill will be due by Tenant to Landlord within thirty (30) days after
submission of bill to Tenant showing in reasonable detail (which shall include
copies of all tax bills to Landlord) the calculation of the Tenant's Share of
the increase.
B. The term "real estate taxes and assessments" shall include any public
charges against the land and improvements of which the Premises are a part
(including assessments by any County, Municipal, Metropolitan District or
Commission) and the term "Base Year" shall mean the twelve (12) month period
beginning July 1, 1990 and ending June 30, 1991; provided, that the Base Year
shall be the year in which real estate taxes and assessments are based on the
Improvements as improved by the Tenant Improvements and the year in which
premiums for fire and extended coverage insurance reflect the Tenant's occupancy
of the Premises. Landlord shall give Tenant prompt notice of any proposed
increase in real estate taxes and assessments and Tenant shall be entitled, at
its own expense, and through its own counsel, to participate with Landlord or
independently to contest or oppose any such increase. Landlord shall cooperate
with Tenant as may be reasonably required in any such contest. All refunds of
real estate taxes and assessments attributable to the Lease Term and which have
been paid by Tenant shall belong to Tenant.
7. FIRE AND EXTENDED COVERAGE AND RENTAL INSURANCE:
Tenant covenants to pay Landlord, as additional rent, Tenant's Share of
any increase after the Base Year of all premiums for fire and
<PAGE>
extended coverage insurance on the Improvements of which the Premises are a
part, as follows:
A. Premiums shall be adjusted and pro-rated to the Commencement Date or
the Termination Date of the term as the case may be.
B. Tenant shall pay Tenant's Share of such insurance premiums as set forth
above within thirty (30) days following receipt from the Landlord of a statement
of its calculations supported by copies of the actual billings rendered to
Landlord.
C. The fire and extended coverage policy shall expressly waive any right
of subrogation against Landlord or Tenant.
D. The Landlord covenants and agrees to pay all such premiums when due and
payable and to maintain fire and extended coverage insurance in at least the
amount of the full replacement cost of the Improvements.
E. In the event a change in the Tenant's occupancy and use of the Premises
occurs from the occupancy and use of the Premises at the commencement of this
Lease Agreement and which causes any increase in premiums for fire, and extended
coverage insurance or rental insurance on the Improvements of which the Premises
are a part above the then current rate, the Tenant shall pay the additional
premiums by reason thereof . Bills for such additional premiums shall be
rendered by Landlord to Tenant at such times as Landlord may elect and shall be
due from and payable by Tenant when rendered, and the amount thereof shall be
deemed to be, and be paid as additional rent.
F. Tenant shall not be obligated to pay Tenant's Share of such insurance
premiums if such increase is caused by the acts, omissions to act, or negligence
of the Landlord or any other tenant of the Improvements or any person, firm or
corporation employed at the Landlord's or such tenant's request.
8. COMMON AREA MAINTENANCE CHARGES:
Tenant covenants to pay Landlord, as additional rent, Tenant's Share of
all reasonable costs incurred for common area maintenance,
<PAGE>
which includes, but is not limited to, snow removal, parking lot maintenance,
grass cutting, grounds maintenance, landscaping, security and common area
electric, during the term of the Lease. Such charges shall be billed in arrears
not more frequently than monthly, nor less frequently than annually, and all
such billings shall include copies of actual bills to Landlord and will become
due and payable thirty (30) days after they are billed to the Tenant.
9. UTILITIES:
Tenant shall pay all charges for separately metered gas, electricity,
light, heat, all public charges for sanitary sewage discharged from the Premises
and for water consumed on the Premises, power and all other utilities and
telephone or other communication services (provided, that the failure to pay all
charges for telephone or other communication services shall not constitute an
Event of Default under Paragraph 20) used, rendered or supplied upon or in
connection with the Premises.
10. LIENS OR ENCUMBRANCES:
Tenant shall not suffer the Premises or any erection of improvements
thereon to become subject to any lien, charge or encumbrances, unless promptly
bonded or discharged, and shall indemnify Landlord against all such liens,
charges and encumbrances which are the result of any act, neglect to act, or
negligence of the Tenant.
11. USE OF PREMISES:
Tenant shall use and occupy the Premises throughout the term hereof solely
for the purpose of general offices/light manufacturing. Tenant shall not load
the building hereby leased beyond its present carrying capacity of Three
Thousand (3, 000) pounds per square inch.
12. ALTERATIONS AND IMPROVEMENTS:
A. Upon completion of the Tenant Improvements in accordance with paragraph
2 hereof, Landlord shall assign to Tenant all warranties relating to such Tenant
Improvements (a complete list of which is set forth in Exhibit D) and shall have
no further obligation to make any alterations or improvements to the Premises
except as provided in paragraph 13.C. hereof, and except for (i) punch list
items designated
<PAGE>
by the Tenant after inspection of the Premises upon completion of the Tenant
Improvements (which items shall be completed by the Landlord within thirty (30)
days after the Commencement Date) and (ii) any defective workmanship and
materials in the Tenant Improvements of which the Tenant has given the Landlord
notice not later than sixty (60) days after the Commencement Date, or in the
case of latent defects, not later than one (1) year after the Commencement Date.
B. Tenant further covenants that it will at no time or times make any
alterations, improvements or changes of any kind over Thirty Thousand Dollars
($30,000) to the Premises without first submitting the plans thereof and
securing the prior written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed; however, Tenant agrees to submit all plans for
alterations, improvements or changes of any kind to Landlord for its
professional review and advice regarding construction matters prior to
performing said alterations, improvements or changes; which review and advice
shall be provided to the Tenant within ten (10) days of submission of the plans
to the Landlord. Tenant may, at its own option and without having to secure the
consent, written or otherwise of the Landlord,
(1) make any alterations or changes of any kind to the Premises
which may be required by any governmental order or regulation, and such
alterations or changes shall, if made by Tenant, be made at no expense to
Landlord; and
(2) undertake any landscaping or similar work with respect to the
Premises (including the Improvements) which are of a minor nature; provided that
such work or alterations or changes are performed at no cost to Landlord. All
improvements, alterations, replacements and building service equipment made or
installed by or on behalf of Tenant and permanently affixed to the Improvements
shall immediately upon completion or installment thereof be and become the
property of Landlord, without payment therefor by Landlord, but subject to the
provisions of this Lease; provided that all machinery, equipment (other than
building service equipment), trade fixtures, movable partitions, furniture and
furnishings installed by Tenant or maintained on the Premises, even if
permanently affixed thereto, shall remain the property of Tenant, and Tenant
shall be entitled to remove the same or
<PAGE>
any part thereof at any time during the Lease term, but Tenant shall, at its
expense, repair any and all damage to the Premises resulting from or caused by
such removal. The interest of Tenant in any property which is not so removed
shall at the end of thirty (30) days after the termination of this Lease vest in
Landlord.
13. REPAIRS AND MAINTENANCE:
A. Subject to (i) Landlord's obligation to deliver the Premises as
provided for in Paragraph 1.B. and (ii) Landlord's maintenance and repair
obligations set forth in Paragraph 12.A., 13.C. and 13.D, and to the extent not
covered by insurance or the warranties relating to the Tenant Improvements as
more particularly described in Paragraph 12.A., Tenant covenants throughout the
term, at its expense, to maintain in good order and repair the interior
structure of the Premises, and to maintain and replace when necessary, all
window and door glass therein, interior and exterior; to maintain and repair all
building service equipment which exclusively serve the Premises therein
including, but not limited to, electrical, plumbing, heating, air conditioning
and sprinkler equipment, pipes, wires, ducts, fixtures and appliances; to make
all ordinary and necessary repairs to the Premises; to keep the Premises in a
safe, clean and sanitary condition; to provide for the removal of trash and
rubbish produced by the Tenant; and to surrender the Premises at the end of the
term in as good condition as when received except for ordinary wear and use,
fire or other unavoidable casualty.
B. Without limiting Tenant's obligations under Paragraph 13.A. above,
Tenant shall, at all times during the term of this Lease, have and keep in force
a maintenance contract, in form and with a contractor reasonably satisfactory to
Landlord (a list of satisfactory contractors is set forth in Exhibit E),
providing for inspection at least once each calendar quarter of the heating, air
conditioning and ventilating equipment (which inspection shall encompass the
work described on Exhibit F attached hereto and made a part hereof) , and
providing for necessary repairs thereto. Said contract shall provide that it
will not be cancellable by either party thereto except upon thirty (30) days'
prior written notice to Landlord. Tenant shall send to Landlord a copy of this
contract within thirty (30) days of the Commencement Date of
<PAGE>
this Lease, as well as provide Landlord with copies of all service calls and
reports within thirty (30) days after requested by Landlord.
C. Landlord agrees to perform at its expense, maintenance to the exterior
structure of the building and roof and building service equipment not
exclusively servicing the Premises, except when such repairs are necessitated by
negligence of the Tenant.
D. Landlord agrees to perform the common area maintenance set forth in
Paragraph 8., the expense of which shall be charged to Tenant as a Common Area
Maintenance Charge.
E. The Tenant covenants and agrees that the Landlord shall not be held
responsible for and the Landlord is hereby released and relieved from, and
forever saved harmless from, any liability by reason of or resulting from damage
or injury to person or property of the Tenant or of anyone else, directly or
indirectly caused by
(1) dampness or water in any part of said premises or in any part of
any other property of the Landlord or of others and/or
(2) any leak or break in any part of said Premises or in any part of
any other property of the Landlord or of others or in the pipes of the plumbing
or heating works thereof, no matter how caused; provided, that any such damage
or injury as described in (1) or (2) is not caused by any act, omission to act,
or negligence of the Landlord or any person, firm or corporation employed at
Landlord's request.
14. LIABILITY INSURANCE:
Tenant shall obtain and maintain public liability insurance insuring
Landlord against claims for bodily injury or death occurring in or about the
Premises and on, in or about the adjoining driveways and passageways, to the
limit of not less than One Million Dollars ($1,000,000.00) in respect of bodily
injury or death to one person, and to the limit of not less than Three million
Dollars ($3,000,000.00) in respect of one accident, and property damage
insurance insuring against claims for damage or injury to property of others
occurring in or about the Premises and on, in or about the adjoining streets and
passageways,
<PAGE>
to the limit of not less than One Hundred Thousand Dollars ($100,000.00) in
respect to damage to the property of another.
Said policy shall provide that notwithstanding any negligent act of Tenant
which might otherwise result in its forfeiture, the policy shall not be
cancelled without at least thirty (30) days written notice to each named
assured. A certificate of insurance shall be delivered to Landlord.
15. DAMAGE OR DESTRUCTION:
A. If during the term the Premises are damaged by fire or other casualty,
but not to the extent that Tenant is prevented from carrying on its business in
the Premises, Landlord shall promptly restore the Premises to their condition
immediately prior to the casualty, but not later than sixty (60) days after the
casualty. If said restorations are not accomplished within said sixty (60) days,
Tenant shall retain the right to make said restorations at Landlord's expense.
B. If during the term the Premises are destroyed or so damaged by fire or
other casualty that Tenant is prevented from carrying on its business in the
Premises, Landlord shall have the option either to restore the Premises to their
condition immediately prior to the casualty or to terminate the Lease. Such
option shall be exercised by Landlord by written notice to the Tenant within
thirty (30) days after the casualty.
If Landlord chooses to restore the Premises, it shall prepare or cause to
be prepared by its construction representative a reasonable estimate of the time
needed to restore the Premises to their condition immediately prior to the
casualty. Such estimate shall accompany the written notice to Tenant. If the
time period to restore the Premises indicated in the notice exceeds one hundred
twenty (120) days from the date such notice is given to Tenant, Tenant may
terminate this Lease within ten (10) working days of receipt of Landlord's
notice, provided, however, that termination shall not occur unless Landlord's
lender has been given notice and opportunity to cause repairs to be made within
a time period not to exceed one hundred twenty (120) days from the date
<PAGE>
notice is given to the Tenant of Landlord's decision to restore the Premises.
If the restoration period is less than one hundred twenty (120) days or if
Tenant agrees to a period in excess of one hundred twenty (120) days, then
Landlord shall promptly commence such repair work and diligently proceed to
complete the same.
Rent shall be equitably abated for any period that the Premises are
destroyed or damaged to the extent that Tenant is prevented from carrying on its
business in the Premises.
16. COMPLIANCE WITH REGULATIONS, ETC.:
Tenant covenants throughout the term at its expense to comply promptly
with all laws, codes, ordinances, administrative and court orders and
directives, rules and regulations which have the force of law (hereinafter
"Governmental Regulations"), whether now in effect or hereafter promulgated,
applicable to Tenant's use and occupancy of the Premises; provided, however,
that (i) Landlord represents that the Tenant's use and occupancy of the
Premises, and the Improvements and Tenant Improvements, comply or will comply,
as of the Commencement Date and thereafter, with all Governmental Regulations
and (ii) Tenant shall have the right to contest the applicability and/or
validity of any of the above so long as by reason of such action, the Premises
or the Improvements would not be in danger of forfeiture or loss.
17. CONDEMNATION:
A. If during the term of this Lease, all or a substantial part of the
Premises shall be taken by eminent domain, then at the option of the Tenant or
the Landlord the Lease shall terminate as of, and the rent shall be apportioned
to and abate from and after, the date of taking, commensurate with the area so
taken and to the extent that the Tenant is prevented from carrying on its
business in the Premises and Tenant shall have no right to participate in any
award or damages for such taking (except as set forth in sub-paragraph D hereof)
and hereby assigns all of its right, title and interest therein to Landlord. For
purposes of this paragraph 17, "a substantial part of the Premises" shall mean a
taking of all or any portion of the Premises which renders Tenant substantially
unable to carry on its business on the Premises or
<PAGE>
use the parking spaces which are part of the Premises in accordance with
Paragraph 1.
B. If during the term of this Lease, less than a substantial part of the
Premises (as hereinbefore defined) shall be taken by eminent domain, this Lease
shall remain in full force and effect according to its terms; and Tenant shall
have no right to participate in any award or damages for such taking (except as
set forth in sub-paragraph D. hereof) and hereby assigns all of its right, title
and interest therein to Landlord, provided that Landlord shall at its expense
promptly make such repairs and improvements as shall be necessary to restore the
Premises to substantially the same efficiency as before the taking, but not
later than ninety (90) days after such taking in which case the Tenant may
terminate this Lease by written notice to the Landlord, which termination shall
take effect upon the giving of such notice.
C. For the purpose of this paragraph 17, "taken by eminent domain" or
"taking under the power of eminent domain" shall include a negotiated sale or
lease and transfer of possession to a condemning authority under bona fide
threat of condemnation for public use, and Landlord alone shall have the right
to negotiate with the condemning authority and conduct and settle all litigation
connected with the condemnation. As hereinabove used, the words "award of
damage" shall, in the event of such sale or settlement, include the purchase or
settlement price of any such negotiated transfer.
D. Nothing herein shall be deemed to prevent Tenant from claiming,
negotiating, and receiving from the condemning authority, if legally payable,
compensation for the taking of Tenant's own tangible property, improvements upon
the leased Premises constructed at Tenant's sole expense, and damages for
Tenant's loss of business, business interruption and/or removal and relocation.
Should any condemnation be effected without a cancellation of the Lease, there
shall be an appropriate reduction in rental.
E. The Landlord shall promptly notify the Tenant upon learning of any
eminent domain proceedings affecting the Premises. In any such proceedings, the
Landlord shall use its best efforts to ensure that the
<PAGE>
Tenant shall have at least six (6) months after a taking of all or a substantial
part of the Premises to relocate to an alternative space.
18. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS:
After the occurrence of an Event of Default, Landlord shall, after
reasonable notice to Tenant (except in case of emergencies) have the right (but
not the duty) to enter the Premises, if necessary, to perform any covenant or
duty required of the Tenant by this Lease or by law, but the reasonable cost
thereof shall be deemed to be additional rent, and shall give the Landlord the
same rights and remedies as though the additional rent were part of the monthly
rent due the Landlord under this Lease.
19. INDEMNIFICATION OF LANDLORD:
Except with respect to claims arising from Landlord's act, omissions to
act, or negligence or that of its agents, servants or employees, including,
without limitation, Landlord's failure to make repairs required of it to be made
pursuant to this Lease or Landlord's construction of the Tenant Improvements,
Tenant covenants to indemnify and save Landlord harmless (to the extent not
reimbursed by insurance required by this Lease to be furnished by Tenant) from
any and all claims for liability of any nature whatever arising from any use,
occupancy, construction, repairs, or other work or activity done in, on or about
the Premises during the term or from any condition of the Premises or anything
thereon or therein during the term, or from any occurrence whatever in, on or
about the Premises during the term, including all Landlord's reasonable costs,
expenses and counsel fees in connection with any such claim.
20. DEFAULT PROVISIONS:
Upon the occurrence of an Event of Default, Landlord may elect to
immediately terminate this Lease by serving a written notice upon Tenant.
Each of the following events shall be deemed an Event of Default by Tenant
within the meaning of this Lease:
<PAGE>
(1) the failure to pay any installment of Basic Rental or additional
rent when due and payable if such failure continues for ten (10) days after
written notice from the Landlord that the same are due;
(2) the failure to perform any of the other covenants or conditions
of this Lease on the part of Tenant to be performed within thirty (30) days
after notice from the Landlord of such failure to perform provided that if such
failure to perform is not susceptible to cure within such thirty (30) days then
so long as the Tenant commences such cure within thirty (30) days and diligently
pursues such cure, such failure to perform shall not be an Event of Default;
(3) the making of an assignment by Tenant for the benefit of its
creditors;
(4) the appointment of a receiver or trustee of all or part of
Tenant's property;
(5) the filing of a petition in bankruptcy by Tenant;
(6) the filing of a petition by or against Tenant for its
reorganization or for an arrangement under any bankruptcy law or other law; or
(7) the filing of or petition by Tenant to effect a composition or
an extension of time to pay its debts; provided that if an event referred to in
sections (4) and (6) above shall have been involuntary on the part of Tenant,
the Tenant shall have sixty (60) days to discharge the receiver or trustee or
dismiss the petition after the appointment or filing.
In the event that this Lease is terminated in the manner provided for in
this paragraph 20, or by court proceedings or otherwise, or in the event that
the Premises, or any part thereof, shall be abandoned by Tenant during the said
term, Landlord or Landlord's agents, servants or representatives may, at any
time after written notice to Tenant and the times set forth in this paragraph
20, reenter and resume possession of said Premises, or any part thereof, and
remove all persons and property therefrom, by any suitable action or proceeding
at law, without being
<PAGE>
liable for any damages therefor. No reentry by Landlord shall be deemed to be an
acceptance of a surrender of this Lease.
The Landlord shall not have the right to distrain or the right to place a
lien in or on any of the property of the Tenant.
The Landlord, upon the happening of any of the events giving it the right
to annul and cancel this Lease, shall be entitled to the benefit of all of the
provisions of law not in conflict with this Lease for the speedy recovery of
lands and tenements under this Lease held over by the Tenant in Howard County,
Maryland that are now in force or may hereafter be enacted.
21. ADDITIONAL REMEDIES OF LANDLORD:
In the event that this Lease is terminated in the manner set forth in
Paragraph 20 because of the occurrence of an Event of Default, or if the
Premises shall be abandoned by Tenant during the term hereof, Landlord shall,
use its best efforts to relet the whole or any portion of said Premises for any
period equal to or greater or less than the remainder of the original term of
this Lease for a reasonable rent in relation to the then current market
conditions to any tenants which it may deem suitable and satisfactory, and for
any use and purposes which it may deem appropriate, but in no event shall
Landlord be under any obligation to relet the same premises for any purpose
which Landlord may regard as injurious to the Premises,, or to any tenant which
Landlord, in the exercise of reasonable discretion shall deem to be
objectionable. In the event of such termination of this Lease because of the
occurrence of an Event of Default or if the Premises are abandoned, and whether
or not the Premises be relet, and whether this Lease be terminated or not,
Landlord shall be entitled to recover of shall be entitled to recover of Tenant,
and Tenant hereby agrees to pay to Landlord as damages, the following:
A. An amount equal to the amount of the rent reserved under this
Lease, less the rent, if any, collected by Landlord on reletting the Premises,
which shall be due and payable by Tenant to Landlord on the several days on
which the rent herein reserved would have become payable under this Lease.
<PAGE>
B. In addition to the damages hereinbefore provided for in this
paragraph 21, an amount equal to the cost
(1) of placing the Premises in the condition in which Tenant has
agreed to surrender them to Landlord and
(2) of performing any other covenant herein contained which Tenant
has agreed to perform, other than the covenant to pay rent. The damages
mentioned in this subdivision B shall become immediately due and payable by
Tenant to Landlord upon the termination of this Lease.
Without any previous notice or demand, separate actions may be
maintained by Landlord against Tenant from time to time to recover any damages
which, at the commencement of any such action, have then or theretofore become
due and payable to Landlord under this paragraph 21, without waiting until the
end of the term of this Lease, providing that any such action shall include all
claims outstanding as of the date of the commencement of such action.
22. RIGHT TO ASSIGN AND SUBLEASE:
Tenant may not assign this Lease or sublet all or any portion of the Premises
without the prior written consent of Landlord, which consent will not be
unreasonably withheld or delayed, provided that in the event of any such
assignment or subletting with consent, Tenant shall remain liable for the
performance of Tenant's obligations during the term hereof and provided further
that if the Landlord requires that any rental received by Tenant in excess of
the rent reserved under this Lease or any payment made to Tenant in
consideration of such assignment or subletting shall be paid over to Landlord as
additional rent, then the Tenant shall be relieved of any monetary liability to
the Landlord with respect to this Lease or the Premises to the extent of such
excess of the rent paid to the Landlord. Notwithstanding the foregoing, the
Tenant may assign this Lease or sublease all, or any portion, of the Premises to
a parent, subsidiary or affiliated entity of the Tenant or to any entity into
which the Tenant may merge or be converted to without the consent of the
Landlord (hereinafter collectively referred to as "Affiliates").
<PAGE>
23. INSPECTION By LANDLORD, ETC.:
Landlord and its agents shall have the right upon reasonable prior
notice and at all reasonable times during the term to enter the Premises for the
purpose of performing the maintenance and repairs required of it by this Lease
and for the purpose of inspecting the same and, during the last ninety (90) days
of the term, to show both the interior and exterior of the Premises to
prospective tenants or purchasers and to place "For Rent" and/or "For Sale"
signs thereon, but not on or in the vicinity of any public entrance to the
Premises.
24. ASSIGNMENT OF LANDLORD'S INTEREST:
If Landlord should ever assign this Lease or the rents hereunder to
a creditor as security for a debt, Tenant shall, after notice of such assignment
and upon demand by Landlord or the assignee, pay all sums thereafter becoming
due Landlord hereunder to the assignee (from and after the time Tenant is
furnished with such assignee's address) and furnish such evidence of insurance
coverages required hereunder as the lender may reasonably require so as to
protect the assignee's interest as it may appear and furnish such assurances to
the assignee.
25. SUBORDINATION:
This Lease shall be subject and subordinate to the lien of any
present or future mortgage or mortgages upon the Premises or any property of
which the Premises are a part irrespective of the time of execution or the time
of recording of any such mortgage or mortgages provided that in the event of
foreclosure or other action taken under any mortgage by the holders thereof,
this Lease and the rights of Tenant hereunder shall not be disturbed but shall
continue in full force and effect so long as there has not occurred an Event of
Default. Landlord shall use its best effort to secure a non-disturbance
undertaking from the existing Mortgagee. The word "mortgage" as used herein
includes mortgages, deeds of trust or other similar instruments
<PAGE>
and modifications, extensions, renewals and replacements thereof and any and all
advances thereunder.
26. NON-DISTURBANCE:
Landlord covenants an d warrants to Tenant that Tenant on paying the
rent provided for in this Lease and performing its covenants herein set forth,
shall peaceably and quietly have, hold and enjoy the Premises and all
appurtenances thereon during the full term of this Lease.
27. ATTORNMENT:
In the event the Premises are sold at any foreclosure sale or sales,
by virtue of any judicial proceedings or otherwise, this Lease shall continue in
full force and effect and Tenant agrees upon request to attorn to and
acknowledge the foreclosure purchaser or purchasers at such sale as Landlord
hereunder.
28. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
The Tenant shall, promptly at the request of the Landlord or the
holder of any Mortgage (herein referred to as "Mortgagee"), execute, enseal,
acknowledge and deliver such further instrument or instruments substantially in
the form attached hereto as Exhibit G:
a) evidencing such subordination as the Landlord or such Mortgagee
deems necessary or desirable, and
b) at such Mortgagee's request, attorning to such Mortgagee,
provided that, as to subparagraphs a) and b) hereof, such Mortgagee agrees
with the Tenant that such Mortgagee will, in the event of a foreclosure of
any such mortgage or deed of trust (or termination of any such ground
lease) take no action to interfere with the Tenant's right here-under,
except on the occurrence of an Event of Default.
29. MORTGAGEE PROTECTION CLAUSE:
<PAGE>
Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by
registered mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice, Tenant has been notified in writing (by way
of Notice of Assignment of Rents and Leases, or otherwise) of the addresses of
such Mortgagees and/or Trust Deed Holders. Tenant further agrees that if
Landlord shall have failed to cure such default, then the Mortgagees and/or
Trust Deed Holders shall have thirty (30) days from the date of receiving notice
within which to cure such default or if such default cannot be cured within that
time, then such additional time as may be necessary if within such thirty (30)
days any Mortgagee and/or Trust Deed Holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
30. TENANT HOLDING OVER:
In the event that Tenant holds over at the expiration of the
original term of this Lease or at the earlier termination thereof, Landlord
shall be entitled to all the remedies now or hereafter in effect in Howard
County, Maryland relating to the speedy recovery of possession of lands and
damages for wrongful detention.
Notwithstanding the foregoing sub-paragraph, any holding over after
the expiration of the term hereof, without the written consent of Landlord shall
be construed to be a tenancy from month to month at one and one-half (1 1/2)
times the monthly rent hereinbefore specified, and shall otherwise be on the
terms and conditions hereinbefore specified. Such tenancy from month to month
shall continue until either party shall give at least thirty (30) days notice in
writing to the other terminating such tenancy.
31. UTILITY LINES AND FACILITIES:
Landlord reserves the right to place (or permit any other tenant in
its building so to place) in, over, below and upon the Premises (in such manner
as to not interfere with Tenant's use of the
<PAGE>
Premises or reduce the leasable square footage of the Premises), utility lines,
conduits, pipes, tunneling and the like to service the Premises and any other
promises in the building and to use, replace, repair and maintain (or permit any
other tenant so to do) such utility lines, conduits, pipes, tunneling and the
like, in, over, below and upon the Premises in such manner as will not interfere
with Tenant's use and enjoyment thereof, provided that Landlord shall use its
best efforts to see that such work does not interfere with the ongoing business
and operations of Tenant, that such work not take place (except in case of
emergencies) during normal business hours, that such work shall be done
expeditiously and in a workmanlike manner, and further that the Premises shall,
upon conclusion of the work, be restored to the same conditions as they were
prior to the commencement of the work.
32. HAZARDOUS MATERIALS
A. Tenant shall not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises by Tenant, its agents,
employees, contractors or invitees, except for such Hazardous Material as is
necessary or useful to Tenant's business.
B. Any Hazardous Material permitted on the Premises as provided in
Paragraph 32.A. above, and all containers therefore, shall be used, kept, stored
and disposed of in a manner that complies with all Federal, State and local laws
or regulations applicable to any such Hazardous Material.
C. Tenant shall not discharge, leak or emit, or permit to be
discharged, leaked or emitted, any material into the atmosphere, ground, sewer
system or any body of water in violation of any applicable Governmental
Regulations as defined in Paragraph 16.
D. At the commencement of each Lease Year, upon request Tenant shall
disclose, to Landlord the names and approximate amounts of all Hazardous
Material which Tenant intends to store, use or dispose of on the Premises in the
coming Lease Year. In addition, at the commencement of each Lease Year,
beginning with the second Lease Year, Tenant shall disclose to Landlord, upon
request the names and amounts
<PAGE>
of all Hazardous Materials which were actually used, stored or disposed of on
the Premises if such materials were not previously identified to Landlord at the
commencement of the previous Lease Year.
E. As used herein, the term "Hazardous Material" means (a) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act of
1976, as amended from time to time, and regulations promulgated thereunder; (b)
any "hazardous substance" as defined by the Comprehensive Environmental
Response, compensation and Liability Act of 1980, as amended from time to time,
and regulations promulgated thereunder; (c) any 110il, petroleum products, and
their by-products"; and (d) any substance which is or becomes regulated by any
Federal, State or local governmental authority.
F. Tenant hereby agrees that it shall be fully liable for all costs
and expenses related to the use, storage and disposal of Hazardous Material kept
on the Premises by the Tenant, and the Tenant shall give immediate notice to the
Landlord of any violation or potential violation 'of the provisions of Paragraph
32.B. above. Tenant shall defend, indemnify and hold harmless Landlord (unless
due to Landlord's negligence), f roin and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs, or expenses
(including, without limitation, reasonable attorney and consultant fees, court
costs and litigation expenses) of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of or in any way related to (a) the
presence, disposal, release, or threatened release of any such Hazardous
Material which is on, from, or affecting the soil, water, vegetation, buildings,
personal property, persons, animals, or otherwise; (b) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such Hazardous Material; (c) any lawsuit brought or threatened,
settlement reached or government order relating to such Hazardous Material;
and/or (d) any violation of any laws applicable thereto. The provisions of this
Paragraph 32.F. shall be in addition to any other obligations and liabilities
Tenant may have to Landlord at law or equity and shall survive the transactions
contemplated herein and shall survive the termination of this Lease.
<PAGE>
33. SPRINKLER:
Landlord represents that a sprinkler system designed to meet NFPA
Ordinary Hazard Group 3 has been installed in the building. Any additional
sprinkler work, i.e., in rack sprinklers, additional heads, etc., required to
meet any other NFPA standards or county requirements to satisfy tenant's
material classification, shall be at the sole cost and expense of the Tenant and
shall be installed by the Landlord prior to the Commencement Date.
34. SIGNS:
Tenant shall be permitted at the entrance to the Premises either to
place a sign (see rules and regulations section for Junction Business Park which
are set forth in Rider #1 to this Lease) on the building facade, however not on
the metal portion of the building, or to erect a free-standing sign.
Furthermore, Landlord agrees to cooperate with Tenant in any necessary sign
permit applications. Signage for other tenants in the building shall be limited
to their respective entry doors.
35. END OF TERM:
Upon the expiration or other termination of the term of this lease,
Tenant shall quit the Premises and surrender same to Landlord, broom clean, in
the same order and condition as at the Commencement Date, ordinary wear and tear
and damage or destruction by f ire or other casualty or the elements or any
other cause beyond Tenant I s reasonable control excepted and Tenant shall
remove all of its property.
36. SUCCESSORS AND ASSIGNS:
Except as hereinabove expressly otherwise provided, this Lease shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
37. NOTICES;
<PAGE>
All notices to Tenant under this lease shall be in writing
conclusively presumed to have been delivered, one day after mailing by United
States mail, first class, certified or registered, and postage prepaid,
addressed to Tenant, at the Premises or to such other address as Tenant may in
writing from time to time designate, with a copy to Thomas A. Beaudoin, Esquire,
Testa, Hurwitz & Thibeault, 53 State Street, Boston, Massachusetts 02109. All
notices to Landlord hereunder shall be in writing and conclusively presumed to
have been delivered one day after mailing by United States mail, first class,
certified or registered, and postage prepaid, addressed to Landlord, at New
Castle Corporate Commons, 10 Corporate Circle, Suite 300, New Castle, Delaware
19720 or to such other address as Landlord may in writing from time to time
designate by notice hereunder to the Tenant.
38. TENANT ESTOPPEL CERTIFICATE:
From time to time during the term of this Lease Tenant agrees to
submit to Landlord's lender, within thirty (30) days following written demand
therefor, a certificate substantially in the form attached hereto as Exhibit H
and modified to such extent as is necessary to make the statements therein true
and accurate.
39. CAPTIONS AND HEADINGS:
The captions and headings throughout this Lease are for convenience
and reference only, and the words contained therein shall in no way be hold or
deemed to define, limit, describe, ex plain, modify, amplify or add to the
interpretation, construction or meaning of any provision of or the scope or
intent of this Lease nor in any way affect this Lease.
40. SEVERABILITY:
A. It is agreed that, for the purpose of any suit brought or based
on this agreement, this agreement shall be construed to be a divisible contract,
to the end that successive actions may be maintained on said agreement as
successive periodic sums shall mature
<PAGE>
under said agreement, providing that any such action shall include all claims
outstanding as of the date of the commencement of such action.
B. If any term, clause or provision of this lease is declared
invalid by a court of competent jurisdiction, the validity of the remainder of
the Lease shall not be affected thereby but shall remain in full force and
effect.
41. NON-WAIVER OF FUTURE ENFORCEMENT:
It is agreed that the failure of the Landlord to insist in any one
or more instances upon a strict performance of any covenant of this Lease or to
exercise any right herein contained shall not be construed as a waiver or
relinquishment for the
future of such covenant or right, but the same shall remain in full force and
effect, unless the contrary is expressed in writing by the Landlord.
42. LEASING RESTRICTIONS:
A. Landlord shall not lease any space in the Improvements to, nor
permit the occupancy of any space in the Improvements by, any company engaged in
the design, manufacture or sale of modems or multiplexes used in data
communications. By way of illustration and not of limitation such companies
shall include:
AT&T/Paradyne
Timeplex, a division of Unisys
Network Equipment Technologies
Digital Communications Associates
Newbridge Networks
General Datacommunications
Corp. Codex, a division of Motorola
UDS, a division of Motorola
Avanti
Racal Milqo, a division of Racal Telecommunications Group
Telematics
<PAGE>
3 Com Corp.
Novell Inc.
Ungerman Bass, a division of Tandem Computer
For purposes of this Section 43 A. the term "company" shall refer only to the
particular division of a company engaged in the design, manufacturer or sale of
modems or multiplexes used in data communications.
B. Landlord shall require in any future lease of a portion of the
Improvements, that such lease may be subject to termination by the Landlord if
the tenant under such lease utilizes radio waves in such a manner that they may
cause radio frequency interference with Tenant's equipment on the Premises.
Landlord shall expeditiously enforce such restriction upon notice from Tenant
that such interference is occurring or, alternatively, shall expeditiously take
steps to shield the Premises so that the interference is eliminated. If Landlord
does not act expeditiously, as set forth above, Tenant may shield the Premises
from such interference at Landlord's expense.
C. Landlord shall provide in any future lease of a portion of the
Improvements that such lease may be subject to termination by the Landlord if
the tenant under such lease utilizes the leased area in such a manner as to
interfere with Tenant's use of the Premises by reason of noise, odor, vibration
or emissions emanating from such leased area. Landlord shall expeditiously
enforce such provision upon notice from Tenant that such interference is
occurring.
43. RIDERS:
Attached hereto and incorporated into this Lease are Riders numbered 1
through 3.
AS WITNESS the hands and seals of the parties hereto the day and year
first above written.
<PAGE>
ATTEST/WITNESS: CHIPPEWA LIMITED PARTNERSHIP
A Maryland Limited Partnership
Landlord
By:/s/ Richard Lantini
General Partner/Landlord
CASE/Datatel, Inc.
------------------
Tenant
By:/s/ Michael Lindsay
VP Finance and Operations
<PAGE>
RIDER #1 TO LEASE AGREEMENT
JUNCTION BUSINESS
RULES AND REGULATIONS
APPLICABLE TO THIS LEASE AGREEMENT
1. SIGNAGE:
PERMANENT SIGNAGE: Exterior signage in 9020 Junction Drive. Annapolis Junction,
Maryland shall be for identification only and may not be treated as an
advertising device. Signage text is limited to company name and/or logo. All
signs must be submitted to Landlord for approval prior to installation, which
approval shall not be unreasonably withheld or delayed.
A. PERMITTED SIGN LOCATIONS
Unless otherwise noted in site specific criteria, each multitenant building will
have one free-standing sign with the building or address only at a point near
the building entrance, and a building mounted tenant identification system.
Notwithstanding the foregoing, only the Tenant may have a sign visible from the
exterior of the building, as further provided in Paragraph 34 of the Lease.
B. PERMITTED SIGN TYPES
Free Standing Sign: maximum height is four feet above grade.
Sign shall be substantial and constructed of durable materials (wood signs will
not be allowed).
Sign must be mounted on a substantial base.
C. BUILDING MOUNTED SIGN
Sign location on building must be compatible with the architectural design of
the building.
<PAGE>
No signs may extend above the roof or parapet line of the building.
Building mounted signs must be individual letters.
The scale of the building shall determine the permitted letter size.
Illumination, if desired, may be internal through a translucent letter face or
opaque letters projected lightly off the wall and back lit from a source
concealed within the letter.
D. PERMITTED SIGN COLORS
Color for signs shall be limited to one color for the background. Where an
additional color is necessary because it is a part of the firm's logo, this will
be considered.
The background color MUST be darker than the message and graphics.
E. PROHIBITED SIGNS INCLUDE THE FOLLOWING:
No sign may be erected which does not have the written approval of Landlord,
which approval shall not unreasonably withheld or delayed. No sign may be
erected without the necessary Howard County approvals. No flashing or moving
signs will be permitted. No exposed neon or other exposed light source will be
permitted. No signs using vacuum formed plastic letters will be permitted. No
signs using applied wood letters will be permitted. No permanent building
identification signs will be permitted where letters are painted in the sign
face and do not project.
2. No awnings, curtains, blinds, shades or screens shall be attached to or hung
in, or used in connection with any window or door of the Premises without the
prior consent of the Landlord and including approval by the Landlord of the
quality, type, design, color and manner attached.
<PAGE>
3. Tenant agrees that its use of electrical current shall never exceed the
capacity of existing feeders, risers or wiring installation. Any additional
electrical wiring shall be done by Landlord's electrician or supervised by such
electrician, and Tenant shall bear the expense of such additional materials and
installation.
4. The Tenant shall not do or permit to be done in or about the Premises or the
Building anything which shall increase the rate of insurance on the Building or
its property, or obstruct or interfere with the rights of other tenants of
Landlord or annoy them in any way, including but not limited to, using any
musical instrument, making loud or unseemly noises, or singing, etc., nor use
the Premises for sleeping, lodging, or cooking by any person deck) at any time
except with permission of Landlord. Tenant will be permitted to use for its own
employees within the Premises conventional coffee makers. No part of said
Building of Premises shall be used for gambling, immoral or other unlawful
purposes. No intoxicating beverage shall be sold in said Building or the
Premises without prior written consent of the Landlord. No area outside of the
Premises shall be used for storage purposes at any time.
5. No birds or animals of any kind shall be brought into said Building or kept
in or about the Premises.
6. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways in the Buildings shall not be obstructed by Tenant or used for any
purposes other than those for which same were intended as ingress and egress. No
windows, floors, or skylights that reflect or admit light into the Building
shall be covered or obstructed by Tenant. Toilets, wash basins, and sinks shall
not be used for any purpose other than those for which they were constructed,
and no sweeping, rubbish, or other obstructing substances shall be thrown
therein. Any damages resulting to them, or to heating apparatus, from misuse, by
Tenant or its employees, shall be borne by Tenant.
7. Only one key for each office in the Premises will be furnished Tenant without
charge. No additional lock, latch or bolt of any kind shall be placed upon any
exterior door nor shall any changes be made in
<PAGE>
existing locks or mechanisms thereof without giving Landlord a copy of any new
keys thereof. At the termination of the Lease, Tenant shall return to Landlord
all keys furnished to Tenant by Landlord, or otherwise procured by Tenant, and
in the event of loss of any keys so furnished, Tenant shall pay to Landlord the
cost thereof.
8. Tenant shall not cause or permit any unusual or objectionable gases, liquids
or odors to be produced upon or permeate from the promises, and no flammable,
combustible or explosive fluid, chemical or substances except gas and
electricity for lighting the Premises shall be brought into the Building, except
for those substances necessary to the business of Tenant.
9. No painting shall be done, nor shall any alterations be made, to any part of
the Building by putting up or changing any partitions, doors or windows, nor
shall there be any nailing, boring or screwing into the woodwork or plastering
(except for normal wall hangings), nor shall any connection be made to the
electric wires or gas or electric fixtures, without the consent in writing on
each occasion of Landlord. All glass, locks and trimmings in or upon the doors
and windows of the Building shall be kept whole and in good repair. Tenant shall
not injure, overload or deface the Building, the woodwork or the walls of the
Premises, nor carry upon the Premises any noisome, noxious, noisy or offensive
business.
10. Tenant and occupants shall observe and obey all parking and traffic
regulations as imposed by Landlord on the lot on which the Building is located.
Landlord in all cases retains the power to designate "no parking" zones, traffic
right-of-ways, and general parking area procedures. Failure of Tenant to comply
with such regulations constitutes a violation of the Lease.
11. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular Tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
Tenant, nor prevent Landlord from thereafter
<PAGE>
enforcing any such Rules and Regulations against any or all of the Tenants of
the Building.
12. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of the Lease.
13. Landlord reserves the right to make such other and reasonable Rules and
Regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building, and for the preservation of good order
therein.
RIDER #2 TO LEASE AGREEMENT
OPTION TO RENEW
THIS RIDER is attached to and forms a part of acertain Lease dated Oct 4, 1989
between CHIPPEWA LIMITED PARTNERSHIP, a Maryland Limited Partnership
(hereinafter called "Landlord"), and CASE/Datatel.Inc,(hereinafter called
"Tenant").
Tenant shall have the option to renew this Lease for an additional
five (5) year term upon giving written notice of intention to renew to Landlord
not less than 150 days prior to the expiration of the original term hereof. All
the terms and conditions of this Lease shall remain in full force and effect
during the renewal term except that there shall be no further right of renewal,
and the Basic Rental during the renewal shall be equal to Fifty Percent (50%) of
the percentage increase in the Consumer Price Index over the Base Year
multiplied by One Hundred Percent (100%) of the Basic Rental for the initial
lease term herein. it is agreed that for each compounded year the Consumer Price
Index shall not exceed Six Percent (6%), and that the Basic Rental for the
renewal term shall not exceed Nine and 27/100 Dollars ($9.27) per leasable
square foot. This increase shall be determined in accordance with the following:
<PAGE>
1. Landlord shall compute the increase, if any, in the cost of
living, using as the basis of such computation the average for "All Items" shown
on the Revised United States City (Washington Region) Consumer Price Index for
Urban Wage Earners and Clerical Workers (including single workers) as
promulgated by the Bureau of Labor Statistics of the United States Department of
Labor using the year 1967 as the base of 100 (hereinafter called the "Index").
2. The Index number in the column for "All Items" (Washington Region), for the
month this Lease is effective shall be the "Base Index Number" and the
corresponding Index number for the last published month immediately preceding
the date of renewal shall be the current Index.
Each option granted to Tenant in this Lease is personal to Tenant or
Affiliates and may not be exercised or be assigned, voluntarily, by or to any
person or entity other than Tenant or Affiliates without prior written consent
of Landlord, which shall not be unreasonably withheld or delayed. Option to
renew does not extend to any subtenant, except Affiliates.
AS WITNESS the hands and seals of the parties hereto the day and
year first above written.
ATTEST/WITNESS: CHIPPEWA LIMITED PARTNERSHIP
A Maryland Limited Partnership
Landlord
By:/s/ Richard Lantini
General Partner/Landlord
CASE/Datatel, Inc.
------------------
Tenant
By:/s/ Michael Lindsay
VP Finance and Operations
<PAGE>
RIDER 3 TO LEASE AGREEMENT
RIGHTS OF EXPANSION
THIS RIDER is attached to and forms a part of a certain Lease dated Oct 4, 1989
between CHIPPEWA UNITED PARTNERSHIP, a Maryland Limited Partnership (hereinafter
called "Landlord"), and CASE/Datatel, Inc. (hereinafter called "Tenant").
At any time during the term of this Lease, it is understood and
agreed that Tenant shall have the Right of First offering on available space
within 9020 Junction Drive. Such offering shall be on the same terms and
conditions as are then being offered for similar space within the building.
should another prospective tenant express a bona fide interest in leasing said
space, Landlord shall notify Tenant in writing in accordance with the provisions
of Paragraph 37. Tenant shall then have ten (10) working days to respond in
writing; the contents of the response to be in the format of a Letter of Intent
to lease said space. If Tenant fails to respond as prescribed, Tenant forfeits
the right to lease the space. This Right of First Offering shall be continuous
for each prospective tenant expressing a bona fide interest in leasing said
space until a Lease is ultimately executed.
Should Tenant desire to lease any available space within 9020
Junction Drive, without there being another prospective tenant expressing a bona
fide interest in leasing said space, then the fair market rent for said space
shall be as determined (a) by mutual agreement of Landlord and Tenant, (b) by a
qualified M.A.I. appraiser selected by Landlord and Tenant, or (c) if Landlord
and Tenant cannot agree upon the fair market rent or the appraiser, Landlord and
Tenant shall each select an independent M.A.I. appraiser active in the area
where the premises are located and the fair market rent shall be the average of
the two appraisals provided the appraisals are within Five Percent (5%) of each
other, If the two appraisals are not within Five Percent (5%) of each other,
then the two appraisers shall select a
<PAGE>
third appraiser and the average of the three appraisals shall be conclusive.
Landlord and Tenant shall share equally the fees and costs of the single
appraiser selected by mutual agreement or the third appraiser selected if
necessary. In the case of two appraisers, Landlord and Tenant shall each pay the
fees and costs of their respective selected appraiser.
These Rights of Expansion granted to Tenant are personal to Tenant
or Affiliates and may not be exercised or be assigned, voluntarily, by or to any
person or entity other than Tenant or
Affiliates without prior written consent of Landlord, which shall not be
unreasonably withheld or delayed. These Rights of Expansion do not extend to any
subtenant, except Affiliates.
AS WITNESS the hands and seals of the parties hereto the day and year
first above written.
ATTEST/WITNESS: CHIPPEWA LIMITED PARTNERSHIP
A Maryland Limited Partnership
Landlord
By:/s/ Richard Lantini
General Partner/Landlord
CASE/Datatel, Inc.
------------------
Tenant
By:/s/ Michael Lindsay
VP Finance and Operations
<PAGE>
Exhibit A
[Building Diagram left blank]
<TABLE>
<S> <C> <C> <C>
BUILDING SIZE one story, 97,000 sq. ft. SPRINKLERS Wet
UNIT SIZE Units from 4, 753 to 97, 000 OFFICE AREA To suit
sq. ft. (bay sizes 8, 000 sq. ft.) ELECTRIC 1, 600
amps, 4 wire, 3 phase, Baltimore
Gas & Electric
LOT SIZE 6.3 Acres
CONSTRUCTION Masonry and steel PARKING 188 spaces
TRUSS HEIGHT 20' Clear ZONING Industrial
LIGHTING Metallialide HEATING AND Gas unit
heaters
AIR CONDITIONING and
energy efficient
efficient heat pumps
LOADING FACILITIES Tailgate loading
WATER HowardCounly LEASE TERM 315years
SEWER HowardCounty
</TABLE>
EMORY HILL McCONNELL ASSOCIATES, INC.
Builders and Developers
Suite 100 7250 Parkway Drive
Hanover, Maryland 21076
<PAGE>
Exhibit B
[Diagram of facility at Junction Drive]
Junction Business Park
U.S. 1 and Route 32
Howard County, Maryland
For further information call:
David Rossetti or Rick Latini,
(301) 796-8866
1-95 2 miles
1-695 (Baltimore Beltway) 13 miles
1-495 (Wash eltway) 14 miles
Route 29 7 miles
BWl Airport 9 miles
Port of Baltimore 19 miles
Howard County General Hospital 9 miles
Columbia, Maryland 9 miles
NSA 1. 8 miles
EMORY HILL WCOWELL ASSOCIATES,INC.
Builders and Developers
Suite 100 n s 7250 Parkway Drive
Hanover, Maryland 21076
<PAGE>
EXHIBIT C-1
CASE/Datatel
TENANT IMPROVEMENT SPECIFICATIONS
PARTITIONING
1. Demising wall (146 LF) is constructed to underside of roof deck using 3
5/811 metal studs with 5/811 fire rated gypsum board. Sound insulation is
installed to 101-011 above finished floor.
2. Interior partitions (2,400 LF) are constructed to suspended ceiling using
3 5/811 metal studs with 1/211 gypsum board. sound insulation is provided
for each bathroom and conference room.
3. Office/Manufacturing separation (146 LF) wall is constructed to the roof
deck using metal studs with 1/211 gypsum board.
4. Ceiling in office area to be constructed using a suspended ceiling grid
with 21 X 41 white lay-in fissured nondirectional acoustical ceiling tile.
Floating ceilings throughout.
5. All frames are 18g hollow metal.
6. A. Office - hardware consists of seventy (70) passage sets, and ten (10)
locksets. All hardware to be brushed chrome.
B. Manufacturing - install thirteen (13) double doors and five (5) single
doors with passage sets.
7. Kitchen/Lunch/Engineering Break areas to have six (6) linear feet of base
cabinets to be selected from Emory Hill samples.
8. A. Install five hundred Sixteen (516 LF) of 84" drywall in
manufacturing area.
B. Install two Hundred Forty-Three (243 LF) of 144" drywall.
<PAGE>
9. Area above block wall in manufacturing area to be covered with 1/2" gypsum
board to 101 above block wall.
10. Include 1/2" plywood in all offices designated as 'MI.
11. 2'- 6" Side light glass panels at 41 doors with black blinds.
12. Block enclosure for air compressor.
13. 84" Drywall enclosure with door and 411 curb in manufacturing for storage.
14. Interior glass as shown on print.
15. Install one revolving door in photo lab.
16. Install weather break with ceiling around shipping dock.
17. Construct room for ATE pumps with ceiling per drawings.
18. Construct weather break in front of manufacturing using glass
construction.
HEATING VENTILATING AND AIR CONDITIONING
1. Entire office space to be heated and cooled using a roof mounted gas fired
package unit providing a 68 degrees rise from 0 degrees outdoor temperature in
office area. Units to be individually controlled. (Must cool to 78 degrees at 95
degrees fahrenheit outside temperature.)
2. Bathrooms to be exhausted through the roof.
3. Conference room to have sound insulated exhaust vented into plenum.
4. Upgrade HVAC per equipment list:
<PAGE>
1-5 Ton roof top unit in demo room
1-5 Ton roof top unit in system lab
2-9 1/2 Ton Liebert units in computer room
1-1 Ton roof top unit in plotter room
5. Venting
Wave solder /cleaning machine
Developer room
Plotter room
Packing area
ATE Pump room
Compressor room
FLOOR COVERING
1. Entire office area, except bathrooms, lunchroom, and storage area, to
receive Stratton glue down carpet.
2. Bathrooms, lunch area, and storage to receive vinyl composition tile.
3. Colors for carpet cove base, and tile to be selected from landlord's
samples.
4. Entire office area to receive four inch vinyl cove base.
5. Entire manufacturing area to receive building standard vinyl composition
tile.
6. Upgrade carpet in demo room, large conference room at lobby and reception
area.
WALL COVERING
1. Entire office area to receive two coats of flat latex paint.
Bathrooms and lunch area to have semi-gloss latex enamel.
<PAGE>
2. Colors to be selected from Duron color chart.
3. All doors and frames to be painted semi-gloss black.
4. Under side of deck in manufacturing area to be spray painted, which
includes: deck, joists, and columns.
5. Drywall mounted atop the block wall in manufacturing area to receive two
coats of flat latex paint.
SPRINKLER
1. Entire area to be sprinklered at suspended ceiling to meet Howard County
life safety code.
2. Manufacturing to have sprinkler protection at roof deck to
3. Install windows in knock out panels in rear of building per drawings.
PLUMBING
1. Men's and women's bathrooms to include sink, toilet, grab bar, mirror, and
paper towel dispenser. Bathrooms to meet Howard County code for handicap
access and be sized to accommodate One Hundred (100) men and One Hundred
(100) women.
2. Cafeteria and kitchen and Engineering Break areas to have kitchen type
sink with hot and cold water.
3. Water heater sized to accommodate fixture count.
4. One shower room.
5. Drinking fountain at each rest room.
<PAGE>
6. Water supply and floor drain to photo development room located in
Engineering.
ELECTRICAL
1. CASE/Datatel to have a One Thousand Six Hundred (1,600) amp 120/208 volt 3
phase, 4 wire electrical service.
2. Five Hundred Forty-Six (546) 2 X 4 lay-in four tube florescent light
fixtures to give seventy (70) foot candles at desk height.
3. Three Hundred Sixty (360) standard 120 volt duplex receptacles in the
office area, to be located by CASE/Datatel.
4. Connect all equipment per list.
5. Single pole and three-way switching to accommodate final layout and
satisfy Howard County code.
6. All exit and emergency lighting to meet Howard County Code.
7. Wire computer room with UPS (one circuit for plotter, one circuit for
system assurance.) NOTE: UPS System by Tenant. Wire three (3) circuits to
system assurance and one (1) circuit to plotter room.
8. Power to Haworth offices are included.
9. Paging system allowance $10,000.
10. Lighting in manufacturing area as follows:
- One Hundred (100) foot candles for assembly using high output 96"
strip florescent fixtures.
- Fifty (50) foot candles for warehouse using 96" strip florescent
fixtures.
11. Heating elements for burn-in room (60 degrees centigrade)
<PAGE>
12. Seventy (70) power drops in manufacturing mounted at 11'-0" A.F.F. Twenty
(20) dedicated circuits in manufacturing.
13. (181 LF) of track lighting with 46 fixtures located in Engineering.
14. Safety lights in dark rooms.
EXHIBIT "H"
TENANT ESTOPPEL CERTIFICATE
Lessor:
Lessee:
Identification of Leased Premises:
Approximately ____ square feet within a warehouse and office
building on land known as _________________________, as more fully set forth in
the lease.
Date of original Lease:
Date(s) of any amendments:
The undersigned, the Tenant named above of the premises identified
above (the "Premises") to induce (The "Lender") to make a loan to Landlord
hereby certifies to Lender the following:
1. The undersigned has accepted and is in possession of and occupies
the Premises under the Lease, which is in full force and
<PAGE>
effect. The initial term of the Lease commenced on _____________________, 198_.
2. There have been no modifications or changes in the Lease, except
by those amendments listed above.
3. The undersigned is paying the full lease rental, which on the
rental payment due in ___________, 19__ is basic minimum rent per month, and is
also paying its proportionate share (____%) of real estate taxes, insurance
premiums and expenses of snow removal, parking lot maintenance and grass cutting
over Base Year.
4. No rent or other sum payable under the Lease has been paid for
more than thirty days in advance of its due date.
5. To the knowledge of Tenant, the Landlord is not in default under
the Lease and the undersigned has no defense, set-off or counterclaim against
the Landlord under the Lease or otherwise.
6. The undersigned has not assigned, mortgaged or encumbered the
Tenant's interest under the Lease.
7. Tenant acknowledges receipt of notice that all of the Landlord's
interest in the Lease has been assigned to Lender as further security for one or
more loans to Landlord.
8. These statements, agreements, representations and
acknowledgements shall bind the undersigned, its successors and assigns and the
undersigned shall deliver a copy hereof to any assignee of its interest in the
Lease.
IN WITNESS WHEREOF, the undersigned has caused this Estoppel Certificate to be
duly executed this _______ day of _____-, 19__
ATTEST
<PAGE>
(Name of Lessee)
By:
meet NFPA Ordinary Hazard Group 3.
3. Halon System with sprinkler back-up in computer room (approximately 986
square feet).
4. Install fire detection per county codes using smoke detectors and/or Pull
Boxes. Sprinkler monitoring is part of the shell construction.
MISCELLANEOUS
1. One (1) 10 X 10 overhead door at 48" dock height.
2. One (1) 10 X 10 overhead door at 30" dock height.
3. All permits and applications by Emory Hill.
4. Entire space to be cleaned and ready for occupancy.
5. Raised floor in computer room by Tate Access Floors.
6. Trash compactor pad and opening per drawing. (Compactor by Tenant).
7. One (1) manually operated dock leveler.
8. Compressed air distribution system (compressor by Tenant) including
thirty-five (35) compressed air drops. (Enclosed in equipment room and
vented.) Male disconnects by Tenant. Female disconnects by Landlord
mounted at 11" - 0" A.F.F.
9. Reception to include per construction drawings attached as Exhibit C-2:
<PAGE>
Glass foyer entrance
Special ceiling with eighteen (18) reception lobby down lights
Mirrored walls
Upgraded carpets
Green LED clock
Reception desk (allowance $2,500) to include shelf to enclose
video monitors.
Power and communications must be supplied via a trough
10. Install fencing on rear of property to screen truck yard.
11. A 20" X 30" pressure treated wooden deck with side rails and two sets of
steps.
12. Provide sign on building (Allowance $7,500)
13. Provide exterior lights for employee safety.
EXHIBIT "D"
Landlord shall assign to Tenant the following warranties relating to
Tenant Improvements:
1. One (1) year warranty on the full HVAC system including all parts
and labor.
2. Four (4) year warranty on all compressors for the HVAC system to
include parts only.
EXHIBIT "E"
<PAGE>
The following are HVAC maintenance contractors satisfactory to Landlord:
1. Emory Hill Development, Inc.
2. Central Air Conditioning Contractors, Inc.
3. Sagamore Heating and Air Conditioning, Inc.
4. L.H. Cranston, Inc.
5. Commercial Air, Inc.
EXHIBIT "F"
The following work will be required in accordance with the
maintenance contract required in the attached Lease under the Paragraph entitled
"Repairs and Maintenance".
1. Check performance of all major components.
2. Lubricate moving parts as required.
3. Check refrigerant charges (during cooling season).
4. Inspect for oil and refrigerant leaks.
5. Check operating and safety controls.
6. Check pressures and temperatures.
7. Inspect condensers.
8. Inspect fans, motors and starters.
<PAGE>
9. Tighten electrical connections at equipment.
10. Test amperages and voltages.
11. Check belts and drives.
12. Change oil and filters, or dryers, as required (at least four
times per year).
13. Check temperature on control system.
14. Thoroughly inspect heat exchanger.
<PAGE>
EXHIBIT 10.22(a)
FIRST AMENDMENT OF LEASE
THIS FIRST AMENDMENT OF LEASE dated this 19th day of October, 1994, is
made and entered into by and between CHIPPEWA LIMITED PARTNERSHIP, (hereinafter
referred to as "Landlord"), and CASE/DATATEL, INC., (hereinafter referred to as
"Tenant"), for the premises known as 9020 Junction Drive, is entered into upon
the following terms and conditions:
W I T N E S S E T 11:
WHEREAS, Landlord and Tenant executed and delivered a Lease
Agreement dated October 4, 1989, for the premises known as 9020 Junction Drive,
and
WHEREAS, Landlord and Tenant executed and delivered an Assignment of
Lease to Emory Hill & Associates dated October 4, 1989, and
WHEREAS, Landlord and Tenant desire to amend this Lease Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, the parties hereby agree to amend the Lease Agreement for the 72,342
leasable square feet of space, upon the following terms and conditions:
1. Landlord and Tenant hereby mutually agree to extend the term of
this Lease for an additional five (5) year term commencing November 1, 1994 and
terminating October 31, 1999.
2. Tenant agrees to pay rent to Landlord according to the following
industrial gross rental schedule:
TERM DOLLARS MONTHLY ANNUAL
/S.F. RENTAL RENTAL
11/01/94-10/31/96 $7.40 $44,610.90 $535,330.80
11/01/96-10/31/97 $7.60 $45,816.60 $549,799.20
11/01/97-10/31/99 $8.00 $48,228.00 $578,736.00
<PAGE>
3. Tenant's name was changed from Case/Datatel, Inc. to Dowty
Communications, Inc- and again changed from Dowty Communications to Cray
Communications effective September 1, 1992.
4. Current base year (1990-1991) shall remain as base year for the
purpose of determining proportional share of real estate taxes and insurance.
5. Landlord will provide Tenant with a $30,000.00 Tenant Improvement
allowance.
6. Provided the Tenant is not in default of any of the terms and
conditions of this Lease or First Amendment of Lease, Tenant shall have the
First Right of Refusal on any space that becomes available space in the
building, subject to existing leases at then market rental rate. Tenant shall
have ten (10) days to accept or reject the space. Should Tenant elect to lease
the available space, the rent shall be at the same rent Tenant is then paying
for its space then under lease and shall be coterminous with the amended lease
term.
7. Landlord shall allow Tenant to erect a prominent, back-lit
building sign identifying the Tenant, at Tenant's sole cost and expense. Tenant
is responsible for obtaining any permits required for erecting the sign and the
sign will be subject to review by Landlord and Park Covenants.
8. Tenant shall have the option to terminate this Lease Agreement
and First Lease amendment after three (3) years and after four (4) years. Should
the Tenant elect to exercise this termination option after three (3) years, the
cancellation penalty will be $202,598.50. Should the Tenant elect to exercise
this termination option after four (4) years, the cancellation penalty will be
$124,207.50.
9. All other terms and conditions of Tenant's existing Lease shall
remain in full force and effect.
10. Tenant shall provide Landlord Six (6) months written notice of
its desire to renew its Lease. The renewal term shall be five (5) years. The
Lease rate during the renewal term shall be established
<PAGE>
using the Three (3) Broker Method. Upon Landlord receiving written notice of
Tenant's desire to renew, Landlord and Tenant shall have fifteen (15) calendar
days to select a Broker. The Landlord and Tenant selected brokers shall then
have seven (7) calendar days to mutually agree upon the third Broker. The three
(3) Brokers shall then have Fourteen (14) calendar days to submit simultaneously
to Landlord and Tenant their opinion of the then Market Renewal Rate for
comparable size, geographic and facility transactions. This option must be
supported by a minimum of five (5) market comparable transactions.
The renewal rate quoted by the Brokers shall be quoted on an Industrial
Gross Basis and the rate shall be flat, i.e. non-escalating during the five (5)
year renewal period. The three (3) Broker rate quotes shall be averaged and then
multiplied by 9.5% to establish a binding rental rate for the renewal period.
Example:
Broker #1 Quote - $5.00
Broker #2 Quote - $6.00
Broker #3 Quote - $5.50
Calculation:
($5.00 + $6.00 + $5.50) (3 x .95) $5.23
Example Renewal Rate:
$5.23 Industrial Gross Flat for five (5) years
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
of Lease the day and year first written above.
<PAGE>
WITNESS: LANDLORD:
CHIPPEWA LIMITED PARTNERSHIP
By: /s/ Robert Hill
-----------------------------
General Partner/ Landlord
-------------------------
WITNESS: TENANT:
CRAY COMMUNICATIONS, INC.
By: /s/ Gil Goldbeck
-----------------------------
Gil Goldbeck
-----------------------------
Print Name
Controller
-----------------------------
Title
10/19/94
-----------------------------
Date
<PAGE>
Exhibit 10.22(b)
AMENDMENT NO. 2 TO LEASE AGREEMENT
THIS AMENDMENT NO. 2 TO LEASE AGREEMENT is made this 22 day of April,
1999, by and between CHIPPEWA LIMITED PARTNERSHIP, a Maryland limited
partnership, hereinafter called "Landlord," and OSICOM TECHNOLOGIES, INC., a
Delaware corporation f/k/a CASE/DATAEL, INC.), hereinafter called "Tenant."
WHEREAS Landlord and Tenant are parties to a Lease Agreement dated October
4, 1989, as modified by First Amendment of Lease dated October 19, 1994 (the
"Lease"); and
WHEREAS Tenant has requested Landlord to make certain modifications to the
term of the Lease; and
WHEREAS Landlord is willing to make the modifications to the Lease Tenant
has requested, upon certain terms and conditions, all as more fully described
herein below.
WITNESSETH, in consideration of the premises and the mutual covenants
herein contained, the Lease is hereby amended as follows:
1. Effective June 1, 1999 Tenant shall vacate [make best efforts to
vacate] and shall deliver to Landlord,in the condition the Premises are to be
delivered at the conclusion of the term, that portion of the Premises consisting
of 34,956 square feet, as shown on Exhibit A attached hereto and hereby made a
part hereof, and such space shall no longer be leased from Landlord to Tenant,
shall no longer be a portion of the Premises and Tenant shall and hereby does,
effective such date, relinquish any right or interest to such space. Effective
[June 1, 1999] the "Premises" shall mean the 37,384 square feet of space shown
on Exhibit A. The foregoing notwithstanding, any obligations of Tenant relating
to such space, that accrued prior to [June 1, 1999] shall remain in effect.
2. Effective June 1, 1999 the term of the Lease shall be for a period
of five (5) years and five (5) months from June 1, 1999. Accordingly, the
term of the Lease shall expire and the Termination Date shall be October 31,
2004.
<PAGE>
3. Landlord shall install the tenant improvements set forth in the Tenant
Improvement Specifications attached hereto as Exhibit A-1 and the Floor Plan
attached hereto as Exhibit A-2. Landlord, based upon its discussions with
Tenant, has estimated that the total costs of the tenant improvements (such
costs to include all amounts paid to contractors, subcontractors, material
suppliers, design or other professionals, permit fees, and etc.) is One Hundred
Eighty-five Thousand Dollars ($185,000.00) (the "Tenant Improvement Allowance").
Any increase in the amount of such total costs, over the Tenant Improvement
Allowance, including, but not limited to, increases resulting from additions to
or modifications of the attached exhibits, shall be Tenant's obligation and
shall be paid for by Tenant within ten (10) days after demand. Landlord
Estimates that the tenant improvements will be substantially completed within
sixty (60) days after the later of (i) the date of this Amendment, or (ii) the
date of full execution of the lease with Earthshell Corporation, as described in
paragraph 10 below. Notwithstanding the foregoing, Landlord shall have no
liability to Tenant if the tenant improvements are not completed by such date
and, in such event, Tenant shall be required to perform in accordance with the
terms of the Lease and this Amendment, and Landlord shall continue to utilize
commercially reasonable efforts to complete the tenant improvements as promptly
as reasonably possible. Tenant shall cooperate with Landlord in Landlord's
efforts to construct the tenant improvements and shall [make reasonable efforts
to] remove all of its goods and materials from the portions of the Premises upon
which Landlord's contractors are working, so as to provide a safe and clear
working environment for Landlord's contractors. Landlord agrees that it will
provide a copy of all costs associated with the tenant improvements to Tenant
within twenty (20) days after full execution of this Amendment. Landlord agrees
that the carpet it will install, as a part of the tenant improvements, will be a
commercial grade carpet that under normal wear and tear with proper maintenance
will have a useful life of not less than five and one-half (5%) years.
4. Until May 30, 1999 Tenant shall continue to pay Basic Rental in
accordance with the terms of the Lease. Beginning June 1, 1999 (if Tenant
complies with paragraph 1 above), the Basic Rental payable with respect to
the Lease and the Premises shall be changed and, beginning on such date,
Tenant will pay to Landlord at % Emory Hill Management Co., Inc., Suite 100,
92 Read's Way, New Castle, Delaware 19720, or at such other place as Landlord
shall from time to time direct, the Basic Rental in the amounts set forth
below. The Basic Rental shall be payable in equal monthly installments, in
2
<PAGE>
advance and without demand, on the first day of each and every month during the
term of the Lease, commencing on June 1, 1999. Basic Rental shall be as follows:
Term Annual Basic Rental Monthly Basic Rental
June 1, 1999 to
April 30, 2000 $371,970.80 $30,997.57
May 1, 2000 to
April 30, 2001 $379,410.21 $31,617.52
May 1, 2001 to
April 30, 2002 $386,998.41 $32,249.87
May 1, 2002 to
April 30, 2003 $394,738.38 $32,894.86
May 1, 2003 to
April 30, 2004 $402,633.14 $33,552.76
May 1, 2004 to
October 31, 2004 $410,685.80 $34,223.87
Notwithstanding anything to the contrary contained in this paragraph
4, the foregoing rent schedule is based upon the assumption that the actual
total costs of the tenant improvements (the "Actual Costs") are at least one
Hundred Eighty-five Thousand Dollars ($185,000.00). In the event that the Actual
Costs is less than the Tenant Improvement Allowance, then the amount of Basic
Rental shall be recalculated and shall be reduced by an amount equal to that
obtained by amortizing the difference between the Tenant Improvement Allowance
and the Actual Costs on a monthly basis over a ten (10) year period at an
interest rate of ten percent (10%). For instance, if the Actual Costs are One
Hundred Thirty-five Thousand Dollars ($135,000.00), then the amount of Basic
Rental payable for the period May 1, 1999 to April 30, 2000 would be Three
Hundred Sixty-four Thousand Forty-one and 68/100 Dollars ($364,041.68) and the
monthly Basic Rental payment for such period would be Thirty Thousand Three
Hundred Thirty-six and 81/100 Dollars ($30,336.81), and such amount would be
increased at the rate of two percent (2%) per year for each of the remaining
lease years during the term.
5. The current base year for all purposes of the Lease, including, but not
limited to, taxes(in accordance with paragraph 6 of the Lease), fire and
extended coverage and rental insurance (in accordance with paragraph 7 of the
Lease), and common area maintenance charges (in accordance with paragraph 8 of
the Lease) will not change and will remain the same as it was when the Lease was
3
<PAGE>
originally executed on October 4, 1989. Tenant's proportionate share, however,
shall (if Tenant is in compliance with paragraph 1 above) change effective June
1, 1999 and shall be reduced from seventy-four and fifty-eight one hundredths
percent (74.58%) to thirty-eight and fifty-four one hundredths percent (38.54%).
6. Paragraph 4 of the Lease is deleted in its entirety and is replaced
with the following:
Late Payment:
In the event that any payment required by Tenant under the
provisions of this Lease shall not be paid when due, Tenant shall,
upon demand, pay to Landlord (i) a late charge equal to the maximum
late charge contained in or mandated by the loan documents
evidencing or securing any first lien affecting the improvements
from time to time, and (ii)interest on such payment from the date
when due until paid at the rate of eighteen percent (18%) per annum.
The late charges imposed under this paragraph shall be deemed "rent"
for all purposes under this Lease, are not penalties and have been
agreed to by Landlord and Tenant as necessary to compensate Landlord
for its additional costs associated with late payment.
7. Landlord is currently in possession of a security deposit under the
Lease in the amount of Forty-eight Thousand Two Hundred Twenty-eight Dollars
($48,228. 00). Effective June 1, 1999, Landlord, provided Tenant is not in
default, will credit Seventeen Thousand Two Hundred Thirty and 43/100 Dollars
($17,230.43) against the Basic Rental payment due on June 1, 1999. The balance
of the amount now being held by Landlord, Thirty Thousand Nine Hundred
Ninety-seven and 57/100 Dollars ($30,997.57), shall continue to be held by
Landlord as a security deposit, which sum shall be held without payment of
interest as security for the performance by Tenant of its obligations under the
Lease. Landlord is authorized to deposit those funds in a non-interest bearing
account commingled with Landlord's general funds or otherwise, and Landlord
shall not be responsible for the solvency of the depository so long as it is
4
<PAGE>
insured by the Federal Deposit Insurance Corporation or similar insurer. If
Tenant shall perform all such obligations, said security deposit shall be
refunded to Tenant, without interest, within thirty (30) days after termination
of the Lease. If Tenant shall default in any obligation, Landlord shall be
entitled to apply any or all of said security deposit toward Landlord's damages
as determined by Landlord, and Tenant shall, within five (5) days after notice
thereof, deposit with Landlord an amount sufficient to restore said security
deposit to its original amount, which amount shall constitute "rent" under this
Lease.
8. Paragraphs 6, 8 and 10 of the October 19, 1994 First Amendment to
Lease, the Rider #2 to Lease Agreement Option to Renew and the Rider #3 to Lease
Agreement Rights of Expansion and any other rights of renewal, expansion,
termination, first refusal or similar rights contained in the Lease are all
hereby deleted from the Lease and declared to be null and void and of no force
or effect. The following renewal right shall be the only right of renewal of
Tenant under or in connection with the Lease:
Tenant shall have the Option to Renew the Lease for one (1)
additional five (5) year term upon giving written notice of intention to renew
to Landlord not less than one hundred eighty (180) days prior to the expiration
of the term of the Lease, as described in paragraph 2 above. Any such written
notice must advise Landlord of Landlord's obligation, described below in this
paragraph 8, to make an initial determination of the "Market Rate" for the
renewal term. All terms and conditions of the Lease shall remain in full force
and effect during the renewal term, except that there shall be no further right
of renewal and the Basic Rental for the renewal term shall be the "Market Rate,"
as defined below, effective the first day of the renewal term.
The Option to Renew granted to Tenant is personal to Tenant and may
not be exercised or be assigned, voluntarily or otherwise, by or to any person
or entity other than Tenant without the prior written consent of Landlord.
Additionally, at Landlord's option, the Option to Renew shall be null and void
if, either at the time Tenant exercises such option or at the time such renewal
term is to commence, Tenant is in default under any provision of the Lease.
The following procedure shall be used to determine the Market Rate,
for the renewal term. Not less than one hundred fifty (150) days prior to the
commencement of the renewal term, Landlord shall send to Tenant a written notice
5
<PAGE>
specifying its determination of the Market Rate. Within twenty (20) days after
receipt of such notice from Landlord, Tenant shall send Landlord a written
notice of Tenant's acceptance or challenge of Landlord's determination of such
Market Rate, provided, however, that in the event that Tenant fails to respond
within such twenty (20) day period, Tenant shall be deemed to have accepted
Landlord's determination of the Market Rate.
In the event that Tenant challenges Landlord' s determination of the
Market Rate and Landlord and Tenant are not able to agree on such Market Rate
within fifteen (15) days (hereinafter referred to as the "Negotiation Period")
after Landlord receives Tenant's initial rejection of Landlord's determination
of such Market Rate, then Landlord and Tenant shall each, within ten (10) days
after the expiration of the Negotiation Period, select an appraiser, each of
whom shall be an MAI-certified real estate appraiser with at least five (5)
years, experience in the Columbia, Maryland market who shall determine the
Market Rate in accordance with this paragraph. The appraisers shall be
instructed to complete the appraisal procedure independently and to submit their
written determinations to Landlord and Tenant within thirty (30) days after
their appointment.
In the event that the higher determination of the Market Rate
submitted by one of the appraisers is equal to or less than one hundred fifteen
percent (115%) of the determination of the Market Rate submitted by the other
appraiser, the Market Rate shall be the average of such determinations. If the
determination of the Market Rate submitted by one of the appraisers is greater
than one hundred fifteen percent (115%) of the determination of the Market Rate
submitted by the other appraiser, the appraisers shall, within five (5) days of
notice from either Landlord or Tenant, appoint a third appraiser with similar
qualifications to make a determination of the Market Rate. The third appraiser
shall be instructed to complete the appraisal procedure and to submit a written
determination of the Market Rate to Landlord and Tenant within thirty (30) days
after such appraiser's appointment.
The determination which is neither the highest nor the lowest of the
three determinations shall be binding upon Landlord and Tenant as the Market
Rate unless two determinations are the same, in which event the Market Rate
shall be such amount. Landlord and Tenant shall each bear the costs of their
respective appraisers. The expenses of the third appraiser shall be borne
one-half (1/2) by Landlord and one-half (1/2) by Tenant. "Market Rate" shall
mean
6
<PAGE>
what a Landlord under no compulsion to lease the Premises and a Tenant under no
compulsion to lease the Premises would determine as the Basic Rental, given the
other provisions of the Lease which remain applicable to the parties.
Notwithstanding anything to the contrary contained in this paragraph 8, in no
event shall the Basic Rental for the renewal term be less than the Basic Rental
in effect at the end of the last year of the term of the Lease. In the event the
Market Rate has not been determined by the commencement of the renewal term, the
Tenant shall pay Basic Rental equal to one hundred twenty percent (120%) of the
Basic Rental in effect at the end of the last year of the term of the Lease,
until the Market Rate is determined and promptly after such determination, the
parties shall make an appropriate adjustment to reconcile any overpayments or
under payments of Basic Rental made prior to the determination of the Market
Rate.
9. Tenant shall have an option to terminate the Lease with respect to that
portion of the Premises, consisting of 11,650 square feet, as shown on Exhibit A
(the "Released Space"). The option to terminate the Lease as to the Released
Space shall be effective, if at all, on April 30, 2003 and shall be effective
only if Tenant delivers written notice of termination to Landlord, which notice
must be given on or before October 31, 2002 and Tenant must deliver with such
notice a cashier or certified check payable to Landlord in an amount (the
"Termination Fee") equal to three (3) times the monthly Basic Rental which would
have been due for the month of April 2003, had Tenant not exercised such
termination option. (For instance, if the Basic Rental due for the month of
April 2003 were $32,894.86, the Termination Fee would be $98,684.58.) The
Termination Fee shall be non-refundable and Landlord shall be entitled to keep
the full amount of the Termination Fee, regardless of whether or not Landlord
re-leases the Released Space or any parts thereof. Any purported exercise of
Tenant's option to terminate which does not strictly comply with the terms set
forth above shall, at Landlord's election, be ineffective.
If Tenant effectively exercises its option to terminate the Lease as to
the Released Space, then, effective May 1, 2003, (i) the Released Space shall no
longer be leased from Landlord to Tenant, shall no longer be a portion of the
Premises and Tenant shall have relinquished any right or interest to such space,
(ii) Tenant shall vacate the Released Space and deliver it to Landlord in the
condition the Premises are to be delivered at the conclusion of the term, and
(iii) there will be a pro rata downward adjustment in the amount of Basic Rental
7
<PAGE>
to be paid for the balance of the Lease term, as well as a pro rata downward
adjustment in the amount of Tenant's proportionate share for all purposes of the
Lease, including those specifically mentioned in paragraph 5 above. The
foregoing notwithstanding, any obligations of Tenant relating to such space,
that accrued prior to May 1, 2003, shall remain in effect.
The option to terminate granted to Tenant is personal to Tenant and may
not be exercised or be assigned, voluntarily or otherwise, by or to any person
or entity other than Tenant without the prior written consent of Landlord.
Additionally, at Landlord's option, the option to terminate shall be null and
void if, either at the time Tenant exercises such option or at the time such
termination is to become effective, Tenant is in default under any provision of
the Lease.
10. Notwithstanding anything to the contrary contained in this Amendment,
this Amendment and Landlord's obligations hereunder shall be contingent upon
Landlord having obtained a fully executed lease for not less than 34,956 square
feet of space within the Improvements with Earthshell Corporation, a Delaware
corporation ("Earthshell"), which lease shall be satisfactory to Landlord in its
sole and absolute discretion in all respects. In the event Landlord fails to
obtain such a lease within fifteen (15) days after the execution of this
Amendment, then, Landlord shall have the right, at any time within fifteen (15)
days after such date, by written notice to Tenant, to declare this Amendment
null and void, in which event this Amendment shall be and become null and void
and the rights and obligations with respect to the parties shall be determined
by the Lease, as if this Amendment had never been executed.
11. In the event and only in the event that this Amendment is fully
executed and delivered and becomes effective (i.e., is not terminated pursuant
to paragraph 9 above), Landlord agrees to pay Ryan Commercial LLC (the "Broker")
a leasing commission on account of this Amendment in the amount specified in a
separate written agreement between Landlord and the Broker. Tenant represents
and warrants to Landlord that it has not dealt with any other realtor, broker or
person that might claim a commission or fee in connection with this Amendment
other than the Broker and shall indemnify, defend and hold harmless Landlord
from and against any claim, loss, cost, damage or expense (including attorneys'
fees) incurred if such representation or warranty shall not be true and correct.
8
<PAGE>
12. Tenant represents and warrants to Landlord that Osicom Technologies,
Inc., a Delaware corporation, is the same entity as Case/Datael, Inc. , a
Delaware corporation, but merely reflects a name change, and that this Amendment
has been duly authorized by all necessary corporate action of Tenant and is the
valid, binding and enforceable act of Tenant.
13. By its execution of this Amendment, Tenant hereby certifies and
represents to Landlord that Landlord is in compliance with all of the terms,
covenants and conditions of the Lease and Tenant has no claim or cause of action
against or with respect to Landlord or its agents, employees or contractors
arising out of or in any way connected with the Lease or the use of the
Premises.
14. Capitalized terms not defined in this Amendment shall have the
meanings ascribed to those terms in the Lease.
15. Except as set forth herein, the Lease remains in full force and effect
and unmodified.
16. Time is of the essence of all provisions of this Amendment and remains
of the essence of all provisions of the Lease.
17. The provisions of this Amendment shall bind and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed under seal this
Amendment on the day and year first written above.
WITNESS/ATTEST: CHIPPEWA LIMITED PARTNERSHIP
By: Emory Holdings II Limited
Partnership, general partner
By: /s/ R. Clayton Emory (SEAL)
- ------------------------ -----------------------
R. Clayton Emory
General Partner
OSICOM TECHNOLOGIES, INC.
By: /s/ Gilbert Goldbeck (SEAL)
- ------------------------ ---------------------------
Gilbert Goldbeck
VP Finance & Operations
9
<PAGE>
[18. Remaining tenant improvement allowance from October 19, 1999 ammounts shall
be credited to Tenant.]
10
<PAGE>
EXHIBIT 10.23
OFFICE LEASE
2200 WEST PARK DRIVE
WESTBOROUGH, MASSACHUSETTS 01581
BY AND BETWEEN
2200 WEST PARK REALTY TRUST
AS LANDLORD
AND
OSICOM TECHNOLOGIES, INC.
AS TENANT
<PAGE>
Table of Contents by Articles and Sections
Page
----
1. Reference Data and Definitions.
1.01 Reference Data 6
1.02 General Provisions 8
1.03 Terms Defined 9
2. Premises.
2.01 Premises 16
2.02 Appurtenances 17
3. Term.
3.01 Term Commencement 17
3.02 Termination 17
4. Rent.
4.01 Basic Rent 17
5. Use of Premises.
5.01 Use Restricted 17
6. Taxes; Operating Expenses; Estimated Cost of Electrical Services.
6.01 Expenses and Taxes 18
6.02 Annual Statement of Additional Rent Due 18
6.03 Monthly Payments of Additional Rent 18
6.04 Accounting Periods 18
6.05 Abatement of Taxes 18
6.06 Electric Service 19
6.07 Late Payment of Rent 19
7. Improvements, Repairs, Additions, Replacements.
7.01 Preparation of the Premises 19
7.02 Time for Completion 19
7.03 Notice to Commence 20
7.04 Delays 20
7.05 Tenant's Access to the Premises 20
7.06 Alterations and Improvements 21
<PAGE>
8. Building Services.
8.01 Building Services 21
8.02 Other janitors 22
8.03 Additional Services 22
8.04 Limitation on Landlord's Liability 22
9. Tenant's Particular Covenants.
9.01 Pay Rent 22
9.02 Occupancy of the Premises 22
9.03 Safety 23
9.04 Equipment 23
9.05 Electrical Equipment 23
9.06 Pay Taxes 23
9.07 Tenant's Covenants 23
9.08 Maintenance 24
9.09 Redelivery 24
10. Requirements of Public Authority.
10.01 Legal Requirements 24
10.02 Contests 24
10.03 Environmental Legal Requirements 24
11. Covenant Against Liens.
11.01 Mechanics Liens 25
11.02 Right to Discharge 25
12. Access to Premises.
12.01 Access 25
13. Assignment and Subletting: Company Arrangements.
13.01 Subletting and Assignments 26
14. Indemnity.
14.01 Tenant's Indemnity 26
14.02 Landlord's Liability 27
15. Insurance.
15.01 Liability Insurance 27
15.02 Casualty Insurance 27
16. Waiver of Subrogation.
<PAGE>
16.01 Waiver of Subrogation 28
16.02 Waiver of Rights 28
17. Damage of Destruction.
17.01 Substantial Damage 28
17.02 Restoration 28
18. Eminent Domain.
18.01 Total Taking 29
18.02 Partial Taking 29
18.03 Awards and Proceeds 29
19. Quiet Enjoyment.
19.01 Landlord's Covenant 30
19.02 Subordination 30
19.03 Notice to Mortgagee 30
19.04 Other Provisions Regarding Mortgages 30
20. Defaults; Events of Default.
20.01 Defaults 31
20.02 Tenant's Best Efforts 32
20.03 Tenant's Default - Rent Abatement
Cancellation 32
21. Bankruptcy or Insolvency.
21.01 32
21.02 32
21.03 34
21.04 35
22. Landlord's Remedies; Damages on Default.
22.01 Landlord's Remedies 35
22.02 Surrender 36
22.03 Right to Relet 36
22.04 Survival of Covenants 36
22.05 Right to Equitable Relief 37
22.06 Right to Self Help; Interest on
Overdue Rent 37
22.07 Intentionally Deleted 37
23. Waivers.
23.01 No Waivers 38
24. Security Deposit.
<PAGE>
24.01 Security Deposit 38
25. General Provisions.
25.01 Force Majeure 38
25.02 Notices and Communications 38
25.03 Certificates, Estoppel Letter 39
25.04 Renewal 39
25.05 Governing Law 39
25.06 Partial Invalidity 39
25.07 Notice of Lease 40
25.08 Interpretation; Consents 40
25.09 Parties 40
25.10 Waiver of Trial by Jury 40
25.11 Time of the Essence 40
26. Miscellaneous.
26.01 Option to Extend 40
26.02 Extended Hours HVAC 41
26.03 Holdover Clause 41
26.04 Relocation 41
26.05 Parking 41
26.06 Signage 41
26.07 Option to Terminate 42
27. Entire Agreement.
27.01 Entire Agreement 43
2200 WEST PARK
2200 WEST PARK DRIVE
WESTBOROUGH, MASSACHUSETTS
OFFICE LEASE
STANDARD FORM
<PAGE>
THIS LEASE ("Lease") made at Southborough Massachusetts, by and between
2200 West Park Realty Trust, a Massachusetts Realty Trust ("Landlord") having a
principal place of business at 259 Turnpike Road, Suite 110, Southborough, MA
and Osicom. Technologies, Inc. a Delaware Corporation ("Tenant") having a
principal place of business at 411 Waverly Oaks Road, Suite 214, Waltham,
Massachusetts 02452.
WITNESSETH:
ARTICLE 1
Reference Data and Definitions
1.01 Reference Data
DATE OF LEASE: July 1, 1999
LANDLORD: 2200 West Park Realty Trust
A Massachusetts Realty Trust
LANDLORD'S REPRESENTATIVE: New England Management and Realty
259 Turnpike Road, Suite 110
Southborough, Massachusetts 01772
LANDLORD'S ADDRESS 259 Turnpike Road, Suite 110
(FOR PAYMENT OF RENT): Southborough, MA 01772
LANDLORD'S ADDRESS (FOR NOTICE AND BILLING): Same as Above
TENANT: Osicom Technologies, Inc.
TENANT ADDRESS: After the Term Commencement Date,
Tenant's address will be the Premises.
Before the Term Commencement Date,
Tenant's address is:
411 Waverly Oaks Road, Suite 214,
Waltham, Massachusetts 02452
TENANT'S REPRESENTATIVE: Gil Goldbeck
TENANT'S PHONE NUMBER: 1-800-262-8538
TENANT'S FACSIMILE NUMBER: 1-301-317-7220
PREMISES: Suite 340 of the building located at 2200
West Park Drive, Westborough,
Massachusetts, known as outlined or
hatched on Exhibit B.
RENTABLE AREA OF PREMISES: 3,728 + / - Estimated Square Feet.
RENTABLE AREA OF THE BUILDING: 75,000 Square Feet
RENT COMMENCEMENT DATE: 9/01/99
TERM COMMENCEMENT DATE: 9/01/99 or as defined in Section 1.03,
<PAGE>
If different
STATED EXPIRATION DATE: 8/31/04
TENANTS SHARE 4.9%
OCCUPANCY DATE: No later than 9/01/99
LANDLORD'S CONTRIBUTION: Landlord shall provide a turnkey build
out using building standard materials and
equipment per a mutually acceptable
space plan. (Exhibit A)
TERM: Five (5) Lease years plus the partial
month, if any, between the Term
Commencement Date and the first day of
the next calendar month.
BASIC RENT: SEE SCHEDULE BELOW:
YEAR RATE PER SO. FT. ANNUAL RENT MONTHLY RENT
- --------------------------------------------------------------------------------
1 23.50 87,600 7,300.67
2 23.50 87,600 7,300.67
3 23.50 87,600 7,300.67
4 24.50 91,336 7,611.33
5 24.50 91,336 7,611.33
INITIAL MONTHLY PAYMENT (Basic Rent): $ 7,300.67
REAL ESTATE TAX BASE YEAR: Fiscal Year 2000 (To be determined on a
fully assessed value.)
OPERATING EXPENSE
BASE YEAR: Calendar Year 2000
SECURITY DEPOSIT: $ 7,300.67. See Section 24.01
GUARANTOR: Osicom. Technologies, Inc.
PERMITTED USES: General Office uses consistent with a
first class office building, to the extent
permitted by the Town of Westborough
Zoning Bylaw.
1.02 General Provisions.
For all purposes of the Lease unless otherwise expressed and provided herein or
therein or unless the context otherwise requires:
(a) The words herein hereto hereunder and other words of similar import refer
to the Lease as a whole and not to any particular article, section or
other subdivision of this Lease.
(b) A pronoun in one gender includes and applies to the other gender as well.
<PAGE>
(c) Each definition stated in Section 1.01 or 1.03 of this Lease applies
equally to the singular and the plural forms of the term or expression
defined.
(d) Any reference to a document defined in Section 1.03 of this Lease is to
such document as originally executed, or, if modified, amended or
supplemented in accordance with the provisions of this Lease, to such
document as so modified, amended or supplemented and in effect at the
relevant time of reference thereto.
(e) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles.
(f) All references in Section 1.01 hereof are subject to the specified
definitions thereof (if any) in Section 1.03 hereof.
1.03 Terms Defined.
Each term of expression set forth above in Section 1.02 hereof or below in this
Section 1.03 has the meaning stated immediately after it.
Additional Rent. All Taxes, Operating Expenses, costs, expenses and other
charges, (other than Basic Rent) due from Tenant to Landlord or incurred by
Landlord as a result of Default.
Additional Services. Services provided to Tenant or in respect of the Premises
which are not described in Exhibit C hereto.
Adjusted Operating Expense Base. The amount determined by multiplying the
Operating Expense Base by the Adjustment Factor.
Adjusted Tax Base. The amount determined by multiplying the Tax Base by the
Adjustment Factor.
Adjustment Factor. With respect to the First Calendar Year and the Last Calendar
Year, the percentage computed by dividing (i) the number of days of each such
period falling within the Lease term by (ii) 365.
Affiliate. With respect to any specified person, any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition, the
term control when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms controlling and controlled by have meanings correlative to the
foregoing.
Authorizations. All franchises, licenses, permits and other governmental
consents issued by Governmental Authorities pursuant to Legal Requirements which
are or may be required for the use and occupancy of the Premises and the conduct
or continuation of a Permitted use therein.
Basic Services. The services described in Exhibit C hereto.
Building. The building located on the Land.
Building Standard Tenant Finishes. The standards set by Landlord for the quality
of work done on the Premises.
<PAGE>
Business Day. A day which is not a Saturday, Sunday or other day on which banks
in Boston, Massachusetts, are authorized or required by law or executive order
to remain closed.
Calendar Year. The First Calendar Year, the Last Calendar Year and full calendar
year (January 1 through December 31) occurring during the Lease Term.
C.P.I. "Consumer Price Index - All Urban Consumers - (CPI-U) - U.S. City Average
- - All Items (1982-1984=100)" as published by the U.S. Department of Labor.
Common Areas. All areas of the Building devoted to the common use of occupants
of the Building or the provision of Services to the Building, including but not
limited to the atrium, all corridors, elevator foyers, air shafts, elevator
shafts and elevators, stairwells and stairs, rest rooms, mechanical rooms,
janitor closets, vending areas and other similar facilities for the provision of
Services or the use of all occupants of multi-tenant floors or all occupants of
the Building.
Control. As defined in the definition of Affiliate.
Corporation. A corporation, company, association, business trust or similar
organization wherever formed.
Default. Any event or condition specified in Article 20 hereof so long as any
applicable requirement for the giving of notice or lapse of time or both have
not been fulfilled.
Event of Default. Any event or condition specified in (a) Article 20 hereof (if
all applicable periods for the giving of notice or lapse of time or both have
been fulfilled) or (b) in Article 21 hereof.
Fair Rental Value. The amount per square foot per annum which a Person not an
Affiliate of either Landlord or Tenant would pay as Basic Rent (using the Tax
Base and Operating Expense Base) as of the time of determination for the
Premises for a term of five (5) years. All Additional Rent such as Taxes,
Operating Expenses and Estimated Cost of Electrical Service shall be in addition
to the price per square foot so determined.
First Calendar Year. The partial Calendar Year period commencing on the Term
Commencement Date and ending on the next succeeding December 31.
Force Majeure. Acts of God, strikes, lock outs, labor troubles, inability to
procure materials, failure of power, restrictive Legal Requirements, riots and
insurrection, acts of public enemy, wars, earthquakes, hurricanes and other
natural disasters, fires, explosions, any act, failure to act or Default of the
other party to this Lease; provided, however, lack of money shall not be deemed
such a cause.
General Contractor. Rosewood Construction Corp., a Corporation with a place of
business at 259 Turnpike Road, Southborough, MA 01772.
Governmental Authority. United States of America, the Commonwealth of
Massachusetts, the County of Worcester, Town of Westborough, and any political
subdivision thereof and any agency, department, commission, board, bureau or
instrumentality of any of them.
Hazardous Substance. "Oil", "hazardous materials", "hazardous wastes" and
"hazardous substances" as those terms are defined under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., as amended, Massachusetts General Laws, Chapters 21C and 21E, as
amended, and the regulations from time to time adopted under those laws.
<PAGE>
Improvements. All (i) structures located in and forming a part of the Premises,
including but not limited to, walls, ceilings, doors and floor covering, (ii)
pipes, wires, conduits, controls and fixtures relating to utilities located in
and serving the Premises, (iii) casework, including but not limited to, benches,
tables, cabinets and storage facilities, connected to a utility or affixed to
the Premises or the Building and (iv) fixtures, equipment and personal property
of any kind installed on the Premises in such a manner that they become part of
the Premises or the Building under law or that they cannot be removed without
material damage to the structure, fixtures, equipment or personal property or to
the Premises or the Building.
Insolvency. The occurrence with respect to any Person of one or more of the
following events: the death, dissolution, termination of existence (other than
by merger or consolidation), insolvency, appointment of a receiver for all or
substantially all of the property of such person, the making of a fraudulent
conveyance or the execution of an assignment or trust mortgage for the benefit
of creditors by such Person, or the filing of a petition of bankruptcy or the
commencement of any proceedings by or against such Person under a bankruptcy,
insolvency or other law relating to the relief or the adjustment of
indebtedness, rehabilitation or reorganization of debtors; provided that if such
petition or commencement is involuntarily made against such a Person and is
dismissed within sixty (60) days of the date of such filing or commencement,
such events shall not constitute an insolvency hereunder.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to (or affecting any condition, operation, use
or occupancy of) the Building or the Premises or any part or parts of either;
and all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions) applicable to (or affecting any
condition, operation, or occupancy of) the Building or the Premises or any part
or parts of either.
Land. The land on 2200 West Park Drive, Westborough, Worcester County,
Commonwealth of Massachusetts.
Landlord's Contribution. The amount contributed by Landlord as a credit toward
the cost of finishing the Premises shown in Exhibit B.
Landlord's Work. The work to be done by Landlord with respect to the Premises
described in Exhibit E.
Last Calendar Year. The partial Calendar Year commencing on January 1 of the
Calendar Year in which the Lease Termination Date occurs and ending on the Lease
Termination Date.
Lease Term. The period stated in Section 1.01 commencing on the Term
Commencement Date and ending on the Lease Termination Date. The Lease Term
includes the period of any extension executed by Tenant as provided in this
Lease.
Lease Termination Date. The earlier to occur of (1) the Stated Expiration Date,
(2) the termination of this Lease by Landlord as the result of an Event of
Default, (3) the termination of this Lease pursuant to Article 17 (Damage or
Destruction) or 18 (Eminent Domain) hereof.
Lease Year. Each twelve consecutive calendar month period ending on the day
before an anniversary of the Term Commencement Date (or on the day before the
first day of the next succeeding calendar month if the Term Commencement Date
occurs other than on the first day of a month); provided that (a) the first
Lease Year includes the partial month, if any, between the Term Commencement
Date and the first day of the next calendar month and (b) the last Lease Year
will end on the Lease Termination Date.
<PAGE>
Legal Requirements. All statutes, codes, ordinances (and all rules and
regulations thereunder), all executive orders and other administrative orders,
judgments, decrees, injunctions and other judicial orders of or by any
Governmental Authority which may at any time be applicable to parts or
appurtenances of the Premises or Building or to any condition or use thereof and
the provisions of all Authorizations.
Occupancy Arrangement . With respect to the Premises or any portion thereof of
the Lease, and whether (a) written or unwritten or (b) for all or any portion of
the Lease Term, an assignment, a sublease, any tenancy at will, a tenancy at
sufferance, or any other arrangement (including but not limited to a license or
concession) pursuant to which a Person occupies the Premises for any purpose.
Operating Expense Base. With respect to the Operating Expense Base Year the
amount determined by dividing the Rentable Area of the Premises into the amount
herein set forth as the Operating Expenses.
Operating Expenses. All expenses, costs, and disbursements of every kind and
nature which Landlord shall pay or become obligated to pay in connection with
the ownership, operation and maintenance of the Building (including all
facilities in operation on the Term Commencement Date and such additional
facilities which are necessary or beneficial for the operation of the Building)
and the Land and the provision of Basic Services, including, but not limited to
(a) wages, salaries, fees and costs to Landlord of all Persons directly engaged
in connection therewith, including taxes, insurance, and benefits relating
thereto; (b) the cost of (i) all supplies and materials, electricity and
lighting, for Common Areas, (ii) water, heat, air conditioning, and ventilation
for the Building, (iii) all maintenance, janitorial, and service agreements,
(iv) snow removal and maintenance of parking and landscaped areas, (v) all
insurance, including the cost of casualty and liability insurance applicable to
the Building and Landlord's personal property used in connection therewith, (vi)
repairs and general maintenance, (vii) capital items which are primarily for the
purpose of reducing Operating Expenses or which may be required by a
Governmental Authority, amortized over the reasonable life of the capital items
with the reasonable life and amortization schedule being determined by Landlord
in accordance with generally accepted accounting principles, (viii) pursuing an
application for an abatement of taxes to the extent not deducted from the
abatement, if any, received, (ix) independent auditors, (x) Landlord's central
accounting functions, and (xi) providing office space for the manager of the
Building; and (c) management fees and maintenance for common areas and open
areas. Operating Expenses shall not include (i) capital items except as provided
above or (ii) specific costs billed to and paid by specific tenants. Operating
Expenses shall be determined using the accrual method of accounting. If at any
time during the Term, less than ninety-five percent (95%) of the Rentable Area
of the Project is occupied, the Operating Expenses shall be adjusted by Landlord
to the exact operating expenses which would have been incurred if the Project
had been at least ninety-five percent (95%) occupied.
Partial Taking. Any Taking which is not a Total Taking.
Permitted Exceptions. Any hens or encumbrances on the Premises in the nature of
(a) liens for taxes assessed but not yet due and payable, (b) easements,
reservations, restrictions and rights of way encumbering or affecting the Land
on the date of this Lease, (c) the rights of Landlord, Tenant and any other
Person to whom Landlord has granted such rights to exercise in common with
respect to the Land and the Common Areas the rights granted to Tenant hereunder,
(d) mortgages of record, and (e) Title Conditions.
<PAGE>
Person. An individual, a Corporation, a company, a voluntary association, a
partnership, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.
Premises. The space in the Building shown outlined or hatched on Exhibit B
hereto.
Proceeds. With respect to any Taking or occurrence described in Article 17
hereof, with respect to which any Person is obligated to pay any amount to or
for the account of Landlord, the aggregate of (i) all sums payable or receivable
under or in respect of any insurance policy, and (ii) all sums or awards payable
in respect to a Taking.
Rent. Basic Rent and all Additional Rent.
Rentable Area of the Premises. The number of square feet stated in Section 1.01,
whether the same should be more or less as a result of minor variations
resulting from actual construction and completion of the Building or Premises so
long as such work is done in accordance with the terms and provisions hereof.
The calculation was made according to the following formula:
(i) On single tenant floors, the usable area measured from the inside surfaces
of the outer glass of the Building, plus Tenant's Share of Common Areas.
(ii) On multi-tenant floors, the usable area measured from inside surface of the
outer glass of the Building to the midpoint of all demising walls of the space
being measured plus the area of each corridor adjacent to and required as the
result of the layout of the space being measured, measured from the midpoint of
the adjacent demising walls, plus Tenant's Share of Common Areas.
Rules and Regulations. Reasonable rules and regulations promulgated by Landlord
and uniformly applicable to persons occupying the Building regulating the
details of the operation and use of the Building. The initial Rules and
Regulations are attached hereto as Exhibit D.
Services. Basic Services and Additional Services.
Special Work. Work done in or with respect to the Premises which is not part
of Landlord's Work or the cost of which exceeds Landlord's Contribution.
Stated Expiration Date. The last day of the last Lease Year of the Term stated
in Section 1.01.
Substantial Completion Date. The date on which the Premises together with the
appurtenant areas of the Building necessary for access and service thereto, have
been completed in accordance with Article 7 hereof except for items of work and
adjustment of equipment and fixtures which are not necessary to make the
Premises reasonably tenantable for the Permitted Uses and because of season or
weather or nature of the item cannot practicably be done at the time.
Taking. The taking or condemnation of title to all or any part of the Land or
the possession or use of the Building or the Premises by a person for any public
use or purpose or any proceeding or negotiations which might result in such a
taking or any sale or lease in lieu of or in anticipation of such a taking.
Tax Base. With respect to the Tax Base Year the amount determined by dividing
the Rentable Area of the Premises into the amount herein before set forth as
Taxes, but with respect to the First Calendar Year and the Last Calendar Year,
the Adjusted Tax Base.
Taxes. All taxes, special or general assessments, water rents, rates and
charges, sewer rents and other impositions and charges imposed by Governmental
Authorities of every kind and nature whatsoever, extraordinary as well as
ordinary and each and every installment thereof which shall or may during the
term
<PAGE>
of this Lease be charged, levied, laid, assessed, imposed, become due and
payable or become hens upon or for or with respect to the Land or any part
thereof or the Building or the Premises, appurtenances or equipment owned by
Landlord thereon or therein or any part thereof or on this Lease under or by
virtue of all present or future Legal Requirements and are tax based on a
percentage, fraction or capitalized value of the Rent (whether in lieu of or in
addition to the taxes herein before described). Taxes shall not include
inheritance, estate, excise, succession, transfer, gift, franchise, income,
gross receipt, or profit taxes except to the extent such are in lieu of or in
substitution for Taxes as now imposed on the Building, the Land, the Premises or
this Lease.
Tenant. As defined in Section 1.01 of this Lease.
Tenant's Cost. The cost of work done in connection with the completion of the
Premises in excess of (i) the cost of Landlord's Work and (ii) Landlord's
Contribution.
Tenant's Share. Tenant' s share of building is equal to T divided by B x 100%,
where "T" is equal to the number in the Rentable Area of the Premises and "B" is
equal to 95% the total Rentable Area of the Building.
Term Commencement Date. The earlier of (a) the later of (x) the date specified
in Section 1.01(y) the Substantial Completion Date, or (b) any other date for
such commencement determined in accordance with said Article 7, or (c) the date
on which Tenant first occupies the Premises for the Permitted Uses.
Title Conditions. All covenants, agreements, restrictions, easements and
declarations of record on the date hereof so far as the same may be from time to
time in force and applicable.
Total Taking. (i) a Taking of: (a) the fee interest in all or substantially all
of the Building or (b) such title to, easement in, over, under or such rights to
occupy and use any part or parts of the Building to the exclusion of Landlord as
shall have the effect, in the good faith judgment of the Landlord, of rendering
the portion of the Building remaining after such Taking (even if restoration
were made) unsuitable for the continued use and occupancy of the Building for
the Permitted Uses or (ii) a Taking of all or substantially all of the Premises
or such tide to or easement in, on or over the Premises to the exclusion of
Tenant which in the good faith judgement of the Landlord prohibits access to the
Premises or the exercise by Tenant of any rights under this Lease.
Working Drawings. The Working Drawings for the finishing of the Premises
developed by Landlord and Tenant. The Working Drawings shall be prepared in
compliance with All applicable Legal Requirements and stamped by registered
Massachusetts professionals, and shall consist of all architectural and
engineering plans which are required to finish the Premises or to obtain any
Authorization required therefor.
ARTICLE 2
Premises
2.01 Premises.
Landlord hereby leases and lets to Tenant, and Tenant hereby takes and
hires from Landlord, upon and subject to the terms, conditions, covenants and
provisions hereof, the Premises subject to the Permitted Exceptions. Landlord
reserves the right to relocate within or without the Premises pipes, ducts,
vents, flues, conduits, wires and appurtenant fixtures which service other parts
of the Building; provided that such work is done in such a manner that it does
not unreasonably interfere with Tenant's use of the Premises.
2.02 Appurtenances.
<PAGE>
Tenant may use the Common Areas and the Land as appurtenant to the
Premises for the purposes for which they were designed. Tenant has the
nonexclusive right to use the parking area on the Land.
ARTICLE 3
Term
3.01 Term Commencement.
The Lease Term shall commence on the Term Commencement Date.
3.02 Termination.
The Lease Term shall end on the Lease Termination Date.
ARTICLE 4
Rent
4.01 Basic Rent
Tenant shall pay Landlord for the Premises, without offset or deduction
and without previous demand therefor, the Basic Rent as annual rent for each
Lease Year. Basic Rent shall be paid in equal monthly installments in advance on
the first day of each calendar month during the Lease Term. The first
installment of Basic Rent should be paid upon execution of this Lease.
Subsequent installments of Basic Rent shall be paid on the first day of every
calendar month after the Rent Commencement Date.. Basic Rent for partial months
at the beginning or end of the Lease Term shall be pro-rated.
ARTICLE 5
Use of Premises
5.01 Use Restricted.
The Premises may be used for the Permitted Uses and for no other purpose.
No Improvements, alterations or additions may be made in or to the Premises
without written approval of Landlord at his sole discretion.
ARTICLE 6
Taxes; Operating Expenses; Estimated Cost of Electrical Services
6.01 Expenses and Taxes.
Tenant agrees to pay Landlord as Additional Rent, Tenant's share of
Operating Expenses and Taxes as provided in this Article 6. If with respect to
any Calendar Year, Tenant's Share of (a) Operating Expenses exceeds the
Operating Base Year or (b) Taxes exceeds the Tax Base Year (whether as the
result of an increase in rate or assessment or both), Tenant shall pay to
Landlord the amount of each such excess. Any amount due with respect to this
Section 6.01 shall be due on the date which is five (5) days after receipt by
the Tenant of the statement described in Section 6.02 hereof.
6.02 Annual Statement of Additional Rent Due.
Landlord shall render to Tenant a statement in reasonable detail and with
such backup information as Tenant shall reasonably request, showing (a) for the
Calendar Year so indicated ( i) Taxes and (ii)
<PAGE>
Operating Expenses and (b) for the then current Calendar Year, an estimate for
(i) Operating Expenses (ii) Taxes and (iii) Tenant's obligation under Section
6.01.
6.03 Monthly Payments of Additional Rent
Tenant shall pay to Landlord in advance for each calendar month as
Additional rent an amount equal to 1/12th of Tenant's estimated obligation under
Section 6.01 shown thereon. The amount due under this Section 6.03 shall be paid
with Tenant's monthly payments of Basic Rent and shall be credited by Landlord
to Tenant's obligations under Section 6.01. If the total amount paid hereunder
exceeds the amount due under such Section, such excess shall be credited by
Landlord against the monthly installments of Additional Rent next falling due or
shall be refunded to Tenant upon the expiration or termination of this Lease
(unless such expiration or termination is the result of an Event of Default).
6.04 Accounting Periods.
Landlord shall have the right from time to time to change the periods of
accounting hereunder to any other annual period than a Calendar Year, and upon
any such change, all items referred to in this Article 6 shall be appropriately
apportioned. In all statements rendered under Section 6.02, amounts for periods
partially within and partially without the accounting periods shall be
appropriately apportioned, and any items which are not determinable at the time
of a statement shall be included therein on the basis of Landlord's estimate and
with respect thereof Landlord shall render promptly after determination a
supplemental statement and appropriate adjustment shall be made according
thereto.
6.05 Abatement of Taxes.
Landlord may at any time and from time to time make application to the
appropriate Governmental Authority for an abatement of Taxes. Landlord shall
make such an application at any time tenants occupying more than 60% of the
Rentable Area of the Building under written Occupancy Arrangements directly with
the Landlord request that Landlord do so. If (i) such an application is
successful and (ii) Tenant has made any payment in respect of Taxes pursuant to
this Article 6 for the period with respect to which the abatement was granted,
Landlord shall (a) deduct from the amount of the abatement all expenses incurred
by it in connection with the application (b) pay to Tenant Tenant's Share
(adjusted for any period for which Tenant has made a partial payment) of
abatement, with interest, if any, paid by the Governmental Authority on such
abatement and (c) retain the balance, if any.
6.06 Electric Service.
The cost of Electrical Service shall be billed separately through the
utility company directly to the Tenant. All additional risers or other equipment
required for Tenant's Use shall be approved and provided by Landlord, and Tenant
thereof shall pay the cost.
6.07 Late Payment of Rent
If any installment of Base Rent or Additional Rent is not received in full
within five (5) days of its due date then, in addition to any other rights or
remedies of the Landlord, upon demand of Landlord, Tenant shall pay for each
month that rental payments are not timely made, a sum equal to ten percent (10%)
of each unpaid portion of such monthly installment as a liquidated damages
charge arising out of and occurring as the result of each such late payment.
<PAGE>
In the event that Tenant makes three or more payments of rent more than
five (5) days after its due date during the Term, Landlord may deem such action
to constitute an Event of Default sufficient to terminate (i) the Lease (ii) any
provision for exercise by Tenant of any option rights under the Lease or (iii)
both.
ARTICLE 7
Improvements, Repairs, Additions, Replacements
7.01 Preparation of the Premises.
Landlord shall perform Landlord's Work as set forth in Exhibit E. All
other work must be of a quality, equal to or better than the Building Standard
Tenant Finishes. Landlord further agrees to do, at Tenant's request, any Special
Work, Tenant shall pay the amount of Tenants Cost to Landlord as the work
progresses. Landlord's work shall be completed in a good and workmanlike manner
and in compliance with all Legal and Insurance Requirements
7.02 Time for Completion
Landlord shall use due diligence to have the Premises ready for occupancy
on or before the Estimated Term Commencement Date. If the Premises is not
substantially completed, as described in Exhibit B to the Lease (with exception
of minor punch list items), within thirty (30) days following the issuance of a
building permit, Tenant shall then receive one (1) day of rent abatement
(commencing on the Rent Commencement) for each day occupancy is delayed.
Reference is made to Exhibit "B" for details of the completion process.
7.03 Notice to Commence.
Approximately fifteen (15) days prior to the Substantial Completion Date,
at Tenant's written request, Landlord shall furnish Tenant a notice stating the
Term Commencement Date.
7.04 Delays.
Provided that Landlord has otherwise complied with its obligations to
complete Landlord's Work, Landlord shall be delayed in substantially completing
the work in the Premises as the result of:
(a) delay in delivery to Landlord by Tenant of any plans, designwork and
detailed drawing, or
(b) Tenant's requests for Special Work. (notwithstanding Landlord's
approval of such changes), or
(c) delays in performance by Tenant or any Person employed by Tenant which
shall cause delays in the completion of Landlord's Work or which shall
otherwise delay the substantial completion of the Premises, or
(d) any fault, negligence, omission, or failure to act on the part of
Tenant or its agents, contractors, workmen, mechanics, suppliers or
invitees.
The Premises shall be deemed substantially completed on (and the Term
Commencement Date shall be) the Occupancy Date.
7.05 Tenants Access to the Premises.
<PAGE>
Tenant and Tenant's agents, at Tenant's sole risk, may, with Landlord's
prior consent, enter the Premises prior to the Term Commencement Date in order
to do such work as may be required to make the Premises ready for Tenant's use
and occupancy thereof. If Landlord permits such entry prior to the Term
Commencement Date, such permission shall be conditioned upon Tenant and Tenant's
agents, contractors, workmen, mechanics, suppliers and invitees, working in
harmony with Landlord and the General Contractor and with other tenants and
occupants of the Building and Tenant delivering evidence of insurance required
by this lease. If at any time such entry shall cause or threaten to cause
disharmony or otherwise interfere with the orderly completion or operation of
the Building, Landlord shall have the right to withdraw such permission upon
twenty-four (24) hours written notice to Tenant. Any such entry into and
occupation of the Premises shall be deemed to be under all of the terms,
covenants, conditions and provisions of this Lease except the covenant to pay
Rent. Landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant's work and installations made in the Premises
or to properties placed therein prior to the Term Commencement Date, the same
being at Tenant's sole risk.
7.06 Alterations and Improvements.
Tenant shall not make Improvements, alterations or additions to the
Premises except in accordance with plans and specifications therefore first
approved by Landlord. Tenant shall not hang shades, curtains, signs, awnings or
other materials, attach any materials to or make any change in the appearance of
any glass visible from outside of the Premises, add any window treatments of any
kind or make improvements, without Landlord's prior written consent. Without
limitation, Landlord shall not be deemed unreasonable for withholding approval
of any alterations or additions which would (a) delay completion of the Premises
or the Building, or (b) require unusual expense to readapt the Premises to
normal office use upon termination of this Lease or increase (i) the cost of (a)
construction or (b) insurance or (ii) Taxes. All Improvements, alterations and
additions shall be part of the Premises unless and until Landlord shall specify
the same for removal in a notice delivered to Tenant on or before the Lease
Termination Date unless otherwise agreed upon by Landlord and Tenant, in
writing, at the time of installation. All of Tenant's Improvements, alterations
and additions and installation of furnishings shall be coordinated with any work
being performed by Landlord and in such manner as to maintain harmonious labor
relations and not to damage the Building or the Premises or interfere with
Building operation and, except for installation of furnishings, shall be
performed by contractors or workers first approved by Landlord. Except for work
done by or through Landlord, Tenant before its work is started shall: secure all
licenses and permits necessary therefor; deliver to Landlord a statement of the
names of all its contractors and subcontractors and the estimated cost of all
labor and material to be furnished by them; and cause each contractor to carry
workmen's compensation insurance in statutory amounts covering all the
contractor's and subcontractor's employees and combined general liability
insurance with limits as Landlord may reasonably require, but in no event less
than $5,000,000.00 and property damage insurance with limits of not less than
$1,000,000.00 and have deductibles of no more than $5,000.00 (all such insurance
to be written in companies approved by Landlord and insuring Landlord and Tenant
as well as the contractors), and to deliver to Landlord certificates of all such
insurance. Tenant agrees to pay promptly when due the entire cost of any work
done in the Premises by Tenant, its agents, employees or independent
contractors, and not to cause or permit any hens therewith to attach to the
Premises and immediately to discharge any such hens which may so attach. All
construction work done by Tenant, its agents, employees or independent
contractors shall be done in a good and workmanlike manner and in compliance
with all Legal Requirements and Insurance Requirements. Landlord may inspect the
work at its option.
ARTICLE 8
Building Services
8.01 Building Services.
Landlord shall furnish, or cause to be furnished, during the Lease Term
the Basic Services.
<PAGE>
8.02 Other Janitors.
No Person shall be employed by Tenant to do janitorial work in the
Premises and no Person other than the janitors of the Building shall clean the
Premises unless Landlord shall give its written consent thereto. Any Person
employed by Tenant with Landlord's consent to do janitorial work shall, while in
the Building, either inside or outside the Premises, be subject to and under the
control and direction of the superintendent of the Building (but not as agent or
servant of said superintendent or of Landlord).
8.03 Additional Services.
Tenant will pay the Landlord a reasonable charge for any extra cleaning of
the Premises required because of the negligence of Tenant and for any Additional
Services rendered at the request of Tenant If the cost of cleaning the Premises
shall be increased due to the installation in the Premises, at Tenants request,
of any unique or special materials, finish or equipment, Tenant shall pay the
Landlord an amount equal to such increase in cost. All charges for Additional
Services shall be due and payable within ten (10) days of the date on which they
are billed.
8.04 Limitations on Landlord's Liability
Landlord shall not be liable in damages, nor in default hereunder, for any
failure or delay in furnishing any Basic Service or Additional Service when such
failure or delay is occasioned by Force Majeure or by the act or Default of
Tenant No such failure or delay shall be held or pleaded as eviction or
disturbance in any manner whatsoever of Tenant's possession or give Tenant any
right to terminate this Lease or give rise to any claim for set-off of any
abatement of Rent or of any of Tenant's obligations under this Lease, provided,
however, if Tenant is unable to operate its business for any 24 hour period,
Basic Rent and Additional Rent shall be abated, and if such interruptions
continues for seven (7) consecutive business days, Tenant may, at its election,
terminate this Lease.
ARTICLE 9
Tenant's Particular, Covenants
9.01 Pay Rent
Tenant shall pay when due and without notice, demand, offset or deduction,
all Rent and all charges for utility services rendered to the Premises not
included in Rent and, as Additional Rent, all charges of Landlord for Additional
Services.
9.02 Occupancy of the Premises.
Tenant shall occupy the Premises continuously from the Term Commencement
Date for the Permitted Uses only. Tenant shall not (i) injure or deface the
Premises or the Building, (ii) install any sign in or on any window, demising
wall or Common Area, (iii) permit in the Premises any flammable fluids or
chemicals not reasonably related to the Permitted Uses nor (iv) permit nuisance
or any use thereof which is improper, offensive, contrary to any Legal
Requirement or Insurance Requirement or liable to render necessary any
alteration or addition to the Building.
9.03 Safety.
Tenant shall keep the Premises equipped with all safety appliances
required by Legal Requirements or Insurance Requirements because of any
particular use made by Tenant. Tenant shall procure all Authorizations so
required because of such use and, if requested by Landlord, shall do any work so
required because of such use, it being understood that the foregoing provision
shall not be construed to broaden in any way the Permitted Uses.
<PAGE>
9.04 Equipment.
Tenant shall not place a load upon the floor of the Premises exceeding a
live load of 100 pounds per square feet; and shall not move any safe or other
heavy equipment in, about or out of the Premises except in such a manner and at
such a time as Landlord shall in each instance authorize. Tenant shall isolate
and maintain all of Tenant's business machines and mechanical equipment which
cause or may cause air-borne or structure-born vibration or noise, whether or
not it may be transmitted to any other Premises so as to eliminate such
vibration or noise.
9.05 Electrical Equipment.
Tenant shall not, without prior written notice to Landlord in each
instance (i) connect to the Building electric distribution system anything other
than normal office equipment or (ii) operate such equipment on a regular basis
beyond normal Building operating hours. Tenant's use of electrical energy in the
Premises shall not at any time exceed the capacity of any of the electrical
conductors or equipment in or otherwise serving the Premises. Tenant shall not,
without prior written notice to Landlord in each instance, connect to the
Building electric distribution system any fixtures, appliances or equipment
which operate on a voltage in excess of 120 volts nominal or make any alteration
or addition to the electric system of the Premises.
9.06 Pay Taxes.
Tenant shall pay promptly when due all taxes upon personal property
(including, without limitation, fixtures and equipment) in the Premises to
whomsoever assessed.
9.07 Tenant's Covenants.
Tenant will not vacate, abandon or desert the Premises or cause the
Premises to be empty or unoccupied during the Lease Term.
9.08 Maintenance.
Tenant shall, at all times during the Lease Term, and at its own cost and
expense, (i) keep and maintain (or cause to be kept and maintained) the Premises
in good repair and condition (ordinary wear and tear and damage by fire or
casualty only excepted) and (ii) use all reasonable precaution to prevent waste,
damage or injury thereto.
9.09 Redelivery.
On the Lease Termination Date, Tenant shall quit and surrender the
Premises free and clear of all tenants, occupants, hens, and encumbrances
whatsoever except
(i) Permitted Exceptions and (ii) encumbrances, restrictions or
reservations caused by or consented to by Landlord. Tenant shall, subject
to the provisions of Articles 17 and 18 hereof, surrender the Premises to
Landlord broom clean and in good condition and repair (ordinary wear and
tear, damage by fire or casualty only excepted) with all damages
occasioned by Tenant's removal of Tenant's fixtures or equipment repaired
at Tenant's cost to Landlord's satisfaction.
ARTICLE 10
Requirements of Public Authority
10.01 Legal Requirements.
<PAGE>
Tenant shall, at its own cost and expense, promptly observe and comply
with all Legal Requirements. Tenant shall pay all costs, expenses, liabilities,
losses, damages, fines, penalties, claims and demands, that may in any manner
arise out of or be imposed because of the failure of Tenant to comply with the
covenants of this Article 10.
10.02 Contests.
Tenant shall have the right to contest by appropriate legal proceedings
diligently conducted in good faith, in the name of the Tenant, or Landlord (if
legally required), or both (if legally required), without cost, expense,
liability or damage to Landlord, the validity or application of any Legal
Requirement and, if compliance with any of the terms of any such Legal
Requirement may legally be delayed pending the prosecution of any such
proceeding, Tenant may delay such compliance therewith until the final
determination of such proceeding.
10.03 Environmental Legal Requirements.
Except to the extent permitted under applicable Legal Requirements, Tenant
agrees not to cause or permit any Hazardous Substances to be released on the
Land or in the Building or the Premises or into the air, or to be introduced
into the sewer or other waste disposal system serving the Premises. Tenant
agrees to generate, store or dispose of Hazardous Substances in the Premises or
dispose of Hazardous Substances from the Premises to any other location only in
compliance with all applicable Legal Requirements and to notify Landlord of any
incident which would require the filing of a notice under any Legal Requirement.
Tenant agrees to provide Landlord with such information required by Governmental
Authorities as Landlord may reasonably request from time to time with respect to
compliance with this Section.
ARTICLE 11
Covenant Against Liens
11.01 Mechanics Liens.
Landlord's right, title and interest in the Premises or the Land or the
Building shall not be subject to or liable for liens of mechanics or material
men for work done on behalf of Tenant in connection with improvements to the
Premises. Notwithstanding such restriction, if because of any act or omission of
Tenant, any mechanic's hen or other hen, charge or order for payment of money
shall be filed against any portion of the Premises or the Land or the Building,
Tenant shall, at its own cost and expense, cause the same to be discharged of
record or bonded within thirty (30) days after the filing thereof.
11.02 Right to Discharge.
Without otherwise limiting any other remedy of Landlord for default
hereunder, if Tenant shall fail to cause such hens to be discharged of record or
bonded within the aforesaid thirty (30) day period or to satisfy such hens
within (30) days after any judgement in favor of such hen holders from which no
further appeal might be taken then Landlord shall have the right to cause the
same to be discharged. All amounts paid by Landlord to cause such hens to be
discharged shall constitute Additional Rent.
ARTICLE 12
Access to Premises
12.01 Access.
Landlord or Landlord's agents and designers shall have the right, but not the
obligation, to enter upon the Premises at all reasonable times with reasonable
advanced notice during ordinary business hours to examine same and to exhibit
the Premises to prospective purchasers and tenants.
<PAGE>
ARTICLE 13
Assignment and Subletting: Occupancy Arrangements
13.01 Subletting and Assignment.
Tenant shall have the right, with Landlord's consent, to sublet the whole
or any portion of the Premises for the use and purposes permitted under the
Lease. The person or entity to which the Tenant intends to sublease must be of
equal net worth as Tenant.
If Tenant intends to enter into a Occupancy Arrangement which requires
Landlord's consent, Tenant shall so notify Landlord in writing, stating the name
of (and a financial statement with respect to) the Person whom Tenant intends to
enter into such arrangement and the description of the portion of the Premises
intended to be subject thereto. Within fifteen (15) days of receipt of such
writing, Landlord shall either (i) consent to such Occupancy Arrangement or (ii)
terminate the Lease pertaining to that portion of the Premises Tenant proposes
to sublease.
If the Landlord consents to such Occupancy Arrangement, Tenant shall (i)
enter into such Arrangement within thirty (30) days of Landlord's consent or
comply again with their terms of this Section and (ii) remain liable for the
payment and performance of the terms and covenants of this Lease. If Tenant
enters into such an Arrangement, Tenant shall pay to Landlord one-half (1/2) of
any received the excess, if any, of amounts received in respect of such
Occupancy Arrangement over the Rent.
If Landlord terminates this Lease, all Rent due shall be adjusted as of
the day the Premises (or portion thereof) are redelivered to Landlord. Any
portion of the Premises so redelivered shall be in the condition specified in
Section 7.08 hereof.
ARTICLE 14
Indemnity
14.01 Landlord and Tenant's Indemnity.
To the fullest extent permitted by law, Landlord and Tenant shall defend,
indemnify and save each other harmless from and against any and all liability,
damage, penalties or judgments and from and, against any claims, actions,
proceedings and expenses and costs in connection therewith, including reasonable
counsel fees arising from injury to person or property sustained by anyone in
and about the Premises, by any act or omission of either party, or their
officers, agents, servants, employees, contractors, sublessees or invitees
unless caused by the negligent or intentional acts of Landlord or Tenant or its
others, agents, servants, or employees. Tenant and Landlord shall, at is own
cost and expense, defend any and all suits or actions just or unjust) in which
either party may be impleaded with others upon any above mentioned matter, claim
or claims, except as may result from the acts as set forth in Section 14.02. All
merchandise, furniture, fixtures and property of every kind, nature and
description of either party's employees, agents, contractors, invitees,
visitors, or guests which may be in or upon the Premises, the Land or the
Building during the Lease Term shall be at the sole risk and hazard of Tenant or
Landlord, and that if the whole or any part thereof shall be damaged,
whatsoever, other than by the gross negligence or willful default of Tenant or
Landlord, no part of said damage or loss shall be charged to or borne by either
party.
14.02 Landlord's Liability.
Except for its intentional acts or negligence or the intentional acts or
negligence of its officers, agents, servants, employees or contractors, Landlord
shall not be responsible or liable for any damage or injury to any property,
fixtures, buildings or improvements, or to any person or persons, at any time in
the
<PAGE>
Premises, including any damage or injury to Tenant or to any of Tenants
officers, agents, servants, employees, contractors, invitees, customers or
sublessee.
ARTICLE 15
Insurance
15.01 Liability Insurance.
Tenant shall provide or cause to be provided at its expense, and keep in
force during the Lease Term, commercial general liability insurance in a good
and solvent insurance company or companies licensed to do business in the
Commonwealth of Massachusetts, selected by Tenant, and reasonably satisfactory
to Landlord, and in an amount reasonably required by Landlord but in any event
not less than One Million Dollars ($1,000,000.00) with respect to injury or
death to any one person and One Million Dollars ($1,000,000.) with respect to
injury or death to more than one person in any one accident or other occurrence
and One Million Dollars ($1,000,000.00) with respect to damages to property.
Such policy or policies shall include Landlord as an additional insured and have
deductibles of no more than $5,000.00. Tenant agrees to deliver certificates of
such insurance to Landlord as of the date hereof and thereafter not less than
ten (10) days prior to the expiration of any such policy. Such insurance shall
not be cancelable without thirty (30) days' written notice to Landlord.
15.02 Casualty Insurance.
Tenant shall cause its improvements to the Premises to be insured for the
benefit of Landlord and Tenant as their respective interests may appear, against
loss or damage by fire and customary extended coverage in an amount equal to (i)
the replacement value thereof, if insurance in such amount is available, or (ii)
the amount necessary to avoid the effect of coinsurance provisions of the
applicable policies. Certificates thereof shall be delivered to Landlord,
Landlord shall, at Tenant's cost and expense, cooperate fully with Tenant and
execute any and all consents and other instruments and take all other actions
necessary to obtain the largest possible recovery. Landlord shall not carry any
insurance concurrent in coverage and contributing in the event of loss with any
insurance required to be furnished by Tenant hereunder if the effect of such
separate insurance would be to reduce the protection or the payment to be made
under Tenant's insurance.
ARTICLE 16
Waiver of Subrogation
16.01 Waiver of Subrogation.
All insurance policies carried by either party covering the Premises,
including but not limited to contents, fire and casualty insurance but not
including commercial general liability insurance, shall expressly waive any
right on the part of the insurer to make any claim against the other party. The
parties hereto agree that their policies will include such waiver clause or
endorsement
16.02 Waiver of Rights.
Landlord and Tenant each hereby waive all claims, causes of action and
rights of recovery against the other and their respective partners, agents,
officers and employees, for any damage to or destruction of persons, property or
business which shall occur on or about the Premises and shall result from any of
the perils insured under any and all policies of insurance maintained by
Landlord and Tenant, regardless of cause, including the negligence and
intentional wrong doing of either party and their respective agents, officers
and employees but only to the extent of recovery, if any under such policy or
policies of insurance; provided however, that this waiver shall be invalidated
by reason of this waiver.
ARTICLE 17
<PAGE>
Damage of Destruction
17.01 Substantial Damage
If the Building or any part thereof shall be damaged by fire or other
casualty to the extent that substantial alteration or reconstruction of the
Building shall, in Landlord's reasonable opinion, be required (whether or not
the Premises shall have been damaged) or if the proceeds of insurance are
required to be used to retire the mortgage debt, Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of such damage. If this Lease is so terminated,
Rent shall be abated as of the date of such damage.
17.02 Restoration.
If Landlord does not terminate this Lease pursuant to Section 17.01,
Landlord shall, within seventy-five (75) days after receipt by Landlord of the
Proceeds payable in respect of such fire or other casualty, proceed with
reasonable diligence to repair and restore the Building (subject to Force
Majeure) to substantially the same condition in which it was immediately prior
to the occurrence of the casualty to the extent of Landlord's Work and the value
of Landlord's Contribution. Landlord shall not be required to rebuild, repair,
or replace any part of Tenant's furniture, furnishings or fixtures or equipment.
Landlord shall not be liable for any inconvenience or annoyance to Tenant or
injury to the business of Tenant resulting in any way from such damage or the
repair thereof, except that, Landlord shall allow Tenant an abatement of Rent,
Additional Rent and all other charges payable hereunder during the time and to
the extent the Premises are unfit for the operation of Tenant's business. If
such restoration is not completed within one hundred and twenty (120) days after
the prior casualty, Tenant may terminate this Lease after Landlord is in receipt
of all proceeds.
ARTICLE 18
Eminent Domain
18.01 Total Taking.
If the Premises or the Building should be the subject of a Total Taking,
then this Lease shall terminate as of the date when physical possession of the
Building or the Premises is taken by the condemning Governmental Authority.
18.02 Partial Taking.
If there occurs a Partial Taking, Landlord (whether or not the Premises are
affected thereby) may terminate this Lease by giving written notice thereof to
Tenant within sixty (60) days after the right of election accrues, in which
event this Lease shall terminate as of the date the Building or Premises is
taken by the condemning authority. If upon such Partial Taking this Lease is not
terminated, Rent shall be abated by an amount representing that part of the Rent
properly allocable to the portion of the Premises so taken and Landlord shall,
at Landlord's sole expense, restore and reconstruct the Building and the
Premises to substantially their former condition to the extent that the same, in
Landlord's judgement, may be feasible, but such work shall not exceed the scope
of Landlord's Work and the value of Landlord's Contribution. The Landlord shall
have no liability for interruption of Tenant's business. If such restoration is
not completed with one hundred and twenty (120) days after such Partial Taking,
Tenant may terminate this Lease.
18.03. Awards and Proceeds.
<PAGE>
All Proceeds payable in respect of Taking shall be the property of
Landlord. Tenant hereby assigns to Landlord all rights of Tenant in or to such
Proceeds, provided that Tenant shall be entitled to separately petition the
condemning authority for a separate award for its moving expenses and trade
fixtures but only if such a separate award will not diminish the amount of
Proceeds payable to Landlord.
ARTICLE 19
Quiet Enjoyment
19.01 Landlord's Covenant.
Provided that an Event of Default has not occurred and is not then
continuing, Tenant shall, subject to the Permitted Exceptions, quietly have and
enjoy the Premises during the Lease Term, without hindrance or molestation from
any Person lawfully claiming by, through or under Landlord. Landlord represents
that it has good and marketable title to the Land, the Building and the
Premises, that the Permitted Use is allowed by law and that the Permitted
Exceptions win not interfere with Tenant's Permitted Use.
19.02 Subordination
This Lease is and shall be subject and subordinate to any mortgage now or
hereafter on the Building and to each advance made or hereafter to be made under
any mortgage, and to all renewals, modifications, consolidations, replacements
and extensions thereof and all substitutions therefore. This Section 19.02 shall
be self-operative and no further instrument of subordination shall be required.
In confirmation of such subordination, Tenant shall execute and deliver promptly
(within ten (10) days of receipt) any certificate that Landlord or any mortgagee
may request. In the event that any mortgagee shall succeed to the interest of
Landlord then this Lease shall terminate, or, at the option of such mortgagee,
this Lease shall nevertheless continue in full force and effect and Tenant shall
and does hereby agree to attorn to such mortgagee and to recognize such
mortgagee as its Landlord.
19.03 Notice to Mortgagee.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant s
obligations hereunder or to terminate this Lease, shall result in a release or
termination or such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees of record, whose identity has been furnished to Tenant in
writing, if any, specifying the act or failure to act on the part of Landlord
which could or would give basis to Tenant's rights; and (ii) such mortgagees,
after receipt of such notice, have had the opportunity to cure such default
within the same time period as applicable to Landlord; but nothing contained in
this Section 19.03 shall be deemed to impose any obligation on any such
mortgagees to correct or cure any such condition. "Reasonable time" as used
above shall mean a period of not less than thirty (30) Business Days and shall
include (but not be limited to) a reasonable time to obtain possession of the
Building if the mortgagee elects to do so and a reasonable time to correct or
cure the condition if such condition is determined to exist.
19.04 Other Provisions Regarding Mortgagees.
If this Lease or the Rent due hereunder is assigned to a mortgagee as
collateral security for a loan, no such mortgagee shall be deemed to have
assumed any of Landlord's obligations hereunder solely as a result of said
assignment. A mortgagee to whom this Lease has been so assigned shall be deemed
to have assumed such obligations only if (i) by the terms of the instrument of
assignment such mortgagee specifically elects to assume such obligations or (ii)
such mortgagee has (a) foreclosed its mortgage, (b) accepted a deed in lieu
thereof, or (c) taken possession of the Premises by entry or otherwise. Even if
such mortgagee assumes the obligations of Landlord hereunder, (i) any such
obligation under Section 24.01 to return the Security Deposit to the Tenant
shall be limited to the amount actually received by the mortgagee
<PAGE>
with respect thereto, and (ii) such mortgagee will be liable for breaches of any
Landlord's obligations hereunder only to the extent such breaches occur during
the period of ownership by the mortgagee after foreclosure (or any conveyance by
a deed in lieu thereof), all as set forth in Section 25.10. hereof. Tenant may
from time to time, at mortgagees request, be required to provide mortgagee with
certain financial information pertaining to the Tenant as mortgagee may
reasonably request.
ARTICLE 20
Defaults; Events of Default
20.01 Defaults.
The following will (i) if any requirement for notice or lapse of time has
not been met, constitute Defaults, and (ii) if there are no such requirements or
if such requirements have been met, constitute Events of Default
(a) The failure of Tenant to pay Rent when due, and the continuation of
the failure for a period of ten (10) days;
(b) The failure of Tenant to perform any of its obligations under this
Lease, other than its obligation to pay Rent, and the continuation of the
failure for a period of twenty (20) days after notice form Landlord
specifying in reasonable detail the nature of the failure;
(c) The failure of Tenant to pay Rent when due or to perform any of its
obligations under this Lease, if Landlord has given Tenant notice of the
same or similar failure at least three times during the term proceeding
the date on which the Rent or performance was due.
(d) The occurrence with respect to Tenant or any Guarantor of one or more
of the following events: the death, dissolution, termination of existence
(other than by merger or consolidation), insolvency, appointment of a
receiver for an or substantially all of its property, the making of a
fraudulent conveyance or the execution of an assignment or trust mortgage
for the benefit of creditors by it, or the filing of a petition of
bankruptcy or the commencement of any proceedings by or against it under a
bankruptcy, insolvency or other law relating to the relief or the
adjustment of indebtedness, rehabilitation or reorganization of debtors;
provided that if such petition or commencement is involuntarily made
against it and is dismissed within sixty (60) days of the date of such
filing or commencement, such events will not constitute an Event of
Default;
(e) The issuance of any execution or attachment against Tenant or any
other occupant of the Premises as a result of which the Premises are taken
or occupied by a Person other than Tenant; and
(f) The cancellation of, refusal to review or denial of liability under
any insurance policy relating to the Premises as a result of the Premises
being unoccupied.
20.02 Tenant's Best Efforts.
In the event that the Default of which Landlord gives notice is of such a
nature that it cannot be cured within such twenty (20) day period, then such
Default shall not be deemed to be an Event of Default so long as Tenant, after
receiving such notice, proceeds to cure the Default as soon as reasonably
possible and continues to take all steps necessary to complete the same within a
period of time which, under all prevailing circumstances, shall be reasonable.
No Default shall be deemed to be an Event of Default if and
<PAGE>
so long as Tenant shall be so proceeding to cure the same in good faith or be
delayed in or prevented from curing the same by reason of Force Majeure.
20.03 Tenant's Default - Rent Abatement Cancellation.
If an Event of Default occurs at any time during the term of this Lease,
Landlord shall have the option of retracting the full rent abatement, if any,
and Tenant shall pay the full abated amount immediately to Landlord upon demand.
ARTICLE 21
Bankruptcy or Insolvency
21.01
In the event that Tenant shall become a debtor under the Bankruptcy Code, and
the trustee or Tenant shall elect to assume this Lease for the purposes of
assigning the same or otherwise, such election and assignment may only be made
if all the terms and conditions of Sections 21.02 and 21.03 hereof are
satisfied. If such trustee shall fail to elect to assume this Lease within sixty
(60) days after the filing of the petition, this Lease shall be deemed to have
been rejected. Landlord shall be thereupon immediately entitled to possession of
the Premises without further obligation to Tenant or the trustee, and this Lease
shall be terminated, but the Landlord's right to be compensated for damages both
at law and as provided in ARTICLE 20 hereof in such case shall survive.
21.02
A. No election by the trustee or debtor-in-possession to assume this lease,
whether under Chapter 7, 11 or 13 of the Bankruptcy Code, unless otherwise
ordered by the Bankruptcy Court, shall be effective unless each of the following
conditions, which Landlord and Tenant acknowledge and agree are commercially
reasonable in the context of a bankruptcy case of Tenant, have been satisfied,
and Landlord has so acknowledged in writing:
(1) The trustee or the debtor-in-possession has cured, or has provided
Landlord adequate assurance (as hereinafter defined) that:
(a) Within ten (10) days from the date of such assumption, the trustee will
cure all monetary defaults under this Lease; and
(b) Within thirty (30) days from the date of such assumption, the trustee will
cure all nonmonetary defaults under this Lease.
(2) The trustee or debtor-in-possession has compensated, or has provided to
Landlord adequate assurance (as hereinafter defined) that within ten (10)
days from the date of assumption, Landlord will be compensated for any
pecuniary loss incurred by Landlord arising from the default of Tenant,
trustee, or the debtor-in possession as recited in Landlord's written
statement of pecuniary loss sent to the trustee or debtor-in-possession.
(3) The trustee or the debtor-in-possession has provided Landlord with adequate
assurance (as hereinafter defined) of the future performance of each of Tenant's
the trustee's or debtor-in possession's obligations under this Lease, Provided,
however, that:
(a) Whether or not otherwise required by the terms of this Lease, the trustee or
debtor-in-possession shall also pay in advance on the date minimum rent is
payable hereunder, one twelfth (1/12th) of Tenant's annual obligations under
this Lease for Operating Expenses, Taxes, and any other charges payable
hereunder;
<PAGE>
(b) From and after the date of the assumption of this Lease, the trustee
or debtor-in possession shall pay as annual minimum rent the amount equal to the
sum of the annual minimum rent otherwise payable hereunder; and
(c) The obligations imposed upon the trustee or debtor-in-possession under
this Lease shall continue with respect to Tenant or any assignee of this Lease
after the completion of the bankruptcy case, subject to any further and/or
increased obligations, which thereafter are imposed by any provisions of this
Lease.
(4) The assumption of this Lease will not breach any provision in this Lease or
any other lease, mortgage, financing agreement or other agreement by which
Landlord is bound relating, to the Building.
(5) The assumption has been ratified and approved by order of such court or
courts as have jurisdiction under the Bankruptcy Code.
B. For the purposes of this Section 21.02, Landlord and Tenant acknowledge that,
in the context of a bankruptcy proceeding of Tenant, at a minimum, "adequate
assurance" shall mean (unless otherwise determined by the Bankruptcy Court):
(1) The trustee or debtor-in-possession has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the trustee or
debtor-in-possession will have sufficient funds to fulfill the obligations of
Tenant under this Lease; and
(2) The Bankruptcy Court or such court as is exercising jurisdiction over the
Bankruptcy Code shall have entered an order segregating sufficient cash payable
to Landlord and/or the trustee or debtor-in-possession, acceptable as to value
and kind to the Landlord, to secure to Landlord the obligation of the trustee or
debtor-in-possession to cure any monetary and/or nonmonetary defaults under this
Lease within the time periods set forth above.
Section 21.03
If the trustee or debtor-in-possession has assumed this Lease pursuant to the
terms and provisions of Section 21.01 and 21.02 hereof, for the purpose of
assigning (or elects to assign) Tenant's interest under this Lease, or the
estate created thereby, to any other person, such interest or estate may be so
assigned only if Landlord shall acknowledge in writing that the intended
assignee has provided adequate assurance of the future performance (as defined
in this Section 21.03) of all the terms, covenants and conditions of this Lease
to be performed by Tenant.
For the purposes of this Section 21.03, Landlord and Tenant acknowledge that, in
the context of a bankruptcy case of Tenant, at a minimum, "adequate assurance of
future performance" shall mean (unless otherwise determined by the Bankruptcy
Court) that each of the following conditions have been satisfied, and Landlord
has so acknowledged in writing:
(1) The assignee has submitted a current financial statement audited by a
certified public accountant which shows a net worth and working capital in
amounts (which amounts shall in no event be less than the greater those of
Tenant and any guarantor of Tenant's obligations hereunder at the time of the
execution of this lease) determined to be sufficient by Landlord to assure the
future performance of such assignee of Tenant's obligations under this Lease;
(2) Landlord has obtained all consents and waivers from any third party required
under any lease, mortgage, financing arrangement or other agreement by which
Landlord is bound to permit Landlord to consent to such assignment;
<PAGE>
(3) The assignee has supplied such additional information requested by Landlord
and has complied with any other provisions, conditions and requirements set
forth in this Lease for an assignment of Tenant's interest in this Lease or the
estate created thereby; and
(4) The Assignee has deposited with Landlord a security deposit in such amount
as determined by Landlord to be appropriate based upon the financial information
supplied under this Section 21.03.
Section 21.04
When, pursuant to the Bankruptcy Code, the trustee or debtor-in-possession
shall be obligated to pay reasonable use and occupancy charges for the use of
the Premises or any portion thereof, such charges shall not be less than the
Rent and any other charges payable by Tenant hereunder unless otherwise
determined by the Bankruptcy Court.
Section 21.05
The rights and remedies of the Landlord contained in the provisions of
this ARTICLE 21 are and shall be deemed to be in addition to, and not in
limitation of, applicable provisions of ARTICLE 20 and ARTICLE 22 and other
provisions hereof, or any other rights which the Landlord may have under
applicable statutory or case law. Whenever any of the terms or provisions of
this Lease, including, without limitation, rental obligations, are modified
pursuant to the provisions of this ARTICLE 21, upon Landlord's request the
parties hereto promptly shall execute, acknowledge and deliver a written
instrument evidencing and confirming the same. In no event shall this Lease, if
the term hereof has expired or has been terminated in accordance with the
provisions hereof, be revived, and no stay or other proceeding shall nullify,
postpone or otherwise affect the expiration or earlier termination of the term
of this Lease pursuant to the provisions of ARTICLE 20 and ARTICLE 22 hereof or
prevent Landlord from regaining possession of the Premises thereupon.
ARTICLE 22
Landlord's Remedies; Damages on Default
22.01 Landlord's Remedies.
If an Event of Default shall occur and be continuing, Landlord may, at its
option, give to Tenant a notice terminating this Lease upon a date specified in
such notice, which date shall be not less than three (3) Business Days after the
date of receipt by Tenant of such notice from Landlord, and upon the date
specified in said notice, the term and estate hereby vested in Tenant shall
cease and any and all other right, title and interest of Tenant hereunder shall
likewise cease without further notice or lapse of time, as fully and with like
effect as if the entire Lease Term had elapsed, but Tenant shall continue to be
liable to Landlord as hereinafter provided.
If such Event of Default results from Tenants failure to pay Tenant's Cost as
required by Section 7.01 hereof and the Work Letter, Landlord may, at its
option, in addition to or in lieu of the other remedies available to Landlord,
refuse Tenant access to the Premises. In such event the Term Commencement Date
shall be the earlier of (i) the date determined in accordance with Section 7.04
or (ii) the Substantial Completion Date.
If such Event of Default results from Tenant's failure to pay a charge for
an Additional Service pursuant to Section 8.03 hereof, Landlord may, without
further notice to Tenant, discontinue any or all of such Additional Services.
If an Event of Default shall occur and be continuing, Landlord shall be
relieved of its undertakings under Article 13 hereof.
<PAGE>
22.02 Surrender.
Upon any termination of this Lease as the result of an Event of Default,
Tenant shall quit and peacefully surrender the Premises to Landlord, upon or at
any time after any such termination, Landlord may without further notice enter
the Premises and possess itself thereof by summary proceedings or otherwise, any
may dispossess Tenant and remove Tenant and all other Persons and property from
the Premises and may have, hold and enjoy the Premises and the right to receive
all rental income of and from the same.
22.03 Right to Relet.
At any time from time to time after any such termination, Landlord may
relet the Premises or any part thereof, in the name of Landlord or otherwise,
for such terms or terms (which may be greater or less than the period which
would otherwise have constituted the balance of the Lease Term) and on such
conditions (which may include concessions or free rent) as Landlord, in its
reasonable discretion, may determine and may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Premises or any part thereof, or for any failure to collect any rent
due upon any such reletting. Landlord shall use reasonable efforts to relet the
Premises and mitigate damages.
22.04 Survival of Covenants.
No such termination of this Lease shall relieve Tenant of its liability
and obligations under this Lease and such liability and obligations shall
survive any such termination. Tenant shall indemnify and hold Landlord harmless
from all loss, cost, expense, damage or liability arising out or in connection
with such termination.
In the event of any such termination, Tenant shall pay to the Landlord the
Rent up to the date of such termination. Tenant shall also pay to Landlord, on
demand, as and for liquidated and agreed damages for Tenant's Default, the
difference between
(1) the aggregate Rent which would have been payable under this Lease by
Tenant from the date of such termination until the Stated Expiration
Date, less
(2) the fair and reasonable rental value of the Premises for the same
period discounted to present value, excluding all of Landlord's
reasonable estimate of expenses to be incurred in connection with
reletting the Premises, including, without limitation, all repossess
costs, brokerage commission, legal expenses, reasonable attorney's
fees, alteration costs, and expenses of preparation for such
reletting.
If the Premises or any part thereof are relet by the Landlord before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be, prima facie,
the fair and reasonable rental value for the part or the whole of the Premises
so relet during the term of the reletting.
Nothing herein contained shall limit or prejudice the right of the
Landlord to prove and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute of rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
22.05 Right to Equitable Relief.
<PAGE>
If there shall occur a Default or threatened Default, Landlord shall be
entitled to enjoin such Default or threatened Default and shall have the right
to invoke any right and remedy allowed at law or in equity or by statute or
otherwise as though re-entry, summary proceedings, and other remedies were not
provided for in this Lease.
22.06 Right to Self Help; Interest on Overdue Rent.
If an Event of Default shall occur and be continuing, Landlord shall have
the right, but shall not be obligated, to enter upon the Premises and to perform
such obligation notwithstanding the fact that no specific provision for such
substituted performance by Landlord is made in this Lease with respect to such
Default In performing such obligation, Landlord may make any payment of money or
perform any other act. The aggregate of (i) all sums so paid by Landlord, (ii)
interest (at the rate of 11/2% per month or the highest rate permitted by law,
whichever is less) on such sum plus all Rent not paid when due and (iii) all
necessary incidental costs and expenses in connection with the performance of.
any such act by Landlord,. shall be deemed to be Rent under this Lease and shall
be payable to Landlord immediately upon demand. Landlord may exercise the
foregoing rights without waiving any other of its rights or releasing Tenant
from any of its obligations under this Lease.
22.07 Intentionally Deleted
ARTICLE 23
Waivers
23.01 No Waivers.
Failure of Landlord to complain of any act or omission on the part of
Tenant no matter how long the same may continue, shall not be deemed to be a
waiver by Landlord of any of its rights hereunder. No waiver of any provision of
this Lease shall be deemed a waiver of a breach of the same or any other
provision. No acceptance by Landlord of any partial payment shall constitute an
accord or satisfaction but shall only be deemed a partial payment on account.
ARTICLE 24
Security Deposit
24.01 Security Deposit
Tenant has deposited the Security Deposit with Landlord. Landlord shall
hold the Security Deposit as security for the full and faithful payment or
performance by Tenant of its obligations under this Lease and not as a
prepayment of Rent. Landlord may commingle the Security Deposit with other funds
of Landlord but shall not be liable to Tenant for the payment of interest
thereon or profits therefrom. Landlord may expend such amounts from the Security
Deposit, including legal fees, as may be necessary to cure any Default and, in
such case, Tenant shall pay to Landlord the amount so expended, on demand, after
written notice from Landlord specifying the application of the spent funds.
Landlord shall assign the Security Deposit to any subsequent owner of the
Building and thereafter Landlord shall have no further liability to Tenant with
respect thereto.
ARTICLE 25
General Provisions
<PAGE>
25.01 Force Majeure.
In the event that Landlord or Tenant shall be delayed, hindered in or
prevented from the performance of any act required hereunder by reason of Force
Majeure, then performance of such act shall be excused for the period of the
delay and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay.
25.02 Notices and Communications.
All notices, demands, requests and other communications provided for or
permitted under this Lease shall be in writing, either delivered by hand or sent
by certified mail, postage prepaid, to the following address:
(a) if to Landlord at the address stated in Section 1.01 hereof, or at
such other address as the Landlord shall have designated in writing to the
Tenant, with a copy to such Persons as Landlord shall have designated in
writing to Tenant, or
(b) if to Tenant at the address stated in Section 1.01 hereof, or at such
other address as the Tenant shall have designated in writing to the
Landlord, with a copy to such Persons as Tenant shall have designated in
writing to Landlord.
Any notice provided for herein shall become effective only upon and at the
time of receipt by the Person to whom it is given, unless such notice is mailed
by first-class registered or certified mail, in which case it shall be deemed to
be received on (i) the third Business Day following the mailing thereof or (h)
the day of its receipt, if a Business Day, or the next succeeding Business Day,
whichever of (i) or (ii) shall be the earlier.
25.03 Certificates, Estoppel Letter.
Either party shall, without charge, at any time and from time to time
hereafter, within ten (10) days after written request of the other, certify by
written instrument duly executed and acknowledged to any mortgagee or purchaser,
or proposed mortgagee or proposed purchaser, or any Person specified in such
request; (a) as to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment, (b) as to the
validity and force constituted, (c) as to the existence of any Default or Event
of Default, (d) as to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party, (e) as to the Term Commencement Date
and Stated Expiration Date, and (f) as to any other matters as may reasonably be
so requested. Any such certificate may be relied upon by the party requesting it
and any other Person to whom the same may be exhibited or delivered, and the
contents of such certificate shall be binding on the party executing same.
Tenant shall in addition, within 5 Business Days of the Term
Commencement Date, execute and deliver to Landlord a tenant estoppel letter
substantially in the form attached hereto as Exhibit A.
25.04 Renewal.
If this Lease is renewed or extended the provisions of Sections 7.01,
7.02, 7.03, 7.04, and 7.05 of Article 7 hereof shall not apply.
25.05 Governing Law.
<PAGE>
This Lease and the performance thereof shall be governed, interpreted,
construed and regulated by the laws of the Commonwealth of Massachusetts.
25.06 Partial Invalidity.
If any term, covenant, condition or provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
25.07 Notice of Lease.
The parties will at any time, at the request of either one, promptly
execute duplicate originals of an instrument, in recordable form, which will
constitute a Notice of Lease, setting forth a description of the Premises, the
Lease Term and any other portions thereof, excepting the rental provisions, as
either party may request Cost of review and recording to be borne by Tenant.
25.08 Interpretation; Consents.
The section headings used herein are for reference and convenience only,
and shall not enter into the interpretation hereof. This Lease may be executed
in several counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument. The term "Landlord" whenever used
herein, shall mean only the owner at the time of Landlord's interest herein, and
shall upon any sale or assignment (other than as collateral security for a loan)
of the interest of Landlord herein, its respective successors in interest and/or
assigns shall, during the term of ownership of its respective estates herein, be
deemed to be Landlord and the liability of Landlord, if any, hereunder shall in
any event be limited to the Landlord's interest in the Building.
Subject to the provisions of the third sentence of Section 7.06 and except
for the consents of Landlord required pursuant to the second sentence of Section
7.06 and Article 13 hereof, consents or approvals required or requested of
either Landlord or Tenant shall not be unreasonably withheld or delayed.
25.09 Parties.
Except as herein otherwise expressly provided, the covenants, conditions
and agreements contained in this Lease shall be binding upon the heirs,
successors and assigns of the parties hereto.
25.10 Waiver of Trial by Jury.
Landlord and Tenant do hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other upon any matters
whatsoever arising out of or in any way connected with this Lease, Tenants use
or occupancy of the Premises and/or claim of injury or damage.
25.11 Time of the Essence.
It is agreed that time is of the essence of this Lease.
ARTICLE 26
Miscellaneous
26.01 Option to Extend.
<PAGE>
Tenant has the option to extend the Lease Term for one additional
period(s) of five (5) year(s) each by giving Landlord written notice of its
intent to exercise at least nine (9) months before the end of the then current
Lease Term. If no Event of Default exists when notice is given and does not
occur during the current Lease Term, this Lease will be extended without a
written amendment and the Premises will be considered to have been leased by
Landlord to Tenant for an additional period of five year(s) beginning
immediately after the end of the current Lease Term upon the same terms except
that (a) Basic Rent will be fair market value for comparable buildings in the
area but not to be less than the rent paid during the last lease year of the
initial term.
26.02 Extended Hours HVAC.
The Building HVAC shall be provided by an energy efficient heat pump
system with a minimum of ten (10) zones per floor. After hours usage shall be at
Tenant's expense, but shall not exceed $25.00/hour, with a four (4) hour minimum
usage. Building hours shall be M-F 6:00 am to 7:00 PM, and Saturday from 8:00 am
to 12:00 PM. Tenant, at its own cost and expense, shall have the right to
install supplemental air conditioning units within its Premises. Tenants request
for extended hours HVAC must be submitted to Landlord's representative in
writing 24 hours in advance.
26.03 Holdover Clause
In the event Tenant fails to vacate the Premises by the Lease Termination
Date, Tenant hereby agrees to pay Landlord fifteen (15%) percent the monthly
rental rate. The "Holdover Rental Rate" shall be paid monthly in advance to
Landlord. In determining the "Holdover Rental Rate" Landlord shall charge two
(2) times the gross monthly for the last full calendar month under the lease. In
addition to the "Holdover Rental Rate", Landlord shall be entitled to seek to
recover full damages sustained as a result of said holdover.
26.04 Relocation
Landlord reserves the right to relocate tenant to a similar space within
the building or a comparable space in another building within the local area at
Landlord's cost.
26.06 Parking
Tenant shall have parking ratio of 4 cars per 1,000 rentable square feet
on an unreserved basis and free of charge.
26.07 Signage
Tenant shall have signage/ identification on the interior tenant directory
and on the Tenant entry door. All signage to be building standard. All signage
to be provided by the Landlord at Landlords expense.
26.08 Option to Terminate
If Tenant (1) needs additional office space and Landlord cannot provide
such space in one of its facilities which is within five (5) miles of the
building or (2) decides to close its Massachusetts office., then, provided (i)
that Tenant is not, at the date of the exercise of the option granted hereby or
at the date of the relevant termination, in default of its obligations under
this Lease beyond any applicable period of notice and grace, and (ii) that
Tenant has not assigned this Lease or sublet the Premises, so that the original
Tenant named herein remains in occupancy of the Premises, that Tenant shall have
the right, on the date which is forty-two (42) months after the Term
Commencement Date (the "Termination Date"), to terminate this Lease by Tenant
giving Landlord notice (the Termination Notice") of its intention so to
terminate, which notice shall not be less than one hundred and eighty days (180)
prior to the Termination Date. If Tenant
<PAGE>
exercises its termination option as aforesaid, then this Lease shall terminate
as of the Termination Date without further liability on the part of either
Landlord or tenant, provided, however, that Tenant shall pay to Landlord, as a
condition to the effectiveness of the Termination Notice, a payment (the
"Termination Payment") equal to six (6) months of the then Basic Rent. One half
of said Termination Payment shall be due with the Termination Notice and
one-half due on the Termination Date. If Tenant does not elect to exercise the
Option to Terminate on the Termination Date, then the Option to Terminate shall
expire and cannot be excised on a later date. If Tenant exercises this Option to
Terminate because of its intention to close its Massachusetts office then the
actual closing date, of the office, must be the same as the Termination Date of
this Lease. If Tenant exercises this Termination Option because Tenant requires
additional office space and Landlord cannot provide the additional space, then
Tenant must enter into a lease, for the required larger space, at another
location under the same terms and conditions as its current Lease except that
the Demised Premises and Basic Rent may be more than the then Basis Rent
required under this Lease Agreement.
ARTICLE 27
Entire Agreement
27.01 Entire Agreement.
No oral statement or prior written matter shall have any force or effect
This Agreement shall not be modified or canceled except by writing subscribed to
all parties.
No Representations, inducement, promises or agreements, oral or otherwise,
between Landlord and Tenant or any of their respective brokers, employees or
agents, not embodied herein, shall be of any force or effect
Executed as a sealed instrument as of the 1st day of July, 1999.
LANDLORD
2200 West Park Realty Trust
By: /s/ Leslie S. Carey
------------------------
Leslie S. Carey, Trustee
TENANT
Osicom. Technologies, Inc.
By: /s/ Gilbert G. Goldbeck
------------------------
Name: Gilbert G. Goldbeck
Title:
VP Finance and Operations
<PAGE>
INDEX
EXHIBITS
Exhibit A: TENANT ESTOPPEL CERTIFICATE AND SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
Exhibit B: PLAN SHOWING TENANT'S SPACE
Exhibit C: SERVICES BY LANDLORD
Exhibit D: RULES AND REGULATIONS
Exhibit E: LANDLORD'S WORK
Exhibit F: CERTIFICATE OF VOTE
<PAGE>
EXHIBIT 10.23(a)
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("First Amendment") is made and shall be effective
for all purposes as of the 10th day of July, 1999 by and between 2200 West Park
Realty Trust ("Landlord") and Osicom Technologies, Inc. ("Tenant").
WITNESSETH
WHEREAS, Tenant and Landlord entered into an Office Building Lease ("Original
Lease") dated July 1, 1999 for 3,728 square feet of Rentable Square Feet (RSF)
of Premises located on the third floor of 2200 West Park Drive, Westborough,
Massachusetts, and
WHEREAS, Landlord and Tenant desire to amend the Lease to extend the Rent
Commencement Date as more fully described hereafter.
NOW, THEREFORE, in consideration of the mutual promise herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Lease shall be amended as
follows:
1. Landlord and Tenant hereby incorporate all terms and provisions of the
Lease herein contained as is specifically set forth, except as said terms
are modified herein. Capitalized terms not specifically defined in this
amendment shall have the same meaning given to the terms in the Lease.
2. Article 1, Section 1.01
a) Delete:
"RENT COMMENCEMENT DATE: 9/01/1991,
Insert:
"RENT COMMENCEMENT DATE: 9/10/1991,
b) Delete:
"BASIC RENT: SEE SCHEDULE BELOW:
- -------------------------------------------------------------------------------
PERIOD RATE PER SQ.FT ANNUAL RENT MONTHLY RENT
- -------------------------------------------------------------------------------
Year 1 23.50 87,600 7,300.67
- -------------------------------------------------------------------------------
Year 2 23.50 87,600 7,300.67
- -------------------------------------------------------------------------------
Year 3 23.50 87,600 7,300.67
- -------------------------------------------------------------------------------
Year 4 24-50 91,33 7,611.33
- -------------------------------------------------------------------------------
Year 5 24.50 91,336 7,611.33
- -------------------------------------------------------------------------------
Insert:
<PAGE>
"BASIC RENT: SEE SCHEDULE BELOW:"
- -------------------------------------------------------------------------------
PERIOD RATE PER SQ.FT. ANNUAL RENT MONTHLY RENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9/10/99-9/30/99 23.50 N/A 5,110.47
- --------------------------------------------------------------------------------
2nd - 12th month 23.50 80,307.33 7,300.67
- --------------------------------------------------------------------------------
Year 2 23.50 87,608 7,300.67
- --------------------------------------------------------------------------------
Year 3 23.50 87,608 7,300.67
- --------------------------------------------------------------------------------
Year 4 24.50 91,336 7,611.33
- --------------------------------------------------------------------------------
Year 5 24.50 91,336 7,611.33
- --------------------------------------------------------------------------------
In all other respects, the Original Lease of July 1, 1999 is hereby ratified,
confirmed, and approved.
IN WITNESS WHEREOF, the parties hereto have executed the Second Amendment to
Lease of the date set forth above.
LANDLORD TENANT:
2200 West Park Realty Trust Osicom Technologies, Inc.
/s/ Leslie S. Carey /s/ Gilbert G. Goldbeck
Leslie S. Carey, Trustee Gilbert G. Goldbeck, Vice President - Finance
Date: July 10, 1999 Date: July 10, 1999
<PAGE>
EXHIBIT 10.24
SUPPLY AGREEMENT(s)
This Agreement is dated as of May 1, 1998, by and between NETsilicon,
Inc., having an address at 411 Waverley Oaks Road, Waltham, MA ("NSI"), and
Osicom Technologies, Inc., having an address at 2800 28th Street, Santa Monica,
CA ("Osicom").
1. Term: The term of this Agreement shall be five (5) years from the
date set forth above, and may be terminated only upon the mutual consent of both
parties hereto.
2. Agreement to Supply: For as long as this Agreement or any renewal or
extension thereof is in effect, Osicom shall purchase from NSI, and NSI shall
sell to Osicom, the products identified on Schedule A attached hereto and as
revised by mutual agreement from time to time ("NSI Products"), for resale to
present and future customers of Osicom. For as long as this Agreement or any
renewal or extension thereof is in effect, Osicom (or any subsidiary of Osicom)
shall manufacture NSI Products on behalf of NSI as long as they as price
competitive.
3. Prices:
A. Osicom shall pay to NSI for all NSI Products delivered
hereunder an amount equal to the price as identified on Schedule A attached
hereto. The price for the NSI Product shall increase or decrease in proportion
to any increase or decrease, as the case may be, in NSI's Landed Costs, as
hereinafter defined, such that NSI shall maintain the same gross margin
percentage for each unit, provided, however, that NSI shall not offer to sell or
sell any NSI Product at a lower price or upon more favorable terms than the
price and terms offered to Osicom. "Landed Costs" shall be equal to costs to NSI
from their supplier.
B. NSI shall pay Osicom for all NSI Products manufactured by
Osicom for NSI at Osicom's best price, which will be determined by the parties
from time to time.
4. Invoicing and Payment: Each party shall invoice the other for their
respective products, indicating in each case a shipping date and billing date.
Payment shall be due on a net cash basis thirty (30) days from the billing date.
5. Delivery of Products: Each party will provide products in accordance
with their usual and customary methods. Orders will be received in accordance
with each party's usual and customary procedures for accepting orders, which
procedures have been communicated to by NSI to Osicom and by Osicom to NSI and
may change from time to time in either party's reasonable discretion. In the
event that either party orders any products in quantities substantially greater
or less than the quantities normally ordered, such order must be placed in time
as will reasonably permit the supplying party to fulfill that order (if greater)
or to dispose of any excess quantity of product (if lesser) which the supplying
party may have obtained.
6. Force Majeure: Each party shall not be liable for any failure to
deliver products if such failure has been occasioned by the occurrence of any
act of war, fire, accident, casualty, embargo, strike, civil commotion,
government prohibitions or pre-emptions, failure of any supplier to supply
necessary products or ingredients, labor difficulties, equipment malfunction,
shortages of ingredients, fuel or energy, or any other circumstance beyond such
party's control.
<PAGE>
7. Miscellaneous:
7.1 Notices given under this Agreement shall be in writing, and shall
be deemed given when delivered by a recognized overnight service, or three (3)
days after deposit by certified mail, return receipt requested, addressed to a
party at the address given above, or to another address specified by a party.
7.2 Each party (the "Indemnifying Party") agrees to protect, indemnify,
and hold the other, its successors and assigns, harmless from and against any
and all losses, liabilities, claims damages and expenses, including attorney's
fees, which Indemnifying Party may hereinafter incur, suffer or be required to
pay, and which arise out of Indemnifying Party's negligence or willful
misconduct.
7.3 This Agreement shall be governed by Massachusetts law. The parties
consent to exclusive jurisdiction of courts sitting in Massachusetts for all
disputes arising under this Agreement. Service of process is effective if served
in the manner a notice may be given under this Agreement.
7.4 Neither NSI nor Osicom shall not assign this Agreement to any other
person or entity, without the prior written consent of the other party, which
consent shall not be unreasonably withheld, provided, however, that Osicom may
assign all or any part of this Agreement to any of its subsidiaries without the
prior consent of NSI.
7.5 This Agreement contains the entire understanding of the parties and
may be changed or waived only in writing. Waiver of a breach of this Agreement
shall not operate as a waiver of any other breach. This Agreement is binding
upon and inures to the benefit of the parties hereto and their successors and
assigns. Invalidity of any provision of this Agreement shall not affect other
provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
Attest: NET SILICON, INC.
By: /s/ Cornelius Peterson
-----------------------------
Cornelius Peterson, President
OSICOM TECHNOLOGIES, INC.
By: /s/ Christopher E. Sue
-----------------------------
Christopher E. Sue,
Vice-President of Finance
<PAGE>
Schedule A
Products
PRODUCTS PRICE
--------------------------------------------------------------
Osicom Purchases from NETsilicon
NET+ARM chips $19.00
Novell runtime licenses $3.50
-3-
<PAGE>
INTERCOMPANY AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 1st
day of May, 1998, by and between NETsilicon, Inc., having an address at 411
Waverley Oaks Road, Waltham, MA ("NSI") and Osicom Technologies, Inc., having an
address at 2800 28th Street, Santa Monica, CA ("Osicom").
W I T N E S S E T H:
WHEREAS, NSI is currently a wholly owned subsidiary of Osicom;
WHEREAS, NSI and Osicom are in the process of registering NSI's common
shares with the U.S. Securities and Exchange Commission for the purposes of
selling rights to purchase NSI's common shares to the public (the "Rights
Offering");
WHEREAS, after the Offering, Osicom will continue to be a substantial
stockholder of NSI;
WHEREAS, the parties deem it advisable at this time to provide for the
terms and conditions of the business relationship between the parties after the
Rights Offering;
NOW, THEREFORE, in consideration of the premises and mutual
undertakings herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each of the parties hereto,
the undersigned parties hereby agree as follows:
1. NSI hereby assigns, and Osicom hereby accepts the assignment of, the
right to manufacture and market those products, commonly referred to by
the parties as commercial products, listed on Schedule A attached
hereto (the "Assigned Products").
2. NSI hereby assigns all of its right, title and interest in the
following assets to Osicom:
a. The names, addresses, phone numbers, principal contacts and sales
history for the period through the close of the month immediately
preceding the Closing Date with respect to all of NSI's
commercial customers and all of NSI's sales leads and prospect
lists together with copies of all relevant documents such as
customer contracts, sales records, agreements, and the like;
b. All accounts receivable with respect to the Assigned Products
accruing after July 31, 1998;
c. NSI's inventory of Assigned Products. Osicom shall have the
option to purchase from NSI all of NSI inventory of Assigned
Products existing on July 31, 1998 at a price equal to NSI's cost
of manufacturing, developing and shipping such Assigned Products.
NSI shall ship such Assigned Products inventory to Osicom at such
a location as Osicom shall designate in such quantities and at
such time as shall be requested by Osicom. Osicom will pay NSI on
terms available to its most favored customers within thirty (30)
days after the end of each calendar month for those Assigned
Products which have been shipped to Osicom by NSI during such
previous calendar month. No later than nine (9) months after the
effective date of this Agreement, both parties will reconcile any
remaining monies owed to NSI by Osicom, and Osicom will pay NSI
any balance due.
d. Furniture, fixtures, equipment and computer software as set forth
on the attached Schedule B.
3. Osicom hereby assigns, and NSI hereby assumes, all of Osicom's right,
title and interest in and to the trademark "NET+ARM", including, but
not limited to those rights arising from a Trademark License Agreement
<PAGE>
dated July 14, 1998 by and between Osicom and ARM Limited. Osicom shall
use its best efforts to obtain ARM Limited's consent to assignment of
the Trademark Licensing Agreement prior to the commencement of the
Rights Offering.
4. The parties acknowledge that Osicom is owed by NSI the approximate sum
of $4,100,000 arising from the parties prior parent/subsidiary
relationship. NSI agrees to pay all indebtedness in full to Osicom upon
completion of the Rights Offering .
5. During the term of this Agreement, NSI shall provide to Osicom
manufacturing and engineering support with respect to the Assigned
Products on an "as needed" basis. Osicom will pay NSI for such support
at a rate of one hundred and ten percent (110%) of the actual labor
costs to NSI. The costs of any materials provided to Osicom by NSI with
respect to manufacturing support provided by NSI shall be reimbursed by
Osicom at a rate of one-hundred and ten (110%) of the actual cost of
material incurred by NSI. NSI will invoice Osicom quarterly for NSI
support and materials. Payment shall be due from Osicom to NSI on a net
cash basis thirty (30) days from the billing date.
6. The parties acknowledge that in connection with the assignment of the
Assigned Products, certain mutually agreeable employees will cease
performing services for NSI and shall thereafter perform services for
Osicom (the "Transferred Employees"). Transferred Employees shall be
transferred to Osicom's payroll as of July 31, 1998. However,
Transferred Employees shall remain on NSI's health insurance plan. NSI
will forward an invoice each month to Osicom which shall indicate the
amount of premium payment made by NSI with respect to such Transferred
Employees as well as documentation of their continued coverage under
NSI's health plan. Payment shall be due from Osicom to NSI on a net
cash basis thirty (30) days from the billing date. Notwithstanding
anything to the contrary in this Agreement, the terms of this Section 5
shall survive the termination of this Agreement.
7. Osicom shall provide to NSI certain MIS computer services at NSI place
of business at Waltham, Massachusetts, including, without limitation,
the maintenance of data lines. In consideration for such services, NSI
shall pay to Osicom the sum of one thousand dollars ($1,000) per month,
payable on the first day of each calendar month as long as NSI requires
such services.
8. Osicom and NSI agree that Osicom shall have co-ownership of the
intellectual property listed on Schedule C attached hereto (the
"Intellectual Property"), completed as of the commencement of the
Rights Offering, for Osicom's product development needs, provided,
however, that the Intellectual Property shall become a part of a
value-added Osicom product provided, further that Osicom shall not
resell, license, transfer or assign to any third party all or any part
of the Intellectual Property or any derivative thereof.
9. The term of this Agreement shall be for a period of twelve (12) months
from the date set forth above. This Agreement may be sooner terminated
only upon the written agreement of both parties hereto.
<PAGE>
10. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions
of this Agreement, which shall remain in full force and effect.
11. Notices given under this Agreement shall be in writing, and shall be
deemed given when delivered by a recognized overnight service, or three
(3) days after deposit by certified mail, return receipt requested,
addressed to a party at the address given above, or to another address
specified by a party.
12. This Agreement shall be governed by Massachusetts law. The parties
consent to exclusive jurisdiction of courts sitting in Massachusetts
for all disputes arising under this Agreement. Service of process is
effective if served in the manner a notice may be given under this
Agreement.
13. Neither NSI nor Osicom shall assign this Agreement to any other person
or entity, without the prior written consent of the other party,
provided, however, that Osicom may assign all or part of this Agreement
to any of its subsidiaries without the prior consent of NSI.
14. This Agreement contains the entire understanding of the parties and may
be changed or waived only in writing. Waiver of a breach of this
Agreement shall not operate as a waiver of any other breach. This
Agreement is binding upon and inures to the benefit of the parties
hereto and their successors and assigns. Invalidity of any provision of
this Agreement shall not affect other provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above
Attest: NET SILICON, INC.
By: /s/ Cornelius Peterson
- -------------------------- ---------------------------------
Cornelius Peterson, President
OSICOM TECHNOLOGIES, INC.
By: /s/ Christopher E. Sue
- -------------------------- -----------------------------
Christopher E. Sue,
Vice-President of Finance
<PAGE>
Schedule A
Commercial Products assigned to Osicom
ALL MODELS OF THE FOLLOWING
NETPrint
JETXPrint
Netcommuter
<PAGE>
Schedule B
Furniture, fixtures and equipment assigned to Osicom-leased or owned.
All such equipment whether owned by NSI or leased located in Suite 241 now
occupied by Osicom commercial sales at 411 Waverley Oaks Park.
All software currently in use in Suite 241 as NSI has title therein.
<PAGE>
Schedule C
NSI Intellectual Property available for Osicom use
All designs of products of NSI as of the date of commencement of the Rights
Offering.
The deliverables for hardware products of NSI are verilog design
models, CAD drawings for artwork, schematics for logic design, and
bills of materials.
The deliverables for software products are source code relating to
software and firmware.
All other hardware, software, firmware, documentation, bills of
material, test plans necessary for Osicom to either design, modify or
manufacture the components produced or to be produced by NSI.
<PAGE>
OSICOM TECHNOLOGIES, INC.
2800 28TH Street
Suite 100
Santa Monica, California 90405
March 10, 1999
Mr. Cornelius Peterson VIII
President and CEO
NETsilicon, Inc.
411 Waverly Oaks Road
Suite 227
Waltham, Mass. 02154
Dear Pete:
This letter confirms our agreement to amend the Intercompany Agreement (the
"Agreement") dated as of May 1, 1998 between NETsilicon, Inc. ("NSI") and Osicom
Technologies, Inc. ("Osicom") as set forth below. Osicom and NETsilicon hereby
agree that these amendments shall be effective as of May 1, 1998.
1. The term of paragraph 5 of the Agreement, as to engineering support
only, shall expire on June 30, 1999, subject, however, to the right of
Osicom to terminate such extension at any time on five (5) business
days prior written notice to NSI. The term of paragraph 5 of the
Agreement, as to manufacturing services, shall expire on April 30,
1999.
2. Paragraph 8 of the Agreement is hereby deleted and replaced in its
entirety by the following: NSI and Osicom shall jointly own the
intellectual property set forth on the attached Schedule C (the
"Intellectual Property") subject to the following limitations: (a)
Osicom's rights to the Intellectual Property shall be limited to its
use solely for the purpose of developing, manufacturing and selling
the commercial products listed on Schedule A to the Agreement; (b)
Osicom shall not use the Intellectual Property in any products that
directly compete with any NETsilicon products; and (c) Osicom shall
have no right to sell, license, transfer or assign to any third party
all or any part of its rights in the Intellectual Property or any
derivative thereof. Furthermore, Osicom acknowledges that, except as
provided herein, NETsilicon's rights to the Intellectual Property are
owned by NETsilicon without limitation.
3. Schedule C of the Agreement is hereby deleted and replaced it its
entirety by Schedule C attached to this letter and made a part hereof.
<PAGE>
4. Except as amended by this letter, the Agreement remains in full force
and effect according to its terms.
If the foregoing correctly sets our agreement, please sign and return this
letter to me.
Very truly yours,
OSICOM TECHNOLOGIES, INC.
By: /s/ Par Chadha
------------------------------------
Par Chadha, Chief Executive Officer
Agreed to and accepted
this 10th day of March, 1999
NETsilicon, Inc.
/s/ Cornelius Peterson VIII
- ---------------------------
Cornelius Peterson, VIII
President and CEO
<PAGE>
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EXHIBIT 10.25
Loan and Security Agreement
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at 12121 Wilshire Boulevard,
Suite 1111, Los Angeles, California 90025, and the borrower named above
("Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
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<PAGE>
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1. LOANS.
1.1 Loans. Coast will make loans to Borrower (the "Loans"), in
amounts determined by Coast in its sole discretion, up to the amounts (the
"Credit Limit") shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing.
1.2 Interest. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement. Interest shall be payable monthly, on
the last day of the month. Interest may, in Coast's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Coast minimum monthly interest
during the term of this Agreement with respect to the Receivable Loans and the
Inventory Loans in the amount set forth on the Schedule (the "Minimum Monthly
Interest").
1.3 Fees. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
not refundable.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all
of the Obligations when due, Borrower hereby grants to Coast a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Receivables, Inventory, Equipment, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Coast's possession (including claims and credit balances), and all proceeds of
any of the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make
Loans, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower is
and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement, and all other documents contemplated hereby (i) have been duly and
validly authorized, (ii) are enforceable against Borrower in accordance with
their terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), and (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and (iv)
do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast 10 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Coast at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule.
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<PAGE>
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3.4 Title to Collateral; Permitted Liens. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Coast, use its best efforts to cause such
third party to execute and deliver to Coast, in form acceptable to Coast, such
waivers and subordinations as Coast shall specify, so as to ensure that Coast's
rights in the Collateral are, and will continue to be, superior to the rights of
any such third party. Borrower will keep in full force and effect, and will
comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral
in good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial
statements now or in the future delivered by Borrower to Coast have been, and
will be, prepared in conformity with generally accepted accounting principles
(except, in the case of unaudited financial statements, for the absence of
footnotes and subject to normal year-end adjustments) and now and in the future
will fairly reflect the financial condition of Borrower, at the times and for
the periods therein stated. Between the last date covered by any such statement
provided to Coast and the date hereof, there has been no material adverse change
in the financial condition or business of Borrower. Borrower is now and will
continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof, Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
3.9 Compliance with Law. Borrower has complied, and will comply, in
all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not
limited to, those relating to Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business, and environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform Coast in writing of any claim, proceeding, litigation or
investigation in the future threatened or
-2-
<PAGE>
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instituted by or against Borrower involving any single claim of $50,000.00 or
more, or involving $100,000.00 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation G of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. Receivables.
See "Other Provisions" on Schedule.
4.1 Representations Relating to Receivables. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
4.2 Representations Relating to Documents and Legal Compliance.
Borrower represents and warrants to Coast as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be.
All sales and other transactions underlying or giving rise to each Receivable
shall fully comply with all applicable laws and governmental rules and
regulations. All signatures and endorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall
deliver to Coast transaction reports and loan requests, schedules of
Receivables, and schedules of collections, all on Coast's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Coast's security interest and other rights in all of
Borrower's Receivables, nor shall Coast's failure to advance or lend against a
specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 AM (Pacific Time) will not be
considered by Coast until the next Business Day. Together with each such
schedule, or later if requested by Coast, Borrower shall furnish Coast with
copies (or, at Coast's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Receivables, and Borrower
warrants the genuineness of all of the foregoing. Borrower shall also furnish to
Coast an aged accounts receivable trial balance in such form and at such
intervals as Coast shall request. In addition, Borrower shall deliver to Coast
the originals of all instruments, chattel paper, security agreements, guarantees
and other documents and property evidencing or securing any Receivables, upon
receipt thereof and in the same form as received, with all necessary
endorsements, all of which shall be with recourse. Borrower shall also provide
Coast with copies of all credit memos as and when requested by Coast.
4.4 Collection of Receivables. Borrower shall have the right to
collect all Receivables, unless and until an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Coast, and Borrower shall deliver all such payments and proceeds to Coast within
one Business Day after receipt by Borrower, in their original form, duly
endorsed to Coast, to be applied to the Obligations in such order as Coast shall
determine. Coast may, in its discretion, require that all proceeds of Collateral
be deposited by Borrower into a lockbox account, or such other "blocked account"
as Coast may specify, pursuant to a blocked account agreement in such form as
Coast may specify. Coast or its designee may, at any time, notify Account
Debtors that Coast has been granted a security interest in the Receivables.
4.5. Remittance of Proceeds. All proceeds arising from the
disposition of any Collateral shall be delivered to Coast within one Business
Day after receipt by Borrower, in their original form, duly endorsed to Coast,
to be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
-3-
<PAGE>
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4.6 Disputes. Borrower shall notify Coast promptly of all material
disputes or claims relating to Receivables. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Coast on the regular reports provided to
Coast; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after the occurrence of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Coast considers
advisable in its reasonable credit judgment and, in all cases, Coast shall
credit Borrower's Loan account with only the net amounts received by Coast in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the
occurrence of any Event of Default, Borrower shall (i) hold the returned
Inventory in trust for Coast, (ii) segregate all returned Inventory from all of
Borrower's other property, (iii) conspicuously label the returned Inventory as
subject to Coast's security interest, and (iv) immediately notify Coast of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Coast's request deliver such
returned Inventory to Coast.
4.8 Verification. Coast may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Coast or such other name as Coast may choose.
4.9 No Liability. Coast shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for its
own gross negligence or willful misconduct.
4.10 See Schedule.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lenders loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $25,000.00, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Coast copies of all
reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Coast with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Coast shall from time to time reasonably
specify.
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5.4 Access to Collateral, Books and Records. At reasonable times,
and on one Business Day's notice, Coast, or its agents, shall have the right to
inspect, audit and copy Borrower's books and records and the Collateral (the
"Audits"). Coast shall take reasonable steps to keep confidential all
confidential information obtained in any Audit, but Coast shall have the right
to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The Audits shall
be at Borrower's expense. The charge for the Audits shall be $550.00 per person
per day (or such higher amount as shall represent Coast's then current standard
charge for the same) not to exceed $3,500.00 per quarter, plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first notifying Coast of the
same and obtaining the written agreement from such accounting firm, service
bureau or other third party to give Coast the same rights with respect to access
to books and records and related rights as Coast has under this Loan Agreement.
5.5 Negative Covenants. Borrower shall not, without Coast's prior
written consent, do any of the following:
(i) merge or consolidate with another corporation or entity, except in a
transaction in which (A) the shareholders of the Borrower hold at least 50% of
the common stock and all other capital stock of the surviving corporation
immediately after such merger or consolidation, and (B) the Borrower is the
surviving corporation;
(ii) acquire any assets, except (A) in the ordinary course of business, or
(B) in a transaction or a series of transactions not involving the payment of an
aggregate amount in excess of $100,000.00.
(iii) enter into any other transaction outside the ordinary course of
business;
(iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(v) store any Inventory or other Collateral with any warehouseman or other
third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment,
or other contingent basis; if Inventory is sold on such basis, such sales shall
be reported to Coast and the receivables therefrom shall not be deemed "Eligible
Receivables". Collection of such Inventory and Receivables shall, when
collected, be applied to the Obligations;
(vii) make any loans of any money or other assets, except (A) advances to
customers or suppliers in the ordinary course of business, (B) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (C) loans to employees, officers and directors for the
purpose of purchasing equity securities of the Borrower in excess of
$100,000.00;
(viii) incur any debts, outside the ordinary course of business, which
would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations
of another party or entity;
(x) pay or declare any dividends on Borrower's stock (except for dividends
payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock, except that Borrower may repurchase stock
owned by employees, directors and consultants of Borrower pursuant to terms of
employment, consulting or other stock restriction agreements at such time as any
such employee, director or consultant terminates his or her affiliation with the
Borrower, for an aggregate purchase price not to exceed $100,000 in any fiscal
year;
(xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or
(xiii) dissolve or elect to dissolve.
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Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 Litigation Cooperation. Should any third-party suit or
proceeding be instituted by or against Coast with respect to any Collateral or
relating to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order to
prosecute or defend any such suit or proceeding.
5.7 Indemnity. Borrower hereby agrees to indemnify Coast and hold
Coast harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, reasonable costs and expenses
(including reasonable attorneys' fees), of every nature, character and
description, which Coast may sustain or incur based upon or arising out of any
of the Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Coast relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the gross negligence or willful misconduct of Coast). Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall for
all purposes continue in full force and effect.
5.8 Further Assurances. Borrower agrees, at its expense, on request
by Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Coast; or (ii) by Coast at any time
after the occurrence of an Event of Default, effective immediately. If this
Agreement is terminated by Borrower under this Section 6.2, Borrower shall pay
to Coast a termination fee (the "Early Termination Fee") in the amount shown on
the Schedule. The Early Termination Fee shall be due and payable on the
effective date of termination.
6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
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7.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Coast immediate written notice thereof: (a) Any material warranty,
representation, statement, report or certificate made or delivered to Coast by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay within 5 days after the due date of any Loan or any interest
thereon or any other monetary Obligation; or (c) the total Loans and other
Obligations outstanding at any time shall exceed the Credit Limit and such
excess is not fully paid within 5 days; or (d) Borrower shall fail to deliver
the proceeds of Collateral to Coast as provided in Section 4.5 above, or shall
fail to give Coast access to its books and records or Collateral as provided in
Section 5.4 above, or shall breach any negative covenant set forth in Section
5.5 above; or (e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or (f) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within 5
Business Days after the date due; or (g) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (h) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or (i) Borrower
breaches any material contract or obligation, which has or may reasonably be
expected to have a material adverse effect on Borrower's business or financial
condition which is not cured within any applicable cure period or waived in
writing by the other party to the contract or to whom the obligation is owing;
or (j) Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (k) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (l) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (n) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations, other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (o) there shall be a change in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of Coast; or (p) Borrower shall generally not pay its
debts as they become due, or Borrower shall conceal, remove or transfer any part
of its property, with intent to hinder, delay or defraud its creditors, or make
or suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (q) there shall be a
material adverse change in Borrower's business or financial condition. Coast may
cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
7.2 Remedies. Upon the occurrence, and during the continuance, of
any Event of Default, Coast, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Coast without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Coast deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Coast seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Coast retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to Coast
at places designated by Coast which
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are reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Coast shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of
the Collateral, in its condition at the time Coast obtains possession of it or
after further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes Coast to endorse
or sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Coast's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general, special or other
Deposit Accounts with Coast; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by Coast
with respect to the foregoing shall be due from the Borrower to Coast on demand.
Coast may charge the same to Borrower's loan account, and the same shall
thereafter bear interest at the same rate as is applicable to the Receivable
Loans. Without limiting any of Coast's rights and remedies, from and after the
occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional three percent per annum.
7.3 Standards for Determining Commercial Reasonableness. Borrower
and Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by Coast,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m (the time being that of the location of the
sale); (v) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; (vi) With respect to any sale of any of the Collateral,
Coast may (but is not obligated to) direct any prospective purchaser to
ascertain directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
7.4 Power of Attorney. Upon the occurrence, and during the
continuance, of any Event of Default, without limiting Coast's other rights and
remedies, Borrower grants to Coast an irrevocable power of attorney coupled with
an interest, authorizing and permitting Coast (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Coast agrees
to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that Coast may, in its sole
discretion, deem advisable in order to perfect and maintain Coast's security
interest in the Collateral, or in order to exercise a right of Borrower or
Coast, or in order to fully consummate all the transactions contemplated under
this Agreement, and all other present and future agreements; (b) Execute on
behalf of Borrower any document exercising, transferring or assigning any option
to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Coast's Collateral or in which Coast
has an interest; (c) Execute on behalf of Borrower, any invoices relating to any
Receivable, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Coast's possession; (e) Endorse all checks and other forms of
remittances received by Coast; (f) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (g) Grant extensions of time to pay, compromise claims and
settle Receivables and General Intangibles
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for less than face value and execute all releases and other documents in
connection therewith; (h) Pay any sums required on account of Borrower's taxes
or to secure the release of any liens therefor, or both; (i) Settle and adjust,
and give releases of, any insurance claim that relates to any of the Collateral
and obtain payment therefor; (j) Instruct any third party having custody or
control of any books or records belonging or relating to, Borrower to give Coast
the same rights of access and other rights with respect thereto as Coast has
under this Agreement; and (k) Take any action or pay any sum required of
Borrower pursuant to this Agreement and any other present or future agreements.
Any and all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast with respect to
the foregoing shall be added to and become part of the Obligations, and shall be
payable on demand. Coast may charge the foregoing to Borrower's loan account and
the foregoing shall thereafter bear interest at the same rate applicable to the
Receivable Loans. In no event shall Coast's rights under the foregoing power of
attorney or any of Coast's other rights under this Agreement be deemed to
indicate that Coast is in control of the business, management or properties of
Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of
any sale of the Collateral shall be applied by Coast first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by Coast
in the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations, in
such order as Coast shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Coast for any deficiency. If, Coast, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Coast shall have the
option, exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of purchase price or deferring the reduction
of the Obligations until the actual receipt by Coast of the cash therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set
forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Coast of one or more of its rights or remedies shall not be deemed an election,
nor bar Coast from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Coast to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. Definitions. As used in this Agreement, the following terms have
the following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Coast is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or
both, would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Inventory" means Inventory which Coast, in its sole
judgment, deems eligible for borrowing, based on such considerations as Coast
may from time to time deem appropriate. Without limiting the fact that the
determination of which Inventory is eligible for borrowing is a matter of
Coast's discretion, Inventory which does not meet
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the following requirements will not be deemed to be Eligible Inventory:
Inventory which (i) consists of finished goods, in good, new and salable
condition which is not perishable, not obsolete or unmerchantable, and is not
comprised of raw materials, work in process, packaging materials or supplies;
(ii) meets all applicable governmental standards; (iii) has been manufactured in
compliance with the Fair Labor Standards Act; (iv) conforms in all respects to
the warranties and representations set forth in this Agreement; (v) is at all
times subject to Coast's duly perfected, first priority security interest; and
(vi) is situated at a one of the locations set forth on the Schedule.
"Eligible Receivables" means Receivables arising in the ordinary
course of Borrower's business from the sale of goods or rendition of services,
which Coast, in its good faith business judgment, shall deem eligible for
borrowing, based on such considerations as Coast may from time to time deem
appropriate. Without limiting the generality of the foregoing, Eligible
Receivables shall exclude (a) Receivables that remain unpaid more than 90 days
past invoice date, (b) Receivables from the federal, state and local
governments, governmental agencies, governmental units, and subdivisions thereof
where the required documents and papers pursuant to applicable law, rule,
regulation or policy (including, but not limited to, the Federal Claims Act) is
not provided, (c) foreign Receivables other than foreign Receivables (i) that
are backed by letters of credit in form, content and amount and issued by
financial institutions acceptable to Coast in its sole discretion, or (ii) where
the Account Debtors have verifiable credit histories over a 6 to 12 month period
that are acceptable to Coast in its sole discretion, or (iii) where the Account
Debtors are foreign subsidiaries or divisions of U.S. companies that Coast, in
its sole discretion deems creditworthy, or (iv) where the Account Debtors have
credit insurance acceptable to Coast in its sole discretion.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1
of this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables)
and, without limiting the generality of the foregoing, the trademarks and
patents listed on Exhibit "A" to the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit, and including without limitation all farm products), and all materials
and supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Maximum Dollar Amount" has the meaning set forth in Section 1 of
the Schedule.
"Obligations" means the Pre-Existing Obligations, all present and
future Loans, advances, debts, liabilities, obligations, guaranties, covenants,
duties and indebtedness at any time owing by Borrower to Coast, whether
evidenced by this Agreement or any note or other instrument or document, whether
arising from an extension of credit, opening of a letter
-10-
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of credit, banker's acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment and any participation by Coast in Borrower's debts owing to others),
absolute or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney's fees, expert witness fees, audit
fees, letter of credit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other present or future instrument
or agreement between Borrower and Coast.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Coast, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), letters of credit,
contract rights, chattel paper, instruments, securities, documents and all other
forms of obligations at any time owing to Borrower, all guaranties and other
security therefor, all merchandise returned to or repossessed by Borrower, and
all rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by Coast
(including proceeds of Receivables and payment of the Obligations in full) shall
be deemed applied by Coast on account of the Obligations three Business Days
after receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM on any day shall be deemed
received on the next Business Day. Coast shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Coast in its sole discretion, and Coast may charge Borrower's
loan account for the amount of any item of payment which is returned to Coast
unpaid.
9.2 Application of Payments. All payments with respect to the
Obligations may be applied, and in Coast's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as Coast shall
determine in its sole discretion.
9.3 Charges to Accounts. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate applicable
to the Loans. Coast may also, in its discretion, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Coast.
-11-
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9.4 Monthly Accountings. Coast shall provide Borrower monthly with
an account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within ninety days after each account
is rendered, describing the nature of any alleged errors or omissions.
9.5 Notices. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Coast or Borrower at the addresses shown in the heading
to this Agreement, or at any other address designated in writing by one party to
the other party. Notices to Coast shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 Waivers. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Coast, or any
of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast, but nothing herein shall relieve Coast
from liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 Attorneys Fees, Costs and Charges. Borrower shall reimburse
Coast for all reasonable attorneys' fees and all filing, recording, search,
title insurance, appraisal, audit, and other reasonable costs incurred by Coast,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs Coast incurs in order to do the following: prepare and
negotiate this Agreement and the documents relating to this Agreement; obtain
legal advice in connection with this Agreement or Borrower; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute
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any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Coast's security interest in, the Collateral; and otherwise represent Coast in
any litigation relating to Borrower. If either Coast or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. Borrower shall also pay Coast's standard
charges for returned checks and for wire transfers, in effect from time to time.
All attorneys' fees, costs and charges to which Coast may be entitled pursuant
to this Paragraph may be charged by Coast to Borrower's loan account and shall
thereafter bear interest at the same rate as the Receivable Loans.
9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations.
9.14 Publicity. Subject to Borrower's prior written consent, Coast
is hereby authorized, at its expense, to issue appropriate press releases and to
cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
9.15 Joint and Several Liability. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.16 Limitation of Actions. Any claim or cause of action by Borrower
against Coast, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Coast, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Coast, or on any other person
authorized to accept service on behalf of Coast, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Coast in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.17 Paragraph Headings; Construction. Paragraph headings are only
used in this Agreement for convenience. Borrower and Coast acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any rule
of construction or otherwise.
9.18 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Coast to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
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9.19 Mutual Waiver of Jury Trial. Borrower and COAST each hereby waive the right
to trial by jury in any action or proceeding based upon, arising out of, or in
any way relating to, this Agreement or any other present or future instrument or
agreement between COAST and Borrower, or any conduct, acts or omissions of COAST
or Borrower or any of their directors, officers, employees, agents, attorneys or
any other persons affiliated with COAST or Borrower, in all of the foregoing
cases, whether sounding in contract or tort or otherwise.
Borrower:
CRAY COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
By: /s/ Par Chadha
---------------------------
Title: CEO
------------------------
By: /s/ Christopher Sue
---------------------------
Title: CFO
-------------------------
Coast:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By: /s/ Barbera Nitkin
---------------------------
Title: VP
------------------------
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Schedule to
Loan and Security Agreement
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Thrift & Loan Association,
and the above-borrower of even date.
================================================================================
1. Credit Limit
(Section 1.1): Loans in a total amount at any time outstanding not to exceed
the lesser of a total of $5,000,000 at any one time
outstanding (the "Maximum Dollar Amount"), or the sum of (a)
and (b) below:
(a) Loans (the "Receivable Loans") in an amount not to
exceed 80% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above), plus (b)
Loans (the "Inventory Loans") in an amount not to exceed
the lesser of:
(1) 30% of the value of Borrower's Eligible
Inventory (as defined in Section 8 above),
calculated at the lower of cost or market value
and determined on a first-in, first-out basis, or
(2) $1,500,000.00.
================================================================================
2. Interest.
Interest Rate
(Section 1.2): A rate equal to the "Prime Rate" plus 2-1/2% per annum,
calculated on the basis of a 360-day year for the actual
number of days elapsed. The interest rate applicable to
all Loans shall be adjusted monthly as of the first day
of each month, and the interest to be charged for each
month shall be based on the highest "Prime Rate" in
effect during said month, but in no event shall the rate
of interest charged on any Loans in any month be less
than 8% per annum. "Prime Rate" means the actual
"Reference Rate" or the substitute therefor of the Bank
of America NT & SA whether or not that rate is the
lowest interest rate
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charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the
prime rates published in the Wall Street Journal on the
first business day of the month, as the base rate on
corporate loans at large U.S. money center commercial
banks.
Minimum Monthly
Interest
(Section 1.2): An amount not less than the interest that would be
payable based upon a daily Loan balance of
$1,000,000.00.
================================================================================
3. Fees (Section 1.3):
Loan Fee: $50,000.00 payable concurrently herewith.
----------
Facility Fee: $3,500.00 per quarter, payable in advance (pro rated
----------for any partial month at the beginning of the
term of this Agreement).
================================================================================
4. Maturity Date
(Section 6.1): 2/1/99 subject to automatic renewal as provided in
Section 6.1 above, and early termination as provided in
Section 6.2 above.
Early Termination
Fee
(Section 6.2): An amount equal to 2% of the Maximum Dollar Amount (as
defined in the Schedule), if termination occurs on or
before the first anniversary of the date of this
Agreement; 1% of the Maximum Dollar Amount, if
termination occurs after the first anniversary and on or
before the second anniversary of the date of this
Agreement; and 1/2% of the Maximum Dollar Amount, if
termination occurs after the second anniversary and on
or before the third anniversary of the date of this
Agreement.
================================================================================
5. Reporting.
(Section 5.3): Borrower shall provide Coast with the following:
1. Monthly Receivable agings, aged by invoice date, within
ten days after the end of each month. The Receivable
reports to also provide breakdown between domestic
commercial Receivables, foreign commercial Receivables,
and government receivables (including identity of
governmental agency).
2. Monthly accounts payable agings, aged by invoice date,
and outstanding or held check registers within ten days
after the end of
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each month. From and after funding, no accounts payable
shall be over 60 days from invoice date.
3. Monthly perpetual inventory reports for the Inventory
valued on a first-in, first-out basis at the lower of
cost or market (in accordance with generally accepted
accounting principles) or such other inventory reports
as are reasonably requested by Coast, all within ten
days after the end of each month. Such inventory reports
shall contain a breakdown of raw materials, work in
process and finished goods.
4. All annual 10K's, quarterly 10Q's, and all other
filings, reports and notices for Osicom Technologies,
Inc.,. and affiliates filed with the Securities and
Exchange Commission ("Filings"). All Filings required by
applicable law, rule or regulation shall be made prior
to delinquency. Copies of all such Filings shall be
provided to Coast not later than 5 days after the same
are filed with the Securities and Exchange Commission.
Internally prepared consolidating quarterly and year end
statements shall be provided as soon as available but in
no event later than 45 days after the end of the quarter
and 90 days after year end.
5. Updated lists of all of Borrower's customers including
customer names, addresses, and phone numbers. Such lists
shall be provided to Coast within 5 after request is
made by Coast for such lists. If not specifically
requested, such lists shall be provided to Coast no
later than 5 days after the end of each fiscal quarter
of Borrower.
6. (A) Annual financial statements, as soon as available,
but in no event later than 90 days following the end of
Borrower's fiscal year, certified by independent
certified public accountants acceptable to Coast. Prior
to funding, Borrower must provide Coast with audited
financial statements of Borrower for the period ended
4/30/96, which statements must be satisfactory to Coast
in accordance with Coast's loan underwriting criteria.
(B) Monthly and quarterly internal financial statements
for Borrower and its affiliates as soon as available,
but in no event later than 30 days and 45 days after the
end of the applicable monthly and quarterly accounting
periods, respectively. The monthly, internally prepared
financial statements need only be in such form and
contain such information as is supplied to management.
The quarterly, internally prepared financial statements
shall include or be accompanied by appropriate
disclosures of material changes in the financial
condition or financial performance and/or explanation of
significant matters of an accounting or management
nature.
7. Proof of payment of all income taxes, penalties and
interest for the fiscal years ended April, 1993 and
April, 1994.
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8. The existing lockbox arrangement with NationsBank to be
switched to Coast.
================================================================================
6. Borrower Information:
Prior Names of
Borrower
(Section 3.2): Dowty Communications, Inc.; Case/Datatel, Inc.; Case
Communications, Inc.; Case Rixon Communications, Inc.;
Rixon Inc.
Trade Names of
Borrower
(Section 3.2): Dowty Communications; Case/Datatel/ Case Communications;
Case-Rixon Communications
Other Locations:
Addresses
(Section 3.3):
9020 Junction Drive
Annapolis Junction, Maryland 20701
7200 Riverwood Drive
Columbia, Maryland
2100 S.E. Main St., Suite 340
Oakbrook Terrace, Illinois 60108
307 Fellowship Drive, Suite 112
Mt. Laurel, New Jersey 08054
5050 Quorom Drive, Suites 36 and 38
Dallas, Texas 75240
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Taxes. There is potential tax liability for tax years ending
4/30/93 and 4/30/94 as described in Arthur Anderson
report. There is an ongoing IRS audit to which the
Corporation is responding.
================================================================================
Litigation
(Section 3.10): None.
================================================================================
7. Other PROVISIONS: All Obligations of Borrower to Coast shall be guarantied
by Osicom Technologies, Inc.
================================================================================
Borrower: Coast:
CRAY COMMUNICATIONS, INC., COAST BUSINESS CREDIT, a division of
a Delaware corporation Southern Pacific Thrift & Loan
Association
By /s/ Par Chadha By /s/ Barbera Nitkin
--------------------------- ------------------------------
Title CEO Title VP
------------------------ ---------------------------
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Continuing Guaranty
Guarantor: B&T Holdings, Inc., a Delaware corporation
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 9020 Junction Drive
Annapolis Junction, MD 20791
Date: September 27, 1996
This Continuing Guaranty is executed by the above-named guarantor
("Guarantor"), as of the above date, in favor of COAST BUSINESS CREDIT, a
division of Southern Pacific Thrift & Loan Association ("Coast"), a California
corporation, with offices at 12121 Wilshire Boulevard, Suite 1111, Los Angeles,
California 90025, with respect to the Indebtedness of Cray Communications, Inc.,
a Delaware corporation ("Borrower").
1. Continuing Guaranty. Guarantor hereby unconditionally guarantees
and promises to pay on demand to Coast, at the address indicated above, or at
such other address as Coast may direct, in lawful money of the United States,
and to perform for the benefit of Coast, all Indebtedness of Borrower now or
hereafter owing to or held by Coast. As used herein, the term "Indebtedness" is
used in its most comprehensive sense and shall mean and include without
limitation: (a) any and all debts, duties, obligations, liabilities,
representations, warranties and guaranties of Borrower or any one or more of
them, heretofore, now, or hereafter made, incurred, or created, whether directly
to Coast or acquired by Coast by assignment or otherwise, or held by Coast on
behalf of others, however arising, whether voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated, certain or uncertain,
determined or undetermined, monetary or nonmonetary, written or oral, and
whether Borrower may be liable individually or jointly with others, and
regardless of whether recovery thereon may be or hereafter become barred by any
statute of limitations, discharged or uncollectible in any bankruptcy,
insolvency or other proceeding, or otherwise unenforceable; and (b) any and all
amendments, modifications, renewals and extensions of any or all of the
foregoing, including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument, document or
agreement; and (c) any and all attorneys' fees, court costs, and collection
charges incurred in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor, or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof. As used herein, the term "Borrower" shall include any successor to the
business and assets of
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Coast Business Credit
Continuing Guaranty
--------------------------------------------------------------------
Borrower, and shall also include Borrower in its capacity as a debtor or debtor
in possession under the federal Bankruptcy Code, and any trustee, custodian or
receiver for Borrower or any of its assets, should Borrower hereafter become the
subject of any bankruptcy or insolvency proceeding, voluntary or involuntary;
and all indebtedness, liabilities and obligations incurred by any such person
shall be included in the Indebtedness guaranteed hereby. This Guaranty is given
in consideration for credit and other financial accommodations which may, from
time to time, be given by Coast to Borrower in Coast's sole discretion, but
Guarantor acknowledges and agrees that acceptance by Coast of this Guaranty
shall not constitute a commitment of any kind by Coast to extend such credit or
other financial accommodation to Borrower or to permit Borrower to incur
Indebtedness to Coast. All sums due under this Guaranty shall bear interest from
the date due until the date paid at the highest rate charged with respect to any
of the Indebtedness.
2. Waivers. Guarantor hereby waives: (a) presentment for payment,
notice of dishonor, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the acceptance hereof; the
creation, existence, or acquisition of any Indebtedness; the amount of the
Indebtedness from time to time outstanding; disposition of any property which
secures any or all of the Indebtedness or which secures the obligations of any
other guarantor of any or all of the Indebtedness; any adverse change in
Borrower's financial position; any other fact which might increase Guarantor's
risk; any default, partial payment or non-payment of all or any part of the
Indebtedness; any and all agreements and arrangements between Coast and Borrower
and any changes, modifications, or extensions thereof, and any revocation,
modification or release of any guaranty of any or all of the Indebtedness by any
person (including without limitation any other person signing this Guaranty);
(b) any right to require Coast to institute suit against, or to exhaust its
rights and remedies against, Borrower or any other person, or to proceed against
any property of any kind which secures all or any part of the Indebtedness, or
to exercise any right of offset or other right with respect to any reserves,
credits or deposit accounts held by or maintained with Coast or any indebtedness
of Coast to Borrower, or to exercise any other right or power, or pursue any
other remedy Coast may have; (c) any defense arising by reason of any disability
or other defense of Borrower or any other guarantor or any endorser, co-maker or
other person, or by reason of the cessation from any cause whatsoever of any
liability of Borrower or any other guarantor or any endorser, co-maker or other
person, with respect to all or any part of the Indebtedness, or by reason of any
act or omission of Coast or others which directly or indirectly results in the
discharge or release of Borrower or any other guarantor or any other person or
any Indebtedness or any security therefor, whether by operation of law or
otherwise; (d) any defense arising by reason of any failure of Coast to obtain,
perfect, maintain or keep in force any security interest in, or lien or
encumbrance upon, any property of Borrower or any other person; (e) any defense
based upon any failure of Coast to give Guarantor notice of any sale or other
disposition of any property securing any or all of the Indebtedness, or any
defects in any such notice that may be given, or any failure of Coast to comply
with any provision of applicable law in enforcing any security interest in or
lien upon any property securing any or all of the Indebtedness including, but
not limited to, any failure by Coast to dispose of any property securing any or
all of the Indebtedness in a commercially reasonable manner; (f) any defense
based upon or arising out of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against Borrower or any other guarantor or any endorser,
co-maker or other person, including without limitation any discharge of, or bar
against collecting, any of the Indebtedness (including without limitation any
interest thereon), in or as a result of any such proceeding; and (g) the benefit
of any and all statutes of limitation with respect to any action based upon,
arising out of or related to this Guaranty. Until all of the Indebtedness has
been paid, performed, and discharged in full, nothing shall discharge or satisfy
the liability of Guarantor hereunder except the full performance and payment of
all of the Indebtedness. If any claim is ever made upon Coast for repayment or
recovery of any amount or amounts received by Coast in payment of or on account
of any of the Indebtedness, because of any claim that any such payment
constituted a preferential transfer or fraudulent conveyance, or for any other
reason whatsoever, and Coast repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over Coast or any of its property, or by reason of any settlement
or compromise of any such claim effected by Coast with any such claimant
(including without limitation the Borrower), then and in any such event,
Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any
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release of any of the Indebtedness, and the Guarantor shall be and remain liable
to Coast under this Guaranty for the amount so repaid or recovered, to the same
extent as if such amount had never originally been received by Coast, and the
provisions of this sentence shall survive, and continue in effect,
notwithstanding any revocation or release of this Guaranty. Until all of the
Indebtedness has been irrevocably paid and performed in full, Guarantor hereby
expressly and unconditionally waives all rights of subrogation, reimbursement
and indemnity of every kind against Borrower, and all rights of recourse to any
assets or property of Borrower, and all rights to any collateral or security
held for the payment and performance of any Indebtedness, including (but not
limited to) any of the foregoing rights which Guarantor may have under any
present or future document or agreement with any Borrower or other person, and
including (but not limited to) any of the foregoing rights which Guarantor may
have under any equitable doctrine of subrogation, implied contract, or unjust
enrichment, or any other equitable or legal doctrine. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Coast shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Guarantor or any other party through the ordinary negligence of Coast, or any
of its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Coast.
3. Consents. Guarantor hereby consents and agrees that, without
notice to or by Guarantor and without affecting or impairing in any way the
obligations or liability of Guarantor hereunder, Coast may, from time to time
before or after revocation of this Guaranty, do any one or more of the following
in Coast's sole and absolute discretion: (a) accelerate, accept partial payments
of, compromise or settle, renew, extend the time for the payment, discharge, or
performance of, refuse to enforce, and release all or any parties to, any or all
of the Indebtedness; (b) grant any other indulgence to Borrower or any other
person in respect of any or all of the Indebtedness or any other matter; (c)
accept, release, waive, surrender, enforce, exchange, modify, impair, or extend
the time for the performance, discharge, or payment of, any and all property of
any kind securing any or all of the Indebtedness or any guaranty of any or all
of the Indebtedness, or on which Coast at any time may have a lien, or refuse to
enforce its rights or make any compromise or settlement or agreement therefor in
respect of any or all of such property; (d) substitute or add, or take any
action or omit to take any action which results in the release of, any one or
more endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as Coast determines in its
sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as Coast determines in its sole discretion, regardless of whether or not
such Indebtedness is secured or is due and payable. Guarantor consents and
agrees that Coast shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness. Guarantor
further consents and agrees that Coast shall have no duties or responsibilities
whatsoever with respect to any property securing any or all of the Indebtedness.
Without limiting the generality of the foregoing, Coast shall have no obligation
to monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. Account Stated. Coast's books and records showing the account
between it and the Borrower shall be admissible in evidence in any action or
proceeding as prima facie proof of the items therein set forth. Coast's monthly
statements rendered to the Borrower shall be binding upon the Guarantor (whether
or not the Guarantor receives copies thereof), and shall constitute an account
stated between Coast and the Borrower, unless Coast receives a written statement
of the Borrower's exceptions within 30 days after the statement was mailed to
the Borrower. The Guarantor assumes full responsibility for obtaining copies of
such monthly statements from the Borrower, if the Guarantor desires such copies.
5. Exercise of Rights and Remedies; Foreclosure of Trust Deeds.
Guarantor
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consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Coast may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of contribution or other right
against any other guarantor of any or all of the Indebtedness or against any
other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
Guarantor waives all rights and defenses arising out of an election of remedies
by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise. (b)
Guarantor further waives all rights and defenses arising out of an election of
remedies by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation, reimbursement and contribution against
any other guarantor of the guaranteed obligation, by the operation of Section
580d of the Code of Civil Procedure or otherwise. (c) Guarantor understands that
if Coast forecloses any present or future trust deed, which secures any or all
of the Indebtedness or which secures any other guaranty of any or all of the
Indebtedness, by nonjudicial foreclosure, Guarantor may, as a result, have a
complete defense to liability under this Guaranty, based on the legal doctrine
of estoppel and Sections 580a, 580d or 726 of the California Code of Civil
Procedure, and Guarantor hereby expressly waives all such defenses. (d)
Guarantor understands and agrees that, in the event Coast in its sole discretion
forecloses any trust deed now or hereafter securing any or all of the
Indebtedness, by nonjudicial foreclosure, Guarantor will remain liable to Coast
for any deficiency, even though Guarantor will lose his right of subrogation
against the Borrower, and even though Guarantor will be unable to recover from
the Borrower the amount of the deficiency for which Guarantor is liable, and
even though Guarantor may have retained his right of subrogation against
Borrower if Coast had foreclosed said trust deed by judicial foreclosure as
opposed to nonjudicial foreclosure, and even though absent the waivers set forth
herein Guarantor may have had a complete defense to any liability for any
deficiency hereunder. (e) Guarantor understands and agrees that, in the event
Coast in its sole discretion forecloses any trust deed now or hereafter securing
any other guaranty of any or all of the Indebtedness, by nonjudicial
foreclosure, Guarantor will remain liable to Coast for any deficiency, even
though Guarantor will lose his right of subrogation or contribution against the
other guarantor, and even though Guarantor will be unable to recover from the
other guarantor any part of the deficiency for which Guarantor is liable, and
even though Guarantor may have retained his right of subrogation or contribution
against the other guarantor if Coast had foreclosed said trust deed by judicial
foreclosure as opposed to nonjudicial foreclosure, and even though absent the
waivers set forth herein Guarantor may have had a complete defense to any
liability for any deficiency hereunder.
6. Acceleration. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of Coast, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to Coast by Borrower or Guarantor, or
any of their respective officers, partners, employees, or agents, is incorrect,
false, untrue, or misleading when given in any material respect; or (b) Borrower
or Guarantor shall fail to pay or perform when due all or any part of the
Indebtedness; or (c) Guarantor shall fail to pay or perform within 5 days after
the same is due any indebtedness or obligation of Guarantor to Coast or to any
parent, subsidiary or corporate affiliate of Coast, whether under this Guaranty
or any other instrument, document, or agreement heretofore or hereafter entered
into; or (d) there occurs in Coast's judgment a material impairment of the
prospect of payment or performance of any or all of the Indebtedness; or (e) any
event shall occur which does result in the acceleration of the maturity of any
indebtedness of Borrower or Guarantor to others (regardless of any requirement
of notice, opportunity to cure or other condition prior to the exercise of any
right of acceleration); or (f) Borrower or Guarantor shall fail promptly to
perform or comply with any term or
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condition of any agreement with any third party which does or may result in a
material adverse effect on the business of Borrower or Guarantor unless timely
cured or waived in writing by such third party; or (g) there shall be made or
exist any levy, assessment, attachment, seizure, lien, or encumbrance for any
cause or reason whatsoever upon all or any part of the property of Borrower or
Guarantor (unless discharged by payment, release or bond not more than ten days
after such event has occurred); or (h) there shall occur the dissolution,
termination of existence, insolvency, or business failure of Borrower or
Guarantor, or the appointment of a receiver, trustee or custodian for Borrower
or Guarantor or all or any part of the property of either of them, or the
assignment for the benefit of creditors by Borrower or Guarantor, or the
commencement of any proceeding by or against Borrower or Guarantor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect; or (i) Borrower or Guarantor shall be deceased or declared
incompetent by any court or a guardian or conservator shall be appointed for
either of them or for the property of either of them; or (j) Guarantor or
Borrower shall generally not pay their respective debts as they become due or
shall enter into any agreement (whether written or oral), or offer to enter into
any such agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management, or control of the business of either of them; or (k) Borrower or
Guarantor shall conceal, remove or permit to be concealed or removed any part of
its property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law, or shall make any transfer of
its property to or for the benefit of any creditor at a time when other
creditors similarly situated have not been paid; or (l) the board of directors
or shareholders of Borrower or Guarantor shall adopt any resolution or plan for
its dissolution or the liquidation of all or substantially all of its assets; or
(m) Guarantor shall revoke this Guaranty or contest or deny liability under this
Guaranty. All of the foregoing are hereinafter referred to as "Events of
Default".
7. Right to Attachment Remedy. Guarantor agrees that,
notwithstanding the existence of any property securing any or all of the
Indebtedness, Coast shall have all of the rights of an unsecured creditor of
Guarantor, including without limitation the right to obtain a temporary
protective order and writ of attachment against Guarantor with respect to any
sums due under this Guaranty. Guarantor further agrees that in the event any
property secures the obligations of Guarantor under this Guaranty, to the extent
that Coast, in its sole and absolute discretion, determines prior to the
disposition of such property that the amount to be realized by Coast therefrom
may be less than the indebtedness of the Guarantor under this Guaranty, Coast
shall have all the rights of an unsecured creditor against Guarantor, including
without limitation the right of Coast, prior to the disposition of said
property, to obtain a temporary protective order and writ of attachment against
Guarantor. Guarantor waives the benefit of Section 483.010(b) of the California
Code of Civil Procedure and of any and all other statutes and rules of law now
or hereafter in effect requiring Coast to first resort to or exhaust all such
collateral before seeking or obtaining any attachment remedy against Guarantor.
Coast shall have no liability to Guarantor as a result thereof, whether or not
the actual deficiency realized by Coast is less than the anticipated deficiency
on the basis of which Coast obtains a temporary protective order or writ of
attachment.
8. Indemnity. Guarantor hereby agrees to indemnify Coast and hold
Coast harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
without limitation attorneys' fees), of every nature, character and description,
which Coast may sustain or incur based upon or arising out of any of the
Indebtedness, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Coast relating in any way to
Borrower or the Indebtedness (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of Coast or any of its
directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing Coast). Notwithstanding any provision in this
Guaranty to the contrary, the indemnity agreement set forth in this Section
shall survive any termination or revocation of this Guaranty and shall for all
purposes continue in full force and effect.
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9. Subordination. Any and all debts, liabilities and obligations
owing from Borrower to Guarantor including any security for and guaranties of
any such obligations, whether now existing or hereafter arising, are hereby
subordinated in right of payment to the prior payment in full of all of the
Indebtedness. Except as permitted in that certain Subordination Agreement
between Guarantor and Coast dated as of September, 1996, and any written
amendments there, no payment in respect of any such subordinated obligations
shall at any time be made to or accepted by Guarantor if at the time of such
payment any Indebtedness is outstanding unless Coast, in its sole discretion,
agrees to such payment in writing. The agreement by Coast to a payment on
account of subordinated debt shall not constitute an agreement to the payment of
any other subordinated. If any Event of Default has occurred, all debts,
liabilities and obligations owing from Borrower to Guarantor shall be
subordinated, Borrower and any assignee, trustee in bankruptcy, receiver, or any
other person having custody or control over any or all of Borrower's property
are hereby authorized and directed to pay to Coast the entire unpaid balance of
the Indebtedness before making any payments whatsoever to Guarantor, whether as
a creditor, shareholder, or otherwise; and insofar as may be necessary for that
purpose, Guarantor hereby assigns and transfers to Coast all rights to any and
all debts, liabilities and obligations owing from Borrower to Guarantor,
including any security for and guaranties of any such obligations, whether now
existing or hereafter arising, including without limitation any payments,
dividends or distributions out of the business or assets of Borrower. Any
amounts received by Guarantor in violation of the foregoing provisions shall be
received and held as trustee for the benefit of Coast and shall forthwith be
paid over to Coast to be applied to the Indebtedness in such order and sequence
as Coast shall in its sole discretion determine, without limiting or affecting
any other right or remedy which Coast may have hereunder or otherwise and
without otherwise affecting the liability of Guarantor hereunder. Guarantor
hereby expressly waives any right to set-off or assert any counterclaim against
Borrower.
10. Revocation. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving written notice of revocation to Coast at
its address above by registered first-class U.S. mail, postage prepaid, return
receipt requested, and only as to new loans made by Coast to Borrower after
actual receipt of such written notice by Coast. No termination or revocation of
this Guaranty shall be effective until actual receipt of said written notice of
revocation by Coast. Notwithstanding such written notice of revocation or any
other act of Guarantor or any other event or circumstance, Guarantor agrees that
this Guaranty and all consents, waivers and other provisions hereof shall
continue in full force and effect as to any and all Indebtedness which is
outstanding on or before the day following actual receipt of said written notice
of revocation by Coast, and all extensions, renewals and modifications of said
Indebtedness (including without limitation amendments, extensions, renewals and
modifications which are evidenced by new or additional instruments, documents or
agreements executed before receipt of revocation, and all attorneys' fees, court
costs and collection charges, incurred before or after receipt of revocation, in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. Independent Liability. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in the
same action in which Borrower may be sued or in separate actions, as often as
deemed advisable by Coast. The liability of Guarantor hereunder is exclusive and
independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by Coast or set forth in this Guaranty); or (b)
any direction as to the application of payment by Borrower or by any other
party; or (c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, modification or
release of any such other guaranty or undertaking; or (f) any
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dissolution or termination of, or increase, decrease, or change in membership of
any Guarantor which is a partnership. Guarantor hereby expressly represents that
he was not induced to give this Guaranty by the fact that there are or may be
other guarantors either under this Guaranty or otherwise, and Guarantor agrees
that any release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser extent.
If Guarantor is a married person, Guarantor hereby expressly agrees that
recourse may be had against his or her separate property for all of his or her
obligations hereunder.
12. Financial Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon his own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Coast with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Coast to
furnish to him any information now or hereafter in Coast's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which Guarantor
will be liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall have no
right to require Coast to obtain or disclose any information with respect to the
Indebtedness, the financial condition or character of Borrower, the existence of
any collateral or security for any or all of the Indebtedness, the filing by or
against Borrower of any bankruptcy or insolvency proceeding, the existence of
any other guaranties of all or any part of the Indebtedness, any action or
non-action on the part of Coast, Borrower, or any other person, or any other
matter, fact, or occurrence.
13. Reports and Financial Statements of Guarantor. Guarantor shall,
at its sole cost and expense, at any time and from time to time, prepare or
cause to be prepared, and provide to Coast upon Coast's request (i) such
financial statements and reports concerning Guarantor for such periods of time
as Coast may designate, (ii) any other information concerning Guarantor's
business, financial condition or affairs as Coast may request, and (iii) copies
of any and all foreign, federal, state and local tax returns and reports of or
relating to Guarantor as Coast may from time to time request. Guarantor hereby
intentionally and knowingly waives any and all rights and privileges it may have
not to divulge or deliver said tax returns, reports and other information which
are requested by Coast hereunder or in any litigation in which Coast may be
involved relating directly or indirectly to Borrower or to Guarantor. Guarantor
further agrees immediately to give written notice to Coast of any adverse change
in Guarantor's financial condition and of any condition or event which
constitutes an Event of Default under this Guaranty. All reports and information
furnished to Coast hereunder shall be complete, accurate and correct in all
respects. Whenever requested, Guarantor shall further deliver to Coast a
certificate signed by Guarantor (and, if Guarantor is a partnership, by all
general partners of Guarantor, in their individual capacities, and, if Guarantor
is a corporation, by the president and secretary of Guarantor, in their
individual capacities) warranting and representing that all reports, financial
statements and other documents and information delivered or caused to be
delivered to Coast under this Guaranty, are complete, correct and thoroughly and
accurately present the financial condition of Guarantor, and that there exists
on the date of delivery of said certificate to Coast no condition or event which
constitutes an Event of Default under this Guaranty.
14. Representations and Warranties. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes goods
or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii) the
execution and delivery of this Guaranty does not violate or constitute a default
under (with or without the giving of notice, the passage of time, or both) any
order, judgment, decree, instrument or agreement to which Guarantor is a party
or by which it or its assets are affected or bound.
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15. Costs. Whether or not suit be instituted, Guarantor agrees to
reimburse Coast on demand for all reasonable attorneys' fees and all other
reasonable costs and expenses incurred by Coast in enforcing this Guaranty, or
arising out of or relating in any way to this Guaranty, or in enforcing any of
the Indebtedness against Borrower, Guarantor, or any other person, or in
connection with any property of any kind securing all or any part of the
Indebtedness. Without limiting the generality of the foregoing, and in addition
thereto, Guarantor shall reimburse Coast on demand for all reasonable attorneys'
fees and costs Coast incurs in any way relating to Guarantor, Borrower or the
Indebtedness, in order to: obtain legal advice; enforce or seek to enforce any
of its rights; commence, intervene in, respond to, or defend any action or
proceeding; file, prosecute or defend any claim or cause of action in any action
or proceeding (including without limitation any probate claim, bankruptcy claim,
third-party claim, secured creditor claim, reclamation complaint, and complaint
for relief from any stay under the Bankruptcy Code or otherwise); protect,
obtain possession of, sell, lease, dispose of or otherwise enforce any security
interest in or lien on any property of any kind securing any or all of the
Indebtedness; or represent Coast in any litigation with respect to Borrower's or
Guarantor's affairs. In the event either Coast or Guarantor files any lawsuit
against the other predicated on a breach of this Guaranty, the prevailing party
in such action shall be entitled to recover its attorneys' fees and costs of
suit from the non-prevailing party.
16. Notices. Any notice which a party shall be required or shall
desire to give to the other hereunder (except for notice of revocation, which
shall be governed by Section 10 of this Guaranty) shall be given by personal
delivery or by telecopier or by depositing the same in the United States mail,
first class postage pre-paid, addressed to Coast at its address set forth in the
heading of this Guaranty and to Guarantor at his address set forth under his
signature hereon, and such notices shall be deemed duly given on the date of
personal delivery or one day after the date telecopied or 3 business days after
the date of mailing as aforesaid. Coast and Guarantor may change their address
for purposes of receiving notices hereunder by giving written notice thereof to
the other party in accordance herewith. Guarantor shall give Coast immediate
written notice of any change in his address.
17. Claims. Guarantor agrees that any claim or cause of action by
Guarantor against Coast, or any of Coast's directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between Coast and Guarantor
or between Coast and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Coast, or by Coast's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Guarantor by the commencement of
an action or proceeding in a court of competent jurisdiction within Los Angeles
County, California, by the filing of a complaint within one year after the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based and service of a summons and complaint on an officer of
Coast or any other person authorized to accept service of process on behalf of
Coast, within 30 days thereafter. Guarantor agrees that such one year period is
a reasonable and sufficient time for Guarantor to investigate and act upon any
such claim or cause of action. The one year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of Coast.
This provision shall survive any termination of this Guaranty or any other
agreement.
18. Construction; Severability. If more than one person has executed
this Guaranty, the term "Guarantor" as used herein shall be deemed to refer to
all and any one or more such persons and their obligations hereunder shall be
joint and several. Without limiting the generality of the foregoing, if more
than one person has executed this Guaranty, this Guaranty shall in all respects
be interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used
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herein in the singular shall include the plural and words used in the plural
shall include the singular, wherever the context so reasonably requires. If any
provision of this Guaranty or the application thereof to any party or
circumstance is held invalid, void, inoperative or unenforceable, the remainder
of this Guaranty and the application of such provision to other parties or
circumstances shall not be affected thereby, the provisions of this Guaranty
being severable in any such instance.
19. General Provisions. Coast shall have the right to seek recourse
against Guarantor to the full extent provided for herein and in any other
instrument or agreement evidencing obligations of Guarantor to Coast, and
against Borrower to the full extent of the Indebtedness. No election in one form
of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Coast's right to proceed in any other form of action or
proceeding or against any other party. The failure of Coast to enforce any of
the provisions of this Guaranty at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to Coast by law or under any
other instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. If Borrower is a
corporation, partnership or other entity, Guarantor hereby agrees that Coast
shall have no obligation to inquire into the power or authority of Borrower or
any of its officers, directors, partners, or agents acting or purporting to act
on its behalf, and any Indebtedness made or created in reliance upon the
professed exercise of any such power or authority shall be included in the
Indebtedness guaranteed hereby. This Guaranty is the entire and only agreement
between Guarantor and Coast with respect to the guaranty of the Indebtedness of
Borrower by Guarantor, and all representations, warranties, agreements, or
undertakings heretofore or contemporaneously made, which are not set forth
herein, are superseded hereby. No course of dealings between the parties, no
usage of the trade, and no parol or extrinsic evidence of any nature shall be
used or be relevant to supplement or explain or modify any term or provision of
this Guaranty. There are no conditions to the full effectiveness of this
Guaranty. The terms and provisions hereof may not be waived, altered, modified,
or amended except in a writing executed by Guarantor and a duly authorized
officer of Coast. All rights, benefits and privileges hereunder shall inure to
the benefit of and be enforceable by Coast and its successors and assigns and
shall be binding upon Guarantor and his heirs, executors, administrators,
personal representatives, successors and assigns. Neither the death of Guarantor
nor notice thereof to Coast shall terminate this Guaranty as to his estate, and,
notwithstanding the death of Guarantor or notice thereof to Coast, this Guaranty
shall continue in full force and effect with respect to all Indebtedness,
including without limitation Indebtedness incurred or created after the death of
Guarantor and notice thereof to Coast. Section headings are used herein for
convenience only. Guarantor acknowledges that the same may not describe
completely the subject matter of the applicable Section, and the same shall not
be used in any manner to construe, limit, define or interpret any term or
provision hereof.
20. Governing Law; Venue and Jurisdiction. This instrument and all
acts and transactions pursuant or relating hereto and all rights and obligations
of the parties hereto shall be governed, construed, and interpreted in
accordance with the internal laws of the State of California. In order to induce
Coast to accept this Guaranty, and as a material part of the consideration
therefor, Guarantor (i) agrees that all actions or proceedings relating directly
or indirectly hereto shall, at the option of Coast, be litigated in courts
located within Los Angeles County, California, (ii) consents to the jurisdiction
of any such court and consents to the service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Guarantor may have to transfer or change the venue of
any such action or proceeding.
21. Mutual Waiver of Right to Jury Trial. COAST AND GUARANTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS GUARANTEE OR ANY
SUPPLEMENT OR AMENDMENT THERETO; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN COAST AND GUARANTOR ; OR (III) ANY BREACH, CONDUCT, ACTS OR
OMISSIONS OF COAST OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR
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REPRESENTING COAST OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
22. Receipt of Copy. Guarantor acknowledges receipt of a copy of
this Guaranty.
B&T HOLDINGS, INC., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------
Title CEO
---------------------
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STATE OF CALIFORNIA )
) ss.
COUNTY OF ________________ )
On _____________________, 199__, before me, __________________________
_________________________________________, Notary Public, personally appeared
_________, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
-------------------------------
(Seal)
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Continuing Guaranty
Guarantor: Osicom Technologies, Inc., a New Jersey
corporation
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Borrower: Cray Communications, Inc., a Delaware corporation
2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
This Continuing Guaranty is executed by the above-named guarantor
("Guarantor"), as of the above date, in favor of COAST BUSINESS CREDIT, a
division of Southern Pacific Thrift & Loan Association ("Coast"), a California
corporation, with offices at 12121 Wilshire Boulevard, Suite 1111, Los Angeles,
California 90025, with respect to the Indebtedness of Cray Communications, Inc.,
a Delaware corporation ("Borrower").
1. Continuing Guaranty. Guarantor hereby unconditionally guarantees
and promises to pay on demand to Coast, at the address indicated above, or at
such other address as Coast may direct, in lawful money of the United States,
and to perform for the benefit of Coast, all Indebtedness of Borrower now or
hereafter owing to or held by Coast. As used herein, the term "Indebtedness" is
used in its most comprehensive sense and shall mean and include without
limitation: (a) any and all debts, duties, obligations, liabilities,
representations, warranties and guaranties of Borrower or any one or more of
them, heretofore, now, or hereafter made, incurred, or created, whether directly
to Coast or acquired by Coast by assignment or otherwise, or held by Coast on
behalf of others, however arising, whether voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated, certain or uncertain,
determined or undetermined, monetary or nonmonetary, written or oral, and
whether Borrower may be liable individually or jointly with others, and
regardless of whether recovery thereon may be or hereafter become barred by any
statute of limitations, discharged or uncollectible in any bankruptcy,
insolvency or other proceeding, or otherwise unenforceable; and (b) any and all
amendments, modifications, renewals and extensions of any or all of the
foregoing, including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument, document or
agreement; and (c) any and all attorneys' fees, court costs, and collection
charges incurred in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor, or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof. As used herein, the term "Borrower" shall include any successor to the
business and assets of
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Borrower, and shall also include Borrower in its capacity as a debtor or debtor
in possession under the federal Bankruptcy Code, and any trustee, custodian or
receiver for Borrower or any of its assets, should Borrower hereafter become the
subject of any bankruptcy or insolvency proceeding, voluntary or involuntary;
and all indebtedness, liabilities and obligations incurred by any such person
shall be included in the Indebtedness guaranteed hereby. This Guaranty is given
in consideration for credit and other financial accommodations which may, from
time to time, be given by Coast to Borrower in Coast's sole discretion, but
Guarantor acknowledges and agrees that acceptance by Coast of this Guaranty
shall not constitute a commitment of any kind by Coast to extend such credit or
other financial accommodation to Borrower or to permit Borrower to incur
Indebtedness to Coast. All sums due under this Guaranty shall bear interest from
the date due until the date paid at the highest rate charged with respect to any
of the Indebtedness.
2. Waivers. Guarantor hereby waives: (a) presentment for payment,
notice of dishonor, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the acceptance hereof; the
creation, existence, or acquisition of any Indebtedness; the amount of the
Indebtedness from time to time outstanding; disposition of any property which
secures any or all of the Indebtedness or which secures the obligations of any
other guarantor of any or all of the Indebtedness; any adverse change in
Borrower's financial position; any other fact which might increase Guarantor's
risk; any default, partial payment or non-payment of all or any part of the
Indebtedness; any and all agreements and arrangements between Coast and Borrower
and any changes, modifications, or extensions thereof, and any revocation,
modification or release of any guaranty of any or all of the Indebtedness by any
person (including without limitation any other person signing this Guaranty);
(b) any right to require Coast to institute suit against, or to exhaust its
rights and remedies against, Borrower or any other person, or to proceed against
any property of any kind which secures all or any part of the Indebtedness, or
to exercise any right of offset or other right with respect to any reserves,
credits or deposit accounts held by or maintained with Coast or any indebtedness
of Coast to Borrower, or to exercise any other right or power, or pursue any
other remedy Coast may have; (c) any defense arising by reason of any disability
or other defense of Borrower or any other guarantor or any endorser, co-maker or
other person, or by reason of the cessation from any cause whatsoever of any
liability of Borrower or any other guarantor or any endorser, co-maker or other
person, with respect to all or any part of the Indebtedness, or by reason of any
act or omission of Coast or others which directly or indirectly results in the
discharge or release of Borrower or any other guarantor or any other person or
any Indebtedness or any security therefor, whether by operation of law or
otherwise; (d) any defense arising by reason of any failure of Coast to obtain,
perfect, maintain or keep in force any security interest in, or lien or
encumbrance upon, any property of Borrower or any other person; (e) any defense
based upon any failure of Coast to give Guarantor notice of any sale or other
disposition of any property securing any or all of the Indebtedness, or any
defects in any such notice that may be given, or any failure of Coast to comply
with any provision of applicable law in enforcing any security interest in or
lien upon any property securing any or all of the Indebtedness including, but
not limited to, any failure by Coast to dispose of any property securing any or
all of the Indebtedness in a commercially reasonable manner; (f) any defense
based upon or arising out of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against Borrower or any other guarantor or any endorser,
co-maker or other person, including without limitation any discharge of, or bar
against collecting, any of the Indebtedness (including without limitation any
interest thereon), in or as a result of any such proceeding; and (g) the benefit
of any and all statutes of limitation with respect to any action based upon,
arising out of or related to this Guaranty. Until all of the Indebtedness has
been paid, performed, and discharged in full, nothing shall discharge or satisfy
the liability of Guarantor hereunder except the full performance and payment of
all of the Indebtedness. If any claim is ever made upon Coast for repayment or
recovery of any amount or amounts received by Coast in payment of or on account
of any of the Indebtedness, because of any claim that any such payment
constituted a preferential transfer or fraudulent conveyance, or for any other
reason whatsoever, and Coast repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over Coast or any of its property, or by reason of any settlement
or compromise of any such claim effected by Coast with any such claimant
(including without limitation the Borrower), then and in any such event,
Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any
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release of any of the Indebtedness, and the Guarantor shall be and remain liable
to Coast under this Guaranty for the amount so repaid or recovered, to the same
extent as if such amount had never originally been received by Coast, and the
provisions of this sentence shall survive, and continue in effect,
notwithstanding any revocation or release of this Guaranty. Until all of the
Indebtedness has been irrevocably paid and performed in full, Guarantor hereby
expressly and unconditionally waives all rights of subrogation, reimbursement
and indemnity of every kind against Borrower, and all rights of recourse to any
assets or property of Borrower, and all rights to any collateral or security
held for the payment and performance of any Indebtedness, including (but not
limited to) any of the foregoing rights which Guarantor may have under any
present or future document or agreement with any Borrower or other person, and
including (but not limited to) any of the foregoing rights which Guarantor may
have under any equitable doctrine of subrogation, implied contract, or unjust
enrichment, or any other equitable or legal doctrine. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Coast shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Guarantor or any other party through the ordinary negligence of Coast, or any
of its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Coast.
3. Consents. Guarantor hereby consents and agrees that, without
notice to or by Guarantor and without affecting or impairing in any way the
obligations or liability of Guarantor hereunder, Coast may, from time to time
before or after revocation of this Guaranty, do any one or more of the following
in Coast's sole and absolute discretion: (a) accelerate, accept partial payments
of, compromise or settle, renew, extend the time for the payment, discharge, or
performance of, refuse to enforce, and release all or any parties to, any or all
of the Indebtedness; (b) grant any other indulgence to Borrower or any other
person in respect of any or all of the Indebtedness or any other matter; (c)
accept, release, waive, surrender, enforce, exchange, modify, impair, or extend
the time for the performance, discharge, or payment of, any and all property of
any kind securing any or all of the Indebtedness or any guaranty of any or all
of the Indebtedness, or on which Coast at any time may have a lien, or refuse to
enforce its rights or make any compromise or settlement or agreement therefor in
respect of any or all of such property; (d) substitute or add, or take any
action or omit to take any action which results in the release of, any one or
more endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as Coast determines in its
sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as Coast determines in its sole discretion, regardless of whether or not
such Indebtedness is secured or is due and payable. Guarantor consents and
agrees that Coast shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness. Guarantor
further consents and agrees that Coast shall have no duties or responsibilities
whatsoever with respect to any property securing any or all of the Indebtedness.
Without limiting the generality of the foregoing, Coast shall have no obligation
to monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. Account Stated. Coast's books and records showing the account
between it and the Borrower shall be admissible in evidence in any action or
proceeding as prima facie proof of the items therein set forth. Coast's monthly
statements rendered to the Borrower shall be binding upon the Guarantor (whether
or not the Guarantor receives copies thereof), and shall constitute an account
stated between Coast and the Borrower, unless Coast receives a written statement
of the Borrower's exceptions within 30 days after the statement was mailed to
the Borrower. The Guarantor assumes full responsibility for obtaining copies of
such monthly statements from the Borrower, if the Guarantor desires such copies.
5. Exercise of Rights and Remedies; Foreclosure of Trust Deeds.
Guarantor
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consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Coast may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of contribution or other right
against any other guarantor of any or all of the Indebtedness or against any
other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
Guarantor waives all rights and defenses arising out of an election of remedies
by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise. (b)
Guarantor further waives all rights and defenses arising out of an election of
remedies by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation, reimbursement and contribution against
any other guarantor of the guaranteed obligation, by the operation of Section
580d of the Code of Civil Procedure or otherwise. (c) Guarantor understands that
if Coast forecloses any present or future trust deed, which secures any or all
of the Indebtedness or which secures any other guaranty of any or all of the
Indebtedness, by nonjudicial foreclosure, Guarantor may, as a result, have a
complete defense to liability under this Guaranty, based on the legal doctrine
of estoppel and Sections 580a, 580d or 726 of the California Code of Civil
Procedure, and Guarantor hereby expressly waives all such defenses. (d)
Guarantor understands and agrees that, in the event Coast in its sole discretion
forecloses any trust deed now or hereafter securing any or all of the
Indebtedness, by nonjudicial foreclosure, Guarantor will remain liable to Coast
for any deficiency, even though Guarantor will lose his right of subrogation
against the Borrower, and even though Guarantor will be unable to recover from
the Borrower the amount of the deficiency for which Guarantor is liable, and
even though Guarantor may have retained his right of subrogation against
Borrower if Coast had foreclosed said trust deed by judicial foreclosure as
opposed to nonjudicial foreclosure, and even though absent the waivers set forth
herein Guarantor may have had a complete defense to any liability for any
deficiency hereunder. (e) Guarantor understands and agrees that, in the event
Coast in its sole discretion forecloses any trust deed now or hereafter securing
any other guaranty of any or all of the Indebtedness, by nonjudicial
foreclosure, Guarantor will remain liable to Coast for any deficiency, even
though Guarantor will lose his right of subrogation or contribution against the
other guarantor, and even though Guarantor will be unable to recover from the
other guarantor any part of the deficiency for which Guarantor is liable, and
even though Guarantor may have retained his right of subrogation or contribution
against the other guarantor if Coast had foreclosed said trust deed by judicial
foreclosure as opposed to nonjudicial foreclosure, and even though absent the
waivers set forth herein Guarantor may have had a complete defense to any
liability for any deficiency hereunder.
6. Acceleration. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of Coast, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to Coast by Borrower or Guarantor, or
any of their respective officers, partners, employees, or agents, is incorrect,
false, untrue, or misleading when given in any material respect; or (b) Borrower
or Guarantor shall fail to pay or perform when due all or any part of the
Indebtedness; or (c) Guarantor shall fail to pay or perform within 5 days after
the same is due any indebtedness or obligation of Guarantor to Coast or to any
parent, subsidiary or corporate affiliate of Coast, whether under this Guaranty
or any other instrument, document, or agreement heretofore or hereafter entered
into; or (d) there occurs in Coast's judgment a material impairment of the
prospect of payment or performance of any or all of the Indebtedness; or (e) any
event shall occur which does result in the acceleration of the maturity of any
indebtedness of Borrower or Guarantor to others (regardless of any requirement
of notice, opportunity to cure or other condition prior to the exercise of any
right of acceleration); or (f) Borrower or Guarantor shall fail promptly to
perform or comply with any term or
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condition of any agreement with any third party which does or may result in a
material adverse effect on the business of Borrower or Guarantor unless timely
cured or waived in writing by such third party; or (g) there shall be made or
exist any levy, assessment, attachment, seizure, lien, or encumbrance for any
cause or reason whatsoever upon all or any part of the property of Borrower or
Guarantor (unless discharged by payment, release or bond not more than ten days
after such event has occurred); or (h) there shall occur the dissolution,
termination of existence, insolvency, or business failure of Borrower or
Guarantor, or the appointment of a receiver, trustee or custodian for Borrower
or Guarantor or all or any part of the property of either of them, or the
assignment for the benefit of creditors by Borrower or Guarantor, or the
commencement of any proceeding by or against Borrower or Guarantor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect; or (i) Borrower or Guarantor shall be deceased or declared
incompetent by any court or a guardian or conservator shall be appointed for
either of them or for the property of either of them; or (j) Guarantor or
Borrower shall generally not pay their respective debts as they become due or
shall enter into any agreement (whether written or oral), or offer to enter into
any such agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management, or control of the business of either of them; or (k) Borrower or
Guarantor shall conceal, remove or permit to be concealed or removed any part of
its property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law, or shall make any transfer of
its property to or for the benefit of any creditor at a time when other
creditors similarly situated have not been paid; or (l) the board of directors
or shareholders of Borrower or Guarantor shall adopt any resolution or plan for
its dissolution or the liquidation of all or substantially all of its assets; or
(m) Guarantor shall revoke this Guaranty or contest or deny liability under this
Guaranty. All of the foregoing are hereinafter referred to as "Events of
Default".
7. Right to Attachment Remedy. Guarantor agrees that,
notwithstanding the existence of any property securing any or all of the
Indebtedness, Coast shall have all of the rights of an unsecured creditor of
Guarantor, including without limitation the right to obtain a temporary
protective order and writ of attachment against Guarantor with respect to any
sums due under this Guaranty. Guarantor further agrees that in the event any
property secures the obligations of Guarantor under this Guaranty, to the extent
that Coast, in its sole and absolute discretion, determines prior to the
disposition of such property that the amount to be realized by Coast therefrom
may be less than the indebtedness of the Guarantor under this Guaranty, Coast
shall have all the rights of an unsecured creditor against Guarantor, including
without limitation the right of Coast, prior to the disposition of said
property, to obtain a temporary protective order and writ of attachment against
Guarantor. Guarantor waives the benefit of Section 483.010(b) of the California
Code of Civil Procedure and of any and all other statutes and rules of law now
or hereafter in effect requiring Coast to first resort to or exhaust all such
collateral before seeking or obtaining any attachment remedy against Guarantor.
Coast shall have no liability to Guarantor as a result thereof, whether or not
the actual deficiency realized by Coast is less than the anticipated deficiency
on the basis of which Coast obtains a temporary protective order or writ of
attachment.
8. Indemnity. Guarantor hereby agrees to indemnify Coast and hold
Coast harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
without limitation attorneys' fees), of every nature, character and description,
which Coast may sustain or incur based upon or arising out of any of the
Indebtedness, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Coast relating in any way to
Borrower or the Indebtedness (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of Coast or any of its
directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing Coast). Notwithstanding any provision in this
Guaranty to the contrary, the indemnity agreement set forth in this Section
shall survive any termination or revocation of this Guaranty and shall for all
purposes continue in full force and effect.
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9. Subordination. Any and all debts, liabilities and obligations
owing from Borrower to Guarantor including any security for and guaranties of
any such obligations, whether now existing or hereafter arising, are hereby
subordinated in right of payment to the prior payment in full of all of the
Indebtedness. Except as permitted in that certain Subordination Agreement
between Guarantor and Coast dated as of September, 1996, and any written
amendments thereto, no payment in respect of any such subordinated obligations
shall at any time be made to or accepted by Guarantor if at the time of such
payment any Indebtedness is outstanding unless Coast, in its sole discretion,
agrees to such payment in writing. The agreement by Coast to a payment on
account of subordinated debt shall not constitute an agreement to the payment of
any other subordinated. If any Event of Default has occurred, all debts,
liabilities and obligations owing from Borrower to Guarantor shall be
subordinated, Borrower and any assignee, trustee in bankruptcy, receiver, or any
other person having custody or control over any or all of Borrower's property
are hereby authorized and directed to pay to Coast the entire unpaid balance of
the Indebtedness before making any payments whatsoever to Guarantor, whether as
a creditor, shareholder, or otherwise; and insofar as may be necessary for that
purpose, Guarantor hereby assigns and transfers to Coast all rights to any and
all debts, liabilities and obligations owing from Borrower to Guarantor,
including any security for and guaranties of any such obligations, whether now
existing or hereafter arising, including without limitation any payments,
dividends or distributions out of the business or assets of Borrower. Any
amounts received by Guarantor in violation of the foregoing provisions shall be
received and held as trustee for the benefit of Coast and shall forthwith be
paid over to Coast to be applied to the Indebtedness in such order and sequence
as Coast shall in its sole discretion determine, without limiting or affecting
any other right or remedy which Coast may have hereunder or otherwise and
without otherwise affecting the liability of Guarantor hereunder. Guarantor
hereby expressly waives any right to set-off or assert any counterclaim against
Borrower.
10. Revocation. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving written notice of revocation to Coast at
its address above by registered first-class U.S. mail, postage prepaid, return
receipt requested, and only as to new loans made by Coast to Borrower after
actual receipt of such written notice by Coast. No termination or revocation of
this Guaranty shall be effective until actual receipt of said written notice of
revocation by Coast. Notwithstanding such written notice of revocation or any
other act of Guarantor or any other event or circumstance, Guarantor agrees that
this Guaranty and all consents, waivers and other provisions hereof shall
continue in full force and effect as to any and all Indebtedness which is
outstanding on or before the day following actual receipt of said written notice
of revocation by Coast, and all extensions, renewals and modifications of said
Indebtedness (including without limitation amendments, extensions, renewals and
modifications which are evidenced by new or additional instruments, documents or
agreements executed before receipt of revocation, and all attorneys' fees, court
costs and collection charges, incurred before or after receipt of revocation, in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. Independent Liability. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in the
same action in which Borrower may be sued or in separate actions, as often as
deemed advisable by Coast. The liability of Guarantor hereunder is exclusive and
independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by Coast or set forth in this Guaranty); or (b)
any direction as to the application of payment by Borrower or by any other
party; or (c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, modification or
release of any such other guaranty or undertaking; or (f) any
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Coast Business Credit
Continuing Guaranty
--------------------------------------------------------------------
dissolution or termination of, or increase, decrease, or change in membership of
any Guarantor which is a partnership. Guarantor hereby expressly represents that
he was not induced to give this Guaranty by the fact that there are or may be
other guarantors either under this Guaranty or otherwise, and Guarantor agrees
that any release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser extent.
If Guarantor is a married person, Guarantor hereby expressly agrees that
recourse may be had against his or her separate property for all of his or her
obligations hereunder.
12. Financial Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon his own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Coast with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Coast to
furnish to him any information now or hereafter in Coast's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which Guarantor
will be liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall have no
right to require Coast to obtain or disclose any information with respect to the
Indebtedness, the financial condition or character of Borrower, the existence of
any collateral or security for any or all of the Indebtedness, the filing by or
against Borrower of any bankruptcy or insolvency proceeding, the existence of
any other guaranties of all or any part of the Indebtedness, any action or
non-action on the part of Coast, Borrower, or any other person, or any other
matter, fact, or occurrence.
13. Reports and Financial Statements of Guarantor. Guarantor shall,
at its sole cost and expense, at any time and from time to time, prepare or
cause to be prepared, and provide to Coast upon Coast's request (i) such
financial statements and reports concerning Guarantor for such periods of time
as Coast may designate, (ii) any other information concerning Guarantor's
business, financial condition or affairs as Coast may request, and (iii) copies
of any and all foreign, federal, state and local tax returns and reports of or
relating to Guarantor as Coast may from time to time request. Guarantor hereby
intentionally and knowingly waives any and all rights and privileges it may have
not to divulge or deliver said tax returns, reports and other information which
are requested by Coast hereunder or in any litigation in which Coast may be
involved relating directly or indirectly to Borrower or to Guarantor. Guarantor
further agrees immediately to give written notice to Coast of any adverse change
in Guarantor's financial condition and of any condition or event which
constitutes an Event of Default under this Guaranty. All reports and information
furnished to Coast hereunder shall be complete, accurate and correct in all
respects. Whenever requested, Guarantor shall further deliver to Coast a
certificate signed by Guarantor (and, if Guarantor is a partnership, by all
general partners of Guarantor, in their individual capacities, and, if Guarantor
is a corporation, by the president and secretary of Guarantor, in their
individual capacities) warranting and representing that all reports, financial
statements and other documents and information delivered or caused to be
delivered to Coast under this Guaranty, are complete, correct and thoroughly and
accurately present the financial condition of Guarantor, and that there exists
on the date of delivery of said certificate to Coast no condition or event which
constitutes an Event of Default under this Guaranty.
14. Representations and Warranties. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes goods
or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii) the
execution and delivery of this Guaranty does not violate or constitute a default
under (with or without the giving of notice, the passage of time, or both) any
order, judgment, decree, instrument or agreement to which Guarantor is a party
or by which it or its assets are affected or bound.
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<PAGE>
Coast Business Credit
Continuing Guaranty
--------------------------------------------------------------------
15. Costs. Whether or not suit be instituted, Guarantor agrees to
reimburse Coast on demand for all reasonable attorneys' fees and all other
reasonable costs and expenses incurred by Coast in enforcing this Guaranty, or
arising out of or relating in any way to this Guaranty, or in enforcing any of
the Indebtedness against Borrower, Guarantor, or any other person, or in
connection with any property of any kind securing all or any part of the
Indebtedness. Without limiting the generality of the foregoing, and in addition
thereto, Guarantor shall reimburse Coast on demand for all reasonable attorneys'
fees and costs Coast incurs in any way relating to Guarantor, Borrower or the
Indebtedness, in order to: obtain legal advice; enforce or seek to enforce any
of its rights; commence, intervene in, respond to, or defend any action or
proceeding; file, prosecute or defend any claim or cause of action in any action
or proceeding (including without limitation any probate claim, bankruptcy claim,
third-party claim, secured creditor claim, reclamation complaint, and complaint
for relief from any stay under the Bankruptcy Code or otherwise); protect,
obtain possession of, sell, lease, dispose of or otherwise enforce any security
interest in or lien on any property of any kind securing any or all of the
Indebtedness; or represent Coast in any litigation with respect to Borrower's or
Guarantor's affairs. In the event either Coast or Guarantor files any lawsuit
against the other predicated on a breach of this Guaranty, the prevailing party
in such action shall be entitled to recover its attorneys' fees and costs of
suit from the non-prevailing party.
16. Notices. Any notice which a party shall be required or shall
desire to give to the other hereunder (except for notice of revocation, which
shall be governed by Section 10 of this Guaranty) shall be given by personal
delivery or by telecopier or by depositing the same in the United States mail,
first class postage pre-paid, addressed to Coast at its address set forth in the
heading of this Guaranty and to Guarantor at his address set forth under his
signature hereon, and such notices shall be deemed duly given on the date of
personal delivery or one day after the date telecopied or 3 business days after
the date of mailing as aforesaid. Coast and Guarantor may change their address
for purposes of receiving notices hereunder by giving written notice thereof to
the other party in accordance herewith. Guarantor shall give Coast immediate
written notice of any change in his address.
17. Claims. Guarantor agrees that any claim or cause of action by
Guarantor against Coast, or any of Coast's directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between Coast and Guarantor
or between Coast and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Coast, or by Coast's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Guarantor by the commencement of
an action or proceeding in a court of competent jurisdiction within Los Angeles
County, California, by the filing of a complaint within one year after the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based and service of a summons and complaint on an officer of
Coast or any other person authorized to accept service of process on behalf of
Coast, within 30 days thereafter. Guarantor agrees that such one year period is
a reasonable and sufficient time for Guarantor to investigate and act upon any
such claim or cause of action. The one year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of Coast.
This provision shall survive any termination of this Guaranty or any other
agreement.
18. Construction; Severability. If more than one person has executed
this Guaranty, the term "Guarantor" as used herein shall be deemed to refer to
all and any one or more such persons and their obligations hereunder shall be
joint and several. Without limiting the generality of the foregoing, if more
than one person has executed this Guaranty, this Guaranty shall in all respects
be interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used
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<PAGE>
Coast Business Credit
Continuing Guaranty
--------------------------------------------------------------------
herein in the singular shall include the plural and words used in the plural
shall include the singular, wherever the context so reasonably requires. If any
provision of this Guaranty or the application thereof to any party or
circumstance is held invalid, void, inoperative or unenforceable, the remainder
of this Guaranty and the application of such provision to other parties or
circumstances shall not be affected thereby, the provisions of this Guaranty
being severable in any such instance.
19. General Provisions. Coast shall have the right to seek recourse
against Guarantor to the full extent provided for herein and in any other
instrument or agreement evidencing obligations of Guarantor to Coast, and
against Borrower to the full extent of the Indebtedness. No election in one form
of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Coast's right to proceed in any other form of action or
proceeding or against any other party. The failure of Coast to enforce any of
the provisions of this Guaranty at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to Coast by law or under any
other instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. If Borrower is a
corporation, partnership or other entity, Guarantor hereby agrees that Coast
shall have no obligation to inquire into the power or authority of Borrower or
any of its officers, directors, partners, or agents acting or purporting to act
on its behalf, and any Indebtedness made or created in reliance upon the
professed exercise of any such power or authority shall be included in the
Indebtedness guaranteed hereby. This Guaranty is the entire and only agreement
between Guarantor and Coast with respect to the guaranty of the Indebtedness of
Borrower by Guarantor, and all representations, warranties, agreements, or
undertakings heretofore or contemporaneously made, which are not set forth
herein, are superseded hereby. No course of dealings between the parties, no
usage of the trade, and no parol or extrinsic evidence of any nature shall be
used or be relevant to supplement or explain or modify any term or provision of
this Guaranty. There are no conditions to the full effectiveness of this
Guaranty. The terms and provisions hereof may not be waived, altered, modified,
or amended except in a writing executed by Guarantor and a duly authorized
officer of Coast. All rights, benefits and privileges hereunder shall inure to
the benefit of and be enforceable by Coast and its successors and assigns and
shall be binding upon Guarantor and his heirs, executors, administrators,
personal representatives, successors and assigns. Neither the death of Guarantor
nor notice thereof to Coast shall terminate this Guaranty as to his estate, and,
notwithstanding the death of Guarantor or notice thereof to Coast, this Guaranty
shall continue in full force and effect with respect to all Indebtedness,
including without limitation Indebtedness incurred or created after the death of
Guarantor and notice thereof to Coast. Section headings are used herein for
convenience only. Guarantor acknowledges that the same may not describe
completely the subject matter of the applicable Section, and the same shall not
be used in any manner to construe, limit, define or interpret any term or
provision hereof.
20. Governing Law; Venue and Jurisdiction. This instrument and all
acts and transactions pursuant or relating hereto and all rights and obligations
of the parties hereto shall be governed, construed, and interpreted in
accordance with the internal laws of the State of California. In order to induce
Coast to accept this Guaranty, and as a material part of the consideration
therefor, Guarantor (i) agrees that all actions or proceedings relating directly
or indirectly hereto shall, at the option of Coast, be litigated in courts
located within Los Angeles County, California, (ii) consents to the jurisdiction
of any such court and consents to the service of process in any such action or
proceeding by personal delivery or any other method permitted by law; and (iii)
waives any and all rights Guarantor may have to transfer or change the venue of
any such action or proceeding.
21. Mutual Waiver of Right to Jury Trial. COAST AND GUARANTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS GUARANTEE OR ANY
SUPPLEMENT OR AMENDMENT THERETO; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN COAST AND GUARANTOR ; OR (III) ANY BREACH, CONDUCT, ACTS OR
OMISSIONS OF COAST OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR
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Coast Business Credit
Continuing Guaranty
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REPRESENTING COAST OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
22. Receipt of Copy. Guarantor acknowledges receipt of a copy of
this Guaranty.
OSICOM TECHNOLOGIES, INC.,
a New Jersey corporation
By /s/ Sharon G. Chadha
----------------------------
Title CE0
-------------------------
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<PAGE>
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STATE OF CALIFORNIA )
) ss.
COUNTY OF ________________ )
On _____________________, 199__, before me, __________________________
_________________________________________, Notary Public, personally appeared
_________, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
-------------------------------
(Seal)
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<PAGE>
Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
Subordination Agreement
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 9020 Junction Drive
Annapolis Junction, MD 20791
Creditor/Investor: B&T Holdings, Inc., a Delaware corporation
2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
This Subordination Agreement is executed by the above-named
Subordinating Creditor. ("Subordinating Creditor") in favor of Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"),
whose address is 12121 Wilshire Blvd., Los Angeles, California, with respect to
the above-named Borrower ("Borrower"). In order to induce Coast to extend or
continue to extend financing to the Borrower (but without obligation on Coast's
part to do so), the Subordinating Creditor hereby agrees as follows:
1. Subordination of Debt and Capital Subordinating Creditor hereby subordinates
payment by the Borrower of any and all indebtedness, liabilities, guarantees and
other obligations of the Borrower to Subordinating Creditor and return of
Capital or Distributions now existing or hereafter arising (collectively, the
"Subordinated Amounts"), to the payment to Coast, in full in cash, of all
indebtedness, liabilities, guarantees and other obligations of the Borrower to
Coast, now existing or hereafter arising (including without limitation any
interest, charges and other sums accruing after the filing of a petition by or
against Borrower under the Bankruptcy Code) (the "Coast Debt").
Subordinating Creditor represents and warrants that it has not transferred
or assigned the Subordinated Amounts or given any other subordination agreement
in respect thereof, and that it will not do so without prior written notice to
Coast and without making such transfer or assignment or subordination expressly
subject to this Agreement. Subordinating Creditor agrees not to ask for, demand,
sue for, take or receive all or any part of the Subordinated Amounts nor any
security therefor unless and until all of the Coast Debt has been paid and
performed in full, in cash; provided that, so long as no Event of Default and no
event which, with notice or passage of time or both, would constitute an Event
of Default under any present or future document, instrument or agreement
evidencing, securing or relating to the Coast Debt, both before and after giving
effect to the following payments, Subordinated Creditor may accept payment of
the following amounts on the Subordinated Amounts: Subordinating Creditor may
accept dividends declared by Borrower and repayment of all or part of the
Subordinated Amounts provided (a) such payments constitute ordinary course of
business transactions, (b) such payments would not constitute an event of
default and no event which, with notice or passage of time or both, would
constitute an event of default under any present or future document, instrument
or agreement between Borrower, Subordinating Creditor or any affiliate, on the
one hand and a party other than Coast on the other hand, (c) all such payments
are reported to Coast on a monthly basis, or more frequently if requested by
Coast, and (d) Coast has not given notice to Subordinating Creditor that Coast
has revoked the authorization of Subordinating Creditor to accept such dividends
or repayments of the Subordinated Amounts, which revocation may be made by Coast
if Coast in good faith believes that revocation is or may be necessary to avoid
or reduce the risk of a material adverse change or impairment of Coast's rights
or financial interests. Coast may further limit or condition dividends or
repayments of the Subordinated Amounts upon such terms as Coast, in its sole
discretion, deems appropriate, including, but not limited to, imposing dollar
limits and requiring advance notice to Coast of proposed dividends and
repayments in amounts which Coast, in its sole discretion, deems material.
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<PAGE>
Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
Subordinating Creditor further agrees that upon any distribution of the assets
or readjustment of the indebtedness of the Borrower whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any of the Subordinated Amounts, or the application of
the assets of the Borrower to the payment or liquidation thereof, Coast shall be
entitled to receive payment in full in cash of all of the Coast Debt prior to
the payment of all or any part of the Subordinated Amounts, and in order to
enable Coast to enforce its rights hereunder in any such action or proceeding,
Coast is hereby irrevocably authorized and empowered in its discretion (but
without any obligation on its part) to make and present for and on behalf of
Subordinating Creditor such proofs of claim and proofs of interest against the
Borrower on account of the Subordinated Amounts as Coast may deem expedient or
proper and to vote such proofs of claim and proofs of interest in any such
proceeding and to receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
to apply same on account of the Coast Debt. Subordinating Creditor further
agrees to execute and deliver to Coast such assignments or other instruments as
may be required by Coast in order to enable Coast to enforce any and all such
claims and to collect any and all dividends or other payments or disbursements
which may be made at any time on account of all and any of the Subordinated
Amounts. Subordinating Creditor shall endorse all notes and other written
evidence of the Subordinated Amounts with a statement that they are subordinated
to the Coast Debt pursuant to the terms of this agreement, in such form as Coast
shall require, and Subordinating Creditor will exhibit the originals of such
notes and other written evidence of the Subordinated Amounts to Coast so that
Coast can confirm that such endorsement has been made, but this Subordination
Agreement shall be fully effective, even if no such endorsement is made.
2. Modifications to Coast Debt; Waivers. Until Coast have received payment in
full of all Coast Debt, the Subordinating Creditor agrees that, in addition to
any other rights that Coast may have at law or in equity, Coast may at any time,
and from time to time, without the Subordinating Creditor' consent and without
notice to the Subordinating Creditor, renew, extend or increase any of the Coast
Debt or that of any other person at any time directly or indirectly liable for
the payment of any Coast Debt, accept partial payments of the Coast Debt,
settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of the Coast Debt, make loans or advances to the
Borrower secured in whole or in part by the any present or future assets
securing any or all of the Coast Debt (the "Collateral") or refrain from making
any loans or advances to the Borrower, change, waive, alter or vary the interest
charge on, or any other terms or provisions of the Coast Debt or any present or
future instrument, document or agreement between Coast and the Borrower,
release, exchange, fail to perfect, delay the perfection of, fail to resort to,
or realize upon any Collateral, and take any other action or omit to take any
other action with respect to the Coast Debt or the Collateral as Coast deems
necessary or advisable in Coast's sole discretion. Subordinating Creditor waives
any right to require Coast to marshal any assets in favor of the Subordinating
Creditor or against or in payment of any or all of the Coast Debt. Subordinating
Creditor further waives any defense arising by reason of any claim or defense
based upon an election of remedies by Coast which in any manner impairs,
affects, reduces, releases, destroys and/or extinguishes the Subordinating
Creditor' subrogation rights, rights to proceed against the Borrower for
reimbursement, and/or any other rights of the Subordinating Creditor. In the
event of any financing of the Borrower by Coast during any bankruptcy,
arrangement, or reorganization of the Borrower, the Subordinating Creditor
agrees that the term "Coast Debt" shall include without limitation all
indebtedness, liabilities and obligations incurred in any such proceeding, and
the Subordinated Amounts shall continue to remain subordinate to the Coast Debt,
and the Subordinating Creditor agrees to take such actions and execute such
documents in such proceedings as may be required in order to continue such
subordination.
3. Default. The Subordinating Creditor shall promptly give Coast written
notice of any default or event of default under any document, instrument or
agreement evidencing, securing or relating to any of the Subordinated Amounts,
and, until the Coast Debt has been paid and performed in full, the Subordinating
Creditor shall not exercise any rights or remedies with respect to, the
Subordinated Amounts, judicially or non-judicially, or attempt to do any of the
foregoing.
4. No Commitment. It is understood and agreed that this Agreement shall in no
way be construed as a commitment or agreement by Coast to continue financing
arrangements with the Borrower and that Coast may terminate such arrangements at
any time, in accordance with Coast's agreements with the Borrower.
5. No Contest. Subordinating Creditor agrees not to contest the validity,
perfection, priority or enforceability of Coast' security interest in the
Collateral or the Coast Debt.
6. Financial Condition of Borrower. The Subordinating Creditor is presently
informed of the financial condition of the Borrower and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of non-payment of the Coast Debt and the Subordinated Amounts. The Subordinating
Creditor covenants that it will continue to keep itself informed as to the
Borrower's financial condition and all other circumstances which bear upon the
risk of non-payment of the
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<PAGE>
Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
Coast Debt and the Subordinated Amounts. The Subordinating Creditor waives any
right to require Coast to disclose to it any information which Coast may now or
hereafter acquire concerning the Borrower.
7. Revivor. If, after payment of the Coast Debt, the Borrower thereafter
becomes liable to Coast on account of the Coast Debt, as a result of any payment
made on the Coast Debt for any reason being returned by Coast or being reversed,
set aside, or recovered by the Borrower or any trustee or assignee for the
Borrower, this Agreement shall thereupon in all respects become effective with
respect to such subsequent or reinstated Coast Debt, without the necessity of
any further act or agreement between Coast and the Subordinating Creditor.
8. General. The Subordinating Creditor agrees, upon Coast's request, to
execute all such documents and instruments and take all such actions as Coast
shall deem necessary or advisable in order to carry out the purposes of this
Agreement. The word "indebtedness" is used in this agreement in its most
comprehensive sense and includes without limitation any and all present and
future loans, advances, credit, debts, obligations, liabilities,
representations, warranties, and guarantees, of any kind and nature, absolute or
contingent, liquidated or unliquidated, and individual or joint. Subordinating
Creditor represents and warrants that it has not heretofore transferred or
assigned the Subordinated Amounts, and that it will not do so without prior
written notice to Coast and without making such transfer or assignment expressly
subject to this Agreement. This Agreement is solely for the benefit of Coast and
Coast's successors and assigns, and neither the Borrower nor any other person
shall have any right, benefit, priority or interest under, or because of the
existence of, this Agreement. All of Coast's rights and remedies hereunder and
under applicable law are cumulative and not exclusive. This Agreement sets forth
in full the terms of agreement between the parties with respect to the subject
matter hereof, and may not be modified or amended, nor may any rights hereunder
be waived, except in a writing signed by Coast and the Subordinating Creditor.
The Subordinating Creditor agrees to reimburse Coast, upon demand, for all costs
and expenses (including reasonable attorneys' fees) incurred by Coast in
enforcing this Agreement against Subordinating Creditor, whether or not suit be
brought. In the event of any litigation between the parties based upon or
arising out of this Agreement, the prevailing party shall be entitled to recover
all of its costs and expenses (including without limitation attorneys fees) from
the non-prevailing party. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of California. As a material part of the
consideration to the parties for entering into this Agreement, each party (i)
agrees that all actions and proceedings based upon, arising out of or relating
in any way directly or indirectly to, this Agreement shall be litigated
exclusively in courts located within Los Angeles County, California, (ii)
consents to the jurisdiction of any such court and consents to the service of
process in any such action or proceeding by personal delivery, first-class mail,
or any other method permitted by law, and (iii) waives any and all rights to
transfer or change the venue of any such action or proceeding to any court
located outside Los Angeles County, California. This Agreement shall be binding
upon the Subordinating Creditor and its successors and assigns and shall inure
to the benefit of Coast and Coast's successors and assigns.
9. Mutual Waiver of Jury Trial. Subordinating Creditor and Coast each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to: (i) this Agreement; or (ii) any other present
or future instrument or agreement between Subordinating Creditor and Coast; or
(iii) any conduct, acts or omissions of Subordinating Creditor or Coast or any
of their directors, officers, employees, agents, attorneys or any other persons
affiliated with Subordinating Creditor or Coast; in each of the foregoing cases,
whether sounding in contract or tort or otherwise.
"Subordinating Creditor:"
B&T Holdings, Inc., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
CONSENT AND AGREEMENT OF BORROWER
The undersigned Borrower hereby approves of, agrees to and consents
to all of the terms and provisions of the foregoing Subordination Agreement and
agrees to be bound thereby and further agrees that any default or event of
default by the Borrower under any present or future instrument or agreement
between the Borrower and the Subordinating Creditor shall constitute an
immediate default and event of default under all present and future instruments
and agreements
-15-
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Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
between the Borrower and Coast. Borrower further agrees that, at any time and
from time to time, the foregoing Agreement may be altered, modified or amended
by Coast and the Subordinating Creditor without notice to or the consent of
Borrower.
Borrower:
Cray Electronics, Inc., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
Accepted:
Coast:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By /s/ Barbara Nitkin
---------------------------
Title VP
------------------------
Subordination Agreement
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 9020 Junction Drive
Annapolis Junction, MD 20791
Creditor/Investor: CEH Holdings, a Delaware corporation
2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
This Subordination Agreement is executed by the above-named
Subordinating Creditor. ("Subordinating Creditor") in favor of Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"),
whose address is 12121 Wilshire Blvd., Los Angeles, California, with respect to
the above-named Borrower ("Borrower"). In order
-16-
<PAGE>
Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
to induce Coast to extend or continue to extend financing to the Borrower (but
without obligation on Coast's part to do so), the Subordinating Creditor hereby
agrees as follows:
1. Subordination of Debt and Capital Subordinating Creditor hereby subordinates
payment by the Borrower of any and all indebtedness, liabilities, guarantees and
other obligations of the Borrower to Subordinating Creditor and return of
Capital or Distributions now existing or hereafter arising (collectively, the
"Subordinated Amounts"), to the payment to Coast, in full in cash, of all
indebtedness, liabilities, guarantees and other obligations of the Borrower to
Coast, now existing or hereafter arising (including without limitation any
interest, charges and other sums accruing after the filing of a petition by or
against Borrower under the Bankruptcy Code) (the "Coast Debt").
Subordinating Creditor represents and warrants that it has not transferred
or assigned the Subordinated Amounts or given any other subordination agreement
in respect thereof, and that it will not do so without prior written notice to
Coast and without making such transfer or assignment or subordination expressly
subject to this Agreement. Subordinating Creditor agrees not to ask for, demand,
sue for, take or receive all or any part of the Subordinated Amounts nor any
security therefor unless and until all of the Coast Debt has been paid and
performed in full, in cash; provided that, so long as no Event of Default and no
event which, with notice or passage of time or both, would constitute an Event
of Default under any present or future document, instrument or agreement
evidencing, securing or relating to the Coast Debt, both before and after giving
effect to the following payments, Subordinated Creditor may accept payment of
the following amounts on the Subordinated Amounts: Subordinating Creditor may
accept dividends declared by Borrower and repayment of all or part of the
Subordinated Amounts provided (a) such payments constitute ordinary course of
business transactions, (b) such payments would not constitute an event of
default and no event which, with notice or passage of time or both, would
constitute an event of default under any present or future document, instrument
or agreement between Borrower, Subordinating Creditor or any affiliate, on the
one hand and a party other than Coast on the other hand, (c) all such payments
are reported to Coast on a monthly basis, or more frequently if requested by
Coast, and (d) Coast has not given notice to Subordinating Creditor that Coast
has revoked the authorization of Subordinating Creditor to accept such dividends
or repayments of the Subordinated Amounts, which revocation may be made by Coast
if Coast in good faith believes that revocation is or may be necessary to avoid
or reduce the risk of a material adverse change or impairment of Coast's rights
or financial interests. Coast may further limit or condition dividends or
repayments of the Subordinated Amounts upon such terms as Coast, in its sole
discretion, deems appropriate, including, but not limited to, imposing dollar
limits and requiring advance notice to Coast of proposed dividends and
repayments in amounts which Coast, in its sole discretion, deems material.
Subordinating Creditor further agrees that upon any distribution of the assets
or readjustment of the indebtedness of the Borrower whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any of the Subordinated Amounts, or the application of
the assets of the Borrower to the payment or liquidation thereof, Coast shall be
entitled to receive payment in full in cash of all of the Coast Debt prior to
the payment of all or any part of the Subordinated Amounts, and in order to
enable Coast to enforce its rights hereunder in any such action or proceeding,
Coast is hereby irrevocably authorized and empowered in its discretion (but
without any obligation on its part) to make and present for and on behalf of
Subordinating Creditor such proofs of claim and proofs of interest against the
Borrower on account of the Subordinated Amounts as Coast may deem expedient or
proper and to vote such proofs of claim and proofs of interest in any such
proceeding and to receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
to apply same on account of the Coast Debt. Subordinating Creditor further
agrees to execute and deliver to Coast such assignments or other instruments as
may be required by Coast in order to enable Coast to enforce any and all such
claims and to collect any and all dividends or other payments or disbursements
which may be made at any time on account of all and any of the Subordinated
Amounts. Subordinating Creditor shall endorse all notes and other written
evidence of the Subordinated Amounts with a statement that they are subordinated
to the Coast Debt pursuant to the terms of this agreement, in such form as Coast
shall require, and Subordinating Creditor will exhibit the originals of such
notes and other written evidence of the Subordinated Amounts to Coast so that
Coast can confirm that such endorsement has been made, but this Subordination
Agreement shall be fully effective, even if no such endorsement is made.
2. Modifications to Coast Debt; Waivers. Until Coast have received payment in
full of all Coast Debt, the Subordinating Creditor agrees that, in addition to
any other rights that Coast may have at law or in equity, Coast may at any time,
and from time to time, without the Subordinating Creditor' consent and without
notice to the Subordinating Creditor, renew, extend or increase any of the Coast
Debt or that of any other person at any time directly or indirectly liable for
the payment of any Coast Debt, accept partial payments of the Coast Debt,
settle, release (by operation of law or otherwise),
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Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
compound, compromise, collect or liquidate any of the Coast Debt, make loans or
advances to the Borrower secured in whole or in part by the any present or
future assets securing any or all of the Coast Debt (the "Collateral") or
refrain from making any loans or advances to the Borrower, change, waive, alter
or vary the interest charge on, or any other terms or provisions of the Coast
Debt or any present or future instrument, document or agreement between Coast
and the Borrower, release, exchange, fail to perfect, delay the perfection of,
fail to resort to, or realize upon any Collateral, and take any other action or
omit to take any other action with respect to the Coast Debt or the Collateral
as Coast deems necessary or advisable in Coast's sole discretion. Subordinating
Creditor waives any right to require Coast to marshal any assets in favor of the
Subordinating Creditor or against or in payment of any or all of the Coast Debt.
Subordinating Creditor further waives any defense arising by reason of any claim
or defense based upon an election of remedies by Coast which in any manner
impairs, affects, reduces, releases, destroys and/or extinguishes the
Subordinating Creditor' subrogation rights, rights to proceed against the
Borrower for reimbursement, and/or any other rights of the Subordinating
Creditor. In the event of any financing of the Borrower by Coast during any
bankruptcy, arrangement, or reorganization of the Borrower, the Subordinating
Creditor agrees that the term "Coast Debt" shall include without limitation all
indebtedness, liabilities and obligations incurred in any such proceeding, and
the Subordinated Amounts shall continue to remain subordinate to the Coast Debt,
and the Subordinating Creditor agrees to take such actions and execute such
documents in such proceedings as may be required in order to continue such
subordination.
3. Default. The Subordinating Creditor shall promptly give Coast written
notice of any default or event of default under any document, instrument or
agreement evidencing, securing or relating to any of the Subordinated Amounts,
and, until the Coast Debt has been paid and performed in full, the Subordinating
Creditor shall not exercise any rights or remedies with respect to, the
Subordinated Amounts, judicially or non-judicially, or attempt to do any of the
foregoing.
4. No Commitment. It is understood and agreed that this Agreement shall in no
way be construed as a commitment or agreement by Coast to continue financing
arrangements with the Borrower and that Coast may terminate such arrangements at
any time, in accordance with Coast's agreements with the Borrower.
5. No Contest. Subordinating Creditor agrees not to contest the validity,
perfection, priority or enforceability of Coast' security interest in the
Collateral or the Coast Debt.
6. Financial Condition of Borrower. The Subordinating Creditor is presently
informed of the financial condition of the Borrower and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of non-payment of the Coast Debt and the Subordinated Amounts. The Subordinating
Creditor covenants that it will continue to keep itself informed as to the
Borrower's financial condition and all other circumstances which bear upon the
risk of non-payment of the Coast Debt and the Subordinated Amounts. The
Subordinating Creditor waives any right to require Coast to disclose to it any
information which Coast may now or hereafter acquire concerning the Borrower.
7. Revivor. If, after payment of the Coast Debt, the Borrower thereafter
becomes liable to Coast on account of the Coast Debt, as a result of any payment
made on the Coast Debt for any reason being returned by Coast or being reversed,
set aside, or recovered by the Borrower or any trustee or assignee for the
Borrower, this Agreement shall thereupon in all respects become effective with
respect to such subsequent or reinstated Coast Debt, without the necessity of
any further act or agreement between Coast and the Subordinating Creditor.
8. General. The Subordinating Creditor agrees, upon Coast's request, to
execute all such documents and instruments and take all such actions as Coast
shall deem necessary or advisable in order to carry out the purposes of this
Agreement. The word "indebtedness" is used in this agreement in its most
comprehensive sense and includes without limitation any and all present and
future loans, advances, credit, debts, obligations, liabilities,
representations, warranties, and guarantees, of any kind and nature, absolute or
contingent, liquidated or unliquidated, and individual or joint. Subordinating
Creditor represents and warrants that it has not heretofore transferred or
assigned the Subordinated Amounts, and that it will not do so without prior
written notice to Coast and without making such transfer or assignment expressly
subject to this Agreement. This Agreement is solely for the benefit of Coast and
Coast's successors and assigns, and neither the Borrower nor any other person
shall have any right, benefit, priority or interest under, or because of the
existence of, this Agreement. All of Coast's rights and remedies hereunder and
under applicable law are cumulative and not exclusive. This Agreement sets forth
in full the terms of agreement between the parties with respect to the subject
matter hereof, and may not be modified or amended, nor may any rights hereunder
be waived, except in a writing signed by Coast and the Subordinating Creditor.
The Subordinating Creditor agrees to reimburse Coast, upon demand, for all costs
and expenses (including reasonable attorneys' fees) incurred by Coast in
enforcing this Agreement against Subordinating Creditor, whether or not suit be
brought. In the event of any litigation between the parties based upon or
arising out of this Agreement, the prevailing party shall be entitled
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Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
to recover all of its costs and expenses (including without limitation attorneys
fees) from the non-prevailing party. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California. As a
material part of the consideration to the parties for entering into this
Agreement, each party (i) agrees that all actions and proceedings based upon,
arising out of or relating in any way directly or indirectly to, this Agreement
shall be litigated exclusively in courts located within Los Angeles County,
California, (ii) consents to the jurisdiction of any such court and consents to
the service of process in any such action or proceeding by personal delivery,
first-class mail, or any other method permitted by law, and (iii) waives any and
all rights to transfer or change the venue of any such action or proceeding to
any court located outside Los Angeles County, California. This Agreement shall
be binding upon the Subordinating Creditor and its successors and assigns and
shall inure to the benefit of Coast and Coast's successors and assigns.
9. Mutual Waiver of Jury Trial. Subordinating Creditor and Coast each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to: (i) this Agreement; or (ii) any other present
or future instrument or agreement between Subordinating Creditor and Coast; or
(iii) any conduct, acts or omissions of Subordinating Creditor or Coast or any
of their directors, officers, employees, agents, attorneys or any other persons
affiliated with Subordinating Creditor or Coast; in each of the foregoing cases,
whether sounding in contract or tort or otherwise.
"Subordinating Creditor:"
CED Holdings, Inc., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
CONSENT AND AGREEMENT OF BORROWER
The undersigned Borrower hereby approves of, agrees to and consents
to all of the terms and provisions of the foregoing Subordination Agreement and
agrees to be bound thereby and further agrees that any default or event of
default by the Borrower under any present or future instrument or agreement
between the Borrower and the Subordinating Creditor shall constitute an
immediate default and event of default under all present and future instruments
and agreements between the Borrower and Coast. Borrower further agrees that, at
any time and from time to time, the foregoing Agreement may be altered, modified
or amended by Coast and the Subordinating Creditor without notice to or the
consent of Borrower.
Borrower:
Cray Electronics, Inc., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
Accepted:
Coast:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By /s/ Barbara Nitkin
---------------------------
Title VP
------------------------
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Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
-20-
<PAGE>
Silicon Valley Bank
Loan and Security Agreement
--------------------------------------------------------------------
Subordination Agreement
Borrower: Cray Communications, Inc., a Delaware corporation
Address: 9020 Junction Drive
Annapolis Junction, MD 20791
Creditor/Investor: Osicom Technologies, Inc.,
a New Jersey corporation
2800 28th Street, Suite 100
Santa Monica, California 90405
Date: September 27, 1996
This Subordination Agreement is executed by the above-named
Subordinating Creditor. ("Subordinating Creditor") in favor of Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"),
whose address is 12121 Wilshire Blvd., Los Angeles, California, with respect to
the above-named Borrower ("Borrower"). In order to induce Coast to extend or
continue to extend financing to the Borrower (but without obligation on Coast's
part to do so), the Subordinating Creditor hereby agrees as follows:
-21-
<PAGE>
--------------------------------------------------------------------
1. Subordination of Debt and Capital Subordinating Creditor hereby subordinates
payment by the Borrower of any and all indebtedness, liabilities, guarantees and
other obligations of the Borrower to Subordinating Creditor and return of
Capital or Distributions now existing or hereafter arising (collectively, the
"Subordinated Amounts"), to the payment to Coast, in full in cash, of all
indebtedness, liabilities, guarantees and other obligations of the Borrower to
Coast, now existing or hereafter arising (including without limitation any
interest, charges and other sums accruing after the filing of a petition by or
against Borrower under the Bankruptcy Code) (the "Coast Debt").
Subordinating Creditor represents and warrants that it has not transferred
or assigned the Subordinated Amounts or given any other subordination agreement
in respect thereof, and that it will not do so without prior written notice to
Coast and without making such transfer or assignment or subordination expressly
subject to this Agreement. Subordinating Creditor agrees not to ask for, demand,
sue for, take or receive all or any part of the Subordinated Amounts nor any
security therefor unless and until all of the Coast Debt has been paid and
performed in full, in cash; provided that, so long as no Event of Default and no
event which, with notice or passage of time or both, would constitute an Event
of Default under any present or future document, instrument or agreement
evidencing, securing or relating to the Coast Debt, both before and after giving
effect to the following payments, Subordinated Creditor may accept payment of
the following amounts on the Subordinated Amounts: Subordinating Creditor may
accept dividends declared by Borrower and repayment of all or part of the
Subordinated Amounts provided (a) such payments constitute ordinary course of
business transactions, (b) such payments would not constitute an event of
default and no event which, with notice or passage of time or both, would
constitute an event of default under any present or future document, instrument
or agreement between Borrower, Subordinating Creditor or any affiliate, on the
one hand and a party other than Coast on the other hand, (c) all such payments
are reported to Coast on a monthly basis, or more frequently if requested by
Coast, and (d) Coast has not given notice to Subordinating Creditor that Coast
has revoked the authorization of Subordinating Creditor to accept such dividends
or repayments of the Subordinated Amounts, which revocation may be made by Coast
if Coast in good faith believes that revocation is or may be necessary to avoid
or reduce the risk of a material adverse change or impairment of Coast's rights
or financial interests. Coast may further limit or condition dividends or
repayments of the Subordinated Amounts upon such terms as Coast, in its sole
discretion, deems appropriate, including, but not limited to, imposing dollar
limits and requiring advance notice to Coast of proposed dividends and
repayments in amounts which Coast, in its sole discretion, deems material.
Subordinating Creditor further agrees that upon any distribution of the assets
or readjustment of the indebtedness of the Borrower whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any of the Subordinated Amounts, or the application of
the assets of the Borrower to the payment or liquidation thereof, Coast shall be
entitled to receive payment in full in cash of all of the Coast Debt prior to
the payment of all or any part of the Subordinated Amounts, and in order to
enable Coast to enforce its rights hereunder in any such action or proceeding,
Coast is hereby irrevocably authorized and empowered in its discretion (but
without any obligation on its part) to make and present for and on behalf of
Subordinating Creditor such proofs of claim and proofs of interest against the
Borrower on account of the Subordinated Amounts as Coast may deem expedient or
proper and to vote such proofs of claim and proofs of interest in any such
proceeding and to receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
to apply same on account of the Coast Debt. Subordinating Creditor further
agrees to execute and deliver to Coast such assignments or other instruments as
may be required by Coast in order to enable Coast to enforce any and all such
claims and to collect any and all dividends or other payments or disbursements
which may be made at any time on account of all and any of the Subordinated
Amounts. Subordinating Creditor shall endorse all notes and other written
evidence of the Subordinated Amounts with a statement that they are subordinated
to the Coast Debt pursuant to the terms of this agreement, in such form as Coast
shall require, and Subordinating Creditor will exhibit the originals of such
notes and other written evidence of the Subordinated Amounts to Coast so that
Coast can confirm that such endorsement has been made, but this Subordination
Agreement shall be fully effective, even if no such endorsement is made.
2. Modifications to Coast Debt; Waivers. Until Coast have received payment in
full of all Coast Debt, the Subordinating Creditor agrees that, in addition to
any other rights that Coast may have at law or in equity, Coast may at any time,
and from time to time, without the Subordinating Creditor' consent and without
notice to the Subordinating Creditor, renew, extend or increase any of the Coast
Debt or that of any other person at any time directly or indirectly liable for
the payment of any Coast Debt, accept partial payments of the Coast Debt,
settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of the Coast Debt, make loans or advances to the
Borrower secured in whole or in part by the any present or future assets
securing any or all of the Coast Debt (the "Collateral") or refrain from making
any loans or advances to the Borrower, change, waive, alter or vary the interest
charge on, or any other terms or
-22-
<PAGE>
provisions of the Coast Debt or any present or future instrument, document or
agreement between Coast and the Borrower, release, exchange, fail to perfect,
delay the perfection of, fail to resort to, or realize upon any Collateral, and
take any other action or omit to take any other action with respect to the Coast
Debt or the Collateral as Coast deems necessary or advisable in Coast's sole
discretion. Subordinating Creditor waives any right to require Coast to marshal
any assets in favor of the Subordinating Creditor or against or in payment of
any or all of the Coast Debt. Subordinating Creditor further waives any defense
arising by reason of any claim or defense based upon an election of remedies by
Coast which in any manner impairs, affects, reduces, releases, destroys and/or
extinguishes the Subordinating Creditor' subrogation rights, rights to proceed
against the Borrower for reimbursement, and/or any other rights of the
Subordinating Creditor. In the event of any financing of the Borrower by Coast
during any bankruptcy, arrangement, or reorganization of the Borrower, the
Subordinating Creditor agrees that the term "Coast Debt" shall include without
limitation all indebtedness, liabilities and obligations incurred in any such
proceeding, and the Subordinated Amounts shall continue to remain subordinate to
the Coast Debt, and the Subordinating Creditor agrees to take such actions and
execute such documents in such proceedings as may be required in order to
continue such subordination.
3. Default. The Subordinating Creditor shall promptly give Coast written
notice of any default or event of default under any document, instrument or
agreement evidencing, securing or relating to any of the Subordinated Amounts,
and, until the Coast Debt has been paid and performed in full, the Subordinating
Creditor shall not exercise any rights or remedies with respect to, the
Subordinated Amounts, judicially or non-judicially, or attempt to do any of the
foregoing.
4. No Commitment. It is understood and agreed that this Agreement shall in no
way be construed as a commitment or agreement by Coast to continue financing
arrangements with the Borrower and that Coast may terminate such arrangements at
any time, in accordance with Coast's agreements with the Borrower.
5. No Contest. Subordinating Creditor agrees not to contest the validity,
perfection, priority or enforceability of Coast' security interest in the
Collateral or the Coast Debt.
6. Financial Condition of Borrower. The Subordinating Creditor is presently
informed of the financial condition of the Borrower and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of non-payment of the Coast Debt and the Subordinated Amounts. The Subordinating
Creditor covenants that it will continue to keep itself informed as to the
Borrower's financial condition and all other circumstances which bear upon the
risk of non-payment of the Coast Debt and the Subordinated Amounts. The
Subordinating Creditor waives any right to require Coast to disclose to it any
information which Coast may now or hereafter acquire concerning the Borrower.
7. Revivor. If, after payment of the Coast Debt, the Borrower thereafter
becomes liable to Coast on account of the Coast Debt, as a result of any payment
made on the Coast Debt for any reason being returned by Coast or being reversed,
set aside, or recovered by the Borrower or any trustee or assignee for the
Borrower, this Agreement shall thereupon in all respects become effective with
respect to such subsequent or reinstated Coast Debt, without the necessity of
any further act or agreement between Coast and the Subordinating Creditor.
8. General. The Subordinating Creditor agrees, upon Coast's request, to
execute all such documents and instruments and take all such actions as Coast
shall deem necessary or advisable in order to carry out the purposes of this
Agreement. The word "indebtedness" is used in this agreement in its most
comprehensive sense and includes without limitation any and all present and
future loans, advances, credit, debts, obligations, liabilities,
representations, warranties, and guarantees, of any kind and nature, absolute or
contingent, liquidated or unliquidated, and individual or joint. Subordinating
Creditor represents and warrants that it has not heretofore transferred or
assigned the Subordinated Amounts, and that it will not do so without prior
written notice to Coast and without making such transfer or assignment expressly
subject to this Agreement. This Agreement is solely for the benefit of Coast and
Coast's successors and assigns, and neither the Borrower nor any other person
shall have any right, benefit, priority or interest under, or because of the
existence of, this Agreement. All of Coast's rights and remedies hereunder and
under applicable law are cumulative and not exclusive. This Agreement sets forth
in full the terms of agreement between the parties with respect to the subject
matter hereof, and may not be modified or amended, nor may any rights hereunder
be waived, except in a writing signed by Coast and the Subordinating Creditor.
The Subordinating Creditor agrees to reimburse Coast, upon demand, for all costs
and expenses (including reasonable attorneys' fees) incurred by Coast in
enforcing this Agreement against Subordinating Creditor, whether or not suit be
brought. In the event of any litigation between the parties based upon or
arising out of this Agreement, the prevailing party shall be entitled to recover
all of its costs and expenses (including without limitation attorneys fees) from
the non-prevailing party. This
-23-
<PAGE>
Agreement shall be construed in accordance with, and governed by, the laws of
the State of California. As a material part of the consideration to the parties
for entering into this Agreement, each party (i) agrees that all actions and
proceedings based upon, arising out of or relating in any way directly or
indirectly to, this Agreement shall be litigated exclusively in courts located
within Los Angeles County, California, (ii) consents to the jurisdiction of any
such court and consents to the service of process in any such action or
proceeding by personal delivery, first-class mail, or any other method permitted
by law, and (iii) waives any and all rights to transfer or change the venue of
any such action or proceeding to any court located outside Los Angeles County,
California. This Agreement shall be binding upon the Subordinating Creditor and
its successors and assigns and shall inure to the benefit of Coast and Coast's
successors and assigns.
9. Mutual Waiver of Jury Trial. Subordinating Creditor and Coast each hereby
waive the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to: (i) this Agreement; or (ii) any other present
or future instrument or agreement between Subordinating Creditor and Coast; or
(iii) any conduct, acts or omissions of Subordinating Creditor or Coast or any
of their directors, officers, employees, agents, attorneys or any other persons
affiliated with Subordinating Creditor or Coast; in each of the foregoing cases,
whether sounding in contract or tort or otherwise.
"Subordinating Creditor:"
Osicom Technologies, Inc..
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
CONSENT AND AGREEMENT OF BORROWER
The undersigned Borrower hereby approves of, agrees to and consents
to all of the terms and provisions of the foregoing Subordination Agreement and
agrees to be bound thereby and further agrees that any default or event of
default by the Borrower under any present or future instrument or agreement
between the Borrower and the Subordinating Creditor shall constitute an
immediate default and event of default under all present and future instruments
and agreements between the Borrower and Coast. Borrower further agrees that, at
any time and from time to time, the foregoing Agreement may be altered, modified
or amended by Coast and the Subordinating Creditor without notice to or the
consent of Borrower.
Borrower:
Cray Electronics, Inc., a Delaware corporation
By /s/ Sharon G. Chadha
---------------------------
Title CEO
------------------------
-24-
<PAGE>
Accepted:
Coast:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By /s/ Barbara Nitkin
---------------------------
Title VP
------------------------
-25-
<PAGE>
Exhibit 10.25(a)
ADDENDUM TO LOAN AND SECURITY AGREEMENT
This Addendum to Loan and Security Agreement is entered into this 8th day of
January, 1999, between Osicom Technologies, Inc. ("Borrower") and Coast Business
Credit ("Coast") a division of Southern Pacific Bank and is made in reference to
the following:
Recitals
A. On September 27, 1996, Coast and Borrower entered into that certain Loan
and Security Agreement ("Loan Agreement") and various other documents and
agreements arising in connection therewith or relating thereto (the Loan
Agreement together with such other related documents and agreements, as the same
may have been amended from time to time, shall be referred to herein as the
"Loan Documents");
B. When the initial Loan Documents were executed, Borrower was then known as
Cray Communications, Inc. but since that time Borrower changed its name to
Osicom Technologies, Inc..
C. Borrower wishes to arrange for the opening of a letter or letters of
credit from time to time by or through the assistance of Coast; and
D. Coast is willing to establish a letter of credit sublimit within the
Credit Limit established under the Loan Documents, provided such Credit Limit is
not increased by such letter of credit sublimit.
Agreement
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms used in this Addendum, which are not defined, shall
have the meanings set forth in the Loan Documents.
2. The Credit Limit shall remain unchanged but shall specifically include a
Letter of Credit Sublimit of $500,0000.00. In addition to the interest, fees and
other charges currently in effect under the Loan Documents, Borrower shall pay
letter of credit fees to Coast equal to 0.25% per calendar month, plus bank
charges and fees.
3. All references to Borrower or Cray Communications, Inc. in the Loan
Documents shall be deemed to mean and include Osicom Technologies, Inc., a
Delaware corporation.
Osicom Technologies, Inc. Coast Business Credit, a division of
a Delaware corporation Southern Pacific Bank
fka Cray Communications, Inc.
By: /s/ Christopher Sue By: /s/ Karen Curran
---------------------- -------------------
Title: CFO Title: VP
------------------- ----------------
<PAGE>
EXHIBIT 10.25(B)
1st Amendment to Loan and
Security Agreement
Borrower: Osicom Technologies, Inc., a Delaware corporation
(formerly known as Cray Communications, Inc.)
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Date: April 16, 1999
This First Amendment (the "Amendment") to Loan and Security Agreement (the
"Loan Agreement") is entered into by and between Coast Business Credit(R), a
division of Southern Pacific Bank (fka Southern Pacific Thrift & Loan
Association) ("Coast"), and Osicom Technologies, Inc., a Delaware corporation,
formerly known as Cray Communications, Inc. ("Borrower"). The Loan Agreement and
Schedule, as modified by this Amendment, shall for all purposes be deemed to be,
and the same shall constitute an integral part of the Loan Agreement and
Schedule. (Definitions and certain terms used in this Amendment shall have the
meanings set forth in the Loan Agreement, the Schedule and all other documents
and agreements executed in connection therewith or in furtherance thereof).
For good and valuable consideration, receipt of which is hereby
acknowledged, the Loan Agreement is hereby amended in the following respects:
SECTION 1 OF THE LOAN AGREEMENT (with respect to Loans) is supplemented as
follows:
A subsection 1.1a is added which reads as follows:
1.1a Letters of Credit. At the request of Borrower, Coast may, in its sole
discretion, arrange for the issuance of letters of credit for the account of
Borrower (collectively, "Letters of Credit"), by issuing guarantees to the
issuer of the letter of credit or by other means. All Letters of Credit shall be
in form and substance satisfactory to Coast in its sole discretion. The
aggregate face amount of all outstanding Letters of Credit from time to time
shall not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder. Borrower shall pay all bank charges for the issuance of
Letters of Credit. Any payment by Coast under or in connection with a Letter of
Credit shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiration date no later than thirty (30) days
prior to the Maturity Date. Borrower hereby agrees to indemnify, save, and hold
Coast harmless from any loss, cost, expense, or liability, including, without
limitation, payments made by Coast, expenses, and reasonable attorneys' fees
incurred by Coast
<PAGE>
arising out of or in connection with any Letters of Credit. Borrower agrees to
be bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Coast and opened for Borrower's account or by Coast's
interpretations of any Letter of Credit issued by Coast for Borrower's account,
and Borrower understands and agrees that Coast shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Coast to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Coast harmless with respect
to any loss, cost, expense, or liability incurred by Coast under any Letter of
Credit as a result of Coast's indemnification of any such issuing bank. The
provisions of this Agreement, as it pertains to Letters of Credit, and any other
present or future documents or agreements between Borrower and Coast relating to
Letters of Credit are cumulative.
Except as expressly modified herein, all other terms and conditions of
Section 1 of the Loan Agreement, as previously modified or amended, remain
unchanged.
================================================================================
SECTION 1 OF THE SCHEDULE (with respect to the Credit Limit) is amended to read
as follows:
1. CREDIT LIMIT
(Section 1.1): Loans in a total amount at any time outstanding
not to exceed the lesser of a total of $7,000,000
(the "Maximum Dollar Amount"), or the sum of (a) and
(b) below:
(a) Loans (the "Receivable Loans") in an amount
not to exceed 79% of the amount of
Borrower's Eligible Receivables (as defined
in Section 8 above) for the month of April,
1999 and decreasing by 1% per month
thereafter until such time as the advance
rate reaches 75%, at which point the maximum
advance rate shall remain at 75%. The
advance rate on the Receivable Loans may be
increased, in Coast's sole and absolute
discretion, to an amount not to exceed 80%
of Borrower's Eligible Receivables if Coast,
in it sole and absolute discretion,
determines that dilution of Receivables has
been and is, in Coast's opinion, likely to
continue at a rate that is 10% or less, plus
(b) Loans (the "Inventory Loans") in an amount
not to exceed the lesser of:
<PAGE>
(1) 30% of the value of Borrower's Eligible
Inventory (as defined in Section 8 above),
calculated at the lower of cost or market
value and determined on a first-in,
first-out basis, or
(2) $1,500,000.00.
(c) A Term Loan (the "Equipment Loan") in the
original principal amount of $478,000. The
Equipment Loan will be repayable in 36 equal
monthly installments of principal with the
first principal installment due on May 31,
1999 and continuing on the last day of each
month thereafter. The Equipment Loan is
evidenced by that certain Secured Term Note
of even date herewith.
(Section 1.1A): Letter of Credit
Sublimit: $500,000
Except as expressly modified herein, all other terms and conditions of
Section 1 of the Schedule, as previously modified or amended, remain unchanged.
================================================================================
SECTION 3 OF THE SCHEDULE (with respect to Fees) is amended to read as follows:
3. FEES
Amendment Fee: $20,000, fully earned and payable on the effective date of this
Amendment.
Except as expressly modified herein, all other terms and conditions of
Section 3 of the Schedule, as previously modified or amended, remain unchanged.
================================================================================
SECTION 4 OF THE SCHEDULE (with respect to Maturity Date and Early Termination
Fee) is amended to read as follows:
================================================================================
4. Maturity Date
(Section 6.1): 2/1/02 subject to automatic renewal as provided in
Section 6.1 above, and early termination as provided
in Section 6.2 above.
<PAGE>
Early Termination Fee
(Section 6.2): An amount equal to 2% of the Maximum Dollar Amount
(as defined in the Schedule), if termination occurs
on or before February 1, 2000; and 1.5% of the
Maximum Dollar Amount, if termination occurs after
February 1, 2000 but prior to the Maturity Date,
including any automatic renewals thereof pursuant to
Section 6.1 of the Loan Agreement.
Except as expressly modified herein, all other terms and conditions of
Section 4 of the Schedule, as previously modified or amended, remain unchanged.
================================================================================
SECTION 6 OF THE SCHEDULE (with respect to Borrower information) is amended to
read as follows:
Trade Names of Borrower
(Section 3.2): Case; Case Communications; Case Data-Tel; Case Rixon; Cray
Communications; Dowty Communications; Osicom; Osicom Technologies
Except as expressly modified herein, all other terms and conditions of
Section 6 of the Schedule, as previously modified or amended, remain unchanged.
================================================================================
Borrower: Coast:
OSICOM TECHNOLOGIES, INC., COAST BUSINESS CREDIT(R), a division of
a Delaware corporation, fka Cray Southern Pacific Bank, fka Southern
Communications, Inc. Pacific Thrift & Loan Association
By /s/ Christopher Sue By /s/ Barbera Nitkin
---------------------------------- ----------------------------------
Title Treasurer/Secretary Title VP
------------------------------- -------------------------------
<PAGE>
EXHIBIT 10.26
Secured Term Note
(Term Loan)
Borrower: Osicom Technologies, Inc., a Delaware corporation
(formerly known as Cray Communications, Inc.)
Address: 2800 28th Street, Suite 100
Santa Monica, California 90405
Date: April 16, 1999
$478,000 Los Angeles, California
FOR VALUE RECEIVED, the undersigned Borrower promises to pay to the order of
COAST BUSINESS CREDIT(R), a division of Southern Pacific Bank ("Coast"), at
12121 Wilshire Boulevard, Suite 1400, Los Angeles, California, or at any such
other address as the holder of this Secured Term Note (this "Note") shall
direct, the principal sum ("Principal") of Four Hundred Seventy Eight Thousand
Dollars ($478,000.00), plus interest and other charges as hereinafter provided.
Principal hereunder shall be repaid in equal monthly installments of
Thirteen Thousand Two Hundred Severty Seven Dollars and Seventy Eight Cents
($13,277.78), with the first payment commencing on May 31, 1999 and continuing
on the last day of each month thereafter.
The unpaid Principal balance together with accrued interest and other
charges shall be fully due and payable on the earlier of (i) the Maturity Date
as provided in Section 6.1 of the Loan and Security Agreement between Borrower
and Coast dated as of September 27, 1996, as amended by the 1st Amendment to
Loan and Security
Agreement of even date herewith (the "Loan Agreement"), (ii) the effective date
of termination as provided in Section 6.2 of the Loan Agreement (the Loan
Agreement and all documents and agreements relating thereto are collectively
referred to as the "Loan Documents") or (iii) February 1, 2002. The automatic
renewal provided in Section 6.1 of the Loan Agreement shall not be applicable to
modify the payment terms of the Principal hereunder.
-1-
<PAGE>
Interest shall accrue at a rate equal to the "Prime Rate" plus 2.5% per
annum, calculated on the basis of a 360-day year for the actual number of days
elapsed or such different interest rate as provided in the Loan Documents. The
interest rate shall be adjusted monthly as of the first day of each month, and
the interest to be charged for each month shall be based on the highest "Prime
Rate" in effect during said month. Interest shall be payable monthly, on the
last day of the month. "Prime Rate" means the actual "Reference Rate" or the
substitute therefor of Bank of America NT & SA whether or not that rate is the
lowest interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal on the first business day of the month, as the base rate
on corporate loans at large U.S. money center commercial banks. Interest on this
Note shall be subject to adjustments as provided in Section 1.2 of the Schedule
to the Loan Agreement and Section 7.2 of the Loan Agreement.
Principal of, and interest on, this Note shall be payable in lawful money
of the United States of America. If a payment hereunder becomes due and payable
on a Saturday, Sunday or legal holiday, the due date thereof shall be extended
to the next succeeding business day, and interest shall be payable thereon
during such extension.
In the event Borrower fails to pay when due any payment of Principal or
interest on this Note, or if any default or event of default occurs under the
Loan Documents or any other present or future instrument, document, or agreement
between Borrower and Coast, Coast may, at its option, at any time, declare the
entire unpaid Principal balance of this Note plus all accrued interest and other
charges to be immediately due and payable, without notice or demand. The
acceptance of any installment of Principal or interest by Coast after the time
when it becomes due, as herein specified, shall not be held to establish a
custom, or to waive any rights of Coast to enforce payment when due of any
further installments or any other rights, nor shall any failure or delay to
exercise any rights be held to waive the same.
Borrower agrees to pay an Early Termination Fee in the amount and when
provided in the Loan Agreement.
All payments hereunder are to be applied first to costs and fees referred
to herein, second to the payment of accrued interest and the remaining balance
to Principal. Any Principal prepayment hereunder shall be applied against
Principal payments in the inverse order of maturity. Coast shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments hereunder in its sole discretion.
Borrower agrees to pay all reasonable costs and expenses (including,
without limitation, attorneys' fees and costs) incurred by Coast in connection
with or related to this Note, or its enforcement, whether or not suit be
brought. Borrower hereby further waives presentment, demand for payment, notice
of dishonor, notice of nonpayment, protest, notice of protest, and any and all
other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note.
-2-
<PAGE>
This Note is secured by the Collateral (as defined in the Loan Agreement)
and all other present and future security that may be provided by Borrower to
Coast. Nothing herein shall be deemed to limit any of the terms or provisions of
the Loan Documents, or any other present or future document, instrument or
agreement, between Borrower and Coast, and all of Coast's rights and remedies
hereunder and thereunder are cumulative.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Coast, and then only to the extent therein specifically
set forth.
COAST AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i)
THIS NOTE; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN
COAST AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF COAST OR BORROWER
OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH COAST OR BORROWER.
Except as otherwise provided in this Note, any dispute, controversy or
claim arising out of or relating to this Note shall be settled by arbitration
pursuant to the arbitration provisions set forth in the Loan Agreement.
This Note is payable in, and shall be governed by the internal laws of,
the State of California.
Borrower:
OSICOM TECHNOLOGIES, INC.,
a Delaware corporation, fka Cray Communications, Inc.
By /s/ Christopher Sue
---------------------------------------------------------------
Title Treasurer/Security
-----------------------------------------------
-3-
<PAGE>
Exhibit 10.27
OEM LICENSE AND PURCHASE AGREEMENT
THIS OEM LICENSE AND PURCHASE AGREEMENT, including the Exhibits
("Agreement"), effective as of December 24, 1997 ("Effective Date"), is hereby
made by and between Cisco Systems, Inc., a California corporation, having
principal offices at 170 West Tasman Drive, San Jose, California 95134-1706
("Cisco") and Osicom Technologies, Inc., a Delaware corporation, having
principal offices at 9020 Junction Drive, Annapolis Junction, MD 20701
("Seller").
RECITALS
A. Seller designs, manufactures and sells certain Products as set
forth on Exhibit A.
B. Seller desires to sell the Products and Cisco desires to
purchase the Products for resale on a stand-alone basis and as incorporated into
Cisco's products.
AGREEMENT
In consideration of the foregoing and the mutual promises and covenants
contained herein, the parties agree as follows:
1. SALES AND PURCHASES OF PRODUCTS
1.1 Products. Subject to the terms and conditions of this Agreement,
Seller shall sell to Cisco the Products which Cisco may order from Seller.
Products shall be manufactured by Seller according to the Product Specifications
set forth in Exhibit B and the Cisco Quality Plan set forth in Exhibit C, as
modified from time to time by written agreement of Cisco and Seller. Products
include hardware products and software. The software includes software imbedded
in hardware or provided separately on disks or other media or provided
electronically, user documentation, packaging and any enhancements,
modifications, updates, bug fixes, releases, patents, patent rights, copyrights,
trade secrets, know-how and other intellectual property related thereto
("Software").
1.2 Product Enhancements and New Products. At the earliest date possible,
Seller shall notify Cisco of any new products or enhancements to or advanced
versions of existing Products. Upon written agreement between Cisco and Seller
as to pricing, such products shall be considered Products under this Agreement
and shall be purchased and sold under the terms and conditions of this
Agreement. Cisco may convert any or all of its future orders of Products to any
enhancements to or advancements of existing Products. If Seller implements any
improved technology (e.g., without limitation, improved manufacturing
processes), Seller shall promptly so advise Cisco and, at Cisco's request,
discuss with Cisco the possibility and advantages of using such improved
technology to redesign any Products. At Cisco's request, Seller shall negotiate
any such redesign in good faith.
1.3 Upgrades. Seller shall keep Cisco informed of all Software upgrades,
enhancements, improvements and bug fixes. Seller shall make such items available
to Cisco no later than the date Seller releases such items to any of its other
customers and at no additional charge provided Seller provides such items to its
other customers at no additional charge.
1.4 Project Managers. Each party has appointed a single project manager
("Project Manager"). The names, addresses and telephone and fax numbers of the
Project Managers are attached to this Agreement as Exhibit D. The Project
Managers shall act as liaisons between the parties with respect to their
respective performances of this Agreement and shall provide the parties from
time to time with the names and telephone numbers of additional specific contact
persons (e.g., to communicate specific information regarding support,
enhancements, etc.) when such direct contact is preferable. In the event that
either party appoints a new Project Manager, such party shall promptly notify
the other. Neither party's Project Manager has the authority to make any changes
to this Agreement.
1.5 Agency Certification. Seller shall provide certification (including,
but not limited to, EMI, Safety, Immunity and Network) of the Products in
accordance with the terms and conditions as set forth in Exhibit C, Cisco
Quality Plan, Sections 6.0 and 6.1.
<PAGE>
1.6 Global Supply Management Reviews. Reviews will be held on a quarterly
basis, after quarter-close per Cisco's fiscal quarters, to assess the
performance of the Parties against established objectives and criteria. Reviews
will include resetting of standards for subsequent periods, as well as
establishing, and measuring, Seller's performance record at Cisco, including, as
applicable, Seller's financial status. The location and/or meeting method will
be mutually agreed upon. If on-site meetings are determined to be appropriate,
the intent will be to alternate periodically between Seller's and Cisco's sites.
2. OWNERSHIP; GRANT OF RIGHTS
2.1 OEM Right. Seller hereby grants Cisco a nonexclusive, worldwide,
royalty free right and license to promote, market, resell and distribute the
Products as standalone products or as incorporated into or in connection with
Cisco's products.
2.2 Software License. Seller hereby grants Cisco a nonexclusive,
worldwide, royalty-free (except as provided below) license to use the Software,
in object and source code form, subject to the following conditions and for the
following purposes:
(a) For promotion, marketing and distribution (in object code form
only) to resellers and end users in connection with Cisco's
distribution of the Product;
(b) To provide customer support (including, without limitation, to
fix Software bugs); and
(c) To make derivative works of the Software for Product
enhancements for use with the Products.
Notwithstanding the above, all other rights, title, interest and ownership in
Seller's Software shall remain with Seller.
2.3 Cisco Property
(a) During the term of this Agreement Cisco may provide equipment,
designs, materials, software and other property of Cisco (collectively
"Cisco Property") to Seller for its use in fulfilling its obligations
hereunder. All Cisco Property furnished to Seller by Cisco or paid for by
Cisco in connection with this Agreement shall (i) be clearly marked or
tagged as the property of Cisco; (ii) be and remain personal property;
(iii) be subject to inspection by Cisco at any time during normal business
hours; (iv) be used only to provide Software to Cisco and Cisco's
authorized subcontractors, if any; (v) be kept free of liens and
encumbrances; (vi) be kept separate from other materials, tools, or
property of Seller or held by Seller; and (vii) not be modified in any
manner by Seller.
(b) Cisco shall retain all rights, title and interest in the Cisco
Property, and Seller shall treat and maintain the Cisco Property with the
same degree of care as Seller uses with respect to its own valuable
equipment, but in no event with less than a reasonable degree of care for
equipment of a similar kind and importance. Seller shall bear all risk of
loss or damage to Cisco Property until it is returned to Cisco. Upon
Cisco's request, Seller shall deliver all Cisco Property to Cisco in good
condition, normal wear and tear excepted, without cost to Cisco (exclusive
of freight costs); the parties shall determine the manner and procedure
for returning the Cisco Property, and Cisco shall pay the corresponding
freight costs. Seller waives any legal or equitable right it may have to
withhold Cisco Property, and Seller shall execute all documents, or
instruments evidencing Cisco's ownership of the Cisco Property as Cisco
may from time to time request.
3. PRICES: PAYMENT
3.1 Prices. Product prices, and discounts thereon, shall be as set forth
in Exhibit A. Such prices shall be fixed, commencing with the Effective Date of
this Agreement, except that if Sellers published list price for a Product is
reduced, a corresponding reduction in price (calculated by applying the same
percentage discount to the new published list price) shall be immediately
effective and shall apply to any Cisco bids, proposals, and customer orders
accepted or pending. Increased volume requirements of Cisco shall be cause for
price decreases, subject to negotiation between Cisco and Seller. All prices are
F.C.A. Origin.
<PAGE>
3.2 Taxes. Prices stated in Exhibit A are in U.S. dollars and include any
withholding taxes and the like. Seller agrees that amounts paid pursuant to this
Agreement are not subject to sales and use tax. Cisco agrees to provide Seller
with satisfactory documentation (including but not limited to resale exemption
or other certificates) supporting such status.
3.3 Drawback. Cisco reserves all rights to duty drawback, if any, which
may be available. Seller shall provide to Cisco Certificates of Delivery and/or
Certificates of Manufacture as requested within ten (10) days of Cisco's
request.
3.4 Payment Terms. Seller shall invoice Cisco with each shipment. All
payments are due within forty (40) days from date of shipment to Cisco's
designated dock. Invoices shall be remitted to Cisco Systems, Inc. PO BOX
641570, SAN JOSE, CA 95164-1570, ATTN: ACCOUNTS PAYABLE; or via Electronic Data
Interchange (EDI). No invoice shall be submitted to Cisco until shipment to
Cisco of the Products covered by such invoice.
4. PURCHASE ORDERS
4.1 Purchase Orders. Cisco's purchase orders for Products shall be
submitted to Seller in writing or via EDI. Each purchase order shall include:
(a) Identification of Products ordered by Cisco part number and
descriptions;
(b) Quantity to be purchased;
(c) Price of Products ordered;
(d) Requested delivery dates; and
(e) Shipping and labeling instructions.
4.2 Forecasts. On a monthly basis, Cisco shall provide Seller with
rolling, non-binding one-hundred-twenty (120) day forecasts of its requirements
for Products.
4.3 Placement by Cisco. All purchase orders and invoices under this
Agreement shall be subject only to the terms and conditions hereof. Standard
lead-time shall be thirty (30) calendar days ARO. All deliveries from Seller to
Cisco will be in minimum lot sizes of fifty (50) units. In the event the terms
of any such purchase order, confirmation or similar document conflict with or
are additional to the terms of this Agreement, the terms of this Agreement alone
shall apply and shall govern regardless of execution of such document by one or
both parties, except that the parties may agree to negotiate non-preprinted
terms which shall be effective only if executed by both parties. Any other Cisco
or Seller terms and conditions shall not apply to this Agreement or the purchase
orders. Any forecasts of Products provided to Seller are non-binding; the orders
placed for Products pursuant to purchase orders shall be binding with respect to
the parties' obligations hereunder.
4.4 Acceptance by Seller. Subject to the establishment of mutually
agreeable delivery dates (any requested delivery date within the lead time set
forth above shall be conclusively deemed agreeable), Seller shall accept all
purchase orders submitted by Cisco in accordance with this Agreement and within
three (3) working days after receipt thereof. 'Working day" shall mean a regular
week day on which Cisco is open for business. Delivery shall be within 30
calendar days ARO or in accordance with accepted purchase orders, whichever is
later. Seller shall give prompt written notice to Cisco of any anticipated
delay.
4.5 Reschedules, Work Stoppage and Cancellations. Cisco may, at any time
prior to the delivery date, cancel any purchase order in whole or in part or
modify the delivery schedule set forth in any purchase order in accordance with
the terms of Exhibit E, provided that Cisco gives written notice thereof.
4.6 Order Increases. Upon written request from Cisco, and according to
reasonable commercial practices, Seller shall use its diligent efforts to: (i)
deliver on the requested date the number of items ordered by Cisco in excess of
that set forth in Cisco's estimated usage; and (ii) deliver items in less than
the
<PAGE>
expected lead-time if so requested by Cisco. However the failure to perform
the foregoing shall not be considered a default under this Agreement.
4.7 Rush Orders. Cisco may, at its option, submit purchase orders
requesting immediate delivery within three (3) working days ("Rush Orders").
Seller shall use its best efforts to fill Rush Orders with Cisco being
responsible for any additional shipping expense.
4.8 On-Time Performance. Seller's on-time performance shall be measured as
three (3) working days early, one (1) working day late of Cisco's required
delivery date, as referenced in the Cisco Quality Plan.
4.9 Shipping. All items shall be shipped in the manner specified as set
forth in the Cisco Quality Plan or as specified in the separate purchase orders
issued hereunder and in accordance with standard commercial practices. In the
event a shipment shall not meet the delivery date, routing may be changed to
premium transportation at Cisco's request. In that event, Seller shall bear the
expense of any difference in freight costs for the premium transportation.
4.10 Delivery. Cisco reserves the right to refuse delivery of any quantity
of Products in excess of that specified in its purchase order and/or any
delivery made more than five (5) days in advance of the delivery date. Cisco, at
its option, may return, freight collect, all units received in advance or in
excess of the quantity specified on its purchase order line item, or may, at its
option, retain such units with payment therefore deferred until it would
otherwise be due.
4.11 Late Deliveries. In the event that the late delivery by Seller
results in an order change, reschedule or cancellation by Cisco or its customer,
Seller shall accommodate, without penalty, such schedule changes as required by
Cisco. Under no circumstances will Seller be liable for any late delivery
damages if it fails to deliver items that were ordered and scheduled for
delivery in shorter than the standard lead-time and Seller was unable to deliver
on time or in accordance with the standard lead time.
4.12 Allocation. Seller shall in any event use reasonable efforts to
maintain the ability to supply all Products that Cisco orders from Seller.
Seller agrees that, in the event of an allocation due to a Force Majeure event,
as specified in Section 16.1, Cisco's order(s), subject to normal lead-time
requirements, shall be filled according to an allocation plan no less favorable
than that provided to any other Seller customer. Seller shall provide Cisco with
as much notice as possible if it anticipates or has reason to believe that
Seller's output of the Product shall not be sufficient to meet all of Cisco's
requirements for any period.
4.13 Discontinuance. Seller shall continuously supply Products for a
minimum period of five (5) years following the date of release of the Products
(the "Supply Period") and in accordance with the Support Guidelines attached
hereto as Exhibit F. In the event that Seller intends to discontinue the
manufacture and sale of any Product after the end of the Supply Period, Seller
shall provide at least six (6) months prior written notice to Cisco. During such
six-month period (the "Discontinuance Period"), Cisco may place purchase orders
for such Product pursuant to this Agreement, provided however, the last delivery
date forsuch Product shall not be more than twelve (12) months after the end of
such Discontinuance Period. Seller shall continue to sell Products to Cisco as
long as such Products are made commercially available to any other of Sellers
customers. During the six (6) months immediately following Cisco's receipt of
notice, Cisco may place orders for Products which have been forecasted by Cisco
and which are not to be considered "end of life" purchases unless specified by
Cisco, provided such units are deliverable within twelve (12) months of the
Discontinuance Period.
4.14 Inventory and Stock Reguirements. Seller shall comply with the
inventory and stock requirements as set forth in Exhibit G.
5. PRODUCT ACCEPTANCE AND QUALITY
5.1 Inspection and Acceptance by Cisco. Notwithstanding any prior
inspection or payment by Cisco, all Products shall be subject to final
inspection and acceptance at Cisco's specified destination within sixty (60)
days after delivery by Seller. In addition, Cisco shall be entitled to inspect,
and accept or reject, by Product lot in accordance with the procedures specified
in the Cisco Quality Plan. Notwithstanding the foregoing to the contrary, if and
when Seller qualifies to bypass Cisco's incoming inspection requirement pursuant
to the Cisco Quality Plan, Cisco shall have the right to reject any Product
which Cisco determines
<PAGE>
to be non-operable upon its removal from its original packaging and initial
check-out ("DOX), whether discovered by Cisco, its subcontractor or its
customer.
5.2 Rejection. If any Product is defective in material or workmanship, or
otherwise not in conformity with the requirements of Seller's published
Specifications, or with respect to all Products in a lot rejected by Cisco,
Cisco shall have the right, at its sole option, to (i) reject such Product; (ii)
require correction of such Product; (iii) accept such Product with an adjustment
in price; or (iv) return such Product for credit or refund. Any Product that has
been rejected or required to be corrected must be replaced or corrected by, and
at the expense of, the Seller within three (3) working days of request by Cisco.
If, after being requested by Cisco, Seller fails to promptly replace or correct
any defective item, then Cisco shall have the right to cancel the applicable
purchase order relative to the rejected material without penalty or terminate
this Agreement for default in accordance with the termination provisions herein
and require refund of any payments made relative to the rejected Products. At
Cisco's request, Seller shall provide to Cisco a failure analysis report
specifying the reason for failure of any rejected Product. Seller shall follow
the procedures in the Cisco Quality Plan and analyze and respond to Product
failures. Seller shall track Products returned for replacement by lot number and
date code (this obligation shall continue beyond the Warranty Period).
5.3 Packing. Unless otherwise specified in the Cisco Quality Plan, Seller
shall package and pack all goods in a manner which is (i) in accordance with
good commercial practice; (ii) acceptable to common carriers for shipment at an
economical rate for the particular goods; (iii) in accordance with I.C.C.
regulations; and (iv) adequate to insure safe arrival of the goods at the named
destination. Seller shall mark all containers with necessary lifting, handling
and shipping information and with purchase order numbers, date of shipment, and
the names of the consignee and consignor, if applicable. An itemized packing
list shall accompany each shipment which shall include (i) prominently the
purchase order number; and (ii) the description, Cisco part number, revision
level, and quantity of the Products so shipped.
5.4 Return Procedure. In the event Cisco rejects Product as set forth
above, Cisco may, at its option, return the Product to Seller F.C.A Cisco's
location, at Seller's expense, or retain such Product and withhold payment
pending Seller's instructions.
6. PRODUCT SPECIFICATIONS: CHANGES
6.1 Specifications, Cisco Quality Plan. Seller shall supply Product(s) in
conformance with Seller's published Product Specifications and the Cisco Quality
Plan. Seller shall not make any changes in the form, fit, function, design or
appearance of any Product purchased hereunder, or to any Specifications of any
Product irrespective of impact on form, fit, or function, without providing
thirty (30) days prior written notice to Cisco.
6.2 Pre-Shipment Testing. Prior to delivery, Seller shall test all
Products in accordance with its standard testing procedures as set forth in
Exhibit H, and shall not ship Products which fail to meet the Specifications.
Seller agrees not to make any changes or modifications to any test process or
procedure without prior written notice to Cisco. At its option Cisco may, from
time to time, send its quality control personnel to Seller's factory to observe
the testing. In addition, Cisco may, from time to time, request modifications to
Seller's test procedure, where repetitive failure to meet Specifications has
been noted on shipped equipment in accordance with the Cisco Quality Plan.
Seller shall not unreasonably withhold modifications of this procedure.
6.3 Engineering Change Approval. Seller shall not make any changes to any
production process, or the controlled process parameters or sources, types or
grade classifications of materials used, with respect to any Product without
first obtaining from Cisco an engineering change approval. Within one (1)
working day after learning of any bug or other problem in a Product which may
result, or has already resulted in, an impact to the installed customer base of
such Product, and in any event no later than at the time an engineering request
is made, the discovering party shall notify the other of such problem. Seller
shall submit a request to make a change containing engineering data in support
of the request. Within ten (10) working days of receiving such request, Cisco
shall respond to Sellers request and shall either (i) approve the change; (ii)
disapprove the change; or (iii) extend the deadline for the approval or
disapproval period for an additional twenty (20) working days. If Cisco fails to
reject or request an extension within the ten (10) working days, or falls to
reject within the additional twenty (20) working days if extended, then the
requested engineering change shall be considered accepted by Cisco.
<PAGE>
6.4 Cisco's Engineering Change Request. When an engineering change is
required by Cisco, Cisco shall provide Seller all applicable documentation,
specifications and the requested effective date of such engineering change.
Seller shall respond initially within ten (10) working days, advising Cisco as
to (i) implementation and the effective date of such change; (ii) associated
costs and effect to on-hand materials, on-order materials and work in process;
and (iii) the impact of the change upon existing Product pricing and shipment
schedules for the entire period for which purchase orders are outstanding.
Seller shall also identify any materials issue or process issue that modifies
the shipment schedule that was in effect immediately prior to the engineering
change. Where a requested change may create scrap costs, Seller agrees to stop
work in process and/or orders for materials within twenty-four (24) hours of
notification of such change by Cisco. Materials on-hand or on-order and work in
process which has become obsolete as a result of the engineering change shall be
treated in the same manner as termination of a Product as set forth herein.
Cisco shall issue requisite documentation and purchase order release changes
before Seller shall begin the change implementation.
7. DOCUMENTATION AND TRADEMARKS
7.1 Documentation. Seller shall deliver its standard commercial
documentation as set forth in Exhibit 1.
7.2 Trademarks. During the term of this Agreement, Seller hereby grants
to Cisco a nonexclusive, nontransferable license to advertise the
Product under the Seller trademarks, trade names, logos and/or
slogans listed on Exhibit J (the 'Trademarks") as updated by Seller
and agreed to in writing by Cisco from time to time. Cisco shall use
the Trademarks in accordance with Seller's Trademark usage
guidelines specified in Exhibit J, and as mutually agreed to by the
parties from time to time. If any of Seller's Trademarks are to used
in conjunction with Cisco's or another party's trademarks, on or in
relation to the Product, then Seller's Trademarks shall be presented
legibly, but nevertheless separated from the other, so that each
appears to be a trademark in its own right, distinct from the other
mark.
8. SUPPORT
Seller shall provide the support services described in Exhibit F on the
terms and conditions set forth therein.
9. REPRESENTATIONS AND WARRANTIES
9.1 Warranty of Title. Seller warrants and represents to Cisco that (i)
Cisco shall acquire good and clear title to the Products, free and clear of all
liens and encumbrances; (ii) all materials and services provided hereunder
including, without limitation, the Products, are either owned or properly
licensed by Seller or are in the public domain and the use thereof by Cisco, its
representatives, distributors, dealers, end users, and other direct and indirect
customers shall not infringe any proprietary rights of any third party; and
(iii) Seller has the full power to enter into this Agreement, to carry out its
obligations under this Agreement and to grant the rights and licenses granted to
Cisco in this Agreement.
9.2 Year 2000 Compliance. To Cisco and its customers, and as applicable,
Seller warrants that the Product and Software shall (i) handle date information
before, during, and after January 1, 2000, including, but not limited to,
accepting date input, providing date output, and performing calculations on
dates or portions of dates; (ii) function accurately and without interruption
before, during, and after January 1, 2000, without any change in operations
associated with the advent of the new century; (iii) respond to two-digit
year-date input in a way that resolves the ambiguity as to century in a
disclosed, defined, and predetermined manner; and (iv) store and provide output
of date information in ways that are unambiguous as to century, provided other
products properly exchange date data with the Seller's Product.
9.3 Product Warranty. To Cisco and its customers, Seller warrants the
Products shall be new and unused, shall perform in accordance with the
applicable published Product Specifications and related documentation provided
by Seller (and shall achieve any function described therein), and shall be free
from defects in materials, workmanship or design for a period of three (3) years
from the date of shipment by Seller (the "Warranty Period"). During the Warranty
Period, Seller shall, at its own expense and risk, repair or replace (at its
option), and return or deliver to the location designated by Cisco within five
(5) working
<PAGE>
days from receipt, any defective Product or part, provided that the Product or
part is returned to Seller. Unless Seller reasonably demonstrates a returned
item is free from defect, Seller shall pay the costs of all shipping and
insurance of the item (including, upon repair or replacement, return of the same
or replacement item to the original location) and assume the risk of loss during
shipping. All replacement Products, which may only be shipped to Cisco's Service
Operations shall be new or remanufactured warranted as new. All replaced or
repaired Products shall be warranted for the longer of six (6) months or the
remaining Warranty Period for the Products being replaced or repaired. All
replaced parts that have been shipped from Seller to Cisco become the property
of Cisco and all defective parts returned to Seller become the property of
Seller. This limited warranty does not extend to any Products which have been
misused, abused, serviced by anyone other than an authorized representative of
Seller, Cisco or a party authorized by Cisco, or damaged due to accident, or act
of God. NO OTHER WARRANTIES ARE EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
9.4 Epidemic Product Failure. For the purposes of this Agreement epidemic
failure shall be deemed to have occurred if more than three percent (3%) of the
then current total installed base of any Product should fail in substantially
the same manner within any time period of ninety (90) days or if more than five
percent (5%) of the then current total installed base of any Product should fail
in substantially the same manner within any time period of thirty (30) days. In
the case of epidemic failure, Seller and Cisco shall cooperate to implement the
following procedure:
(a) Cisco shall promptly notify Seller in writing upon discovery of the
failure.
(b) Within two (2) working days Seller shall give an initial response
indicating its preliminary plan for diagnosing the problem.
(c) Seller and Cisco shall jointly exert all commercially reasonable
efforts to diagnose the problem and plan a work-around or more permanent
solution.
(d) Seller shall apply its engineering change order procedure in
appropriate circumstances for hardware problems originating in the manufacturing
process.
(e) Seller shall prepare and consult with Cisco regarding an appropriate
recovery plan as well as an appropriate work-around, as an interim solution, if
one is needed.
(f) Seller and Cisco shall mutually agree on a recovery plan, provided
that Cisco shall be entitled to require Seller to recall or perform field
replacement of all defective Products as well as all Products which may be
susceptible to the same failure mode as required.
(g) Seller shall be responsible for all costs incurred in rectifying any
epidemic failure caused by a failure of, or defect in, the Product, including
without limitation, for any solution, work-arounds, recovery plan or engineering
changes.
10. MANUFACTURING RIGHTS
10.1 If at any time during the term of this Agreement, including but not
limited to periods during the occurrence of an event of Force Majeure but
excepting periods of raw material shortages, Seller is unable to supply in a
timely manner to Cisco its forecast requirements of Product, Seller shall have
the right to select and the obligation to utilize an alternate supplier to fill
such shortfall until such time as Seller is able to resume full performance of
its supply obligations. With regard to the portion of Products manufactured by
an alternate supplier, payment to said supplier for the costs of manufacture
shall be the responsibility of Seller. Cisco shall have the right to approve the
alternate supplier, validate the manufacturing of Products by any alternate
supplier hereunder and the right of audit of said alternate supplier upon the
same terms and conditions as shall apply to Seller pursuant to this Agreement.
10.2 In the event that, for any reason except raw material shortages,
Seller shall be unable to supply Cisco with forecast requirements of Product and
shall have failed to arrange for an alternate supplier, with Cisco's written
approval of same pursuant to Section 10. 1 above within a commercially
reasonable period of time (not to exceed thirty (30) working days), Seller shall
be deemed to have granted Cisco a non-transferable, limited, royalty-free
license to manufacture or to have manufactured the Products in the United
<PAGE>
States until such time as Osicom is able to resume full performance of its
obligations per the terms and conditions of the Agreement, and demonstrate that
it is able resume such full performance. Upon written request of Cisco, Seller
shall, subject to the provisions of 10.2 hereof, cooperate to furnish Cisco or a
designee of Cisco approved by Seller the necessary information and technology to
permit the alternate manufacturing of sufficient quantities of Product to
fulfill Cisco's requirements provided, however, any such information and/or
technology disclosed or furnished by Seller hereunder shall be safeguarded by
Cisco; shall not be used for any purpose other than that contemplated by this
Section; shall not be disclosed to third parties, other than a designee of Cisco
approved by Seller; and shall be made available only to those employees,
officers, representatives, agents or consultants of Cisco who are directly
involved in or concerned with the manufacture contemplated hereby and who have
agreed in writing prior to such disclosure to be bound by the obligations of
confidentiality contained in this Agreement. Further, it is expressly understood
and agreed by Cisco that under no circumstances other than that contemplated by
this Section 10 will any proprietary technology be disclosed or furnished by
Seller under this Agreement. The parties agree that the items listed in Exhibit
K, Manufacturing Information and Escrow, will be placed in escrow at a time to
be mutually agreed upon by the parties.
11. INDEMNITY
11.1 Indemnification by Seller. Seller shall defend, indemnify and hold
Cisco harmless from any and all damages, liabilities, costs and expenses
(including but not limited to reasonable attorneys fees) incurred by Cisco as a
result of (i) any breach of this Agreement; (ii) any claim of product liability
in any way relating to the Product; (iii) any claim which alleges that any
Product provided to Cisco hereunder or the use or distribution thereof infringes
upon, misappropriates or violates any patents, copyrights, trademarks, or trade
secret rights or other proprietary rights, of persons, firms or entities who are
not parties to this Agreement. As a condition to such defense and
indemnification, Cisco will provide Seller with prompt written notice of the
claim and permit Seller to control the defense, settlement, adjustment or
compromise of any such claim. Cisco may employ counsel at its own expense to
assist it with respect to any such claim. Cisco shall have no authority to
settle any claim on behalf of Seller.
11.2 Sellers Efforts. If the manufacture, service, import, support,
distribution, use or sale of the Product is enjoined or becomes the subject of a
claim of infringement, Seller shall obtain such licenses, or make such
replacements or modifications, as are necessary to the continue the manufacture,
use, service, import, support, distribution, or sale of the Product without
infringement and in compliance with the Specifications. If Seller is unable to
achieve either of the foregoing within thirty (30) days after receipt of notice
thereof, Seller shall promptly refund to Cisco the invoiced purchase price, plus
all shipping, storage, and associated costs, of any Products returned freight
collect to Seller which Cisco or its customers are legally prohibited from
selling or using. Nothing in this paragraph shall limit any other remedy of
Cisco.
11.3 Exceptions to Seller Indemnity. Seller shall have no obligation under
paragraphs 11.1 and 11.2 to the extent any claim of infringement or
misappropriation results from (i) use of a Product in combination with any other
products not intended by Seller; (ii) any alteration or modification of a
Product not provided or authorized by Seller; or (iii) use of the Product in a
way not intended by Seller or not provided for or described in the applicable
technical documentation.
12. CONFIDENTIALITY
12.1 Agreement as Confidential Information. The parties shall treat the
terms and conditions and the existence of this Agreement as Confidential
Information. Each party shall obtain the other's consent prior to any
publication, presentation, public announcement or press release concerning the
existence or terms and conditions of this Agreement.
12.2 Confidential Information. Upon execution of this Agreement, the
parties shall execute a Non-Disclosure Agreement in the form and substance
attached hereto as Exhibit L.
13. LIMITATION OF LIABILITY
EXCEPT AS PROVIDED UNDER SECTION 11 AND BREACH OF THE PARTIES' RESPECTIVE
CONFIDENTIALITY OBLIGATION UNDER SECTION 12, UNDER NO CIRCUMSTANCES WILL EITHER
PARTY BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY, NEGLIGENCE OR
OTHER LEGAL OR EQUITABLE THEORY, FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
<PAGE>
OR LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT, EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
14. TERM AND TERMINATION
14.1 Term. Unless terminated earlier as provided herein, this Agreement
shall have a term of two (2) years commencing from the Effective Date, unless
terminated sooner by written notice given by a party pursuant to this Section.
This Agreement shall be automatically renewed for additional successive one (1)
year periods, unless written notice of non-renewal is received by the other
party no later than sixty (60) days prior to the expiration of the then current
term. Upon any expiration or termination, the rights and obligations of the
parties shall continue except that Seller shall not be required to accept
further orders or undertake further product development.
14.2 Termination for Cause. This Agreement may be terminated by a party
for cause immediately upon the occurrence of and in accordance with the
following:
(a) Insolvency Event. Either may terminate this Agreement by delivering
written notice to the other party upon the occurrence of any of the following
events: (1) a receiver is appointed for either party or its property; (ii)
either makes a general 13 assignment for the benefit of its creditors; (iii)
either party commences, or has commenced against it, proceedings under any
bankruptcy, insolvency or debtor's relief law, which proceedings are not
dismissed within sixty (60) days; or (iv) either party is liquidated or
dissolved.
(b) Change of Control. If there is a change in ownership representing
fifty percent (50%) or more of the equity ownership of either party, the other
party may, at its option, terminate this Agreement upon written notice to the
first party.
(c) Default. Either party may terminate this Agreement effective upon
written notice to the other if the other party violates any covenant, agreement,
representation or warranty contained herein in any material respect or defaults
or fails to perform any of its obligations or agreements hereunder in any
material respect, which violation, default or failure is not cured within thirty
(30) days after receipt of written notice thereof from the non-defaulting party
stating its intention to terminate this Agreement by reason thereof.
14.3 Survival of Rights and Obligations Upon Termination. Sections 2, 9,
10, 11, 12, 13, 14, 16 and Cisco's right to distribute Products in inventory or
subject to any pending purchase order or pursuant to any escrow license shall
survive termination or expiration of this Agreement. Furthermore, in the event
of any termination or expiration of this Agreement (i) all end-user licenses
shall remain in effect; and (ii) Seller shall continue to provide maintenance
support to Cisco at Seller's prevailing rates for a minimum of three (3) years
after termination or expiration.
14.4 Notwithstanding anything in the foregoing to the contrary, in the
case of termination by Cisco for cause pursuant to Section 14.2, Cisco shall not
be required to pay any royalty or license fee to Seller after termination, and,
in the case of termination by Seller for cause pursuant to Section 14.2, all end
user licenses, if any, shall remain in effect and Cisco's license rights under
Section 2.2 shall survive only for a period of nine (9) months following such
termination and only with respect to Products then in inventory or subject to
any pending purchase order.
14.5 Return of Materials Upon Termination. On or before ten (10) days
after the termination of this Agreement, each party shall deliver to the other
party all of that party's Confidential Information and Property in its
possession. Cisco shall be entitled to retain any Seller Confidential
Information required to support the Product
15. DESIGNATED THIRD PARTIES
15.1 Designation. Cisco may assign all or a portion of its rights to
purchase the Products to Designated Third Parties. "Designated Third Party" for
a Product shall mean each company (including without limitation Cisco's
manufacturing subcontractors ("Cisco Subcontractors") and Cisco's trading
partners ("Trading Partners")) which Cisco notifies Seller in writing is
authorized to purchase that Product from Seller pursuant to the terms and
conditions of this Agreement. Cisco shall be entitled to withdraw each such
authorization by written notice to Seller, and upon such notice the applicable
company shall no longer be a "Designated Third Party" for that Product. If so
requested, Seller agrees to negotiate, in good faith, with
<PAGE>
any Trading Partner modifications to the terms and conditions of this Agreement
as applied to Product purchases by that Trading Partner.
15.2 Application of Agreement to Designated Third Parties (Contract
Manufacturer). As provided above, a Designated Third Party may issue to Seller
purchase orders of its own against a purchase order issued by Cisco to such
Designated Third Party. Cisco shall be liable to pay only for Products ordered
by and invoiced directly to Cisco and shall not be liable to pay for any
Products ordered by the Designated Third Parties, except as otherwise agreed to
in writing by Cisco with respect to Cisco Subcontractors. All references in this
Agreement to purchases of, purchase orders for, or shipments of Products by or
to Cisco shall mean by or to Cisco or the Designated Third Parties. For purposes
of volume pricing or other terms or conditions dependent on volume, all
purchases of Products by Cisco and Cisco Subcontractors shall be aggregated for
the benefit of Cisco.
16. MISCELLANEOUS
16.1 Force Majeure. Neither party shall be liable to the other for delays
or failures in performance resulting from causes beyond the reasonable control
of that party, including, but not limited to, acts of God, labor disputes or
disturbances, material shortages or rationing, riots, acts of war, governmental
regulations, communication or utility failures, or casualties. In the event
Seller fails to deliver Product due to such causes, Cisco may either:
(a) Terminate this Agreement or any part hereof as to Product(s) not
shipped; or
(b) Suspend this Agreement in whole or in part for the duration of the
delaying cause, and at Cisco's option, buy the Product(s) elsewhere and deduct
from any commitment to Seller the quantity so purchased. Seller shall resume
performance under this Agreement immediately after the delaying cause ceases
and, at Cisco's option, extend the then current term period for a period
equivalent to the length of time the excused delay endured; or
(c) Exercise its Manufacturing Rights pursuant to this Agreement.
16.2 Compliance with Laws. Seller warrants that in performance of work
under this Agreement it has complied with or shall comply with all applicable
federal, state, local laws and ordinances now or hereafter enacted including,
but not limited to OSHA, the Fair Labor Standards Act of 1938 (29 USC 201-219),
the 8Hour Law (40 USC 327-332), the Foreign Corrupt Practices Act (15 USC 78),
the Equal Opportunity and Affirmative Action Regulations, and laws restraining
the use of convict labor. Seller warrants that in performance of work under this
Agreement it has complied, in all material respects, with all laws, regulations,
statutes and ordinances of all governmental entities including local, state,
federal or international, now or hereafter enacted, which regulate any material
because it is radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment, including but not limited to the Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Resource
Conservation Recovery Act, the Federal Water Pollution Control Act, the Clean
Air Act, the Montreal Protocol, the Toxic Substances Control Act and similar
laws, rules, statutes, treaties or orders and international understandings. In
addition, Seller shall secure and maintain adequate workmen's compensation
insurance in accordance with the laws of the state or states from which Seller
shall furnish the Product and/or services for Cisco. Upon Cisco's request,
Seller shall issue certificates certifying compliance with any of the
aforementioned laws or regulations as may be applicable to the Product and/or
services being furnished hereunder.
16.3 Import and Export. Seller shall provide all information under its
control which is necessary or useful for Cisco to obtain any export or import
licenses required for Cisco to ship or receive Software, including, but not
limited to, certificates of origin, (NAFTA, etc.), manufacturer's affidavits,
Buy America qualification, and U.S. Federal Communications Commissions
identifier, if applicable. This information is to be provided within ten (10)
business days of Cisco's request. The parties agree to comply with all
applicable export laws and regulations of the United States.
16.4 Relationship of Parties. The parties are independent contractors
under this Agreement and no other relationship is intended, including a
partnership, franchise, joint venture, agency, employer/employee, fiduciary,
master/servant relationship, or other special relationship. Neither party shall
act in a manner which expresses or implies a relationship other than that of
independent contractor, nor bind the other party.
<PAGE>
16.5 No Third Party Beneficiaries. Unless otherwise expressly provided, no
provisions of this Agreement are intended or shall be construed to confer upon
or give to any person or entity other than Cisco and Seller any rights, remedies
or other benefits under or by reason of this Agreement.
16.6 Equitable Relief. Each party acknowledges that a breach by the other
party of any confidentiality or proprietary rights provision of this Agreement
may cause the non-breaching party irreparable damage, for which the award of
damages would not be adequate compensation. Consequently, the non-breaching
party may institute an action to enjoin the breaching party from any and all
acts in violation of those provisions, which remedy shall be cumulative and not
exclusive, and a party may seek entry of an injunction enjoining any breach or
threatened breach of those provisions, in addition to any other relief to which
the non-breaching party may be entitled at law or in equity.
16.7 Attorneys Fees. In addition to any other relief awarded, the
prevailing party in any action arising out of this Agreement shall be entitled
to its reasonable attorneys' fees and costs.
16.8 Notices. Any notice required or permitted to be given by either party
under this Agreement shall be in writing and shall be personally delivered or
sent by a reputable overnight mail service (e.g., Federal Express), or by first
class mail (certified or registered), or by facsimile confirmed by first class
mail (registered or certified), to the Project Manager of the other party.
Notices will be deemed effective (i) three 3) working days after deposit,
postage prepaid, if mailed; (ii) the next day if sent by overnight mail; or
(iii) the same day if sent by facsimile and confirmed as set forth above. A copy
of any notice shall be sent to the following:
Cisco Systems, Inc. Osicom Technologies, Inc.
170 West Tasman Drive 8245 Boone Blvd., Ste 704
San Jose, CA 95134 Vienna, VA 22182
Attn: VP Legal and Government Attn: Joe Scott,
Affairs Manager Federal Business Group
Fax: (408) 526-7019 Fax: (703) 287-3475
16.9 Assignment. Neither party may assign its rights or delegate its
obligations hereunder, either in whole or in part, whether by operation of law
or otherwise, without the prior written consent of the other. Any attempted
assignment or delegation without the other party's written consent will be void.
The rights and liabilities of the parties under this Agreement will bind and
inure to the benefit of the parties' respective successors and permitted
assigns. For purposes of this Section, a fifty percent (50%) change in control
shall constitute an assignment.
16.10 Waiver and Modification. Failure by either party to enforce any
provision of this Agreement will not be deemed a waiver of future enforcement of
that or any other provision. Any waiver, amendment or other modification of any
provision of this Agreement will be effective only if in writing and signed by
the parties.
16.11 Severability. If for any reason a court of competent jurisdiction
finds any provision of this Agreement to be unenforceable, that provision of the
Agreement will be enforced to the maximum extent permissible so as to effect the
intent of the parties, and the remainder of this Agreement will continue in full
force and effect.
16.12 Controlling Law and Jurisdiction. This Agreement and any action
related thereto shall be governed, controlled, interpreted and defined by and
under the laws of the State of California and the United States, without regard
to the conflicts of laws provisions thereof. The parties specifically disclaim
the UN Convention on Contracts for the International *Sale of Goods.
16.13 Headings. Headings used in this Agreement are for ease of reference
only and shall not be used to interpret any aspect of this Agreement.
16.14 Entire Agreement. This Agreement, including all exhibits which are
incorporated herein by reference, constitutes the entire agreement between the
parties with respect to the subject matter hereof,
<PAGE>
and supersedes and replaces all prior and contemporaneous understandings or
agreements, written or oral, regarding such subject matter.
16.15 Counterparts. This Agreement may be executed in two counterparts,
each of which shall - be an original and together which shall constitute one and
the same instrument.
16.16 Basis of Bargain. EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY
DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL
BARGAINED FOR BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT
AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER
THIS AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT BY PERSONS
DULY AUTHORIZED AS OF THE DATE AND YEAR FIRST ABOVE WRITTEN.
CISCO SYSTEMS INC. OSICOM TECHNOLOGIES, INC.
By: /s/ Dennis Davidson By: /s/ Arthur Trakas
Name: Dennis Davidson Name: Arthur Trakas
Title: Director Title: V President, Sales
<PAGE>
Cisco/Osicom Agreement CISCO CONFIDENTIAL INFORMATION
Rev. 12/11/97
9
EXHIBIT A
PRODUCTS; PRICES
1. When reference is made in the Agreement or any exhibit to Seller's published
U.S. List Price of a Product specially modified for Cisco, such reference shall
mean Seller's published U.S. List Price for the Seller standard product upon
which the Product has been based. In the event that the parties amend this
Agreement to include specifically modified Products for Cisco, Seller will sell
such Products specially modified for Cisco only to Cisco.
2. The purchase price, to Cisco, for the Products(s) shall be per the prices set
forth herein, in accordance with the following schedule, throughout the life of
the Agreement. Each category refers to the aggregate volume of Products
purchased.
3. The unit purchase price to be paid by Cisco for quantity 1 - 3000 shall be
$450. After the 3000th unit is ordered with firm delivery, Cisco shall then be
entitled to a unit purchase price of $435 for all units ordered with firm
delivery, starting with the 3001st up to and including the 5000th unit. After
the 5000th unit is ordered with firm delivery, Cisco shall then be entitled to a
unit purchase price of $425 for the 5001st and all subsequent units.
- --------------------------------------------------------------------------------
Product Aggregate Quantity Unit Price
- --------------------------------------------------------------------------------
2340 Quad 10/100, Cisco P/N 74-0796-01 1-3000 $450
- --------------------------------------------------------------------------------
2340 Quad 10/100, Cisco P/N 74-0796-01 3001-5000 $435
- --------------------------------------------------------------------------------
2340 Quad 10/100, Cisco P/N 74-0796-01 5001+ $425
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 10.27(a)
Amendment No. I
to
OEM License and Purchase Agreement
between
Cisco Systems, Inc.
and
Osicom Technologies, Inc.
This Amendment No. I ("Amendment") is made and entered into as of November 20,
1998 ("Effective Date"), by and between Cisco Systems, Inc., a California
corporation, having principal offices at 170 West Tasman Drive, San Jose,
California 95134-1706 ("Cisco"), and Osicom Technologies, Inc, a Delaware
Corporation, having principal offices at 9020 Junction Drive, Annapolis
Junction, MD 20701 ("Seller"). Cisco and Seller are referred to collectively
herein as "Parties."
The Parties desire to amend the OEM License and Purchase Agreement ("Agreement")
between Cisco and Seller dated December 24, 1997, as set forth below:
1. Exhibit A is modified as follows:
Subparagraph 2 is deleted and replaced with the following:
"2. The purchase price, to Cisco, for the Product(s) shall be per the
prices set forth herein."
Subparagraph 3. Shall apply only to the pricing included in the subparagraph for
the 2340 Quad 10/100 product.
Subparagraph 4 is added to the exhibit and consists of the following:
"Prices applicable to additional products provided by Osicom are as stated
below:
Product Description Quantity/Quarter Unit
Number Price
- ------------------------------------------------------------------------------
124040-01 2404-TX PCI Quad 50-599 cards $375
Fast Ethernet Adapter 600-1,499 cards $350
1500+ cards $325
Orders will be placed on a Cisco fiscal year quarterly basis. Cisco quarters are
August-October, November-January, February-April, May-July. The applicable
quantity pricing will be for the aggregate of all orders placed, whether
received directly from Cisco or from a Designated Third Party, provided the
Third Party order is received by Osicom within 5 working days of the Cisco order
for that quarter. Each purchase order must include the shipping schedule for the
applicable quarter."
2. Exhibit B is modified to include Exhibit B- 1, dated September 25, 1998, the
product specification for the 2404-TX PCI Quad Fast Ethernet Adapter.
3. Exhibit D is deleted and replaced with the attached exhibit dated
September 25, 1998.
4. Exhibit E is deleted and replaced with the attached exhibit dated
September 25, 1998.
5. Exhibit H is modified to include Exhibit H-1, dated September 25, 1998,
the Product Testing Procedures for the 2404-TX PCI Quad Fast Ethernet
Adapter.
<PAGE>
6. Exhibit K, paragraph 1, Manufacturing Information, is modified to include
the following additional items required to build the 2404-TX PCI Quad Fast
Ethernet Adapter:
"Detailed List of Items required to Build the Quad 2404-TX board
BOMs
124040-01 2404-TX/QUAD FE/64 BIT ERC 01
402404-01 S/A PCB CMPT/2404-TX/QUAD FE/64 BIT ERC 01
Schematics
320130-00-SCH SCHEMATICS/2404-TX ERC 01
Stencil
402404-00-STE STENCILJ2404-TX ERC 01"
Except as amended and supplemented herein, the terms and conditions of the
Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by persons
duly authorized as of the date and year first above written.
CISCO SYSTEMS, INC. OSICOM TECHNOLOGIES, INC.
By: /s/ S. L. Blaine By: /s/ Arthur Trakas
Name: S. L. Blaine Name: Arthur Trakas
Title: Manager OEM Solutions Title: VP, Sales
Cisco/Osicom Amend. I Page 2 of 7 Cisco Confidential Information
9/25/98
<PAGE>
Exhibit B-1
Product Specification for 2404-TX
September 25, 1998
4 Port, 64-bit Fast Ethernet Adapter for PCI
o High Performance, 64 bit, 4 Port Fast Ethernet Adapter
o Supports both 32 AND 64 bit PCI Buses
o Supports IEEE 802.3u Auto Negotiation for 10OBase-TX and lOBase-T
o Full Support for Full Duplex or Half Duplex operation
o Short Form Factor PCI Card
o Onboard Status LEDs
o Uses Existing Category 5 Cabling
o Full Plug-and-Play Support (No Jumpers)
The 2404-TX Fast Ethernet Adapter provides the equivalent of 4 separate
10/10OBase-TX adapters on one card, occupying only one slot on the PCI bus. The
addition of a 64-bit, PCI V2.1 compliant interface makes the card an excellent
choice for use in high-end server applications, while still being compatible
with current 32-bit bus architectures. The use of a 64-bit PCI to PCI Bridge,
with buffering, increases throughput on the PCI bus to the Ethernet controllers
giving your LAN even better performance.
Full Auto-Negotiation Capabilities
The 2404-TX adapter fully supports the IEEE standards for Auto-Negotiation and
flow control. The adapter will automatically determine the highest rate of
communication between other devices on the network. This includes full duplex,
100 Mbps operation giving a rate of 200 Mbps per port.
Using Existing CAT 5 Cabling
2404-TX adapters work with your existing Ethernet cabling (CAT 5 UTP), so you
don't have to re-cable your network to get the I OX performance available with
Fast Ethernet.
System Requirements
- -------------------
For 100 Mbps (Fast Ethernet)
Category 5 unshielded twisted pair (UTP) cable
For 10 Mbps
Category 3 or 5 UTP cable
l0Base-T or 100Base-TX Ethernet Hub, Switch or Concentrator
Product Specifications
- ----------------------
Port Configuration: 4 Ports
Media: 100 Mbps - CAT 5 UTP
10 Mbps - CAT 5 or CAT 3 UTP
Media Connectors: RJ-45 (UTP)
Size: Short form factor PCI
4.2 in X 6.875in (107mm X 175mm)
Status Indicators: Onboard LEDs indicate board status:
Link Integrity and Data Traffic Activity
Power: +5 Vdc +/- 5%,3A Max
Agency Compliance: FCC (Class B), CE, UL
Warranty: 3 Years for hardware (Parts and Labor),
90 days for software
Cisco/Osicom Amend. I Page 3 of 7 Cisco Confidential Information
9/25/98
Environment: Testing Underway
Interoperability: Tested for interoperability with other major
equipment manufacturers
<PAGE>
Standards Compatibility: All IEEE Fast Ethernet and Ethernet Standards
PCI Bus Interface: Fully compliant with PCI SIG V2.1
Bus Signaling Voltage = Universal 3.3V or 5V
Data and Address Path 64 bits
Supports Parity Generation/checking
Clock rates up to 33 MHz for peak
throughput of 264 Mbps
Master Mode = supports unlimited PCI bursts
Plug and Play PCI auto configuration
Models
2404-TX 4 Port, 64 bit Fast Ethernet RJ-45 UTP Connectors P/N = 124040
Cisco/Osicom Amend. 1 Page 4 of 7 Cisco Confidential Information
9/25/98
<PAGE>
Exhibit D
Project Managers
September 25, 1998
Cisco Systems, Inc.
Sarah L. Blaine
OEM Program Manager
170 West Tasman Dr., NIS SJ/A-2
San Jose, CA 95134
(408) 527-5741
(408) 525-1665 FAX
Cisco Systems, Inc.
Myra Diamond
Buyer/Planner
170 West Tasman Dr., MS SJ/A-2
San Jose, CA 95134
(408) 526-7859
(408) 527-7995 FAX
Osicom Technologies, Inc.
Don Ellsworth
Project Manager
9020 Junction Drive
Annapolis Junction, MD 20701
(301)317-7318
(301)317-7697 FAX
Cisco/Osicom Amend. I Page 5 of 7 Cisco Confidential Information
9/25/98
<PAGE>
Exhibit E
Reschedules and Cancellations
September 25, 1998
I . Increases/Reschedules. Upon notice to Seller, Cisco may increase a purchase
order as follows:
<TABLE>
<CAPTION>
Number of Days from Quantity Subject to Increase; New Delivery Date Original Delivery Date
----------------------------------------------------------------------
<S> <C>
1-30 days 20% of quantity for delivery within 90 days from original scheduled delivery date
31-60 days 25% of quantity for delivery within 90 days from original scheduled delivery date
61-90 days 50% of quantity for delivery within 120 days from original scheduled delivery date
90 days or more 100%
</TABLE>
Cisco may reschedule the delivery of all or any portion of Products ordered
under a purchase order or modify the delivery locations, provided that Seller
has received at least 15 working days advance written notice. Such reschedule
may be as follows:
Number of Calendar Days Maximum Number of Calendar Days
Prior to Scheduled Ship Date To Delay Shipment
- ---------------------------- -----------------
15 days 30 days
30 days 60 days
60 days 90 days
2. Work Stoppage. In the event that Cisco receives a stop work order pursuant to
any government contract, Cisco may, prior to the Delivery Date, by a written
order, suspend its purchase of products hereunder. Should Cisco request Supplier
to stop shipment of Products, Supplier's obligations to meet delivery
commitments on such "stopped" shipments shall thereafter be suspended until such
time as Cisco requests Supplier to recommence shipment of Products. Cisco and
Supplier shall work together to allow Supplier to resume production as soon as
possible.
3. Cancellation. Prior to the delivery of any item, Cisco, for its own
convenience, may notify Seller in writing of its intent to cancel the order for
Products, provided Seller is notified in writing of the cancellation at least
fifteen (15) working days prior to the scheduled ship date.
THIS EXHIBIT SETS FORTH SELLER'S ENTIRE REMEDIES WITH RESPECT TO A CANCELLATION
OF ANY PURCHASE ORDER OR TERMINATION OF THE AGREEMENT BY CISCO UNDER SECTION
14.2 OF THE AGREEMENT.
Cisco/Osicorm Amend. I Page 6 of 7 Cisco Confidential Information
9/25/98
<PAGE>
Exhibit H-1
Product Testing Procedures
September 25, 1998
Cisco/Osicom Amend. I Page 7 of 7 Cisco Confidential Information
9/25/98
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet - EXHIBIT H-1 Document #: 915-4945-01
- --------------------------------------------------------------------------------
0SICOM
TEST PROCEDURE 2404 Quad FAST-Ethernet
Document #: 915-4945-01
11/09/98 Page 1 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret taws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet Document #: 915-4945-01
1 INTRODUCTION
1.1 The purpose of this procedure is to insure the functional operation of the
2404 PCI Quad FAST-Ethernet card.
1.2 This procedure must be followed explicitly, step by step. Do not attempt to
make connections, apply power, or change options, until instructed to do so.
Failure to comply with these instructions could result in personal injury or
equipment damage.
2 REFERENCE DOCUMENTS
UUT Schematic 320131-01-SCH ERC 03
Top Bill of Material 402404-01 ERC 02
3 EQUIPMENT REQUIRED
1) IBM compatible PC with internal PCI bus and Monitor, Keyboard and Scanner
2) 2) Fast Ethernet RJ45 Loopback Plugs (4 per card)
4 INITIAL SETUP
4.1 Install up to four (4) 2404 boards into the PCI slot(s)on the test
fixture starting with slot 0. See figure 1.
4.2 Install the appropriate loopback plugs into each card.
5 POWER UP SEQUENCE
5.1 Apply power to the PC and Monitor.
6 TEST SEQUENCE
6.1 SROM Programming, Version: 2.0 must be performed before diagnostic
tests can be run.
At the menu prompt:
Scan the SRON2404 -p 2404 barcode on the test bed.
Scan serial number barcodes on UUT cards starting with slot 0.
**serial#Oserial#3.
Press Enter
**Osicom Networking Division requires serial number data To be
entered via a bar-code wand or pen for accuracy.
6.2 Turn off power to the PC.
6.3 Turn on the power to the PC. This will load the contents of the SROM
into the INTEL components.
6.4 Verify all green link LEDs are on. (Lights closest to the main board)
6.5 At the menu type: 7 < cr >.
11/09/98 Page 2 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret laws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet Document #: 915-4945-01
This will load the 2404 diagnostics test software. Verify that you
are using the correct version of software. The version number is
printed at the top of the screen at startup as well as above the
result matrix.
6.6 When prompted to type the number of 2404 cards inserted into the PCI
slots, make sure the number given is the number of CARDS in the
system, and NOT the number of ports. For example, if there are four
2404 cards in the system then press '4', and DO NOT hit the return
key after typing the number!
Note: Be sure to watch the LEDs on the 2404 ports to ensure they all
flicker during this test. The link LED lights are the closest to the
motherboard. While the activity link lights are farthest from the
motherboard.
6.7 Diagnostic sub-tests will start to execute, indicated by intermittent
progress messages.
A 'FAILED!' appearing at the end of a stream of dots, indicates a failure.
A passed test is indicated by 'PASSED'.
After the number of selected passes have been completed, the 'press any
key to continue ...' I prompt will appear.
Press any key and a test matrix is generated and displayed. A test report
is created in the file diag. out as well. This file will be overwritten on
each run of the diagnostics, so if the test information needs to be kept,
be sure to move the output file.
Note: The 'MAC' addresses at the top of the screen must be checked for
accuracy and that they all there. There should be 4 addresses per card and
the addresses must be in sequence. (if 4 cards are being tested there must
be 16 addresses)
Failures are displayed by a IF[ being displayed in the appropriate box. A
box corresponds to a single test ran on a single port. Any box that
displays a 1-1 means a particular test, was not executed for that port,
and any box that displays a IV' means the test passed on that particular
port. See figure 2 for a sample result matrix with two ports being tested
with all tests. When completed reviewing the test matrix, press any key to
back to the command prompt.
The diagnostics tests may be stopped at any time by pressing the 'Escape'
key.
6.8 Turn power off to the PC test bed.
Remove loopback plugs.
Remove tested cards from the test bed and apply a 'Tested by' label to the
cards which have passed and move cards to the next operation.
11/09/98 Page 3 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret laws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet Document #: 915-4945-01
Failed boards need to identified, test failure documented, and boards routed to
repair.
11/09/98 Page 4 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret laws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet Document #: 915-4945-01
Diagram page, Figure 1.
blank not scanned
11/09/98 Page 5 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret laws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
TEST PROCEDURE 2404 FAST-Ethernet Document #: 915-4945-01
CARD #100 101 1
--------------
TEST 01 p I p I
--------------
TEST 11 p I p I
--------------
TEST 21 p I p I
--------------
TEST 31 p I p I
--------------
TEST 41 p I p I
--------------
TEST 51 p I p I
--------------
TEST 61!F!j p I
--------------
TEST 71 - I p I
--------------
TEST 81 - [ILLEGIBLE]
--------------
TEST 91 - I - I
--------------
Figure 2: Example, test matrix
11/09/98 Page 6 of 6 Revision 1.0
This document is confidential and proprietary and is the exclusive property of
OSICOM Technologies Inc. This document is unpublished and is protected by
copyright and trade secret laws. This document has been provided for review by
the recipient only. Any other reproduction of this document without express
written consent of OSICOM Technologies Inc. is strictly prohibited.
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-4 and related Proxy Statement/Prospectus of
Sync Research, Inc. for the registration of 4,300,000 shares of its common
stock to be filed with the Securities and Exchange Commission on or about May
19, 2000 and to the incorporation by reference therein of our report dated
January 28, 2000, with respect to the consolidated financial statements and
schedule of Sync Research, Inc. included in its Annual Report (Form 10-K) for
the year ended December 31, 1999, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Orange County, California
May 19, 2000
<PAGE>
Exhibit 23.03
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman, LLP
1900 Avenue of the Stars, 11th Floor
Los Angeles, CA 90067
Sync Research, Inc.
Irvine, California
We hereby consent to the use of our report dated March 23, 2000 relating to
the financial statements of Osicom Technologies, Inc., (a Delaware
corporation, f/k/a Cray Communications, Inc., doing business as Entrada
Networks), a wholly-owned subsidiary of Osicom Technologies, Inc., (a New
Jersey corporation), as of January 31, 2000 and 1999 and for each of the
three years in the period ending January 31, 2000 that is made part of this
Registration Statement on Form S-4 (No. 333-_______) and related prospectus
of Sync Research, Inc.
We also consent to the reference to us under the caption "Experts" in the
Registration Statement and prospectus.
/s/ BDO SEIDMAN, LLP
Los Angeles, California
May 19, 2000
