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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 12, 1996
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OSICOM TECHNOLOGIES, INC.
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(Exact name of Registrant as specified in charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New Jersey 0-15810 22-2367234
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(State of other jurisdiction (Commission file number) (IRS Employer
of incorporation) Identification Number)
</TABLE>
2800 28th Street, Suite 100, Santa Monica, CA
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(Address of principal executive offices)
90405
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(Zip code)
(310) 828-7496
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 4, 1996, Osicom Technologies, Inc. ("Osicom") agreed to acquire
100% of Digital Products, Inc. ("DPI") through a merger with a newly-formed
subsidiary, DPI Acquisition Corp. for common stock and options to acquire common
stock of Osicom valued at $5 million less agreed upon merger expenses of DPI and
DPI option repurchases. The acquisition, which will be effective as of June 30,
1996, closed on September 12, 1996 and will be accounted for as a pooling. The
purchase price was determined by negotiations between the buyer and seller.
In addition, a new $3 million line of credit with a lender will provide funds to
repay approximately $1,344,000 owed by DPI to one of its lenders and to provide
additional working capital.
DPI, a privately-held company established in 1984, produces and markets to
printer original equipment manufacturers a broad line of print server products
that provide board level and chip level integrated solutions for local area
networks and remote access. DPI's products are compatible with a variety of
networks included Novell NewWare, Banyan, Vines, DEC LAT, Apple, UNIX, Microsoft
Windows NT and Microsoft Windows for Workgroups.
DPI employs 90 at its Waltham, Massachusetts facility. The current employee
based will be retained, with the management team receiving both retention and
performance-based incentive options.
All assets acquired in this transaction will continue to be used in the conduct
of the normal business activities of DPI and Osicom. No significant business
relationship existed between DPI and Osicom or their officers or directors.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements and pro forma financial information of the
business acquired are expected to be filed by amendment to this
filing within sixty (60) days of the earliest date reported herein.
(b) Exhibit 2.1 Plan of Acquisition:
Merger Agreement by and among Osicom Technologies, Inc., DPI
Acquisition Corp., Digital Products, Inc. and Certain Shareholders
of Digital Products, Inc. Dated as of July 1, 1996
Amendment to Merger Agreement Dated September 12, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Osicom Technologies, Inc.
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(Registrant)
Dated September 20, 1996 By: /s/ Sharon Chadha
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Sharon Chadha
Chief Executive Officer
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EXHIBIT 2.1
Merger Agreement by and among Osicom Technologies, Inc.,
DPI Acquisition Corp., Digital Products, Inc. and
Certain Shareholders of Digital Products, Inc.
Dated as of July 1, 1996
Amendment to Merger Agreement
Dated September 12, 1996
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MERGER AGREEMENT
by and among
OSICOM TECHNOLOGIES, INC.,
DPI ACQUISITION CORP.,
DIGITAL PRODUCTS, INC.
and
CERTAIN SHAREHOLDERS OF DIGITAL PRODUCTS, INC.
Dated as of July 1, 1996
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TABLE OF CONTENTS
PAGE
MERGER AGREEMENT ............................................................ 1
ARTICLE I - MERGER OF ACQUISITION AND THE CORPORATION ....................... 1
1.01 The Merger ..................................................... 1
1.02. Articles of Organization ....................................... 1
1.03. By-Laws ........................................................ 2
1.04. Directors and Officers ......................................... 2
1.05. Effective Time ................................................. 2
1.06. Effect of Merger ............................................... 2
1.07. Additional Actions ............................................. 2
1.08. Conversion of Securities; Merger Consideration ................. 3
1.09. Exchange of Certificates and Cash .............................. 4
1.10. Stock Transfer Books ........................................... 5
1.11. Market Value ................................................... 5
1.12. Shareholder Approval ........................................... 5
ARTICLE II - ADDITIONAL TRANSACTIONS ........................................ 6
2.01. Peterson Employment Agreement and Options ...................... 6
2.02. Stock Option Agreements ........................................ 7
2.03. Confidentiality and Non-Competition Agreements ................. 8
2.04. Board of Directors ............................................. 8
2.05. Outstanding Options ............................................ 8
2.06. Peterson Note .................................................. 8
2.07. Shareholder Loans .............................................. 8
2.08. Freemont Bank Loan ............................................. 8
2.09. Restrictive Legend ............................................. 8
2.10. Receipt of Information ......................................... 9
2.11. Registration Rights ............................................ 9
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION ................................................... 9
3.01. Valid Corporate Existence; Qualification ....................... 9
3.02. Capitalization ................................................. 10
3.03. Subsidiaries ................................................... 10
3.04. Consents ....................................................... 10
3.05. Binding Nature of Agreement; Title to Shares ................... 10
3.06. Financial Statements ........................................... 10
3.07. Liabilities .................................................... 11
3.08. Action Since Balance Sheet Date ................................ 11
3.09. Adverse Developments ........................................... 11
3.10. Taxes .......................................................... 12
3.11. Ownership of Assets ............................................ 12
3.12. Insurance ...................................................... 13
3.13. Litigation, Compliance with Law ................................ 13
3.14. Real Property .................................................. 13
3.15. Agreements and Obligations; Performance ........................ 13
3.16. Condition of Assets ............................................ 14
3.17. Accounts Receivable ............................................ 14
3.18. Permits and Licenses ........................................... 14
3.19. Banking Arrangements ........................................... 15
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3.20. Interest in Assets ............................................. 15
3.21. Salary Information ............................................. 15
3.22. Employee Benefit Plans ......................................... 15
3.23. No Breach ...................................................... 17
3.24. Brokers ........................................................ 17
3.25. Labor Discussions .............................................. 17
3.26. Change of Name ................................................. 17
3.27. Backlog ........................................................ 18
3.28. Environmental .................................................. 18
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF OSICOM ....................... 18
4.01. Organization ................................................... 18
4.02. No Breach ...................................................... 18
4.03. Authority for and Binding Nature of Agreement .................. 19
4.04. Brokers ........................................................ 19
4.05. Consents ....................................................... 19
4.06. Litigation ..................................................... 19
4.07. Public Reports ................................................. 19
4.08. Acquisition .................................................... 20
4.09. Osicom Stock ................................................... 20
ARTICLE V - PRE-CLOSING COVENANTS ........................................... 20
5.01. Access ......................................................... 20
5.02. Conduct of Business ............................................ 20
5.03. Insurance ...................................................... 20
5.04. Liabilities .................................................... 20
5.05. Preservation of Business ....................................... 21
5.06. Financial Statements ........................................... 21
5.07. No Breach ...................................................... 21
5.08. No Negotiations ................................................ 21
ARTICLE VI - CONDITIONS PRECEDENT TO THE OBLIGATIONS
TO OSICOM TO CLOSE ............................................. 21
6.01. Representations and Warranties ................................. 21
6.02. Covenants ...................................................... 21
6.03. No Action ...................................................... 21
6.04. Consents, Licenses and Permits ................................. 22
6.05. Certificate .................................................... 22
6.06. Opinion ........................................................ 22
6.07. Employment and Confidentiality Agreements ...................... 22
6.08. No Material Adverse Change ..................................... 22
6.09. Audit .......................................................... 22
6.10. Shareholder Approval ........................................... 22
ARTICLE VII - CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE CORPORATION AND THE SHAREHOLDERS
TO CLOSE ..................................................... 22
7.01. Representations and Warranties ................................. 22
7.02. Covenants ...................................................... 23
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7.03. No Actions ..................................................... 23
7.04. Certificates ................................................... 23
7.05. Opinion ........................................................ 23
7.06. Debt Payments .................................................. 23
7.07. Shareholder Approval ........................................... 23
ARTICLE VIII - CLOSING ...................................................... 24
8.01. Location ....................................................... 24
8.02. Items to be Delivered by the Corporation ....................... 24
8.03. Items to be Delivered by Osicom and
Acquisition .................................................... 24
ARTICLE IX - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION ................... 25
9.01. Survival ....................................................... 25
9.02. Indemnification ................................................ 25
9.03. Defense of Claims .............................................. 25
9.04. Limitation on Liability; Escrow ................................ 25
ARTICLE X - TERMINATION AND WAIVER .......................................... 26
10.01. Termination .................................................... 26
10.02. Waiver ......................................................... 27
ARTICLE XI - MISCELLANEOUS PROVISIONS ....................................... 27
11.01. Expenses ....................................................... 27
11.02. Confidential Information ....................................... 27
11.03. Modification, Termination or Waiver ............................ 27
11.04. Publicity ...................................................... 28
11.05. Notices ........................................................ 28
11.06. Binding Effect and Assignment .................................. 28
11.07. Entire Agreement ............................................... 28
11.08. Disclosure Letter .............................................. 28
11.09. Governing Law .................................................. 29
11.10. Counterparts ................................................... 29
11.11. Section Headings ............................................... 29
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MERGER AGREEMENT
AGREEMENT made as of the 1st day of July 1996, by and among Osicom
Technologies, Inc., a New Jersey corporation ("Osicom"), DPI Acquisition Corp.,
a Massachusetts corporation in formation ("Acquisition"), Digital Products,
Inc., a Massachusetts corporation (the "Corporation") and Cornelius Peterson
("Peterson" or the "Principal Shareholder").
WHEREAS, the Principal Shareholder is the owner of 830,512 shares of
Class A Common Stock, par value $.10 per share ("Class A Common Stock") and
496,000 shares of Class B Common Stock, par value $.10 per share ("Class B
Common Stock", and, together with the Class A Common Stock, the "Common Stock")
of the Corporation; and
WHEREAS, the Corporation has outstanding shares of Common Stock and
Preferred Stock, held of record by the persons and entities, including the
Principal Shareholder listed on the Disclosure Schedule (as defined)
(collectively, the "Existing Shareholders" and, together with the persons who
will acquire shares of Common Stock from the Corporation prior to the closing of
the transactions contemplated hereby pursuant to Section 2.05 hereof, the
"Shareholders"); and
WHEREAS, upon being incorporated and organized, Acquisition will be a
wholly-owned subsidiary of Osicom; and
WHEREAS, the parties to this Agreement wish to merge Acquisition with
and into the Corporation in a merger in which the Corporation will be the
surviving corporation and will be a wholly-owned subsidiary of Osicom and in
which the Shareholders will receive the consideration provided for in this
Agreement, which transaction is intended by the parties to this Agreement to
qualify as a tax-free reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual agreements recited
herein, the parties agree as follows:
ARTICLE I
MERGER OF ACQUISITION AND THE CORPORATION
1.01 THE MERGER. In accordance with the provisions of this Agreement
and the Massachusetts Business Corporation Law (the "BCL"), on the Closing Date,
Acquisition will be merged with and into the Corporation (the "Merger"), and the
Corporation shall be the surviving corporation in the Merger (hereinafter
sometimes called the "Surviving Corporation"), shall continue its corporate
existence under the laws of the State of Massachusetts, and shall be a
wholly-owned subsidiary of Osicom. At the Effective Time, as defined in Section
1.05 the separate existence of Acquisition shall cease. The name of the
Surviving Corporation shall remain "Digital Products, Inc.,
1.02. ARTICLES OF ORGANIZATION. The Articles of Organization of the
Corporation, as in effect immediately prior to the Closing Date, shall be the
Articles of Organization of the Surviving Corporation until thereafter amended
as provided by law.
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1.03. BY-LAWS. The By-Laws of the Corporation, as in effect
immediately prior to the Closing Date, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by law.
1.04. DIRECTORS AND OFFICERS. The directors of Acquisition
immediately prior to the Closing Date shall, after the Effective Time, be the
directors of the Surviving Corporation. The officers of the Corporation
immediately prior to the Closing Date shall, after the Closing Date, be the
officers of the Surviving Corporation. Each director and officer of the
Surviving Corporation shall hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation.
1.05. EFFECTIVE TIME. The Merger shall become effective at the time of
filing (the "Effective Time") of articles of merger with the Secretary of State
of the State of Massachusetts in accordance with the provisions the BCL (the
"Articles of Merger"). The Articles of Merger shall be filed at the time of the
Closing.
1.06. EFFECT OF MERGER. Upon consummation of the Merger, the Surviving
Corporation shall thereupon and thereafter possess all the rights, privileges,
powers and franchises, including those of a public as well as of a private
nature, of each of Acquisition and the Corporation (collectively, the
"Constituent Corporations"), and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all of the
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, as well for stock
subscriptions as for all other choses in action or belonging to each of the
Constituent Corporations shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective Constituent Corporations;
and the title to any real estate, vested by deed or otherwise, under the laws of
Massachusetts or elsewhere in either of the Constituent Corporations, shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property as of the Effective Time of either of
the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of each of the Constituent Corporations as of the
Effective Time shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
1.07. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall believe or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, title to and possession of any property or right of either
Constituent Corporation acquired or to be acquired by reason of, or as a result
of, the Merger, or (b) otherwise to carry out the purposes of this Agreement,
either Constituent Corporation and its proper officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute an deliver all such proper deeds, assignments and assurances
in law and to undertake all such acts necessary or desirable to vest, perfect or
confirm, of record or otherwise, such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
proper officers and directors of the Surviving
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Corporation are fully authorized in the name of either Constituent Corporation
or otherwise to take any and all such action.
1.08. CONVERSION OF SECURITIES; MERGER CONSIDERATION. At the Effective
Time and without any action on the part of Osicom, Acquisition, the Corporation
or the holders of any of the securities of any of these corporations, each of
the following shall occur:
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted, subject to the provisions of
Section 1.09(d), into the right to receive the amount equal to the Per Share
Merger Consideration (as defined below), which shall be payable in cash or in
shares of Osicom Stock as provided herein and which shall be subject to the
Escrow Agreement referred to in paragraph (d) below; provided, however, that if
between the date of this Agreement and the Effective Time the outstanding shares
of Osicom Stock or Common Stock shall have been changed into a different number
of shares or a different class or series, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares the Per Share Merger Consideration shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. All such shares of Common Stock shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously evidencing any such shares
shall thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 1.09, the Per Share
Merger Consideration. The holders of such certificates previously evidencing
such shares of Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Common Stock
except as otherwise provided herein or by law. No fractional shares of Osicom
Stock shall be issued in connection with the Merger, and in lieu thereof, a cash
payment shall be made in accordance with the provisions of Section 1.09(d).
(b) Each share of capital stock of Acquisition issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corpora tion and thereafter each stock certificate
of Acquisition shall evidence ownership of shares of common stock of the
Surviving Corporation.
(c) The "Per Share Merger Consideration" shall mean the amount equal
to result obtained by dividing (x) the Merger Consideration (as defined below)
by (y) the number of shares of Common Stock outstanding immediately prior to the
Closing hereun der. The "Merger Consideration" shall mean $5,000,000, less the
purchase price reductions for certain expenses relating to the transactions
contemplated in connection herewith specified in Sections 2.05 and 11.01:
(i) the amount paid by the Corporation to repur chase options to
purchase shares of Common Stock pursuant to Section 2.05 hereof; and
(ii) the amount of transaction expenses paid by or on behalf of
the Corporation with respect to the investment banking fees of Tucker Anthony
and legal and accounting fees and disbursements of legal counsel and the
auditors for the Corporation incurred in connection with the transactions
contemplated hereby, in accordance with Section 11.01 hereof.
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(d) At the Effective Time, Osicom shall deposit, or shall cause to be
deposited, with the Escrow Agent named in the Escrow Agreement referred to in
Section 9.04 of this Agreement $1,476,000 of the Merger Consideration, to be
held and distributed in accordance with the terms of such Escrow Agreement.
(e) At the sole discretion of Osicom, the Merger Consideration and Per
Share Merger Consideration shall be payable in cash and/or in shares of Osicom
Stock having a Market Value (as defined in Section 1.11) equal to the Merger
Consideration.
1.09. EXCHANGE OF CERTIFICATES AND CASH. (a) At or prior to the
Effective Time, Osicom shall deposit, or shall cause to be deposited, with or
for the account of a bank or trust company designated by Osicom and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of shares of Common Stock, for exchange in accordance with this Article I, (i)
certificates evidencing the shares of Osicom Stock and/or cash issuable pursuant
to Section 1.08 (less the amount of the Merger Consideration deposited under the
Escrow Agreement) in exchange for outstanding shares of Common Stock and (ii)
upon the request of the Exchange Agent, cash in an amount sufficient to make any
cash payment due under Section 1.09(d) hereof (such certificates for shares of
Common Stock and cash being hereafter collectively referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
Osicom Stock and/or cash contemplated to be issued pursuant to Section 1.08 out
of the Exchange Fund to holders of shares of Common Stock. Except as
contemplated by Section 1.09(d) hereof, the Exchange Fund shall not be used for
any other purpose. Any interest, dividends or other income earned on the
investment of cash or other property held in the Exchange Fund shall be for the
account of Osicom
(b) As soon as reasonably practicable after the Effective Time, Osicom
will instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates that, immediately prior to the Effective Time,
evidenced outstanding shares of Common Stock (the "Certificates") (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Osicom may reasonably specify and (ii) instructions to effect the
surrender of the Certificates in exchange for the certificates evidencing shares
of Osicom Stock and cash, if applicable. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Per Share Merger Consideration for each share of Common
Stock so tendered, including cash in lieu of fractional shares of Osicom Stock
to which such holder is entitled pursuant to Section 1.09(d), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Common Stock that are not registered in the
transfer records of the Company, the Per Share Merger Consideration may be
issued and paid in accordance with this Article I to a transferee if the
Certificate evidencing such shares of Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 1.09, each Certificate
shall be deemed any time after the Effective Time to evidence only the right to
receive a Per Share Merger Consideration for the number of shares of Common
Stock evidenced thereby upon such surrender. One or after the Effective Time,
any Certificates presented to the
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Exchange Agent or Osicom for any reason shall be converted into the Merger
Consideration.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Osicom Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Osicom Stock they are entitled to receive until the
holder of such Certificate shall surrender such Certificate.
(d) No fraction of a share of Osicom Stock shall be issued in
connection with the Merger. In lieu of any such fractional shares, each holder
of Common Stock upon surrender of a Certificate for exchange pursuant to this
Section 1.09 shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the Per Share Merger Consider ation
by (ii) the fraction of a share of Osicom Stock to which such holder would be
entitled to receive under Section 1.08 of this Agreement.
(e) Any portion of the Exchange Fund that remains undistributed to the
holders of Common Stock for six months after the Effect Time shall be delivered
to Osicom, upon demand, and any holders of Common Stock who have not theretofore
complied with this Article I shall thereafter look only to Osicom for the Merger
Consideration to which they are entitled pursuant to this Article I.
(f) None of the Surviving Corporation, Osicom or the Corporation shall
be liable to any holder of, or person otherwise entitled to receive, cash or
share of Osicom Stock for any such cash or shares of Osicom Stock (or dividends
or distributions with respect thereto) from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Osicom and the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of shares of Common Stock such amounts as Osicom or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Osicom or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Common Stock in respect of which such
deduction and withholding was made by Osicom or the Exchange Agent.
1.10. STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Corporation shall be closed, and there shall be no further
registration of transfers of shares of Common Stock thereafter on the records of
the Corporation.
1.11. MARKET VALUE. For purposes of this Agreement, the market value
of the Osicom Stock shall be the average bid and asked prices of such stock as
reported by NASDAQ for the five (5) trading days preceding the applicable
payment date (e.g., the Closing Date in the case of Section 1.08).
1.12. SHAREHOLDER APPROVAL. Neither Acquisition nor the Corporation
shall have any obligation to effect the Merger unless Shareholders holding not
less than ninety-five (95%) of the Shares vote to approve the Merger in
accordance with all requirements of the BCL and the Corporation's Articles or
Organization and By-Laws (collectively, the "Charter") on or
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before September 3, 1996. The Corporation represents to Osicom and Acquisition
that a meeting (the "Meeting") of the Shareholders has been duly called and
noticed to the Shareholders in accordance with the BCL and the Charter. The
Meeting is to be held on September 3, 1996 and was called for the purpose of
acting upon the approval of the Merger. To the extent that one or more
Shareholders exercises his, her or its dissenter's rights under Sections 85
through 98 of the BCL, and pursuant thereto is finally entitled to consideration
in excess of the Merger Consideration, such excess amount, as well as any costs
(such as but not limited to attorney's fees) incurred by Osicom, Acquisition or
the Corporation in connection with such exercise of dissenter's rights, will be
paid from the amount of the Merger Consideration to be placed in escrow pursuant
to the Escrow Agreement referred to in Sections 8.02 and 8.03 hereof.
ARTICLE II
ADDITIONAL TRANSACTIONS
2.01. PETERSON EMPLOYMENT AGREEMENT AND OPTIONS.
(a) At the Closing, the Corporation will enter into an employment
agreement with Cornelius Peterson ("Peterson") for a term of twenty-four (24)
months commencing on the Closing Date. Such employment agreement will provide to
Peterson a base annual salary of $150,000 and benefits consistent with those
provided to senior executives of Osicom. The employment agreement will be
terminable by the Corporation only for cause, to be defined as a material
failure of Peterson to act in good faith on a full-time basis or to follow the
instructions of the Corporation's Board of Directors (after prior notice and an
opportunity to cure such failure), fraud or conviction of a crime. The
Corporation will pay to Peterson a bonus of $50,000 on the second anniversary of
the Closing Date, provided he is then employed by the Corporation, payable at
the Corporation's option in cash or shares of Osicom Stock, valued at the
average bid and asked price on the last five (5) trading days of the 24th month
after the Closing, as reported by NASDAQ. Peterson will agree not to solicit or
hire employees of the Corporation for a period of one (1) year following the
termination of his employment for any reason. The employment agreement will
contain such other terms and conditions as agreed to by the Corporation and
Peterson, subject to Osicom's approval.
(b) At the Closing, Osicom will grant to Peterson options to purchase
Osicom Stock, with exercise prices equal to the Market Value of Osicom Stock on
the Closing Date. Such options will apply to that number of shares equal to (i)
$1,000,000 divided by (ii) the Market Value of Osicom Common Stock on the
Closing Date. Provided Peterson is then employed by the Corporation, such option
will become exercisable on the second anniversary of the Closing Date (or
immediately upon termination of Peterson's employment by the Corporation without
cause prior to the second anniversary of the Closing Date) and will remain
exercisable for a period of three (3) years thereafter, subject to Peterson
remaining employed by the Corporation.
(c) (i) Subject to the Corporation's gross profits during the two year
period following the Closing Date, Osicom will grant options (the "Contingent
Options") to purchase Osicom Stock as of the first and second anniversaries of
the Closing Date as described in this subsection 2.01(c).
(ii) If the Corporation's gross profit for the twelve months
ending July 31, 1997 (the "First Year") is at least $10,250,000, Osicom
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will grant to Peterson, at the end of the First Year, Contingent Options having
a Value (as defined below) of $1,500,000. If the Corporation's gross profit for
the First Year is less than $9,225,000, no Contingent Options will be granted
then. If the gross profit for the First Year is between $9,225,000 and
$10,500,000, the $1,500,000 Value of the Contingent Options will be pro rated.
For example, if the gross profit for the First Year is $9,737,500 (one-half of
the difference between $9,225,000 and $10,500,000), Contingent Options having a
Value of $750,000 (one-half of $1,500,000) will be granted.
(iii) If the Corporation's gross profit for the twelve months
ending July 31, 1998 (the "Second Year") is at least $12,000,000, Osicom will
grant to Peterson at the end of the Second Year Contingent Options having a
Value of $1,500,000. If the Corporation's gross profit for the Second Year is
less than $10,800,000, no Contingent Options will be granted. If the gross
profit for the Second Year is between $10,800,000 and $12,000,000, the
$1,500,000 Value will be pro rated. For example, if the gross profit for the
Second Year is $11,700,000 (three-fourths of the difference between $10,800,000
and $12,000,000), Contingent Options having a value of $1,125,000 (three-fourths
of $1,500,000) will be granted. For purposes of Contingent Options granted as of
the end of the second year, if the gross profit for the Second Year exceeds
$12,000,000, such excess will be applied to any shortfall in the First Year's
gross profit below $10,500,000, provided gross profits in the First Year were at
least $9,225,000, and such additional Value of Contingent Options will be issued
at the second anniversary. Thereafter, any additional gross profit in the Second
Year will be applied to grant Peterson Additional Contingent Options at the rate
of $150,000 in Value for each $100,000 in gross profit. In no event, however,
shall the total value of all Contingent Options exceed $3,000,000.00.
(iv) As used in this subsection (c), the "Value" of options
refers to the aggregate exercise price of the Contingent Options being issued.
The exercise price of the Contingent Options will be Fifteen Dollars ($15.00)
per share of Osicom Stock. The number of shares subject to each grant of
Contingent Options will equal the Value divided by $15.00. For example, if
Peterson earns Contingent Options having a Value of $1,500,000, the Contingent
Options will be exercisable, at $15.00 per share, to acquire 100,000 shares of
Osicom Stock ($1,500,000 divided by $15.00).
(v) All Contingent Options will be exercisable immediately upon
issuance and for three (3) years thereafter.
(vi) As used in this subsection (c), gross profit shall be
computed in accordance with generally accepted accounting principles,
consistently applied.
2.02. STOCK OPTION AGREEMENTS. On the Closing Date, the Corporation
will enter into stock option agreements with certain employees to be designated
by Osicom and the Principal Shareholder (the "Named Employees"). Such agreements
will grant options to acquire Osicom Stock to be granted to the Named Employees,
which will have exercise prices equal to the Market Value (as defined in Section
1.11) of the Osicom Stock. Such options will apply to that number of shares
equal to (i) $1,000,000 divided by (ii) the per share Market Value of Osicom
Stock on the Closing Date, and be allocated among the Named Employees as agreed
by the Corporation and Osicom. The options will vest on the second anniversary
of the Closing Date for any Named Employee still employed by the Corporation at
that time, and will remain exercisable for a period of three (3) years
thereafter, subject to the Named Employee remaining employed by the Corporation.
The Options will be canceled upon
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termination of employment with the Corporation, unless termination is the result
of the employee's death or disability or the result of termination by the
Corporation without cause, to be defined in the Employment Agreements.
2.03. CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS. At the Closing,
each of Peterson and members of Peterson's immediate family will enter into
agreements with the Corporation and Osicom not to use or disclose any
confidential information relating to the Corporation or its business and not to
compete with the Corporation in its business in the United States, in both cases
for a period of two (2) years following the Closing Date. Such agreements will
be in a form to be agreed upon by Osicom and such individuals.
2.04. BOARD OF DIRECTORS. On the Closing Date, each of the directors
of the Corporation will resign from the Corpora tion's Board of Directors.
2.05. OUTSTANDING OPTIONS. On or prior to the Closing Date, the
Corporation will purchase certain outstanding options to acquire the
Corporation's Common Stock for amounts to be agreed upon by Osicom and the
holders of such options. The Merger Consideration will be reduced by the amount
paid to such option holders. All remaining options to acquire the Corporation's
Common Stock shall either be exercised for cash or in a cashless exercise
transaction prior to the Closing or shall terminate and be of no further force
or effect upon consummation of the transactions contemplated hereby.
2.06. PETERSON NOTE. The Corporation is currently indebted to Peterson
in the amount of $484,000 pursuant to one or more notes in such aggregate
principal amount (the "Peterson Note"). Osicom shall pay or cause the
Corporation to pay $120,000 to Peterson at Closing with respect to the Peterson
Note, and the Peterson Note will be amended to be payable in full on the first
anniversary of the Closing Date with interest thereon from the Closing Date at
the rate of 5.5% per annum.
2.07. SHAREHOLDER LOANS. The Corporation is indebted to certain of the
Shareholders (other than the Peterson Note) in the aggregate principal amount of
$193,764.53 as of September 1, 1996, plus accrued interest (the "Shareholder
Loans") as reflected on the Corporation's books and records. The Shareholder
Loans will remain liabilities of the Corporation. The Shareholder Loan payable
to William Kahn ($76,420.00 as of September 1, 1996) will be paid pursuant to
its existing terms, and the other Shareholder Loans will be repaid on the first
anniversary of the Closing Date.
2.08. FREMONT BANK LOAN. The Corporation is indebted to Fremont Bank
in the principal amount of $1,344,326.21, as of July 31, 1996 and to the
Massachusetts Business Development Corporation ("MBDC"), in the principal amount
of $120,143.35 (as of September 1, 1996). Osicom will pay or assume the loans to
Fremont Bank and MBDC at the Closing.
2.09. RESTRICTIVE LEGEND. Osicom will have an appropriate stop order
placed on its records indicating that the certificates representing Osicom's
Stock shall bear the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE SOLD, TRANSFERRED OR
ENCUMBERED ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A NO ACTION LETTER FROM THE
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STAFF OF THE SECURITIES AND EXCHANGE COMMISSION OR EVIDENCE SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS UNNECESSARY."
2.10. RECEIPT OF INFORMATION. Each Shareholder, by delivering the
Shares owned by him, her or it at or after the Closing pursuant to Section 8.02
of this Agreement, shall be deemed to acknowledge receipt of all information
required to be delivered to him with respect to the transactions contemplated by
this Agreement pursuant to Regulation D promulgated by the Commission under the
Act.
2.11. REGISTRATION RIGHTS. In the event Osicom elects to deliver the
Merger Consideration in the form of Osicom Common Stock, Osicom agrees to use
its best efforts to register such stock under the Act, but only as to those
Shareholders who execute the escrow agreement referred to in Section 9.04 of
this Agreement, within one hundred fifty (150) days following the Closing Date.
At the Closing, Osicom will enter into an agreement with the Shareholders whose
Osicom Common Stock is entitled to the benefit of this Section 2.11 (the
"Selling Shareholders") in which Osicom will convenant that (a) it will
indemnify the Selling Shareholders against liabilities under the Act, (b) it
will comply with all applicable securities and other laws in the preparation and
filing of such registration statement, and (c) upon a registration statement
with respect to such stock becoming effective, it will keep such registration
statement effective for a period of three (3) years and will deliver copies of
the prospectus included in such registration statement to the Selling
Shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION AND PRINCIPAL SHAREHOLDER
The Corporation and the Principal Shareholder make the following
representations and warranties to Osicom as of September 3, 1996.
Notwithstanding the Principal Shareholder's making the following representations
and warranties, his liability under the indemnification provisions of Article IX
of this Agreement are limited to his pro rata portion of the Merger
Consideration as set forth in such Article IX. Osicom, in execut ing, delivering
and consummating this Agreement, has relied and will rely upon the correctness
and completeness of each of such representations and warranties:
3.01. VALID CORPORATE EXISTENCE; QUALIFICATION. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Massachusetts. The Corporation has the corporate power to carry
on its business as now conducted and to own its assets. The Corporation is duly
qualified to conduct business and is in good standing as a foreign corporation
in those jurisdictions set forth in a letter delivered to Osicom simultaneously
with the execution and delivery of this Agreement, signed by each Principal
Shareholder (the "Disclosure Letter"), which are the only jurisdictions in which
the Corporation is required to qualify in order to own its assets or properties
or to carry on its business as now conducted (except for such jurisdictions
where the failure to so qualify would not have a material adverse effect on the
Company), and there has not been any claim by any other jurisdiction to the
effect that the Corporation is required to qualify or otherwise be authorized to
do business as a foreign corporation therein (except for such jurisdictions
where the failure to so qualify would not have a material adverse effect on the
Company). The copies of the Corporation's Certificate of Incorporation
(certified by the Secretary of
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State of Massachusetts) and By-Laws (certified by the Corporation's secretary),
as amended to date, which have been delivered to Osicom, are true and complete
copies of those documents as now in effect. The minute books of the Corporation
contain accurate records of all material meetings of its Board of Directors,
Executive Committee of the Board, if any, and shareholders since its
incorporation, and accurately reflect all transactions authorized therein in all
material respects.
3.02. CAPITALIZATION. The authorized capital stock of the Corporation
consists of 5,000,000 shares of Class A Common Stock, par value $.10 per share,
of which 1,366,460 shares are issued and outstanding and 800,000 shares of Class
B Common Stock, par value $.10 per share, of which 760,000 shares are issued and
outstanding (which outstanding amounts may change prior to Closing, which
changes will be disclosed in the certificate referred to in Section 6.05 of this
Agreement), and 141,527 shares of Series A Convertible Preferred Stock all of
which are issued and outstanding and which will convert into an aggregate of
566,908 shares of Class A Common Stock immediately prior to the Closing. All of
such issued shares of Common Stock are duly authorized and validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the Disclosure
Letter, there are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which the Corporation or any of the Shareholders is
a party or by which any of such persons is bound, calling for the issuance,
transfer, sale or other disposition of any class of securities of the
Corporation. Except as set forth in the Disclosure Letter, there are no
outstanding securities of the Corporation convertible or exchange able, actually
or contingently, into shares of Common Stock or any other securities of the
Corporation.
3.03. SUBSIDIARIES. There are no corporations, partnerships or other
business entities controlled by the Corpora tion. As used herein, "controlled
by" means (i) the ownership of not less than 50% of the voting securities or
other interests of a corporation, partnership or other business entity, or (ii)
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation, partnership or other
business entity, whether through the ownership of voting shares, by contract or
otherwise. The Corporation has not made any investments in, nor does it own, any
of the capital stock of, or any other proprietary interest in, any other
corporation, partnership or other business entity.
3.04. CONSENTS. All requisite consents of governmental and other
regulatory agencies, foreign or domestic, and of other parties required to be
received by or on the part of the Corporation or any of the Principal
Shareholders to enable them to enter into and carry out this Agreement in all
material respects are set forth in the Disclosure Letter.
3.05. BINDING NATURE OF AGREEMENT; TITLE TO SHARES. This Agreement
constitutes the Corporation's and each Principal Shareholder's valid and binding
obligation and is enforceable in accordance with its terms.
3.06. FINANCIAL STATEMENTS. The books of account of the Corporation
fairly reflect its income, expenses, assets and liabilities in all material
respects. The audited financial statements of the Corporation for the years
ended December 31, 1994 and 1995 and the unaudited financial statements for the
six (6) months ended June 30, 1996 fairly present the financial position of the
Corporation as of the said dates and the results of
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its operations for such fiscal years and period and, except as set forth
therein, were prepared in conformity with generally accepted accounting
principles consistently applied throughout the periods covered thereby. The
financial statements as of and for the period ending June 30, 1996 will be
audited by the Corporation's independent certified public accountants prior to
the Closing Date.
3.07. LIABILITIES. Except as set forth in the Disclosure Letter, as at
June 30, 1996, (the "Balance Sheet Date"), the Corporation had no material
debts, liabilities or obligations, contingent or absolute, that is required to
be reflected on a balance sheet in accordance with generally accepted accounting
principles other than those debts, liabilities and obligations reflected or
reserved against the Corporation's Balance Sheet at the Balance Sheet Date (the
"Balance Sheet") or arising after the Balance Sheet Date in the ordinary course
of the Corporation's business.
3.08. ACTION SINCE BALANCE SHEET DATE. Except as otherwise expressly
provided or set forth in, or required by, this Agreement or as set forth the
Disclosure Letter, since the Balance Sheet Date, the Corporation has not: (i)
issued or sold, or agreed to issue or sell any of its capital stock, options,
warrants, rights or calls to purchase such stock, any securities convertible or
exchangeable into such capital stock or other corporate securities, or effected
any subdivision or other recapitalization affecting its capital stock; (ii)
incurred any material obligation or liability, absolute or contingent, except
those arising in the ordinary and usual course of its business; (iii) discharged
or satisfied any lien or encumbrance, except in the ordinary and usual course of
business, or paid or satisfied any liability, absolute or contingent, other than
liabilities as of the Balance Sheet Date and current liabilities incurred since
the Balance Sheet Date in the ordinary and usual course of business; (iv) made
any wage or salary increases or granted any bonuses other than wage and salary
increases and bonuses granted in accordance with its normal salary increase and
bonus policies; (v) mortgaged, pledged or subjected to any lien or other
encumbrance any of its properties or assets, or permitted any of its property or
assets to be subjected to any lien or other encumbrance, except in the ordinary
and usual course of business; (vi) sold, assigned or transferred any of its
properties or assets, except in the ordinary and usual course of business; (vii)
entered into any transaction except in the ordinary course of its business;
(viii) waived any rights of substantial value, or canceled, modified or waived
any indebtedness for borrowed money held by it, except in the ordinary and usual
course of business; (ix) declared, paid or set aside any dividends or other
distributions or payments on its capital stock, or redeemed or repurchased, or
agreed to redeem or repurchase, any shares of its capital stock; (x) made any
loans or advances to any person, or assumed, guaranteed, endorsed or otherwise
became responsible for the obligations of any person; or (xi) incurred any
indebtedness for borrowed money (except for endorsement, for collection or
deposit of negotiable instruments received in the ordinary and usual course of
business).
3.09. ADVERSE DEVELOPMENTS. Except as otherwise expressly provided or
set forth in, or required by, this Agreement, since the Balance Sheet Date,
there have been no changes in the properties, operations or financial condition
of the Corporation, and no event has occurred other than in the ordinary and
usual course of business, in each case, which could be reasonably expected to
have a materially adverse effect upon the business of the Corporation.
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<PAGE> 17
3.10. TAXES. The Corporation has delivered to Osicom true and complete
copies of the Federal income tax returns on Form 1120 of the Corporation as
filed with the Internal Revenue Service for each of the fiscal years ended
December 31, 1994 and 1995, respectively. Except as set forth in the Disclosure
Letter each of such returns was prepared in conformity with information
contained in the books and records of the Corporation and contains no untrue
statement of a material fact or omits to state any fact required to make any
such return correct and complete in all material respects. All taxes, including,
without limitation, income, property, sales, use, franchise, capital stock,
excise, added value, employees' income withholding, social security and
unemployment taxes imposed by the United States, any state or any foreign
country, or by any other taxing authority, which have or may have become due or
payable by the Corporation and all interest and penalties thereon, whether
disputed or not, have been paid in full or adequately provided for by reserves
shown in its books of account; all deposits required by law to be made by the
Corporation with respect to estimated income, franchise and employees'
withholding taxes have been duly made; and all tax returns, including estimated
tax returns, required to be filed have been duly filed. No extension of time for
the assessment of deficiencies for any year is in effect. No deficiency is
proposed or, to the knowledge of each of the Principal Shareholders, after
reasonable inquiry, threatened against the Corporation. The Disclosure Letter
sets forth a list of those states in which income, franchise or sales and use
tax returns were filed by the Corporation for the fiscal years ended December
31, 1994 and December 31, 1995, respectively.
3.11. OWNERSHIP OF ASSETS. Except as set forth in the Disclosure
Letter, the Corporation owns outright, and has good and marketable title to all
of their respective assets, properties and business (including all assets
reflected in the Balance Sheet, except as the same may have been disposed of in
the ordinary course of business since the Balance Sheet Date), free and clear of
all liens, mortgages, pledges, conditional sales agreements, restrictions on
transfer or other encumbrances or charges (collectively, the "Encumbrances")
except for Encumbrances arising by operation of law rather than by grant of the
Corporation (for example, tax liens and mechanics liens) in the ordinary course
of the Corporation's business for liabilities reflected in the Balance Sheet and
not more than $25,000 in the aggregate. The Disclosure Letter sets forth a true
and complete list and brief description of all patents, copyrights, trademarks,
trade names and other similar intangible assets which are either owned by the
Corporation or in which it has an interest. Except as set forth in the
Disclosure Letter, no other person, firm or corporation has any proprietary or
other interest in any such intangible assets. Such assets so owned or leased
are, in the reasonable business judgment of each of the Shareholders, sufficient
to permit the Corporation to conduct its business as now conducted in all
material respects. Except as set forth in the Disclosure Letter, the Corporation
is not a party to or bound by any license or agreement requiring the payment to
any person, firm or corporation of any royalty. None of the Principal
Shareholders, after reasonable inquiry, knows, or has reasonable grounds to know
of any violation by others of the trademark, trade name or patent rights of the
Corporation. Except as set forth in the Disclosure Letter, the Corporation is
not infringing upon any patent, copyright, trade name or trademark or otherwise
is violating the rights of any third party with respect thereto, and no
proceedings have been instituted or, to the knowledge of each of the Principal
Shareholders, after reasonable inquiry, are threatened, and no claim has been
received by the Corporation or any Shareholder alleging any such violation.
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<PAGE> 18
3.12. INSURANCE. The Disclosure Letter sets forth a list and brief
description of all policies of fire, liability and other forms of insurance held
by the Corporation and the Subsidiaries as of the date hereof. Except as set
forth in the Disclosure Letter, such policies are valid, outstanding and
enforceable policies, as to which premiums have been paid currently. Except as
set forth in the Disclosure Letter, none of the Principal Shareholders, after
reasonable inquiry, knows of any state of facts, or of the occurrence of any
event which might reasonably form the basis for any claim exceeding $25,000
against the Corporation not fully covered by insurance for liability on account
of any product liability theory (but not including normal returns and other
express or implied warranty claims in the ordinary course of business).
3.13. LITIGATION, COMPLIANCE WITH LAW. Except as set forth in the
Disclosure Letter, there are no actions, suits, proceedings or governmental
investigations relating to the Corporation or to any of its properties, assets
or businesses pending or, to the knowledge of each of the Principal
Shareholders, after reasonable inquiry, threatened, or any order, injunction,
award or decree outstanding against the Corporation or against or relating to
any of its properties, assets or businesses. Except as set forth in the
Disclosure Letter, to the knowledge of the Principal Shareholders, the
Corporation is not in violation of any law, regulation, ordinance, order,
injunction, decree, award or other requirement of any governmental body, court
or arbitrator relating to its properties, assets or business which violation
could have a material adverse effect on the Corporation.
3.14. REAL PROPERTY. The Disclosure Letter sets forth a brief
description of all real property which is owned by, or leased to the
Corporation, including all material structures located hereon. The Corporation
owns outright the fee simple title in and to the real properties shown in the
Disclosure Letter as being owned by it, free and clear of all claims, liens,
mortgages, charges, or encumbrances of any nature whatsoever, except as
otherwise described in the Disclosure Letter. The real property leases described
in the Disclosure Letter that relate to the leased properties described therein
are now in full force and effect, and all material amounts due and payable
thereunder have been paid. Except as set forth in the Disclosure Letter, none of
such leases could reasonably be expected to result in material liability for
restoration of premises. All uses of such owned or leased property by the
Corporation conform, in all material respects, to all applicable building and
zoning ordinances, laws, and regulations and, in the case of leased property, to
all terms of the leases relating thereto.
3.15. AGREEMENTS AND OBLIGATIONS; PERFORMANCE. Except as listed in the
Disclosure Letter (the "Listed Agreements"), the Corporation is not a party to,
or bound by any (other than purchase orders entered into in the ordinary course
of business, a list of which as of a recent date has been provided to Osicom):
(i) written or oral agreement or other contractual commitment, understanding or
obligation which involves aggregate payments or receipts in excess of $25,000;
(ii) contract, arrangement, commitment or understanding which involves aggregate
payments or receipts in excess of $25,000 that cannot be canceled on thirty
(30) days or less notice without penalty or premium or any continuing obligation
or liability; (iii) contractual obligation or contractual liability of any kind
to the Shareholders; (iv) contract, arrangement, commitment or understanding
with its customers or any officer, employee, shareholder, director,
representative or agent thereof for the repurchase of products, sharing of fees,
the rebating of charges to such customers, bribes, kickbacks from such customers
or other
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similar arrangements; (v) contract for the purchase or sale of any materials,
products or supplies which contain, or which commits or will commit it for a
fixed term; (vi) contract of employment with any officer or employee not
terminable at will without penalty or premium or any continuing obligation of
liability; (vii) deferred compensation, bonus or incentive plan or agreement not
cancelable at will without penalty or premium or any continuing obligation or
liability; (viii) management or consulting agreement not terminable at will
without penalty or premium or any continuing obligation or liability; (ix) lease
for real or personal property (including borrowings thereon), license or royalty
agreement; (x) union or other collective bargaining agreement; (xi) agreement,
commitment or understanding relating to the indebtedness for borrowed money;
(xii) contract involving aggregate payments or receipts of $25,000 or more
which, by its terms, requires the consent of any party thereto to the
consummation of the transactions contemplated hereby; (xiii) contract containing
covenants limiting the freedom of the Corporation to engage or compete in any
line or business or with any person in any geographical area; (xiv) contract or
opinion relating to the acquisition or sale of any business; (xv) voting trust
agreement or similar shareholders' agreement; (xvi) other contract, agreement,
commitment or understanding which materially affects any of its properties,
assets or business, whether directly or indirectly, or which was entered into
other than in the ordinary course of business. Except as set forth in the
Disclosure Letter, the Corporation has not during the last 36 months entered
into any of the types of contracts, arrangements, commitments or understandings
with any of its suppliers or customers referred to in item (iv) of this Section
3.15. A true and correct copy of each of the written listed Agreements, has been
and delivered to Osicom. The Corporation has in all material respects performed
all obligations required to be performed by it to date under all of the Listed
Agreements, is not in default in any material respect under any of the Listed
Agreements and has received no notice of any default or alleged default
thereunder which has not heretofore been cured or which notice has not
heretofore been withdrawn. None of the Principal Shareholders, after reasonable
inquiry, knows of any material default under any of the Listed Agreements by any
other party thereto or by any other person, firm or corporation bound there
under.
3.16. CONDITION OF ASSETS. Except for normal break downs and servicing
requirements, substantially all machinery and equipment regularly used by the
Corporation in the conduct of its business is in reasonably good operating
condition and repair, ordinary wear and tear excepted. The inventories of the
Corpora tion are accurately reflected on the Corporation's financial statements
in all material respects in accordance with generally accepted accounting
principles.
3.17. ACCOUNTS RECEIVABLE. Except as set forth in the Disclosure
Letter, all of the accounts receivable reflected in the books of account of each
of the Corporation in accordance with generally accepted accounting principles
and arose in the ordinary course of its business, from the sale of services or
goods.
3.18. PERMITS AND LICENSES. The Disclosure Letter sets forth all
permits, licenses, orders, franchises and approvals from all federal, state,
local and foreign governmental regulatory bodies held by the Corporation. The
Corporation has all permits, licenses, orders and approvals of all federal,
state, local and foreign governmental or regulatory bodies required of it to
carry on its business as presently conducted in all material respects; all such
other permits, licenses, orders, franchises and approvals are in full force and
effect, and to the knowledge of each of the Principal Shareholders,
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after reasonable inquiry, no suspension or cancellation or any of such other
permits, licenses, etc. is threatened; and the Corporation are each in
compliance in all material respects with all requirements, standards and
procedures of the federal, state, local and foreign governmental bodies which
have issued such permits, licenses, orders, franchises and approvals. The
Disclosure Letter also sets forth a brief description of all vans, automobiles,
trucks or other vehicles owned or leased by each of the Corporation and the
state of title thereof.
3.19. BANKING ARRANGEMENTS. The Disclosure Letter sets forth the name
of each bank in or with which the Corporation has an account, credit line or
safety deposit box, and a brief description of each such account, credit line or
safety deposit box including the names of all persons currently authorized to
draw thereon or having access thereto, and the names of all persons, if any, now
holding powers of attorney from the Corporation and a summary statement of the
terms thereof.
3.20. INTEREST IN ASSETS. Except as set forth in the Disclosure
Letter, no Shareholder nor any member of his family nor any affiliate of a
Shareholder or the Corporation, owns any property or rights, tangible or
intangible, including without limitation technology and intellectual property
rights, used in or related, directly or indirectly, to the business of the
Corporation.
3.21. SALARY INFORMATION. By separate letter, the Principal
Shareholders have provided to Osicom a list of the names and current salary
rates of and bonus commitments to all present officers of the Corporation, and
the names and current annual salary rates of all other persons employed by the
Corpora tion whose annual salaries exceed $10,000.00.
3.22. EMPLOYEE BENEFIT PLANS. The Disclosure Letter includes a list of
all of the "pension" and "welfare" benefit plans (within the respective meanings
of sections 3(2) and 3(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) maintained by the Corporation or to which it makes
employer contributions with respect to its employees, a complete and correct
copy of each of which has been delivered to Osicom. There are no vested and
unfunded benefits under any such plans.
3.22.1. All of the pension and profit sharing plans maintained by the
Corporation (herein collectively referred to as the "Pension Plans") are listed
in the Disclosure Letter. Each of the Pension Plans has received a favorable
determination letter as to its qualification under section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") (including, but not
limited to, amendments made by ERISA), nothing has occurred with respect to any
such Pension Plan which would cause the loss of such qualification, and the
Corporation has delivered to Osicom true and correct copies of all such
determination letters.
3.22.2. All of the pension plans not maintained by the Corporation but
to which it makes employer contributions with respect to its employees (herein
collectively referred to as the "Other Pension Plans"), are listed in the
Disclosure Letter. Each of the Other Pension Plans is a multi-employer plan
(within the meaning of section 3(37) of ERISA), but the Corporation is not a
substantial employer (within the meaning of section 4001(a)(2) of ERISA) with
respect to any of the Other Pension Plans.
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3.22.3. All contributions required by law or required under the
Pension Plans with respect to plan years ended prior to the Closing Date shall
have been made on or prior to the Closing Date by the Corporation. With regard
to the current plan year of each of the Other Pension Plans, all contributions
required to meet the employer contribution obligations of the Corporation, under
Section 412 of the Code, Part 3 of Title I(B) of ERISA, such other Pension Plan
or any applicable collective bargaining agreement, with respect to that portion
of the current plan year ending on the Closing Date, shall have been made on or
prior to the Closing Date by the Corporation.
3.22.4. No Pension Plan or related trust has terminated, and no
"reportable event" (within the meaning of section 4043(b) of ERISA) has occurred
with respect to either any of the Pension Plans of the participation of the
Corporation in any of the Other Pension Plans, other than the transactions
contemplated by this Agreement, since the effective date of ERISA.
3.33.5. None of the Pension Plans which are subject to provisions of
Section 412 of the Code or Part 3 of Title I(B) of ERISA or their related trusts
has incurred any "accumulated funding deficiency" (within the meanings of
Section 412(a) of the Code and section 302 of ERISA) since the effective date of
ERISA.
3.22.6. The Corporation has not incurred any liability (except for
required premium payments, which premium payments have been made for plan years
ended prior to the Closing Date, to the Pension Benefit Guaranty Corporation)
with respect to the Pension Plans.
3.22.7. All of the welfare plans maintained by the Corporation or to
which it makes employer contributions with respect to its employees (herein
collectively referred to as the "Welfare Plans") are listed in the Disclosure
Letter. There are no actions, suits or claims, pending or threatened, and the
Principal Shareholders, after reasonable inquiry, have no knowledge of any facts
which could give rise to any actions, suits or claims against any of the Pension
Plans, or (with respect to the participation of the Corporation therein) against
any of the Other Pension or Welfare Plans, or against the Corporation with
respect to any thereof.
3.22.8. The Corporation has satisfied in all material respects all
reporting and disclosure requirements applicable to it under ERISA, and the
Department of Labor and Internal Revenue Service regulations promulgated
thereunder, with respect to all of the Pension and Welfare Plans, and the
Corporation will deliver to Osicom prior to the Closing Date true and complete
copies of the most recently filed and disclosed Forms EBS-1, Forms 5500 and
5500-C (with exhibits), 1976 "ERISA Notices" and summary plan description for
the Pension and Welfare Plans.
3.22.9. None of the Pension and Welfare Plans or any of their related
trusts, nor the Corporation or any trustee, administrator or other "party in
interest" or "disqualified person" (within the meaning of section 3(14) of ERISA
or section 4975(e)(2) of the Code, respectively) with respect to the Plans, has
engaged in any "prohibited transaction" (within the meaning of section 408 of
ERISA or section 4975(c)(23) or (d) of the Code), with respect to the
participation of the Corporation therein, which could subject any of the Pension
or Welfare Plans or related trusts, or any trustee, administrator or other
fiduciary of the Plan, or the Corporation or Osicom, or any other party dealing
with the Plans, to the penalties or excise tax imposed
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on prohibited transactions by section 502(i) or ERISA or section 4975 of the
Code.
3.22.10. The Trustees of each of the Pension Plans have completed
their required annual accountings for the plan years ended December 31, 1995,
such accountings accurately reflect the financial positions of the Pension Plans
as at such date, and true and complete copies of the Trustees' reports or
schedules of such accountings have been delivered to Osicom.
3.23. NO BREACH. Neither the execution and delivery of this Agreement
nor compliance by the Corporation and each of the Principal Shareholders with
any of the provisions hereof nor the consummation of the transactions
contemplated hereby, will:
(a) violate or conflict with any provision of theCertificate of
Incorporation or By-Laws of the Corporation;
(b) violate or, alone or with notice of the passage of time,
result in the material breach or termination of, or otherwise give any
contracting party the right to terminate, or declare a material default under,
the terms of any agreement or other document or undertaking, oral or written to
which the Corporation is a party or by which any of them or any of their
respective properties or assets may be bound (except for such violations,
conflicts, breaches or defaults as to which required waivers or consents by
other parties have been, or will, prior to the Closing, be, obtained or which
will not have a material adverse effect on the Corporation);
(c) result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Corporation pursuant
to the terms of any such agreement or instrument;
(d) violate any judgment, order, injunction, decree or award
against, or binding upon, any of the Corporation or any Shareholder or upon
their respective properties or assets; or
(e) violate any law or regulation of any jurisdic tion relating
to the Corporation or any of its securities, assets or properties.
3.24. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly with Osicom by
the Corporation and the Principal Shareholders without the intervention of any
broker, finder, investment banker or other third party except Tucker Anthony
Incorporated ("Tucker"). Neither the Corporation nor any of the Principal
Shareholders has engaged, consented to, or authorized any broker, finder,
investment banker or other third party other than Tucker to act on his or its
behalf, directly or indirectly, as a broker or finder in connection with the
transac tion contemplated by this Agreement.
3.25. LABOR DISCUSSIONS. The Corporation is not, and during the past
three years has not been, involved in any labor discussions with any unit or
group seeking to become the bargaining unit for any of its employees.
3.26. CHANGE OF NAME. The Corporation has not conducted business under
any name other than Digital Products, Inc. during the past three (3) years.
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3.27. BACKLOG. The Disclosure Letter sets forth as of July 31, 1996,
the name, aggregate contract price, revenues received to date and balance
remaining upon all orders then in progress or under contract.
3.28. ENVIRONMENTAL. As used in this Agreement, the term "Hazardous
Materials" shall mean any waste material which is regulated by any state or
local governmental authority in the states in which the Corporation conducts
business, or the United States Government, including, but not limited to, any
material or substance which is (i) defined as "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste" or "restricted
hazardous waste" under any provision of Massachusetts law, (ii) petroleum, (iii)
asbestos, (iv) designated as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C. 1321) or listed pursuant
to Section 307 of the Clean Water Act (33 U.S.C. 1317), (v) defined as a
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6901), or (vi) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C.
9601). Except as set forth in the Disclosure Letter, the current operations of
the Corporation and its current and, to the knowledge of the Corporation, its
past use comply and then complied in all material respects with all applicable
laws and governmental regulations including all applicable federal, state and
local laws, ordinances, and regulations pertained to air and water quality,
Hazardous Materials, waste, disposal or other environmental matters, including
the Clean Water Act, the Clean Air Act, the Federal Water Pollution Control Act,
the Solid Waste Disposal Act, the Resource Conservation Recovery Act, the Compre
hensive Environmental Response, Compensation and Liability Act, and the
statutes, rules, regulations and ordinances or the state, city and country in
which the Corporation's property is located.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OSICOM
Osicom makes the following representations and warranties to the
Corporation and each of the Shareholders and the Corporation in executing this
Agreement, has relied and will rely on the correctness and completeness of such
representations and warranties:
4.01. ORGANIZATION. Osicom is a corporation, duly organized, validly
existing and in good standing under the laws of the State of New Jersey, and has
the corporate power to carry on its business as now conducted and to own its
assets.
4.02. NO BREACH. The execution and delivery of this Agreement by
Osicom and the consummation of the transactions contemplated hereby will not:
(a) violate any provision of the Certificate of Incorporation or By-Laws of
Osicom, (b) violate any judgment, order, injunction, decree or award against, or
binding upon, Osicom or upon its properties or assets, or (c) violate or, alone
or with notice of the passage of time, result in the material breach or
termination of, or otherwise give any contracting party the right to terminate,
or declare a material default under, the terms of any agreement or other
document or undertaking to which Osicom is a party or by which any of its
properties or assets may be bound (except for such violations, conflicts,
breaches or defaults as to which required waivers or consents by other parties
have been, or will, prior to the Closing, be, obtained or which will not have a
material adverse effect on Osicom).
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4.03. AUTHORITY FOR AND BINDING NATURE OF AGREEMENT. All corporate and
other proceedings required to be taken by or on behalf of Osicom including,
without limitation, all actions required to be taken by its Board of Directors,
to authorize Osicom to enter into and carry out this Agreement will have been
duly and properly taken at or prior to the Closing Date. This Agreement has been
duly executed and delivered by Osicom and is valid and binding upon Osicom in
accordance with its terms.
4.04. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly with the
Corporation and the Principal Shareholders by Osicom without the intervention of
any broker, finder, investment banker or other third party other than Tucker.
Osicom has not engaged, consented to, or authorized any broker, finder,
investment banker or third party to act on its behalf, directly or indirectly,
as a broker or finder in connection with the transactions contemplated by this
Agreement other than Tucker, and Osicom agrees to indemnify each of the
Shareholders against, and to hold each of them harmless from, any claim for
brokerage or similar commission or other compensation which may be made against
any Shareholder by any third party in connection with the transactions
contemplated hereby, which claim is based upon any action by Osicom.
4.05. CONSENTS. All requisite consents of governmental and other
regulatory agencies, foreign or domestic, and of other parties required to be
received by or on the part of Osicom to enable it to enter into and carry out
this Agreement in all material respects have been, or prior to the Closing will
have been, obtained.
4.06. LITIGATION. There are no actions, suits, proceedings or
governmental investigations relating to Osicom or to any of its properties,
assets or businesses pending or, to the knowledge of Osicom's officers, after
reasonable inquiry, threatened, or any other, injunction, award or decree
outstanding against or against or relating to any of its properties, assets or
businesses.
4.07. PUBLIC REPORTS. Osicom has filed all required forms, reports and
documents with the Commission since March 31, 1995 (collectively, the "SEC
Reports"), all of which were prepared in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the Securities Act of
1933, each as amended, and the rules and regulations promulgated thereunder (the
"Securities Laws"). The SEC Reports were filed with the Commission in a timely
manner and constitute all forms, reports and documents required to be filed by
Osicom since March 31, 1995, under the Securities Laws. As of their respective
dates, the SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Osicom included in or incorporated by reference
into the SEC Reports (including the related notes and schedules) fairly presents
the consolidated financial position of Osicom on a consolidated basis as of its
date and each of the consolidated statements of income, retained earnings and
cash flows of Osicom included in or incorporated by reference into the SEC
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings or cash flows, as the case may be, of Osicom on
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a consolidated basis for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act. Osicom has provided copies of the SEC Reports to each of the
Shareholders.
4.08. ACQUISITION. Acquisition is currently a corporation in formation
by Osicom. At the Closing, Osicom will cause Acquisition to make representations
substantially identical to those in Sections 4.01, 4.02, 4.03, 4.05 and 4.06
with respect to itself.
4.09. OSICOM STOCK. The Osicom Stock to be issued under this Agreement
has been duly authorized and reserved for issuance and, when issued in
accordance with this Agreement, will be validly issued and outstanding, fully
paid and non-assessable.
ARTICLE V
PRE-CLOSING COVENANTS
The Corporation and the Principal Shareholders hereby covenant that,
from and after the date hereof, and until the Closing or earlier termination of
this Agreement:
5.01. ACCESS. The Corporation shall afford to the officers, attorneys,
accountants and other authorized representa tives of Osicom free and full
access, during regular business hours and upon reasonable notice, to the books,
records, personnel and properties of the Corporation (including, without
limitation, the work papers prepared by the Corporation's auditors) so that
Osicom may have full opportunity to make such review, examination and
investigation as it may desire of their respective businesses and affairs. The
Corporation will cause its employees, accountants and attorneys to cooperate
fully with said review, examination and investigation and to make full
disclosure to Osicom of all material facts affecting their respective financial
conditions and business operations.
5.02. CONDUCT OF BUSINESS. The Corporation shall conduct its business
only in the ordinary and usual course and make no material change in any of
their policies without the prior written consent of Osicom.
5.03. INSURANCE. The Corporation shall maintain in force the insurance
policies listed in the Disclosure Letter, except to the extent that they may be
replaced with equivalent policies at the same or lower rates approved by Osicom.
5.04. LIABILITIES. The Corporation shall not incur any obligation or
liability, absolute or contingent, except for those incurred in the ordinary and
usual course of its business; nor shall it pay any obligation or liability other
than: (i) the foregoing obligations and liabilities, (ii) debts, liabilities,
and obligations set forth in the Balance Sheet; (iii) debts, liabilities and
obligations arising after the Balance Sheet Date in the ordinary course of their
respective businesses; and (iv) debts, liabilities and obligations under the
contracts, agreements, past practices, arrangements, relationships, documents
and instruments listed, described or contained in this Agreement or in the
Schedules annexed to this Agreement.
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5.05. PRESERVATION OF BUSINESS. The Corporation will use reasonable
efforts to preserve the Corporation's business organization intact, to keep
available the services of their present officers, employees and consultants
(except as Osicom may otherwise approve), and to preserve its goodwill.
5.06. FINANCIAL STATEMENTS. The Corporation will cause the June 30,
1996 financial statements of the Corporation to be audited and will provide
Osicom with such unaudited financial statements of the Corporation up to and
including the Closing Date as Osicom may reasonably request.
5.07. NO BREACH. The Corporation will (i) use reasonable efforts to
assure that all of its representations and warranties contained herein are true
in all material respects of the Closing Date as if repeated at and occur with
respect to any of its covenants, representations or warranties contained herein
that has not been cured by the Closing Date; (ii) not voluntarily take any
action or do anything which will cause a material breach of or default
respecting such covenants, representations or warranties; and (iii) promptly
notify Osicom of any event or fact which represents or is like to cause such a
breach or default.
5.08. NO NEGOTIATIONS. So long as Osicom is proceeding in good faith
with consummation of the transactions contemplated hereby on the terms contained
herein, neither the Corporation nor any of its officers or directors nor any of
the Principal Shareholders shall enter into or conduct negotiations, or enter
into any agreement or understanding, for the sale or possible sale of any
securities of the Corporation of the business or the assets of the Corporation,
with anyone other than Osicom unless the Closing shall not have occurred by
September 30, 1996.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS TO OSICOM TO CLOSE
The obligations of Osicom to enter into and complete each Closing is
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions, any one or more of which may be waived by Osicom (except
when the fulfillment of such condition is a requirement of law).
6.01. REPRESENTATIONS AND WARRANTIES. All representa tions and
warranties of the Corporation contained in this Agreement and in any written
statement (including financial statements), exhibit, certificate, schedule or
other document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be true and correct in all material respects as at the
Closing Date, as if made at the Closing and as of the Closing Date. All such
statements, exhibits, schedules and other documents shall be in form and
substance acceptable to Osicom.
6.02. COVENANTS. The Corporation shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it prior to or at the Closing.
6.03. NO ACTION. No action, suit, proceeding or investigation shall
have been instituted, and be continuing before a court or before or by a
governmental body or agency, and be unresolved, to restrain or to prevent or to
obtain damages in respect of, the carrying out of the transactions
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contemplated hereby, or which might materially and adversely affect the right of
Osicom to consummate the Merger or to operate or control the assets, properties
and business of the Corporation after the Closing Date, or which might have a
materially adverse effect thereon.
6.04. CONSENTS, LICENSES AND PERMITS. The Corporation, Acquisition,
the Principal Shareholders and Osicom shall have each obtained all consents,
licenses and permits of third parties necessary for the performance by each of
them of all of their respective obligations under this Agreement, and such other
consents, if any, to prevent (i) agreements of the Corporation from terminating,
the termination of which, in the aggregate, would have a material adverse effect
on the business, financial condition or assets of the Corporation, or (ii) any
material indebtedness of any of the Corporation (other than the indebtedness of
the Corporation to MBDC, which shall be paid at the Closing) from becoming due
or being subject to becoming due with the passage of time or on notice as a
result of the perfor mance of this Agreement, any other provisions of this
Agreement to the contrary notwithstanding.
6.05. CERTIFICATE. Osicom shall have received a certificate dated on
each Closing Date, signed by the President and the Treasurer of the Corporation
as to the satisfaction of the conditions contained in Sections 6.01 and 6.02.
6.06. OPINION. Osicom shall have received the written opinion of
Goodwin, Procter & Hoar, LLP, dated the Closing Date, in form and substance
satisfactory to Osicom and its counsel.
6.07. EMPLOYMENT AND CONFIDENTIALITY AGREEMENTS. The Corporation shall
have entered into the Employment Agreement with Peterson and the confidentiality
and non-competition agreement with Peterson and his immediate family.
6.08. NO MATERIAL ADVERSE CHANGE. There shall have been no materially
adverse change at the Closing Date in the business, assets and properties or
financial status of the Corporation since the Balance Sheet Date.
6.09. AUDIT. The audited financial statements as of June 30, 1996 of
the Corporation shall have been delivered to, and be acceptable to, Osicom.
6.10. SHAREHOLDER APPROVAL. Shareholders owning at least 95% of the
outstanding Shares shall have voted to approve the Merger.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE CORPORATION AND THE SHAREHOLDER TO CLOSE
The obligation of the Principal Shareholder and the Corporation to
enter into and complete the Closing is subject to the fulfillment, prior to or
on the Closing Date, of each of the following conditions, any one or more of
which may be waived by the Corporation and Principal Shareholder (except when
the fulfillment of such condition is a requirement of law).
7.01. REPRESENTATIONS AND WARRANTIES. All representa tions and
warranties of Osicom contained in this Agreement and in any written statement,
schedule or other document delivered pursuant hereto or in connection with the
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transactions contemplated hereby shall be true and correct in all material
respects as at the Closing Date, as if made at the Closing and as of the Closing
Date.
7.02. COVENANTS. Osicom shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing.
7.03. NO ACTIONS. No action, suit, proceedings or investigation shall
have been instituted, and be continuing, before a court or before or by a
governmental body or agency, or have been threatened, and be unresolved, by any
governmental body or agency to restrain or prevent, or obtain damages in respect
of, the carrying out of the transactions contemplated hereby.
7.04. CERTIFICATES. The Principal Shareholders shall have received a
certificate of Osicom, dated the Closing Date, signed by the Chairman, President
or any Vice President of Osicom as to the satisfaction of the conditions
contained in Sections 7.01 and 7.02.
7.05. OPINION. The Shareholders shall have received the opinion of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, dated the Closing Date, in form
and substance satisfactory to the Principal Shareholders and their counsel.
7.06. DEBT PAYMENTS. The $120,000 payment with respect to the Peterson
Note shall have been made and Osicom shall have paid or assumed the Fremont Bank
indebtedness and repaid (and Peterson shall have been released from his guaranty
thereof) the MBDC indebtedness.
7.07. SHAREHOLDER APPROVAL. Shareholders owning at least 95% of the
outstanding Shares shall have voted to approve the Merger.
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ARTICLE VIII
CLOSING
8.01. LOCATION. The Closing provided for herein shall take place at
the office of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, 99 Wood Avenue
South, Woodbridge, New Jersey at 10:00 o'clock a.m. on September 10, 1996 or at
such other time and place as may be mutually agreed to by the parties hereto.
Such date is referred to in this Agreement as the "Closing Date."
8.02. ITEMS TO BE DELIVERED BY THE CORPORATION. At the Closing, the
Corporation will deliver or cause to be delivered to Osicom:
(a) The Articles of Merger;
(b) The Employment Agreement with Peterson;
(c) The Confidentiality and Non-Competition Agreement;
(d) The certificates required by Section 6.05;
(e) The opinion of Goodwin, Procter & Hoar, LLP as required by
Section 6.06;
(f) The resignations of the Corporation's directors;
(g) The escrow agreement pursuant to Section 9.04 of this
Agreement; and
(h) Such other certified resolutions, documents and certificates
as are required to be delivered by the Corporation and the Principal
Shareholders pursuant to the provisions of this Agreement.
8.03. ITEMS TO BE DELIVERED BY OSICOM AND ACQUISITION. At the Closing,
Osicom or Acquisition will deliver or cause to be delivered to the Principal
Shareholders:
(a) The Articles of Merger;
(b) The Purchase Price in accordance with Section 1.02 hereof;
(c) The stock options for Peterson and the Named Employees;
(c) The certificate required by Sections 7.04; and
(e) The $120,000 payment to Peterson and the Peterson Note;
(f) The opinion of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel;
(g) Evidence of Osicom's payment or assumption of the
Corporation's indebtedness to Fremont Bank and the Massachu setts Business
Development Corporation;
(h) The representations of Acquisition pursuant to Section 4.08;
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(i) The escrow agreement referred to in Section 9.04; and
(j) Such other certified resolutions, documents and certificates
as are required to be delivered by Osicom pursuant to the provisions of this
Agreement.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.01. SURVIVAL. The parties hereto agree that their respective
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing for a term of eighteen (18) months with the
exception of those regarding taxes set forth in Section 3.10 which shall survive
until the expiration of the respective periods within which such taxes may be
assessed.
9.02. INDEMNIFICATION. The Shareholders, pro rata to their respective
shares of the Merger Consideration, agree to save, defend and indemnify Osicom
against and hold it harmless from any and all liabilities, of every kind, nature
and descrip tion, fixed or contingent (including, without limitation, counsel
fees and expenses in connection with any action, claim or proceeding relating to
such liabilities) (collectively, "Damages") (a) resulting or arising out of,
caused by or otherwise relating to any failure by the Corporation to perform or
otherwise fulfill or comply with any undertaking, agreement or obligation of the
Corporation under this Agreement or by reason of any breach of any breach of any
representation or warranty of the Corporation under this Agreement, and (b) any
severance or similar payments due to the employees of the Corporation that are
parties to Executive Salary Continuation Agreements with the Corporation as of
the Closing Date whose employment is terminated during the First Year, provided
that Peterson, acting in good faith, approves such termination. Osicom agrees to
save, defend and indemnify the Shareholders against and hold it harmless from
any and all losses, damages, deficiencies or liabilities caused by, resulting or
arising from or otherwise relating to any failure by Osicom to perform or
otherwise fulfill or comply with any undertaking, agreement or obligation of
Osicom hereunder or by reason of any breach of any representation or warranty of
Osicom contained herein. The party providing indemnification under either the
two previous sentences is referred to as the "Indemnifying Party" and the party
receiving the benefit of indemnification is referred to as the "Indemnified
Party." At the Closing, Shareholders owning at least 95% of the Shares will
execute a signature page with respect to the escrow agreement.
9.03. DEFENSE OF CLAIMS. The Indemnified Party agrees to notify the
Indemnifying Party with reasonable promptness of any claim asserted against it
or them in respect of which the Indemnifying Party, may be liable under this
Agreement, which notification shall be accompanied by a written statement
setting forth the basis of such claim and the manner of calculation thereof. The
Indemnifying Party shall have the right to defend any such claim at their own
expense and with counsel of their choice; provided, however, that such counsel
shall have been approved by Osicom prior to engagement, which approval shall not
be unreasonably withheld, or delayed; and provided further, that Indemnified
Party may participate in such defense, if it so chooses, with its own counsel
and at its own expense.
9.04. LIMITATION ON LIABILITY; ESCROW. The Indemnifying Party will
have no liability under Section 9.02(a) if the Damages are less than
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Fifty Thousand Dollars ($50,000); however once such $50,000 amount is equaled
or exceeded, the Indemnifying Party shall be liable for $25,000 of the first
$50,000 of such Damages, and for all damages in excess of $50,000. However, such
$50,000 limit will not apply to the indemnification for severance or similar
payments under Section 9.02(b). The liability of each Shareholder under Section
9.01 of this Agreement shall be limited (a) to the pro rata portion of the
amount of the Merger Consideration received by such Shareholder plus the amount
realized, if any, by such Shareholder upon the exercise of any stock options
granted to such Shareholder in connection with the Closing hereunder (collective
ly, the "Total Consideration") during the First Year, and (b) to twenty-five
(25%) of the amount of the Total Consideration during the first six (6) months
of the Second Year; provided, however, that (a) the Shareholders shall be
entitled to pay indemnification claims with shares of Osicom Stock, valued for
this purpose at the Market Value on the Closing Date, or in cash; and (b) with
respect to shares of Osicom Stock received by a Shareholder that are sold, a
Shareholder's liability hereunder shall be limited to the net proceeds before
taxes received from the sale thereof. Furthermore, none of the Shareholders
other than the Principal Shareholder shall have any liability to Osicom with
respect to the covenants, representations and warranties made in this Agreement
except for such liability as is specifically provided for in this Article IX. At
the Closing, an amount equal to $1,476,000 will be placed in an escrow account,
which will be interest bearing if the Merger Consideration is paid in cash,
pursuant to a separate escrow agreement, to be used to fund any claims against
the Shareholders under Section 9.02 and, to the extent not so used, to be
released to the Shareholders eighteen (18) months following the Closing Date,
except that $276,000 less any amounts paid pursuant to Section 9.02(b) will be
released on the first anniversary of the Closing Date. Osicom agrees to satisfy
any indemnification claim first from the amount held in escrow. If such escrow
is funded with Osicom Stock, such stock shall be valued at Market Value on the
Closing Date if and when used to satisfy a claim for indemnification.
ARTICLE X
TERMINATION AND WAIVER
10.01. TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing Date:
(a) By mutual consent of Osicom, the Corporation and the
Principal Shareholder;
(b) By Osicom if any of the conditions set forth in Article VI
hereof shall not have been fulfilled on or prior to September 30, 1996, or shall
become incapable of fulfillment at any time, and shall not have been waived;
(c) By the Corporation and Principal Shareholder if any of the
conditions set forth in Article VII hereof shall not have been fulfilled on or
prior to September 30, 1996, or shall have become incapable of fulfillment at
any time, and shall not have been waived;
(d) By Osicom if any material legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit, invalidate or
otherwise affect the consummation of the transactions
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contemplated by this Agreement which makes it inadvisable, in the judgment of
Osicom, to consummate same.
In the event that this Agreement is terminated as described above,
this Agreement shall be void and of no force and effect, without any liability
or obligation on the part of any of the parties hereto except for any liability
which may arise pursuant to Section 11.02.
10.02. WAIVER. Any condition to the performance of the Corporation,
the Principal Shareholder or Osicom which legally may be waived on or prior to
the Closing Date may be waived at any time by the party entitled to the benefit
thereof by action taken or authorized by an instrument in writing executed by
the relevant party or parties. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such party as a later time to enforce the same. No waiver by any party of the
breach of any term, covenant, representation or warranty contained in this
Agreement as a condition to such party's obligations hereunder shall release or
affect any liability resulting from such breach, and no waiver of any nature,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such condition or of
any breach of any other term, covenant, representation or warranty of this
Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. EXPENSES. Each of the parties hereto shall bear its own
expenses in connection herewith. However, Osicom will pay up to $520,000 of the
expenses of the Corporation relating to the transactions contemplated hereby,
including fees and expenses of up to $325,000 to Tucker and legal and audit fees
of the Corporation relating to this Agreement. All amounts so paid will reduce
the Merger Consideration by such amount.
11.02. CONFIDENTIAL INFORMATION. Each party agrees that such party and
its representatives will hold in strict confidence all information and documents
received from the other parties and, if the transactions herein contemplated
shall not be consummated, each party will continue to hold such information and
documents in strict confidence and will return to such other party all such
documents (including the documents annexed to this Agreement) then in such
receiving party's possession without retaining copies thereof; provided,
however, that each party's obligations under this Section 11.02 to maintain such
confidentiality shall not apply to any information or documents that are in the
public domain at the time furnished by the others or that become in the public
domain thereafter through any means other than as a result of any act of the
receiving party or of its agents, officers, directors or shareholders which
constitutes a breach of this Agreement, or that are required by applicable law
to be disclosed.
11.03. MODIFICATION, TERMINATION OR WAIVER. This Agreement may be
amended, modified, superseded or terminated, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, but only by a
written instrument executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect the right of such party at a later time to enforce the same.
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<PAGE> 33
11.04. PUBLICITY. The parties agree that no publicity release or other
public announcement concerning the transactions contemplated by this Agreement
shall be issued by either party without the advance approval of both the form
and substance of the same by the other party, which approval, in the case of any
publicity, release or other public announcement required by applicable law,
shall not be unreasonably withheld or delayed.
11.05. NOTICES. Any notice or other communication required or which
may be given hereunder shall be in writing and either be delivered personally or
by reputable overnight delivery service, or be mailed, certified or registered
mail, postage prepaid, as follows:
If to the Principal Shareholder, or prior to Closing, the
Corporation, to:
the addresses set forth on Schedule A
With a copy to:
Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Richard E. Floor, P.C.
and if to Osicom, to:
2800 28th Street, Suite 100
Santa Monica, California 90405
With a copy to:
Greenbaum, Rowe, Smith, Ravin & Davis
99 Wood Avenue South
P.O. Box 5600
Woodbridge, New Jersey 07095
Attention: W. Raymond Felton
The parties may change the persons and addresses to which the notices
or other communications are to be sent to it by giving written notice of any
such change in the manner provided herein for giving notice.
11.06. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, that no assignment of any rights or delegation of any
obligations provided for herein may be made by any party without the express
consent of the other parties, and except that Osicom may assign this Agreement
to an affiliate of Osicom.
11.07. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof.
11.08. DISCLOSURE LETTER. The Disclosure letter, the Exhibits and the
documents and instruments referred to herein or required to be
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<PAGE> 34
delivered simultaneously herewith or at the Closing are expressly made a part of
this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such Schedules, documents or
instruments shall be deemed to refer to and include all the Disclosure Letter,
the Exhibits and such other items.
11.09. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
agreements made and to be performed entirely within that state, excluding the
choice of law rules thereof.
11.10. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but which together shall
constitute one and the same instrument.
11.11. SECTION HEADINGS. The section headings contained in this
Agreement are inserted for conveniences of reference only
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<PAGE> 35
and shall not affect the meaning or interpretation of this Agreement.
WITNESS the execution of this Agreement as of the date
first above written.
OSICOM TECHNOLOGIES, INC.
By: /s/ Par Chadha
______________________________
Name: Par Chadha
____________________________
Title: Director
___________________________
DIGITAL PRODUCTS, INC.
By: /s/ Cornelius ("Pete") Peterson VIII
_____________________________________
Name: Cornelius ("Pete") Peterson VIII
___________________________________
Title: President and Chief Executive Officer
______________________________________
PRINCIPAL SHAREHOLDER:
/s/ Cornelius ("Pete") Peterson VIII
_____________________________________
CORNELIUS PETERSON
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<PAGE> 36
AMENDMENT TO MERGER AGREEMENT
Amendment dated September 12, 1996 to a Merger Agreement (the "Merger
Agreement") dated as of July 1, 1996 by and among Osicom Technologies, Inc.
("Osicom"), DPI Acquisition Corp. ("Acquisition"), Digital Products, Inc. (the
"Corporation") and Cornelius Peterson VIII ("Peterson").
WHEREAS, the parties to the Merger Agreement wish to amend the Merger
Agreement to (i) modify Section 2.05 of the Merger Agreement regarding the
Corporation's outstanding stock options, (ii) establish the Market Value and
Merger Consideration as of the Closing Date, as those terms are defined in the
Merger Agreement, (iii) agree upon the expenses to be deducted from the Merger
Consideration, (iv) provide the representations of Acquisition required by
Section 4.08 of the Merger Agreement, and (v) address certain other matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Amendment, the parties agree as follows:
1. DEFINITIONS. Any capitalized term used in this Amendment and not
otherwise defined shall have the meaning given in the Merger Agreement.
2. CLOSING DATE. The Closing Date is established as September 12,
1996.
3. STOCK OPTIONS. Section 2.05 of the Merger Agreement is hereby
amended by the addition of the following after the second
<PAGE> 37
sentence and before the third sentence of Section 2.05: "In addition, certain
options to acquire Common Stock, and certain bonuses payable to certain
employees of the Corporation in Shares of Common Stock, will be assumed by
Osicom issuing to such employees options to purchase shares of Osicom Common
Stock at an exercise price of $.01 per share. The form of such option
agreements will be in the form attached hereto. The Merger Consideration will
be further reduced by the product of (a) the Market Value Per Share of Osicom
Common Stock as of the date of this Amendment, times (b) the aggregate number
of shares of Osicom Common Stock purchasable pursuant to such options. The
names, addresses and number of shares subject to such options are set forth on
Schedule A to this Amendment".
4. NAMED EMPLOYEES. The Named Employees, to whom options to purchase
94,118 shares of Osicom Common Stock will be issued in the aggregate, are set
forth on Schedule B to this Amendment. Osicom and Peterson will agree as to the
allocation of options among the Named Employees as of the Closing Date.
5. MARKET VALUE. The Market Value of Osicom Common Stock as of the
Closing Date is $10.625 per share.
6. EXPENSES. The expenses of the Shareholders and the Corporation
which Osicom agreed to pay under Section 11.01 of the Merger Agreement as a
reduction in the Merger Consideration are $534,994 in the aggregate. Exhibit C
to this Agreement sets forth the parties to which such expenses are payable,
the amounts
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thereof, and wire transfer instructions with respect thereto. The cost to
repurchase options of DPI referred to in Section 2.05 is $62,177.
7. MERGER CONSIDERATION. The Merger Consideration (after deducting
the amounts referred to in Sections 3 and 6 of this Amendment) is $3,860,477,
and the Per Share Merger Consideration (as defined in Section 1.08(c), as
amended hereby) is $1.2731.
8. REPRESENTATIONS BY ACQUISITION. Acquisition makes the following
representations and warranties to the Corporation and each of the Shareholders,
and the Corporation and Peterson, in executing this Amendment, has relied and
will rely on the correctness and completeness of such representations and
warranties:
(a) Acquisition is a corporation, duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts, and has the corporate power to carry on its business as now
conducted and to own its assets.
(b) The execution and delivery of the Merger Agreement and this
Amendment by Acquisition and the consummation of the transactions contemplated
hereby will not: (i) violate any provision of the Articles of Incorporation or
By-Laws of Acquisition, (ii) violate any judgment, order injunction, decree or
award against, or binding upon, Acquisition or upon its properties or assets,
or (iii) violate or, alone or with notice of the passage of time, result in the
material breach or termination of, or
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otherwise give any contracting party the right to terminate, or declare a
material default under, the terms of any agreement or other document or
undertaking to which Acquisition is a party or by which any of its properties
or assets may be bound.
(c) All corporate and other proceedings required to be taken by
or on behalf of Acquisition including, without limitation, all actions required
to be taken by its Board of Directors and shareholders, to authorize
Acquisition to enter into and carry out the Merger Agreement will have been
duly and properly taken. The Merger Agreement has been duly executed and
delivered by Acquisition and is valid and binding upon Acquisition in
accordance with its terms.
(d) All requisite consents of governmental and other regulatory
agencies, foreign or domestic, and of other parties required to be received by
or on the part of Acquisition to enable it to enter into and carry out the
Merger Agreement in all material respects have been obtained.
(e) There are no actions, suits, proceedings or governmental
investigations relating to Acquisition or to any of its properties, assets or
businesses pending or, to the knowledge of Acquisition's officers, after
reasonable inquiry, threatened, or any other, injunction, aware or decree
outstanding against or against or relating to any of its properties, assets or
businesses.
9. EFFECT OF AMENDMENT. Except as modified by this Amendment, the
Agreement remains in full force and effect.
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<PAGE> 40
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
OSICOM TECHNOLOGIES, INC.
By: /s/ Xin Cheng
---------------------------------
XIN CHENG, President
OSICOM TECHNOLOGIES, INC.
By: /s/ Christopher Sue
----------------------------------
CHRISTOPHER SUE, Treasurer
DPI ACQUISITION CORP.
By: /s/ Sharon G. Chadha
----------------------------------
SHARON G. CHADHA, President
DPI ACQUISITION CORP.
By: /s/ Christopher Sue
----------------------------------
CHRISTOPHER SUE, Treasurer
DIGITAL PRODUCTS, INC.
By: /s/ Cornelius (Neil) Peterson, IX
----------------------------------
CORNELIUS (NEIL) PETERSON, IX,
Vice President
DIGITAL PRODUCTS, INC.
By: /s/ George H. Simmons
----------------------------------
GEORGE H. SIMMONS, Treasurer
/s/ Cornelius Peterson, VIII
----------------------------------
CORNELIUS PETERSON, VIII
5
