STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May 12, 2000,
by and between Sync Research Inc., a Delaware corporation (the "COMPANY"), and
Entrada Holdings LLC, a New York limited liability company (the "PURCHASER").
WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Company, on the terms and subject to the conditions
set forth in this Agreement, shares of the Company's Preferred Stock, par value
$.001 per share (the "SHARES") with the rights, preferences and privileges as
shown in the Certificate of Designation of Rights, Preferences and Privileges of
Series A Preferred Stock attached as EXHIBIT A hereto (the "CERTIFICATE OF
DESIGNATION"); and
WHEREAS, the Company has agreed to effect the registration of the
shares of Common Stock issuable on conversion of the Shares (the "REGISTRABLE
SHARES") under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
pursuant to a Registration Rights Agreement of even date herewith by and between
the Company and the Purchaser attached hereto as EXHIBIT B (the "REGISTRATION
RIGHTS AGREEMENT"); and
WHEREAS, the sale of the Shares by the Company to the Purchaser will be
effected in reliance upon an exemption from securities registration in
accordance with Section 4(2) of the Securities Act and the rules and regulations
promulgated by the Securities and Exchange Commission (the "COMMISSION") under
the Securities Act.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the Company and the Purchaser hereby
agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
1.1 AGREEMENT TO PURCHASE AND SELL. Upon the terms and subject to the
satisfaction of the conditions set forth herein, the Company agrees to sell at
the Closing (as defined in paragraph 1.2 below), and the Purchaser agrees to
purchase, Seven Hundred Thousand (700,000) Shares at a purchase price per Share
equal to the average closing sale price of the Company's Common Stock as
reported by the Nasdaq National Market for the ten trading days ending on April
28, 2000 (which the parties agree is $3.19375 per Share) or Two Million Two
Hundred Thirty Five Thousand Six Hundred Twenty Five Dollars ($2,235,625) in the
aggregate (the "PURCHASE PRICE").
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth herein, the closing of the purchase and sale of the Shares hereunder
(the "CLOSING") will be held simultaneously with the execution and delivery of
this Agreement and will be deemed completed when this Agreement and the other
Transaction Documents (as defined below) have been executed and delivered by the
Company and Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price has been made by the
Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of
duly executed certificates representing the Shares purchased by the Purchaser
at the Closing. The date on which the Closing occurs is referred to herein as
the "CLOSING DATE".
1.3 CERTAIN DEFINITIONS. When used herein, (A) "BUSINESS DAY" shall
mean any day on which the New York Stock Exchange and commercial banks in the
city of Los Angeles are open for business, (B) an "AFFILIATE" of a party shall
mean any person or entity controlling, controlled by or under common control
with that party and (C) "CONTROL" shall mean, with respect to an entity, the
ability to direct the business, operations or management of such entity, whether
through an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby makes the following representations and warranties
to the Company and agrees with the Company that, as of the date of this
Agreement and as of the Closing Date:
2.1 AUTHORIZATION; ENFORCEABILITY. The Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Shares and to execute and deliver this Agreement. This Agreement
constitutes the Purchaser's valid and legally binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 ACCREDITED INVESTOR; INVESTMENT INTENT. The Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Shares solely for its own account for investment purposes as a
principal and not with a present view to the public resale or distribution of
all or any part thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act or sales registered under the
Securities Act; provided, however that in making such representation, the
Purchaser does not agree to hold the Shares for any minimum or specific term and
reserves the right to sell, transfer or otherwise dispose of the Shares at any
time in accordance with the provisions of this Agreement and with Federal and
state securities laws applicable to such sale, transfer or disposition.
2.3 INFORMATION. The Company has provided the Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to the Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Shares hereunder.
2.4 LIMITATIONS ON DISPOSITION. The Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Shares and the
Registrable Shares have not been and are not being registered under the
Securities Act and may not be transferred or resold without registration under
the Securities Act or unless pursuant to an exemption therefrom.
-2-
2.5 LEGEND. The Purchaser understands that the certificates
representing the Shares and any Registrable Shares will bear at issuance a
restrictive legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the securities laws of any state, and
may not be offered or sold unless a registration statement
under the Securities Act and applicable state securities laws
shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and
applicable state securities laws is available in connection
with such offer or sale. The securities are subject to the
provisions of a Stock Purchase Agreement dated May 12, 2000
between the Company and Entrada Holdings LLC with respect to
voting."
Notwithstanding the foregoing, it is agreed that, as long as (A) the
resale or transfer (including without limitation a pledge) of any of the
Registrable Shares is registered pursuant to an effective registration
statement, (B) the Registrable Shares can be sold to the public pursuant to
Rule 144 under the Securities Act ("Rule 144") and a registered broker dealer
provides to the Company a customary broker's Rule 144 letter, or (C) the
Registrable Shares are eligible for sale to the public, without limitation as
to the amount of or manner in which the Registrable Shares may be sold, under
Rule 144(k) or any successor provision, the Registrable Shares shall be
issued without any legend or other restrictive language and, with respect to
Registrable Shares upon which such legend is stamped, the Company shall issue
new certificates without the first sentence of such legend to the holder upon
request. In addition to the foregoing, in the event that the Shares are
transferred to any transferee other than a member of the Purchaser, the
Company will issue new certificates without the last sentence of such legend.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to the Purchaser and agrees with the Purchaser that, as of the date of this
Agreement and as of the Closing Date, except as disclosed in a document (the
"DISCLOSURE SCHEDULE") delivered to Purchaser prior to the Closing:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite corporate power and authority to carry on its business as now
conducted. The term "subsidiaries" shall mean (i) Tylink Corporation and (ii)
Sync Research Asia Pacific Limited, the only entities in which the Company has a
voting equity interest of 50% or greater.
3.2 AUTHORIZATION; CONSENTS. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) all other
agreements, documents, certificates or other instruments executed and delivered
by or on behalf of the Company at any Closing (the instruments
-3-
described in (i), (ii) and (iii) being collectively referred to herein
as the "TRANSACTION DOCUMENTS") and to issue and sell the Shares to the
Purchaser in accordance with the terms hereof. All corporate action on the
part of the Company by its officers, directors and stockholders necessary for
the authorization of the Certificate of Designation, and necessary for the
authorization, execution and delivery of, and the performance by the Company
of its obligations under the Transaction Documents has been taken, and no
further consent or authorization of the Company, its Board of Directors, its
stockholders, any governmental agency or organization (other than as may be
required under the Securities Act and applicable state securities laws in
respect of the Registration Rights Agreement), or any other person or entity
is required (pursuant to any rule of the National Association of Securities
Dealers, Inc. (the "NASD") or otherwise).
3.3 ENFORCEMENT. The Transaction Documents and the Osicom Merger
Agreement constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity.
3.4 DISCLOSURE DOCUMENTS; AGREEMENTS; FINANCIAL STATEMENTS; OTHER
INFORMATION. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 and (ii) all Current
Reports on Form 8-K required to be filed by the Company with the Commission
since December 31, 1999 (collectively, the "DISCLOSURE DOCUMENTS"). The Company
is not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date of the filing thereof with the Commission,
conformed, and as of the Closing Date will conform, in all material respects to
the requirements of the Exchange Act, and the rules and regulations thereunder
and such Disclosure Document did not, as of the date of such filing, and will
not, as of the Closing Date, contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that any information set forth in any
Disclosure Document that is a forward-looking statement as defined in Rule
175(c) promulgated by the Commission under the Securities Act shall not be
deemed to contain an untrue statement of material fact as long as such
forward-looking statement was made with a reasonable basis and in good faith.
3.5 CAPITALIZATION. The capitalization of the Company as of March 31,
2000, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of Common Stock is set forth in the Disclosure
Schedule. All of such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and non-assessable. No shares of
the capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
created by or through the Company. Except as disclosed in the
-4-
Disclosure Schedule, or as contemplated herein, there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of
its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries.
3.6 VALID ISSUANCE. The Shares and the Registrable Shares are duly
authorized and, when issued, sold and delivered in accordance with the terms of
this Agreement and the Certificate of Designation, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company, (ii) based in part upon the representations of the Purchaser in this
Agreement, will be issued, sold and delivered in compliance with all applicable
Federal and state securities laws and (iii) will be entitled to all of the
rights, preferences and privileges of the holders of the Preferred Stock (and,
upon the conversion of the Shares into Registrable Shares, the Common Stock) of
the Company.
3.7 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement and the other Transaction Documents, and
consummation of the transactions contemplated hereby and thereby will not result
in (a) a violation of any provision of the Certificate of Incorporation or
by-laws of the Company or its subsidiaries, (b) a violation of any Law (as
defined below) or any judgment, decree, order, regulation or rule of any court
or other Governmental Entity (as defined in Section 5.1.8 hereof) applicable to
the Company or its subsidiaries, or (c) any violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any provision, instrument or contract to which the Company or any
of its subsidiaries is a party or by which any of their assets are subject, or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company or of any of its subsidiaries or the triggering of any
preemptive or anti-dilution rights or rights of first refusal or first offer on
the part of holders of the Company's securities. "LAW" shall mean any statute,
ordinance, code, rule, regulation or order enacted, adopted, promulgated,
applied or followed by any Governmental Entity.
3.8 BREACH OF CONTRACT; LITIGATION.
3.8.1 The Company is not aware of any breaches in any
agreement to which it is a party, which breach could have a material adverse
effect on the Company and its subsidiaries taken as a whole.
3.8.2 Except as described in the Disclosure Schedule, there is
no material claim or litigation pending, or, to the Company's knowledge,
threatened or contemplated, against the Company or any of its subsidiaries, or
against any officer, director or employee of the Company or any such subsidiary
in connection with such person's employment therewith. Neither the Company nor
any of its subsidiaries is a party to or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality which
-5-
could reasonably be expected to have a material adverse effect on the
consolidated business or financial condition of the Company and its
subsidiaries taken as a whole.
3.9 TRADING ON NASDAQ. The Common Stock is designated for quotation on
the NASDAQ National Market and trading in the Common Stock on such market has
not been suspended. The Company is in full compliance with the continued
designation criteria of the NASDAQ National Market and does not reasonably
anticipate that the Common Stock will be delisted from the NASDAQ National
Market, whether by reason of the transactions contemplated by this Agreement or
the other Transaction Documents and is not aware of any inquiry by or received
any notice from the NASD regarding any failure or alleged failure by the Company
to comply with such requirements which has not been favorably resolved prior to
the date hereof.
3.10 SOLICITATION. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Shares or (ii) has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under any circumstances that would require
registration of the Shares under the Securities Act.
3.11 REGISTRATION RIGHTS. No holders of the Company's Common Stock nor
of any securities convertible or exchangeable into Common Stock nor of other
rights to acquire Common Stock (except stock options under our stock plans) have
any rights to require such Common Stock to be registered under the Securities
Act, whether pursuant to a demand, piggyback or other type of registration
right.
4. COVENANTS OF THE COMPANY.
4.1 CORPORATE EXISTENCE. The Company shall, so long as any Purchaser
or any member of the Purchaser beneficially owns any of the Shares, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes.
4.2 PROVISION OF INFORMATION. The Company shall provide the Purchaser,
as long as the Purchaser holds any Shares, with copies of its annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy
statements and other materials sent to stockholders, in each such case promptly
after the filing thereof with the Commission.
4.3 REPORTING STATUS. As long as the Purchaser or any member of the
Purchaser beneficially owns any Shares and until the date on which any of the
foregoing may be sold to the public pursuant to Rule 144(k) (or any successor
rule or regulation), (i) the Company shall timely file with the Commission all
reports required to be so filed pursuant to the Exchange Act and (ii) the
Company shall not terminate its status as an issuer required by the Exchange Act
to file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination. The Company agrees to file with the
Commission a Form 8-K describing the terms of the transactions contemplated by
this Agreement and the Registration Rights
-6-
Agreement, with this Agreement attached to such Form 8-K as an exhibit
thereto, on or before the tenth (10th) day following the Closing Date in the
form required by the Exchange Act.
4.4 QUOTATION ON NASDAQ. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include the Shares for
quotation on the NASDAQ National Market and (ii) use its best efforts to
maintain the listing of the Shares on such market.
4.5 BLUE SKY FILINGS. In connection with the sale of the Shares to the
Purchaser, the Company will comply with, and make all filings required under,
any state securities law to which the sale of the Shares hereunder is subject.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING. The Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase the Shares, are conditioned upon the fulfillment (or waiver by the
Purchaser) of each of the following events as of the Closing Date:
5.1.1 the representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects as of
such date as if made on such date;
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and conditions set forth in
this Agreement that are required to be complied with or performed by the Company
on or before the Closing;
5.1.3 the Company shall have delivered to the Purchaser a
certificate, signed by an officer of the Company, certifying that the conditions
specified in paragraphs 5.1.1, 5.1.2 and 5.1.7 have been fulfilled as of the
Closing;
5.1.4 the Company shall have delivered to the Purchaser a
certificate, signed by the Secretary of the Company, attaching a copy of the
resolutions of the Board of Directors authorizing the transactions contemplated
hereby, and certifying that such resolutions have not been modified or rescinded
since the date of their adoption by the Company's Board of Directors;
5.1.5 the Company shall have delivered a binding instruction
letter and opinion letter to the transfer agent, instructing the transfer agent
to issue a stock certificate representing the Shares being purchased;
5.1.6 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.7 except for the effects of the Company's lower than
expected first quarter revenues, as disclosed in a press release on April 11,
2000, there shall have been no material
-7-
adverse changes in the Company's consolidated business or financial condition
since the date of the Company's most recent audited financial statements
contained in the Disclosure Documents;
5.1.8 there shall be no action or proceeding by or before any
federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "GOVERNMENTAL ENTITY") or
NASD, pending or threatened, challenging or seeking to restrain or prohibit the
purchase and sale of any of the Shares or any of the other transactions
contemplated by this Agreement or seeking to obtain damages from either party
hereto in connection with the purchase and sale of the Shares or any of the
other transactions contemplated by this Agreement.
5.1.9 there shall be no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary injunction, permanent
injunction or other order, enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
purchase and sale of the Shares in effect.
5.1.10 the Purchaser shall have received an opinion of the
Company's counsel in form and substance as set forth on EXHIBIT B.
5.1.11 the Certificate of Designation shall be filed with the
office of the Secretary of State of Delaware and shall be in effect as of the
Closing.
5.1.12 the Company shall have delivered to counsel for the
Purchaser a certificate from the Delaware Secretary of State of recent date
stating that the Company is in good standing and has paid all of its franchise
taxes and a bringdown letter stating that the Company continued to be in good
standing with the State of Delaware as of the date of the Closing.
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The
Company's obligations at the Closing are conditioned upon the fulfillment (or
waiver by the Company) of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of the Purchaser
shall be true and correct in all material respects as of such date as if made on
such date; and
5.2.2 the Purchaser shall have complied with or performed all
of the agreements, obligations and conditions set forth in this Agreement that
are required to be complied with or performed by the Purchaser on or before the
Closing.
5.2.3 there shall be no action or proceeding by or before any
Governmental Entity or NASD, pending or threatened, challenging or seeking to
restrain or prohibit the purchase and sale of any of the Shares or any of the
other transactions contemplated by this Agreement or seeking to obtain damages
from either party hereto in connection with the purchase and sale of the Shares
or any of the other transactions contemplated by this Agreement.
5.2.4 there shall be no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary injunction, permanent
injunction or other order, enacted,
-8-
entered, promulgated, enforced or issued by any Governmental Entity or other
legal restraint or prohibition preventing the purchase and sale of the Shares
in effect.
5.2.5 pursuant to the Agreement and Plan of Merger by and
among the Company, Merger Co, a Delaware corporation and wholly-owned subsidiary
of the Company, Osicom Technologies, Inc., a Delaware corporation ("OSICOM") and
Osicom Technologies, Inc., a New Jersey corporation ("OSICOM NEW JERSEY"), dated
April 10, 2000 (the "OSICOM MERGER AGREEMENT") pursuant to which Merger Co will
merge with and into Osicom and Osicom will become a wholly-owned subsidiary of
the Company (the "OSICOM MERGER"), the Company shall have obtained the consent
of Osicom to this Agreement and the transactions contemplated hereby, including
the issuance of the Shares.
6. ADDITIONAL COVENANTS
6.1 COMMISSION. At the Closing, the Company shall pay to Xxxxxxxx
Xxxxxxxx Capital Corp., by certified check or wire transfer, a cash fee equal to
five percent (5%) of the aggregate Purchase Price, which the parties agree
equals One Hundred Eleven Thousand Seven Hundred Eighty-One Dollars and Twenty
Five Cents ($111,781.25), in connection with the transactions contemplated by
this Agreement.
6.2 BOARD OF DIRECTORS SEAT. If the Osicom Merger has not closed on or
before August 31, 2000, the Purchaser shall have the right, for so long as the
Purchaser together with its members holds at least 350,000 shares of Series A
Preferred Stock, to designate one member of the Board of Directors of the
Company (and to fill the vacancy of such member in the event of the resignation,
death or removal of such member). The nominee shall be required to complete a
questionnaire in the same form as has been executed by all other directors of
the Company. Subject to the approval of the existing directors upon review of
such questionnaire and any other relevant information, such approval not to be
unreasonably withheld, the existing directors will elect such nominee to the
Board of Directors, and the Company shall include such designee in its proposed
slate of directors for each subsequent annual meeting of stockholders, and such
individual shall receive the same compensation as each other non-employee
director of the Company.
6.3 CONDUCT OF BUSINESS BY THE COMPANY. The Company covenants that,
except (i) as otherwise expressly contemplated by this Agreement or the Osicom
Merger Agreement or (ii) as consented to by the Purchaser, from and after the
date of this Agreement and until the earlier of: (A) the closing of the Osicom
Merger, or (B) August 31, 2000, the Company shall, and shall cause each of its
subsidiaries to:
(a) use all reasonable efforts consistent with good business judgment
to (i) preserve intact the present business organization of the Company and
its subsidiaries and pay payables and collect receivables in a manner
consistent with past practice and otherwise operate the Company and its
subsidiaries in the ordinary and regular course of business consistent with
past practice; (ii) maintain the Company's and its subsidiaries' books and
records in accordance with past practices; (iii) keep available the services
of the Company's and its subsidiaries' officers and
-9-
employees; and (iv) maintain satisfactory relationships with licensors,
suppliers, creditors, distributors, customers and others having material
business relationships with the Company and its subsidiaries;
(b) notify the Purchaser of any change in the normal course of business
or operations of the Company or its subsidiaries and of any governmental
complaints, investigations or hearings of which the Company or its subsidiaries
is notified (or communications received by the Company or its subsidiaries
indicating that the same may be contemplated), or the institution or settlement
of litigation or any claim, in each case involving the Company or its
subsidiaries, and to keep Purchaser informed of such events;
(c) comply in all material respects with all applicable laws,
including, without limitation, applicable environmental laws.
(d) not
(i) cause to be issued or sold any shares of capital stock or
debt or equity securities of the Corporation or its subsidiaries, except for (A)
shares issued on the exercise of stock options or (B) the shares to be issued in
connection with the Osicom Merger;
(ii) issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect to the issuance
of any shares of capital stock or debt or equity securities of the Corporation
or its subsidiaries, except in the ordinary course of business pursuant to the
Company's stock plans;
(iii) directly or indirectly cause to be purchased, redeemed
or otherwise acquired or disposed of any shares of capital stock of the
Corporation or its subsidiaries;
(iv) declare, set aside or pay any dividend or other
distribution;
(v) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any securities, other than
pursuant to the Corporation's stock plans and agreements in accordance with
their terms as in effect on the date hereof;
(vi) permit or allow the Corporation or its subsidiaries to
borrow or agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money, except in an aggregate amount not
in excess of $2.1 million;
(vii) subject any of the assets of the Corporation or any of
its subsidiaries (real, personal or mixed, tangible or intangible) to any
encumbrance or otherwise permit or allow the sale, lease, transfer or
disposition of any assets of the Corporation or its subsidiaries (real, personal
or mixed, tangible or intangible), other than in the ordinary course of business
and consistent with past practice;
-10-
(viii) assume, guarantee, or otherwise become responsible for
the obligations of, or make any loans or advances to, any other individual, firm
or corporation;
(ix) enter into any new material line of business;
(x) enter into any collective bargaining agreements;
(xi) increase the compensation or fringe benefits of any of
the officers or directors of the Corporation or any of its subsidiaries or,
other than in accordance with past practice, effect any material general
increase in the compensation or fringe benefits of the employees of the
Corporation or any of its subsidiaries or pay or agree to pay any pension,
retirement allowance, or other benefit not required by any existing employee
benefit plan or agreement to any such officers or employees, or alter, amend,
terminate in whole or in part, or curtail or permanently discontinue
contributions to, any pension plan or any other employee benefit plan;
(xii) amend the certificate of incorporation, the Certificate
of Designation or by-laws of the Corporation or any of its subsidiaries; or
(xiii) agree to do any of the foregoing.
6.4 CONDUCT OF BUSINESS BY THE COMPANY AFTER AUGUST 31, 2000. The
Company covenants that in the event the Osicom Merger has not closed on or
before August 31, 2000, except (i) as otherwise expressly contemplated by this
Agreement, or (ii) as consented to by the Purchaser, from and after August 31,
2000 and until the earlier of: (A) the closing of the Osicom Merger, or (B) the
date on which less than 350,000 shares of Series A Preferred Stock are
outstanding, the Company shall:
(a) notify the Purchaser of any change in the normal course of business
or operations of the Company or its subsidiaries and of any governmental
complaints, investigations or hearings of which the Company or its subsidiaries
is notified (or communications received by the Company or its subsidiaries
indicating that the same may be contemplated), or the institution or settlement
of litigation or any claim, in each case involving the Company or its
subsidiaries, and to keep Purchaser informed of such events;
(b) comply in all material respects with all applicable laws,
including, without limitation, applicable environmental laws.
(c) not
(i) cause to be issued or sold any shares of capital stock or
debt or equity securities of the Company or its subsidiaries, except for (A)
shares issued on the exercise of stock options, (B) the shares to be issued in
connection with the Osicom Merger, or (C) the issuance of shares or securities
exercisable for or convertible into shares in one or a series of transactions
and in an aggregate number of shares not in excess of ten percent (10%) of the
-11-
outstanding shares of capital stock (as measured on the date of such
issuance) in any twelve month period (excluding the Shares issued hereunder
in the calculation of any such ten percent limit, but including the Shares
issued hereunder in the calculation of shares outstanding on such date of
issuance), PROVIDED HOWEVER that none of such shares shall rank pari passu
with or senior to the Shares in terms of voting, dividends, conversion or
upon liquidation.
(ii) issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect to the issuance
of any shares of capital stock or debt or equity securities of the Corporation
or its subsidiaries, except in the ordinary course of business pursuant to the
Company's stock plans.
(iii) directly or indirectly cause to be purchased, redeemed
or otherwise acquired or disposed of any shares of capital stock of the
Corporation or its subsidiaries.
(iv) declare, set aside or pay any dividend or other
distribution.
(v) permit or allow the Corporation or its subsidiaries to
borrow or agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money, other than in an aggregate amount
not in excess of $2.1 million.
(vi) assume, guarantee, or otherwise become responsible for
the obligations of, or make any loans or advances to, any other individual, firm
or corporation other than in the ordinary course of business and consistent with
past practice.
(vii) amend the certificate of incorporation, the Certificate
of Designation or by-laws of the Corporation or any of its subsidiaries in a
manner adverse to the holders of Series A Preferred Stock; or
(viii) agree to do any of the foregoing.
6.5 BEST EFFORTS. The Company shall use its best efforts to perform
its obligations under the Osicom Merger Agreement.
6.6 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Purchaser
and its Affiliates (as defined below), and the successors and assigns of all
of them, from, against and in respect of any and all Losses (as defined
below) resulting from, incurred in connection with or arising out of the
purchase and ownership by the Purchaser of the Shares and the Registrable
Shares. The party or parties being indemnified are referred to herein as the
"INDEMNITEE" and the Company is referred to herein as the "INDEMNITOR." The
term "AFFILIATE" or "AFFILIATED" shall mean a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Purchaser. The term "LOSS" or "LOSSES"
shall mean any and all legal fees and related expenses reasonably incurred by
such Indemnitee in connection with the defense of or any proceeding with
respect to any claims, whether accrued,
-12-
contingent or otherwise, resulting from or arising out of the purchase and
ownership by the Purchaser of the Shares and the Registrable Shares and in
which Indemnitee is named as a defendant, provided however that "LOSS" and
"LOSSES" shall not mean any judgments, damages or amounts paid in settlement
of any claim.
(b) Any party who receives notice of a potential claim that may, in the
judgment of such party, result in a Loss shall use all reasonable efforts to
provide the parties hereto notice thereof in the manner provided herein,
provided that failure or delay or alleged delay in providing such notice shall
not adversely affect such party's right to indemnification hereunder unless such
failure materially prejudices Indemnitor's ability to coordinate the defense of
any such claim. In the event that any party shall incur or suffer any Losses in
respect of which indemnification may be sought by such party hereunder, the
Indemnitee shall assert a claim for indemnification by written notice (a
"NOTICE") to the Indemnitor stating the nature and basis of such claim in
reasonable detail, which Notice shall be given within 30 days of the filing of
the proceeding in which Indemnitee is named as a defendant, but the failure of
the Indemnitee to give the Notice within such time period shall not relieve the
Indemnitor of any liability that the Indemnitor may have to the Indemnitee,
unless such failure materially prejudices Indemnitor's ability to coordinate the
defense of such claim.
(c) The Losses in respect of such claims shall be borne and paid by the
Indemnitor, and the Indemnitor shall pay the Indemnitee, in immediately
available funds, as such Losses are incurred, as evidenced by itemized bills for
Losses to such Indemnitee. The parties agree to cooperate fully with one another
in connection with the defense of any such claims.
(d) The remedies provided for in this Agreement shall not be exclusive
of any other rights or remedies available to one party against the other, either
at law or in equity.
(e) The provisions of this Section 6.6 shall survive the Closing.
7. MISCELLANEOUS.
7.1 SURVIVAL; SEVERABILITY. The representations, warranties, covenants
and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
7.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assignors any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
-13-
provided in this Agreement. The Purchaser may assign its rights and
obligations hereunder, in connection with any private sale or transfer of the
Shares in accordance with the terms hereof, as long as, as a condition
precedent to such transfer, (i) the transferee executes an acknowledgment
agreeing to be bound by the applicable provisions of this Agreement
(including but not limited to the Purchaser's obligations under Section 6.1)
in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto and
(ii) the Board of Directors of the Company reasonably deems that the proposed
transferee is not a competitor of the Company. The Company may not assign its
rights or obligations under this Agreement.
7.3 NO RELIANCE. Each party acknowledges that (i) it has such knowledge
in business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
the other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice of
its advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by such party.
7.4 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed under the laws of the State of California without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the State
of California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
7.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.6 HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
-14-
7.7 NOTICES. Any notice, demand or request required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., California time, on a business day or, if such day is not a business
day, on the next succeeding business day, (ii) on the next business day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed to the parties as follows:
If to the Purchaser:
Entrada Holdings, LLC
x/x Xxxxxxxx Xxxxxxxx Xxxxxxx Xxxx.
0000 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company:
Sync Research, Inc.
00 Xxxxxx
Xxxxxx, XX 00000
Attn: Chief Executive Officer
Tel: 000-000-0000
Fax: 000-000-0000
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
-15-
Tel: 000-000-0000
Fax: 000-000-0000
7.8 EXPENSES. The Company and the Purchaser each shall pay all costs
and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement; provided, however, that the
Company shall reimburse the Purchaser for legitimate and itemized legal fees
and expenses incurred by it in connection with its due diligence
investigation of the Company and the negotiation, preparation, execution,
delivery and performance of this Agreement and the other Transaction
Documents in an amount not to exceed Thirty Thousand Dollars ($30,000).
7.9 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed
by the Company and the Purchaser and no provision hereof may be waived other
than by a written instrument signed by the party against whom enforcement of
any such waiver is sought.
7.10 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction, other than the commission that is payable by the Company to
Xxxxxxxx Xxxxxxxx Capital Corp. pursuant to Section 6.1. The Purchaser agrees
to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless the Purchaser
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
-16
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
ENTRADA HOLDINGS LLC SYNC RESEARCH INC.
By: /s/ X. Xxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
---------------------------- -----------------------------
Name: Xxxxx Xxxxxxxxxx Name: Xxxxxxx X. Xxxxxx
Title: Manager Title: Chief Executive Officer
----------------------
XXXXXXXX XXXXXXXX CAPITAL CORP.
By: /s/ E. Xxxx Xxxxxxxxxx
-------------------------------
Name: E. Xxxx Xxxxxxxxxx
Title: President
------------------------
-17-
