AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ,
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SYNC RESEARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 3577 33-0676350
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
Incorporation or Organization) Classification Code Number)
12 MORGAN
IRVINE, CALIFORNIA 92618
(949) 588-2070
(Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
WILLIAM K. GUERRY
SYNC RESEARCH, INC.
12 MORGAN
IRVINE, CALIFORNIA 92618
(949) 588-2070
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
BLASE P. DILLINGHAM, ESQ.
GLENN M. HAMMOND, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE, LLP
777 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA 90017
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger of a subsidiary of the
Registrant with and into Osicom Technologies, Inc., a Delaware corporation, as
described in the Agreement and Plan of Merger dated as of April 10, 2000.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT PRICE(2) REGISTRATION FEE(3)
Common Stock, par value $0.001 per
share............................... 4,300,000(1) N/A $333.33 $0.09
(1) The maximum number of shares of Sync common stock issuable in connection
with the merger, based on the sum of (a) 3,531,007 shares of Sync common
stock outstanding on May 12, 2000, and (b) 700,000 shares of Sync Series A
convertible preferred stock outstanding on May 12, 2000.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(2) under the
Securities Act, the proposed maximum aggregate offering price of the
registrant's common stock was calculated in accordance with Rule 457(f)(2)
under the Securities Act as one-third of the par value of the Osicom
securities being received in the transaction.
(3) This fee has been calculated pursuant to Section 6(b) of the Securities Act
as .0264 of one percent of $333.33.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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[SYNC LOGO]
SYNC RESEARCH, INC.
Dear Stockholder:
As most of you are aware, Sync has entered into an agreement with Osicom
Technologies, Inc., (doing business as Entrada Networks and referred to herein
as "Entrada" or "Osicom"), a Delaware corporation and wholly-owned subsidiary of
Osicom Technologies, Inc, a New Jersey corporation that is publicly held
(Nasdaq: FIBR) (referred to herein as "Parent"). As a result of this pending
transaction, we have delayed our annual meeting of stockholders in order to
incorporate this very important matter. Our meeting is scheduled to be held at
local time, on Monday, August 14, 2000, at .
We cannot complete the merger unless the holders of a majority of the shares
of Sync common stock voting at the meeting vote in person or by proxy to
authorize the issuance of shares of Sync common stock under the merger
agreement. Only stockholders who hold shares of Sync common stock at the close
of business on Friday, June 30, 2000 will be entitled to vote at the annual
meeting. The Sync board of directors has unanimously approved the merger
agreement and recommends that you vote FOR the proposal to issue shares of Sync
common stock under the merger agreement so that the merger transaction may be
completed.
We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition, the merger represents
a significant business opportunity to enter into the emerging and rapidly
growing market for data storage systems (a.k.a. storage area networks or SANs).
Entrada has already begun the implementation of a strategy for the SAN market
and has SAN products currently in development. We believe that the complementary
technologies, combined resources, expected synergies, experience and market
position of Sync and Entrada, with established relationships with key original
equipment manufacturers and large enterprise customers, create a unique platform
for growth and significant long-term stockholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully developing
communications technology companies. For example, NETsilicon, Inc., a company
acquired for $5 million by Parent in 1996, has a market capitalization as of May
17, 2000 of more than $265 million after Parent helped it develop a new business
model. Another subsidiary of Parent, Sorrento Networks, has been rebuilt by
Parent from a maker of relatively slow-growth video networking products into a
pioneer in the field of all-optical networking products for metropolitan or
intra-city networks, a market with substantial opportunities for growth.
The proposed transaction involves the issuance of Sync common stock to
Parent for all of the outstanding common stock of Entrada. After the merger,
Sync will own all of the outstanding common stock of Entrada, and Parent will
own 50% of the outstanding Sync common stock. Details of the proposed merger,
important information concerning Sync and Entrada, and information concerning
other important proposals to be considered at the special meeting appear in the
accompanying proxy statement/prospectus. We urge you to give this material your
careful and dedicated consideration.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" COMMENCING ON PAGE 15 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
All shareholders are cordially invited to attend our annual meeting in
person. However, whether or not you plan to attend the meeting, please complete,
sign and date the enclosed proxy and return it promptly to us in the enclosed
postage-prepaid envelope. It is very important that your shares be represented
and voted at the annual meeting. Your prompt cooperation is greatly appreciated.
Sincerely,
Gregorio Reyes
CHAIRMAN OF THE BOARD
2
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Sync from documents that are not included in or
delivered with this proxy statement/prospectus. This information is available to
you without charge upon your written or oral request. You can obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from Sync at the following address and telephone
number:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
If you would like to request documents, please do so by July 15, 2000 in
order to receive them before the Sync annual meeting. See "Where You Can Find
More Information" (page 99).
3
SYNC RESEARCH, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 2000
------------------------
To the Stockholders of Sync Research, Inc.:
We will hold an annual meeting of the stockholders of Sync Research, Inc. on
Monday, August 14, 2000, at local time at , to
consider and vote upon the following proposals:
1. To authorize the issuance of shares of Sync common stock under a
merger agreement among Sync, a wholly-owned subsidiary of Sync, Osicom
Technologies, Inc., doing business as Entrada Networks ("Entrada" or
"Osicom"), and the parent of Entrada. After the merger, Sync will own all of
the outstanding common stock of Entrada, and the parent of Entrada will own
50% of the outstanding Sync common stock;
2. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
3. To amend the 1995 Employee Stock Purchase Plan to increase the
number of shares reserved for issuance thereunder by an additional 100,000
shares;
4. To ratify the appointment of Ernst & Young LLP as Sync's independent
auditors for the fiscal year ending December 31, 2000; and
5. To transact such other business as may properly come before the
meeting or any postponements or adjournments of it by the Sync board of
directors.
Only holders of record of shares of Sync common stock at the close of
business on Friday, June 30, 2000, the record date for the annual meeting, are
entitled to notice of, and to vote at, the annual meeting and any adjournments
or postponements of it. We cannot complete the merger unless the holders of a
majority of the shares of Sync common stock voting at the meeting in person or
by proxy vote to authorize the issuance of shares of Sync common stock under the
merger agreement.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX A.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope.
By Order of the Board of Directors,
--------------------------------------
William K. Guerry
SECRETARY
Irvine, California
, 2000
TABLE OF CONTENTS
PAGE
--------
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Companies............................................... 4
General..................................................... 4
The Sync Annual Meeting..................................... 6
The Merger And The Merger Agreement......................... 6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA AND SUMMARY
UNAUDITED PRO FORMA INFORMATION........................... 9
COMPARATIVE PER SHARE DATA.................................. 13
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY........... 14
RISK FACTORS................................................ 15
Risks Related to the Merger................................. 15
Risks Related to the Combined Companies' Business........... 18
Risks Related to the Combined Companies' Industry........... 22
THE SYNC ANNUAL MEETING..................................... 26
Date, Time and Place........................................ 26
Purpose of Annual Meeting................................... 26
Record Date; Voting Power; Quorum........................... 26
Votes Required.............................................. 27
Voting By Sync Directors And Executive Officers............. 27
Voting of Proxies........................................... 27
Revocability of Proxies..................................... 27
Solicitation of Proxies..................................... 28
THE MERGER.................................................. 29
Ownership of Sync and Entrada Following the Merger; Stock
Options................................................... 29
Background to the Merger.................................... 29
Reasons for the Merger and Board of Directors
Recommendation............................................ 31
Fairness Opinion of Financial Advisor....................... 32
Private Placement Financing; Bring-Down of Alliant
Opinion................................................... 37
Interests of Sync Directors and Management in the Merger.... 37
Accounting Treatment........................................ 38
Appraisal Rights............................................ 38
Form of the Merger; Name Change............................. 39
Merger Consideration........................................ 39
Conversion of Shares........................................ 39
Effective Time of the Merger................................ 39
Stock Exchange Listing of Sync Common Stock................. 39
Material United States Federal Income Tax Consequences of
the Merger................................................ 39
i
PAGE
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Regulatory Matters.......................................... 40
Resale of Sync Common Stock................................. 40
THE MERGER AGREEMENT........................................ 41
Conditions to the Completion of the Merger.................. 41
No Solicitation............................................. 42
Termination................................................. 42
Conduct of Entrada's Business Prior to the Merger........... 43
Conduct of Sync's Business Prior to the Merger.............. 45
Amendment; Waiver........................................... 47
Fees and Expenses........................................... 47
Representations and Warranties.............................. 47
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY........... 49
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 50
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET.... 51
SYNC RESEARCH, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET................................ 52
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS................................................ 55
SYNC RESEARCH, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS...................... 56
BUSINESS OF ENTRADA......................................... 57
Description of Business..................................... 57
Entrada's Strategic Plan.................................... 57
Markets for Entrada's Products.............................. 57
Entrada's Product Development Approach...................... 58
Products.................................................... 59
Sales and Marketing......................................... 60
Customers and Markets....................................... 60
Customer Service and Support................................ 61
Research and Development.................................... 61
Manufacturing and Quality................................... 62
Availability of Raw Materials............................... 62
Patents, Trademarks and Licenses............................ 62
Seasonality................................................. 63
Working Capital Practices................................... 63
Backlog..................................................... 63
Competition................................................. 63
Environmental Compliance.................................... 64
Employees................................................... 64
ii
PAGE
--------
ENTRADA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 65
Results of Operations: Comparison of the Years Ended
January 31, 2000 and January 31, 1999..................... 65
Results of Operations: Comparison of the Years Ended
January 31, 1999 and January 31, 1998..................... 66
Liquidity and Capital Resources............................. 66
Year 2000 Compliance........................................ 67
Effects of Inflation and Currency Exchange Rate............. 67
Impact of Recent Accounting Pronouncements.................. 68
EXPERTS..................................................... 68
LEGAL MATTERS............................................... 68
DEADLINE FOR RECEIPT OF FUTURE STOCKHOLDER PROPOSALS........ 68
OTHER ANNUAL MEETING PROPOSALS.............................. 69
Proposal No. 2: Election Of Directors....................... 69
Potential New Directors..................................... 71
Proposal No. 3: Approval of Amendment to the 1995 Employee
Stock Purchase Plan....................................... 72
Proposal No. 4: Approval of Independent Auditors............ 76
Possible Stockholder Proposal............................... 77
OTHER MATTERS............................................... 77
INFORMATION CONCERNING SYNC................................. 77
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/
PROSPECTUS................................................ 78
TRADEMARKS.................................................. 78
WHERE YOU CAN FIND MORE INFORMATION......................... 79
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION............ 80
INDEX TO ENTRADA FINANCIAL STATEMENTS....................... F-1
Index To Entrada Financial Statements..................... F-1
Report of Independent Certified Public Accountants........ F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Stockholder's Equity (Deficit).............. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
ANNEX A AGREEMENT AND PLAN OF MERGER
ANNEX B OPINION OF FINANCIAL ADVISOR TO SYNC
ANNEX C BRING-DOWN OPINION OF FINANCIAL ADVISOR TO SYNC
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY IS SYNC PROPOSING TO ENTER INTO THIS MERGER?
A. We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition, the merger
represents a significant business opportunity to enter into the emerging and
rapidly growing market for data storage systems (a.k.a. Storage Area
Networks or SANs). Entrada has already begun the implementation of a
strategy for the SAN market and has SAN products currently in development.
We believe that the complementary technologies, combined resources, expected
synergies, experience and market position of Sync and Entrada, with
established relationships with key original equipment manufacturers and
large enterprise customers, create a unique platform for growth and
significant long-term stockholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully
developing communications technology companies. For example, Parent's
networking system-on-silicon subsidiary, NETsilicon, Inc., was acquired by
Parent in 1996 for $5 million. As of May 17, 2000, after Parent helped it
develop a new business model, and after a September 1999 spinoff via an
initial public offering, NETsilicon has a market capitalization of more than
$265 million. Parent's other major subsidiary is Sorrento Networks, which
Parent has rebuilt from a maker of relatively slow-growth video networking
products into a pioneer in the field of all-optical networking products for
metropolitan or intra-city networks, a market with substantial opportunities
for growth.
Q. WHAT WILL THE PARENT OF ENTRADA RECEIVE IN THE MERGER?
A. In the merger, the parent of Entrada (which we will refer to as "Parent"
throughout this proxy statement/prospectus), which is the sole holder of
Entrada common stock, will receive a number of shares of Sync common stock
equal to 50% of the outstanding Sync common stock after the merger.
Q. HOW WILL THE MERGER BE ACCOMPLISHED, AND WHAT WILL BE ITS IMPACT ON THE
COMPANIES?
A. The respective boards of directors of Sync, Entrada and Parent have each
approved the merger. If the Sync stockholders authorize the issuance of Sync
common stock under the merger agreement at the annual meeting, then Entrada
will merge with a wholly-owned subsidiary of Sync, with Entrada remaining as
the surviving entity. Upon completion of the merger, Sync will own 100% of
Entrada, and the Parent will own 50% of Sync. In addition, Sync will change
its name to Entrada Networks, Inc. upon completion of the merger. Throughout
this proxy statement/prospectus, the term "the combined companies" refers to
Sync and Entrada following the merger.
Q. WILL SYNC STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A. No. Sync stockholders will continue to hold the Sync shares they currently
own.
Q. WHO WILL MANAGE SYNC FOLLOWING THE MERGER?
A. The Chief Executive Officer of Sync following the merger will be Dr. Kanwar
J.S. Chadha, who is currently the President of Entrada. William K. Guerry,
currently the Chief Executive Officer, President and Chief Financial Officer
of Sync, will be the Chief Operating Officer, Chief Financial Officer and
Vice President-Finance and Administration of Sync following the merger.
Anand Mehta, currently the Chief Technology Officer and Vice
President-Engineering of Entrada, will be the Chief Technology Officer and
Vice President-Engineering of Sync following the merger. Arthur Trakas,
currently the Executive Vice President-Sales and Marketing of Parent and
Entrada, will be the Executive Vice President-Sales and Marketing of Sync
following the merger. Assuming that at the annual meeting the Sync
stockholders authorize the issuance of Sync common stock under the merger
agreement and elect the slate of directors that the Sync board of directors
has nominated,
1
Mr. Guerry and William J. Schroeder will step down as directors of Sync and
the board of directors of Sync following the merger will consist of Gregorio
Reyes, currently the Chairman of Sync's board of directors, Dr. Chadha,
Charles A. Haggerty, currently a director of Sync, Leonard N. Hecht,
currently a director of Parent, and Rohit Phansalkar, currently a director
of Parent and a partner of Andersen Weinroth & Co. LP, affiliates of which
own all of the outstanding Series A Preferred Stock of Sync and are
stockholders of Parent. For more information, see "Other Annual Meeting
Proposals--Proposal No. 2: Election Of Directors."
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We are working to complete the merger as quickly as possible. We expect to
complete the merger by August 31, 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO SYNC STOCKHOLDERS?
A. The merger will not have any tax consequences for Sync stockholders. For more
information, see "Material Federal Income Tax Consequences of the Merger."
Q: WHEN AND WHERE IS THE SYNC STOCKHOLDER MEETING?
A. The annual meeting will take place at local time, on Monday,
August 14, 2000, at . You may attend the annual
meeting and vote your shares in person, rather than signing and mailing your
proxy.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement/ prospectus, please complete and sign your proxy and return
it in the enclosed return envelope as soon as possible, so that your shares
may be represented at the annual meeting. If you sign and send in your proxy
and do not indicate how you want to vote, we will count your proxy as a vote
in favor of adoption of the merger agreement. In order to assure that your
vote is obtained, please vote your proxy as instructed on your proxy card
even if you currently plan to attend the annual meeting in person.
Q. DOES SYNC'S BOARD RECOMMEND VOTING IN FAVOR OF THE MERGER?
A. Yes. After careful consideration, the board of directors of Sync unanimously
recommends voting in favor of authorizing the issuance of shares of Sync
common stock under the merger agreement.
Q. ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
MERGER?
A. Yes. There are risks and uncertainties because Sync and Entrada are in a
highly competitive and rapidly evolving industry. In evaluating the merger,
you should carefully consider these and other factors discussed in the
section entitled "Risk Factors" on page 15 of this proxy statement/
prospectus.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at the
annual meeting. You can do this three different ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy card. Sync stockholders choosing either
of these options should send their revocation letter or new proxy card to
the Sync corporate secretary at the address provided below. The third way
you may change your vote is to attend the annual meeting and vote in person.
Simply attending the meeting, however, will not revoke your proxy. If you
have instructed a broker to vote your shares, you must follow the directions
provided by your broker to change those instructions.
2
Q: IF MY SYNC SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A. Your broker will vote your Sync shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, unless you appear in person at
the annual meeting with a legal, valid proxy from the record holder.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should
contact:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
3
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD CAREFULLY READ THIS
ENTIRE PROXY STATEMENT/ PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 104. WE HAVE
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE COMPANIES
SYNC RESEARCH, INC. Sync develops, manufactures, markets, supports and
provides wide-area network access and management products and services designed
to economically and reliably support business critical applications across
carrier provided packetized transmission services, such as frame relay. Sync
follows a sales strategy relying primarily on a direct sales force and
leveraging resellers, distributors and carriers as delivery channels for its
products.
As used in this proxy statement/prospectus, the term "Sync" refers to Sync
Research, Inc. and its subsidiaries, unless the context otherwise requires. Sync
was incorporated in California in September 1981 and was reincorporated in
Delaware in September 1995. Sync's principal executive offices are located at 12
Morgan, Irvine, California 92618 and its telephone number is (949) 588-2070.
OSICOM TECHNOLOGIES, INC., doing business as Entrada Networks. Entrada,
based in Annapolis Junction, Maryland, designs, manufactures and markets
products that provide access to and enhance the performance of data and
telecommunications networks, and is currently developing products that provide
connectivity for storage networks. Many of Entrada's products are incorporated
into the remote access and other server products of original equipment
manufacturers ("OEMs"). In addition, certain of Entrada's products are deployed
by telecommunications network operators, applications service providers,
internet service providers, and the operators of corporate local area and wide
area networks for the purpose of providing access to and transport within their
networks.
As used in this proxy statement/prospectus, the terms "Osicom" and "Entrada"
both refer to Osicom Technologies, Inc., a Delaware corporation, unless the
context otherwise requires. Entrada was incorporated in Delaware in 1972.
Entrada's principal executive offices are located at 9020 Junction Drive,
Annapolis Junction, Maryland 20701 and its telephone number is (301) 317-7710.
As used in this proxy statement/prospectus, the term "the combined
companies" refers to both Sync and Entrada following the completion of the
merger.
GENERAL
SYNC'S BOARD RECOMMENDATION TO STOCKHOLDERS (PAGE 31)
The Sync board of directors believes that the merger is fair to you and in
your best interest and unanimously recommends that you vote "for" the proposal
to authorize the issuance of Sync common stock under the merger agreement for
completion of the merger. To review the background and reasons for the merger in
greater detail, as well as certain risks related to the merger, see pages 15 and
36.
OWNERSHIP OF SYNC AND ENTRADA FOLLOWING THE MERGER; STOCK OPTIONS (PAGE 29)
Immediately following the merger, (i) Sync will own 100% of Entrada, and
(ii) Parent will own 50% of Sync. In addition, certain employees of Entrada will
be granted options to purchase shares of Sync's common stock which, in the
aggregate, shall equal the number of shares of Sync common stock issuable upon
the exercise of all of the outstanding Sync options at the time of the merger.
4
REASONS FOR THE MERGER (PAGE 31)
We believe that the combination of Sync and Entrada will allow Sync to
significantly improve its operating results. In addition the merger represents a
significant business opportunity to enter into the emerging and rapidly growing
market for data storage systems (a.k.a. Storage Area Networks or SANs). Entrada
has already begun the implementation of a strategy for the SAN market and has
SAN products currently in development. We believe that the complementary
technologies, combined resources, expected synergies, experience and market
position of Sync and Entrada, with established relationships with key original
equipment manufacturers and large enterprise customers, create a unique platform
for growth and significant long-term shareholder value.
In addition, we believe that the merger significantly strengthens our
capabilities by leveraging Parent's past experience in successfully developing
communications technology companies. For example, Parent's networking
system-on-silicon subsidiary, NETsilicon, Inc., was acquired by Parent in 1996
for $5 million. As of May 17, 2000, after Parent helped it develop a new
business model, and after a September 1999 spinoff via an initial public
offering, NETsilicon has a market capitalization of more than $265 million.
Parent's other major subsidiary is Sorrento Networks, which Parent has rebuilt
from a maker of relatively slow-growth video networking products into a pioneer
in the field of all-optical networking products for metropolitan or intra-city
networks, a market with substantial opportunities for growth.
The merger will strengthen the capabilities of Sync and Entrada to compete
in the very competitive networking market. The combined companies will be able
to (i) provide customers with a more comprehensive set of networking solutions
by expanding each company's product offerings, technologies and customer bases
in the remote access and wide area network areas; (ii) increase each company's
ability to successfully develop products for new high growth technologies and
markets, including storage networking; (iii) increase the overall size and scope
of each company's operations; and (iv) expand each company's distribution
channels. The Sync board of directors believes that the combination with Entrada
will assist Sync in strengthening its ability to effectively compete in the
market and improve the overall financial results of Sync. The Sync board of
directors also believes that the technologies, product lines and fundamental
business and operating strategies of Sync and Entrada are complementary and
consistent, and that Sync and Entrada together can provide a greater range of
products and superior market coverage compared to each as a stand-alone
business. In addition, the Sync board of directors believes that a combination
of the two companies provides greater potential for enhanced stockholder value
than does the continuation of Sync's operations in its present form or any of
the alternative business strategies that it considered.
APPRAISAL RIGHTS (PAGE 38)
Holders of Sync common stock are not entitled to dissenters' appraisal
rights under Delaware law in connection with the merger.
INTERESTS OF SYNC DIRECTORS AND MANAGEMENT IN THE MERGER (PAGE 37)
In considering the Sync board's recommendation that you vote in favor of the
merger, you should be aware that some officers and directors of Sync have
interests in the merger that are different from, or in addition to, the
interests of Sync stockholders. Please refer to page for more information.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 39)
For United States federal income tax purposes, regardless of whether the
merger will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, no gain or loss will be recognized by Sync or the
Sync stockholders as a result of the merger.
5
FAIRNESS OPINION OF FINANCIAL ADVISOR (PAGE 32)
In deciding to approve the issuance of shares of Sync common stock under the
merger, the Sync board of directors considered the opinion, as of the date of
the merger agreement, of its financial advisor, Alliant Partners, as to the
fairness of the exchange ratio in the merger to Sync stockholders from a
financial point of view. This opinion is attached as Annex B to this proxy
statement/prospectus and sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion. WE
ENCOURAGE STOCKHOLDERS TO READ THIS OPINION CAREFULLY. THIS OPINION IS DIRECTED
TO THE BOARD OF DIRECTORS AND IS NOT A RECOMMENDATION TO STOCKHOLDERS WITH
RESPECT TO ANY MATTER RELATING TO THE MERGER. THE OPINION SPEAKS ONLY AS OF ITS
DATE OF ISSUANCE AND THE FINANCIAL ADVISOR OF SYNC IS UNDER NO OBLIGATION TO
CONFIRM ITS OPINION AS OF A LATER DATE. FURTHER, THE BOARD OF DIRECTORS MAY NOT
NECESSARILY REQUEST THAT ITS FINANCIAL ADVISOR CONFIRM ITS OPINION AS OF A LATER
DATE.
THE SYNC ANNUAL MEETING (PAGE 26)
The Sync annual meeting will be held at , at [a.m./p.m.],
local time, on Monday, August 14, 2000. At the Sync annual meeting, Sync
stockholders will be asked to adopt the merger agreement, as well as to vote
upon other proposals of the board of directors as described in this proxy
statement/prospectus. This proxy statement/prospectus is being furnished to you
in connection with the solicitation by the Sync board of directors of proxies
for use in voting at the annual meeting.
RECORD DATE; VOTING POWER
You are entitled to vote at the annual meeting if you owned shares of Sync
as of the close of business on Friday, June 30, 2000, which is the record date.
On the record date, there were shares of Sync common stock
entitled to vote at the Sync annual meeting. Sync stockholders will have one
vote for each share of Sync common stock they owned on the record date.
VOTES REQUIRED
In order to consummate the merger, a majority of the shares of Sync common
stock present in person or by proxy at the meeting must vote in favor of
adopting the merger agreement. A plurality of votes cast is required to elect
directors. Approval of the amendment to the 1995 Employee Stock Purchase Plan,
as well as approval of Ernst & Young LLP as Sync's independent auditors, require
the affirmative vote of at least a majority of the shares of Sync common stock
present in person or by proxy at the meeting.
VOTING BY DIRECTORS AND EXECUTIVE OFFICERS
On the record date, directors and executive officers of Sync and their
affiliates owned and were entitled to vote shares of Sync common
stock, or approximately % of the shares of Sync common stock outstanding on
the record date. The directors and executive officers of Sync have indicated
that they intend to vote the Sync common stock owned by them "for" adoption of
the merger agreement.
THE MERGER AND THE MERGER AGREEMENT
THE MERGER AGREEMENT IS ATTACHED TO THIS PROXY STATEMENT/ PROSPECTUS AS
ANNEX A. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT CAREFULLY. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE MERGER.
6
MERGER CONSIDERATION (PAGE 39)
At the closing of the merger, Sync will issue shares of Sync common stock to
Parent in exchange for all of the outstanding common stock of Entrada. The
exchange ratio was determined through arm's-length negotiations between Sync and
Parent. After the merger, Sync will own all of the outstanding common stock of
Entrada, and Parent will own 50% of the outstanding Sync common stock.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE 41)
The respective obligations of Sync and Parent to effect the merger are
subject to the satisfaction of certain conditions, including, but not limited
to, obtaining requisite Sync stockholder and regulatory approvals, the approval
for quotation on The Nasdaq National Market of the Sync common stock to be
issued pursuant to the merger, the absence of any injunction prohibiting
consummation of the merger, and the accuracy of the representations and
warranties contained in the merger agreement.
Each of the conditions to the merger may be waived by the company entitled
to assert the condition.
TERMINATION OF THE MERGER AGREEMENT AND TERMINATION FEE (PAGE 42)
Sync and Parent can mutually agree to terminate the merger agreement without
completing the merger. Either Sync or Parent can terminate the merger agreement
by written notice if the merger is not completed by August 31, 2000, or if any
court or governmental authority prohibits the transactions contemplated by the
merger agreement and such prohibition is final and nonappealable. Additionally,
if Sync receives a non-solicited proposal from another company to acquire or
merge with Sync that Sync's board of directors considers to be superior to the
proposed transaction with Entrada, then Sync may terminate the merger agreement
upon agreement to pay Parent a termination fee of $1,000,000. Likewise, if
Parent receives a non-solicited proposal from another company to acquire or
merge with Entrada that Parent's board of directors considers to be superior to
the proposed merger with Sync, then Parent may terminate the merger agreement
upon agreement to pay Sync a termination fee of $1,000,000. If the stockholders
of Sync vote not to authorize the issuance of Sync common stock for completion
of the merger, then Sync will be required to pay Parent a fee of $250,000 within
thirty (30) days of such stockholder vote.
WHEN THE MERGER TAKES EFFECT (PAGE 39)
The merger will become effective when all necessary documentation has been
filed with the Delaware Secretary of State. Such documentation will be filed
promptly upon satisfaction or waiver of each of the conditions provided in the
merger agreement.
CONVERSION OF SHARES (PAGE 39)
After completion of the merger, Parent will no longer have any rights as a
stockholder of Entrada. Once the merger is effective, Parent will surrender its
Entrada stock certificates and in turn will receive Sync stock certificates from
the transfer agent as quickly as is feasible.
REGULATORY MATTERS (PAGE 40)
Certain aspects of the merger will require notifications to, and/or
approvals from, certain United States authorities. Sync and Entrada believe that
all material notifications, filings and approvals have been made or obtained, or
will be made or obtained prior to the effective date of the merger, as the case
may be. See "The Merger Agreement--Conditions to the Completion of the Merger."
7
ACCOUNTING TREATMENT (PAGE 38)
The merger will be accounted for as an acquisition of Sync by Entrada under
the "purchase" method of accounting in accordance with generally accepted
accounting principles.
RESALE OF SYNC COMMON STOCK (PAGE 40)
All shares of Sync common stock received by Parent in the merger will be
freely transferable, except that Parent shall be deemed to be an "affiliate" (as
such term is defined under the Securities Act) of Sync and, accordingly, such
shares may be resold by Parent only in transactions permitted by the resale
provisions of Rules 144 promulgated under the Securities Act or as otherwise
permitted under the Securities Act.
8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
AND SUMMARY UNAUDITED PRO FORMA INFORMATION
The following selected historical financial data of Sync for the three years
ended December 31, 1999, 1998 and 1997 and as of December 31, 1999 and 1998 has
been derived from the audited historical financial statements incorporated by
reference herein and should be read in conjunction with such consolidated
financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations. The statement of
operations data for the years ended December 31, 1996 and 1995 have been derived
from audited financial statements not included in this proxy
statement/prospectus. The selected financial data of Sync for the three months
ended March 31, 2000 and 1999 has been derived from Sync's unaudited financial
statements which have been incorporated by reference from Sync's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 filed with the
Securities and Exchange Commission. These interim operating results are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
The following selected historical financial data of Entrada for the three
years ended January 31, 2000, 1999 and 1998 and as of January 31, 2000 and 1999
has been derived from the audited historical financial statements included
elsewhere herein and should be read in conjunction with such consolidated
financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations. The statement of
operations data for the years ended January 31, 1997 and 1996 have derived from
audited financial statements not included in this proxy statement/prospectus.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the merger had been consummated, nor is it necessarily
indicative of future operating results or financial position.
9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA--SYNC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE
MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $ 3,150 $ 5,106 $18,152 $ 24,702 $ 23,256 $ 36,346 $34,933
Cost of sales...................... 1,916 2,851 9,905 15,850 14,724 19,995 17,584
------- ------- ------- -------- -------- -------- -------
Gross profit....................... 1,234 2,255 8,247 8,852 8,532 16,351 17,349
Operating expenses:
Research and development......... 1,062 1,715 5,503 7,420 7,195 7,687 5,636
Selling and marketing............ 859 1,796 5,136 11,851 14,318 14,484 11,248
General and administrative....... 551 614 2,284 3,048 3,741 5,795 2,871
Non-recurring charges............ -- -- -- 2,852 1,241 -- --
------- ------- ------- -------- -------- -------- -------
Total operating expenses......... 2,472 4,125 12,923 25,171 26,495 27,966 19,755
------- ------- ------- -------- -------- -------- -------
Operating loss..................... (1,238) (1,870) (4,676) (16,319) (17,963) (11,615) (2,406)
Interest income, net............... 114 135 408 875 1,455 2,184 461
------- ------- ------- -------- -------- -------- -------
Loss before income taxes........... (1,124) (1,735) (4,268) (15,444) (16,508) (9,431) (1,945)
Provision for income taxes......... 1 -- 6 2 -- 2 45
------- ------- ------- -------- -------- -------- -------
Net loss........................... $(1,125) $(1,735) $(4,274) $(15,446) $(16,508) $ (9,433) $(1,990)
======= ======= ======= ======== ======== ======== =======
Basic and diluted net loss per
share............................ $ (0.32) $ (0.50) $ (1.22) $ (4.44) $ (4.81) $ (3.04) $ (2.31)
======= ======= ======= ======== ======== ======== =======
Shares used in computing net loss
per share........................ 3,516 3,505 3,493 3,479 3,434 3,258 1,364
======= ======= ======= ======== ======== ======== =======
AS OF
MARCH
31, AS OF DECEMBER 31,
-------- ----------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 7,696 $ 8,632 $ 14,135 $ 21,734 $ 35,874 $50,633
Working capital........................... 10,665 11,611 14,337 28,718 44,336 58,260
Total assets.............................. 16,839 19,197 26,791 38,495 55,692 66,672
Capitalized lease obligations, less
current maturities...................... 9 7 60 111 146 398
Mandatorily redeemable preferred stock.... -- -- -- -- -- 5,591
Total stockholders' equity................ 12,225 13,291 17,571 32,818 48,803 54,862
10
SELECTED HISTORICAL FINANCIAL DATA--ENTRADA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
JULY 1, 1996 MAY 1, YEARS ENDED
YEARS ENDED JANUARY 31, TO 1996 TO APRIL 30,
------------------------------ JANUARY 31, JUNE 30, -------------------
2000 1999 1998 1997(1) 1996 1996 1995
-------- -------- -------- ------------- --------- -------- --------
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 28,771 $ 29,007 $30,624 $14,884 $ 5,174 $25,731 $30,627
Cost of sales.................... 17,498 16,043 17,061 8,545 2,930 17,795 20,159
-------- -------- ------- ------- ------- ------- -------
Gross profit..................... 11,273 12,964 13,563 6,339 2,244 7,936 10,468
Operating expenses:
Research and development....... 6,223 5,503 3,546 1,128 450 2,874 2,790
Selling and marketing.......... 5,647 8,329 8,974 3,374 1,003 7,000 10,037
General and administrative..... 2,177 2,270 3,611 1,219 183 1,800 2,004
Non-recurring charges.......... -- -- 3,873 6,877 -- -- --
-------- -------- ------- ------- ------- ------- -------
Total operating expenses....... 14,047 16,102 20,004 12,598 1,636 11,674 14,831
-------- -------- ------- ------- ------- ------- -------
Loss from operations............. (2,774) (3,138) (6,441) (6,259) 608 (3,738) (4,363)
Interest expense, net............ 613 578 513 152 63 413 148
-------- -------- ------- ------- ------- ------- -------
Loss before income taxes......... (3,387) (3,716) (6,954) (6,411) 545 (4,151) (4,511)
Income taxes..................... -- -- -- -- 7 1 17
-------- -------- ------- ------- ------- ------- -------
Net loss......................... $ (3,387) $ (3,716) $(6,954) $(6,411) $ 538 $(4,152) $(4,528)
======== ======== ======= ======= ======= ======= =======
Net loss per share, basic and
diluted........................ $ (3,387) $ (3,716) $(6,954) $(6,411) $ 538 $(4,152) $(4,528)
======== ======== ======= ======= ======= ======= =======
Shares used in computing net loss
per share, basic and diluted... 1 1 1 1 1 1 1
======== ======== ======= ======= ======= ======= =======
AS OF JANUARY 31, AS OF AS OF APRIL 30,
---------------------------------------------- JUNE 30, -------------------
2000 1999 1998 1997 1996 1996 1995
-------- -------- -------- ------------- --------- -------- --------
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 112 $ 198 $ 246 $ 20 $ 228 $ 511 $ (10)
Working capital.................. 4,209 1,066 108 1,276 4,094 1,903 4,035
Total assets..................... 16,544 16,750 16,381 13,260 11,654 11,243 14,778
Long-term debt, less current
portion........................ 302 154 -- -- -- -- --
Amount due to Parent............. 21,769 17,337 11,878 7,287 1,400 1,400 --
Total stockholders' equity
(deficit)...................... (14,706) (11,319) (7,603) 649 1,971 1,726 5,878
- ------------------------
(1) Entrada was acquired by Parent on July 1, 1996.
11
SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)(1)
YEAR ENDED
JANUARY 31, 2000
----------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.............................................. $46,923
Loss from operations...................................... (7,336)
Net loss.................................................. (7,547)
Net loss per share........................................ (0.90)
Number of shares used to compute net loss per share....... 8,424
AS OF
JANUARY 31, 2000
----------------
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:
Cash...................................................... $10,805
Working capital........................................... 16,981
Total assets.............................................. 37,459
Long-term debt............................................ 309
Total stockholders' equity................................ 21,172
- ------------------------
(1) The pro forma consolidated financial information for Sync and Entrada
reflects the issuance of 4,231,007 shares of Sync common stock for all of
the issued and outstanding Entrada shares in connection with the merger and
reflects the issuance of 700,000 shares of common stock upon the conversion
of all of Sync's outstanding Series A Preferred Stock, which was issued in
May 2000 to an affiliate of a stockholder of Parent for net proceeds of
approximately $2.1 million.
12
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Sync and
Entrada and combined per share data on an unaudited pro forma basis after giving
effect to the merger on a purchase accounting basis assuming 4,231,007 shares of
Sync common stock are issued in the merger in exchange for all of the Entrada
common stock outstanding and reflecting the issuance of 700,000 shares of common
stock upon the conversion of all of the outstanding Series A preferred stock.
The information set forth below should be read in conjunction with the selected
historical consolidated financial data, the unaudited pro forma combined
condensed financial information and the historical financial statements of Sync
and Entrada included in this proxy statement/prospectus. The unaudited pro forma
combined condensed financial information is not necessarily indicative of the
operating results that would have been achieved had the transaction been
effected as of the beginning of the periods presented and should not be
construed as representative of future results of operations. The merger is
expected to be accounted for as a reverse acquisition of Sync by Entrada.
Neither Sync nor Entrada has ever declared or paid cash dividends on its
respective shares of capital stock.
YEAR ENDED
DECEMBER 31, 1999
-----------------
Per share amounts:
Historical-Sync:
Net loss.................................................. $ (1.22)
Book value (at period end)................................ 3.79
YEAR ENDED
JANUARY 31, 2000
----------------
Historical-Entrada:
Net loss.................................................. $ (3,387)
Book value (at period end)................................ (14,706)
YEAR ENDED
JANUARY 31, 2000
----------------
Per Sync share:
Net loss.................................................. $ (0.90)
Book value................................................ 2.50
Per equivalent Entrada share:
Net loss.................................................. $(3,808)
Book value................................................ 10,586
13
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
Sync's common stock is listed on the Nasdaq Stock Market and trades under
the symbol SYNX. The following table presents the high and low closing sale
prices for Sync's common stock as reported in the Nasdaq National Market for the
periods indicated.
HIGH LOW
-------- --------
1999
Q1........................................................ $ 6.56 $ 2.97
Q2........................................................ 3.59 1.87
Q3........................................................ 2.75 1.94
Q4........................................................ 3.25 2.19
1998
Q1........................................................ 19.38 11.71
Q2........................................................ 20.31 10.44
Q3........................................................ 19.38 6.88
Q4........................................................ 7.81 3.56
On April 10, 2000, the last trading day prior to the announcement by Sync
and Entrada that they had reached an agreement concerning the merger, the
closing sales price of Sync common stock as reported on the Nasdaq National
Market was $3.125 per share. The equivalent per share value of Entrada common
stock as of such date was approximately $13,222. On May 12, 2000, the closing
sale price of Sync common stock as reported on the Nasdaq National Market was
$3.50 per share. Based on the May 12, 2000, closing sale price of Sync common
stock, the equivalent per share value of Entrada common stock as of such date
was approximately $14,808.
As of May 4, 2000, there were 213 stockholders of record of Sync common
stock, and Sync believes there were approximately 2,936 beneficial owners of
Sync common stock.
Following the merger, Sync common stock will continue to be traded on the
Nasdaq National Market. Sync is in the process of applying for a new trading
symbol to take effect upon the consummation of the merger.
Neither Sync nor Entrada has ever paid cash dividends on its capital stock.
Any future determination to pay cash dividends will be at the discretion of the
board of directors and will be dependent upon the combined companies' financial
condition, results of operations, capital requirements and such other factors as
the board of directors deems relevant.
14
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ PROSPECTUS, SYNC STOCKHOLDERS SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO VOTE FOR THE MERGER. THE
OCCURRENCE OF ANY OF THE RISKS DESCRIBED BELOW OR INCORPORATED BY REFERENCE
HEREIN COULD MATERIALLY ADVERSELY AFFECT THE BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATION OF SYNC.
RISKS RELATED TO THE MERGER
SYNC AND ENTRADA MAY BE UNABLE TO SUCCESSFULLY INTEGRATE THEIR OPERATIONS
AND REALIZE THE COST SAVINGS THAT WE ANTICIPATE.
The success of the merger depends in substantial part on the ability of Sync
and Entrada to integrate their respective operations in an efficient and
effective manner. The integration of Entrada's operations into Sync following
the merger will require the dedication of management resources in order to
achieve the anticipated operating efficiencies of the merger which may
temporarily distract attention from day to day business operations of the
combined companies. The difficulties of combining the Entrada operations into
Sync are exacerbated by the necessity of coordinating geographically separated
organizations, integrating personnel with disparate business backgrounds and
combining different corporate cultures. No assurance can be given that
difficulties encountered in integrating the operations of Entrada into Sync will
be overcome or that the benefits expected from such integration will be
realized. The inability of management to successfully integrate the operations
of the two companies could have a material adverse effect on the business,
results of operations and financial condition of the combined companies. In
addition, as commonly occurs with mergers of technology companies, aggressive
competitors may undertake initiatives to attract customers and to recruit key
employees, which could have a material adverse effect on the business, results
of operations and financial condition of Sync.
THE COMBINED COMPANIES WILL INCUR SUBSTANTIAL EXPENSES AND RESTRUCTURING
CHARGES IN CONNECTION WITH THE MERGER.
Sync and Entrada expect to incur certain expenses in connection with the
restructuring and consolidation of the operations of the combined companies
including, but not limited to, costs related to the closure and elimination of
duplicate leased facilities and write-offs of related fixed assets, write-offs
of discontinued products, and severance costs. Sync and Entrada anticipate that
the integration activities will ultimately result in increased efficiencies and
lower operating costs. These activities have not been formalized, and therefore
the expenses and related efficiency cost savings are not currently estimable
with a reasonable degree of accuracy. Although Sync and Entrada expect that the
elimination of duplicative expenses as well as other efficiencies related to the
integration of the businesses may offset additional expenses over time, there
can be no assurance that such net benefit will be achieved in the near term, or
at all.
Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have been
included in the estimated purchase price reflected in the pro forma condensed
consolidated balance sheet.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for investment
banking, filings with regulatory agencies, legal, accounting, financial printing
and other related costs. These transaction costs will be expensed as they are
incurred by Sync and have been reflected in the pro forma condensed consolidated
balance sheet.
15
THE MERGER MAY ADVERSELY IMPACT THE BUYING PATTERNS OF THE CUSTOMERS OF THE
COMBINED COMPANIES.
There is no assurance that resellers and current and potential end-users of
Sync and Entrada products will continue their current buying patterns without
regard to the announced merger. Certain customers may defer purchasing decisions
as they evaluate the combined companies' future product strategy and consider
product offerings of competitors. If substantial numbers of customers decide to
defer or cancel such purchases, such deferrals or cancellations could have a
material adverse effect on the business, results of operations and financial
condition of the combined companies.
SYNC AND ENTRADA MAY NOT BE ABLE TO OBTAIN THIRD PARTY CONSENTS IN
CONNECTION WITH THE MERGER.
Sync and Entrada each have contracts with many suppliers, customers and
other business partners relating to, among other things, certain intellectual
property rights. Some of these contracts require Sync and Entrada to obtain the
consent, waiver or approval of these other parties in connection with the
merger. If consent, waiver or approval cannot be obtained, Sync and Entrada may
lose the right to use intellectual property that is necessary for their
respective businesses. Sync and Entrada have agreed to use commercially
reasonable efforts to secure the necessary consents, waivers and approvals.
However, Sync and Entrada may not be able to obtain all of the necessary
consents, waivers and approvals, which could have a material adverse effect on
the business, results of operations and financial condition of the combined
companies.
OBTAINING REQUIRED GOVERNMENT APPROVALS AND SATISFYING CLOSING CONDITIONS
MAY DELAY OR PREVENT COMPLETION OF THE MERGER.
Completion of the merger is conditioned upon the receipt of all material
governmental authorizations, consents, orders and approvals, including the
expiration or termination of the applicable waiting periods, and any extension
of the waiting periods, under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended. Sync and Entrada intend to vigorously pursue all required
approvals. The requirement for these approvals could delay the completion of the
merger for a significant period of time after Sync stockholders have approved
the proposals relating to the merger at the annual meeting. No assurance can be
given, however, that these approvals will be obtained or that the required
conditions to closing will be satisfied and, if all such approvals are obtained
and the conditions are satisfied, no assurance can be given as to the terms,
conditions and timing thereof.
SYNC'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT THE MERGER.
The directors and officers of Sync have certain interests in the merger and
participate in certain arrangements that are different from, or are in addition
to those of Sync stockholders generally. These interests and arrangements
include:
- all executive officers of Sync are parties to agreements that provide for
the partial vesting of any unvested options upon a change in control and
certain severance benefits if such executive officer is terminated
following a corporate transaction such as the merger
- Mr. Gregorio Reyes, the current Chairman of the Sync board of directors,
will remain as a director of Sync following the merger, and certain
current executive officers of Sync will remain as executives of Sync
following the merger
- Mr. Reyes is party to an agreement that provides for the full vesting of
any unvested options upon a change in control and certain severance
benefits if he is terminated following a corporate transaction such as the
merger.
16
THE VALUE OF SYNC STOCKHOLDERS' HOLDINGS IN SYNC MAY BE DIMINISHED AS A
RESULT OF THE MERGER.
Although the companies believe that beneficial synergies will result from
the merger, there can be no assurance that the combining of the two companies'
businesses, even if achieved in an efficient, effective and timely manner, will
result in combined results of operations and financial condition superior to
what would have been achieved by each company independently, or as to the period
of time required to achieve such result. The issuance of Sync common stock in
connection with the merger may have the effect of reducing Sync's net income per
share from levels otherwise expected and could reduce the market price of the
Sync common stock unless revenue growth or cost savings and other business
synergies sufficient to offset the effect of such issuance can be achieved. As a
consequence of the merger, Sync stockholders will lose the chance to invest in
the development and exploitation of Sync's products on a stand-alone basis.
Additionally, Sync following the merger will have different management than
Sync's current management, and consequently the management of Sync following the
merger may make strategic and operational decisions that differ from those of
Sync's current management.
THE NUMBER OF SYNC SHARES OF COMMON STOCK THAT ARE TO BE EXCHANGED FOR ALL
OF THE SHARES OF ENTRADA COMMON STOCK IS FIXED.
Under the terms of the merger agreement, the outstanding shares of Entrada
common stock issued and outstanding at the closing will be converted into the
right to receive shares of Sync common stock. The merger agreement does not
contain any provisions for adjustment of the exchange amount or termination of
the merger agreement based solely on fluctuations in the price of Sync common
stock. The price of Sync common stock at the closing of the merger may vary from
its prices on the date of this proxy statement/prospectus and on the date of the
annual meeting. These prices may vary because of changes in the business,
operations or prospects of Sync, market assessments of the likelihood that the
merger will be completed, the timing of the completion of the merger, the
prospects of post-merger operations, regulatory considerations, general market
and economic conditions and other factors. Because the date that the merger is
completed will be later than the date of the annual meeting, the price of Sync
common stock on the date of the annual meeting may not be indicative of its
price on the date the merger is completed. We urge Sync stockholders to obtain
current market quotations for Sync common stock.
SYNC CANNOT ASSURE YOU THAT ITS STOCK PRICE WILL NOT DECLINE AFTER THE
MERGER.
Factors such as announcements of technological innovations or the
introduction of new products by the combined companies or their competitors, as
well as market conditions in the technology sector, may have a significant
effect on the market price of Sync's common stock following the merger. Further,
the stock market has experienced volatility which has particularly affected the
market prices of equity securities of many high technology companies and which
often has been unrelated to the operating performance of such companies. These
market fluctuations may have an adverse effect on the price of Sync's common
stock following the merger.
THE COMBINED COMPANIES MAY FACE INCREASED CREDIT RISKS AS A RESULT OF THE
MERGER.
Entrada distributes a significant portion of its products through third
party distributors, resellers and original equipment manufacturers ("OEMs"). Due
to the consolidation in the distribution and reseller channels and Entrada's
reliance upon these channels, Entrada has experienced an increased concentration
of credit risks. While Sync and Entrada have each continuously monitored and
managed these risks, financial difficulties on the part of one or more of their
respective significant distributors, resellers or OEM partners may have a
material adverse effect on the combined companies.
17
RISKS RELATED TO THE COMBINED COMPANIES' BUSINESS
SYNC AND ENTRADA HAVE INCURRED CONSISTENT OPERATING LOSSES AND THE COMBINED
COMPANIES MAY CONTINUE TO INCUR SIGNIFICANT NET LOSSES AND NEGATIVE CASH FLOWS
IN THE FUTURE, AND THE COMBINED COMPANIES MAY NEVER BE PROFITABLE.
Sync has experienced operating losses since inception and has never been
profitable. In recent years, Sync has experienced operating losses of
$18.0 million in 1997, $16.3 million in 1998 and $4.7 million in 1999. As of
December 31, 1999, Sync had an accumulated deficit of approximately
$58.7 million. Entrada experienced operating losses of $6.4 million in fiscal
1998, $3.1 million in fiscal 1999 and $2.8 million in fiscal 2000, and has not
achieved operating profitability. As of January 31, 2000, Entrada had an
accumulated deficit of approximately $20.5 million. Both Sync and Entrada have
experienced, and may in the future experience, significant fluctuations in
revenues and operating results from quarter to quarter and from year to year due
to a combination of factors. Factors that have caused, or may cause, revenues
and operating results to vary significantly from period to period include:
- the timing of significant orders;
- the relatively long length of the sales cycles for certain products;
- the market conditions, competition and pricing in the networking industry;
- the timing of capital expenditures by target market customers;
- the success in developing, introducing and shipping new products;
- new product introductions by competitors;
- production or quality problems;
- changes in material costs;
- disruption in sources of supply;
- changes in foreign currency exchange rates; and
- general economic conditions.
In addition, revenues and gross margins may fluctuate due to the mix of
distribution channels employed and the mix of products sold. For example, Sync
generally realizes a higher gross margin on direct sales than on sales through
its channel partners and other resellers. Accordingly, if channel partners and
other resellers account for a large percentage of the combined companies' net
revenues, gross profit as a percentage of net revenues may decline.
The combined companies' future revenues are difficult to predict. Revenues
and operating results in any quarter depend on the volume and timing of, and the
ability to fulfill, orders received within the quarter. Sales of many of Sync's
and Entrada's products typically involve a sales cycle of several months or over
a year from the point of initial customer contact until receipt of the first
system order, and, in addition, Sync and Entrada have in the past encountered,
and may in the future encounter, delays between initial orders and network-wide
deployment. There can be no assurance that average sales cycles will not
increase in future periods. Significant portions of the combined companies'
expenses are relatively fixed. If sales are below expectations in any given
period, the adverse effect of a shortfall in sales on the combined companies'
operating results may be magnified by their inability to adjust spending to
compensate for such shortfall. Sync and Entrada have in the past and may in the
future reduce prices or increase spending to respond to competition or to pursue
new product or market opportunities. Accordingly, there can be no assurance that
the combined companies will be able to attain or sustain profitability on a
quarterly or an annual basis. In addition, if the combined companies'
18
operating results fall below the expectations of public market analysts and
investors, the price of the Sync's common stock would likely be materially and
adversely affected.
IF THE COMBINED COMPANIES FAIL TO MANAGE EXPANSION EFFECTIVELY, THEY MAY NOT
BE ABLE TO SUCCESSFULLY MANAGE THEIR BUSINESS, WHICH COULD CAUSE THE COMBINED
COMPANIES TO FAIL TO MEET CUSTOMER DEMAND OR TO ATTRACT NEW CUSTOMERS.
Neither Sync nor Entrada has had significant experience in managing issues
related to the expansion of their respective operations, which may place
significant demands on the combined companies' administrative, operational and
financial resources. To manage future growth, if any, the combined companies
must:
- implement additional management information systems
- improve their operating, administrative, financial and accounting systems,
procedures and controls
- attract, train and retain new employees
- maintain close coordination among their executive, engineering,
professional services, accounting, finance, marketing, sales and
operations organizations.
There can be no assurance that the combined companies will be able to
perform such actions successfully. The combined companies intend to continue to
invest in improving their financial systems and controls in connection with
higher levels of operations. In the future, the combined companies may make
additional acquisitions of complementary companies, products or technologies.
Managing acquired businesses entails numerous operational and financial risks,
including difficulties in assimilating acquired operations, diversion of
management's attention to other business concerns, amortization of acquired
intangible assets and potential loss of key employees or customers of acquired
operations. There can be no assurance that the combined companies will be able
to effectively achieve growth, or manage any such growth, and failure to do so
could have a material adverse effect on the combined companies' operating
results.
THE COMBINED COMPANIES WILL DEPEND ON THIRD PARTY LICENSES FOR THEIR
PRODUCTS.
Sync and Entrada rely on certain software technology which is licensed from
third parties and used in Sync's and Entrada's products to perform key functions
and provide additional functionality. Because the combined companies' products
will incorporate software developed and maintained by third parties, the
combined companies will be, to a certain extent, dependent upon such third
parties' ability to maintain or enhance their current products, to develop new
products on a timely and cost-effective basis, and to respond to emerging
industry standards and other technological changes. Further, these third-party
technology licenses may not always be available to the combined companies on
commercially reasonable terms or at all. If the combined companies' agreements
with third-party vendors are not renewed or the third-party software fails to
address the needs of the combined companies' software products, the combined
companies would be required to find alternative software products or
technologies of equal performance or functionality. Sync and Entrada cannot
assure that they would be able to replace the functionality provided by
third-party software if the combined companies lost the license to this
software, if it became obsolete or incompatible with future versions of the
combined companies' products, or if the software otherwise was not adequately
maintained or updated.
19
THE COMBINED COMPANIES WILL DEPEND ON CONTINUED DEMAND FOR THEIR PRODUCTS BY
ORIGINAL EQUIPMENT MANUFACTURERS AND OTHER RESELLERS.
Sync and Entrada have OEM relationships with a number of companies that
provide network access hardware. Agreements with OEM customers provide for
Sync's and Entrada's software products to be bundled with the OEM's hardware
products when sold. The cost, if any, of integrating software is assumed by the
OEM. These agreements may provide for a license fee to be paid to Sync or
Entrada. The license fee may be a royalty based upon unit sales, a flat fee or a
fee for a certain time period. Sync and Entrada cannot assure you that OEM
customers will accurately report license fees or have the ability to pay them.
Each of the combined companies' distributors and resellers will be able to cease
marketing the combined companies' products with limited notice and with little
or no penalty. Other risks include whether the OEMs will:
- give sufficient priority to marketing the combined companies' products
- continue to offer the combined companies' products at all
- elect instead to bundle software products of the combined
companies'competitors.
In 1999, 1998 and 1997, OEM revenue represented approximately 6%, 19% and 25%,
respectively, of Sync's total net revenue. In fiscal 2000, 1999 and 1998, OEM
revenue represented approximately 46%, 26% and 21%, respectively, of Entrada's
total net revenue. In the past several years, Sync has seen a significant
reduction in revenue from certain OEM customers and the combined companies may
not be able to replace the revenue generated from those relationships.
THE COMBINED COMPANIES WILL RELY ON THIRD PARTY MANUFACTURERS TO PRODUCE
THEIR PRODUCTS, AND THEIR REPUTATION AND RESULTS OF OPERATIONS COULD BE
ADVERSELY AFFECTED BY THE COMBINED COMPANIES INABILITY TO CONTROL THEIR
OPERATIONS.
The combined companies' manufacturing operations will consist primarily of
materials planning and procurement, light assembly, system integration, testing
and quality assurance. Sync and Entrada have entered into arrangements with
contract manufacturers to outsource substantial portions of their respective
board level procurement, assembly and system test operations, and Sync and
Entrada expect to expand the use of such outsource arrangements in the future.
The combined companies' reliance on third party manufacturers will expose them
to the following risks outside their control:
- unexpected increases in manufacturing costs;
- interruptions in shipments if any manufacturer is unable to complete
production;
- inability to control quality of finished products;
- inability to control delivery schedules;
- unpredictability of manufacturing yield;
- potential lack of adequate capacity; and
- potential inability to secure adequate volumes of components.
The inability of the combined companies' contract manufacturers to provide
the combined companies with adequate supplies of high quality products could
have a material adverse effect upon the combined companies' business, operating
results and financial condition. The loss of any of the combined companies'
contract manufacturers could cause a delay in the combined companies' ability to
fulfill orders while the combined companies identify a replacement manufacturer.
Such an event could have a material adverse effect on the combined companies'
business, operating results and financial condition.
20
The combined companies' manufacturing procedures may in certain instances
create a risk of excess or inadequate inventory if orders do not match
forecasts. Any manufacturing delays, excess manufacturing capacity or
inventories or inability to increase manufacturing capacity, if required, could
have a material adverse effect on the combined companies' business, operating
results and financial condition.
THE COMBINED COMPANIES WILL BE DEPENDENT ON SUPPLIERS, MANY OF WHICH WILL BE
THE SOLE SOURCE FOR THEIR COMPONENTS, AND THEIR PRODUCTION WOULD BE SERIOUSLY
HARMED IF THESE SUPPLIERS ARE NOT ABLE TO MEET THE COMBINED COMPANIES' DEMAND
AND ALTERNATIVE SOURCES ARE NOT AVAILABLE.
Certain key components used in the manufacture of Sync's and Entrada's
products are currently purchased only from single or limited sources. At
present, single-sourced components include programmable integrated circuits,
selected other integrated circuits and cables, custom-molded plastics and
custom-tooled sheet metal, and limited-sourced components include flash
memories, printed circuit boards and selected integrated circuits. Sync and
Entrada generally rely upon contract manufacturers to buy component parts that
are incorporated into board assemblies. Sync and Entrada each directly buys
final assembly parts, such as plastics and metal covers, cables and other parts
used in final configurations. The combined companies generally will not have
long-term agreements with any of these single or limited sources of supply. Any
loss of a supplier, increase in lead times, cost increases, component supply
interruption, or the inability of the combined companies to procure these
components from alternate sources at acceptable prices and within a reasonable
time, could have a material adverse effect upon the combined companies'
business, operating results and financial condition. If orders do not match
forecasts, the combined companies may have excess or inadequate inventory of
certain materials and components, and suppliers may demand longer lead times,
higher prices or termination of contracts. From time to time Sync and Entrada
have experienced shortages of certain components and have paid above-market
prices to acquire such components on an accelerated basis or have experienced
delays in fulfilling orders while waiting to obtain the necessary components.
Such shortages may occur in the future and could have a material adverse effect
on the combined companies' business, operating results and financial condition.
THE COMBINED COMPANIES WILL HAVE POTENTIAL SEVERANCE PAYMENT LIABILITIES.
Sync's executive officers have entered into employment agreements under
which such persons will be entitled to receive severance payments in certain
circumstances, including following any termination of their employment within
one year following a "change in control" of Sync, including the change in
control that will be deemed to result from the consummation of the merger.
Assuming the termination of the employment of all of the Sync executive officers
immediately following the consummation of the merger, the combined companies'
aggregate liabilities under such severance provisions could be as much as
approximately $800,000. Due to the nature of these termination rights, some or
all of these severance payments may not be includable in the merger reserve and,
therefore, could adversely impact earnings in any subsequent quarters in which
the rights are exercised.
THERE IS NO ASSURANCE THAT SYNC WILL CONTINUE TO MEET THE REQUIREMENTS FOR
CONTINUED LISTING ON THE NASDAQ NATIONAL MARKET.
Sync's common stock is listed and traded on the Nasdaq National Market. On
January 4, 1999, Sync received a letter from Nasdaq notifying it of its failure
to maintain a closing bid price of greater than $1.00 in accordance with the
Nasdaq listing requirements. In order to comply with the Nasdaq listing
requirements, Sync implemented a 1 for 5 reverse stock split on June 28, 1999.
As a result of the reverse stock split, Sync maintained its stock price above
the $1 per share minimum level, and accordingly, was informed by Nasdaq that it
had met the requirements for continued listing. However,
21
there can be no assurance that Sync will meet the minimum closing bid price or
any other Nasdaq listing requirements on an ongoing basis.
SYNC'S AND ENTRADA'S CHARTER DOCUMENTS, AND CERTAIN BENEFIT PLANS AND OTHER
AGREEMENTS, WILL CONTAIN ANTI-TAKEOVER PROVISIONS.
Sync and Entrada are currently, and following the merger will continue to
be, subject to the provisions of Section 203 of the Delaware General Corporation
Law, an anti-takeover law. In addition, certain provisions of Sync's and
Entrada's charter documents, including provisions eliminating cumulative voting,
eliminating the ability of stockholders to call meetings or to take actions by
written consent and limiting the ability of stockholders to raise matters at a
meeting of stockholders without giving advance notice, may have the effect of
delaying or preventing a change in control or management of Sync and Entrada,
which could have an adverse effect on the market price of Sync's common stock.
Certain of Sync's and Entrada's stock option and purchase plans and agreements
will provide for assumption of such plans, or, alternatively, immediate vesting
upon a change of control or similar event. In addition, Sync and Entrada have
entered into severance agreements with their respective officers, pursuant to
which such officers are entitled to defined severance payments if they are
actually or constructively terminated within specified time periods following a
change of control. The board of directors of Sync currently has, and following
the merger will continue to have, authority to issue up to 2,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of these shares without any further vote or action by
the stockholders. The rights of the holders of the common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of Sync and
Entrada, thereby delaying, deferring or preventing a change in control.
Furthermore, such preferred stock may have other rights, including economic
rights senior to the common stock, and as a result, the issuance of such
preferred stock could have a material adverse effect on the market value of the
common stock. Sync and Entrada have no present plan to issue shares of preferred
stock.
RISKS RELATED TO THE COMBINED COMPANIES' INDUSTRY
THE NETWORK ACCESS MARKET IS HIGHLY COMPETITIVE, AND THE COMBINED COMPANIES
WILL FACE RISKS ASSOCIATED WITH RAPIDLY CHANGING TECHNOLOGY, EVOLVING INDUSTRY
STANDARDS AND FREQUENT NEW PRODUCT INTRODUCTIONS.
The market for communications products is intensely competitive and subject
to rapid technological change and emerging industry standards, with frequent new
product introductions and enhancements, and constant pressure to reduce prices.
Increased competition may force us to lower our prices, experience decreased
gross margins or lose market acceptance. Sync believes that the principal
competitive factors in the combined companies' market include:
- expertise and familiarity with systems network architecture (SNA) networks
and protocols
- expertise and knowledge with mission-critical network solutions
- product performance, features, functionality and reliability
- price and overall cost of ownership
- timeliness of new product introductions
- adoption of emerging industry standards
- service and support.
22
Sync's and Entrada's current competitors include internetworking companies
such as Cisco Systems, Inc., Lucent Technologies, Inc., Netopia, Inc., Nortel
Networks Corp. Hldg., and Intel Corporation, frame relay access device ("FRAD")
providers such as Hypercom Network Systems, Motorola Information Systems Group,
and Cabletron Systems, Inc., and circuit management and digital transmission
providers such as Visual Networks, Inc., NetScout, Quick Eagle Networks, Racal
Datacom, Inc., ADC Telecommunications, Inc., Verilink Corporation, AT&T Paradyne
and Adtran, Inc., among others. Regarding the market for storage area networking
products, Entrada expects that its competitors will include JNI Corporation,
Emulex Corporation, Brocade Communications Systems, Inc., Interphase
Corporation, Gadzoox Networks, Inc. and others. In the LAN adapter area, Entrada
competes with 3Com Corporation, Adaptec, Inc., Alteon WebSystems, Inc., Intel
Corporation, Interphase Corporation, Sun Microsystems, Inc., RAMiX Inc., SBS
Technologies, Inc., VMIC, ZYNX Corporation and others. In the WAN adapter area,
Entrada competes with Ariel, Corporation Digi International, Inc., Eicon
Technology, Interphase Corporation, Brooktrout Inc., Patriot Scientific
Corporation, Performance Technologies Incorporated, Pika Technologies Inc., SDL
Communications, Inc. and others. In the remote access area, Entrada competes
with Lucent Technologies, Inc. Cisco Systems, Inc. 3Com Corporation, LM Ericsson
Telephone Company, Intel Corporation, Nbase-Xyplex, Nortel Networks Corp. Hlgd.,
Perle Systems Limited, General DataComm Inds. Inc., Cabletron Systems, Inc.,
Assured Access Technologies, Inc. and others. Potential competitors of the
combined companies include other internetworking and WAN access and transmission
companies, frame relay switch providers, and the combined companies' channel
partners.
The combined companies face the following challenges from their competitors:
- Certain of these competitors have announced products and intentions to
enter the frame relay access or circuit management market
- Many of these current and potential competitors have longer operating
histories and greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base
- Certain of these competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or may be able
to devote greater resources to the development, promotion, sale and
support of their products
- Many of these competitors have long-standing customer relationships with
large enterprises that are part of the combined companies' target market,
and these relationships may make it more difficult to complete sales of
the combined companies' products to these enterprises
- Certain of Sync's channel partners have in the past developed competitive
products and terminated their relationships with Sync, and such
developments could occur in the future with respect to the combined
companies.
As a consequence of all these factors, the combined companies may face
increased competition, particularly in the frame relay market. Increased
competition could result in significant price competition, reduced profit
margins or loss of market share, any of which could have a material adverse
effect on the combined companies' business, operating results and financial
condition. There can be no assurance that the combined companies will be able to
compete successfully in the future.
THE COMBINED COMPANIES WILL DEPEND ON KEY PERSONNEL AND WILL FACE RISKS
ASSOCIATED WITH THE HIRING, RETENTION AND INTEGRATION OF SUFFICIENT QUALIFIED
PERSONNEL.
The success of the combined companies after the merger depends in part upon
the retention of key employees of Sync and Entrada. In addition, the combined
companies' future success also depends in large part upon their ability to
attract highly skilled engineering, managerial, sales and marketing personnel.
Competition for qualified personnel in the networking industry is very intense,
especially
23
with respect to sales and engineering personnel. Stock options, which generally
become exercisable only over a period of several years of employment, serve as
an important incentive for retaining key employees. The stock options held by
most Entrada optionees will terminate. Sync intends to issue options to purchase
Sync common stock to these optionees. During 1999, Sync and Entrada encountered
significant personnel turnover in research and development, sales and other
functional areas and experienced significant turnover in the composition of its
executive officers. Such turnover has affected its ability to successfully
develop new products and generate additional business. The loss of the services
of any of key personnel or the failure to attract or retain qualified personnel
in the future could have a material adverse effect on the combined companies'
business, operating results or financial condition.
IF THIRD PARTIES INFRINGE THE COMBINED COMPANIES' INTELLECTUAL PROPERTY AND
PROPRIETARY TECHNOLOGY, THE COMBINED COMPANIES MAY EXPEND SIGNIFICANT RESOURCES
ENFORCING THEIR RIGHTS OR SUFFER COMPETITIVE INJURY.
The combined companies' future success depends, in part, upon their
proprietary technology. Sync does not hold any patents and currently relies on a
combination of contractual rights, trade secrets and copyright laws to establish
and protect its proprietary rights on its products. Entrada owns approximately
nine patents, but such patents are not anticipated to be material to the
business of the combined companies. There can be no assurance that the steps
taken by the combined companies to protect their intellectual property will be
adequate to prevent misappropriation of their technology or that their
competitors will not independently develop technologies that are substantially
equivalent or superior to combined companies' technology. In the event that
protective measures are not successful, combined companies' business, operating
results and financial condition could be materially and adversely affected. In
addition, the laws of some foreign countries will not protect the combined
companies' proprietary rights to the same extent as do the laws of the United
States.
THIRD PARTIES MAY CLAIM IN THE FUTURE THAT THE COMBINED COMPANIES ARE
INFRINGING THE INTELLECTUAL PROPERTY OF SUCH THIRD PARTIES, AND THE COMBINED
COMPANIES COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE
PREVENTED FROM SELLING PRODUCTS IF ANY SUCH CLAIMS ARE SUCCESSFUL.
The combined companies will be subject to the risk of adverse claims and
litigation alleging infringement of intellectual property rights of others.
There can be no assurance that third parties will not assert infringement claims
in the future with respect to Sync's and Entrada's current or future products or
that any such claims will not require the combined companies to enter into
license arrangements or result in litigation, regardless of the merits of such
claims. No assurance can be given that any necessary licenses will be available
or that, if available, such licenses can be obtained on commercially reasonable
terms. Should litigation with respect to any such claims commence, such
litigation could be expensive and time-consuming and could have a material
adverse effect on the combined companies' business, operating results and
financial condition regardless of the outcome of such litigation.
PRODUCT DEFECTS MAY HARM THE COMBINED COMPANIES' BUSINESS.
Products as complex as those to be offered by the combined companies may
contain undetected software or hardware errors. Such errors have occurred in the
past with respect to products offered by Sync and Entrada, and there can be no
assurance that, despite testing by the combined companies and customers, errors
will not be found after commencement of commercial shipments. Moreover, there
can be no assurance that once detected, such errors can be corrected in a timely
manner, if at all. Software errors may take several months to correct, if they
can be corrected at all, and hardware errors may take even longer to rectify.
The occurrence of such software or hardware errors, as well as any delay in
correcting them, could result in the delay or loss of market acceptance of the
combined
24
companies' products, additional warranty expense, diversion of engineering and
other resources from the combined companies' product development efforts or the
loss of credibility with the combined companies' end-user customers, channel
partners and other resellers, any of which could have a material adverse effect
on the combined companies' business, operating results and financial condition.
THE COMBINED COMPANIES MAY FACE RISKS ASSOCIATED WITH THE CONSOLIDATION OF
THE NETWORK ACCESS BUSINESS INDUSTRY.
Certain of Sync's and Entrada's major competitors have been engaged in
merger and acquisition transactions. Such consolidations by competitors are
likely to create entities with increased market shares, customer bases,
technology and marketing expertise, sales force size, or proprietary technology
in product markets in which the combined companies will compete. These
developments may adversely affect the combined companies' ability to compete.
THE COMBINED COMPANIES' FINANCIAL CONDITION MAY BE ADVERSELY IMPACTED BY A
DECLINE IN GENERAL ECONOMIC CONDITIONS.
Demand for the combined companies' products will depend in large part on the
overall demand for communications and networking products, which has in the past
and may in the future fluctuate significantly based on numerous factors,
including capital spending levels and general economic conditions. There can be
no assurance that the combined companies will not experience a decline in demand
for their products due to general economic conditions. Any such decline could
have a material adverse effect on the combined companies' business, operating
results and financial condition.
THE COMBINED COMPANIES MAY FACE RISKS ASSOCIATED WITH TARIFF AND REGULATORY
MATTERS.
Rates for public telecommunications services, including features and
capacity of such services, are governed by tariffs determined by carriers and
subject to regulatory approval. Future changes in these tariffs could have a
material adverse effect on the combined companies' business. For example, should
tariffs for frame relay services increase relative to tariffs for dedicated
leased lines, the cost-effectiveness of the combined companies' products could
be reduced, which could have a material adverse effect on the combined
companies' business, operating results and financial condition. In addition, the
combined companies' products must meet industry standards and receive
certification for connection to certain public telecommunications networks prior
to their sale. In the United States, the combined companies' products must
comply with various regulations defined by the Federal Communications Commission
and Underwriters Laboratories. Internationally, the combined companies' products
must comply with standards established by the various European Community
telecommunications authorities. In addition, carriers require that equipment
connected to their networks comply with their own standards. Any future
inability to obtain on a timely basis or retain domestic or foreign regulatory
approvals or certifications or to comply with existing or evolving industry
standards could have a material adverse effect on the combined companies'
business, operating results and financial condition.
25
THE SYNC ANNUAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of Sync as
part of the solicitation of proxies by the Sync board of directors for use at
the annual meeting.
DATE, TIME AND PLACE
The Sync annual meeting will be held at , at [a.m./p.m.],
local time, on Monday, August 14, 2000.
PURPOSE OF ANNUAL MEETING
At the Sync annual meeting, we are asking holders of Sync common stock to
adopt the following proposals:
1. To authorize the issuance of shares of Sync common stock under the
merger agreement for completion of the merger. The Sync board of directors
has determined that the merger is fair to, and in the best interests of,
Sync stockholders, has approved the merger and the issuance of shares of
Sync common stock under the merger agreement, and recommends that Sync
stockholders vote "for" authorization of the issuance of shares of Sync
common stock under the merger agreement;
2. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
3. To amend the 1995 Employee Stock Purchase Plan to increase the
number of shares reserved for issuance thereunder by an additional 100,000
shares;
4. To ratify the appointment of Ernst & Young LLP as Sync's independent
auditors for the fiscal year ending December 31, 2000; and
5. To transact such other business as may properly be brought before
the annual meeting or any postponements or adjournments of it by the Sync
board of directors.
RECORD DATE; VOTING POWER; QUORUM
Only holders of record of Sync common stock at the close of business on
Friday, June 30, 2000, the record date, are entitled to notice of and to vote at
the annual meeting. On the record date, shares of Sync common stock
were issued and outstanding. Sync stockholders will have one vote for each share
of Sync common stock they owned on the record date. A quorum is present at the
annual meeting if a majority of the shares of Sync common stock issued and
outstanding and entitled to vote on the record date are represented in person or
by proxy. For purposes of the quorum and the discussion below under "Votes
Required" regarding the vote necessary to adopt each stockholder proposal,
stockholders of record who are present at the meeting in person or by proxy and
who abstain, including brokers holding customers' shares of record who cause
abstentions to be recorded at the meeting, are considered stockholders who are
present and entitled to vote and they count toward the quorum. In the event that
a quorum is not present at the annual meeting, it is expected that the meeting
will be adjourned or postponed to solicit additional proxies. Holders of record
of Sync common stock on the record date are entitled to one vote per share at
the annual meeting for each of the proposals to be voted on.
Brokers holding shares of record for customers generally are not entitled to
vote on certain matters unless they receive voting instructions from their
customers. As used in this proxy statement/ prospectus, "uninstructed shares"
means shares held by a broker who has not received instructions from its
customers on such matters and the broker has so notified Sync on a proxy form in
accordance with industry practice or has otherwise advised Sync that it lacks
voting authority. As used in this proxy
26
statement/prospectus, "broker non-votes" means the votes that could have been
cast on the matter in question by brokers with respect to uninstructed shares if
the brokers had received their customers' instructions.
VOTES REQUIRED
Approval of the proposal to authorize the issuance of Sync common stock for
completion of the merger requires the affirmative vote of at least a majority of
the shares present in person or by proxy at the meeting and entitled to vote.
Uninstructed shares may not be voted on this matter, and therefore broker
non-votes do not affect the outcome. Abstentions have the effect of negative
votes.
Directors are elected by a plurality and the four (4) nominees who receive
the most votes will be elected. Abstentions and broker non-votes will not be
taken into account in determining the outcome of the election.
Approval of the amendment to the 1995 Employee Stock Purchase Plan requires
the affirmative vote of at least a majority of the shares present in person or
by proxy at the meeting and entitled to vote. Uninstructed shares are entitled
to vote on this matter. Therefore, abstentions and broker non-votes have the
effect of negative votes.
Approval of Ernst & Young LLP as Sync's independent auditors requires the
affirmative vote of at least a majority of the shares present in person or by
proxy at the meeting and entitled to vote. Uninstructed shares are entitled to
vote on this matter. Therefore, abstentions and broker non-votes have the effect
of negative votes.
VOTING BY SYNC DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on the record date, directors and executive
officers of Sync and their affiliates owned and were entitled to vote
shares of Sync common stock, which represented approximately % of
the shares of Sync common stock outstanding on that date. Each Sync director and
executive officer has indicated his or her present intention to vote, or cause
to be voted, the Sync common stock owned by him or her "for" adoption of the
merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
annual meeting will be voted at the annual meeting in the manner specified by
the holders. Properly executed proxies that do not contain voting instructions
will be voted "for" adoption of the merger agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the annual meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Other than the matter described under the heading "Possible Stockholder
Proposal," Sync is not aware of, and does not expect that, any matters other
than the proposals described in this proxy statement/prospectus will be brought
before the annual meeting. If, however, the Sync board of directors properly
presents other matters, the persons named as proxies will vote in accordance
with their judgment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the annual meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary of
Sync a duly executed revocation of proxy, by submitting a duly executed
27
proxy to the Secretary of Sync bearing a later date or by appearing at the
annual meeting and voting in person. Attendance at the annual meeting will not
itself constitute revocation of a proxy.
SOLICITATION OF PROXIES
Sync will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Sync and its subsidiaries may solicit proxies from stockholders by
telephone or other electronic means or in person. Sync will cause brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of stock held of record by such persons. Sync
will reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in doing so.
MacKenzie Partners will assist in the solicitation of proxies by Sync. Sync
will pay MacKenzie Partners an estimated fee of $25,000, plus reimbursement of
certain out-of-pocket expenses, and will indemnify MacKenzie Partners against
any losses arising out of MacKenzie Partners' proxy soliciting services on
behalf of Sync.
THE MATTERS TO BE CONSIDERED AT THE SYNC ANNUAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF SYNC. ACCORDINGLY, STOCKHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE MERGER
The following discussion summarizes the material terms of the merger and the
merger agreement. Stockholders should read carefully the merger agreement, which
is attached as Annex A to this proxy statement/prospectus.
OWNERSHIP OF SYNC AND ENTRADA FOLLOWING THE MERGER; STOCK OPTIONS
Immediately following the merger, (i) Sync will own 100% of the issued and
outstanding shares of Entrada common stock, and (ii) Parent will own 50% of the
issued and outstanding shares of Sync common stock. In addition, certain
employees of Entrada will be granted options to purchase shares of Sync common
stock which, in the aggregate, shall equal the number of shares of Sync common
stock issuable upon the exercise of all of the outstanding Sync options at the
time of the merger.
BACKGROUND TO THE MERGER
Business combinations have been a significant part of the networking
industry. From time to time, Sync has developed various corporate development
programs to review and evaluate potential business combinations, corporate
acquisition opportunities, strategic alliances, joint development programs and
other strategic transactions involving other participants in the networking,
communications and computer industries and related industries, with the aim of
obtaining and developing access to complementary technologies, products and
distribution channels. Over the past two years, Sync has actively searched for a
desirable business combination in an effort to maximize value to it
stockholders.
On May 27, 1999, as part of Sync's corporate development efforts, Sync's
president and chief executive officer, Dick Martin, and chairman of the board,
Gregorio Reyes, met with a representative of Alliant Partners and discussed
various strategic alternatives for Sync. On June 7, 1999, Sync engaged Alliant
Partners to search for strategic alternatives for Sync.
Upon commencing the assignment, Alliant prepared a package of information
regarding Sync, as well as a prospect list of thirty-one potential merger
partners. Contacts were made with each of these thirty-one companies over the
subsequent thirty day period. Of the thirty-one companies contacted, eleven
requested that Alliant provide additional information regarding Sync. Meetings
were subsequently held with five of the target companies during the months of
July and August.
During the month of July 1999, Sync senior management met with Par Chadha,
chairman, president and chief executive officer of Parent, and Leonard Hecht, a
director of Parent, to discuss the possibility of a business combination between
the two companies. In connection with such meeting, Sync and Parent signed a
non-disclosure agreement.
On July 27, 1999, the Sync board of directors held a regular meeting. During
that meeting, the Sync board and management discussed various strategic issues
and the status of Sync's operations. In addition, the Sync board received a
status report from Alliant Partners on its progress to find a suitable strategic
alternative for Sync.
During the months of July and August, 1999, no further meetings with
additional prospects were scheduled, and all of the prospects except Entrada
indicated that they did not have any interest in proceeding with a transaction.
While Entrada did indicate some interest in a transaction with Sync,
representatives of Entrada indicated that they were not open to the idea of an
outright acquisition.
On August 28, 1999, Alliant reported to senior management of Sync that it
appeared unlikely that a transaction could be consummated with a larger company
that would provide liquidity to Sync's stockholders, or other usual and
customary benefits such as a premium to market. Based on market conditions,
Alliant recommended that discussions be held with Entrada, while an additional
thirteen
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prospects, consisting of large networking companies, were contacted regarding a
potential business combination with Sync.
On October 20, 1999, members of Sync's senior management and board of
directors met with members of Parent's senior management and board to discuss
whether a strategic combination of Sync and Entrada or other alternative would
be feasible and the possible framework for such a transaction.
On November 1, 1999, Mr. Reyes and Mr. Guerry met with Mr. Par Chadha and
other representatives of Entrada to conduct further discussions regarding the
framework and structure for such a strategic combination of the two companies.
It was mutually agreed that Sync's board would formally consider a merger of
Sync and Entrada at its next board meeting.
On November 15-16, 1999, members of Sync's executive management met with
Mr. Par Chadha and representatives of Entrada and Entrada's parent to review all
significant aspects of Entrada's operations including, but not limited to,
research and development projects, sales channels and customer relationships,
financial statements, product offerings and personnel.
During the months of September, October and November 1999, Alliant made
contact with the other thirteen prospects previously identified and was unable
to generate any interest in a transaction for Sync that would provide either
cash or a highly liquid security for Sync's stockholders.
On December 16, 1999, the Sync board of directors held a regular meeting.
During that meeting, the Sync board, its management and representatives of
Alliant Partners discussed the general terms of the proposed merger and the
assessment of Sync's management of Entrada's network access business. At that
meeting, it was determined that the terms of the proposed merger were not
acceptable and Alliant, accordingly, informed Parent that Sync was not
interested in completing the merger as proposed. The board, however, indicated
its agreement that a merger with an acceptable valuation should be considered.
On January 14, 2000, the president and chief executive officer of Parent
called Alliant Partners to reengage in further discussions with revised terms
and an acceptable valuation. Based on a series of discussions between
representatives of Alliant Partners and Parent, an agreement in principal was
reached to pursue a transaction between Sync and Entrada on a basis under which
the current Sync stockholders would own 50% of Sync following the proposed
merger.
Even after the agreement in principal was reached, Alliant continued to
explore alternative transactions, but was unable to identify any prospective
merger partner other than Entrada.
Between February 1, 2000 and April 9, 2000, the parties and their respective
financial and legal advisors conducted intensive on- and off-site due diligence
reviews and held numerous meetings and discussions regarding possible terms and
structures for the proposed combination. As part of their due diligence, each
party reviewed public and non-public documents and information of the other
party and heard presentations by representatives of the other party.
On February 11, 2000, a draft of the merger agreement was provided by
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP legal counsel for Parent, to
Sync. From February 11 through April 10, 2000 representatives of Sync and Parent
and their respective legal advisors held numerous meetings and discussions
regarding the terms of the proposed combination.
On March 22, 2000, senior management of Sync met with personnel of Parent to
discuss the sales outlook for Sync and Entrada, respectively.
On April 7, 2000 and April 10, 2000 the Sync board of directors met to
review the proposed transaction and alternative business strategies. At the
meeting, Sync management, Alliant Partners and Orrick, Herrington, & Sutcliffe,
LLP each made presentations to the Sync board, and copies of the draft merger
agreement and other pertinent information were distributed to the Sync board.
After
30
discussing the terms of the proposed transaction, the Sync board voted at the
April 10 meeting to give approval to the combination of Sync and Entrada on the
terms set forth in the then current draft of the merger agreement.
On April 11, 2000, following the execution and delivery of the merger
agreement, Sync and Parent issued a joint press release announcing the merger.
REASONS FOR THE MERGER AND BOARD OF DIRECTORS RECOMMENDATION
REASONS FOR THE MERGER. In reaching its decision to approve the merger
agreement and the merger and to recommend that Sync stockholders approve the
issuance of shares of Sync common stock in connection with the merger, the Sync
board of directors consulted with its management team and advisors and
independently considered the proposed merger agreement and the transactions
contemplated by the merger agreement. The following discussion of the factors
considered by the Sync board of directors in making its decision is not intended
to be exhaustive but includes all material factors considered by the Sync board
of directors.
The Sync board of directors considered the following factors as reasons that
the merger will be beneficial to Sync and its stockholders:
- the opportunity to enter into the emerging and rapidly growing market for
storage area networking for which Entrada has already begun development of
product offerings
- the anticipated contributions of Parent, which has past experience in
working with developing high technology companies
- the complementary nature of Sync's and Entrada's technologies and product
offerings across a range of products and possible synergies from combining
Sync and Entrada
- the opportunity for Sync to distribute its products through Entrada's more
established reseller and distribution channels and through its stronger
presence in the OEM market
- the potential of the combined companies to deliver more complete network
access solutions to customers across the local and wide area networks, and
to develop products in new high growth technologies and markets, including
storage networking, with enhanced network manageability and reduced costs
- the potential of the combined companies to achieve operational
efficiencies and other synergies including improved manufacturing capacity
utilization, procurement savings, corporate overhead reductions and other
cost savings
- the terms and conditions of the merger agreement, including the ability of
the Sync board of directors to consider other nonsolicited strategic
transaction proposals prior to the closing of the merger
- detailed financial analysis and pro forma and other information with
respect to the companies presented by Alliant Partners to the Sync board
of directors, including Alliant Partner's opinion that the consideration
to be received by Sync stockholders pursuant to the exchange ratio in the
merger is fair to the Sync stockholders from a financial point of view.
In the course of deliberations, the Sync board of directors also considered
a number of additional factors relevant to the merger, including:
- information relating to the business, assets, management, competitive
position, financial performance and condition, technology, trading
performance and prospects of each of Sync and Entrada before and after
giving effect to the merger
- current industry, market and economic conditions
31
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations, are reasonable
- the prospects of Sync if it were to continue as an independent company
- the potential for other third parties to enter into strategic
relationships with or to acquire Sync
- the impact of the merger on Sync's and Entrada's customers, suppliers and
employees
- reports from Sync management and from legal and financial advisors as to
the results of their due diligence investigations of Entrada
- the likelihood that the merger would be completed.
The Sync board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized
- the possibility that the merger might not be consummated
- the risk that the issuance of Sync common stock in the merger could be
dilutive to current Sync stockholders
- the effect of the public announcement of the merger on (a) demand for the
products and services of Sync, its customer relations, its operating
results and its stock price, and (b) the ability of Sync to attract and
retain key management, account managers, network engineers and other
personnel
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
from the merger
- the risk that despite the efforts of the combined companies, key
management and other personnel might not remain employed by the combined
companies
- risks associated with fluctuations in Sync's stock price prior to the
closing of the merger
- various other risks.
The foregoing discussion is not exhaustive of all factors considered by
Sync's board of directors. The Sync board of directors believed that certain
risks were unlikely to occur, that Sync could avoid or mitigate others, and
that, overall, these risks were outweighed by the potential benefits of the
merger.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger, the Sync board of directors
did not find it practicable to and did not quantify or otherwise assign relative
weight to the specific factors considered in reaching its determination. In
addition, individual members of the Sync board of directors may have given
different weight to different factors.
RECOMMENDATION OF THE SYNC BOARD OF DIRECTORS. After careful consideration,
the Sync board of directors has unanimously determined that the terms of the
merger agreement and the merger are fair to, and in the best interests of, the
stockholders of Sync and has approved the merger agreement and the merger. The
Sync board of directors recommends that the stockholders of Sync vote "for" the
proposal to authorize the issuance of Sync common stock under the merger
agreement for completion of the merger.
FAIRNESS OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated June 7, 1999, Sync retained Alliant
Partners to render an opinion regarding the fairness, from a financial point of
view, of the merger to the Sync stockholders.
32
On April 10, 2000, in a 5:00 a.m. PST conference call, the Sync board of
directors met and approved the merger. At this meeting and during the previous
board meeting on Friday, April 7, 2000, Alliant Partners delivered to the Sync
Research board of directors its opinion by teleconference (the "Alliant
Opinion") that as of April 10, 2000, and based on the matters described therein,
the transaction was fair, from a financial point of view, to the Sync
stockholders. Alliant Partners noted that its presentation on the financial
terms of the merger was based on the closing stock prices and general market
conditions as of April 7, 2000. No limitations were imposed by Sync on the scope
of Alliant Partners' investigations or the procedures to be followed by Alliant
Partners in rendering the Alliant Opinion. The exchange ratio was determined
through negotiations between the management of Sync and Parent. In furnishing
the Alliant Opinion, Alliant Partners was not engaged as an agent or fiduciary
of Sync's stockholders or any other third party.
The full text of the Alliant Opinion, which sets forth, among other things,
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Annex B and is incorporated herein by reference.
STOCKHOLDERS OF SYNC ARE URGED TO READ THE ALLIANT OPINION IN ITS ENTIRETY. THE
ALLIANT OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE SYNC BOARD OF
DIRECTORS IN ITS CONSIDERATION OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO STOCKHOLDERS OF SYNC AS TO HOW THEY SHOULD VOTE AT THE ANNUAL
MEETING IN CONNECTION WITH THE MERGER. The Alliant Opinion does not address the
relative merits of the merger and any other transactions or business strategies
discussed by the Sync board of directors as alternatives to the merger agreement
or, except with respect to the fairness of the exchange ratio, from a financial
point of view, to the holders of Sync common stock, the underlying business
decision of the Sync board to proceed with or effect the merger. The summary of
the Alliant Opinion set forth in this proxy statement/prospectus is qualified in
its entirety by reference to the full text of the Alliant Opinion.
In connection with the preparation of the Alliant Opinion, Alliant Partners,
among other things, engaged in the following activities: reviewed the terms of
the Agreement and Plan of Merger dated April 10, 2000 and the associated
exhibits thereto; reviewed the Sync Form 10-K for the fiscal years ended
December 1998 and 1999, including the audited financial statements included
therein; reviewed certain internal financial and operating information relating
to Sync prepared by Sync management; participated in discussions with Sync
management concerning the operations, business strategy, financial performance
and prospects for Sync; reviewed the recent reported closing prices and trading
activity for Sync common stock; compared certain aspects of the financial
performance and business strategy of Sync and Entrada with comparable public
companies; analyzed available information, both public and private, concerning
other mergers and acquisitions comparable in whole or in part to the merger;
reviewed Form 10-Q for the period ending October 31, 1999, Forms 10-K for 1998,
1997 and 1996, and several Forms 8-K of Parent; participated in discussions with
management of Parent concerning the operations, business strategy, financial
performance and prospects for Entrada and its strategic rationale for the
merger; reviewed the recent reported closing prices and trading activity for the
common stock of Parent; reviewed recent equity analyst reports covering
Entrada's business sector and Parent; considered the effect of the merger on the
future financial performance of the consolidated entity; participated in
discussions related to the merger among Parent, Sync, and their respective
financial and legal advisors; and conducted other financial studies, analyses
and investigations as Alliant Partners deemed appropriate for purposes of
rendering the Alliant Opinion.
In conducting its review and rendering the Alliant Opinion, Alliant Partners
relied upon and assumed the accuracy and completeness of the financial
statements and other information provided by Sync and Parent or otherwise made
available to Alliant Partners and did not assume responsibility independently to
verify such information. Alliant Partners further relied upon the assurances of
Parent's and Sync's management that the information provided was prepared on a
reasonable basis in accordance with industry practice, that with respect to
financial planning data, the information provided reflected the best currently
available estimates and good faith judgments of Parent's and Sync's
33
management as to the expected future financial performance of Sync and Entrada,
and that such parties were not aware of any information or facts that would make
the information provided to Alliant Partners incomplete or misleading. Without
limiting the generality of the foregoing, for the purpose of the Alliant
Opinion, Alliant Partners assumed that neither Sync nor Entrada was a party to
any pending transaction, including external financing, recapitalizations,
acquisitions or merger discussions, other than the merger or in the ordinary
course of business. Alliant Partners also assumed that the merger would be free
of Federal tax to the Sync stockholders.
In arriving at the Alliant Opinion, Alliant Partners did not perform any
appraisals or valuations of specific assets or liabilities of Sync or Entrada
and was not furnished with any such appraisals or valuations.
Without limiting the generality of the foregoing, Alliant Partners did not
undertake any independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities, to which Sync,
Entrada, Parent or any of their respective affiliates was a party or may be
subject and, at Sync's direction and with its consent, the Alliant Opinion made
no assumption concerning, and therefore did not consider, the possible assertion
of claims, outcomes or damages arising out of any such matters. Although
developments following the date of the Alliant Opinion may affect the Alliant
Opinion, Alliant Partners assumed no obligation to update, revise or reaffirm
the Alliant Opinion.
Following is a summary explanation of the various sources of information and
valuation methodologies employed by Alliant Partners in conjunction with
rendering its opinion to the Sync board of directors.
COMPARABLE COMPANY ANALYSIS
Alliant Partners compared certain financial information and valuation ratios
relating to Entrada to corresponding publicly available data and ratios from a
group of selected publicly traded companies deemed comparable to Entrada. The
comparable companies selected included twenty-two publicly traded companies in
the business of telecommunications and networking. The following financial
information was reviewed by Alliant Partners for each selected company:
Enterprise Value, calculated as the market capitalization of the selected
company, plus such company's debt, less such company's cash; Trailing Twelve
Months revenue, calculated as the most recent four quarters revenue as filed
with the Securities and Exchange Commission; Calendar Year 1999 Revenue; Prior
Year Revenue Growth Rate; and Current Year Revenue Growth Rate. The companies
assessed by Alliant Partners included: 3Com Corporation, ACT Networks Inc., ADC
Telecommunications, ADTRAN Inc., Asante Technologies Inc., Cabletron
Systems Inc., Cisco Systems Inc., Digi International, General DataComm
Industries, Harris Corporation, Hypercom Corporation, Interphase Corporation,
Larscom Incorporated, Lucent Technologies Inc., Motorola Inc., Newbridge
Networks Corp., Nortel Networks Corp., Paradyne Networks Inc., Verilink
Corporation, Visual Networks Inc., Westell Technologies Inc. and Xircom Inc.
The comparable companies had an Enterprise Value/TTM Revenue ratio range of
.5x to 35x with a weighted narrow average (narrow average excludes the highest
and lowest estimates) of 4.3x; Enterprise Value/TTM Earnings (where positive)
ratio range of 10.8x to 206x with a weighted narrow average of 79x; (Enterprise
Value/1 million)/Headcount ratio range of .2x to 20x with a weighted narrow
average of 1.2x. After making certain adjustments for differences in liquidity,
performance and size, this analysis yielded an implied Entrada equity value of
$32.1 million.
No company utilized as a comparison in the Comparable Company Analysis is
identical to Entrada or Sync. In evaluating the comparable companies, Alliant
Partners made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Entrada or Sync.
34
COMPARABLE TRANSACTION ANALYSIS
Alliant Partners reviewed twenty-three comparable merger and acquisition
transactions from November 1998 through April 2000, which involve sellers
sharing many characteristics with Entrada including revenue size, products
offered and business model. These comparable transactions of companies in the
telecommunications and networking sectors are: ADC Telecommunications, Inc.'s
acquisition of PairGain Technologies, Inc.; Lucent Technologies Inc.'s
acquisition of Ortel Corp.; Cisco Systems Inc.'s acquisition of Pirelli Optical
Systems; Westell Technologies Inc.'s acquisition of Teltrend, Inc.; Cisco
Systems Inc.'s acquisition of Aironet Wireless Communications Inc.; Zhone
Technologies Inc.'s acquisition of Premisys Communications, Inc.; Alcatel SA's
acquisition of Genesys Telecommunications Laboratories Inc.; Motorola Inc.'s
acquisition of General Instrument Corp.; DLZ Corp.'s acquisition of Digital Link
Corp. (Quick Eagle Networks); Cisco Systems Inc.'s acquisition of Monterey
Networks; Nortel Networks Corp.'s acquisition of Periphonics Corp.; Lucent
Technologies Inc.'s acquisition of Excel Switching Corp.; Lucent
Technologies Inc.'s acquisition of Nexabit Networks Inc.; Newbridge Networks
Corp.'s acquisition of Stanford Telecommunications Inc.; ADC
Telecommunications Inc.'s acquisition of Saville Systems; Alcatel SA's
acquisition of XYLAN Corp.; 3COM Corp.'s acquisition of NBX Corp.; Verilink
Corp.'s acquisition of TXPORT, Inc.; Lucent Technologies Inc.'s acquisition of
Agere, Inc.; Cisco Systems Inc.'s acquisition of Altiga Networks; Cisco
Systems Inc.'s acquisition of Compatible Systems Corp.; Efficient Networks'
acquisition of FlowPoint Corporation; and Cisco Systems Inc.'s acquisition of
Tasmania Network Systems Inc.
The Price/Revenue multiples of the twenty-three transactions range from .27x
to 55x with a weighted average of 12x. The Price/Earnings ratio ranged
from--506x to 339x, with a narrow average of 13x. This was not a meaningful
multiple as Entrada had negative earnings. The Price/Headcount multiple ranged
from .05x to 19x, with the narrow average of 3x. The Comparable Transaction
Analysis yielded an implied Entrada equity value of $87.2 million.
Estimated multiples paid in the comparable transactions were based on
information obtained from public filings, public company disclosures, press
releases, industry and popular press reports, research reports, databases and
other sources. No company, transaction or business used in the Comparable
Company Analysis or Comparable Transaction Analysis as a comparison is identical
to Entrada or the merger. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading and other values of the comparable companies, comparable transactions or
the business segment, company or transactions to which they are being compared.
COMPARISON OF ENTRADA WITH SYNC RESEARCH
Alliant Partners evaluated Sync and Entrada in terms of business strategy,
business performance and various financial metrics to determine the relative
value of each if the two companies were combined as one entity. Financial
metrics included a comparison of revenues, EBIT, earnings, various margins,
assets, fixed assets, investment, employees, and growth rates. Based on this
analysis, Alliant Partners concluded that Entrada would represent on average a
49% share of the combined companies.
ENTRADA AS A PERCENTAGE OF FIBR MARKET VALUATION
In this analysis, Alliant Partners evaluated Entrada to determine its
percentage of the market valuation of Parent (NASDAQ: FIBR). In the months
preceding the transaction, Parent had seen its share price rise at an
exceptional rate, mainly due to the market appetite for Optical Networking
companies. To determine Entrada's share of the valuation of Parent, Alliant
Partners used a 20 day average share price of $105.51, (dates from March 13
through April 7, 2000) which translated to a market capitalization of
$1,052.59 million.
35
In determining the value of Entrada, Alliant Partners used three methods:
estimates from public investment research; percentage of revenues, based on the
Parent's management revenue estimates and industry growth rates; and a
conservative estimate of 1 X estimated fiscal year 2000 revenues. This analysis
produced an average value for Entrada of $37.1 million.
CONCLUSION
While the foregoing summary describes certain analyses and factors that
Alliant Partners deemed material in its presentation to the Sync board of
directors, it is not a comprehensive description of all analyses and factors
considered by Alliant Partners. The preparation of a fairness opinion is a
complex process that involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Alliant Partners believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all analyses and factors,
would create an incomplete view of the evaluation process underlying the Alliant
Opinion. Several analytical methodologies were employed and no one method of
analysis should be regarded as critical to the overall conclusion reached by
Alliant Partners. Each analytical technique has inherent strengths and
weaknesses, and the nature of the available information may further affect the
value of particular techniques. The conclusions reached by Alliant Partners are
based on all analyses and factors taken as a whole and also on application of
Alliant Partners' own experience and judgment. Such conclusions may involve
significant elements of subjective judgment and qualitative analysis. Alliant
Partners therefore gives no opinion as to the value or merit standing alone of
any one or more parts of the analysis it performed. In performing its analyses,
Alliant Partners considered general economic, market and financial conditions
and other matters, many of which are beyond the control of Sync and Entrada. The
analyses performed by Alliant Partners are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
those suggested by such analyses. Accordingly, analyses relating to the value of
a business do not purport to be appraisals or to reflect the prices at which the
business actually may be purchased. Furthermore, no opinion is being expressed
as to the prices at which shares of Sync common stock may trade at any future
time.
Pursuant to an engagement letter dated June 7, 1999, Alliant Partners
received a fee of $100,000 for the fairness opinion rendered to the Sync board
or directors. Sync has also agreed to reimburse Alliant Partners for its out of
pocket expenses and to indemnify and hold harmless Alliant Partners and its
affiliates and any person, director, employee or agent acting on behalf of
Alliant Partners or any of its affiliates, or any person controlling Alliant
Partners or its affiliates, for certain losses, claims, damages, expenses and
liabilities relating to or arising out of services provided by Alliant Partners
as financial advisor to Sync. The terms of the fee arrangement with Alliant
Partners, which Sync and Alliant partners believe are customary in transactions
of this nature, were negotiated at arm's length between Sync and Alliant
Partners, and the Sync board was aware of such fee arrangements.
Alliant Partners was retained based on Alliant Partners' experience as a
financial advisor in connection with mergers and acquisitions and in securities
valuations generally, as well as Alliant Partners' investment banking
relationship and familiarity with Sync. Alliant Partners has provided financial
advisory and investment banking services to Sync in the past.
As part of its investment banking business, Alliant Partners is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, sales and divestitures, joint ventures and strategic
partnerships, private financings and other specialized studies.
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PRIVATE PLACEMENT FINANCING; BRING-DOWN OF ALLIANT OPINION
Subsequent to the issuance of the initial fairness opinion by Alliant
Partners, Sync closed a private placement financing on May 12, 2000, in which
Entrada Holdings LLC ("Entrada Holdings"), purchased 700,000 shares of Series A
Preferred Stock from Sync for approximately $3.19 per share, which was the
average closing sale price of Sync stock for the ten days ended April 28, 2000.
An affiliate of Entrada Holdings is a shareholder of Parent. Sync raised a total
of $2,235,625 in cash in the private placement. The shares of Series A Preferred
Stock are convertible into shares of Sync common stock on a one-for-one basis,
and will be automatically converted into shares of Sync common stock on the
closing of the merger. Entrada Holdings may request that Sync register the
shares of Sync common stock issuable on the conversion of the Series A Preferred
Stock on a Form S-3 registration statement for resale in the public market at
any time after the earlier of: (i) ninety (90) days after the closing of the
merger, or (ii) May 12, 2001. If the merger has not closed by a specified date,
Entrada Holdings will receive certain protective provisions, including the right
to designate one member to Sync's board of directors for so long as a specified
percentage of the shares of Series A Preferred Stock are outstanding. In
connection with the private placement, Sync paid a fee equal to five percent
(5%) of the aggregate purchase price to Andersen Weinroth Capital Corp., an
investment firm affiliated with Entrada Holdings.
After careful consideration, the management of Sync has determined that,
notwithstanding the fact that the merger consideration payable by Sync to Parent
will increase by an additional 700,000 shares of Sync common stock as a result
of the private placement, the terms of the merger agreement and the merger
remain fair to, and in the best interests of, the stockholders of Sync. Alliant
Partners has provided Sync with an updated opinion, subsequent to the closing of
the private placement financing, to supplement its initial opinion regarding the
fairness, from a financial point of view, of the merger to the Sync
stockholders. Alliant Partners delivered to the Sync board of directors its
opinion dated , 2000 (the "Bring-Down Alliant Opinion"), confirming
that the private placement financing described above does not impact the
conclusion that the merger transaction is fair, from a financial point of view,
to the Sync stockholders. The full text of the Bring-Down Alliant Opinion is
attached hereto as Annex C and is incorporated herein by reference. STOCKHOLDERS
OF SYNC ARE URGED TO READ THE BRING-DOWN ALLIANT OPINION IN ITS ENTIRETY. THE
BRING-DOWN ALLIANT OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE SYNC
BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO STOCKHOLDERS OF
SYNC AS TO HOW THEY SHOULD VOTE AT THE ANNUAL MEETING IN CONNECTION WITH THE
MERGER. The summary of the Bring-Down Alliant Opinion set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the Bring-Down Alliant Opinion.
INTERESTS OF SYNC DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the Sync board of directors in favor of
the merger, stockholders of Sync should be aware that members of the Sync board
of directors and executive officers of Sync have interests in the merger that
are different from, or in addition to, the interests of stockholders of Sync.
Such interests relate to or arise from, among other things:
- all executive officers of Sync are parties to agreements that provide for
the partial vesting of any unvested options upon a change in control and
certain severance benefits if such executive officer is terminated
following a corporate transaction such as the merger
- Mr. Gregorio Reyes, the current Chairman of the Sync board of directors,
will remain as a director of Sync following the merger, and certain
current executive officers of Sync will remain as executives of Sync
following the merger
- Mr. Reyes is party to an agreement that provides for the full vesting of
any unvested options upon a change in control and certain severance
benefits if he is terminated following a corporate transaction such as the
merger.
37
Each of these additional interests are described below, to the extent
material, and except as described below these individuals have, to the knowledge
of Sync and Entrada, no material interest in the merger apart from those of
stockholders generally. The Sync board of directors was aware of, and considered
the interests of, their directors and executive officers in approving the merger
agreement and the merger.
BOARD OF DIRECTORS. Upon consummation of the merger, the board of directors
of Sync intends to increase the number of directors who sit on the board from
four to five, and to appoint Dr. Kanwar J.S. Chadha, currently the President of
Entrada and the intended Chief Executive Officer of Sync following the merger,
to fill such created vacancy. Further, it is the present intention of Sync and
Entrada to have Messrs. Guerry and Schroeder step down from the board upon
consummation of the merger, and be replaced by Leonard N. Hecht, currently a
director of Parent, and Rohit Phansalkar, currently a director of Parent and a
partner of Andersen Weinroth & Co. LP, affiliates of which own all of the
outstanding Series A Preferred Stock of Sync and are stockholders of Parent.
Therefore, assuming that the Sync stockholders authorize the issuance of Sync
common stock under the merger agreement for completion of the merger and elect
the slate of directors that the Sync board of directors has nominated, the board
of directors of Sync following the merger will consist of Gregorio Reyes,
currently the Chairman of Sync's board of directors, Dr. Chadha, Charles A.
Haggerty, currently a director of Sync, Mr. Hecht and Mr. Phansalkar.
EXECUTIVE OFFICERS. The Chief Executive Officer of Sync following the
merger will be Dr. Kanwar J.S. Chadha, who is currently the President of
Entrada. William K. Guerry, currently the Chief Executive Officer, President and
Chief Financial Officer of Sync, will be the Chief Operating Officer, Chief
Financial Officer and Vice President-Finance and Administration of Sync
following the merger. Anand Mehta, currently the Chief Technology Officer and
Vice President-Engineering of Entrada, will be the Chief Technology Officer and
Vice President-Engineering of Sync following the merger. Arthur Trakas,
currently the Executive Vice President-Sales and Marketing of Parent and
Entrada, will be the Vice President-Sales and Marketing of Sync following the
merger.
CHANGE IN CONTROL AGREEMENTS. Sync has entered into change in control
agreements with all of the executive officers and the Chairman of the board of
Sync. Pursuant to these agreements, 50% (100% in the case of Mr. Reyes) of each
officer's unvested options will become fully vested as a result of the merger.
In addition, if the employment of any officer is terminated within one year of
the merger other than for cause, the officer will become entitled to
- an amount equal to 100% of his annual salary, payable monthly for twelve
months (twenty-four months in the case of the Chief Executive Officer)
following the date of termination
- continued health, dental and life insurance coverage for twelve months
- have all remaining unvested Sync stock options vest at the same monthly
rate as prior to the merger and in accordance with the applicable stock
option plan.
ACCOUNTING TREATMENT
The merger will be accounted for as an acquisition of Sync by Entrada under
the "purchase" method of accounting in accordance with generally accepted
accounting principles.
APPRAISAL RIGHTS
Holders of Sync common stock are not entitled to dissenters' appraisal
rights under Section 262 of the Delaware General Corporation Law with respect to
the merger or the proposals to be considered at the Sync annual meeting.
38
FORM OF THE MERGER; NAME CHANGE
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, Sync Research
Acquisition Corp., a wholly-owned subsidiary of Sync formed for the purpose of
the merger which is a party to the merger agreement, will merge with and into
Entrada. Entrada will survive the merger as a wholly owned Delaware subsidiary
of Sync, and Sync will continue under the name "Entrada Networks, Inc."
MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of Entrada
common stock will be converted into the right to receive shares of Sync common
stock, except that treasury stock and stock held by Entrada or any subsidiary of
Entrada will be canceled. As of the effective time of the merger, all shares of
Entrada common stock will no longer be outstanding and will automatically be
canceled and will cease to exist and each holder of a certificate representing
any shares of Entrada common stock will cease to have any rights as a
stockholder except the right to receive Sync common stock in the merger. The
exchange ratio was determined through arm's-length negotiations between Sync and
Entrada.
CONVERSION OF SHARES
The conversion of Entrada common stock into the right to receive Sync common
stock will occur automatically at the effective time of the merger. After the
effective time of the merger, each certificate that previously represented
shares of Entrada common stock will represent only the right to receive the Sync
common stock into which such shares were converted in the merger. All shares of
Sync common stock issued upon conversion of shares of Entrada common stock will
be issued in full satisfaction of all rights relating to such shares of Entrada
common stock.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State or such later time as is agreed upon
by Sync and Entrada and specified in the certificate of merger. The filing of
the certificate of merger will occur as soon as practicable, but no later than
the second business day, after satisfaction or waiver of the conditions to the
completion of the merger described in the merger agreement unless another date
is agreed to in writing by Sync and Entrada.
STOCK EXCHANGE LISTING OF SYNC COMMON STOCK
It is a condition to the completion of the merger that Sync common stock
issuable to Parent in the merger be approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following are the material United States federal income tax consequences
of the merger to Sync and the Sync stockholders. The following discussion is
based on and subject to the Internal Revenue Code of 1986, its legislative
history, applicable Treasury regulations, administrative rulings and court
decisions currently in effect, all of which are subject to change at any time,
possibly with retroactive effect. For United States federal income tax purposes,
regardless of whether the merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, no gain or loss will be
recognized by Sync or the Sync stockholders as a result of the merger.
39
REGULATORY MATTERS
UNITED STATES ANTITRUST. Under the Hart-Scott-Rodino Act and related rules,
certain transactions, including the merger, may not be completed unless certain
waiting period requirements have been satisfied. Sync and Entrada each intend to
file soon a Notification and Report Form with the Antitrust Division of the
Department of Justice and the Federal Trade Commission, and expect the waiting
period to expire approximately thirty (30) days after such date of filing,
unless earlier terminated, or extended by a "second request" for additional
information and materials by the Antitrust Division or the Federal Trade
Commission. At any time before or after the effective time of the merger, the
Antitrust Division, the Federal Trade Commission or others could take action
under the antitrust laws, including seeking to prevent the merger, to rescind
the merger or to conditionally approve the merger upon the divestiture of
substantial assets of Sync or Entrada. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
GENERAL. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:
- Sync or Entrada will be able to satisfy or comply with such conditions
- compliance or non-compliance will not have adverse consequences for Sync
after completion of the merger
- the required regulatory approvals will be obtained within the time frame
contemplated by Sync and Entrada and referred to in this proxy
statement/prospectus or on terms that will be satisfactory to Sync and
Entrada.
See "The Merger Agreement--Conditions to the Completion of the Merger."
RESALE OF SYNC COMMON STOCK
Sync common stock issued in the merger to Parent will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except that,
because Parent is an "affiliate" of Sync under the Securities Act, the Sync
common stock issued to Parent as a result of the merger may be resold by Parent
only in transactions permitted by the resale provisions of Rule 144 under the
Securities Act or as otherwise permitted under the Securities Act. An affiliate
is defined generally as including, without limitation, directors, certain
executive officers and beneficial owners of 10% or more of a class of common
stock of a company.
40
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT. STOCKHOLDERS SHOULD READ CAREFULLY THE MERGER AGREEMENT, A COPY WHICH
IS ATTACHED AS ANNEX A TO THIS PROXY STATEMENT/ PROSPECTUS.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each party's obligation to effect the merger is subject to the satisfaction
or waiver of various conditions which include, in addition to other customary
closing conditions, the following:
- holders of a majority of the voting power of all outstanding shares of
Sync common stock having adopted the merger agreement
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Act having expired or been terminated
- no injunction, writ, preliminary restraining order or other order in
effect of any nature issued by a United States federal or state court or
governmental authority of competent jurisdiction being in effect that
would prevent the completion of the merger
- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, having become effective under the
Securities Act and not being the subject of any stop order or proceedings
seeking a stop order
- the shares of Sync common stock issuable to Parent in the merger having
been approved for listing on the Nasdaq National Market, subject to
official notice of issuance
- the representations and warranties of the other party set forth in the
merger agreement being true and correct as of the date of the merger
agreement and as of the date on which the merger is to be completed as
though made on and as of the date on which the merger is to be completed,
or, if such representations and warranties expressly relate to an earlier
date, then as of such date
- the other party to the merger agreement having performed and complied in
all material respects with all agreements and obligations required to be
so performed and complied with by it under the merger agreement on or
prior to the date on which the merger is to be completed
- the other party having obtained all material orders, consents, approvals,
permits, authorizations, notices, declarations, filings, applications,
qualifications and registrations necessary to complete the merger or
continue the business of the combined companies after the merger
Sync can provide no assurance that all of the conditions precedent to the
merger will be satisfied or waived by the party permitted to do so. Sync cannot
at this point determine whether it would resolicit proxies in the event that it
decides to waive any of the items listed above. This decision would depend upon
the facts and circumstances leading to Sync's decision to complete the merger
and whether Sync believes there has been a material change in the terms of the
merger and its effect on Sync stockholders. In making its determination, Sync
would consider, among other factors, the reasons for the waiver, the effect of
the waiver on the terms of the merger, whether the requirement being waived was
necessary in order to make the deal fair to the stockholders from a financial
point of view, the availability of alternative transactions and the prospects of
Sync as an independent entity. If Sync determines that a waiver of a condition
would materially change the terms of the merger, including the expected
qualification of the merger as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, it will resolicit proxies.
41
NO SOLICITATION
The merger agreement provides that Sync, Parent and its subsidiaries, and
the officers, directors, employees or other agents of Sync, Parent and its
subsidiaries, will not, directly or indirectly:
- take any action to solicit, initiate or encourage any takeover proposal,
as described below
- engage in negotiations with, or disclose any nonpublic information
relating to Sync or Entrada to, or afford access to the properties, books
or records of Sync or Entrada to, any person that has advised Sync,
Entrada or Parent that it may be considering making, or that has made, a
takeover proposal.
The merger agreement further provides that the term "takeover proposal"
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving Sync or Entrada, or the acquisition of any
significant equity interest in, or a significant portion of the assets of, Sync
or Entrada, other than the merger contemplated by the merger agreement.
Notwithstanding the restrictions described above, if an unsolicited takeover
proposal, or an unsolicited written expression of interest that can reasonably
be expected to lead to a takeover proposal, shall be received by the board of
directors of Sync or Parent, then, to the extent the board of directors of such
company believes in good faith (after consultation with its financial advisor)
that such takeover proposal would, if accepted, result in a transaction more
favorable to such company's stockholders from a financial point of view than the
merger contemplated by the merger agreement (any such more favorable takeover
proposal being referred to in the merger agreement as a "superior proposal"),
and the board of directors of such company determines in good faith after
consultation with outside legal counsel that it is necessary for such board of
directors to evaluate the superior proposal in order to comply with its
fiduciary duties to stockholders, such company and its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives retained by it may provide relevant information and take
such other actions as are consistent with the fiduciary obligations of its board
of directors, and such actions shall not violate the merger agreement; PROVIDED,
HOWEVER, that Sync and Parent shall not, and shall not permit any of their
respective officers, directors, employees or other representatives to, agree to
or endorse any takeover proposal regarding Sync or Entrada unless Sync or Parent
shall have
- terminated the merger agreement; and
- agreed to pay to the other party, without interest, the sum of $1,000,000
no later than thirty days after the closing of the transaction resulting
from the superior proposal.
Each of Sync and Parent will promptly notify the other after receipt of any
takeover proposal or any notice that any person is considering making a takeover
proposal or any request for nonpublic information relating to Sync or Entrada or
for access to the properties, books or records of Sync or Entrada by any person
that has advised Sync or Parent that it may be considering making, or that has
made, a takeover proposal and will keep Sync or Parent, as applicable, fully
informed of the status and details of any such takeover proposal notice or
request.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger:
- by the mutual consent of Sync and Parent
- by Sync, if the merger has not been completed by August 31, 2000, unless
the failure of the merger to occur is due to (i) a material breach by Sync
of any of its representations or warranties contained in the merger
agreement, or (ii) the breach or failure of Sync to comply in
42
all material respects with the agreements and covenants contained in the
merger agreement to be performed by Sync by August 31, 2000
- by Parent, if the merger has not been completed by August 31, 2000, unless
the failure of the merger to occur is due to (i) a material breach by
Entrada or Parent of any of their representations or warranties contained
in the merger agreement, or (ii) the breach or failure of Entrada or
Parent to comply in all material respects with the agreements and
covenants contained in the merger agreement to be performed by Entrada or
Parent by August 31, 2000
- by either Sync or Parent, if any court or governmental authority of
competent jurisdiction shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
merger and such order, decree or ruling or other action shall have become
final and nonappealable
- by either Sync or Parent, upon (i) receipt of an unsolicited proposal that
its board of directors determines in good faith to be superior to the
merger and (ii) agreement to pay to the other party, without interest, the
sum of $1,000,000 no later than thirty days after the closing of the
transaction resulting from the superior proposal
- by Sync, if the stockholders of Sync vote not to authorize the issuance of
Sync common stock for completion of the merger, provided that Sync pays
Parent a fee of $250,000 within thirty (30) days of such stockholder vote.
In the event of the termination of the merger agreement and the abandonment
of the merger by Sync or Parent, written notice of such termination must be
given to the other parties.
CONDUCT OF ENTRADA'S BUSINESS PRIOR TO THE MERGER
Under the merger agreement, Entrada and Parent have agreed that, except
(i) as otherwise expressly provided in the merger agreement or (ii) as consented
to by Sync in writing, from the date of the merger agreement and until the
effective time of the merger Parent and Entrada shall, and shall cause each of
its subsidiaries to:
- use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Entrada and its
subsidiaries and pay payables and collect receivables in a manner
consistent with past practice and otherwise operate Entrada and its
subsidiaries in the ordinary and regular course of business consistent
with past practice; (ii) maintain Entrada's and its subsidiaries' books
and records in accordance with past practices; (iii) keep available the
services of Entrada's and its subsidiaries' officers and employees; and
(iv) maintain satisfactory relationships with licensors, suppliers,
creditors, distributors, customers and others having material business
relationships with Entrada and its subsidiaries
- notify Sync of any change in the normal course of business or operations
of Entrada or its subsidiaries and of any governmental complaints,
investigations or hearings of which Entrada or its subsidiaries is
notified (or communications received by Entrada or its subsidiaries
indicating that the same may be contemplated), or the institution or
settlement of litigation or any claim, in each case involving Entrada or
its subsidiaries, and to keep Sync informed of such events;
- comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
In addition, under the merger agreement Entrada and Parent have agreed that,
except (i) as otherwise expressly provided in the merger agreement or (ii) as
consented to by Sync in writing, from
43
and after the date of the merger agreement and until the effective time of the
merger, neither Parent, Entrada nor any subsidiaries thereof shall:
- cause to be issued or sold any shares of capital stock or debt or equity
securities of Entrada or its subsidiaries or Entrada capital stock
equivalents or issue, grant or enter into any options, warrants, rights,
subscription agreements or commitments of any kind with respect thereto
- directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Entrada or its
subsidiaries
- declare, set aside or pay any dividend or other distribution
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or any Entrada
capital stock equivalents, other than pursuant to Entrada stock option
plans in accordance with their terms as in effect on the date hereof
- permit or allow Entrada or its subsidiaries to borrow or agree to borrow
any funds or incur, whether directly or by way of guarantee, any
obligation for borrowed money, other than in the ordinary course of
business and consistent with past practice
- subject any of the assets of Entrada or any of its subsidiaries (real,
personal or mixed, tangible or intangible) to any encumbrance or otherwise
permit or allow the sale, lease, transfer or disposition of any assets of
Entrada or its subsidiaries (real, personal or mixed, tangible or
intangible), other than in the ordinary course of business and consistent
with past practice
- assume, guarantee, or otherwise become responsible for the obligations of,
or make any loans or advances to, any other individual, firm or
corporation
- waive or release any rights of material value, or cancel, compromise,
release or assign any material indebtedness owed to Entrada or its
subsidiaries or any material claims held by Entrada or its subsidiaries
- except for capital expenditures not to exceed $5,000, make any investment
or expenditure of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise
- enter into any new material line of business
- cancel or terminate any insurance policy naming Entrada or its
subsidiaries as a beneficiary or a loss payable payee
- enter into any collective bargaining agreements
- increase the compensation or fringe benefits of any of the officers or
directors of Entrada or any of its subsidiaries or, other than in
accordance with past practice, effect any material general increase in the
compensation or fringe benefits of the employees of Entrada or any of its
subsidiaries or pay or agree to pay any pension, retirement allowance, or
other benefit not required by any existing employee benefit plan or any
bonus to any such officers or employees, commit Entrada or any of its
subsidiaries to any employment agreement or employee benefit plan with or
for the benefit of any of Entrada's or its subsidiaries' officers or
employees or any other person, or alter, amend, terminate in whole or in
part, or curtail or permanently discontinue contributions to, any pension
plan or any other employee benefit plan
- except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting practices or
principles used by Entrada or its subsidiaries
44
- enter into or terminate any license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement, or any
contract, agreement or transaction involving a total remaining commitment
of at least $25,000
- except as may be required by law, make any material tax election, make or
change any method of accounting with respect to taxes, file any amended
tax returns that may have a material adverse effect on the tax position of
Entrada or any of its subsidiaries or settle or compromise any material
federal, state, local or foreign tax liability
- enter into any "non-compete" or similar agreement
- amend the certificate of incorporation or bylaws of Entrada or any of its
subsidiaries
- take any action with knowledge that such action would reasonably be
expected to result in any of Sync's conditions to closing, as described in
the merger agreement, not being satisfied
- agree to do any of the foregoing.
CONDUCT OF SYNC'S BUSINESS PRIOR TO THE MERGER
Under the merger agreement, Sync has agreed that, except (i) as otherwise
expressly provided in the merger agreement or (ii) as consented to by Entrada in
writing, from the date of the merger agreement and until the effective time of
the merger Sync shall, and shall cause each of its subsidiaries to:
- use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Sync and its
subsidiaries and pay payables and collect receivables in a manner
consistent with past practice and otherwise operate Sync and its
subsidiaries in the ordinary and regular course of business consistent
with past practice; (ii) maintain Sync's and its subsidiaries' books and
records in accordance with past practices; (iii) keep available the
services of Sync's and its subsidiaries' officers and employees; and
(iv) maintain satisfactory relationships with licensors, suppliers,
creditors, distributors, customers and others having material business
relationships with Sync and its subsidiaries
- notify Entrada of any change in the normal course of business or
operations of Sync or its subsidiaries and of any governmental complaints,
investigations or hearings of which Sync or its subsidiaries is notified
(or communications received by Sync or its subsidiaries indicating that
the same may be contemplated), or the institution or settlement of
litigation or any claim, in each case involving Sync or its subsidiaries,
and to keep Entrada informed of such events
- comply in all material respects with all applicable laws, including,
without limitation, applicable environmental laws.
In addition, under the merger agreement Sync has agreed that, except (i) as
otherwise expressly provided in the merger agreement or (ii) as consented to by
Entrada in writing, from and after the date of the merger agreement and until
the effective time of the merger, neither Sync nor any of its subsidiaries
shall:
- cause to be issued or sold any shares of capital stock or debt or equity
securities of Sync or its subsidiaries or Sync capital stock equivalents,
except for the exercise of outstanding stock options, or issue, grant or
enter into any options, warrants, rights, subscription agreements or
commitments of any kind with respect thereto, except in the ordinary
course to non-executive employees of Sync
- directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Sync or its
subsidiaries
45
- declare, set aside or pay any dividend or other distribution
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock or any Sync
capital stock equivalents, other than pursuant to Sync stock option plans
in accordance with their terms as in effect on the date hereof
- permit or allow Sync or its subsidiaries to borrow or agree to borrow any
funds or incur, whether directly or by way of guarantee, any obligation
for borrowed money, other than in the ordinary course of business and
consistent with past practice
- subject any of the assets of Sync or any of its subsidiaries (real,
personal or mixed, tangible or intangible) to any encumbrance or otherwise
permit or allow the sale, lease, transfer or disposition of any assets of
Sync or its subsidiaries (real, personal or mixed, tangible or
intangible), other than in the ordinary course of business and consistent
with past practice
- assume, guarantee, or otherwise become responsible for the obligations of,
or make any loans or advances to, any other individual, firm or
corporation
- waive or release any rights of material value, or cancel, compromise,
release or assign any material indebtedness owed to Sync or its
subsidiaries or any material claims held by Sync or its subsidiaries
- except for (i) capital expenditures in the ordinary course of business and
(ii) capital expenditures not to exceed $5,000, make any investment or
expenditure of a capital nature either by purchase of stock or securities,
contributions to capital, property transfer or otherwise
- enter into any new material line of business
- cancel or terminate any insurance policy naming Sync or its subsidiaries
as a beneficiary or a loss payable payee
- enter into any collective bargaining agreements
- increase the compensation or fringe benefits of any of the officers or
directors of Sync or any of its subsidiaries or, other than in accordance
with past practice, effect any material general increase in the
compensation or fringe benefits of the employees of Sync or any of its
subsidiaries or pay or agree to pay any pension, retirement allowance, or
other benefit not required by any existing employee benefit plan to any
such officers or employees, commit Sync or any of its subsidiaries to any
employment agreement or employee benefit plan with or for the benefit of
any of Sync's or its subsidiaries' officers or employees or any other
person, or alter, amend, terminate in whole or in part, or curtail or
permanently discontinue contributions to, any pension plan or any other
employee benefit plan
- except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting practices or
principles used by Sync or its subsidiaries
- enter into or terminate any license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement, or any
contract, agreement or transaction involving a total remaining commitment
of at least $25,000
- except as may be required by law, make any material tax election, make or
change any method of accounting with respect to taxes, file any amended
tax returns that may have a material adverse effect on the tax position of
Sync or any of its subsidiaries or settle or compromise any material
federal, state, local or foreign tax liability
- enter into any "non-compete" or similar agreement
- amend the certificate of incorporation or bylaws of Sync or any of its
subsidiaries
46
- take any action with knowledge that such action would reasonably be
expected to result in any of Entrada's conditions to closing, as described
in the merger agreement, not being satisfied
- agree to do any of the foregoing.
AMENDMENT; WAIVER
Subject to applicable law
- the merger agreement may be amended by the parties in writing at any time,
except that after the merger agreement has been adopted by the
stockholders of Sync, no amendment may be entered into which requires
further approval by Sync stockholders unless such further approval is
obtained
- at any time prior to the effective time of the merger, a party may, by
written instrument signed on behalf of such party, waive inaccuracies in
representations and warranties of any other party contained in the merger
agreement or in any related document and except as provided in the merger
agreement, waive compliance by any other party with any agreements or
conditions in the merger agreement.
Under Section 251(d) of the Delaware General Corporation Law, no amendment
to the merger agreement made after the adoption of the merger agreement by the
stockholders of Sync may, without further stockholder approval, alter or change
the amount or kind of shares, securities, cash, property and/or rights to be
received by Sync stockholders in the merger, or alter or change any terms and
conditions of the merger agreement if such alteration or change would adversely
affect the holders of any class or series of stock of Sync.
FEES AND EXPENSES
Whether or not the merger is completed, all fees and expenses incurred in
connection with the merger and the merger agreement will be paid by the party
incurring such fees or expenses, except as otherwise provided in the merger
agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by
Sync and Entrada relating to, among other things:
- corporate organization and similar corporate matters
- capital structure
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters
- financial statements
- no undisclosed liabilities
- compliance with applicable laws and required consents, approvals, orders
and authorizations of governmental authorities relating to the merger
agreement
- outstanding and pending material litigation
- good and valid title to assets
- absence of material changes or events
- filing of tax returns and payment of taxes
47
- absence of changes in benefit plans, and matters relating to the Employee
Retirement Income Security Act
- labor relations
- intellectual property
- material contracts
- environmental matters
- insurance policies and any pending claims under such policies
- material customers and suppliers
- title to properties
- Investment Company Act status
- product liability claims
- financial books and records
- engagement and payment of fees of brokers, investment bankers, finders and
financial advisors
- documents filed by Sync with the Securities and Exchange Commission and
the accuracy of information contained in such documents
48
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
Sync's common stock is listed on the Nasdaq Stock Market and trades under
the symbol SYNX. The following table presents the high and low closing sale
prices for Sync's common stock as reported in the Nasdaq National Market for the
periods indicated.
HIGH LOW
-------- --------
1999
Q1........................................................ $ 6.56 $ 2.97
Q2........................................................ 3.59 1.87
Q3........................................................ 2.75 1.94
Q4........................................................ 3.25 2.19
1998
Q1........................................................ 19.38 11.71
Q2........................................................ 20.31 10.44
Q3........................................................ 19.38 6.88
Q4........................................................ 7.81 3.56
On April 10, 2000, the last trading day prior to the announcement by Sync
and Entrada that they had reached an agreement concerning the merger, the
closing sales price of Sync common stock as reported on the Nasdaq National
Market was $3.125 per share. The equivalent per share value of Entrada common
stock as of such date was approximately $13,222. On May 12, 2000, the closing
sale price of Sync common stock as reported on the Nasdaq National Market was
$3.50 per share. Based on the May 12, 2000, closing sale price of Sync common
stock, the equivalent per share value of Entrada common stock as of such date
was approximately $14,808.
As of May 4, 2000, there were 213 stockholders of record of Sync common
stock, and Sync believes there were approximately 2,936 beneficial owners of
Sync common stock.
Following the merger, Sync common stock will continue to be traded on the
Nasdaq National Market. Sync is in the process of applying for a new trading
symbol to take effect upon the consummation of the merger.
Neither Sync nor Entrada has ever paid cash dividends on its capital stock.
Sync's bank line of credit prohibits Sync from paying cash dividends without the
bank's prior written consent. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will be dependent upon
the combined companies' financial condition, results of operations, capital
requirements and such other factors as the board of directors deems relevant.
49
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements assume the transaction between Sync and Entrada will be accounted for
as an acquisition of Sync by Entrada and are based upon the respective
historical financial statements and notes thereto of Entrada, which are included
in this proxy statement/prospectus, and the historical financial statements and
notes thereto of Sync, which are incorporated by reference in this proxy
statement/prospectus. The following Pro Forma Condensed Consolidated Statement
of Operations for the fiscal year ended January 31, 2000 present unaudited pro
forma operating results for Entrada as if the transaction between Entrada and
Sync had occurred as of the beginning of the period presented. The following Pro
Forma Condensed Consolidated Balance Sheet presents the unaudited pro forma
financial condition of Entrada as if the merger and Sync's May 12, 2000
Series A preferred stock private placement had occurred as of January 31, 2000.
The unaudited pro forma adjustments are described in the accompanying notes. The
carrying values of Sync's net assets are assumed to equal their fair values for
purposes of these unaudited pro forma financial statements, unless indicated
otherwise in the accompanying notes. These values are subject to revision.
However, Sync management believes that any resulting adjustments will not have a
material effect on the financial position or results of operations.
The unaudited pro forma financial information presented does not consider
any future events which may occur after the merger. The unaudited pro forma
financial information presented does not attempt to quantify any operating
expense synergies or cost reductions of the consolidated operations of Sync and
Entrada that may be realized after the merger. The unaudited pro forma financial
information does not consider the incremental expense, capital or conversion
costs which may be incurred as a result of the merger.
THE UNAUDITED PRO FORMA FINANCIAL INFORMATION IS PRESENTED FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS OR
FINANCIAL POSITION THAT WOULD HAVE OCCURRED HAD THE MERGER BEEN CONSUMMATED AT
THE DATES INDICATED, NOR IS IT NECESSARILY INDICATIVE OF FUTURE OPERATING
RESULTS OR FINANCIAL POSITION OF THE CONSOLIDATED COMPANIES FOLLOWING THE
MERGER.
These unaudited pro forma condensed consolidated financial statements should
be read in conjunction with, the historical consolidated financial statements
and the related notes thereto of Sync and Entrada.
50
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
HISTORICAL PRO FORMA
--------------------------------- --------------------------
SYNC RESEARCH, INC. ENTRADA
AS OF AS OF
DECEMBER 31, JANUARY 31,
1999 2000 ADJUSTMENTS CONSOLIDATED
------------------- ----------- ----------- ------------
Current Assets
Cash and cash equivalents............... $ 8,632 $ 112 $ 2,061 $10,805
Accounts receivable, net................ 3,173 5,919 -- 9,092
Due from affiliate...................... -- 753 -- 753
Inventories, net........................ 5,140 6,041 -- 11,181
Prepaid expenses and other current
assets................................ 565 563 -- 1,128
------- ------- ------- -------
Total current assets.................. 17,510 13,388 2,061 32,959
Furniture, fixtures and equipment, net.... 1,632 1,384 (343) 2,673
Other assets.............................. 55 1,772 -- 1,827
------- ------- ------- -------
Total assets.............................. $19,197 $16,544 $ 1,718 $37,459
======= ======= ======= =======
Current Liabilities
Accounts payable........................ $ 1,769 $ 4,381 $ 900 $ 7,050
Accrued compensation and benefits....... 736 745 -- 1,481
Deferred revenue and customer
deposits.............................. 3,048 317 -- 3,365
Other accrued liabilities............... 297 1,160 -- 1,457
Short-term debt......................... -- 2,264 -- 2,264
Current portion of capitalized lease
obligations........................... 49 312 361
------- ------- ------- -------
Total current liabilities............. 5,899 9,179 900 15,978
Capitalized lease obligations and
long-term debt.......................... 7 302 -- 309
Amount due to Parent...................... -- 21,769 (21,769) --
Stockholders' Equity
Common stock............................ 4 1 3 8
Additional paid-in capital.............. 71,958 5,761 (35,387) 42,332
Accumulated deficit..................... (58,671) (20,468) 57,971 (21,168)
------- ------- ------- -------
Total stockholders' equity
(deficit)........................... 13,291 (14,706) 22,587 21,172
------- ------- ------- -------
Total liabilites and stockholders' equity
(defict)................................ $19,197 $16,544 $ 1,718 $37,459
======= ======= ======= =======
See accompanying notes.
51
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
On April 10, 2000, Sync, Sync Research Acquisition Corp., a wholly-owned
subsidiary of Sync, Osicom Technologies, Inc., a New Jersey corporation
("Parent"), and Osicom Technologies, Inc., doing business as Entrada Networks, a
Delaware corporation and wholly-owned subsidiary of Parent ("Entrada" or
"Osicom"), entered into an Agreement and Plan of Merger (the "Agreement"). The
merger is expected to be accounted for as an acquisition of Sync by Entrada
using the purchase method of accounting.
A. ACCOUNTING PERIODS
The unaudited pro forma condensed consolidated financial statements include
the results of operations and financial position of Entrada and Sync for the
years ended and as of January 31, 2000 and December 31, 1999, respectively and
were derived from audited financial statements as of and for the fiscal year
ended January 31, 2000 and December 31, 1999, respectively.
52
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
B. PRO FORMA ADJUSTMENTS
The following table reflects a detailed breakdown of the pro forma
adjustments in the Unaudited Pro Forma Condensed Consolidated Balance Sheet:
UNAUDITED PRO FORMA ADJUSTMENTS (IN THOUSANDS)
PRIVATE TRANSACTION
PLACEMENT(A) MERGER(B) COSTS(C) TOTAL
------------ --------- ----------- --------
Current Assets
Cash and cash equivalents....................... $2,061 $ -- $ -- $ 2,061
Accounts receivable, net........................ -- -- -- --
Due from affiliate.............................. -- -- -- --
Inventories, net................................ -- -- -- --
Prepaid expenses and other current assets....... -- -- -- --
------ -------- ----- --------
2,061 -- -- 2,061
Furniture, fixtures and equipment, net............ -- (543) 200 (343)
Other assets...................................... -- -- -- --
------ -------- ----- --------
Total assets...................................... $2,061 $ (543) $ 200 $ 1,718
====== ======== ===== ========
Current Liabilities
Accounts payable................................ $ -- $ -- $ 900 900
Accrued compensation and benefits............... -- -- -- --
Deferred revenue and customer deposits.......... -- -- -- --
Other accrued liabilities....................... -- -- -- --
Short-term debt................................. -- -- -- --
Facility consolidation and severance............ -- -- -- --
Current portion of capitalized lease
obligations................................... -- -- -- --
------ -------- ----- --------
-- -- 900 900
Capitalized lease obligations and long-term
debt............................................ -- -- -- --
Amount due to Parent.............................. -- (21,769) -- (21,769)
Stockholders' Equity
Common stock.................................... 2 1 -- 3
Additional paid-in capital...................... 2,059 (37,446) -- (35,387)
Accumulated deficit............................. -- 58,671 (700) 57,971
------ -------- ----- --------
Total stockholders' equity (deficit).......... 2,061 21,226 (700) 22,587
------ -------- ----- --------
Total liabilities and stockholders' equity
(deficit)....................................... $2,061 $ (543) $ 200 $ 1,718
====== ======== ===== ========
- ------------------------
(a) On May 12, 2000, Sync completed a private placement of newly issued
Series A Preferred Stock for an aggregate price of $2,235,625. All such
shares will be automatically converted into Sync common stock upon the
completion of the merger. Accordingly, the private placement, net of
offering costs estimated to be approximately $175,000, has been reflected in
the accompanying pro forma condensed consolidated balance sheet as if the
transaction occurred at January 31, 2000.
53
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
B. PRO FORMA ADJUSTMENTS (CONTINUED)
(b) The Agreement specifies that all of Entrada's outstanding common stock will
be cancelled in exchange for shares of Sync common stock. The number of
shares of Sync common stock to be issued in exchange for Entrada's
outstanding common stock will equal the amount of shares of Sync common
stock outstanding at closing. Based upon the number of shares outstanding on
May 12, 2000, the date of the completion of the private placement discussed
in footnote (a), the number of shares to be issued in connection with the
merger would have been 4,231,007. The pro forma condensed consolidated
balance sheet reflects the allocation of approximately $14.8 million to
Sync's assets and liabilities based upon a value of $3.50 per share, the
closing price of Sync's common stock on the Nasdaq National Market on
May 12, 2000. The excess of the net book value of Sync's net assets as of
the pro forma balance sheet date over such purchase price, approximately
$0.5 million, has been reported as a reduction in the carrying value of
furniture, fixtures and equipment.
In connection with the merger, the outstanding intercompany payable from
Entrada to Parent will be contributed by Parent as an equity contribution.
This contribution has been reflected in the accompanying pro forma condensed
consolidated balance sheet.
(c) Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have
been included in the estimated purchase price reflected in the pro forma
condensed consolidated balance sheet.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for
investment banking, filings with regulatory agencies, legal, accounting,
financial printing and other related costs. These transaction costs will be
expensed within the twelve month period following January 31, 2000 as they
are incurred by Sync and have been reflected as a liability in the pro forma
condensed consolidated balance sheet.
(d) Sync and Entrada expect to incur certain expenses in connection with the
restructuring and consolidation of the operations of the consolidated
companies including, but not limited to, costs related to the closure and
elimination of duplicate leased facilities and write-offs of related fixed
assets, write-off of discontinued products, and severance costs. Sync and
Entrada anticipate that the ultimate integration activities will result in
increased efficiencies and lower operating costs. These activities have not
been formalized, therefore, the amount of such expenses is not currently
estimable with a reasonable degree of accuracy. Accordingly, no liability
for these expenses has been included in the unaudited pro forma condensed
consolidated balance sheet.
54
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA
---------------------------- --------------------------
SYNC RESEARCH ENTRADA
YEAR ENDED YEAR ENDED
DECEMBER 31, JANUARY 31,
1999 2000 ADJUSTMENTS CONSOLIDATED
------------- ------------ ----------- ------------
Net sales..................................... $18,152 $28,771 $ -- $46,923
Cost of sales................................. 9,905 17,498 -- 27,403
------- ------- ----- -------
Gross profit................................ 8,247 11,273 -- 19,520
Research and development...................... 5,503 6,223 -- 11,726
Selling and marketing......................... 5,136 5,647 -- 10,783
General and administrative.................... 2,284 2,177 (114) 4,347
------- ------- ----- -------
Total operating expenses.................... 12,923 14,047 (114) 26,856
Loss from operations.......................... (4,676) (2,774) 114 (7,336)
Other income (expense)........................ 408 (613) -- (205)
------- ------- ----- -------
Loss before income taxes.................... (4,268) (3,387) 114 (7,541)
------- ------- ----- -------
Provision for income taxes.................... 6 -- -- 6
------- ------- ----- -------
Net loss...................................... $(4,274) $(3,387) $ 114 $(7,547)
======= ======= ===== =======
Net loss per share, basic and diluted......... $ (1.22) $ (0.90)
======= =======
Shares used in computation of net loss per
share, basic and diluted.................... 3,493 8,424
See accompanying notes.
55
SYNC RESEARCH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
On April 10, 2000, Sync, Sync Research Acquisition Corp., a wholly-owned
subsidiary of Sync, Osicom Technologies, Inc., a New Jersey corporation
("Parent"), and Osicom Technologies, Inc., doing business as Entrada Networks, a
Delaware corporation and wholly-owned subsidiary of Parent ("Entrada" or
"Osicom"), entered into an Agreement and Plan of Merger (the "Agreement"). The
merger is expected to be accounted for as an acquisition of Sync by Entrada
using the purchase method of accounting.
A. ACCOUNTING PERIODS
The unaudited pro forma condensed consolidated financial statements include
the results of operations and financial position of Entrada and Sync for the
years ended and as of January 31, 2000 and December 31, 1999, respectively and
were derived from audited financial statements as of and for the fiscal year
ended January 31, 2000 and December 31, 1999, respectively.
B. MERGER COSTS
Parent expects to incur direct transaction costs of approximately $200,000
consisting primarily of legal and accounting costs. These direct costs have been
included in the purchase price allocation.
Sync estimates it will incur direct transaction costs of approximately
$700,000 associated with the merger, consisting primarily of fees for investment
banking, filings with regulatory agencies, legal, accounting, financial printing
and other related costs. These non-recurring transaction costs will be expensed
as they are incurred by Sync and have been excluded from the pro forma condensed
consolidated statement of operations.
Sync and Entrada expect to incur in the twelve months following the closing
of the merger, certain expenses in connection with the restructuring and
consolidation of the operations of the consolidated companies including, but not
limited to, costs related to the closure and elimination of duplicate leased
facilities and write-offs of related fixed assets, write-off of discontinued
products, and severance costs. Sync and Entrada anticipate that the ultimate
integration activities will result in increased efficiencies and lower operating
costs. These activities have not been formalized, therefore, the amount of such
expenses is not currently estimable with a reasonable degree of accuracy.
Accordingly, no estimate of such expense is reflected in the unaudited pro forma
condensed consolidated statement of operations.
C. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the condensed consolidated statement
of operations represent the amortization of a $343,000 reduction to the carrying
value of Sync's long-term assets, utilizing a 3 year estimated remaining useful
life, attributable to the excess of the net identifiable assets and liabilities
over the purchase price of Sync.
D. EARNINGS PER SHARE
The pro forma consolidated weighted average common share amounts reflected
in the unaudited pro forma condensed consolidated statements of operations
represent the aggregate of the historical weighted average common shares of Sync
outstanding during the year ended December 31, 1999 plus 4,231,007 shares
expected to be issued to Parent in connection with the merger, based upon the
number of shares outstanding on May 12, 2000 shares, 700,000 shares of common
stock to be issued in connection with the conversion of Sync's outstanding
Series A preferred stock which Sync issued in May 2000, and the dilutive effect,
if any, of common stock equivalents outstanding as calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share.
56
BUSINESS OF ENTRADA
DESCRIPTION OF BUSINESS
Entrada, based in Annapolis Junction, Maryland, designs, manufactures and
markets products that provide access to and enhance the performance of data and
telecommunications networks, and is currently developing products that provide
connectivity for storage networks. Many of Entrada's products are incorporated
into the remote access and other server products of original equipment
manufacturers ("OEMs"). In addition, certain of Entrada's products are deployed
by telecommunications network operators, applications service providers,
internet service providers, and the operators of corporate local area and wide
area networks for the purpose of providing access to and transport within their
networks. Entrada was incorporated in Delaware in 1972, and it operates in one
business segment, with primary facilities in Annapolis Junction, Maryland and
Westborough, Massachusetts.
ENTRADA'S STRATEGIC PLAN
- DEVELOP PRODUCTS FOR STORAGE AREA NETWORKS. One of the most rapidly
growing segments of the market for networking equipment is the market for
storage area networks. Storage area networks are used to provide data
warehousing and clustering, remote backup, disaster recovery, near online
storage and a variety of other operations on stored data that are better
performed when that data is archived in locations physically near to
users, or connected to users via optical networks. The industry standard
for transmitting data to and within storage area networks is Fibre
Channel, a protocol or format for transmitting data over copper wire or
fiber optic cable. In 1999, Entrada began developing Fibre Channel
products to address the needs of storage area networks. Entrada's first
Fibre Channel and storage networking products are expected to be available
for sale during the third quarter of calendar 2000. Entrada believes that
it will be able to leverage its experience in data networking in order to
develop and sell Fibre Channel products to the storage area networking
market.
- FOCUS ON LAN CONNECTIVITY PRODUCTS. Entrada's current products include
network interface (or "adapter") cards which allow computers, servers,
load balancers and other devices to connect to a local area network
("LAN"). These network interface cards generally support the widely-
employed Fast Ethernet protocol, and have achieved acceptance among
several of the server and other OEMs to whom Entrada plans to market and
sell its Fibre Channel products. Entrada plans to focus its product
offerings on its LAN adapters while it develops new products for the
storage area networking market.
- FOCUS ON ORIGINAL EQUIPMENT MANUFACTURERS (OEMS). Entrada currently sells
its LAN products directly to OEMs, while its other networking products are
generally sold to end-users through distributors and network systems
integrators. In order to maintain the continuity of its relationships with
its OEMs while it develops its Fibre Channel products, Entrada plans to
continue to focus most of its sales and marketing efforts on the OEM
channel.
MARKETS FOR ENTRADA'S PRODUCTS
Entrada's products address the growing connectivity needs for networked,
high bandwidth data and voice communications. The networking industry has
experienced dramatic growth since the early 1990's as corporations discovered
increasing value in connecting desktop devices through local area networks. The
emergence of the Internet and the cultural movement toward wireless and home
computing in the 1990's further accelerated this trend. Entrada's products
address the demand for connectivity solutions in the traditional data networking
markets and the emerging market for storage area networking. There can be no
assurance that any of the projections cited in the following discussion
regarding the growth of traditional data networking markets or of the storage
area networking market will prove accurate,
57
and Sync stockholders should not rely on such projections in evaluating the
business of Entrada or the combined companies.
STORAGE AREA NETWORKING MARKET
The technology behind storage area networks is similar to that of LANs and
WANs. Storage area networks are essentially separate local area networks that
consist of servers, storage devices (such as disc drives) and the networking
equipment used to connect and route traffic among them. These devices include
adapters, hubs, switches and routers supporting the Fibre Channel standard.
Storage area networks create a shared storage resource that is readily
available, highly scalable and designed to be easily protected and managed.
While storage area networks are not new, Entrada believes that trends
already under way will move them into the mainstream of distributed networking
and that they will become the standard way of accessing stored information. A
report by Dataquest, an Information Technology ("IT") market research and
consulting firm, projects sales of the networking equipment used to build
storage area networks to reach $1.8 billion by 2002, representing a cumulative
annual growth rate of 88%. Strategic Research, a market research firm
specializing on the storage and network storage markets, projects that storage
area networks will represent approximately 50% of all sales of non-mainframe
storage arrays (such as disc drives) in 2000. In addition, the S.G.
Cowen-Datamation 2000 Computer Systems User Survey, conducted by the securities
and investment banking firm of S.G. Cowen and EarthWeb's datamation.com, a
publication for the IT industry, reported that in 1999, 42% of all enterprises
surveyed were planning to deploy storage area networks.
IDC (International Data Corporation), a provider of analysis and market data
for the IT industry, projects that the amount of disk storage capacity being
shipped by vendors will grow by 86% per year over the next three years, from
116,000 terabytes in 1998 to 1.4 million terabytes in 2002. IDC projects storage
capacity based on the UNIX operating system to grow 76% annually to nearly
460,000 terabytes in 2002 and storage capacity based on the Windows NT operating
system to increase by 114% annually to more than 610,000 terabytes in 2002. The
Yankee Group, a research and consulting firm which focuses on e-business, the
Internet, and enterprise applications, reports that storage is now the biggest
line item in the IT budgets of corporations interviewed.
ENTRADA'S PRODUCT DEVELOPMENT APPROACH
The goal of any storage system is to allow users to retrieve information
quickly, easily and reliably. There are five major capabilities that a storage
solution must provide:
- CONNECTIVITY. Storage systems must provide access to the data and
applications that users need.
- AVAILABILITY AND FAULT TOLERANCE. Storage systems must allow continuous
access to their data, even if one or more components fail.
- PERFORMANCE. Storage systems must provide high performance and be
scalable.
- INTEGRITY. Storage systems must protect their data to ensure its accuracy
and reliability.
- MANAGEABILITY. Network operators must be able to manage their storage
systems using the traditional tools of network management (such as network
management software).
Entrada is designing its storage area networking to be in conformity with
these requirements.
58
PRODUCTS
FIBRE CHANNEL PRODUCTS
Entrada's Fibre Channel products under development leverage its skills and
know-how gained from providing LAN and WAN connectivity to traditional data
networks. These products also address the same or similar OEM customer base for
Entrada's LAN products.
Entrada is currently developing two product lines designed to meet the needs
of storage area networks, and it plans to introduce additional product lines in
the future. The first of these products are expected to be available for sale
during the third quarter of calendar 2000. Each of the two product lines under
current development supports the Fibre Channel protocol, which Entrada's believe
will become the standard protocol for storage area networks.
FIBRE CHANNEL HOST BUS ADAPTERS
Entrada is currently developing a family of Fibre Channel Host Bus Adapters
("HBA's") for the storage area networks market. HBA's are installed in servers
and workstations, and provide the interface to the Fibre Channel network in much
the same way as our LAN adapters provide an interface to the Ethernet network.
Entrada expects that its HBA product line will include 1 Gigabit and 2 Gigabit
per second data transfer rate products for a variety of computer bus types.
FIBRE CHANNEL HUBS
Entrada is also developing a family of Fibre Channel hubs, which are used
for insertion and removal of devices on a Fibre Channel loop and for efficient
network management. Entrada plans to offer both entry-level and managed models
in a variety of port configuration options. Entrada expects that its hub product
line will include 1 Gigabit and 2 Gigabit per second data transfer rates
products.
LAN ADAPTERS
In the fiscal year ended January 31, 2000, 52% of Entrada's revenues were
derived from the sale of its line of high performance Local Area Network adapter
cards to OEMs. These adapter cards are used in a variety of products, including
high availability telecommunications equipment, Transmission Control
Protocol/Internet Protocol ("TCP/IP") load balancing routers, and remote access
servers. Entrada's LAN adapters are also used in a variety of industrial control
applications. Entrada's key products in this category consist of 10/100 Fast
Ethernet Adapters in both Peripheral Component Interconnect ("PCI") Bus
Specification and PCI Mezzanine Card ("PMC") form factors or sizes.
SERIES 2400 FAST ETHERNET ADPATERS
The 2404 is a high performance, quad-port 10/100 adapter that provides four
separate Fast Ethernet ports on a single PCI card, extending the local bus with
a PCI-to-PCI bridge and reducing the PCI bus load. The product is based on the
widely-used Intel media access controller ("MAC") and provides 64-bit data
transfer.
SERIES 2350 FAST ETHERNET ADAPTERS
The 2350 PMC adapter provides a single 10/100 port in the convenient PMC
form factor. The PMC form factor allows the card to be used in systems that are
based on both the VME industrial bus standard and the emerging Compact PCI bus
standard. Since drivers can easily be ported between these formats, the cards
can be used commonly by system OEMs.
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SERIES 2450 FAST ETHERNET ADAPTERS
Using the feature rich and power-efficient Intel MAC, both the single-port
2451 and dual-port 2452 adapter offer low-profile RJ-45 front panel connectors
which eliminate the need for transition cables. The 2450 series adapters fully
support IEEE 802.3u and are compatible with PCI-SIG v2.1 and PICMG v2.1.
SERIES 2200 AND 2250 FIBER DISTRIBUTED DATA INTERFACE ("FDDI") ADAPTERS
Entrada provides adapters for high-performance, high-reliability networking
using the FDDI protocol in the PCI (2200) and PMC (2250) form factors. Both
models are offered in single attach station and dual attach station versions,
and are available in a number of media and connector options. Entrada believes
that this product is in the final stages of its marketable life.
GIGABIT ETHERNET ADAPTERS
Entrada is developing a series of LAN Adapters that support the growing
market for Gigabit Ethernet connectivity. The 2500 Series Gigabit Ethernet
Adapters will provide 10/100/1000 Mbps data transmission speeds, which will
offer existing 10/100 customers a convenient migration path to Gigabit Ethernet.
Entrada plans to introduce dual port Gigabit Ethernet PCI adapters and single
port PMC adapters in both copper media (1000-TX) and multimode fiber media
(1000-SX) versions. These products are expected to be available for sale during
the third quarter of calendar 2000.
SALES AND MARKETING
Entrada's sales organization at January 31, 2000 consisted of approximately
28 individuals, including managers, sales representatives, and support
personnel. Entrada's sales organization addresses the needs of customers by
focusing on major accounts and indirect channels. Major accounts includes
telecommunications service providers, internet service providers, government
customers and original equipment manufacturers. Entrada's indirect channels are
comprised of system integrators, distributors, resellers and value added
resellers. Entrada supports its customers by providing product training, regular
mailing of promotional and technical material, telephone and other technical
support.
The goal of Entrada's marketing effort is to identify market dynamics and
translate these dynamics into strategic product development plans. Entrada's
marketing staff identifies product and vertical market segment opportunities and
provides to its sales force the tools, training, and pre-sales support it
requires to exploit the identified opportunities. Entrada's marketing staff also
engages in a number of marketing communication activities, and it participates
in cooperative marketing programs, including advertising, trade shows and
seminars.
CUSTOMERS AND MARKETS
Entrada's customer base is concentrated in the telecommunications and
networking equipment industries. With the exception of two customers, none of
Entrada's customers has accounted for ten percent or more of its net sales. One
customer accounted for 19.4% of net sales for the year ended January 31, 2000
and 1.0% of net sales for the year ended January 31, 1999. This customer
accounted for 4.4% and 2.3% of net receivables at January 31, 2000 and
January 31, 1999, respectively. A second customer accounted for 13.7% of net
sales for the year ended January 31, 2000 and 1.3% of net sales for the year
ended January 31, 1999. This customer accounted for 8.6% and 0% of net
receivables at January 31, 2000 and January 31, 1999, respectively. Two
customers accounted for 39.4% and 9.6% of net receivables, respectively, at
January 31, 2000. These two customers accounted for 29.7% and 10.0% of net
receivables, respectively, at January 31, 1999. A third customer accounted for
18.7% of net sales for the year ended January 31, 2000 and 16.3% of net sales
for the year ended January 31, 1999. This customer accounted for 39.4% and 29.7%
of net receivables at January 31, 2000 and January 31, 1999,
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respectively. Five customers represented 68% and 60% of accounts receivable at
January 31, 2000 and 1999, respectfully.
Entrada's strategy addresses the following three customer profiles:
- ORIGINAL EQUIPMENT MANUFACTURERS. Original Equipment Manufacturers
("OEMs") develop and sell solutions that incorporate Entrada LAN and WAN
products to provide connectivity to networks, including storage area
networks, local area networks and wide area networks. In addition to the
revenues Entrada may achieve directly by having its connectivity solutions
incorporated into the products of major networking OEMs, Entrada believes
that the incorporation of its technology into the products of major
networking OEMs can have an indirect positive impact on the adoption of
Entrada's technology, and therefore the sales of its stand-alone products.
- SERVICE PROVIDERS. These customers provide communication services and
primarily include telecommunication carriers, applications service
providers and internet service providers. Entrada believes that in the
future, these service providers will add data storage to the
telecommunications services they currently offer to their subscribers.
- SYSTEM INTEGRATORS. Networks are frequently provided to enterprises by
system integrators who bring together all of the technology pieces
required to build a network, and who organize those pieces into a logical
architecture. In the frequent instance that the selection of specific
equipment types is made by the system integrator, the system integrator
(and not the enterprise for which the network is being constructed) is the
customer to vendors of network equipment.
CUSTOMER SERVICE AND SUPPORT
Entrada's customer service organization is structured to assist both systems
integrators and its major OEM accounts. In addition to the product design,
integration and troubleshooting support Entrada supplies to its OEM customers,
it generally provides training and sales support to its system integrator
customers.
Post-sales support for all of Entrada's customers includes its product
warranty against defects in material and workmanship. The length of product
warranties varies by product, from 12 months in some instances, to 60 months for
a broad range of products, and up to lifetime warranties for certain selected
products. Telephone technical support programs for hardware and software
generally cover the first 12 months from purchase. On-site support and shared
support agreements are designed to provide a high level of service to fulfill a
broad spectrum of customer needs.
RESEARCH AND DEVELOPMENT
The goal of Entrada's research and development efforts is to achieve
technological advances which will allow it to introduce innovative products to
market. Product introduction is driven by a combination of rapidly evolving
technology and standards, as well as changing customer requirements. Entrada's
marketing staff works closely with its engineering staff, performing continuous
evaluations of customer needs, emerging trends and technical challenges in order
to identify new market opportunities. Entrada's research and development program
focuses on the combining of various proprietary technologies into a single,
common, standards-based platform. Entrada believes that its ability to introduce
new products on a timely basis depends upon its ability to maintain
sophisticated technology research programs while simultaneously focusing on
their practical application to its customers' strategic requirements.
As of January 31, 2000, there were 21 employees and 12 independent
contractors working in Entrada's research and development area. Entrada's
research and development expenditures were
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$6.2 million and $5.5 million for the fiscal years ended January 31, 2000 and
January 31, 1999, respectively.
MANUFACTURING AND QUALITY
Entrada's products are manufactured on an outsourced basis by various
turn-key vendors. Final assembly, test and quality assurance are performed by
Entrada at its Annapolis Junction, Maryland facility.
Entrada believes that its strategy of outsourcing the majority of its
manufacturing activities to third party contract manufacturers enables it to
react quickly to market demand and avoid the significant capital investment that
would be required to establish and maintain full manufacturing facilities.
Entrada is thus able to focus its manufacturing resources on final assembly,
burn-in and final testing to ensure reliability and quality assurance for its
products. Entrada has a quality assurance program in place and continually
evaluates its process to ensure quality practices throughout its organization
and to monitor the performance of its third party vendors.
AVAILABILITY OF RAW MATERIALS
Many of Entrada's products require components which may not be readily
available. These include microprocessors, custom integrated circuits and other
electronic components. To minimize the risks of component or product shortages,
Entrada attempts to maintain multiple supply sources. However, there can be no
assurance that such sources will be adequate to meet Entrada's needs.
PATENTS, TRADEMARKS AND LICENSES
Entrada currently hold nine patents. Although Entrada attempts to protect
its intellectual property rights through patents, trademarks, and copyrights, by
maintaining certain technology as trade secrets and by other measures, Entrada
cannot assure you that any patent, trademark, copyright or other intellectual
property rights owned by Entrada will not be invalidated, circumvented or
challenged; that such intellectual property rights will provide competitive
advantages to Entrada; or that any of Entrada's future patent applications, if
any, will be issued with the scope of the claims sought by Entrada, if at all.
Entrada cannot assure you that others will not develop technologies that are
similar or superior to its technology, or that its competitors will not
duplicate its technology or "design around" the patents that it owns. In
addition, effective patent, copyright and trade secret protection may be
unavailable or limited in certain foreign countries in which Entrada does
business or intends to do business in the future.
Entrada believes that the future success of its business will depend on its
ability to translate the technological expertise and innovation of its personnel
into new and enhanced products. Entrada cannot assure you that the steps taken
by it will prevent misappropriation of its technology. In the future, Entrada
may take legal action to enforce its patents and other intellectual property
rights, to protect its trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could harm its business and operating results.
As is common in Entrada's industry, Entrada has from time to time received
notification from other companies claiming that certain Entrada products may
infringe intellectual property rights held by such companies. Any claim or
litigation, with or without merit, could be costly, time consuming and could
result in a diversion of management's attention, which could harm Entrada's
business. If Entrada were found to be infringing the intellectual property
rights of any third party, it could be subject to liabilities for such
infringement, which could be material, and could be required to seek licenses
from other companies or to refrain from using, manufacturing or selling certain
products or using certain processes. Although holders of patents and other
intellectual property rights often offer licenses to
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their patent or other intellectual property rights, no assurance can be given
that licenses would be offered, that the terms of any offered license would be
acceptable to Entrada or that failure to obtain a license would not cause its
operating results to suffer.
SEASONALITY
Entrada's sales are impacted by the buying patterns of its customers,
including but not limited to cultural and religious holidays in Asia, Europe and
the United States, and other factors.
WORKING CAPITAL PRACTICES
Entrada has historically maintained high levels of inventories to meet the
output requirements of its customers and to ensure an uninterrupted flow of
inputs from its suppliers.
Entrada performs ongoing credit evaluations of each of its customers'
financial condition and it extends unsecured credit related to the sales of
various products. Two customers accounted for 39.4% and 9.6% of net receivables,
respectively, at January 31, 2000. These two customers accounted for 29.7% and
10.0% of net receivables, respectively, at January 31, 1999. Five customers
represented 68% and 60% of accounts receivable at January 31, 2000 and 1999,
respectfully.
BACKLOG
Entrada's backlog on January 31, 2000 was approximately $3.1 million
compared with an approximate backlog of $4.8 million at January 31, 1999.
Entrada includes in its backlog only orders confirmed with a purchase order for
products to be shipped within twelve months to customers with approved credit
status. Because of what has historically been a short time period between its
customers' orders and its shipments of products, and because its customers may
notify it of desired changes in delivery schedules or cancellations of orders
(which are made without significant penalty), Entrada does not believe that its
backlog, as of any particular date, is necessarily an indication of actual net
sales for any future period.
COMPETITION
The markets for Entrada's current and planned products are intensively
competitive, highly fragmented and characterized by rapidly changing technology,
evolving industry standards, price competition and frequent new product
introductions. A number of companies offer products that compete with one or
more of its current or planned products. Entrada's current and prospective
competitors include OEMs, product manufacturers of internet access equipment,
remote access equipment, and LAN, WAN and storage area network equipment.
Regarding the market for storage area networking products, Entrada expects that
its competitors will include JNI Corporation, Emulex Corporation, Brocade
Communications Systems, Inc., Interphase Corporation, Gadzoox Networks, Inc.,
and others. In the LAN adapter area, Entrada competes with 3Com Corporation,
Adaptec, Inc., Alteon Websystems, Inc., Intel Corporation, Interphase
Corporation, Sun Microsystems, Inc., RAMiX Inc., SBS Technologies, Inc., VMIC,
ZYNX Corporation and others. In the WAN adapter area Entrada competes with Ariel
Corporation, Digi International, Inc., Eicon Technology, Interphase,
Corporation, Netaccess/ Brooktrout, Patriot Scientific Corporation, Performance
Technologies, Incorporated, Pika Technologies, Inc., SDL Communications, Inc.
and others. In the remote access area, Entrada competes with Lucent
Technologies, Inc., Cisco Systems, Inc., 3Com Corporation, Ericsson, Intel
Corporation, Nbase-Xyplex, Nortel Networks Corp. Hlgd., Perle Systems Limited,
General DataComm Inds., Inc., Cabletron Systems, Inc., Assured Access
Technologies, Inc. and others. In the market for routers, Entrada competes with
Cisco Systems, Inc., 3Com Corporation, Lucent Technologies Inc., Netopia, Inc.,
Intel Corporation and others. In the market for CSU/DSU's, Entrada competes with
ADC Telecommunications, Inc., Adtran, Inc., Verilink Corporation, Quick Eagle
Networks and others.
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Entrada has experienced, and expects to continue to experience, increased
competition from current and potential competitors, many of whom have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and larger customer based than
Entrada does. In particular, established companies in the telecommunications
equipment or computing industries may seek to expand their product offerings by
designing and selling products using competitive technology that could render
Entrada's products obsolete or have a material adverse effect on its sales. The
markets in which Entrada competes currently are subject to intense competition
and Entrada expects additional price and product competition as other
established and emerging companies enter the markets in which it is competing
and new products and technologies are introduced. Increased competition may
result in further price reductions, reduced gross margins and loss of market
share, any of which could materially and adversely affect its business,
operating results and financial condition. There can be no assurance that
Entrada will be able to compete successfully against current and future
competitors, or that the competitive factors it will face will not have a
material adverse effect on its business, operating results and financial
condition.
ENVIRONMENTAL COMPLIANCE
Entrada's operations are subject to various federal, state and local laws
and regulations with respect to environmental matters. Entrada believes that it
is in material compliance with all such federal, state and local laws and
regulations.
EMPLOYEES
As of January 31, 2000, Entrada employed 129 full-time employees and
independent contractors, including 33 in engineering, 35 in manufacturing and
quality assurance, 43 in sales, customer support and marketing, 17 in
administration, and 1 executive. None of Entrada's employees are represented by
a collective bargaining agreement, and it believes that relations with its
employees are good.
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ENTRADA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31, 2000 AND
JANUARY 31, 1999
NET SALES. Net sales decreased to $28.8 million, or by less than 1%, for
fiscal 2000 from $29.0 million for fiscal 1999. While the sales to OEM's of our
LAN-adapter product lines increased, this increase was offset by the decrease in
the Remote Access and Print Server product lines during fiscal 2000 reflecting
Entrada's shift towards its new generation of products and the planned phase out
of its legacy products.
GROSS PROFIT. Cost of sales consists principally of the costs of
components, subcontract assembly from outside manufacturers, and in-house system
integration, quality control, final testing and configuration costs. Gross
profit decreased to $11.3 million, or 13.0%, for fiscal 2000 from $13.0 million
for fiscal 1999. Gross margin decreased to 39.2% for fiscal 2000 from 44.7% for
fiscal 1999. The gross margin percentage decrease was the result of higher raw
material costs associated with shipments of Entrada's LAN-adapter products and
lower margins on legacy products.
SELLING AND MARKETING. Selling and marketing expenses consist primarily of
employee compensation and related costs, commissions to sales representatives,
tradeshow expenses and travel expenses. Sales and marketing expenses decreased
to $5.6 million, or 19.6% of net sales, for fiscal 2000 from $8.3 million, or
28.7% of net sales for fiscal 1999. During the past fiscal year Entrada
completed a realignment of its sales organization, which resulted in a reduction
in these expenses as well as reduced advertising and promotional expenses for
legacy products.
ENGINEERING, RESEARCH AND DEVELOPMENT. Engineering, research and
development expenses consist primarily of compensation related costs for
engineering personnel, facilities costs, and materials used in the design,
development and support of our technologies as well as amortization of
capitalized software development costs. Engineering, research and development
expenses increased to $6.2 million, or 21.6% of net sales, for fiscal 2000 from
$5.5 million, or 19.0% of net sales, for fiscal 1999. The increase in
engineering, research and development expenses was the result of a $1.8 million
reduction to the net book value of capitalized software development costs caused
by changing market conditions partially offset by cost savings achieved through
the consolidation of Entrada's facilities. Exclusive of the valuation allowance,
engineering research and development expenses for fiscal 2000 were 15.3% of net
sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of employee compensation and related costs, legal and accounting fees,
and allocable occupancy costs. General and administrative expenses decreased to
$2.2 million, or 7.6% of net sales, for fiscal 2000 from $2.3 million, or 7.8%
of net sales, for fiscal 1999. This decrease is the result of cost savings
achieved through the consolidation of Entrada's various facilities as well as
eliminating the 35,000 square feet of unused space leased at our Annapolis
Junction, Maryland facility.
INCOME TAXES. There was no provision for income taxes for fiscal years 2000
and 1999. We have carry forwards of domestic federal net operating losses, which
may be available, in part, to reduce future taxable income in the United States.
However, due to potential adjustments to the net operating loss carry forwards
as provided by the Internal Revenue Code with respect to future ownership
changes, future availability of the tax benefits is not assured. In addition, we
provided a valuation allowance in full for our deferred tax assets as it is our
opinion that it is more likely than not that some portion or all of the assets
will not be realized.
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RESULTS OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31, 1999 AND
JANUARY 31 1998
NET SALES. Net sales decreased to $29.0 million, or 5.3%, for fiscal 1999
from $30.6 million for fiscal 1998. This decrease was primarily the result of a
decline in the sales of Entrada's legacy products which was not fully offset by
introductions of Entrada's new generation of products.
GROSS PROFIT. Gross profit decreased to $13.0 million, or 4.4%, for fiscal
1999 from $13.6 million for fiscal 1998. Gross margin remained relatively
unchanged at 44.7% for fiscal 1999 and 44.3% for fiscal 1998. This decline in
gross profit is comparable to the decline in net sales.
SELLING AND MARKETING. Sales and marketing expenses decreased to
$8.3 million, or 28.7% of net sales, for fiscal 1999 from $9.0 million, or 29.3%
of net sales for fiscal 1998. This decrease was primarily the result of the
mid-fiscal year 1998 closure of the Santa Barbara, California facility.
ENGINEERING, RESEARCH AND DEVELOPMENT. Engineering, research and
development expenses increased to $5.5 million, or 19.0% of net sales, for
fiscal 1999 from $3.5 million, or 11.6% of net sales, for fiscal 1998. The
increase in engineering, research and development expenses was the result of
increased expenditures associated with continuing development of Entrada's
existing products and future technologies.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
to $2.3 million, or 7.8% of net sales, for fiscal 1999 from $3.6 million, or
11.8% of net sales, for fiscal 1998. This decrease is the result of cost savings
achieved through the consolidation of Entrada's various facilities as well as
other cost reduction programs implemented mid-fiscal year 1998.
OTHER OPERATING EXPENSES. Other operating expenses consist of
acquisition-related charges including amortization of purchased technology and
valuation allowances recorded against purchased technology. During fiscal 1998
other operating expenses including amortization of $123,000 and a valuation
allowance of $3.8 million. Certain of Entrada's products, primarily LAN related
items, were not competitive in the market for such products as the technology
desired by customers could not be cost-effectively added to such products.
Entrada re-aligned its resources to focus on providing integrated networking and
bandwidth aggregation products desired by customers. Accordingly, Entrada
recorded a valuation allowance against purchased technology that had no future
alternative use.
INCOME TAXES. There was no provision for income taxes for fiscal years 1999
and 1998. We have carry forwards of domestic federal net operating losses, which
may be available, in part, to reduce future taxable income in the United States.
However, due to potential adjustments to the net operating loss carry forwards
as provided by the Internal Revenue Code with respect to future ownership
changes, future availability of the tax benefits is not assured. In addition, we
provided a valuation allowance in full for our deferred tax assets as it is our
opinion that it is more likely than not that some portion or all of the assets
will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
Entrada finances its operations through a combination of debt and
non-interest bearing advances from its parent. At January 31, 2000, Entrada's
working capital was $4.2 million including $112,000 in cash.
Operating activities provided cash flows of $134,000 during fiscal 2000 as
compared to a cash flow deficit of $2.8 million during fiscal 1999. The decrease
in cash flows used in operations reflects a substantial decline in our net loss,
after adjustment for non-cash expenses including depreciation, amortization,
reserves and valuation allowances, partially offset by fiscal 2000 investments
in inventory. During fiscal 1999 the operating cash flow deficit reflected an
increase in accounts receivable including amounts due from affiliates, a decline
in accounts payable and a decline in accrued expenses. Entrada's operating cash
flow deficit for fiscal 1998 of $3.7 million reflects a greater net loss, after
adjustment for
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non-cash operating expenses, as well as substantial increases in accounts
receivable and inventories offset, in part, by increases in current liabilities.
Our standard payment terms are net 30 days. Receivables from distribution
customers have frequently taken longer to collect.
Entrada's investing activities consist of purchases of property and
equipment and software development costs. During fiscal 2000 Entrada purchased
equipment of $239,000 and invested $318,000 in software development as compared
with fiscal 1999 equipment purchases of $567,000 and software development of
$1.3 million. Investing activities during fiscal 1998 were comparable to those
of fiscal 1999.
Entrada's financing activities during fiscal 2000 provided cash flows of
$337,000 which consisted of $2.3 million of non-interest bearing advances from
Osicom partially offset by net repayments of short and long term debt of
$1.9 million. During fiscal 1999 financing activities provided cash flows of
$4.6 million which consisted primarily of non-interest bearing advances from
Osicom. During fiscal 1998 financing activities provided cash flows of
$5.9 million which consisted of $3.2 million in advances from Osicom with the
remaining amounts received from short and long term financing.
At January 31, 2000 the balance due Osicom was $21.8 million. The merger
agreement entered into by Osicom provides that amounts owed by Entrada to Osicom
at closing will be contributed to the capital of Entrada and no remaining debt
will be outstanding to Osicom after the merge.
Entrada has a $7.0 million line of credit provided by Coast Business Credit,
a division of Southern Pacific Bank, an asset-based lender. Outstanding
short-term borrowings against this line of credit were $2.3 million at
January 31, 2000. This credit line is collateralized by accounts receivable,
inventory and equipment.
YEAR 2000 COMPLIANCE
We have not experienced any year 2000 compliance problems to date and we
believe our products are year 2000 compliant. We are not aware that any of our
customers, vendors or contract manufacturers that have experienced any such
problems to date. It is possible that yet undiscovered problems could severely
disrupt our operations and would adversely affect our business if not properly
addressed.
EFFECTS OF INFLATION AND CURRENCY EXCHANGE RATES
We are exposed to financial market risks, including changes in interest
rates and foreign currency rates. Our exposure to interest rate risk is the
result of our need for periodic additional financing for our large operating
losses and capital expenditures associated with establishing and expanding our
operations. The interest rate that we will be able to obtain on debt financing
will depend on market conditions at that time, and may differ from the rates we
have secured on our current debt. Additionally, the interest rates charged by
our present lender adjusts on the basis of the lenders' prime rate.
We believe that the relatively moderate rate of inflation in the United
States over the past few years and the relatively stable interest rates incurred
on short-term financing have not had a significant impact on our sales,
operating results or prices of raw materials. There can be no assurance,
however, that inflation or an upward trend in short-term interest rates will not
have a material adverse effect on our operating results in the future should we
require debt financing in the future.
All of our sales and expenses have been denominated in U.S. dollars and to
date our business has not been significantly affected by currency fluctuations.
However, we conduct business in several different countries and thus
fluctuations in currency exchange rates could cause our products to become
relatively more expensive in particular countries, leading to a reduction in
sales in that country.
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In addition, inflation in such countries could increase our expenses. In the
future, we may engage in foreign currency denominated sales or pay material
amounts of expenses in foreign currencies and, in such event, may experience
gains and losses due to currency fluctuations. Our operating results could be
adversely affected by such fluctuations.
We do not hold or issue derivative, derivative commodity instruments or
other financial instruments for trading purposes. Investments held for other
than trading purposes do not impose a material market risk.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for financial
statements with fiscal quarters of all fiscal years beginning after June 15,
2000. The Accounting Standards Executive Committee issued Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-up
Activities," effective in the current or future periods. The adoption or future
adoption of these standards has had or will have no material effects, if any, on
our financial position or results of operations.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual report on form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
The financial statements of Entrada at January 31, 2000 and 1999, and for
each of the three years in the period ended January 31, 2000, included in this
proxy statement/prospectus, have been audited by BDO Seidman, LLP, independent
auditors, as set forth in their report which is included in this proxy
statement/prospectus and have been so included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, is acting as
counsel for Sync in connection with certain legal matters relating to the merger
and the transactions contemplated thereby.
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, Woodbridge, New Jersey,
is acting as counsel for Entrada in connection with certain legal matters
relating to the merger and the transactions contemplated thereby.
DEADLINE FOR RECEIPT OF FUTURE STOCKHOLDER PROPOSALS
Proposals of Sync stockholders that are intended to be presented by such
stockholders at Sync's 2001 Annual Meeting of Stockholders must be received by
Sync no later than [anniversary date of this year's proxy mailing minus
120 days] in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. If Sync is not notified of
a stockholder proposal on or after May 14, 2001 and before July 25, 2001 in
writing of a proposal for the 2001 annual meeting as provided in Sync's Bylaws,
the management of Sync may exclude the matter from consideration at the annual
meeting. In addition, if Sync is not notified by [anniversary date of this
year's proxy mailing minus 45 days] of a stockholder proposal, the proxies held
by management of Sync provide discretionary authority to vote against such
stockholder's proposal, even though such proposal is not discussed in the proxy
statement.
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OTHER ANNUAL MEETING PROPOSALS
This section relates specifically to Sync's other annual meeting proposals
and related matters and not to matters relating to the proposed Sync/Entrada
merger discussed elsewhere in this proxy statement/prospectus. As of the date of
this proxy statement/prospectus, the Sync board of directors knows of no other
matters that will be presented for consideration at the annual meeting other
than as described in this proxy statement/prospectus.
PROPOSAL NO. 2: ELECTION OF DIRECTORS
NOMINEES
In October 1999, the board of directors amended Sync's bylaws to increase
the number of persons who sit on the board of directors from three to four. The
board of directors subsequently elected Mr. William K. Guerry, the President and
Chief Executive Officer of Sync, to the board to fill the newly created vacancy
and Mr. Guerry is standing for election at the annual meeting. There are
currently three other members standing for election.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the nominees named below, regardless of whether any other
names are placed in nomination by anyone other than one of the proxy holders. In
the event that any such nominee is unable or declines to serve as a director at
the time of the annual meeting, the proxy holders will vote in their discretion
for a substitute nominee. It is not expected that any nominee will be
unavailable. The term of office of each person elected as a director will
continue until the next annual meeting or until his successor has been elected
and qualified.
The names of the nominees, their ages as of May 12, 2000, and certain other
information about them are set forth below:
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------- -------- ------------------------------------------- --------------
Gregorio Reyes....................... 59 Chairman of the Board of Directors of Sync 1995
William K. Guerry.................... 35 President, Chief Executive Officer and 1999
Chief Financial Officer of Sync
Charles A. Haggerty.................. 58 Former Chairman, President and Chief 1995
Executive Officer of Western Digital Corp.
William J. Schroeder................. 55 President and Chief Executive Officer of 1998
CYBERIQ Systems, Inc.
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
MR. REYES has served as Chairman of Sync's board of directors since
January 1995 and from October 1997 to May 1998 in the Office of the Chief
Executive Officer of Sync. From 1990 to August 1994, he served as Chairman and
Chief Executive Officer of Sunward Technologies, Inc., a provider of rigid disk
magnetic recording head products for the data storage industry. Previously, he
was Chairman and Chief Executive Officer of American Semiconductor Equipment
Technologies, a wafer stepper company. Mr. Reyes currently also serves as a
director of C-Cube Microsystems, Inc. and several privately-held companies.
Mr. Reyes received a B.S. in Mechanical Engineering from Rensselaer Polytechnic
Institute and a M.S. in Management from the Stevens Institute of Technology.
MR. GUERRY has served as Sync's President and Chief Executive Officer and as
a Director of Sync since October 1999 and as Sync's Vice President of Finance
and Administration, Secretary and Chief Financial Officer since June 1997. From
January 1987 to June 1997, Mr. Guerry held various positions, including Audit
Senior Manager, with Ernst & Young LLP. Mr. Guerry received his B.S. in
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Accounting from California State Polytechnic University, Pomona. Mr. Guerry is a
Certified Public Accountant in the State of California and is a member of the
California Society of Certified Public Accountants.
MR. HAGGERTY has served as a member of Sync's board of directors since
June 1995. He served as Chairman, President and Chief Executive Officer of
Western Digital Corp., a manufacturer of disk drives, from July 1992 to
January 2000. He currently serves as the Chairman of the board of directors of
Western Digital. From June 1992 through June 1993, Mr. Haggerty served as
President and Chief Operating Officer of Western Digital. Mr. Haggerty also
serves as a director of Pentair, Inc., Beckman Coulter Inc. and Vixel Inc. He
received a B.A. in Business and Social Science from the University of St.
Thomas.
MR. SCHROEDER has served as a member of Sync's board of directors since
April 1998. Since February 2000, Mr. Schroeder has served as President and Chief
Executive Officer of CYBERIQ Systems, Inc., a developer of Internet traffic and
content management appliances. Mr. Schroeder served as President and Chief
Executive Officer and Director of Diamond Multimedia Systems, Inc., a supplier
of multi-media peripherals, from May 1994 to September 1999. Mr. Schroeder was
employed by Conner Peripherals, Inc., a manufacturer and distributor of hard
drives, from 1986 to 1994, initially as President and, from 1989, as Vice
Chairman of the board of directors. He was also President of Conner's New
Products Group from 1989 to 1990, President of Archive Corporation (a Conner
subsidiary) from January 1993 to November 1993, and CEO of Arcada
Software, Inc. (a Conner subsidiary) from November 1993 to May 1994.
Mr. Schroeder is also a director of Xircom, Inc. and CNF Transportation Inc. He
received his M.B.A. from Harvard University and M.S.E.E. and B.E.E. from
Marquette University.
BOARD MEETINGS AND COMMITTEES
The board of directors held a total of seven (7) meetings during the fiscal
year ended December 31, 1999. The board of directors has an Audit Committee and
a Compensation Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
During 1999, the Audit Committee of the board of directors consisted of
Charles A. Haggerty and William J. Schroeder, both of whom were non-employee
directors of Sync. The Audit Committee participated in several meetings during
1999, including meetings with Sync's management to review audited and interim
financial statements, independent auditor findings, accounting policies and
adequacy of internal controls.
During 1999, the Compensation Committee of the board of directors consisted
of Charles Haggerty and William J. Schroeder, both of whom were non-employee
directors. The Compensation Committee participated in several meetings during
1999. The Compensation Committee, in conjunction with the board of directors,
establishes salaries, incentives and other forms of compensation for directors,
officers and other employees, administers the various incentive compensation and
benefit plans (including Sync's stock purchase and stock option plans) and
recommends policies relating to such plans. The Compensation Committee has
exclusive authority to award grants of options or restricted stock to executive
officers of Sync, pursuant to the 1991 Stock Plan and the 1995 Employee Stock
Purchase Plan.
During 1999, no incumbent director attended fewer than 75% of the aggregate
number of meetings of the board of directors and of the committees of the board
of directors on which he serves.
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COMPENSATION OF DIRECTORS
Mr. Reyes, the Chairman of the board of directors, earned $68,000 ($6,000
per month through October 1999 and $4000 per month thereafter) during 1999
pursuant to a consulting agreement with Sync. Non-employee directors are paid a
fee of $5,000 per quarter plus $1,000 for each full meeting of the board of
directors attended by such director. Directors are reimbursed for out-of-pocket
travel expenses associated with their attendance at board meetings. Non-employee
directors of Sync will automatically be granted options to purchase shares of
Sync common stock pursuant to the terms of the 1995 Directors' Stock Option Plan
(the "Directors' Plan"). Under the Directors' Plan, each non-employee director
who is elected to the board will receive an option to purchase 8,000 shares of
common stock on the date on which he or she first becomes a non-employee
director. In addition, on the date of each annual stockholders meeting, each
non-employee director, will be granted an additional option to purchase 2,000
shares of common stock if, on such date, he or she has served on the board for
at least six months and remains a director as of the date of such meeting. Each
option becomes exercisable at the rate of 25% of the total number of shares
subject to such option on the first anniversary of the grant date, and 1/48(th)
of the total number shares at the end of each month thereafter. Options granted
under the Directors' Plan have an exercise price equal to the fair market value
of Sync common stock on the date of grant and a term of ten years.
Messrs. Haggerty and Schroeder each received options to purchase 2,000 shares
pursuant to the Directors' Plan in 1999. Subject to his election to the board of
directors by the stockholders at the annual meeting, Mr. Haggerty will be
automatically granted an option to purchase 2,000 shares of common stock on the
date of the annual meeting. Subject to the authorization by the stockholders at
the annual meeting of the issuance of Sync common stock under the merger
agreement, Mr. Schroeder will not receive an option to purchase 2,000 shares of
common stock on the date of the annual meeting, as he will resign from the board
following the merger. There are no family relationships among the directors or
executive officers of Sync.
POTENTIAL NEW DIRECTORS
If the Sync stockholders authorize the issuance of Sync common stock
pursuant to the merger agreement for completion of the merger, the board of
directors of Sync following the merger intends to increase the number of
directors who sit on the board from four to five, and to appoint Kanwar J.S.
Chadha, currently the President of Entrada and the intended Chief Executive
Officer of Sync following the merger, to fill such created vacancy. Further, it
is the present intention of Sync and Entrada to have Messrs. Guerry and
Schroeder step down from the board upon consummation of the merger, and be
replaced by Leonard N. Hecht, currently a director of Parent, and Rohit
Phansalkar, currently a director of Parent and a partner of Andersen Weinroth &
Co. LP, affiliates of which own all of the outstanding Series A Preferred Stock
of Sync and are stockholders of Parent. Therefore, assuming that the Sync
stockholders authorize the issuance of Sync common stock under the merger
agreement for completion of the merger and elect the slate of directors that the
Sync board of directors has nominated, the board of directors of Sync following
the merger will consist of Gregorio Reyes, currently the Chairman of Sync's
board of directors, Dr. Chadha, Charles A. Haggerty, currently a director of
Sync, Mr. Hecht and Mr. Phansalkar.
DR. CHADHA has served as the President of Entrada since April 2000. He is a
co-founder of WaterBazaar.com e-portal, currently under development, that will
provide buyers and suppliers of water purification products worldwide an
electronic exchange through which to conduct e-commerce. Dr. Chadha is also a
founding member of ERPL, Inc., an Internet firm that specializes in the
development of embedded software systems, enterprise and manufacturing resource
planning software systems, and that provides business to business e-marketplace
systems solutions & development. Dr. Chadha has also been active in the
commercial graphic arts industries. Dr. Chadha joined AT&T Bell Laboratories in
February 1973 as a Member of Technical Staff and served as a systems engineer &
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principal software designer for the AMPS trial system. As a Supervisor at AT&T
Bell Laboratories from August 1977 to August 1980, Dr. Chadha was responsible
for the development of various software systems. As a Department Head at AT&T
Bell Laboratories from August 1980 to January 1987, Dr. Chadha managed the
development of cellular technologies, MERLIN phone system, Applications
Processor, Videotex system, and System 25 PBX. Dr. Chadha holds a B.E. (Hons) in
Electrical Engineering from Thapar Institute of Technology, Punjab, India, a
M.A.Sc. in Control Systems from the University of Toronto, Ontario, Canada, and
a Ph.D. in Systems Engineering from Case Western Reserve University, Cleveland,
Ohio.
LEONARD N. HECHT has served as a director of Parent since June 1996. Since
1994, he has been President of Chrysalis Capital Group, an investment banking
company that he founded, specializing in mergers, acquisitions and financing.
From 1987 to 1993, Mr. Hecht was Managing Director of the Investment Banking
Group and head of the Technology Assessment Group of Houlihan Lokey Howard &
Zukin, a financial advisory firm. From 1984 to 1987, Mr. Hecht was the Vice
Chairman of the board of directors and Chief Executive Officer of Quantech
Electronics Corp., a diversified publicly held electronics company. Prior to
joining Quantech, Mr. Hecht was a founding principal of Xerox Development
Corporation, a wholly owned subsidiary of the Xerox Corporation. Xerox
Development Corporation was active in strategic planning, mergers and
acquisition, divestitures, licensing, joint ventures and venture investing for
the Xerox Corporation.
ROHIT PHANSALKAR has served as a director of Parent since December 1999.
Since February 1998, he has been a partner of Andersen Weinroth & Co. LP,
affiliates of which own all of the outstanding Series A Preferred Stock of Sync
and are stockholders of Parent. Prior to joining Andersen Weinroth,
Mr. Phansalkar was the co-founder, Vice Chairman and Chief Executive Officer of
Newbridge Capital, a firm dedicated to making private equity investments in
India. From 1993 to 1996 Mr. Phansalkar was a Managing Director of
Oppenheimer & Co., where he was the head of the Energy Finance Group. From 1985
to 1993 Mr. Phansalkar was a Managing Director of Bear Stearns & Co. Prior
thereto, he was the co-head of the Energy Finance Group at Shearson American
Express. Mr. Phansalkar also serves as a director of Zip Global Networks.
Mr. Phansalkar received a B.S. in Engineering from Michigan Technological
University and an M.B.A. from Harvard Graduate School of Business.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The four nominees receiving the highest number of affirmative votes of
shares of Sync's common stock present at the annual meeting in person or by
proxy and entitled to vote shall be elected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED ABOVE TO SERVE AS DIRECTORS FOR THE ENSUING YEAR AND
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
PROPOSAL NO. 3: APPROVAL OF AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
At the annual meeting, stockholders are being asked to approve an amendment
to the 1995 Employee Stock Purchase Plan to increase the number of shares of
common stock reserved for issuance thereunder by 100,000 shares to an aggregate
of 140,000 shares, for which stockholder approval is being requested.
GENERAL
Sync's 1995 Employee Stock Purchase Plan was adopted by the board of
directors in August 1995 and was approved by Sync's stockholders in
November 1995. On May 9, 2000 the board of directors approved an amendment to
increase the number of shares reserved for issuance under the 1995
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Employee Stock Purchase Plan by 100,000 shares to a total of 140,000 shares, for
which stockholder approval is being requested.
The 1995 Employee Stock Purchase Plan, as amended, provides for the granting
to employees (including officers and employee directors) of stock purchase
rights within the meaning of Section 423 of the Internal Revenue Code of 1986,
as amended. See "United States Federal Income Tax Information" below for
information concerning the tax treatment of incentive stock purchase rights.
As of May 3, 2000, 40,000 shares had been issued under the 1995 Employee
Stock Purchase Plan and no shares remained available for future purchase.
The 1995 Employee Stock Purchase Plan is not a qualified deferred
compensation plan under Section 401(a) of the Internal Revenue Code, and is not
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended.
The board of directors believes that in order to afford eligible individuals
whose present and potential contributions are important to the continued success
of Sync an opportunity to acquire a proprietary interest in Sync and to enable
Sync to continue to attract and retain the best available talent for the
successful conduct of its business in a competitive marketplace, it is necessary
to amend the 1995 Employee Stock Purchase Plan to reserve an additional 100,000
shares of common stock for issuance thereunder. The increase sought at the
annual meeting is expected to provide sufficient additional stock to continue
Sync's policy of using equity incentives to attract and retain the services of
key individuals essential to Sync's long-term success.
PURPOSE
The purpose of the 1995 Employee Stock Purchase Plan is to provide employees
of Sync the opportunity to purchase Sync common stock.
ADMINISTRATION
The board of directors, or a committee named by the board of directors,
shall supervise and administer the 1995 Employee Stock Purchase Plan and shall
have full power to adopt, amend and rescind any rules deemed desirable and
appropriate for, and not inconsistent with, the administration of the 1995
Employee Stock Purchase Plan, to construe and interpret the 1995 Employee Stock
Purchase Plan, and to make all other determinations necessary or advisable for
the administration of the 1995 Employee Stock Purchase Plan. The composition of
the committee shall be in accordance with the requirements to obtain or retain
any available exemption from the operation of Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 promulgated thereunder.
ELIGIBILITY
Any person who is an employee of Sync shall be eligible to participate in
the 1995 Employee Stock Purchase Plan, subject to the limitations imposed by
Section 423(b) of the Internal Revenue Code. Any provisions of the 1995 Employee
Stock Purchase Plan to the contrary notwithstanding, no employee shall be
granted an option under the 1995 Employee Stock Purchase Plan (i) if,
immediately after the grant, such employee (or any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Internal
Revenue Code) would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of Sync or of any subsidiary of Sync, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of Sync and its
subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
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OFFERING PERIODS; PARTICIPATION
The 1995 Employee Stock Purchase Plan shall be implemented by a series of
offering periods, with new offering periods commencing on or about February 1
and August 1 of each year (or at such other time or times as may be determined
by the board of directors). An eligible employee may become a participant in the
1995 Employee Stock Purchase Plan by completing a subscription agreement on the
form provided by Sync and filing it with the payroll office prior to the
applicable offering date of each offering period.
METHOD OF PAYMENT OF CONTRIBUTIONS
The participant shall elect to have payroll deductions made on each payday
during the offering period in an amount not less than one percent (1%) and not
more than five percent (5%) of such participant's compensation on each such
payday. All payroll deductions made by a participant shall be credited to his or
her account under the 1995 Employee Stock Purchase Plan. A participant may not
make any additional payments into such account. A participant, on one occasion
only during the offering period, may decrease the rate of his or her
contributions during the offering period by completing and filing with Sync a
new subscription agreement. Notwithstanding the foregoing, to the extent
necessary to comply with the Internal Revenue Code and the eligibility
requirements under the 1995 Employee Stock Purchase Plan, a participant's
payroll deductions may be decreased to 0% at such time during any offering
period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such offering
period and any other offering period ending within the same calendar year equals
or exceeds $21,250.
GRANT OF OPTION
On the commencement date of each offering period, each eligible employee
participating in such offering period shall be granted an option to purchase on
the exercise date a number of shares of Sync common stock determined by dividing
such employee's contributions accumulated prior to such exercise date by the
lower of (i) eighty-five percent (85%) of the fair market value of a share of
Sync common stock on the offering date, or (ii) eighty-five percent (85%) of the
fair market value of a share of Sync common stock on the exercise date. The
maximum number of shares an employee may purchase during each offering period
shall be determined at the offering date by dividing $12,500 by the fair market
value of a share of Sync common stock on the offering date.
The fair market value of Sync common stock on a given date shall be
determined by the board of directors in its discretion based on the closing
price of Sync common stock for such date, as reported by the National
Association of Securities Dealers Automated Quotation (Nasdaq) National Market
or, if such price is not reported, the mean of the bid and asked prices per
share of Sync common stock as reported by Nasdaq.
EXERCISE OF OPTION
Unless a participant withdraws from the 1995 Employee Stock Purchase Plan,
his or her option for the purchase of shares will be exercised automatically on
the exercise date of the offering period, and the maximum number of full shares
subject to the option will be purchased at the applicable option price with the
accumulated contributions in his or her account. The shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the exercise date. During his or her lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or her.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participant may withdraw all but not less than all of the contributions
credited to his or her account under the 1995 Employee Stock Purchase Plan at
any time prior to the exercise date of the
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offering period by giving written notice to Sync. All of the participant's
contributions credited to his or her account will be paid to him or her promptly
after receipt of his or her notice of withdrawal and his or her option for the
current period will be automatically terminated, and no further contributions
for the purchase of shares will be made during the offering period.
Upon termination of the participant as a Sync employee prior to the exercise
date of the offering period for any reason, including retirement or death, the
contributions credited to his or her account will be returned to him or her or,
in the case of his or her death, to the person or persons entitled previously
designated by the participant, and his or her option will be automatically
terminated. In the event an employee fails to remain in continuous status as an
employee of Sync for at least twenty (20) hours per week during the offering
period in which the employee is a participant, he or she will be deemed to have
elected to withdraw from the 1995 Employee Stock Purchase Plan and the
contributions credited to his or her account will be returned to him or her and
his or her option terminated.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTIONS
CHANGES IN CAPITALIZATION. If any change is made in the shares subject to
the 1995 Employee Stock Purchase Plan or subject to any option granted under the
1995 Employee Stock Purchase Plan, through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise, the board of directors shall
make appropriate adjustments as to the maximum number of shares subject to the
1995 Employee Stock Purchase Plan, the number of shares covered by any option
grant, the maximum number of shares issuable to employees, and the number of
shares and price per share covered by outstanding options.
CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of Sync, the offering period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the board. In
the event of a proposed sale of all or substantially all of the assets of Sync,
or the merger of Sync with or into another corporation, each option under the
1995 Employee Stock Purchase Plan shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
offering period then in progress by setting a new exercise date. If the board
shortens the offering period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the board shall notify
each participant in writing, at least ten (10) days prior to the new exercise
date, that the exercise date for his or her option has been changed to the new
exercise date and that his or her option will be exercised automatically on the
new exercise date, unless prior to such date he or she has withdrawn from the
offering.
AMENDMENT OR TERMINATION
The board of directors may at any time terminate or amend the 1995 Employee
Stock Purchase Plan. Except as otherwise provided in the plan, no such
termination may affect options previously granted, nor may an amendment make any
change in any option theretofore granted which adversely affects the rights of
any participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or with Section 423 of the Code, Sync shall obtain
stockholder approval in such a manner and to such a degree as so required.
Without stockholder consent and without regard to whether any participant rights
may be considered to have been adversely affected, the board (or its committee)
shall be entitled to change the offering periods, limit the frequency and/or
number of changes in the amount withheld during an offering period, establish
the exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in Sync's processing of
75
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Sync common stock for each participant
properly correspond with amounts withheld from the participant's compensation,
and establish such other limitations or procedures as the board (or its
committee) determines in its sole discretion advisable which are consistent with
the 1995 Employee Stock Purchase Plan.
FEDERAL INCOME TAX ASPECTS OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The following is a brief summary of the United States federal income tax
consequences of transactions under the 1995 Employee Stock Purchase Plan based
on federal income tax laws in effect as of the date of this proxy statement
(which laws could change at any time hereafter). This summary is not intended to
be exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or other country
in which an optionee may reside. This summary does not purport to be complete.
Sync advises all participants to consult their own tax advisors concerning tax
implications of option grants and exercises, and the disposition of shares
acquired upon such exercises, under the 1995 Employee Stock Purchase Plan.
The 1995 Employee Stock Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under the provisions of Sections
421 and 423 of the Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares. Upon
disposition of the shares, the participant will generally be subject to tax, and
the amount of the tax will depend upon how long the participant has held the
shares. If the shares have been held by the participant for more than two years
after the date of option grant and one year after the date of purchase, the
participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such disposition
over the purchase price, or (b) an amount equal to 15% of the fair market value
of the shares as of the first day of the offering period. Any additional gain
will be treated as long-term capital gain, taxed at a maximum rate of 20% if the
shares are held for more than one year after the date of purchase. If the shares
are disposed of before the expiration of these holding periods, the excess of
the fair market value of the shares on the exercise date over the option price
will be treated as ordinary income, and any further gain or loss on such
disposition will be long-term or short-term capital gain or loss, depending on
whether or not the shares are disposed of more than one year after the date of
purchase. Sync is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
reported by participants upon disposition of shares prior to the expiration of
the holding periods described above.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Sync
common stock present at the annual meeting in person or by proxy and entitled to
vote is required to approve the amendment to the 1995 Employee Stock Purchase
Plan to reserve an additional 100,000 shares of common stock for issuance
thereunder.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN TO RESERVE AN ADDITIONAL
100,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 4: APPROVAL OF INDEPENDENT AUDITORS
The board of directors has appointed the firm of Ernst & Young LLP,
independent auditors, to audit the financial statements of Sync for the fiscal
year ending December 31, 2000, and recommends that stockholders vote for
ratification of this appointment. In the event the stockholders do not ratify
such appointment, the board of directors will reconsider its selection.
Representatives of Ernst &
76
Young LLP are expected to be present at the annual meeting with the opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the shares of Sync's
common stock present at the annual meeting in person or by proxy and entitled to
vote is required for approval of the ratification of the appointment of Ernst &
Young LLP as Sync's independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
ERNST & YOUNG LLP AS SYNC'S INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 2000.
POSSIBLE STOCKHOLDER PROPOSAL
In a letter dated April 11, 2000, Sync has been informed by one of its
stockholders, Steel Partners II, L.P. ("Steel"), beneficial owner of
approximately 747,080 shares of Sync common stock as of the date of the proxy
statement/prospectus, of Steel's intention to nominate Warren G. Lichtenstein,
James R. Henderson, Robert B. Frankfurt and Steven Wolosky as nominees to be
elected to Sync's board of directors. Sync and Entrada oppose the election of
any individuals to Sync's board of directors other than those individuals
nominated by the Sync board of directors as set forth in this proxy statement/
prospectus.
OTHER MATTERS
Other than the matter described under the heading "Possible Stockholder
Proposal," the board of directors knows of no other matters to be submitted to
the meeting. If any other matters properly come before the meeting, then the
persons named in the enclosed form of proxy will vote the shares they represent
in such manner as the board may recommend.
INFORMATION CONCERNING SYNC
Additional information concerning:
- the business of Sync
- Sync management's discussion and analysis of financial condition and
results of operation
- directors and executive officers
- executive compensation
- principal stockholders
- certain relationships and related transactions
- and other related matters concerning Sync
is included or incorporated by reference in Sync's annual report on Form 10-K
for the year ended December 31, 1999. As described below, Sync's annual report
on Form 10-K, as well as other documents that have been filed by Sync with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement/prospectus.
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DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
All documents filed by Sync pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, after the date hereof and before the date
of the Sync annual meeting, are incorporated by reference into and are to be a
part of this proxy statement/prospectus from the date of filing of those
documents. The following documents, which have been filed by Sync with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement/prospectus:
- Sync's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, a copy of which is being delivered to all holders of Sync common
stock in conjunction with this proxy statement/prospectus;
- Sync's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Sync's Current Reports on Form 8-K filed on April 18, 2000 and May [ ],
2000; and
- Sync's Registration Statement on Form 8-A (which describes Sync's common
stock), filed on October 10, 1995 and November 4, 1995.
Sync has not authorized anyone to provide you with information that is
different from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated , 2000. You should not assume that the
information contained in the prospectus/ proxy statement is accurate as of any
other date, and neither the mailing of this proxy statement/prospectus to
stockholders nor the issuance of Sync common stock in the merger should create
any implication to the contrary.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference will be deemed to be modified or superseded for
purposes of this proxy statement/prospectus to the extent that a statement
contained herein or any other subsequently filed document that is deemed to be
incorporated herein by reference modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this proxy statement/prospectus.
TRADEMARKS
The Sync logo is a registered trademark of Sync. Sync, Sync Research,
Tylink, Avanti, FrameNode, ConversionNode, ControlSight, Pro-Act, Sync/Manager,
Syncview, and Tyview are registered trademarks or trademarks of Sync.
The Entrada logo is a registered trademark of Entrada. Entrada, Snmptalk,
Routermate, and IQX-200 are registered trademarks or trademarks of Entrada.
This proxy statement/prospectus also includes trade names and trademarks of
companies other than Sync or Entrada. The use of any such third party trade name
or trademark herein is in editorial fashion only, and to the benefit of the
owner thereof, with no intention of commercial use or infringement of such trade
name or trademark.
78
WHERE YOU CAN FIND MORE INFORMATION
Sync files reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of Sync's reports, proxy statements
and other information may be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13(th) Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Reports, proxy statements and other information concerning Sync may be
inspected at:
The National Association of
Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at
l-800-SEC-0330. The Securities and Exchange Commission maintains a website that
contains reports, proxy statements and other information regarding each of us.
The address of the Securities and Exchange Commission website is
http://www.sec.gov.
Sync has filed a registration statement on Form S-4 under the Securities Act
of 1933 with the Securities and Exchange Commission with respect to Sync's
common stock to be issued to Parent in the merger. This proxy
statement/prospectus constitutes the proxy statement/prospectus of Sync filed as
part of the registration statement. This proxy statement/prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted in accordance with the
rules and regulations of the Securities and Exchange Commission. The
registration statement and its exhibits are available for inspection and copying
as set forth above.
The documents incorporated by reference into this proxy statement/prospectus
are available from us upon request. We will provide a copy of any and all of the
information that is incorporated by reference in this proxy statement/prospectus
(not including exhibits to the information unless those exhibits are
specifically incorporated by reference into this proxy statement/prospectus) to
any person, without charge, upon written or oral request. ANY REQUEST FOR
DOCUMENTS SHOULD BE MADE BY JULY 15, 2000 TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS.
If you have any questions about the merger, please contact our Investor
Relations department as follows:
Ms. Gloria Corken
Investor Relations
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Telephone: (949) 588-2070
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
79
INFORMATION SET FORTH OR INCORPORATED INTO THIS PROXY STATEMENT/PROSPECTUS BY
REFERENCE OR IN OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO
SYNC AND ITS SUBSIDIARIES WAS PROVIDED BY SYNC AND THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO ENTRADA WAS PROVIDED BY ENTRADA.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus contains forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to our financial condition, results of operations and
business, and on the expected impact of the merger on Sync's financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. These risks and uncertainties include:
- the possibility that the merger will not be consummated
- the possibility that the anticipated benefits from the merger cannot be
fully realized
- the possibility that costs or difficulties related to the integration of
our businesses are greater than expected
- our dependence on the timely development, introduction and customer
acceptance of new products
- the impact of competition on revenues and margins
- rapidly changing technology and shifting demand requirements
- other risks and uncertainties, including the risks and uncertainties
involved in obtaining new customers, the impact of competitive services,
products and prices, the unsettled conditions in the high-technology
business and the ability to attract and retain key personnel
- other risk factors as may be detailed from time to time in Sync's and
Entrada's public announcements and filings with the Securities and
Exchange Commission.
In evaluating the merger, you should carefully consider the discussion of
these and other factors in the section entitled "Risk Factors" on page 15 of
this proxy statement/prospectus.
80
INDEX TO ENTRADA FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholder's Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder of
Osicom Technologies, Inc.
We have audited the accompanying balance sheets of Osicom
Technologies, Inc. (a Delaware corporation, f/k/a Cray Communications, Inc.,
doing business as Entrada Networks) ("Entrada"), a wholly-owned subsidiary of
Osicom Technologies, Inc. (a New Jersey corporation), as of January 31, 2000 and
1999 and the related statements of operations, stockholder's deficit, and cash
flows for each of the years ended January 31, 2000, 1999 and 1998. These
financial statements are the responsibility of Entrada's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Entrada as of January 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the years ended January 31, 2000, 1999 and 1998 in conformity with generally
accepted accounting principles.
/s/ BDO SEIDMAN LLP
--------------------------------------
BDO Seidman LLP
Los Angeles, California
March 23, 2000
F-2
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS)
JANUARY 31, 2000 JANUARY 31, 1999
---------------- ----------------
CURRENT ASSETS
Cash...................................................... $ 112 $ 198
Accounts receivable, net (Notes D and P).................. 5,919 6,328
Inventory, net (Notes B, D and P)......................... 6,041 4,493
Due from affiliates (Note K).............................. 753 475
Prepaid expenses and other current assets................. 563 150
-------- --------
TOTAL CURRENT ASSETS.................................... 13,388 11,644
PROPERTY AND EQUIPMENT, NET (Notes C, D and E).............. 1,384 790
OTHER ASSETS
Capitalized software, net (Note B)........................ 1,772 4,316
-------- --------
TOTAL ASSETS................................................ $ 16,544 $ 16,750
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Short-term debt (Note D).................................. $ 2,264 $ 4,550
Current maturities of long-term debt (Note E)............. 312 121
Accounts payable.......................................... 4,381 3,458
Due to affiliates (Note K)................................ 0 186
Deferred revenue.......................................... 317 785
Accrued liabilities....................................... 1,905 1,478
-------- --------
TOTAL CURRENT LIABILITIES............................... 9,179 10,578
Long-term debt and capital lease obligations................ 302 154
Due to parent company (Note K).............................. 21,769 17,337
-------- --------
TOTAL LIABILITIES....................................... 31,250 28,069
STOCKHOLDER'S EQUITY (DEFICIT) (Note H)
Common stock--Class A, $1.00 par value, 41 shares
authorized, 1 shares issued and outstanding; Class B,
$1.00 par value, 9 shares authorized, none issued or
outstanding............................................. 1 1
Additional paid in capital................................ 5,761 5,761
Accumulated deficit....................................... (20,468) (17,081)
-------- --------
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)........................ (14,706) (11,319)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)........ $ 16,544 $ 16,750
======== ========
See accompanying notes to financial statements.
F-3
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
Net Sales................................................... $28,771 $29,007 $30,624
Cost of Sales............................................... 17,498 16,043 17,061
------- ------- -------
Gross Profit............................................ 11,273 12,964 13,563
------- ------- -------
Selling and marketing....................................... 5,647 8,329 8,974
Engineering, research and development....................... 6,223 5,503 3,546
General and administrative.................................. 2,177 2,270 3,611
Other operating expenses (Note B)........................... -- -- 3,873
------- ------- -------
Total operating expenses................................ 14,047 16,102 20,004
------- ------- -------
Loss from operations........................................ (2,774) (3,138) (6,441)
Interest expense............................................ (613) (578) (513)
------- ------- -------
Loss before income taxes.................................... (3,387) (3,716) (6,954)
Provision for income taxes (Note I)......................... -- -- --
------- ------- -------
Net loss.................................................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Income (loss) per share (Note J):
Basic
Weighted average common shares outstanding.............. 1 1 1
Basic net loss per share................................ $(3,387) $(3,716) $(6,954)
======= ======= =======
Diluted
Weighted average common shares outstanding.............. 1 1 1
Diluted net loss per share.............................. $(3,387) $(3,716) $(6,954)
======= ======= =======
See accompanying notes to financial statements.
F-4
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS)
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
-------- -------- ---------- ----------- -------------
BALANCE AT JANUARY 31, 1997................. 1 $1 $5,761 $ (6,411) $ (649)
Net loss.................................... (6,954) (6,954)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 1998................. 1 1 5,761 (13,365) (7,603)
Net loss.................................... (3,716) (3,716)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 1999................. 1 1 5,761 (17,081) (11,319)
Net loss.................................... (3,387) (3,387)
-- -- ------ -------- --------
BALANCE AT JANUARY 31, 2000................. 1 $1 $5,761 $(20,468) $(14,706)
== == ====== ======== ========
See accompanying notes to financial statements.
F-5
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED JANUARY 31,
------------------------------
2000 1999 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(3,387) $(3,716) $(6,954)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,796 1,501 772
Accounts receivable and inventory reserves.............. 979 1,826 1,280
Intangible asset valuation allowance (Note B)........... 1,818 -- 3,750
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.............. 366 (1,528) (1,132)
Increase in due from affiliates......................... (278) (457) (18)
(Increase) decrease in inventories...................... (1,442) 588 (4,203)
(Increase) decrease in other current assets............. (413) 95 (19)
Increase (decrease) in accounts payable................. 923 (490) 1,944
Increase (decrease) in due to affiliates................ (186) 159 28
Increase (decrease) in accrued expenses................. 426 (812) 712
Increase (decrease) in other current liabilities........ (468) 74 161
------- ------- -------
NET CASH USED IN OPERATING ACTIVITIES................... 134 (2,760) (3,679)
------- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment........................ (239) (567) (654)
Software development costs................................ (318) (1,297) (1,324)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES................... (557) (1,864) (1,978)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from parent company.............................. 2,285 4,882 3,243
Proceeds from short-term debt, net of repayments (Note
D)...................................................... (2,286) (476) 2,539
Proceeds from long-term debt (Note E)..................... 600 285 126
Repayment of long-term debt (Note E)...................... (262) (115) (25)
------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... 337 4,576 5,883
------- ------- -------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS............. (86) (48) 226
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD.............. 198 246 20
------- ------- -------
CASH AND CASH EQUIVALENTS--END OF PERIOD.................... $ 112 $ 198 $ 246
======= ======= =======
See accompanying notes to financial statements.
F-6
']
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Entrada Networks (the "Company," "We," "Our," or "Us") designs,
manufactures, and markets products that provide access to and enhance the
performance of data and telecommunications networks, and is currently developing
products that provide connectivity for storage networks. Many of our products
are incorporated into the remote access and other server products of original
equipment manufacturers ("OEMs"). In addition, certain of our products are
deployed by telecommunications network operators, applications service
providers, internet service providers, and the operators of corporate local area
and wide area networks for the purpose of providing access to and transport
within their networks. We have our facility in Annapolis Junction, Maryland. In
addition, we have various sales offices located in the United States. We market
and sell our products and services directly to end users as well as through a
broad array of channels including system integrators, worldwide distributors,
value added resellers, original equipment manufacturers ("OEM's"),
telecommunication service providers and governmental agencies.
The accompanying financial statements are the responsibility of the
management of the Company.
A. THE COMPANY AND BASIS OF PRESENTATION
The Company, incorporated in Delaware in 1972, became a wholly owned
subsidiary of Osicom Technologies, Inc. ("Osicom" or "Parent") effective
June 30, 1996 in a transaction accounted for as a purchase in which the book
values of our assets and liabilities were adjusted to reflect their then market
value. During the periods covered by the financial statements, we operated as an
integral part of Osicom's overall operations and separate financial statements
were not prepared. These financial statements have been prepared from Osicom's
historical accounting records. The statements of operations may not be
indicative of the results of operations that would have resulted had we operated
as a stand-alone entity.
General and administrative expenses include, in addition to amounts incurred
by us, an amount that management considers to be a reasonable allocation of
general corporate expenses. Management and administrative salaries are allocated
based upon estimated time; all other allocations of general corporate expenses
were based upon specific identification of the relationship of our operations to
the total operations of Osicom. Management believes that such allocated general
expenses are representative of the expenses we will incur as a separate public
company, however, actual expenses may be higher or lower. Included in general
and administrative expenses are $220, $182 and $160 of allocated corporate
expenses for the fiscal years 2000, 1999, and 1998, respectively.
On April 11, 2000, Osicom entered into an agreement with Sync
Research, Inc. ("Sync"), a Nasdaq listed company, to exchange 100% of our
outstanding stock for a 50% interest in the merged corporation to be known as
Entrada Networks, Inc. The merger is subject to the approval of Sync's
shareholders and is expected to occur prior to September 2000.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires us to make estimates that
affect the reported amounts of assets, liabilities, revenues and expenses, the
disclosure of contingent assets and liabilities and the values of purchased
assets. Actual results could differ from these estimates.
F-7
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE--In the normal course of business, we extend unsecured
credit to our customers related to the sales of various products. Typically
credit terms require payment within thirty days from the date of shipment. We
evaluate and monitor the creditworthiness of each customer on a case-by-case
basis.
ALLOWANCE FOR DOUBTFUL ACCOUNTS--We provide an allowance for doubtful
accounts based on our continuing evaluation of our customers' credit risk. We
generally do not require collateral from our customers.
INVENTORY--Inventory, comprised of raw materials, work in process, finished
goods and spare parts, are stated at the lower of cost (first-in, first-out
method) or market. Inventories at January 31, 2000 and 1999 consist of:
2000 1999
-------- --------
Raw materials............................................. $ 4,740 $ 3,673
Work in process........................................... 1,958 1,361
Spare parts............................................... 141 190
Finished goods............................................ 1,228 807
------- -------
8,067 6,031
Less: Valuation reserve................................... (2,026) (1,538)
------- -------
$ 6,041 $ 4,493
======= =======
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair value of financial instruments
is determined by reference to various market data and other valuation techniques
as appropriate. We believe that there are no material differences between the
recorded book values of our financial instruments and their estimated fair value
PROPERTY AND EQUIPMENT--Property and equipment are recorded at historical
cost. Depreciation and amortization are provided over the estimated useful lives
of the individual assets or the terms of the leases if shorter using accelerated
and straight-line methods. Useful lives for property and equipment range from 3
to 7 years.
Capitalized leases are initially recorded at the present value of the
minimum payments at the inception of the contracts, with an equivalent liability
categorized as appropriate under current or non-current liabilities. Such assets
are depreciated on the same basis as described above. Interest expense, which
represents the difference between the minimum payments and the present value of
the minimum payments at the inception of the lease, is allocated to accounting
periods using a constant rate of interest over the lease.
Property and equipment are reviewed for impairment whenever events or
circumstances indicate that the asset's undiscounted expected cash flows are not
sufficient to recover its carrying amount. We measure impairment loss by
comparing the fair market value, calculated as the present value of expected
future cash flows, to its net book value. Impairment losses, if any, are
recorded currently.
F-8
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPMENT--Software development costs where technological
feasibility has not been established are expensed in the period in which they
occurred, otherwise, development costs that will become an integral part of our
products are deferred in accordance with Statement of Financial Accounting
Standards Nos. 2 and 86. The deferred costs are amortized using the
straight-line method over the remaining estimated economic life of the product
or the ratio that current revenues for the product bear to the total of current
and anticipated future revenues for that product. Amortization expense for the
years ended January 31, 2000, 1999 and 1998 was $1,043, $668 and $7,
respectively, over 3 to 5 years. Accumulated amortization was $727 and $675 as
of January 31, 2000 and 1999, respectively.
The recoverability of capitalized software costs are reviewed on an ongoing
basis primarily based upon projections of discounted future operating cash flows
from each software product line. The excess amount, if any, of the remaining net
book value over the calculated amount is fully reserved. During the quarter
ended January 31, 2000 we recorded a reduction to the net book value of our
capitalized software development costs of $1,818, recorded as engineering
expense, to reflect the decline in the net realizable value of these assets as a
result of changing market conditions.
PURCHASED TECHNOLOGY--Technology assets were recorded in connection with
Osicom's acquisition during the year ended January 31, 1997. The discounted
projected future cash flow from proven technology and software were capitalized
and amortized over their remaining estimated economic life (7 years) using the
straight-line method.
We assess the recoverability of purchased technology primarily by
determining whether the amortization of the net book value of purchased
technology over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The amount of the impairment, if
any, of the net book value of the excess cost over net assets acquired is
measured by determining the fair value of these assets primarily based on
projected discounted future operating cash flows from the purchased technologies
using a discount rate commensurate with our cost of capital. During the quarter
ended July 31, 1997, we recorded reductions to the net book value of purchased
technology of $3,750 to reflect the decline in the fair value of these assets as
the result of changing market conditions. This reduction has been included in
Other operating expenses.
RESEARCH AND DEVELOPMENT--We expense research and development costs as
incurred in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 2, "Accounting for Research and Development Costs". Research and development
costs are costs associated with products or processes for which technological
feasibility has not been proven and future benefits are uncertain. In-process
research and development purchased by us includes the value of products and
processes in the development stage and have not reached technological
feasibility; this amount is expensed at the date of purchase.
REVENUE RECOGNITION--We generally recognize product revenue when the
products are shipped, all substantial contractual obligations, if any, have been
satisfied, and the collection of the resulting receivable is reasonably assured.
Revenue from installation is recognized as the services are performed to the
extent of the direct costs incurred. To date, installation revenue has not been
material. Revenue
F-9
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
from service obligations, if any, is deferred and recognized over the life of
the contract. Inventory or demonstration equipment shipped to potential
customers for field trials is not recorded as revenue. We accrue for warranty
costs, sales returns and other allowances at the time of shipment. Although our
products contain a software component, the software is not sold separately and
we are not contractually obligated to provide software upgrades to our
customers.
WARRANTY AND CUSTOMER SUPPORT--We typically warrant our products against
defects in materials and workmanship for a period of one to five years from the
date of sale and a provision for estimated future warranty and customer support
costs is recorded when revenue is recognized. To date, warranty and customer
support costs have not been material.
INCOME TAXES--Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." The
statement employs an asset and liability approach for financial accounting and
reporting of deferred income taxes generally allowing for recognition of
deferred tax assets in the current period for future benefit of net operating
loss and research credit carryforwards as well as items for which expenses have
been recognized for financial statement purposes but will be deductible in
future periods. A valuation allowance is recognized, if on the weight of
available evidence it is more likely than not that some portion or all of the
deferred tax assets will not be realized. (See Note I).
ADVERTISING--We expense advertising expenditures as incurred. Advertising
expenses consist of allowances given to customers as well as direct
expenditures. Advertising expenses for fiscal 2000, 1999 and 1998 were $11,
$536, and $290, respectively.
INCOME AND LOSS PER COMMON SHARE--Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," requires dual presentation of
basic and diluted earnings per share ("EPS") on the face of the income
statement. It also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation. (See Note M). Basic income and loss per common share is computed by
dividing net income or loss available to common shareholders by the weighted
average number of common shares outstanding during each period presented.
Diluted EPS is based on the weighted average number of common shares outstanding
as well as dilutive potential common shares, which in our case was none.
Potential common shares would not be included in the diluted loss per share
computation for fiscal 2000, 1999 and 1998 as they would be anti-dilutive.
DERIVATIVE INSTRUMENTS--SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," is effective for financial statements with fiscal
quarters of all fiscal years beginning after June 15, 2000. The statement
establishes standards for accounting for derivatives and hedging instruments of
which we currently have none. We do not expect the adoption of SFAS No. 133 to
have a material effect, if any, on our financial position or results of
operations.
COMPUTER SOFTWARE FOR INTERNAL USE--The Accounting Standards Executive
Committee issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," is effective for
financial statements with fiscal years beginning after
F-10
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 15, 1998. The SOP provides guidance on accounting for the costs of
computer software developed or obtained for internal use. The SOP requires that
we continue to capitalize certain costs of software developed for internal use
once certain criteria are met. The adoption of SOP 98-1 had no effect on our
financial position or results of operations.
START-UP COSTS--Statement of Opinion 98-5, "Reporting on the Costs of
Start-up Activities," is effective for financial statements for fiscal years
beginning after December 31, 1998. The SOP provides guidance and examples of the
types of expenses associated with one-time (start-up) activities which under
this SOP must be expensed as incurred. The adoption of SOP 98-5 had no effect on
our financial position or results of operations.
C. PROPERTY AND EQUIPMENT
Property and equipment of the Company consisted of the following components
as of January 31, 2000 and 1999:
2000 1999
-------- --------
Manufacturing, engineering and plant equipment and
software.............................................. $ 14,674 $ 14,023
Office furniture and fixtures........................... 916 949
Leasehold and building improvements..................... 459 233
-------- --------
Total property and equipment.......................... 16,049 15,205
Less: Accumulated depreciation.......................... (14,665) (14,415)
-------- --------
Net book value........................................ $ 1,384 $ 790
======== ========
Depreciation expense for fiscal 2000, 1999 and 1998 was $751, $834 and $642,
respectively.
D. SHORT TERM DEBT
Short term debt at January 31, 2000 and 1999 consisted of the following:
2000 1999
-------- --------
Floating interest rate loan (2.5% over lender's prime rate)
secured by all of our tangible assets; weighted average
interest rate for the year ended January 31, 2000 was
13.4%..................................................... $2,264 $4,550
====== ======
We have a $7,000 line of credit collateralized by substantially all our
assets including accounts receivable, inventory and property and equipment and a
guarantee by our parent. Advances are limited to 75% of eligible receivables and
30% of eligible inventory. The loan bears interest at 2.5% over the lender's
prime rate but not less than 8%; the interest rate on the line of credit was
11.0% at January 31, 2000. The agreement automatically renews for successive one
year terms on a continuous basis at February 1(st) of each year unless
terminated by written notice of either party or by default. The highest amount
outstanding was $5,283 and $4,730 during fiscal years 2000 and 1999,
respectively. The average amount outstanding was $4,156 and $4,059 during fiscal
years 2000 and 1999, respectively.
We are in compliance with our debt covenants at January 31, 2000.
F-11
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
E. LONG TERM DEBT
Long term debt at January 31, 2000 and 1999 consisted of the following:
2000 1999
-------- --------
Floating interest rate term loans (2.5% over Coast's prime
rate) secured by machinery and equipment; interest rate
for year ended January 31, 2000 was 11.0%................. $345 $ --
Obligations under finance leases (See Note F)............... 269 275
---- ----
614 275
Less: Current portion....................................... 312 121
---- ----
$302 $154
==== ====
Long term debt including capitalized leases at January 31, 2000 is payable
by year as follows:
2001.. $312
2002.. 259
2003.. 43
----
$614
====
F. LEASES AND OTHER COMMITMENTS
Rental expense under operating leases was $672, $1,147 and $1,031 for fiscal
2000, 1999, and 1998, respectively. The table below sets forth minimum payments
under capital and operating leases with remaining terms in excess of one year,
at January 31, 2000:
CAPITAL OPERATING
LEASES LEASES
-------- ---------
2001....................................................... $172 $ 561
2002....................................................... 102 546
2003....................................................... 21 480
2004....................................................... -- 840
---- ------
295 $2,427
------
Less: Amount representing interest......................... (26)
----
Present value of minimum annual rentals.................... $269
====
The net book value of equipment under capital leases was $331 and $269 at
January 31, 2000 and 1999, respectively.
G. LITIGATION
We are involved in various other legal proceedings and claims incidental to
the normal conduct of our business. Although it is impossible to predict the
outcome of any outstanding legal proceedings, we
F-12
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
G. LITIGATION (CONTINUED)
believe that such legal proceedings and claims, individually and in the
aggregate, are not likely to have a material effect on our financial position,
the results of operations or cash flows.
H. STOCKHOLDERS' EQUITY
We are authorized to issue the following shares of stock:
41,000 shares of Common Stock--Class A ($1.00 par value)
9,000 shares of Common Stock--Class B ($1.00 par value)
The Class B common stock is convertible on a one-for-one basis into Class A
common stock. The holders of Class A shares may elect eight directors separately
as a class while the holders of Class B shares may elect two directors
separately as a class. In any other matter voted upon by the shareholders, each
share of Class B has a 1/3 vote. The remaining rights, privileges of the two
classes of common stock are identical, including dividend and dissolution
rights.
I. INCOME TAXES
Our provisions for taxes on income for the years ended January 31, 2000,
1999 and 1998 consist of:
2000 1999 1998
--------- --------- ---------
Current.................................................... $ -- $ -- $ --
Deferred................................................... -- -- --
--------- --------- ---------
Total...................................................... $ -- $ -- $ --
========= ========= =========
Our operations generate permanent and temporary differences for
depreciation, amortization, and valuation allowances. We have recorded a 100%
valuation allowance against our deferred tax assets, including net operating
loss and research credit carryforwards, in accordance with the provisions of
Statement of Financial Accounting Standards No. 109. Such allowance is
recognized if, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
2000 1999
-------- --------
Deferred tax assets:
Tax loss carryforwards.................................. $ 8,604 $ 8,297
Valuation allowances.................................... 990 859
Other................................................... 172 221
------- -------
Gross deferred tax assets............................. 9,766 9,377
Less: valuation allowance............................... (8,737) (8,021)
------- -------
Deferred tax asset.................................... 1,029 1,356
------- -------
Deferred tax liabilities:
Depreciation.......................................... 320 400
Software development costs............................ 709 956
------- -------
Deferred tax liabilities.............................. 1,029 1,356
------- -------
Net deferred tax liability................................ $ -- $ --
======= =======
F-13
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
I. INCOME TAXES (CONTINUED)
At January 31, 2000, we have federal net operating losses which may be
available to reduce future taxable income. Among potential adjustments which may
reduce available loss carryforwards, the Internal Revenue Code of 1986, as
amended, (IRC), reduces the extent to which net operating loss carryforwards may
be utilized in the event there has been an "ownership change" of a company as
defined by applicable IRC provisions. We believe that the acquisition of 100% of
our outstanding stock in September, 1996 by Osicom resulted in such an ownership
change, and we intend to analyze the impact of this transfer on the continued
availability, for tax purposes, of our net operating losses incurred through
January 31, 2000. Further ownership changes in the future, as defined by the
IRC, may reduce the extent to which any net operating losses may be utilized.
These NOL carryforwards expire as follows:
2007........................................................ $ 2,840
2008........................................................ 1,888
2009........................................................ 2,270
2010........................................................ 3,034
2011........................................................ 2,477
2018........................................................ 3,855
2019........................................................ 5,715
2020........................................................ 1,785
-------
$23,864
=======
The reconciliation between income tax expense and a theoretical United
States tax computed by applying a rate of 35% for the years ended January 31,
2000, 1999 and 1998, is as follows:
2000 1999 1998
-------- -------- --------
Loss before income taxes.......................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Theoretical tax (benefit) at 35%.................. $(1,185) $(1,301) $(2,434)
Impact of purchase accounting..................... -- -- 1,365
Change in valuation allowance..................... 1,185 1,301 1,069
------- ------- -------
$ -- $ -- $ --
======= ======= =======
J. EARNINGS PER SHARE CALCULATION
We incurred a net loss for fiscal years 2000, 1999 and 1998. Accordingly,
dilutive potential common shares which we have none would not be included in the
calculation of earnings per share because their
F-14
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
J. EARNINGS PER SHARE CALCULATION (CONTINUED)
effect would be antidilutive. The following data show the amounts used in
computing basic and diluted earnings per share.
2000 1999 1998
-------- -------- --------
Net loss.......................................... $(3,387) $(3,716) $(6,954)
Adjustments....................................... -- -- --
------- ------- -------
Net loss available to common shareholder used in
basic and diluted EPS........................... $(3,387) $(3,716) $(6,954)
======= ======= =======
Average number of common shares used in basic and
diluted EPS..................................... 1,000 1,000 1,000
======= ======= =======
We have no stock option plans, however many of our employees hold options
granted under our parent's stock option plans. All options were granted at not
less than fair market value on the date of grant. Under these plans, options
generally vest over a two-year to four-year period from the date of grant.
K. RELATED PARTY TRANSACTIONS
From time to time we have received non-interest bearing advances from our
parent, including payment of various expense on our behalf and transfer of
assets from other subsidiaries of our parent which are used in our business. The
balance due our parent, included in non-current liabilities in the accompanying
financial statements, was $21,769 and $17,337 at January 31, 2000 and 1999,
respectively. The merger agreement entered into by our parent provides that the
balance due at closing will be contributed to our capital and we will have no
remaining debt outstanding due our parent.
We manufacture assemblies for the Optical Networking business of our parent,
purchase components for as well as purchase assemblies from our parent's former
subsidiary located in Hong Kong, and purchased inventory from as well as
reimbursed engineering, occupancy and manufacturing support expenses to our
parent's former subsidiary, NETsilicon, Inc. The following data show the amounts
of these transactions with our affiliates.
2000 1999 1998
-------- -------- --------
Sales to Optical Networking.......................... $ 735 $ 506 $110
Component sales to foreign affiliate................. 1,678 38 7
Purchases from foreign affiliate..................... 1,714 1,017 510
Purchases from NETsilicon, Inc....................... 564 953 --
Expenses reimbursed to NETsilicon, Inc............... 593 854 --
F-15
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
K. RELATED PARTY TRANSACTIONS (CONTINUED)
Balances due to and from our affiliates, included in current liabilities and
assets in the accompany financial statements, at January 31, 1999 and 2000
consist of:
2000 1999
-------- --------
Due from Optical Networking................................. $427 $475
Due from foreign affiliate.................................. 326 --
---- ----
Due from affiliates....................................... $753 $475
==== ====
Due to foreign affiliate.................................... $ -- $186
---- ----
Due to affiliates......................................... $ -- $186
==== ====
L. SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest expense and taxes paid approximated the related expenses for the
years ended January 31, 2000, 1999 and 1998.
Assets transferred to us from our affiliates neither provided nor used cash.
Accordingly, assets with net book values of $2,147, $577 and $1,348 were
excluded from the statements of cash flows for fiscal 2000, 1999 and 1998,
respectively.
M. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to concentrations of
credit risk consist primarily of temporary cash investments and trade
receivables. As regards the former, we place its temporary cash investments with
high credit financial institutions and limits, by policy, the amount of credit
exposure to any one institution. No accounts at a single bank accounted for more
than 10% of current assets.
Concentrations of credit risk with respect to trade receivables are limited
because there is a large number of customers in our customer base spread across
many industries and geographic areas. Three customers each accounted for 19.4%,
18.7%, and 13.7% of fiscal 2000 net sales. One customer accounted for 16.3% of
fiscal 1999 net sales. One customer accounted for 16.1% of fiscal 1998 net
sales. At January 31, 2000 one customer accounted for 39.4% of net receivables.
At January 31, 1999 one customer accounted for 29.7% of net receivables.
N. SUBSEQUENT EVENTS
On April 11, 2000, Osicom entered into an agreement with Sync
Research, Inc. ("Sync"), a Nasdaq listed company, to exchange 100% of our
outstanding stock for a 50% interest in the merged corporation to be known as
Entrada Networks, Inc. The merger is subject to the approval of Sync's
shareholders and is expected to occur prior to September 2000. The merger
agreement provides that the balance due Osicom at closing will be contributed to
our capital and we will have no remaining debt outstanding due Osicom. Sync
develops, manufactures, markets and sells frame relay circuit management
solutions, multi-service frame relay access and routing solutions, and a series
of digital transmission products.
F-16
ENTRADA NETWORKS
A SUBSIDIARY OF OSICOM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
O. SEGMENT INFORMATION
We operate in one business segment. Enterprise wide information regarding
our geographical concentrations is as follows. Export sales and certain income
and expense items are reported in the geographic area where the final sales to
customers are made, rather than where the transaction originates.
2000 1999 1998
-------- -------- --------
Net sales:
United States.................................. $27,827 $27,516 $29,840
Europe......................................... 510 1,010 582
Asia........................................... 78 195 128
Other.......................................... 356 286 74
Inter-area eliminations........................ -- -- --
------- ------- -------
Total net sales.............................. $28,771 $29,007 $30,624
======= ======= =======
P. VALUATION AND QUALIFYING ACCOUNTS
Changes in the inventory valuation reserve were as follows:
Balance at February 1, 1997................................. $ 3,582
Additions charged to costs and expenses................... 1,100
Amounts used during year.................................. (1,533)
-------
Balance at January 31, 1998................................. 3,149
Additions charged to costs and expenses................... 1,416
Amounts used during year.................................. (3,027)
-------
Balance at January 31, 1999................................. 1,538
Additions charged to costs and expenses................... 936
Amounts used during year.................................. (448)
-------
Balance at January 31, 2000................................. $ 2,026
=======
Changes in the accounts receivable valuation reserve were as follows:
Balance at February 1, 1997................................. $ 352
Additions charged to costs and expenses................... 180
Amounts used during year.................................. (62)
-----
Balance at January 31, 1998................................. 470
Additions charged to costs and expenses................... 410
Amounts used during year.................................. (270)
-----
Balance at January 31, 1999................................. 610
Additions charged to costs and expenses................... 43
Amounts used during year.................................. (204)
-----
Balance at January 31, 2000................................. $ 449
=====
F-17
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNC RESEARCH, INC.,
A DELAWARE CORPORATION
MERGER CO,
A DELAWARE CORPORATION
OSICOM TECHNOLOGIES, INC.,
A NEW JERSEY CORPORATION
AND
OSICOM TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
DATED AS OF
APRIL 10, 2000
TABLE OF CONTENTS
PAGE
--------
ARTICLE I THE MERGER.................................................. A-1
1.1 The Merger.................................................. A-1
1.2 Closing..................................................... A-1
1.3 Effective Time.............................................. A-1
1.4 Certificate of Incorporation; By-laws....................... A-2
1.5 Officers and Directors...................................... A-2
1.6 Sync........................................................ A-2
1.7 Additional Matters.......................................... A-2
1.8 Lucent...................................................... A-2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS................................................ A-2
2.1 Effect on Capital Stock..................................... A-2
2.2 Exchange Procedures......................................... A-3
2.3 Stock Transfer Books........................................ A-3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND
OSICOM...................................................... A-3
3.1 Corporate Organization...................................... A-3
3.2 Capitalization.............................................. A-4
3.3 Authorization, Etc.......................................... A-4
3.4 Financial Statements........................................ A-5
3.5 No Undisclosed Liabilities.................................. A-5
3.6 No Approvals or Conflicts................................... A-5
3.7 Compliance with Law; Governmental Authorizations............ A-5
3.8 Litigation.................................................. A-5
3.9 Assets...................................................... A-6
3.10 Absence of Certain Changes.................................. A-6
3.11 Taxes....................................................... A-6
3.12 Employee Benefits........................................... A-7
3.13 Labor Relations............................................. A-9
3.14 Patents, Trademarks, Trade Names, Etc....................... A-9
3.15 Contracts................................................... A-9
3.16 Environmental Matters....................................... A-10
3.17 Insurance................................................... A-11
3.18 Material Customers and Suppliers............................ A-11
3.19 Real Property............................................... A-11
i
PAGE
--------
3.20 Investment Company Act Status............................... A-12
3.21 Product Liability........................................... A-12
3.22 Books and Records........................................... A-12
3.23 No Brokers' or Other Fees................................... A-13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SYNC...................... A-13
4.1 Corporate Organization...................................... A-13
4.2 Capitalization.............................................. A-13
4.3 Authorization, Etc.......................................... A-14
4.4 Financial Statements........................................ A-14
4.5 No Undisclosed Liabilities.................................. A-14
4.6 No Approvals or Conflicts................................... A-14
4.7 Compliance with Law; Governmental Authorizations............ A-14
4.8 Litigation.................................................. A-15
4.9 Assets...................................................... A-15
4.10 Absence of Certain Changes.................................. A-15
4.11 Taxes....................................................... A-15
4.12 Employee Benefits........................................... A-16
4.13 Labor Relations............................................. A-17
4.14 Patents, Trademarks, Trade Names, Etc....................... A-17
4.15 Contracts................................................... A-18
4.16 Environmental Matters....................................... A-18
4.17 Insurance................................................... A-19
4.18 Material Customers and Suppliers............................ A-19
4.19 Real Property............................................... A-19
4.20 Investment Company Act Status............................... A-20
4.21 Product Liability........................................... A-20
4.22 Books and Records........................................... A-21
4.23 No Brokers' or Other Fees................................... A-21
4.24 Sync Reports................................................ A-21
4.25 NASDAQ...................................................... A-21
ARTICLE V COVENANTS AND AGREEMENTS.................................... A-21
5.1 Conduct of Business by Osicom............................... A-21
5.2 Conduct of Business by Sync................................. A-22
5.3 Access to Books and Records; Cooperation.................... A-24
5.4 Filings and Consents........................................ A-24
5.5 No Solicitation............................................. A-24
ii
PAGE
--------
5.6 Proxy; Registration Statement............................... A-25
5.7 Shareholders' Meeting....................................... A-25
5.8 Listing..................................................... A-25
5.9 Covenant to Satisfy Conditions.............................. A-26
5.10 Best Efforts and Further Assurances......................... A-26
ARTICLE VI CONDITIONS TO OSICOM'S OBLIGATIONS.......................... A-26
6.1 Representations and Warranties.............................. A-26
6.2 Performance................................................. A-26
6.3 Officer's Certificate....................................... A-26
6.4 HSR Act..................................................... A-26
6.5 Shareholder Approval........................................ A-26
6.6 Registration Statement...................................... A-26
6.7 Nasdaq...................................................... A-26
6.8 Injunctions................................................. A-26
6.9 Consents.................................................... A-26
6.10 Non-Competition Agreement................................... A-27
ARTICLE VII CONDITIONS TO SYNC'S OBLIGATION............................. A-27
7.1 Representations and Warranties.............................. A-27
7.2 Performance................................................. A-27
7.3 Officer's Certificate....................................... A-27
7.4 HSR Act..................................................... A-27
7.5 Shareholder Approval........................................ A-27
7.6 Registration Statement...................................... A-27
7.7 Injunctions................................................. A-27
7.8 Consents.................................................... A-27
7.9 Non-Competition Agreement................................... A-27
ARTICLE VIII TERMINATION................................................. A-28
8.1 Termination................................................. A-28
8.2 Procedure and Effect of Termination......................... A-28
ARTICLE IX INDEMNIFICATION............................................. A-28
9.1 Indemnification............................................. A-28
ARTICLE X MISCELLANEOUS............................................... A-30
10.1 Survival of Representations, Warranties and Agreements...... A-30
10.2 Fees and Expenses........................................... A-30
iii
PAGE
--------
10.3 Governing Law............................................... A-30
10.4 Amendment................................................... A-31
10.5 No Assignment............................................... A-31
10.6 Waiver...................................................... A-31
10.7 Notices..................................................... A-31
10.8 Complete Agreement.......................................... A-32
10.9 Counterparts................................................ A-32
10.10 Publicity................................................... A-32
10.11 Headings.................................................... A-32
10.12 Severability................................................ A-32
10.13 Third Parties............................................... A-33
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.............. A-33
10.15 WAIVER OF JURY TRIAL........................................ A-33
10.16 Definitions................................................. A-34
10.17 Effective Date.............................................. A-34
iv
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of April 10,
2000 and effective when indicated in Section 10.17 below, is entered into by and
among Sync Research, Inc., a Delaware corporation ("Sync"), Merger Co, a
Delaware corporation and a wholly owned Subsidiary of Sync ("Merger Co"), Osicom
Technologies, Inc., a New Jersey corporation (the "Shareholder") and Osicom
Technologies, Inc., a Delaware corporation and a wholly owned Subsidiary of the
Shareholder ("Osicom").
R E C I T A L S:
WHEREAS, the respective Boards of Directors of Sync, Osicom, the Shareholder
and Merger Co have approved the merger of Merger Co into Osicom (the "Merger"),
subject to the terms and conditions of this Agreement, whereby each outstanding
share of common stock, $1.00 par value per share (the "Osicom Common Stock") of
Osicom will be converted into the right to receive shares of common stock, par
value $.001 per share, of Sync (the "Sync Common Stock") as provided herein;
WHEREAS, Sync, Merger Co, the Shareholder and Osicom desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
provisions, agreements and covenants contained herein, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Merger Co shall be merged with and into Osicom at the Effective Time
(as hereinafter defined). Following the Merger, the separate corporate existence
of Merger Co shall cease and Osicom shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to all rights, privileges,
powers, franchises, assets, liabilities and obligations of Osicom and Merger Co
in accordance with the provisions of the DGCL.
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to the
provisions of Article VIII, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., on a date to be specified by the parties, which date shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Articles VI and VII (the "Closing Date"), at the offices
of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, 99 Wood Avenue South,
Woodbridge, New Jersey, or such other place, time and date as the parties may
agree. Subject to the provisions of this Agreement, a certificate of merger
shall be duly prepared, executed and acknowledged by the Surviving Corporation
and thereafter delivered for filing and recordation with the Secretary of State
of the State of Delaware in accordance with the DGCL on the Closing Date.
1.3 EFFECTIVE TIME. The Merger shall become effective at the time of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or at such later time as shall be agreed by Osicom and Sync and as
shall be set forth in such certificate) in accordance with the DGCL (the date
and time the Merger becomes effective being the "Effective Time").
A-1
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective Time and
without any further action on the part of Osicom and Merger Co, (i) the
certificate of incorporation of Osicom as in effect immediately prior to the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, (ii) the by-laws of Osicom shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law and (iii) the Merger shall, from and after the Effective Time,
have all the effects provided by applicable law, including the DGCL.
1.5 OFFICERS AND DIRECTORS. The officers and directors of Osicom at the
Effective Time shall be the officers and directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation.
1.6 SYNC. At the Closing, the name of Sync will be changed to Entrada
Networks, Inc., or such other name as Sync and the Shareholder may mutually
agree, and the Board of Directors of Sync will consist of the Chief Executive
Officer of Sync, Greg Reyes and three (3) individuals selected by the mutual
agreement of Sync and the Shareholder.
1.7 ADDITIONAL MATTERS. At the Closing, (a) any indebtedness owed by
Osicom to the Shareholder, or any other affiliates of the Shareholder, will be
contributed to the capital of Osicom; (b) the Shareholder shall agree to
indemnify and hold Osicom, Sync, Merger Co and the Surviving Corporation
harmless against any liability arising after the Effective Date from (i) the
early termination by Osicom of its real estate lease for property located in
Aurora, Illinois (ii) the termination of the Case Defined Benefit Plan
previously maintained by Osicom and (iii) the late filing of Osicom's tax
returns; (c) Osicom will use its best efforts to cause those employees of Osicom
listed on Section 1.7 of the Disclosure Schedule to enter into employment
agreements with the Surviving Corporation having such terms and conditions as
are mutually agreed upon by Osicom and Sync; and (d) the Shareholder will enter
into an agreement with Sync and the Surviving Corporation, in such form and
substance as Sync and the Shareholder may mutually agree.
1.8 LUCENT. The Shareholder agrees to be responsible for and pay any
royalties or similar payments due from Osicom to Lucent Technologies, Inc. and
its Affiliates for all periods prior to the Closing Date up to an aggregate of
$500,000. Any additional royalties or similar payments due to Lucent in excess
of $500,000 shall be paid by the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Osicom
Common Stock or any shares of common stock, par value $.01 per share ("Merger Co
Common Stock"), of Merger Co:
(a) CAPITAL STOCK OF MERGER CO. Each share of Merger Co Common Stock
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Surviving Corporation Common Stock. Each stock certificate of Merger Co
evidencing shares of Merger Co Common Stock shall thereafter evidence
ownership of shares of Surviving Corporation Common Stock.
(b) CANCELLATION OF TREASURY STOCK. Each share of Osicom Common Stock
that is owned by Osicom or any Subsidiary (as defined in Section 10.16) of
Osicom shall automatically be canceled and retired and shall cease to exist,
and no Sync Common Stock, Surviving Corporation Common Stock or other
consideration shall be delivered or deliverable in exchange therefor.
A-2
(c) CONVERSION OF OSICOM COMMON STOCK. Other than shares to be
canceled pursuant to Section 2.1(b), the outstanding shares of Osicom Common
Stock shall be converted into the right to receive that number of validly
issued, fully paid and nonassessable shares of Sync Common Stock that is
equal to the number of shares of Sync Common Stock outstanding on the
Closing Date (the "Merger Consideration"). The parties intend that
immediately following the Merger, the Shareholder will own fifty percent
(50%) of the outstanding Sync Common Stock. In addition, Sync, promptly
after the Effective Time, shall issue options to purchase its Common Stock
to Osicom employees in an amount equal to the number of shares of Sync
Common Stock issuable pursuant to the stock options and convertible and
exchangeable securities listed on Schedule 4.2(a) of the Disclosure
Schedule, which Schedule shall be updated as of the Closing Date for
purposes of this computation. Such options will not affect the Merger
Consideration calculation.
2.2 EXCHANGE PROCEDURES. At the Closing, the Shareholder shall surrender
to Sync the share certificate(s) (the "Osicom Certificate") representing all of
the outstanding shares of Osicom Common Stock. The Osicom Certificate so
surrendered shall forthwith be canceled. As soon as reasonably practicable after
the Effective Time, the Shareholder shall, upon surrender to Sync of the Osicom
Certificate, together with such other documents as may be reasonably required by
Sync, be entitled to a share certificate(s) representing the number of shares of
Sync Common Stock into which the aggregate number of shares of Osicom Common
Stock shall have been converted pursuant to this Agreement. Each such share
certificate of Sync Common Stock issued to each holder will bear the following
legend on the face thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO A
REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.
2.3 STOCK TRANSFER BOOKS. At the close of business, eastern standard time,
on the day the Effective Time occurs, the stock transfer books of Osicom shall
be transferred to Sync and there shall be no further registration of transfers
of shares by Osicom of Osicom Common Stock thereafter on the records of Osicom.
From and after the Effective Time, the Shareholder shall cease to have any
rights with respect to such shares of Osicom Common Stock formerly represented
by the Osicom Certificate surrendered pursuant to Section 2.2, except as
otherwise provided herein or by law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND OSICOM
The Shareholder and Osicom hereby represent and warrant to Sync as follows:
3.1 CORPORATE ORGANIZATION. Osicom, and each Subsidiary of Osicom, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Osicom and each of its Subsidiaries has full corporate
power and authority to own their respective assets and to carry on their
respective businesses as now being conducted and are duly qualified or licensed
to do business as foreign corporations in good standing in the jurisdictions in
which the ownership of their respective property or the conduct of their
respective businesses requires such qualification or license, except
jurisdictions in which the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 10.16) on Osicom. Section 3.1 of the Disclosure Scheduleattached hereto
lists by name each of Osicom and the Subsidiaries of Osicom, each jurisdiction
in which each entity is qualified or authorized to do business and its
capitalization
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(including the identity of each stockholder and the number of shares held by
each). Osicom has delivered to Sync complete and correct copies of the
certificate of incorporation and all amendments thereto, the by-laws as
presently in effect, and the minute books and stock transfer records of Osicom
and each of its Subsidiaries.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Osicom consists of 50,000 shares of
Class A Common Stock, par value $1.00 per share (the "Osicom Common Stock")
of which 1,000 shares are issued and outstanding as of the date hereof and
9,000 shares of Class B Common Stock, none of which are outstanding as of
the date hereof. The Shareholder owns all of the shares of Osicom Common
Stock issued and outstanding as of the date hereof. No other shares of any
other class or series of capital stock of Osicom or securities exercisable
or convertible into or exchangeable for capital stock of Osicom ("Osicom
Capital Stock Equivalents") were authorized, issued or outstanding as of
January 31, 2000. Since January 31, 2000, there have been no issuances of
Osicom Common Stock or Osicom Capital Stock Equivalents. There are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares, whether issued or unissued, of capital
stock of Osicom or Osicom Capital Stock Equivalents, including any rights of
issuance, conversion or exchange under any outstanding securities or other
instruments, other than restrictions imposed by Federal and state securities
laws. All of the shares of Osicom Common Stock are duly authorized, validly
issued and outstanding and fully paid, nonassessable and free and clear of
all pledges, mortgages, claims, options, rights of first refusal, liens,
charges, encumbrances, security interests and limitations of voting rights
of any kind or nature whatsoever ("Encumbrances"). Neither Osicom nor any of
its Subsidiaries has any outstanding debt securities or other indebtedness
or guarantees, except as specifically disclosed in the Osicom Financial
Statements (as defined in Section 3.4).
(b) Section 3.2(b) of the Disclosure Schedule contains a complete and
correct list of all direct or indirect Subsidiaries of Osicom and the amount
of capital stock or other equity interests owned by Osicom and its
Subsidiaries in such Subsidiaries. All the outstanding shares of capital
stock of each of the Subsidiaries of Osicom have been duly authorized,
validly issued and are fully paid and non-assessable and, except as set
forth in Section 3.2(b) of the Disclosure Schedule, are owned (of record and
beneficially) by Osicom designed in Section 3.2(b) of the Disclosure
Schedule, free and clear of all Encumbrances. Except for the Subsidiaries
set forth in Section 3.2(b) of the Disclosure Schedule, neither Osicom nor
any of its Subsidiaries owns or has any option or right to acquire, directly
or indirectly, any capital stock or other equity securities of, or has any
direct or indirect equity or ownership interest or debt investment in, any
corporation, association, partnership, joint venture or other business.
3.3 AUTHORIZATION, ETC. Each of the Shareholder and Osicom has full power
and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Shareholder and
of Osicom and no other corporate proceedings on the part of Osicom, the
Shareholder or their respective stockholders are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than, with
respect to the Merger, the filing of the Certificate of Merger as required by
the DGCL). This Agreement has been duly and validly executed by Osicom and the
Shareholder and, assuming this Agreement constitutes the legal, valid and
binding agreement of the other parties hereto, constitutes a legal, valid and
binding agreement of Osicom and the Shareholder, enforceable against each of
them in accordance with its terms, except that (i) the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(ii) the remedy of specific performance and
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injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.4 FINANCIAL STATEMENTS. Osicom has previously delivered to Sync (i) the
audited balance sheet of Osicom and its Subsidiaries as of January 31, 2000 (the
"Osicom Balance Sheet") and the related audited statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and the
notes thereto, and the related unaudited statements of income, stockholders'
equity and cash flows for the year then ended, and the notes thereto
(collectively the "Osicom Financial Statements"). The Osicom Financial
Statements present fairly the assets, liabilities, financial position, results
of operations and cash flows of Osicom and its Subsidiaries as of the dates and
for the periods indicated, and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied by
Osicom.
3.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 3.5 of the
Disclosure Schedule, neither Osicom nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected on or reserved against the Osicom Balance Sheet or the
Osicom Interim Balance Sheet and current liabilities incurred in the ordinary
course of business and consistent with past practice since the respective dates
thereof.
3.6 NO APPROVALS OR CONFLICTS. Except as set forth in Section 3.6 of the
Disclosure Schedule, the execution, delivery and performance by Osicom and the
Shareholder of this Agreement and the consummation by Osicom and the Shareholder
of the transactions contemplated hereby will not (i) violate, conflict with or
result in a breach by Osicom of any provision of the certificate of
incorporation or by-laws of Osicom or any of its Subsidiaries, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
by Osicom or any of its Subsidiaries (or an event which, with notice or lapse of
time or both, would constitute a default) or give rise to any right of
termination, cancellation or acceleration under, or result in the creation of
any Encumbrance upon any of the properties of Osicom or any of its Subsidiaries
under, any Osicom Contract (as defined in Section 3.15), (iii) violate or result
in a breach of any order, injunction, judgment, ruling, law or regulation of any
court or governmental authority applicable to Osicom, any of its Subsidiaries,
or any of their respective properties or except for those required under or in
relation to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
require any order, consent, approval or authorization of, or notice to, or
declaration, filing, application, qualification or registration with, any
governmental or regulatory authority, excluding from the foregoing clauses
(ii) and (iii) above, such violations, conflicts and breaches which,
individually or in the aggregate, would not have a Material Adverse Effect on
Osicom or prevent or delay the consummation of the transactions contemplated
hereby.
3.7 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Neither Osicom nor
any of its Subsidiaries is in violation of any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
the property or business of Osicom or any such Subsidiary. Osicom and each of
its Subsidiaries have all material licenses, permits and other governmental
authorizations reasonably necessary to conduct their respective businesses as
currently conducted and such licenses, permits and authorizations are valid and
in full force and effect.
3.8 LITIGATION. Except as set forth in Section 3.8 of the Disclosure
Schedule, there are no claims, suits, actions, proceedings or investigations
(collectively, "Claims") pending or, to the best knowledge of Osicom or the
Shareholder, threatened against Osicom, any of its Subsidiaries, or the
transactions contemplated by this Agreement before any arbitrator, court or
governmental or regulatory authority or body, which, if decided unfavorably to
Osicom or such Subsidiary, would have a Material Adverse Effect on Osicom.
Except as set forth in Section 3.8 of the Disclosure Schedule, neither Osicom
nor any of its Subsidiaries nor any of their respective assets is subject to any
decree, order or judgment which would have a Material Adverse Effect on Osicom.
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3.9 ASSETS.
(a) Except as set forth in Section 3.6(a) of the Disclosure Schedule, on
January 31, 2000, Osicom and each of its Subsidiaries had and, except with
respect to assets disposed of or acquired in the ordinary course of business
and consistent with past practice since such date, Osicom and each of its
Subsidiaries now has, good and valid title to, or holds by valid and
existing lease or license, all the assets reflected as assets of Osicom and
its Subsidiaries on the Osicom Balance Sheet or which would have been
reflected on the Osicom Balance Sheet if acquired prior to such date, free
and clear of all Encumbrances except for: Encumbrances which secure
indebtedness or obligations which are properly reflected on the Osicom
Balance Sheet and Permitted Liens (as defined in Section 10.16). Except as
set forth in Section 3.9(a) of the Disclosure Schedule, Osicom and its
Subsidiaries own, or have valid leasehold interests in, all material assets,
tangible and intangible, necessary for the operation or conduct of Osicom's
and such Subsidiary's business as conducted prior to and through the Closing
Date (the "Osicom Assets"), and all such assets are in reasonably good
maintenance, operating condition and repair, normal wear and tear excepted,
other than machinery and equipment under repair or out of service in the
ordinary course of Osicom's or such Subsidiary's business. The Osicom Assets
include, without limitation, all right, title and interest to the hubs,
switches, LAN adapters, FDDI, VME boards, stand alone print servers,
Nethopper and all other network access business assets, and all associated
know-how and proprietary information related thereto, that (i) are necessary
for Sync to operate Osicom's business in the manner in which Osicom has
operated the same, and (ii) were owned by the Shareholder or any of its
Subsidiaries as of January 31, 2000.
(b) Except as set forth in Section 3.9 of the Disclosure Schedule, no
licenses or other consents from, or payments to, any other person, entity or
governmental authority are or will be necessary for Sync to operate Osicom's
business and use the Osicom Assets in the manner in which Osicom has
operated the same, and no such person, entity or authority has made any
claim to the contrary. No person or entity other than Osicom and its
Subsidiaries has any right or interest in the Osicom Assets, including the
right to grant interests in the Osicom Assets to third parties, except as
set forth in Section 3.9(b) of the Disclosure Schedule, and there exists no
restriction on the use or transfer of the Osicom Assets.
(c) Except as provided in Section 3.9(c) of the Disclosure Schedule, no
restrictions will exist on Sync's right to sell, resell, license or
sublicense any of the Osicom Assets or engage in Osicom's business, nor will
any such restrictions be imposed on Sync as a consequence of the
transactions contemplated by this Agreement or by any agreement referenced
in this Agreement.
3.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 3.10 of
the Disclosure Schedule, since January 31, 2000, the business of Osicom and each
of its Subsidiaries has been conducted only in the ordinary course and
consistent with past practice in all material respects, there has not been any
event or development prior to the date hereof which, if it had occurred or
existed after the date hereof, would be a violation of Section 5.1(c), and there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Osicom.
3.11 TAXES. Except as disclosed on the Disclosure Schedule, Osicom and
each of its Subsidiaries has filed or caused to be filed all Tax Returns
(including estimated Tax Returns) required to be filed by Osicom and each such
Subsidiary. Except as disclosed on the Disclosure Schedule, All Tax Returns are
complete and accurate in all material respects and all Taxes required to be
shown on such Tax Returns or otherwise due or payable and all additional
assessments of any such Taxes received prior to the date hereof have been paid
in full on the due date for payment thereof. Neither Osicom nor any of its
Subsidiaries is required to file any income or franchise tax returns in any
jurisdiction other than the United States and the States of Arizona, California,
Colorado, Connecticut, Denver, Delaware, Florida,
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Illinois, Kansas, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and
Washington and the City of Denver and the District of Columbia. The amounts set
up as accruals for Taxes on the Osicom Financial Statements are sufficient for
the payment of all Taxes of Osicom and each of its Subsidiaries, whether or not
disputed, for all periods ended on and prior to the respective dates thereof. In
addition, the amounts set up as accruals for Taxes on the financial books of
Osicom and each of its Subsidiaries on the date hereof are and will be
sufficient for the payment of all Taxes of Osicom and each such Subsidiary,
whether or not disputed, for all periods ended on and prior to the Closing Date.
Except as disclosed in Section 3.11 of the Disclosure Schedule, the United
States Federal, state and local income tax returns of Osicom and each of its
Subsidiaries have been audited by the Internal Revenue Service or other Tax
Authority or are closed and there are no proceedings or claims relating thereto
or any facts that could give rise to the reopening thereof. Except as disclosed
on the Disclosure Schedule, no deficiency in the payment of Taxes by Osicom or
any of its Subsidiaries for any period has been asserted or, to the best
knowledge of Osicom or the Shareholder, threatened against Osicom or any of its
Subsidiaries by any Tax Authority and remains unsettled as of the date of this
Agreement. Except as disclosed on the Disclosure Schedule, all Taxes required to
be withheld, collected or deposited by Osicom or any of its Subsidiaries have
been timely withheld, collected or deposited and, to the extent required, have
been paid to the relevant Tax Authorities. Except as disclosed on the Disclosure
Schedule, neither Osicom nor any of its Subsidiaries owe any amount pursuant to
any written or unwritten Tax sharing agreement or arrangement, or will have any
liability after the date hereof in respect of any written or unwritten Tax
sharing agreement or arrangement executed or agreed prior to the date hereof.
Except as disclosed on the Disclosure Schedule, there are no Tax liens on any of
the assets of Osicom or any of its Subsidiaries, other than liens for current
Taxes which are not yet due or payable. Except as set forth in Section 3.11 of
the Disclosure Schedule, neither Osicom nor any of its Subsidiaries has made any
agreement, waiver or other arrangement providing for an extension of time with
respect to the assessment or collection of any Tax against Osicom or any such
Subsidiary. Neither Osicom nor any of its Subsidiaries has been, or will be,
subject to Tax under Section 1374 or Section 1375 of the Code for any taxable
year ending on or prior to the Closing Date. Neither Osicom nor any of its
Subsidiaries has filed a consent with the Internal Revenue Service pursuant to
Section 341(f) of the Code or with any other Tax Authority to any similar effect
or made an election under Section 338 of the Code other than as provided for in
the terms of this Agreement.
For purposes of this Agreement, the term "Tax" or "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States Federal, state, local or foreign Tax Authority, including, but not
limited to, income, service, leasing, occupation, excise, property, sales and
use, transfer, franchise, payroll, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto.
For purposes of this Agreement, the term "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any Tax Authority
with respect to Taxes.
For purposes of this Agreement, the term "Tax Authority" shall mean the
Internal Revenue Service and any similar state, local or foreign authority
having jurisdiction over Taxes.
3.12 EMPLOYEE BENEFITS.
(a) Section 3.12 of the Disclosure Schedule contains a true and complete
list of each "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, without limitation, multi-employer plans within the meaning of
ERISA Section 3(37)), stock purchase, stock option, stock bonus, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other
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arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of
the transaction contemplated by this Agreement or otherwise), whether formal
or informal, oral or written, legally binding or not, under which any
employee or former employee of Osicom or any of its Subsidiaries has any
present or future right to benefits and under which Osicom or any of its
Subsidiaries may have any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively
referred to as the "Osicom Plans."
(b) With respect to each Osicom Plan, Osicom has delivered to Sync a
current, accurate and complete copy (or, to the extent no such copy exists,
an accurate written description) thereof and, to the extent applicable: Any
related trust agreement or other funding instrument; the most recent
determination letter, if the Osicom Plan is intended to qualify under Code
Section 401(a); any summary plan description and other written
communications (or a written description of any oral communications) by
Osicom or any of its Subsidiaries to their respective employees concerning
the extent of the benefits provided under an Osicom Plan; and, for the three
most recent years, (1) the Form 5500 and attached schedules, (2) audited
financial statements, (3) actuarial valuation reports and (4) attorney's
responses to an auditors' requests for information.
(c) No Osicom Plan is subject to Title IV of ERISA, and neither Osicom
nor any member of its Controlled Group has ever contributed to, sponsored,
or been obligated to contribute to any plan subject to Title IV of ERISA.
(d) (i) Each Osicom Plan has been established and administered in
accordance with its terms and with the applicable provisions of ERISA, the
Code and other applicable laws, rules and regulations; (ii) no event has
occurred and no condition exists that would subject Osicom or its
Subsidiaries either directly or by reason of its affiliation with any member
of its "Controlled Group" (defined as any organization which is a member of
a controlled group of organizations within the meaning of Code Sections
414(b), (c), (m) or (o)), to any Tax, fine, lien or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (iii) each
Osicom Plan which is intended to be qualified within the meaning of Code
Section 401(a) is so qualified and has received a favorable determination
letter pursuant to the Tax Reform Act of 1986 and subsequent legislation as
to its qualification, and nothing has occurred, whether by action or failure
to act, that could reasonably be expected to cause the loss of such
qualification; (iv) for each Osicom Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form 5500 since the date thereof; (v) no Osicom
Plan provides retiree welfare benefits and neither Osicom nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits
other than as required by Section 4980B of the Code; and (vi) neither Osicom
nor any member of its Controlled Group has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described
in Sections 4069 or 4212(c) of ERISA.
(e) With respect to any Osicom Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or, to the best knowledge of Osicom or the Shareholder, threatened, and
(ii) no facts or circumstances exist that could reasonably be expected to
give rise to any such actions, suits or claims.
(f) Except as set forth in Section 3.12 of the Disclosure Schedule, no
Osicom Plan exists that could result in the payment to any present or former
employee of Osicom or any of its Subsidiaries of any money or other property
or accelerate or provide any other rights or benefits to any present or
former employee or other service provider of Osicom or any of its
Subsidiaries as a result of the transactions contemplated by this Agreement.
There is no contract, plan or arrangement (written or otherwise) covering
any employee or other service provider or former employee or service
provider of Osicom or any of its Subsidiaries that, individually or
collectively,
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could give rise to the payment of any amount that would not be deductible
pursuant to the terms of the Code.
3.13 LABOR RELATIONS. Since January 1, 1998, neither Osicom nor any of its
Subsidiaries has been or is a party to any collective bargaining or other labor
agreement. Except as set forth in Section 3.13 of the Disclosure Schedule, there
is no unfair labor practice charge or complaint pending or, to the best
knowledge of Osicom or the Shareholder, threatened against or otherwise
affecting Osicom or any of its Subsidiaries which, if adversely determined,
would reasonably be likely to result in a liability having a Material Adverse
Effect on Osicom; there is no labor strike, slowdown, work stoppage, or lockout
in effect, or, to the best knowledge of Osicom and the Shareholder, threatened
against or otherwise affecting Osicom or any of its Subsidiaries, and neither
Osicom nor any of its Subsidiaries has experienced any such labor controversy
within the past three years; neither Osicom nor any of its Subsidiaries is a
party to, or otherwise bound by, any consent decree with, or citation by, any
governmental authority relating to employees or employment practices; and Osicom
and each of its Subsidiaries is in compliance with their obligations pursuant to
the Worker Adjustment and Retraining Notification Act of 1988 ("WARN Act"), and
all other notification and bargaining obligations arising under any collective
bargaining agreement, statute or otherwise. To the best knowledge of Osicom and
the Shareholder, there is no effort to organize employees of Osicom or any of
its Subsidiaries which is pending or threatened.
3.14 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 3.14 of the Disclosure
Schedule contains a true and complete list of all patents, trademarks, trade
names, copyrights and pending applications therefor (collectively, the "Osicom
Intellectual Property") used or owned by Osicom and each of its Subsidiaries and
a list of all licenses and other agreements (collectively, the "Osicom License
Agreements") relating thereto. Except as set forth in Section 3.14 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Osicom
Intellectual Property or the Osicom License Agreements, (ii) all Osicom
Intellectual Property and Osicom License Agreements are valid, in good standing
and free and clear of liens or other security interests, (iii) neither Osicom
nor any of its Subsidiaries has received written or, to the best knowledge of
Osicom or the Shareholder, oral, notice of any claims by any person to the use
of any such Osicom Intellectual Property, or challenging or questioning the
validity or effectiveness of any such Osicom License Agreement, and (iv) to the
knowledge of Osicom and the Shareholder, no other person is interfering with,
infringing upon, misappropriating or otherwise coming into conflict with any of
the Osicom Intellectual Property.
3.15 CONTRACTS. The contracts and agreements listed in Section 3.15 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of Osicom and each of
its Subsidiaries (the "Osicom Contracts"). Complete copies (or, if oral, written
summaries) of each Osicom Contract have been made available to Sync, including,
without limitation, all of the following Osicom Contracts: (i) any indenture,
note, mortgage, installment obligation, or other instrument for or relating to
any borrowing of money; (ii) any guaranty of any obligation; (iii) any
agreement, contract, commitment or arrangement containing any covenant limiting
the ability of Osicom or any of its Subsidiaries to engage in any line of
business or to compete with any business or person; (iv) any agreement,
contract, commitment or arrangement relating to capital expenditures with
respect to Osicom or any of its Subsidiaries and involving future payments which
exceed $25,000 in any 12-month period; (v) any agreement, contract, commitment
or arrangement relating to the acquisition of assets or any capital stock of any
business enterprise which has not been consummated; (vi) any real property
lease; (vii) any contract, commitment, agreement or arrangement which requires
payments in excess of $25,000 in any 12-month period, to the extent such
contract, commitment, agreement or arrangement is not terminable within 30 days
without payment of premium or penalty; (viii) any license agreement; (ix) any
joint venture, partnership or other agreement for the joint performance of work
or services; (x) each power of attorney that is effective and outstanding;
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(xi) any agreement entered into other than in the ordinary course of business
containing or providing for an express undertaking by Osicom or any of its
Subsidiaries to be responsible for consequential damages and (xii) any contract,
commitment, agreement or arrangement with any director, stockholder or Affiliate
(as defined in Section 10.16) of Osicom or any of its Subsidiaries. Each Osicom
Contract is in full force and effect, and is a legal, valid and binding
obligation of Osicom or such Subsidiary and each of the other parties thereto,
enforceable in accordance with its terms, except that (x) enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
(y) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. No condition
exists or event has occurred which (whether with or without notice or lapse of
time or both, or the happening or occurrence of any other event) would
constitute a default by Osicom, any of its Subsidiaries, or, to the best
knowledge of Osicom and the Shareholder, any other party thereto under, or
result in a right in termination of, any Osicom Contract, by any other party
thereto. To the best knowledge of Osicom and the Shareholder, no party to any
Osicom Contract intends (x) to terminate such Osicom Contract or materially
amend the terms thereof, (y) to refuse to renew such Osicom Contract upon
expiration thereof or (z) to renew such Osicom Contract upon expiration thereof
on terms and conditions which are materially more onerous to Osicom or such
Subsidiary than those pertaining to such existing Osicom Contract.
3.16 ENVIRONMENTAL MATTERS. Except as to matters which would not be
expected to result, individually or in the aggregate, in a Material Adverse
Effect on Osicom, or as set forth in Section 3.16 of the Disclosure Schedule,
(i) neither Osicom nor any of its Subsidiaries has received any notice alleging
the material violation of, or any material actual or potential liability
relating to, any applicable foreign, federal, state or local statutes, laws,
regulations, rules, decrees, orders, judgments, ordinances, or common law
related to the protection of human health or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, the Emergency Planning and Community Right-To-Know Act, the Solid Waste
Disposal Act, the Resource Conservation and Recovery Act, the Clean Air Act, the
Water Pollution Control Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act, and the Occupational Safety and Health Act, each
as amended and supplemented, and any regulations promulgated pursuant to such
laws, and any similar state or local statutes or regulations but excluding
workers compensation or similar laws ("Environmental Laws"), which violation has
not been resolved and, to the best knowledge of Osicom and the Shareholder, no
such notice is threatened or otherwise expected, (ii) to the best knowledge of
Osicom and the Shareholder, Osicom and each of its Subsidiaries is and has been
in material compliance with all applicable Environmental Laws and there is no
condition that could prevent or materially interfere with such compliance in the
future, (iii) Osicom and each of its Subsidiaries has obtained and is and has
been in material compliance with all required governmental environmental
permits, registrations and authorizations with respect to the business of Osicom
and each of its Subsidiaries as currently conducted, (iv) to the best knowledge
of Osicom and the Shareholder, no hazardous waste, substance, material, or
chemical, including, without limitation, petroleum and petroleum products,
polychlorinated biphenyls, asbestos and any other material regulated under, or
that can result in liability under, applicable Environmental Laws ("Hazardous
Material"), has been transported, stored, treated, arranged to be disposed of or
disposed of by Osicom or any of its Subsidiaries on or from the real estate
owned, operated or otherwise used by Osicom or any of its Subsidiaries or at any
other location, except in compliance with, or as otherwise would not result in
material liability under all applicable Environmental Laws, (v) except for
successor liability as an owner of real property, neither Osicom nor any of its
Subsidiaries has assumed, contractually or by operation of law, any liabilities,
potential liabilities or obligations of any other person or entity under any
applicable Environmental Laws, (vi) neither Osicom nor any of its Subsidiaries
has entered into, agreed to, or is subject to any judgment, decree, order or
other similar requirement of any
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governmental authority under any Environmental Laws, (vii) to the best knowledge
of Osicom and the Shareholder, there are no (w) underground or aboveground
storage tanks, (x) surface impoundments, (y) landfills or (z) sewer or septic
systems currently or formerly present at or about any of the properties or
facilities currently or formerly owned, operated or otherwise used by Osicom or
any of its Subsidiaries that could result in material liability to Osicom or any
such Subsidiary under any applicable Environmental Laws, and (viii) to the best
knowledge of Osicom and the Shareholder, there are no actions, activities,
events, conditions or circumstances occurring or existing, including without
limitation the release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that can reasonably be
expected to result in any material liability or obligation of Osicom or any of
its Subsidiaries under or relating to any Environmental Laws.
3.17 INSURANCE. Section 3.17 of the Disclosure Schedule lists all
insurance policies of Osicom and each of its Subsidiaries covering the assets,
employees and operations of Osicom and each of its Subsidiaries as of the date
hereof and any pending claims under such policies. All such policies are in full
force and effect, all premiums due thereon have been paid by Osicom or such
Subsidiary and Osicom and each of its Subsidiaries has complied in all material
respects with the provisions of such policies and has not received any notice
from any of its insurance brokers or carriers that any insurance policy is no
longer in full force or effect or that such broker or carrier will not be
willing or able to renew their existing coverage and perform its obligations
thereunder. All such policies shall continue in full force and effect following
the consummation of the transactions contemplated by this Agreement.
3.18 MATERIAL CUSTOMERS AND SUPPLIERS. Section 3.18 of the Disclosure
Schedule sets forth the names of the ten suppliers of Osicom and its
Subsidiaries whom Osicom and its Subsidiaries paid the greatest sum of money in
respect of products, services and materials sold to Osicom and its Subsidiaries
and the ten customers of Osicom and its Subsidiaries from whom Osicom and its
Subsidiaries received the greatest sum of money in respect of products or
services provided by Osicom and its Subsidiaries between February 1, 1999 and
January 31, 2000.
3.19 REAL PROPERTY.
(a) The real property listed in Section 3.19(a) of the Disclosure
Schedule constitutes all of the real property that any of Osicom and its
Subsidiaries owns as of the date hereof (the "Osicom Owned Real Property").
Except as set forth in Section 3.19(a) of the Disclosure Schedule, with
respect to each such parcel of Osicom Owned Real Property the identified
owner has good and marketable fee simple title to the parcel of real
property, free and clear of any Encumbrance (other than Permitted Liens).
(b) The leases listed in Section 3.15 of the Disclosure Schedule
constitute all the real property leases which are used in the conduct of the
business of Osicom and its Subsidiaries as it is presently being conducted
and/or to which Osicom or its Subsidiaries is a party (the "Osicom Leases"
and, such property, "Osicom Leased Property"; the Osicom Leased Property,
together with the Osicom Owned Real Property, the "Osicom Real Property").
The Osicom Real Property is all of the real property which is used for the
conduct of the business of Osicom and its Subsidiaries as is presently
conducted.
(c) Since January 31, 2000, neither Osicom nor any of its Subsidiaries
has sold, assigned, transferred or otherwise disposed of, or granted any
security interest in or lien on, any Osicom Owned Real Property or any
Osicom Lease. With respect to each Osicom Lease, all accrued and payable
rents required by each Osicom Lease to be paid by Osicom or any of its
Subsidiaries have been paid or adequate provision for such payment has been
made, no written notice of default or termination has been given or received
by Osicom or any of its Subsidiaries, and no material event of default has
occurred, no condition exists and no event has occurred that, with the
giving of notice or the lapse of time, would become a material default or
permit early termination, under any Osicom Lease, and (iii) Osicom has, and
immediately after the Closing, will have, good, valid
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and enforceable title to the leasehold estate in the Osicom Leased Property,
free and clear of any Encumbrance (other than Permitted Liens). Except as
set forth in Section 3.19(c) of the Disclosure Schedule, no third party
consent or approval under any Osicom Lease is required for the consummation
of the transactions contemplated herein.
(d) Osicom has obtained all easements and rights of way required from
all governmental jurisdictions or from private parties for the normal use
and operation of the business on the Osicom Owned Real Property as
heretofore conducted.
(e) There is no pending or, to Osicom's knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting
any of the Osicom Real Property and Osicom has not received any written
notice of any of the same.
(f) Each Osicom Owned Real Property and, to Osicom's knowledge, each
Osicom Leased Property and all buildings, structures, fixtures and
improvements on each Osicom Owned Real Property and, to Osicom's knowledge,
each Osicom Leased Property, and all use of any thereof by Osicom or its
subsidiaries, conform with all applicable building, zoning, subdivision,
land use, fire and other laws pertaining to or affecting real property,
except where the failure to so conform would not have a Material Adverse
Effect on Osicom. Each occupied Osicom Owned Real Property and, to Osicom's
knowledge, each occupied Osicom Leased Property is occupied under a valid
and existing certificate of occupancy for such Osicom Real Property. Osicom
has taken all corrective action indicated in all written notices or orders
to Osicom to correct violations of laws issued by any governmental authority
having jurisdiction against or affecting the Osicom Real Property. The
Osicom Real Property is not in violation of any restrictive covenant,
condition, restriction or limitation which would have a Material Adverse
Effect on Osicom or a material adverse effect on the use thereof as
currently utilized.
(g) No Osicom Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Osicom to convey or use it as currently operated.
(h) All Osicom Real Property and the improvements thereon are supplied
with the utilities necessary for the operation of such facilities as
currently operated.
(i) Osicom has not received written notice of any special assessment
relating to any Osicom Real Property or any portion thereof, and, to
Osicom's knowledge, there are no pending or threatened special assessments.
(j) Osicom has furnished Sync with all non-privileged environmental,
engineering or other studies or reports prepared for Osicom or its
subsidiaries since January 1, 1995 which primarily deal with the ownership,
operation, maintenance or management of the Osicom Real Property.
3.20 INVESTMENT COMPANY ACT STATUS. Neither Osicom nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940.
3.21 PRODUCT LIABILITY. Except as set forth in Section 3.21 of the
Disclosure Schedule, neither Osicom nor any of its Subsidiaries has received
written notice of any claim or threatened claim against Osicom or any such
Subsidiary for product liability, nor, to the best knowledge of Osicom and the
Shareholder, has Osicom or any of its Subsidiaries received oral notice of any
claim or threatened claim against Osicom or any of its Subsidiaries for product
liability.
3.22 BOOKS AND RECORDS. The financial books and records pertaining to the
business of Osicom and its Subsidiaries are complete and correct in all material
respects, have been maintained in accordance with good business practice, and
reflect the basis for the financial condition and results of operations of
Osicom set forth in the Osicom Financial Statements referred to in Section 3.4
hereto.
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3.23 NO BROKERS' OR OTHER FEES. No broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Shareholder or Osicom or any of its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SYNC
SYNC HEREBY REPRESENTS AND WARRANTS TO OSICOM AS FOLLOWS:
4.1 CORPORATE ORGANIZATION. Sync, and each Subsidiary of Sync, is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Sync and each of its Subsidiaries has
full corporate power and authority to own their respective assets and to carry
on their respective businesses as now being conducted and are duly qualified or
licensed to do business as foreign corporations in good standing in the
jurisdictions in which the ownership of their respective property or the conduct
of their respective businesses requires such qualification or license, except
jurisdictions in which the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect on Sync. Sync
has delivered to Osicom complete and correct copies of the certificate of
incorporation and all amendments thereto, the by-laws as presently in effect,
and the minute books and stock transfer records of Sync and each of its
Subsidiaries.
4.2 CAPITALIZATION.
(a) The authorized capital stock of Sync consists of 50,000,000 shares
of Sync Common Stock, of which 3,531,007 shares of Sync Common Stock (the
"Sync Shares") were outstanding as of March 31, 2000, and 754,280 shares of
Sync Common Stock were reserved for issuance upon exercise of options
outstanding as of March 31, 2000, and 2,000,000 shares of Sync Preferred
Stock, par value $.001 per share, of which no shares were outstanding as of
March 31, 2000. No other shares of any other class or series of capital
stock of Sync or securities exercisable or convertible into or exchangeable
for capital stock of Sync ("Sync Capital Stock Equivalents") were
authorized, issued or outstanding as of March 31, 2000. Since March 31,
2000, there have been no issuances of Sync Common Stock or Sync Capital
Stock Equivalents other than (i) issuances of shares of Sync Common Stock
upon exercise of options outstanding on March 31, 2000 and (ii) issuance of
shares of Sync Common Stock under Sync's Employee Stock Purchase Plan.
Except as set forth in Section 4.2(a) of the Disclosure Schedule, there are
no subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares, whether issued or unissued, of capital
stock of Sync or Sync Capital Stock Equivalents, including any rights of
issuance, conversion or exchange under any outstanding securities or other
instruments, other than restrictions imposed by Federal and state securities
laws. All of the Sync Shares are, and any shares of Sync Common Stock to be
issued upon exercise of outstanding options will be, duly authorized,
validly issued and outstanding and fully paid, nonassessable and free and
clear of all Encumbrances. Neither Sync nor any of its Subsidiaries has any
outstanding debt securities or other indebtedness or guarantees, except as
specifically disclosed in the Sync Financial Statements (as defined in
Section 4.4).
(b) Section 4.2(b) of the Disclosure Schedule contains a complete and
correct list of all direct or indirect Subsidiaries of Sync and the amount
of capital stock or other equity interests owned by Sync and its
Subsidiaries in such Subsidiaries. All the outstanding shares of capital
stock of each of the Subsidiaries of Sync have been duly authorized, validly
issued and are fully paid and non-assessable and, except as set forth in
Section 4.2(b) of the Disclosure Schedule, are owned (of record and
beneficially) by Sync or by another Subsidiary of Sync, free and clear of
all Encumbrances. Except for the Subsidiaries set forth in Section 4.2(b) of
the Disclosure Schedule, neither Sync nor any of its Subsidiaries owns or
has any option or right to acquire, directly or indirectly, any capital
stock or other equity securities of, or has any direct or indirect equity or
ownership interest or debt investment in, any corporation, association,
partnership, joint venture or other business.
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4.3 AUTHORIZATION, ETC. Each of Sync and Merger Co has full power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Sync and Merger Co
(other than the approval of this Agreement by the holders of a majority of the
outstanding shares of Sync Common Stock) and no other corporate proceedings on
the part of Sync, Merger Co or their respective stockholders are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than, with respect to the Merger, the filing of the Certificate of Merger
as required by the DGCL). This Agreement has been duly and validly executed by
each of Sync and Merger Co and, assuming this Agreement constitutes the legal,
valid and binding agreement of the other parties hereto, constitutes a legal,
valid and binding agreement of each of Sync and Merger Co, enforceable against
each of Sync and Merger Co in accordance with its terms, except that (i) the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
4.4 FINANCIAL STATEMENTS. Sync has previously delivered to Osicom (i) the
audited balance sheet of Sync and its Subsidiaries as of December 31, 1999 and
the related audited statements of income, stockholders' equity and cash flows
for the fiscal year then ended, and the notes thereto (the "Sync Financial
Statements"). The Sync Financial Statements present fairly the assets,
liabilities, financial position, results of operations and cash flows of Sync
and its Subsidiaries as of the dates and for the periods indicated, and have
been prepared in accordance with GAAP consistently applied by Sync.
4.5 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.5 of the
Disclosure Schedule, neither Sync nor any of its Subsidiaries has any
liabilities or obligations, whether accrued, absolute, contingent, matured or
unmatured, that are required to be reflected, accrued or reserved for in an
audited balance sheet of Sync or such Subsidiary or the notes thereto prepared
in accordance with GAAP, other than (i) liabilities and obligations that are
reflected, accrued or reserved for in the balance sheet as of December 31, 1999
included in the Sync Financial Statements (the "Sync Balance Sheet"),
(ii) liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date of the Sync Balance Sheet and
(iii) liabilities and obligations which in the aggregate would not have a
Material Adverse Effect on Sync.
4.6 NO APPROVALS OR CONFLICTS. Except as set forth in Section 4.6 of the
Disclosure Schedule, the execution, delivery and performance by Sync and Merger
Co of this Agreement and the consummation by Sync and Merger Co of the
transactions contemplated hereby will not violate, conflict with or result in a
breach by Sync or any of its Subsidiaries of any provision of the certificate of
incorporation or by-laws of Sync or any of its Subsidiaries, violate, conflict
with or result in a breach of any provision of, or constitute a default by Sync
or any of its Subsidiaries (or an event which, with notice or lapse of time or
both, would constitute a default) or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any Encumbrance
upon any of the properties of Sync or any of its Subsidiaries under, any Sync
Contract (as defined in Section 4.15), violate or result in a breach of any
order, injunction, judgment, ruling, law or regulation of any court or
governmental authority applicable to Sync, any of its Subsidiaries, or any of
their respective properties or except for those required under or in relation to
the HSR Act, require any order, consent, approval or authorization of, or notice
to, or declaration, filing, application, qualification or registration with, any
governmental or regulatory authority, excluding such violations, conflicts and
breaches which, individually or in the aggregate, would not have a Material
Adverse Effect on Sync or prevent or delay the consummation of the transactions
contemplated hereby.
4.7 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Neither Sync nor any
of its Subsidiaries is in violation of any order, injunction, judgment, ruling,
law or regulation of any court or governmental
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authority applicable to the property or business of Sync or any such Subsidiary.
Sync and each of its Subsidiaries have all material licenses, permits and other
governmental authorizations reasonably necessary to conduct their respective
businesses as currently conducted and such licenses, permits and authorizations
are valid and in full force and effect.
4.8 LITIGATION. Except as set forth in Section 4.8 of the Disclosure
Schedule, there are no Claims pending or, to the best knowledge of Sync,
threatened against Sync, any of its Subsidiaries, or the transactions
contemplated by this Agreement before any arbitrator, court or governmental or
regulatory authority or body, which, if decided unfavorably to Sync or such
Subsidiary, would have a Material Adverse Effect on Sync. Except as set forth in
Section 4.8 of the Disclosure Schedule, neither Sync nor any of its Subsidiaries
nor any of their respective assets is subject to any decree, order or judgment
which would have a Material Adverse Effect on Sync.
4.9 ASSETS. Except as set forth in Section 4.9 of the Disclosure Schedule,
on December 31, 1999, Sync and each of its Subsidiaries had and, except with
respect to assets disposed of or acquired in the ordinary course of business and
consistent with past practice since such date, Sync and each of its Subsidiaries
now has, good and valid title to, or holds by valid and existing lease or
license, all the assets reflected as assets of Sync and its Subsidiaries on the
balance sheet as of December 31, 1999 included in the Sync Financial Statements
(the "1999 Sync Balance Sheet") or which would have been reflected on the 1999
Sync Balance Sheet if acquired prior to such date, free and clear of
Encumbrances except for: Encumbrances which secure indebtedness or obligations
which are properly reflected on the 1999 Sync Balance Sheet and Permitted Liens.
Except as set forth in Section 4.9 of the Disclosure Schedule, Sync and its
Subsidiaries own, or have valid leasehold interests in, all material tangible
assets necessary for the operation or conduct of Sync's or such Subsidiary's
business as currently conducted and all such assets are in reasonably good
maintenance, operating condition and repair, normal wear and tear excepted,
other than machinery and equipment under repair or out of service in the
ordinary course of Sync's or such Subsidiary's business.
4.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 4.10 of
the Disclosure Schedule, since December 31, 1999, the business of Sync and each
of its Subsidiaries has been conducted only in the ordinary course and
consistent with past practice in all material respects, there has not been any
event or development prior to the date hereof which, if it had occurred or
existed after the date hereof, would be a violation of Section 5.2(c), and there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Sync.
4.11 TAXES. Sync and each of its Subsidiaries has filed or caused to be
filed all Tax Returns (including estimated Tax Returns) required to be filed by
Sync and each such Subsidiary. To the best knowledge of Sync, all Tax Returns
are complete and accurate in all material respects. All Taxes required to be
shown on such Tax Returns or otherwise due or payable and all additional
assessments of any such Taxes received prior to the date hereof have been paid
in full on the due date for payment thereof. Neither Sync nor any of its
Subsidiaries is required to file any income or franchise tax returns in any
jurisdiction other than the United States and the States of Arizona, Delaware,
Colorado, Connecticut, Florida, Georgia, Illinois, California, Maryland,
Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Ohio,
Oklahoma, Pennsylvania, Rhode Island, Texas and Virginia. The amounts set up as
accruals for Taxes on the Sync Financial Statements are sufficient for the
payment of all Taxes of Sync and each of its Subsidiaries, whether or not
disputed, for all periods ended on and prior to the respective dates thereof. In
addition, the amounts set up as accruals for Taxes on the financial books of
Sync and each of its Subsidiaries on the date hereof are and will be sufficient
for the payment of all Taxes of Sync and each such Subsidiary, whether or not
disputed, for all periods ended on and prior to the Closing Date. Except as
disclosed in Section 4.11 of the Disclosure Schedule, the United States Federal,
California and Massachusetts income tax returns of Sync and each of its
Subsidiaries have been audited by the Internal Revenue Service or other Tax
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Authority or are closed and, to the best knowledge of Sync, there are no
proceedings or claims relating thereto or any facts that could give rise to the
reopening thereof or in connection with any other state or local income tax
returns. No deficiency in the payment of Taxes by Sync or any of its
Subsidiaries for any period has been asserted or, to the best knowledge of Sync,
threatened against Sync or any of its Subsidiaries by any Tax Authority and
remains unsettled as of the date of this Agreement. All Taxes required to be
withheld, collected or deposited by Sync or any of its Subsidiaries have been
timely withheld, collected or deposited and, to the extent required, have been
paid to the relevant Tax Authorities. Neither Sync nor any of its Subsidiaries
owe any amount pursuant to any written or unwritten Tax sharing agreement or
arrangement, or will have any liability after the date hereof in respect of any
written or unwritten Tax sharing agreement or arrangement executed or agreed
prior to the date hereof. There are no Tax liens on any of the assets of Sync or
any of its Subsidiaries, other than liens for current Taxes which are not yet
due or payable. Except as set forth in Section 4.11 of the Disclosure Schedule,
neither Sync nor any of its Subsidiaries has made any agreement, waiver or other
arrangement providing for an extension of time with respect to the assessment or
collection of any Tax against Sync or any such Subsidiary. Neither Sync nor any
of its Subsidiaries has been, or will be, subject to Tax under Section 1374 or
Section 1375 of the Code for any taxable year ending on or prior to the Closing
Date. Neither Sync nor any of its Subsidiaries has filed a consent with the
Internal Revenue Service pursuant to Section 341(f) of the Code or with any
other Tax Authority to any similar effect or made an election under Section 338
of the Code other than as provided for in the terms of this Agreement.
4.12 EMPLOYEE BENEFITS.
(a) Section 4.12 of the Disclosure Schedule contains a true and complete
list of each "employee benefit plan" (within the meaning of Section 3(3) of
ERISA, including, without limitation, multiemployer plans within the meaning
of ERISA Section 3(37)), stock purchase, stock option, stock bonus,
severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether
or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated
by this Agreement or otherwise), whether formal or informal, oral or
written, legally binding or not, under which any employee or former employee
of Sync or any of its Subsidiaries has any present or future right to
benefits and under which Sync or any of its Subsidiaries may have any
present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "Sync Plans."
(b) With respect to each Sync Plan, Sync has delivered to Osicom a
current, accurate and complete copy (or, to the extent no such copy exists,
an accurate description) thereof and, to the extent applicable: any related
trust agreement or other funding instrument; the most recent determination
letter, if the Sync Plan is intended to qualify under Code Section 401(a);
any summary plan description and other written communications (or a
description of any oral communications) by Sync or any of its Subsidiaries
to their respective employees concerning the extent of the benefits provided
under a Sync Plan; and, for the three most recent years, (A) the Form 5500
and attached schedules, (B) audited financial statements, (C) actuarial
valuation reports and (D) attorney's response to an auditor's request for
information.
(c) No Sync Plan is subject to Title IV of ERISA, and neither Sync nor
any member of its Controlled Group has ever contributed to, sponsored, or
been obligated to contribute to any plan subject to Title IV of ERISA.
(d) (i) Each Sync Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations;
(ii) no event has occurred and no condition exists that would subject Sync
or
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its Subsidiaries either directly or by reason of its affiliation with any
member of its "Controlled Group" (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any Tax, fine, lien or penalty imposed
by ERISA, the Code or other applicable laws, rules and regulations;
(iii) each Sync Plan which is intended to be qualified within the meaning of
Code Section 401(a) is so qualified and has received a favorable
determination letter pursuant to the Tax Reform Act of 1986 and subsequent
legislation as to its qualification, and nothing has occurred, whether by
action or failure to act, that could reasonably be expected to cause the
loss of such qualification; (iv) for each Sync Plan with respect to which a
Form 5500 has been filed, no material change has occurred with respect to
the matters covered by the most recent Form 5500 since the date thereof;
(v) except as set forth on Section 4.12 of the Disclosure Schedule, no Sync
Plan provides retiree welfare benefits and neither Sync nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits
other than as required by Section 4980B of the Code; and (vi) neither Sync
nor any member of its Controlled Group has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described
in Sections 4069 or 4212(c) of ERISA.
(e) With respect to any Sync Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or, to the knowledge of Sync, threatened, and (ii) no facts or circumstances
exist that could reasonably be expected to give rise to any such actions,
suits or claims.
(f) Except as set forth in Section 4.12 of the Disclosure Schedule, no
Sync Plan exists that could result in the payment to any present or former
employee of Sync or any of its Subsidiaries of any money or other property
or accelerate or provide any other rights or benefits to any present or
former employee or other service provider of Sync or any of its Subsidiaries
as a result of the transactions contemplated by this Agreement. There is no
contract, plan or arrangement (written or otherwise) covering any employee
or other service provider or former employee or other service provider of
Sync or any of its Subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant
to the terms of Section 280G of the Code.
4.13 LABOR RELATIONS. Except as set forth in Section 4.13 of the
Disclosure Schedule, there is no unfair labor practice charge or complaint
pending or, to the best knowledge of Sync, threatened against or otherwise
affecting Sync or any of its Subsidiaries which, if adversely determined, would
reasonably be likely to result in a liability having a Material Adverse Effect
on Sync; there is no labor strike, slowdown, work stoppage, or lockout in
effect, or, to the best knowledge of Sync, threatened against or otherwise
affecting Sync or any of its Subsidiaries, and neither Sync nor any of its
Subsidiaries has experienced any such labor controversy within the past three
years; neither Sync nor any of its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any governmental authority
relating to employees or employment practices; and Sync and each of its
Subsidiaries is in compliance with their obligations pursuant to the WARN Act,
and all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise. To the best knowledge of
Sync, there is no effort to organize employees of Sync or any of its
Subsidiaries which is pending or threatened.
4.14 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 4.14 of the Disclosure
Schedule contains a true and complete list of all patents, trademarks, trade
names, copyrights and pending applications therefor (collectively, the "Sync
Intellectual Property") used or owned by Sync and each of its Subsidiaries and a
list of all licenses and other agreements (collectively, the "Sync License
Agreements") relating thereto. Except as set forth in Section 4.14 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Sync Intellectual
Property or the Sync License Agreements, (ii) all Sync Intellectual Property and
Sync License Agreements are valid, in good standing and free and clear of liens
or other security
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interests, (iii) neither Sync nor any of its Subsidiaries has received written
or, to the best knowledge of Sync, oral, notice of any claims by any person to
the use of any such Sync Intellectual Property, or challenging or questioning
the validity or effectiveness of any such Sync License Agreement, and (iv) to
the knowledge of Sync, no other person is interfering with, infringing upon,
misappropriating or otherwise coming into conflict with any of the Sync
Intellectual Property.
4.15 CONTRACTS. The contracts and agreements listed in Section 4.15 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of Sync and each of
its Subsidiaries (the "Sync Contracts"). Complete copies (or, if oral, written
summaries) of each Sync Contract have been made available to Osicom, including
all of the following Sync Contracts: (i) any indenture, note, mortgage,
installment obligation, or other instrument for or relating to any borrowing of
money; (ii) any guaranty of any obligation; (iii) any agreement, contract,
commitment or arrangement containing any covenant limiting the ability of Sync
or any of its Subsidiaries to engage in any line of business or to compete with
any business or person; (iv) any agreement, contract, commitment or arrangement
relating to capital expenditures with respect to Sync or any of its Subsidiaries
and involving future payments which exceed $25,000 in any 12-month period;
(v) any agreement, contract, commitment or arrangement relating to the
acquisition of assets or any capital stock of any business enterprise which has
not been consummated; (vi) any real property lease; (vii) any contract,
commitment, agreement or arrangement which requires payments in excess of
$25,000 in any 12-month period, to the extent such contract, commitment,
agreement or arrangement is not terminable within 30 days without payment of
premium or penalty; (viii) any license agreement; (ix) any joint venture,
partnership or other agreement for the joint performance of work or services;
(x) each power of attorney that is effective and outstanding; (xi) any agreement
entered into other than in the ordinary course of business containing or
providing for an express undertaking by Sync or its Subsidiaries to be
responsible for consequential damages and (xii) any contract, commitment,
agreement or arrangement with any director, stockholder or Affiliate of Sync or
any of its Subsidiaries. Each Sync Contract is in full force and effect, and is
a legal, valid and binding obligation of Sync or such Subsidiary and, to the
best knowledge of Sync, each of the other parties thereto, enforceable in
accordance with its terms, except that (x) enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (y) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. No condition exists or event has
occurred which (whether with or without notice or lapse of time or both, or the
happening or occurrence of any other event) would constitute a default by Sync,
any of its Subsidiaries, or, to the best knowledge of Sync, any other party
thereto under, or result in a right in termination of, any Sync Contract, by any
other party thereto. To the best knowledge of Sync, no party to any Sync
Contract intends (x) to terminate such Sync Contract or materially amend the
terms thereof, (y) to refuse to renew such Sync Contract upon expiration thereof
or (z) to renew such Sync Contract upon expiration thereof on terms and
conditions which are materially more onerous to Sync or such Subsidiary than
those pertaining to such existing Sync Contract.
4.16 ENVIRONMENTAL MATTERS. Except as to matters which would not be
expected to result, individually or in the aggregate, in a Material Adverse
Effect on Sync, or as set forth in Section 4.16 of the Disclosure Schedule,
(i) neither Sync nor any of its Subsidiaries has received any notice alleging
the material violation of, or any material actual or potential liability
relating to, any applicable Environmental Laws which violation has not been
resolved and, to the best knowledge of Sync, no such notice is threatened or
otherwise expected, (ii) to the best knowledge of Sync, Sync and each of its
Subsidiaries is and has been in material compliance with all applicable
Environmental Laws and, to the best knowledge of Sync, there is no condition
that could prevent or materially interfere with such compliance in the future,
(iii) Sync and each of its Subsidiaries has obtained and is and has been in
material compliance with all required governmental environmental permits,
registrations and
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authorizations with respect to the business of Sync and each of its Subsidiaries
as currently conducted, (iv) to the best knowledge of Sync, no Hazardous
Material has been transported, stored, treated, arranged to be disposed of or
disposed of by Sync or any of its Subsidiaries on or from the real estate owned,
operated or otherwise used by Sync or any of its Subsidiaries or at any other
location, except in compliance with or as otherwise would not result in material
liability under any applicable Environmental Laws, (v) except for successor
liability as owner of real property, neither Sync nor any of its Subsidiaries
has assumed, contractually or by operation of law, any liabilities, potential
liabilities or obligations of any other person or entity under any applicable
Environmental Laws, (vi) neither Sync nor any of its Subsidiaries has entered
into, agreed to, or is subject to any judgment, decree, order or other similar
requirement of any governmental authority under any Environmental Laws,
(vii) to the best knowledge of Sync, there are no (w) underground or aboveground
storage tanks, (x) surface impoundments, (y) landfills or (z) sewer or septic
systems currently or formerly present at or about any of the properties or
facilities currently or, to the best knowledge of Sync, formerly owned, operated
or otherwise used by Sync or any of its Subsidiaries that could result in
material liability to Sync or any such Subsidiary under any applicable
Environmental Laws, and (viii) to the best knowledge of Sync, there are no
actions, activities, events, conditions or circumstances occurring or existing,
including without limitation the release, threatened release, emission,
discharge, generation, treatment, storage or disposal of Hazardous Materials,
that can reasonably expected to result in any material liability or obligation
of Sync or any of its Subsidiaries under or relating to any Environmental Laws.
4.17 INSURANCE. Section 4.17 of the Disclosure Schedule lists all
insurance policies of Sync and each of its Subsidiaries covering the assets,
employees and operations of Sync and each of its Subsidiaries as of the date
hereof and any pending claim under such policies. All such policies are in full
force and effect, all premiums due thereon have been paid by Sync or such
Subsidiary and Sync and each of its Subsidiaries has complied in all material
respects with the provisions of such policies and has not received any notice
from any of its insurance brokers or carriers that such broker or carrier will
not be willing or able to renew their existing coverage.
4.18 MATERIAL CUSTOMERS AND SUPPLIERS. Section 4.18 of the Disclosure
Schedule sets forth the names of the ten suppliers of Sync and its Subsidiaries
whom Sync and its Subsidiaries paid the greatest sum of money in respect of
products, services and materials sold to Sync and its Subsidiaries and the ten
customers of Sync and its Subsidiaries from whom Sync and its Subsidiaries
received the greatest sum of money in respect of products or services provided
by Sync and its Subsidiaries between January 1, 1999 and December 31, 1999.
4.19 REAL PROPERTY.
(a) The real property listed in Section 4.19(a) of the Disclosure
Schedule constitutes all of the real property that any of Sync and its
Subsidiaries owns as of the date hereof (the "Sync Owned Real Property").
Except as set forth in Section 4.19(a) of the Disclosure Schedule, with
respect to each such parcel of Sync Owned Real Property the identified owner
has good and marketable fee simple title to the parcel of real property,
free and clear of any Encumbrance (other than Permitted Liens).
(b) The leases listed in Section 4.15 of the Disclosure Schedule
constitute all the real property leases which are used in the conduct of the
business of Sync and its Subsidiaries as it is presently being conducted
and/or to which Sync or its Subsidiaries is a party (the "Sync Leases," and
such property, "Sync Leased Property"; the Sync Leased Property, together
with the Sync Owned Real Property, the "Sync Real Property"). The Sync Owned
Real Property and the Sync Leased Property is all of the real property which
is used for the conduct of the business of Sync and its Subsidiaries as is
presently conducted.
(c) Since December 31, 1999, neither Sync nor any of its Subsidiaries
has sold, assigned, transferred or otherwise disposed of, or granted any
security interest in or lien on, any Sync Lease.
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With respect to each Sync Lease, all accrued and payable rents required by
each Sync Lease to be paid by Sync or any of its Subsidiaries have been paid
or adequate provision for such payment has been made, no written notice of
default or termination has been given or received by Sync or any of its
Subsidiaries, and, to the best knowledge of Sync, no material event of
default has occurred, no condition exists and no event has occurred that,
with the giving of notice or the lapse of time, would become a material
default or permit early termination, under any Sync Lease, and (iii) Sync
has, and immediately after the Closing, Osicom will have, good, valid and
enforceable title to the leasehold estate in the Sync Leased Property, free
and clear of any Encumbrance (other than Permitted Liens). Except as set
forth in Section 4.19(c) of the Disclosure Schedule, no third party consent
or approval under any Sync Lease is required for the consummation of the
transactions contemplated herein.
(d) Sync has obtained all easements and rights of way required from all
governmental jurisdictions or from private parties for the normal use and
operation of the business on the Sync Owned Real Property as heretofore
conducted.
(e) There is no pending or, to Sync's knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting
any of the Sync Real Property and Sync has not received any written notice
of any of the same.
(f) Each Sync Owned Real Property and, to Sync's knowledge, each Sync
Leased Property and all buildings, structures, fixtures and improvements on
each Sync Owned Real Property and, to Sync's knowledge, each Sync Leased
Property, and all use of any thereof by Sync, conform with all applicable
building, zoning, subdivision, land use, fire and other laws pertaining to
or affecting real property, except where the failure to so conform would not
have a Material Adverse Effect on Sync. Each occupied Sync Owned Real
Property and, to Sync's knowledge, each occupied Sync Leased Property is
occupied under a valid and existing certificate of occupancy for such Sync
Real Property. Sync has taken all corrective action indicated in all written
notices or orders to Sync to correct violations of laws issued by any
governmental authority having jurisdiction against or affecting the Sync
Real Property. The Sync Real Property is not in violation of any restrictive
covenant, condition, restriction or limitation which would have a Material
Adverse Effect on Sync or a material adverse effect on the use thereof as
currently utilized.
(g) No Sync Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Sync to convey or use it as currently operated.
(h) All Sync Real Property and the improvements thereon are supplied
with the utilities necessary for the operation of such facilities as
currently operated.
(i) Sync has not received written notice of any special assessment
relating to any Sync Real Property or any portion thereof, and, to Sync's
knowledge, there are no pending or threatened special assessments.
(j) Sync has not obtained any environmental, engineering or other
studies or reports prepared for Sync since January 1, 1995 which primarily
deal with the ownership, operation, maintenance or management of the Sync
Real Property.
4.20 INVESTMENT COMPANY ACT STATUS. Neither Sync nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940.
4.21 PRODUCT LIABILITY. Except as set forth in Section 4.21 of the
Disclosure Schedule, neither Sync nor any of its Subsidiaries has received
written notice of any claim or threatened claim against Sync or any such
Subsidiary for product liability, nor, to the best knowledge of Sync, has Sync
or any of
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its Subsidiaries received oral notice of any claim or threatened claim against
Sync or any of its Subsidiaries for product liability.
4.22 BOOKS AND RECORDS. The financial books and records pertaining to the
business of Sync and its Subsidiaries are complete and correct in all material
respects, have been maintained in accordance with good business practice, and
reflect the basis for the financial condition and results of operations of Sync
set forth in the Sync Financial Statements referred to in Section 4.4 hereto.
4.23 NO BROKERS' OR OTHER FEES. No broker, finder or investment banker
(other than Alliant Partners) is entitled to any fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Sync or any of its Subsidiaries.
4.24 SYNC REPORTS. Since January 1997, Sync has filed all forms, reports
and documents with the Commission required to be filed by it pursuant to the
federal securities laws and the Commission rules and regulations thereunder (the
"Sync Commission Filings"), and all such forms, reports and documents filed with
the Commission have complied in all material respects with all applicable
requirements of the federal securities laws and the Commission rules and
regulations promulgated thereunder. Sync has made available to Osicom true and
complete copies of all Sync Commission Filings filed by Sync with the Commission
since January 1, 1997. As of their respective dates, the Sync Commission Filings
did not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.25 NASDAQ. Sync's Common Stock is currently trading on the NASDAQ
National Market and Sync currently satisfies the "maintenance criteria" for
continued trading thereon. Except as set forth in Section 4.25 of the Disclosure
Schedule, Sync has received no notice from NASDAQ of a potential revocation of
its National Market listing, nor is Sync aware of any facts that would form the
basis of such a notice.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS BY OSICOM. The Shareholder and Osicom covenant
that, except (i) as otherwise expressly contemplated by this Agreement or
(ii) as consented to by Sync in writing, from and after the date of this
Agreement and until the Effective Time Osicom shall, and shall cause each of its
Subsidiaries to:
(a) use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Osicom and its
Subsidiaries and pay payables and collect receivables in a manner consistent
with past practice and otherwise operate Osicom and its Subsidiaries in the
ordinary and regular course of business consistent with past practice;
(ii) maintain Osicom's and its Subsidiaries' books and records in accordance
with past practices; (iii) keep available the services of Osicom's and its
Subsidiaries' officers and employees; and (iv) maintain satisfactory
relationships with licensors, suppliers, creditors, distributors, customers
and others having material business relationships with Osicom and its
Subsidiaries;
(b) notify Sync of any change in the normal course of business or
operations of Osicom or its Subsidiaries and of any governmental complaints,
investigations or hearings of which Osicom or its Subsidiaries is notified
(or communications received by Osicom or its Subsidiaries indicating that
the same may be contemplated), or the institution or settlement of
litigation or any claim, in each case involving Osicom or its Subsidiaries,
and to keep Sync informed of such events;
(c) not (i) cause to be issued or sold any shares of capital stock or
debt or equity securities of Osicom or its Subsidiaries or Osicom Capital
Stock Equivalents or issue, grant or enter into any options, warrants,
rights, subscription agreements or commitments of any kind with respect
thereto;
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(ii) directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock of Osicom or its
Subsidiaries; (iii) declare, set aside or pay any dividend or other
distribution; (iv) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock or
any Osicom Capital Stock Equivalents, other than pursuant to Osicom Plans in
accordance with their terms as in effect on the date hereof; (v) permit or
allow Osicom or its Subsidiaries to borrow or agree to borrow any funds or
incur, whether directly or by way of guarantee, any obligation for borrowed
money, other than in the ordinary course of business and consistent with
past practice; (vi) subject any of the assets of Osicom or any of its
Subsidiaries (real, personal or mixed, tangible or intangible) to any
Encumbrance or otherwise permit or allow the sale, lease, transfer or
disposition of any assets of Osicom or its Subsidiaries (real, personal or
mixed, tangible or intangible), other than in the ordinary course of
business and consistent with past practice; (vii) assume, guarantee, or
otherwise become responsible for the obligations of, or make any loans or
advances to, any other individual, firm or corporation; (viii) waive or
release any rights of material value, or cancel, compromise, release or
assign any material indebtedness owed to Osicom or its Subsidiaries or any
material claims held by Osicom or its Subsidiaries; (ix) except for capital
expenditures not to exceed $5,000, make any investment or expenditure of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfer or otherwise; (x) enter into any new material
line of business; (xi) cancel or terminate any insurance policy naming
Osicom or its Subsidiaries as a beneficiary or a loss payable payee;
(xii) enter into any collective bargaining agreements; (xiii) increase the
compensation or fringe benefits of any of the officers or directors of
Osicom or any of its Subsidiaries or, other than in accordance with past
practice, effect any material general increase in the compensation or fringe
benefits of the employees of Osicom or any of its Subsidiaries or pay or
agree to pay any pension, retirement allowance, or other benefit not
required by any existing employee benefit plan or any bonus to any such
officers or employees, commit Osicom or any of its Subsidiaries to any
employment agreement or employee benefit plan with or for the benefit of any
of Osicom's or its Subsidiaries' officers or employees or any other person,
or alter, amend, terminate in whole or in part, or curtail or permanently
discontinue contributions to, any pension plan or any other employee benefit
plan; (xiv) except as may be required as a result of a change in law or in
GAAP, change any of the accounting practices or principles used by Osicom or
its Subsidiaries; (xv) enter into or terminate any license, distributorship,
dealer, sales representative, joint venture, credit or similar agreement, or
any contract, agreement or transaction involving a total remaining
commitment of at least $25,000; (xvi) except as may be required by law, make
any material Tax election, make or change any method of accounting with
respect to Taxes, file any amended Tax Returns that may have a Material
Adverse Effect on the Tax position of Osicom or any of its Subsidiaries or
settle or compromise any material Federal, state, local or foreign Tax
liability; (xvii) enter into any "non-compete" or similar agreement;
(xviii) amend the certificate of incorporation or by-laws of Osicom or any
of its Subsidiaries; (xix) take any action with knowledge that such action
would reasonably be expected to result in any of the conditions contained in
Article VII not being satisfied; (xx) or agree to do any of the foregoing;
and
(d) comply in all material respects with all applicable laws, including,
without limitation, applicable Environmental Laws.
5.2 CONDUCT OF BUSINESS BY SYNC. Sync covenants that, except (i) as
otherwise expressly contemplated by this Agreement or (ii) as consented to by
Osicom in writing, from and after the date of this Agreement and until the
Effective Time Sync shall, and shall cause each of its Subsidiaries to:
(a) use all reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of Sync and its
Subsidiaries and pay payables and collect receivables in a manner consistent
with past practice and otherwise operate Sync and its Subsidiaries in the
ordinary and regular course of business consistent with past practice;
(ii) maintain Sync's and its
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Subsidiaries' books and records in accordance with past practices;
(iii) keep available the services of Sync's and its Subsidiaries' officers
and employees; and (iv) maintain satisfactory relationships with licensors,
suppliers, creditors, distributors, customers and others having material
business relationships with Sync and its Subsidiaries;
(b) notify Osicom of any change in the normal course of business or
operations of Sync or its Subsidiaries and of any governmental complaints,
investigations or hearings of which Sync or its Subsidiaries is notified (or
communications received by Sync or its Subsidiaries indicating that the same
may be contemplated), or the institution or settlement of litigation or any
Claim, in each case involving Sync or its Subsidiaries, and to keep Osicom
informed of such events;
(c) not (i) cause to be issued or sold any shares of capital stock or
debt or equity securities of Sync or its Subsidiaries or Sync Capital Stock
Equivalents, except for the exercise of outstanding stock options, or issue,
grant or enter into any options, warrants, rights, subscription agreements
or commitments of any kind with respect thereto, except in the ordinary
course to non-executive employees of Sync; (ii) directly or indirectly cause
to be purchased, redeemed or otherwise acquired or disposed of any shares of
capital stock of Sync or its Subsidiaries; (iii) declare, set aside or pay
any dividend or other distribution; (iv) reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock or any Sync Capital Stock Equivalents, other than
pursuant to Sync Plans in accordance with their terms as in effect on the
date hereof; (v) permit or allow Sync or its Subsidiaries to borrow or agree
to borrow any funds or incur, whether directly or by way of guarantee, any
obligation for borrowed money, other than in the ordinary course of business
and consistent with past practice; (vi) subject any of the assets of Sync or
any of its Subsidiaries (real, personal or mixed, tangible or intangible) to
any Encumbrance or otherwise permit or allow the sale, lease, transfer or
disposition of any assets of Sync or its Subsidiaries (real, personal or
mixed, tangible or intangible), other than in the ordinary course of
business and consistent with past practice; (vii) assume, guarantee, or
otherwise become responsible for the obligations of, or make any loans or
advances to, any other individual, firm or corporation; (viii) waive or
release any rights of material value, or cancel, compromise, release or
assign any material indebtedness owed to Sync or its Subsidiaries or any
material claims held by Sync or its Subsidiaries; (ix) except for
(A) capital expenditures in the ordinary course of business and (B) capital
expenditures not to exceed $5,000, make any investment or expenditure of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfer or otherwise; (x) enter into any new material
line of business; (xi) cancel or terminate any insurance policy naming Sync
or its Subsidiaries as a beneficiary or a loss payable payee; (xii) enter
into any collective bargaining agreements; (xiii) increase the compensation
or fringe benefits of any of the officers or directors of Sync or any of its
Subsidiaries or, other than in accordance with past practice, effect any
material general increase in the compensation or fringe benefits of the
employees of Sync or any of its Subsidiaries or pay or agree to pay any
pension, retirement allowance, or other benefit not required by any existing
employee benefit plan to any such officers or employees, commit Sync or any
of its Subsidiaries to any employment agreement or employee benefit plan
with or for the benefit of any of Sync's or its Subsidiaries' officers or
employees or any other person, or alter, amend, terminate in whole or in
part, or curtail or permanently discontinue contributions to, any pension
plan or any other employee benefit plan; (xiv) except as may be required as
a result of a change in law or in GAAP, change any of the accounting
practices or principles used by Sync or its Subsidiaries; (xv) enter into or
terminate any license, distributorship, dealer, sales representative, joint
venture, credit or similar agreement, or any contract, agreement or
transaction involving a total remaining commitment of at least $25,000;
(xvi) except as may be required by law, make any material Tax election, make
or change any method of accounting with respect to Taxes, file any amended
Tax Returns that may have a Material Adverse Effect on the Tax position of
Sync or any of its Subsidiaries or settle or compromise any material
Federal, state, local or foreign Tax liability; (xvii) enter into any
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"non-compete" or similar agreement; (xviii) amend the certificate of
incorporation or by-laws of Sync or any of its Subsidiaries; (xix) take any
action with knowledge that such action would reasonably be expected to
result in any of the conditions contained in Article VI not being satisfied;
or (xx) agree to do any of the foregoing; and
(d) comply in all material respects with all applicable laws, including,
without limitation, applicable Environmental Laws.
5.3 ACCESS TO BOOKS AND RECORDS; COOPERATION. (a) OSICOM. During the
period commencing on the date hereof and ending on the Closing Date, Osicom will
afford to Sync and its counsel, accountants and other authorized representatives
access, at all reasonable times upon reasonable advance notice, to the officers,
directors, employees, accountants and other advisors and agents, properties,
books, records and contracts of Osicom and its Subsidiaries, and the right to
make copies and extracts from such books, records and contracts, and to furnish
Sync with all financial, operating and other data and information concerning
Osicom and its Subsidiaries as Sync and its advisors may reasonably request.
Sync will hold, and will use its best efforts to cause its representatives to
hold, any such information which is non-public in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement dated April 19, 1999 between Sync and Osicom (the "Confidentiality
Agreement").
(b) SYNC. During the period commencing on the date hereof and ending
on the Closing Date, Sync will afford to Osicom and its counsel, accountants
and other authorized representatives access, at all reasonable times upon
reasonable advance notice, to the officers, directors, employees,
accountants and other advisors and agents, books, records and contracts of
Sync and its Subsidiaries, and the right to make copies and extracts from
such books, records and contracts, and to furnish Osicom with all financial,
operating and other data and information concerning Sync and its
Subsidiaries as Osicom may reasonably request. Osicom will hold, and will
use its best efforts to cause its representatives to hold, any such
information which is non-public in confidence to the extent required by, and
in accordance with, the provisions of the Confidentiality Agreement.
5.4 FILINGS AND CONSENTS. Sync and Osicom shall use all reasonable efforts
to obtain and to cooperate in obtaining any consent, approval, authorization or
order of, and in making any registration or filing with, any governmental agency
or body or other third party required in connection with the execution, delivery
or performance of this Agreement. The parties agree to cause to be made all
appropriate filings under the HSR Act within three business days of the date of
this Agreement and to diligently pursue early termination of the waiting period
under such act.
5.5 NO SOLICITATION. (a) Sync, the Shareholder and its Subsidiaries, and
the officers, directors, employees or other agents of Sync, the Shareholder and
its Subsidiaries, will not, directly or indirectly, (i) take any action to
solicit, initiate or encourage any Takeover Proposal (as defined below) or
(ii) subject to the terms of Section 5.5(b), engage in negotiations with, or
disclose any nonpublic information relating to Sync or Osicom (as applicable)
to, or afford access to the properties, books or records of Sync or Osicom (as
applicable) to, any person that has advised Sync, the Shareholder or Osicom that
it may be considering making, or that has made, a Takeover Proposal. Each of
Sync and the Shareholder will promptly notify the other after receipt of any
Takeover Proposal or any notice that any person is considering making a Takeover
Proposal or any request for nonpublic information relating to Sync or Osicom, as
applicable, or for access to the properties, books or records of Sync or Osicom,
as applicable, by any person that has advised Sync or the Shareholder, as
applicable, that it may be considering making, or that has made, a Takeover
Proposal and will keep the Shareholder or Sync, as applicable, fully informed of
the status and details of any such Takeover Proposal notice or request. For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal for,
or any indication of interest in, a merger or other business combination
involving Sync or Osicom, or the acquisition of any significant equity interest
in, or a significant portion of the assets of, Sync or Osicom, other than the
transactions contemplated by this Agreement.
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(b) Notwithstanding Section 5.5(a), if an unsolicited Takeover Proposal,
or an unsolicited written expression of interest that can reasonably be
expected to lead to a Takeover Proposal, shall be received by the Board of
Directors of Sync or the Shareholder, then, to the extent the Board of
Directors of Sync or the Shareholder, as applicable, believes in good faith
(after consultation with its financial advisor) that such Takeover Proposal
would, if consummated, result in a transaction more favorable to Sync's or
the Shareholder's stockholders, as applicable, from a financial point of
view than the transaction contemplated by this Agreement (any such more
favorable Takeover Proposal being referred to in this Agreement as a
"Superior Proposal"), and the Board of Directors of Sync or the Shareholder,
as applicable, determines in good faith after consultation with outside
legal counsel that it is necessary for such Board of Directors to evaluate
the Superior Proposal in order to comply with its fiduciary duties to
stockholders under applicable law, Sync or the Shareholder, as applicable,
and its officers, directors, employees, investment bankers, financial
advisors, attorneys, accountants and other representatives retained by it
may furnish in connection therewith information and take such other actions
as are consistent with the fiduciary obligations of its Board of Directors,
and such actions shall not be considered a breach of this Section 5.5 or any
other provisions of this Agreement; provided, however, that Sync and the
Shareholder shall not, and shall not permit any of their respective
officers, directors, employees or other representatives to, agree to or
endorse any Takeover Proposal regarding Sync or Osicom, as applicable,
unless Sync or the Shareholder, as applicable, shall have (i) terminated
this Agreement pursuant to Section 8.1(e), and (ii) agreed to pay, without
interest, to the Shareholder or Sync, as applicable, the sum of $1,000,000
(the "Break-up Fee") no later than thirty (30) days after the closing of the
transaction resulting from the Superior Proposal.
5.6 PROXY; REGISTRATION STATEMENT. As soon as practicable after the date
hereof, Sync shall prepare and file with the Commission a proxy statement and
related materials to be furnished by the Company to the holders of Sync Common
Stock in connection with the Merger and the matter referred to in Section 1.6 of
this Agreement (the "Proxy Statement") and a Registration Statement on Form S-4
with respect to the shares of Sync Common Stock to be issued to the Shareholder.
As soon as practicable following receipt of final comments from the staff of the
Commission on the Proxy Statement and the Registration Statement (or advice that
such staff will not review such filing), Sync shall use its best efforts to have
the Registration Statement declared effective by the Commission and to maintain
the effectiveness of such Registration Statement until completion of the Merger.
Promptly after the effectiveness of the Registration Statement, Sync shall mail
the Proxy Statement to all holders of Sync Common Stock. Sync, the Shareholder
and Osicom shall cooperate with each other in the preparation of the Proxy
Statement and the Registration Statement and shall advise the other in writing
if, at any time prior to the Sync Meeting, any such party shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or supplement
the Proxy Statement or the Registration Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law. Notwithstanding the foregoing, each party shall be
responsible for the information and disclosures which it makes or incorporates
by reference in all regulatory filings, the Proxy Statement and the Registration
Statement.
5.7 SHAREHOLDERS' MEETING. Sync shall take all action necessary, in
accordance with applicable law and its Certificate of Incorporation and By-Laws,
to convene a meeting of the holders of the Sync Common Stock (the "Sync
Meeting") as promptly as practicable for the purpose of considering and taking
action required by this Agreement. Except to the extent legally required for the
discharge by the Board of Directors of its fiduciary duties, the Board of
Directors of Sync shall recommend that the holders of the Sync Common Stock vote
in favor of and approve the Merger and adopt this Agreement at the Sync Meeting.
5.8 LISTING. Sync shall use its best efforts to list on the Nasdaq
National Market upon official notice of issuance the Sync Common Stock to be
issued in the Merger.
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5.9 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees to use all
reasonable efforts to insure that the conditions set forth in Article VI and
Article VII, respectively hereof are satisfied, insofar as such matters are
within the control of such party.
5.10 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall at any time execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable, including
without limitation the transfer to Osicom of all right, title and interest in
the Osicom Assets, for effecting completely the consummation of this Agreement
and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO OSICOM'S OBLIGATIONS
The obligation of Osicom to effect the Closing under this Agreement is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless validly waived in writing by Osicom.
6.1 REPRESENTATIONS AND WARRANTIES. (a) Each of the representations and
warranties of Sync set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as if made at and as of
the Closing Date (except, in each case, for those representations and warranties
which address matters only as of a particular date, in which case they shall be
true and correct, or true and correct in all material respects, as applicable,
as of such date).
6.2 PERFORMANCE. Sync shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement to be so
performed or complied with by it prior to the Closing.
6.3 OFFICER'S CERTIFICATE. Sync shall have delivered to Osicom a
certificate, dated as of the Closing Date and executed by the President or a
Senior Vice President of Sync, certifying to the fulfillment of the conditions
specified in Sections 6.1 and 6.2 hereof.
6.4 HSR ACT. All applicable waiting periods under the HSR Act with respect
to the transactions contemplated hereby shall have expired or been terminated.
6.5 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of shareholders of Sync.
6.6 REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
6.7 NASDAQ. The Sync Common Stock issuable pursuant to the Merger shall
have been designated for inclusion in the Nasdaq National Market (the "Nasdaq").
6.8 INJUNCTIONS. On the Closing Date there shall be no injunction, writ,
preliminary restraining order or other order in effect of any nature issued by a
United States Federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
6.9 CONSENTS. All material orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 4.6 of the Disclosure Schedule and necessary
to effect the Closing or continue the business of Osicom after the Closing shall
have been obtained.
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6.10 NON-COMPETITION AGREEMENT. Prior to the Closing, pursuant to
Section 1.7(d), Sync shall have entered into a Non-Competition Agreement with
the Shareholder in such form and substance as Sync and the Shareholder may
mutually agree.
ARTICLE VII
CONDITIONS TO SYNC'S OBLIGATION
The obligation of Sync to effect the Closing under this Agreement is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions, unless validly waived in writing by Sync.
7.1 REPRESENTATIONS AND WARRANTIES. (a) Each of the representations and
warranties of the Shareholder and Osicom set forth in this Agreement that shall
be true and correct as of the date of this Agreement and as of the Closing Date
as if made at and as of the Closing Date, (except, in each case, for those
representations and warranties which address matters only as of a particular
date, in which case they shall be true and correct, or true and correct in all
material respects, as applicable, as of such date).
7.2 PERFORMANCE. The Shareholder and Osicom shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be so performed or complied with by the Shareholder and
Osicom prior to the Closing.
7.3 OFFICER'S CERTIFICATE. The Shareholder and Osicom shall have delivered
to Sync a certificate, dated as of the Closing Date and executed by the
President or a Senior Vice President each of Osicom, certifying to the
fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof.
7.4 HSR ACT. All applicable waiting periods under the HSR Act with respect
to the transactions contemplated hereby shall have expired or been terminated.
7.5 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of shareholders of Sync.
7.6 REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and remain in effect.
7.7 INJUNCTIONS. On the Closing Date there shall be no injunction, writ,
preliminary restraining order or other order in effect of any nature issued by a
United States Federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
7.8 CONSENTS. All material orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 3.6 of the Disclosure Schedule and necessary
to effect the Closing or continue the business of Osicom after the Closing shall
have been obtained. Without limiting the foregoing, Coast Business Credit, Inc.
shall have agreed to continue to provide financing to the Surviving Corporation
in the same amount and on the same terms and conditions as it has provided such
financing to Osicom prior to the date of this Agreement.
7.9 NON-COMPETITION AGREEMENT. Prior to the Closing, pursuant to
Section 1.7(d), Sync shall have entered into a Non-Competition Agreement with
the Shareholder in such form and substance as Sync and the Shareholder may
mutually agree.
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ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time:
(a) by the mutual consent of Sync and the Shareholder;
(b) by Sync, if the Closing has not occurred on or before August 31,
2000, unless the failure of such consummation shall be due to any materially
false, inaccurate or misleading representations and warranties of Sync
contained herein or the breach or failure of Sync to comply in all material
respects with the agreements and covenants contained herein to be performed
by Sync on or before August 31, 2000;
(c) by the Shareholder, if the Closing has not occurred on or before
August 31, 2000, unless the failure of such consummation shall be due to any
materially false, inaccurate or misleading representations and warranties of
the Shareholder or Osicom contained herein or the breach or failure of the
Shareholder or Osicom to comply in all material respects with the agreements
and covenants contained herein to be performed by the Shareholder or Osicom
on or before August 31, 2000;
(d) by either Sync or the Shareholder, if any court or governmental
authority of competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree or
ruling or other action shall have become final and nonappealable;
(e) by either Sync or the Shareholder, upon (i) receipt of an
unsolicited proposal that constitutes a Superior Proposal and
(ii) agreement to pay the Break-up Fee; or
(f) by Sync in the event its Shareholders vote not to approve this
Agreement, provided that Sync shall then pay to Osicom a fee of Two Hundred
Fifty Thousand Dollars ($250,000.00) within thirty (30) days of such
shareholder vote.
8.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the termination
of this Agreement and the abandonment of the transactions contemplated hereby by
Sync or the Shareholder pursuant to Section 8.1 hereof, written notice thereof
shall forthwith be given to the other parties. If this Agreement is terminated
and the transactions contemplated by this Agreement are abandoned as provided
herein, no party to this Agreement will have any liability under this Agreement
to any other except (i) that nothing herein shall relieve any party from any
liability for making any false, inaccurate or misleading representations or
warranties, or the breach of any covenants and agreements set forth in this
Agreement and (ii) as contemplated by Section 9.1 and (iii) if applicable,
payment of the Break-up Fee pursuant to Section 5.5(b) or the $250,000.00 fee
pursuant to Section 8.1(f).
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE SHAREHOLDER OF SYNC. Subject to the limits
set forth in this Section 9.1, the Shareholder agrees that from and after
the date hereof the Shareholder shall, indemnify, defend and hold Sync, its
Subsidiaries (including, without limitation, Osicom after the Effective
Date) and their respective officers, directors, partners, stockholders,
employees, agents and representatives (collectively, the "Sync Indemnified
Persons") harmless from and in respect of any and all losses, damages, costs
and reasonable expenses (including, without limitation, reasonable fees and
expenses of counsel) (collectively, "Losses"), that such Sync Indemnified
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Persons or Sync or its Subsidiaries may incur arising out of or due to
(i) any false, inaccurate, or misleading representation or warranty or the
breach of any covenant by the Shareholder or Osicom in the Agreement,
(ii) the termination of the Case Defined Benefit Plan; (iii) the early
termination by Osicom of its real estate lease for property located in
Aurora, Illinois; and (iv) the failure of Osicom to pay any owed Taxes and
to file all required Tax Returns, and all fines and penalties associated
therewith. The matters referred to in clause (i) of this paragraph (a) shall
be subject to indemnification only as to claims made within the period
ending twenty-four (24) months following the Effective Date (except as to
matters referred to in Section 3.16, for which the time limit is the
applicable statute of limitations).
(b) INDEMNIFICATION BY SYNC OF THE SHAREHOLDER. Subject to the limits
set forth in this Section 9.1, Sync agrees that from and after the date
hereof Sync shall, for claims made within the period ending twenty-four
(24) months following the Effective Date (except as to matters referred to
in Section 4.16, for which the time limit is the applicable statute of
limitations) indemnify, defend and hold the Shareholder and its officers,
directors, partners, stockholders, employees, agents and representatives
(collectively, the "Osicom Indemnified Persons" and, together with the Sync
Indemnified Persons, the "Indemnified Persons") harmless from and in respect
of any and all Losses that such Osicom Indemnified Persons may incur arising
out of or due to any false, inaccurate, or misleading representation or
warranty or the breach of any covenant by Sync in the Agreement. The matters
referred to this paragraph (b) shall be subject to indemnification only as
to claims made within the period ending twenty-four (24) months following
the Effective Date (except as to matters referred to in Section 3.16, for
which the time limit is the applicable statute of limitations).
(c) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 9.1(a) or
9.1(b), then Sync or the Shareholder as applicable, shall promptly notify
the Shareholder or Sync, respectively (the "Indemnifying Party"). If such
event involves any claim, or the commencement of any action or proceeding,
by a third person against any of the Indemnified Persons, the Indemnified
Person will give the Indemnifying Party prompt written notice of such claim
or the commencement of such action or proceeding; provided, however, that
the failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that such
failure prejudices the Indemnifying Party hereunder. In case any such action
shall be brought against any party seeking indemnification and the
Indemnified Person shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein or,
following the delivery by the Indemnifying Party to the Indemnified Person
of Indemnified Party's acknowledgment in writing that the relevant Loss is
an indemnified liability hereunder and that the Indemnifying Party, in its
good faith judgment, will be able to pay any award of money damages against
the Indemnified Person in connection with such action, to assume the defense
thereof, with legal counsel reasonably satisfactory to such Indemnified
Person and, after notice from the Indemnified Person to such Indemnified
Person of such election so to assume the defense thereof, the Indemnifying
Party shall not be liable to the party or parties seeking indemnification
hereunder for any legal expenses of other counsel or any other expenses
subsequently incurred by such party or parties in connection with the
defense thereof. The Indemnifying Party and the Indemnified Person agree to
cooperate fully with each other and their respective legal counsel in
connection with the defense, negotiation or settlement of any such action or
asserted liability. The Indemnified Person shall have the right to
participate at his own expense in the defense of such action or asserted
liability. If the Indemnifying Party assumes the defense of an action
(a) no settlement or compromise thereof may be effected (i) by the
Indemnifying Party without the written consent of the Indemnified Person
(which consent shall not be unreasonably withheld or delayed) unless
(x) there is no finding or admission of any violation of law or any
violation of the rights of any person by any Indemnified Person and no
adverse effect on any other claims that may be made
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against any Indemnified Person and (y) all relief provided is paid or
satisfied in full by the Indemnifying Party or (ii) by the Indemnified
Person without the written consent of Indemnifying Party (which consent
shall not be unreasonably withheld or delayed) and (b) the Indemnified
Person may subsequently assume the defense of such action if a court of
competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action and the Indemnifying Party shall bear all
costs and expenses incurred by the Indemnified Party in its defense of such
action, including without limitation, fees and expenses of legal counsel. In
no event shall the Indemnifying Party be liable for any settlement effected
without its written consent
(d) PAYMENT. On each occasion that any Indemnified Person shall be
entitled to indemnification or reimbursement under this Section 9.1, the
Indemnifying Party shall, at each such time, promptly pay by wire transfer,
to the Indemnified Person the aggregate amount of such Loss. To the extent
the Indemnified Person is the Shareholder and/or Osicom and Sync makes a
payment to a third party or incurs defense costs subsequent to the Effective
Date with respect to a matter subject to indemnification hereunder, then the
Loss payable to the Shareholder shall equal the amount of such payment and
costs, which the Surviving Corporation shall pay to the Shareholder. To the
extent that the Indemnified Person is a Sync Indemnified Person, and Sync
makes a payment to a third party or incurs defense costs subsequent to the
Effective Date with respect to a matter subject to indemnification hereunder
by the Shareholder, then the Loss payable to Sync shall equal the amount of
such payment and costs, which the Shareholder shall pay to Sync. If any
Indemnified Person shall be entitled to indemnification under this
Section 9.1, the Indemnifying Party shall reimburse in cash the Indemnified
Person's actual out-of-pocket expenses, if any, arising as a result of
defending against any such claim, action or proceeding.
(e) MINIMUM LIABILITY. Neither party shall have any liability to the
other under this Article IX unless such party's aggregate Losses exceed
$250,000, in which event the Indemnifying Party shall be liable only for all
such Losses above that amount. Neither party shall have any liability under
this Article IX in an amount greater that Sync's market capitalization as of
the date of this Agreement..
ARTICLE X
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time for a period of two
(2) years, except for (a) those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
prior to or at the Effective Time, and (b) those representations concerning
Taxes, which will survive for the statute of limitations period applicable to
the payment of such taxes, and (c) those representations concerning matters
under or relating to any Environmental Laws, which will survive for the statute
of limitations period applicable to such matters.
10.2 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
Osicom and Shareholder shall bear their own expenses and the expenses of their
Affiliates and Sync shall bear its own expenses and the expenses of its
Affiliates in connection with the preparation and negotiation of this Agreement
and the consummation of the transactions contemplated by this Agreement. Each of
Osicom. Shareholder and Sync shall bear the fees and expenses of any broker or
finder retained by such party or parties and their respective Affiliates
(including, in the case of Sync, Merger Co) in connection with the transactions
contemplated herein.
10.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of California applicable to contracts made and to be
performed therein.
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10.4 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by Sync, the Shareholder, Osicom and Merger Co.
10.5 NO ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of Osicom, in the case of assignment by Sync, and
Sync, in the case of any assignment by Osicom or the Shareholder.
Notwithstanding the foregoing, Merger Co may assign, in its sole discretion, any
or all of its rights, interests and obligations under this Agreement to any
direct wholly owned Subsidiary of Sync without the consent of Osicom, but no
such assignment shall relieve Sync or Merger Co of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
10.6 WAIVER. Any of the terms or conditions of this Agreement which may be
lawfully waived may be waived in writing at any time by each party which is
entitled to the benefits thereof. Any waiver of any of the provisions of this
Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
10.7 NOTICES. Any notice, demand, or communication required or permitted
to be given by any provision of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if (a) personally delivered,
(b) mailed by registered or certified first-class mail, prepaid with return
receipt requested, (c) sent by a nationally recognized overnight courier
service, to the recipient at the address below indicated or (d) delivered by
facsimile which is confirmed in writing by sending a copy of such facsimile to
the recipient thereof pursuant to clause (a) or (c) above:
If to Sync or Merger Co:
Sync Research, Inc.
12 Morgan
Irvine, California 92618
Attn: William K. Guerry, President
(949) 460-4481 (telecopier)
(949) 588-2070 (telephone)
With copies to:
Orrick, Harrington & Sutcliffe, LLP
777 South Figueroa Street, Suite 3200
Los Angeles, California 90017
Attn: Blase P. Dillingham, Esq.
(213) 612-2499 (telecopier)
(213) 629-2020 (telephone)
Venture Law Group
2775 and 2800 Sand Hill Road
Menlo Park, California 94025
Attn: Mark Medearies, Esq.
(650) 233-8386 (telecopier)
(650) 854-4488 (telephone)
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If to the Shareholder or Osicom:
Osicom Technologies, Inc.
2800 28th Street, Suite 100
Santa Monica, California 90405
Attn: President
(310) 581-4032 (telecopier)
(310) 581-4030 (telephone)
With copies to:
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP
Metro Corporate Campus I
99 Wood Avenue South
P.O. Box 5600
Woodbridge, New Jersey 07095
Attn: W. Raymond Felton, Esq.
(732) 549-1881 (telecopier)
(732) 549-5600 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this Agreement will be
deemed to have been given (x) on the date such notice is personally delivered or
delivered by facsimile, (y) four days after the date of mailing if sent by
certified or registered mail or (z) the next succeeding business day after the
date such notice is delivered to the overnight courier service if sent by
overnight courier; provided that in each case notices received after 4:00 p.m.
(local time of the recipient) shall be deemed to have been duly given on the
next business day.
10.8 COMPLETE AGREEMENT. This Agreement and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.10 PUBLICITY. Sync and Osicom will consult with each other and will
mutually agree upon any publication or press release of any nature with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such publication or press release prior to such consultation and agreement
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any securities exchange or any securities exchange
regulation, in which case the party proposing to issue such publication or press
release shall make all reasonable efforts to consult in good faith with the
other party or parties before issuing any such publication or press release and
shall provide a copy thereof to the other party or parties prior to such
issuance.
10.11 HEADINGS. The headings contained in this Agreement are for reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10.12 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or
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rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
10.13 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
10.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE PARTIES HERETO
HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE AREA ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF CALIFORNIA AND
IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO EACH ACCEPT
FOR ITSELF AND HIMSELF, AS THE CASE MAY BE, AND IN CONNECTION WITH ITS OR HIS,
AS THE CASE MAY BE, RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE
OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY NON-APPEALABLE
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. OSICOM DESIGNATES
GIL GOLDBECK AT HIS BUSINESS ADDRESS, 9020 JUNCTION DRIVE, ANNAPOLIS JUNCTION,
MARYLAND 20701 AND SUCH OTHER PERSON AS MAY HEREINAFTER BE SELECTED BY OSICOM
WHO IRREVOCABLY AGREES IN WRITING TO SO SERVE AS AGENT FOR OSICOM TO RECEIVE ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. SYNC DESIGNATES WILLIAM K. GUERRY AT HIS BUSINESS ADDRESS SET FORTH IN
SECTION 10.7 AND SUCH OTHER PERSON AS MAY HEREINAFTER BE SELECTED BY SYNC WHO
IRREVOCABLY AGREES IN WRITING TO SO SERVE AS AGENT FOR SYNC TO RECEIVE ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE PARTIES HERETO, AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS.
10.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, THE
PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE PARTIES
HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT
FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED
A-33
THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10.16 DEFINITIONS. As used in this Agreement:
"AFFILIATE" of a person means a person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
"BEST KNOWLEDGE" means the knowledge of Osicom's or Sync's, as the case may
be, officers, as such knowledge has been obtained in the normal course of its
business or in connection with the preparation of the Disclosure Schedule and
the furnishing of information to Sync or Osicom as contemplated by this
agreement, after having made a reasonable investigation of the accuracy of the
representations and warranties made by Osicom or Sync in this Agreement or in
any document, certificate or other writing furnished by Osicom or Sync to the
other pursuant hereto or in connection therewith.
"MATERIAL ADVERSE EFFECT" means, with respect to any entity, to the extent
not reflected on such entity's Balance Sheet, any liability, obligation,
impairment, restriction, lien, cost, expense, loss, compensation, payment,
reimbursement, damage, judgment or settlement to, of, by or on the business
(including on assets that has such effect on the business), operations, cash
flow, property, assets, prospects or condition (financial or otherwise) of such
entity and its Subsidiaries taken as a whole in the amount of $250,000 or more
for an individual occurrence or $500,000 or more in the aggregate for multiple
occurrences, arising outside the ordinary course of business. "Material Adverse
Effect" includes, without limitation, any effect that impairs the ability of any
of the parties hereto to consummate any transaction contemplated hereby.
"PERMITTED LIENS" means (a) any mechanic's, materialman's or other liens
arising by operation of law in the ordinary course of business consistent with
past practice, (b) liens for Taxes, assessments and other governmental charges
not yet due and payable or which the taxpayer is contesting in good faith
through appropriate proceedings and for which any required reserves have been
established, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, (d) liens arising as a matter of law in the ordinary
course of business, provided that the obligations secured by such liens are not
delinquent or are being contested in good faith, and (e) Encumbrances which,
individually and in the aggregate, do not materially impair the current use or
continued use (in the same manner as they are being used on the date hereof) of
the asset to which they attach.
"SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, of which such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or at least a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
10.17 EFFECTIVE DATE. Notwithstanding anything to the contrary herein,
this Agreement shall become effective only upon the preparation and public
release of a press release, agreed upon by Sync and the Shareholder, announcing
the merger transaction contemplated by this Agreement.
A-34
IN WITNESS WHEREOF, each of Sync, Merger Co, the Shareholder and Osicom has
caused this Agreement to be executed by its duly authorized officer, in each
case as of the day and year first above written.
SYNC RESEARCH, INC., a Delaware
Corporation
By: /s/ WILLIAM K. GUERRY
Name: William K. Guerry
Title: Chief Executive Officer
MERGER CO, a Delaware Corporation
By: /s/ WILLIAM K. GUERRY
Name: William K. Guerry
Title: Chief Executive Officer
OSICOM TECHNOLOGIES, INC. a New Jersey
corporation
By: /s/ CHRISTOPHER E. SUE
Name: Christopher E. Sue
Title: Vice President of Finance
OSICOM TECHNOLOGIES, INC. a Delaware
corporation
By: /s/ CHRISTOPHER E. SUE
Name: Christopher E. Sue
Title: Treasurer and Secretary
A-35
ANNEX B
OPINION OF FINANCIAL ADVISOR TO SYNC
[letterhead of Alliant Partners]
April 10, 2000
Board of Directors
Sync Research, Inc.
12 Morgan
Irvine, CA 92618
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Sync Research, Inc. ("Sync" or the "Company") in
connection with the transactions contemplated by the Agreement and Plan of
Merger (the "Agreement") dated April 10, 2000 by and among
1. Sync Research, Inc. ("Sync"), a Delaware corporation
2. Osicom Technologies, Inc. ("Parent"), a New Jersey corporation
3. Osicom Technologies, Inc., doing business as Entrada Networks ("Entrada"
or "Entrada"), a Delaware Corporation in which reside substantially all
of the assets of the Network Access division of Osicom Technologies Inc.
New Jersey
4. a wholly-owned subsidiary of Sync Research, Inc. (yet to be created),
formed for the purpose of this transaction
and the issuance of common stock, par value $0.001, of Sync (the "Shares")
pursuant thereto. The total consideration to be paid to Parent for Entrada is
equal to the number of shares of Sync Common Stock outstanding at the time of
closing, to be issued at closing. As of April 10, 2000, that number was
3,531,007. The transactions described above are collectively referred to herein
as the "Transaction".
Alliant Partners, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and corporate partnering transactions. We have acted as
financial advisor to Sync in connection with the Transaction and will receive a
fee for our services, including rendering this opinion, a significant portion of
which is contingent upon the consummation of the Transaction.
In arriving at our opinion, we have reviewed the Agreement and all of the
Exhibits and schedules, and have reviewed financial, product and other
information that was furnished to us by Sync and Parent. We also have held
discussions with members of the senior management of Sync and Parent regarding
the historic and current business operations and future risks and prospects of
the Company, including their expectation for certain strategic benefits of the
transaction. As part of these discussions, we also reviewed other transactions
contemplated by the Company over the last twelve months. In addition, we have
compared certain financial and securities data, both historic and projected, of
Entrada with those of various other companies engaged in businesses we
considered comparable with
B-1
securities which are traded in public markets, analyzed prices paid in certain
other similar business combinations, and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
We have assumed, without independent verification, the accuracy,
completeness and fairness of all of the financial statements, product
information, marketing strategies and other information regarding Entrada that
has been provided to us by Parent and its representatives. We did not make any
independent evaluation of Entrada's assets or intellectual property, nor did we
review any of Parent's corporate records.
Based on the foregoing and such other factors as we deem relevant, we are of
the opinion, as of the date hereof, that the consideration to be paid by Sync in
connection with the Transaction is fair, from a financial point of view, to Sync
and its shareholders.
Sincerely Yours,
/s/ ALLIANT PARTNERS
B-2
ANNEX C
BRING-DOWN OPINION OF FINANCIAL ADVISOR TO SYNC
[To be filed by amendment.]
C-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director
or officer of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the corporation,
against any expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the corporation against any
liability asserted against the person in any such capacity, or arising out of
the person's status as such, whether or not the corporation would have the power
to indemnify the person against such liability under the provisions of the law.
Article X of the Registrant's Certificate of Incorporation (incorporated by
reference herein) provides for indemnification of directors, officers and other
persons as follows:
"A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
B. The Corporation shall indemnify to fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director, officer or
employee of the Corporation or any predecessor of the Corporation, or serves
or served at any other enterprise as a director, officer or employee at the
request of the Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article X, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article X, shall eliminate or reduce the effect of this Article X in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article X, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision."
II-1
Article VI of the Registrant's Bylaws (incorporated by reference herein)
provides in pertinent part that:
"INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation
Law of Delaware, indemnify each of its directors and officers against
expenses (including attorneys' fees), judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a
director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
INDEMNIFICATION OF OTHERS. The corporation shall have the power, to the
maximum extent and in the manner permitted by the General Corporation Law of
Delaware, to indemnify each of its employees and agents (other than
directors and officers) against expenses (including attorneys' fees),
judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact
that such person is or was an agent of the corporation. For purposes of this
Section 6.2, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or
agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
the provisions of the General Corporation Law of Delaware."
The Registrant has entered into indemnification agreements with its
directors containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Registrant,
among other things, to indemnify its directors against certain liabilities that
may arise by reason of their status or service as directors (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain director's insurance if available on
reasonable terms.
The Registrant has also obtained directors and officers' liability insurance
covering, subject to certain exceptions, actions taken by the Registrant's
directors and officers in their capacities as such.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed herewith or incorporated herein by
reference.
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
2.01(3) Agreement and Plan of Reorganization, dated April 10, 2000,
by and among the Registrant, Sync Research Acquisition
Corp., Osicom Technologies, Inc., a New Jersey corporation,
and Osicom Technologies, Inc., a Delaware corporation.
3.1(12) Amended and Restated Certificate of Incorporation of
Registrant.
3.3(14) Amended and restated Bylaws of Registrant.
5.01* Form of opinion of Orrick, Herrington & Sutcliffe LLP as to
the legality of the Registrant's Common Stock being
registered hereby.
10.01(1) Form of Indemnification Agreement.
10.02(8) Amended and Restated 1991 Stock Plan (amended as of June 12,
1998) and form of Option Agreement.
10.03(4) Amended 1995 Employee Stock Purchase Plan (amended as of
September 27, 1996) and form of Subscription Agreement.
10.04(8) Amended and Restated 1995 Directors' Option Plan (amended as
of June 12, 1998) and form of Option Agreement.
10.05(1) Amended and Restated Investors' Rights Agreement among the
Registrant and certain security holders of the Registrant,
dated as of April 25, 1994.
10.06(1) Consulting Agreement between the Registrant and Gregorio
Reyes dated January 1995.
10.07(1) 401(k) Plan.
10.08(5) Assumed TyLink Corporation 1994 Equity Incentive Plan.
10.09(4) Form of Severance Agreement between the Registrant and other
executive officers of the Registrant.
10.10(4) Real Estate Lease between TyLink and Thomas J. Flatley d/b/a
The Flatley Company, dated May 14, 1991.
10.11(13) Third Amendment to Lease for 10C Commerce Way, Norton, MA
dated July 28, 1999.
10.12(9) Amended and Restated 1996 Non-Executive Stock Option Plan
(amended as of August 21, 1998).
10.13(7) Letter Agreement dated June 6, 1997 between William K.
Guerry and the Registrant.
10.14(10) Form of Severance Agreement between the Registrant and
Gregorio Reyes, dated October 24, 1997.
10.15(13) Standard Industrial Lease for 12 Morgan, Irvine, CA dated
July 19, 1999.
10.16(14) Form of Amended and Restated Severance Agreement between the
Registrant and William Guerry, dated October 8, 1999.
10.17(15) Stock Purchase Agreement between the Registrant and Entrada
Holdings LLC, dated May 12, 2000.
II-3
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.18(15) Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of the Registrant,
dated May 12, 2000.
10.19(15) Registration Rights Agreement between the Registrant and
Entrada Holdings LLC, dated May 12, 2000.
10.20* Distribution Agreement, dated February 25, 1997, between
Entrada and Ingram Micro, Inc.
10.21* Distribution Agreement, dated March 25, 1997, between
Entrada and Tech Data Product Management, Inc.
10.22* Lease Agreement, dated October 4, 1989, between Case/Datatel
Inc. and Chippewa Limited Partnership.
10.22(a)* First Amendment of Lease Agreement, dated October 19, 1994,
between Chippewa Limited Partnership and Case/Datatel Inc.
10.22(b)* Amendment No. 2 to Lease Agreement, dated April 22, 1999,
between Entrada and Chippewa Limited Partnership.
10.23* Lease Agreement, dated July 1, 1999, between Entrada and
West Park Realty Trust.
10.23(a)* First Amendment to Lease Agreement, dated July 1999, between
Entrada and West Park Realty Trust.
10.24* Supply Agreement, dated May 1, 1998, between Entrada and
NETsilicon, Inc.
10.25* Loan and Security Agreement, dated September 27, 1996,
between Entrada and Coast Business Credit.
10.25(a)* Addendum to Loan and Security Agreement between Entrada and
Coast Business Credit dated January 8, 1999.
10.25(b)* 1st Amendment to Loan and Security Agreement between Entrada
and Coast Business Credit dated April 16, 1999.
10.26* Secured Term Note between Entrada and Coast Business Credit
dated April 16, 1999.
10.27* OEM Agreement, dated December 24, 1997, between Entrada and
Cisco Systems, Inc.
10.27(a)* Amendment No. 1 to OEM Agreement, dated November 20, 1998,
between Entrada and Cisco Systems, Inc.
21.01(10) Subsidiaries of the Registrant.
23.01* Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.01).
23.02* Consent of Ernst & Young LLP, Independent Auditors, with
respect to financial statements of Registrant.
23.03* Consent of BDO Seidman, LLP, Independent Auditors, with
respect to financial statements of Entrada.
24.01* Power of Attorney (included on page II-11).
99.01** Form of Proxy Card to be mailed to holders of Registrant's
common stock.
- ------------------------
* Filed herewith.
** To be filed by amendment.
II-4
(1) Incorporated by reference from exhibits filed in response to Item 16(a),
"Exhibits," of the Registrant's Registration Statement on Form S-1, as
amended (File No. 33-06910), which became effective on November 9, 1995.
(2) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(3) Incorporated by reference from Exhibit 2.1 included with the Current Report
on Form 8-K filed April 18, 2000. Exhibits filed in response to Item 6.
(4) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, filed November 14, 1996.
(5) Incorporated by reference from Registrant's Registration Statement on Form
S-8 (No. 333-12315), filed on September 19, 1996.
(6) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, filed August 14, 1997.
(7) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, filed November 14, 1997.
(8) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998, filed August 14, 1998.
(9) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998, filed November 16, 1998.
(10) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
(11) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999, filed May 16, 1999.
(12) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999, filed August 16, 1999.
(13) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, filed November 15, 1999.
(14) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 24, 2000.
(15) Incorporated by reference from exhibits filed with the Registrant's Current
Report on Form 8-K, filed May 19, 2000.
- ------------------------
+ Confidential Treatment Requested.
II-5
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of any such request, and to send
the incorporated documents by first class mail or other equally prompt
means, including information contained in documents filed after the
effective date of this registration statement through the date of responding
to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this registration statement when
it became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. If a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on , 2000.
SYNC RESEARCH, INC.
By: /s/
-----------------------------------
William K. Guerry
President and Chief Executive
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William K. Guerry as his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
President, Chief Executive
Officer (Principal
/s/ Executive Officer) and
- ------------------------------------------- Chief Financial Officer , 2000
William K. Guerry (Principal Financial
Officer) and Director
/s/
- ------------------------------------------- Chairman of the Board of , 2000
Gregorio Reyes Directors
/s/
- ------------------------------------------- Director , 2000
Charles A. Haggerty
/s/
- ------------------------------------------- Director , 2000
William J. Schroeder
II-7
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
2.01(3) Agreement and Plan of Reorganization, dated April 10, 2000,
by and among the Registrant, Sync Research Acquisition
Corp., Osicom Technologies, Inc., a New Jersey corporation,
and Osicom Technologies, Inc., a Delaware corporation.
3.1(12) Amended and Restated Certificate of Incorporation of
Registrant.
3.3(14) Amended and restated Bylaws of Registrant.
5.01* Form of opinion of Orrick, Herrington & Sutcliffe LLP as to
the legality of the Registrant's Common Stock being
registered hereby.
10.01(1) Form of Indemnification Agreement.
10.02(8) Amended and Restated 1991 Stock Plan (amended as of June 12,
1998) and form of Option Agreement.
10.03(4) Amended 1995 Employee Stock Purchase Plan (amended as of
September 27, 1996) and form of Subscription Agreement.
10.04(8) Amended and Restated 1995 Directors' Option Plan (amended as
of June 12, 1998) and form of Option Agreement.
10.05(1) Amended and Restated Investors' Rights Agreement among the
Registrant and certain security holders of the Registrant,
dated as of April 25, 1994.
10.06(1) Consulting Agreement between the Registrant and Gregorio
Reyes dated January 1995.
10.07(1) 401(k) Plan.
10.08(5) Assumed TyLink Corporation 1994 Equity Incentive Plan.
10.09(4) Form of Severance Agreement between the Registrant and other
executive officers of the Registrant.
10.10(4) Real Estate Lease between TyLink and Thomas J. Flatley d/b/a
The Flatley Company, dated May 14, 1991.
10.11(13) Third Amendment to Lease for 10C Commerce Way, Norton, MA
dated July 28, 1999.
10.12(9) Amended and Restated 1996 Non-Executive Stock Option Plan
(amended as of August 21, 1998).
10.13(7) Letter Agreement dated June 6, 1997 between William K.
Guerry and the Registrant.
10.14(10) Form of Severance Agreement between the Registrant and
Gregorio Reyes, dated October 24, 1997.
10.15(13) Standard Industrial Lease for 12 Morgan, Irvine, CA dated
July 19, 1999.
10.16(14) Form of Amended and Restated Severance Agreement between the
Registrant and William Guerry, dated October 8, 1999.
10.17(15) Stock Purchase Agreement between the Registrant and Entrada
Holdings LLC, dated May 12, 2000.
10.18(15) Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of the Registrant,
dated May 12, 2000.
10.19(15) Registration Rights Agreement between the Registrant and
Entrada Holdings LLC, dated May 12, 2000.
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
10.20* Distribution Agreement, dated February 25, 1997, between
Entrada and Ingram Micro, Inc.
10.21* Distribution Agreement, dated March 25, 1997, between
Entrada and Tech Data Product Management, Inc.
10.22* Lease Agreement, dated October 4, 1989, between Case/Datatel
Inc. and Chippewa Limited Partnership.
10.22(a)* First Amendment of Lease Agreement, dated October 19, 1994,
between Chippewa Limited Partnership and Case/Datatel Inc.
10.22(b)* Amendment No. 2 to Lease Agreement, dated April 22, 1999,
between Entrada and Chippewa Limited Partnership.
10.23* Lease Agreement, dated July 1, 1999, between Entrada and
West Park Realty Trust.
10.23(a)* First Amendment to Lease Agreement, dated July 1999, between
Entrada and West Park Realty Trust.
10.24* Supply Agreement, dated May 1, 1998, between Entrada and
NETsilicon, Inc.
10.25* Loan and Security Agreement, dated September 27, 1996,
between Entrada and Coast Business Credit.
10.25(a)* Addendum to Loan and Security Agreement between Entrada and
Coast Business Credit dated January 8, 1999.
10.25(b)* 1st Amendment to Loan and Security Agreement between Entrada
and Coast Business Credit dated April 16, 1999.
10.26* Secured Term Note between Entrada and Coast Business Credit
dated April 16, 1999.
10.27* OEM Agreement, dated December 24, 1997, between Entrada and
Cisco Systems, Inc.
10.27(a)* Amendment No. 1 to OEM Agreement, dated November 20, 1998,
between Entrada and Cisco Systems, Inc.
21.01(10) Subsidiaries of the Registrant.
23.01* Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.01).
23.02* Consent of Ernst & Young LLP, Independent Auditors, with
respect to financial statements of Registrant.
23.03* Consent of BDO Seidman, LLP, Independent Auditors, with
respect to financial statements of Entrada.
24.01* Power of Attorney (included on page II-11).
99.01** Form of Proxy Card to be mailed to holders of Registrant's
common stock.
- ------------------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference from exhibits filed in response to Item 16(a),
"Exhibits," of the Registrant's Registration Statement on Form S-1, as
amended (File No. 33-06910), which became effective on November 9, 1995.
(2) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(3) Incorporated by reference from Exhibit 2.1 included with the Current Report
on Form 8-K filed April 18, 2000. Exhibits filed in response to Item 6.
(4) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, filed November 14, 1996.
(5) Incorporated by reference from Registrant's Registration Statement on Form
S-8 (No. 333-12315), filed on September 19, 1996.
(6) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, filed August 14, 1997.
(7) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, filed November 14, 1997.
(8) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998, filed August 14, 1998.
(9) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998, filed November 16, 1998.
(10) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
(11) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999, filed May 16, 1999.
(12) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999, filed August 16, 1999.
(13) Incorporated by reference from exhibits filed in response to Item 6,
"Exhibits," of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, filed November 15, 1999.
(14) Incorporated by reference from exhibits filed in response to Item 14,
"Exhibits," of the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 24, 2000.
(15) Incorporated by reference from exhibits filed with the Registrant's Current
Report on Form 8-K, filed May 19, 2000.
- ------------------------
+ Confidential Treatment Requested.