<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 1997, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 0-26952
------------------------
SYNC RESEARCH, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0676350
(State or other jurisdiction (IRS Employer Identification
of incorporation or No.)
organization)
40 PARKER
IRVINE, CA 92618
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 588-2070
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
YES _X_ NO ___
As of July 31, 1997, 17,251,661 shares of the Registrant's Common Stock were
issued and outstanding.
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<PAGE>
SYNC RESEARCH, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
Part I. Financial Information......................................................................... 3
Item 1. a) Condensed consolidated balance sheets at June 30, 1997 (unaudited) and December 31,
1996...................................................................................... 3
b) Condensed consolidated statements of operations (unaudited) for the three and six month
periods ended June 30, 1997 and June 30, 1996............................................. 4
c) Condensed consolidated statements of cash flows (unaudited) for the six-month periods
ended June 30, 1997 and June 30, 1996..................................................... 5
d) Notes to condensed consolidated financial statements...................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 8
Part II. Other Information............................................................................. 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents........................................................... $ 27,133 $ 35,874
Accounts and other receivables, net................................................. 5,535 7,587
Inventories......................................................................... 7,271 7,139
Prepaid expenses and other current assets........................................... 597 479
----------- ------------
Total current assets.................................................................. 40,536 51,079
Furniture, fixtures and equipment, net................................................ 4,751 4,570
Other assets.......................................................................... 44 43
----------- ------------
Total assets...................................................................... $ 45,331 $ 55,692
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities............................................ $ 5,131 $ 5,902
Bank borrowings and current maturities of capitalized lease obligations............. 47 841
----------- ------------
Total current liabilities............................................................. 5,178 6,743
Capitalized lease obligations, less current maturities................................ 130 146
Stockholders' equity:
Common stock, $.001 par value:
Authorized shares--50,000
Issued and outstanding shares--17,247 at June 30, 1997 and 16,946 at December 31,
1996............................................................................ 17 17
Additional paid-in capital.......................................................... 71,708 71,385
Deferred compensation............................................................... (97) (156)
Accumulated deficit................................................................. (31,605) (22,443)
----------- ------------
Total stockholders' equity............................................................ 40,023 48,803
----------- ------------
Total liabilities and stockholders' equity............................................ $ 45,331 $ 55,692
----------- ------------
----------- ------------
</TABLE>
See accompanying notes.
3
<PAGE>
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Net revenues.......................................................... $ 6,291 $ 7,570 $ 11,373 $ 16,664
Cost of sales......................................................... 3,826 4,296 7,295 9,891
--------- --------- --------- ---------
Gross profit........................................................ 2,465 3,274 4,078 6,773
Operating expenses:
Research and development............................................ 1,555 1,853 3,753 3,479
Selling and marketing............................................... 3,392 3,254 7,626 6,373
General and administrative.......................................... 854 1,272 2,163 2,242
Severance and lease rationalization costs........................... -- -- 506 --
--------- --------- --------- ---------
Total operating expenses............................................ 5,801 6,379 14,048 12,094
--------- --------- --------- ---------
Operating loss........................................................ (3,336) (3,105) (9,970) (5,321)
Interest income, net.................................................. 353 592 808 1,235
--------- --------- --------- ---------
Net loss.............................................................. $ (2,983) $ (2,513) $ (9,162) $ (4,086)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per share.................................................... $ (0.17) $ (0.17) $ (0.54) $ (0.29)
--------- --------- --------- ---------
Shares used in computing net loss per share........................... 17,173 16,069 17,079 16,010
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes.
4
<PAGE>
SYNC RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
<S> <C> <C>
1997 1996
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................................................. $ (9,162) $ (4,086)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.......................................................... 832 484
Provision for losses on accounts receivable............................................ 147 284
Deferred compensation expense.......................................................... 59 175
Changes in operating assets and liabilities, net....................................... 886 (3,380)
--------- ----------
Net cash used in operating activities...................................................... (7,238) (6,523)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities, net.................................................. -- (11,757)
Purchases of furniture, fixtures and equipment........................................... (1,013) (1,154)
--------- ----------
Net cash used in investing activities...................................................... (1,013) (12,911)
CASH FLOWS FROM FINANCING ACTIVITIES
Net bank borrowings (repayments)......................................................... (802) 556
Payments on capitalized lease obligations................................................ (11) (18)
Proceeds from common stock options exercised............................................. 166 23
Proceeds from employee stock purchase plan............................................... 157 38
--------- ----------
Net cash provided by (used in) financing activities........................................ (490) 599
--------- ----------
Net decrease in cash and cash equivalents.................................................. (8,741) (18,835)
Cash and cash equivalents at beginning of period........................................... 35,874 50,683
--------- ----------
Cash and cash equivalents at end of period................................................. $ 27,133 $ 31,848
--------- ----------
--------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................................................ $ 14 $ 63
--------- ----------
--------- ----------
Income taxes paid........................................................................ $ 1 $ 40
--------- ----------
--------- ----------
</TABLE>
See accompanying notes.
5
<PAGE>
SYNC RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION
On August 28, 1996, Sync Research, Inc. ("Sync" or the "Company") acquired
TyLink Corporation ("TyLink"), pursuant to a merger (the "Merger") of a
wholly-owned subsidiary of the Company with and into TyLink. In the Merger, the
Company exchanged 2,148,168 shares of its common stock for all of the
outstanding shares of TyLink common and Series A preferred stock and reserved
423,155 shares of Sync common stock for issuance upon exercise of TyLink
options, which were assumed by the Company. In addition, Sync acquired all of
the issued and outstanding Series B preferred stock for $4 million in cash and
208,677 shares of Sync common stock. The merger has been accounted for as a
pooling of interests. Accordingly, the accompanying financial statements reflect
the combination of Sync and Tylink for all periods presented.
The condensed consolidated balance sheet as of June 30, 1997, the condensed
consolidated statements of operations for the three and six months ended June
30, 1997 and 1996 and the condensed consolidated statements of cash flows for
the six month periods ended June 30, 1997 and 1996 have been prepared without
audit. In the opinion of management, the unaudited financial statements include
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the financial position at June 30, 1997, the results of
operations for the three and six months ended June 30, 1997 and 1996 and cash
flows for the six months ended June 30, 1997 and 1996. The condensed financial
statements should be read in conjunction with the audited financial statements
of Sync Research, Inc. and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996. The results of operations for
the three and six months ended June 30, 1997 are not necessarily indicative of
the operating results to be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Actual results could differ from those estimates.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company invests its excess cash in money market funds and debt
instruments of U.S. corporations with strong credit ratings. The Company has
established guidelines with respect to the diversification and maturities in
order to maintain safety and liquidity. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company considers investments with original maturities between
three and twelve months to be short-term investments. Management determines the
appropriate classification of such securities at the time of purchase and
reevaluates such classification as of each balance sheet date. Based on its
intent, the Company's investments are classified as available-for-sale and are
carried at fair value, with unrealized gains and losses, net of tax, reported as
a separate component of stockholders' equity. The investments are adjusted for
amortization of premiums and discounts to maturity and such amortization is
included in interest income. Realized gains and losses and declines in value
judged to be other than temporary are determined based on the specific
identification method and are reported in the consolidated statements of
operations. There were no significant unrealized gains or losses at June 30,
1997.
6
<PAGE>
SYNC RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. INVENTORIES
Inventories consist primarily of computer hardware and components and are
stated at the lower of cost (first-in, first-out) or market as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- -------------
<S> <C> <C>
Raw Materials........................................................ $ 3,458 $ 3,973
Work in Process...................................................... 1,257 1,043
Finished Goods....................................................... 2,556 2,123
----------- ------
$ 7,271 $ 7,139
----------- ------
----------- ------
</TABLE>
4. PER SHARE INFORMATION
Net loss per share is computed using the weighted average number of common
shares and common share equivalents outstanding during the periods presented.
Common share equivalents result from the dilutive effect, if any, of outstanding
options and warrants to purchase common stock, except that for periods prior to
the Company's initial public offering, pursuant to the requirements of the
Securities and Exchange Commission (SEC), common shares issued by Sync during
the twelve months immediately preceding its initial public offering which was
completed on November 10, 1995, plus the number of equivalent shares resulting
from stock options and warrants granted during this period, have been included
in the calculation of the shares used in computing net loss per share as if they
were outstanding for all periods presented (using the treasury stock method and
the estimated public offering price in calculating equivalent shares). The
weighted average number of common shares outstanding for all periods also
reflects the issuance of .1576 shares of the Company's common stock for each
share of TyLink Series A preferred and common stock. Net loss applicable to
common and common equivalent shares reflects the accretion of dividends and
liquidation value related to the mandatorily redeemable preferred stock. Such
accretion aggregated $222,000 and $533,000 during the three and six months ended
June 30, 1996.
5. CREDIT AGREEMENT
In June 1997, the Company amended its $5 million unsecured bank credit
agreement to revise certain financial covenants. As of June 30, 1997 there were
no amounts outstanding under this agreement and the Company was in compliance
with the covenants.
6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" was issued and is effective for interim and annual periods
ended after December 15, 1997. The statement requires presentation of both basic
and diluted earnings per share. As a result of the Company's net loss, basic and
diluted earnings per share will not differ materially from the earnings per
share amounts in the accompanying financial statements.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I--Item 1 of this Quarterly Report. In addition, except for the historical
statements contained herein, the following discussion contains forward-looking
statements. The Company wishes to alert readers that the factors set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
and in the section of this Item 2 titled "Additional Factors That May Affect
Future Results," as well as other factors, could in the future affect, and in
the past have affected, the Company's results. The Company's actual results for
future periods could differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.
OVERVIEW
Sync commenced operations in 1981 and shipped its first commercial product
in 1989. Over the past several years, the Company has expanded its operations
through its internal field sales organization and has entered into various OEM,
marketing and sales arrangements with communications and networking companies
such as International Business Machines ("IBM") and 3Com Corporation ("3Com"),
as well as telephone service carriers such as Sprint, MCI, Ameritech and AT&T.
Starting in the first half of 1995, the Company added senior management
personnel and built its sales and other organizations in order to support
anticipated growth in its business. In addition, the Company increased its
manufacturing capacity through the expansion of its relationships with contract
manufacturers and its internal manufacturing resources.
On August 28, 1996, Sync acquired TyLink, pursuant to a merger of a
wholly-owned subsidiary of the Company with and into TyLink. In the merger, the
Company exchanged 2,148,168 shares of its common stock for all of the
outstanding shares of TyLink common and Series A preferred stock and reserved
423,155 shares of Sync common stock for issuance upon exercise of TyLink
options, which were assumed by the Company. In addition, Sync acquired all of
the issued and outstanding Tylink Series B preferred stock for $4 million in
cash and 208,677 shares of Sync common stock. The merger has been accounted for
as a pooling of interests. Accordingly, the accompanying financial statements
reflect the combination of Sync and TyLink for all periods presented.
In March 1997, the Company implemented significant expense reductions,
including a reduction in force and certain lease terminations, with the goal of
enabling the Company to achieve profitability at lower revenue levels. There can
be no assurance that Sync's products will achieve significant market
penetration, either through its channel partners and other resellers or its
direct sales force, or that the Company will successfully introduce new and
enhanced products or compete effectively in its market, or that its efforts to
implement expense reductions will enable it to become profitable at lower
revenue levels, if at all.
RESULTS OF OPERATIONS
NET REVENUES
The Company derives its revenues primarily from sales of advanced wide-area
networking products, which are recognized upon shipment. The Company generally
does not have any significant remaining obligations upon shipment of its
products. Product returns and sales allowances are provided for at the date of
sale. Service revenues from customer maintenance fees for ongoing customer
support and product updates, which have not been material to date, are
recognized ratably over the term of the maintenance period, which is typically
12 months.
8
<PAGE>
Net revenues for the second quarter of 1997 were $6.3 million, compared to
net revenues of $7.6 million for the quarter ended June 30, 1996. Net revenues
for the six months ended June 30, 1997 were $11.4 million, compared to $16.7
million for the comparable period in 1996. The lower net revenues during 1997
reflected decreased sales of all of the Company's product groups (other than an
increase in revenue from sales of frame relay access products in the second
quarter of 1997 compared to the second quarter of 1996), as well as lower
average selling prices.
Net revenues by product group for the three months ended June 30, 1997 and
1996 were as follows ($ in millions):
<TABLE>
<CAPTION>
1997 PERCENTAGE 1996 PERCENTAGE
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Frame relay access..................................... $ 3.2 51% $ 2.3 30%
Circuit management..................................... 1.2 19 1.6 21
Transmission........................................... 0.9 14 1.3 17
Other.................................................. 1.0 16 2.4 32
--- --- --- ---
$ 6.3 100% $ 7.6 100%
--- --- --- ---
--- --- --- ---
</TABLE>
The shift in revenues to frame relay access products from other products was
consistent with the Company's expected change in product mix from its older
product offerings.
Net revenues by product group for the six months ended June 30, 1997 and
1996 were as follows ($ in millions):
<TABLE>
<CAPTION>
1997 PERCENTAGE 1996 PERCENTAGE
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Frame relay access.................................. $ 4.8 42% $ 6.1 37%
Circuit management.................................. 2.1 18 2.8 17
Transmission........................................ 2.2 19 2.6 16
Other............................................... 2.3 21 5.2 30
--------- --- --------- ---
$ 11.4 100% $ 16.7 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
The decrease in net revenues from sales of frame relay access products
during the six months ended June 30, 1997 as compared to the same period of 1996
was, in part, due to the loss of Racal-Datacom, Inc (Racal) and Network
Equipment Technologies, Inc (NET) as channel partners. Racal and NET have
developed competing products and no longer purchase frame relay products from
the Company.
The Company expects that average selling prices will continue to decline and
that sales though channel partners and other resellers will continue to account
for a substantial majority of net revenues, however, the mix of sales to channel
partners and other resellers may change from period to period. Sales of frame
relay access products and circuit management products are expected to grow as a
percentage of net revenues and revenues from the sale of transmission and other
products are expected to decline. International sales represented approximately
20% of the Company's total revenues during the six months ended June 30, 1997
and may increase as a percentage of the total revenues in future periods.
GROSS PROFIT
Cost of sales primarily consists of purchased materials used in the assembly
of the Company's products and compensation paid to employees in the Company's
manufacturing organization. Gross profit decreased to $2.5 and $4.1 million for
the three and six months ended June 30, 1997, respectively, from $3.3 and $6.8
million in the corresponding prior year periods. Gross profit as a percentage of
net revenues decreased to 39.2% and 35.9% for the three and six months ended
June 30, 1997, respectively as compared to 43.2% and 40.1% for the three and six
months ended June 30, 1996, respectively. The decrease in 1997 as compared to
1996 was due primarily to lower sales volume and lower average selling prices.
9
<PAGE>
OPERATING EXPENSES
Research and development expenses primarily consist of compensation paid to
personnel, including consultants engaged in research and development, amounts
paid for outside development services, costs of materials utilized in the
development of hardware products, including prototype units, and license fees
and other payments to acquire rights to technology. The Company expenses all
research and development costs as incurred. Research and development costs
decreased to $1.6 million for the second quarter of 1997 as compared to $1.9
million for the second quarter of the prior year. For the six months ended June
30, 1997, research costs were $3.8 million compared to $3.5 million for the six
months ended June 30, 1996. The decreased expenses in the second quarter of 1997
were primarily due to the Company's March 1997 expense reductions. The increase
in research and development expenses for the six months ended June 30, 1997 as
compared to the prior year period was due to the higher compensation costs
incurred in the first quarter of 1997 related to the development of new products
and the continued enhancement of existing products. The Company believes that
significant research and development efforts are necessary in order for it to
compete in the evolving marketplace in which it operates.
Selling and marketing expenses consist primarily of base and incentive
compensation paid to sales and marketing personnel, travel and related expenses,
and costs associated with promotional and trade show activities. Selling and
marketing expenses increased to $3.4 million for the quarter ended June 30,
1997, as compared to $3.3 million in the quarter ended June 30, 1996, and
increased to $7.6 million for the six months ended June 30, 1997 as compared to
$6.4 million in the prior year period. The increased expenses principally
reflected increased hiring and personnel-related expenses associated with the
build-up of the Company's sales organization.
General and administrative expenses consist primarily of compensation paid
to administrative personnel, payments to consultants and for professional
services, and costs incurred in recruiting senior management personnel. General
and administrative expenditures decreased to $0.9 for the three months ended
June 30, 1997 as compared to $1.3 million for the second quarter of 1996, and
remained flat at $2.2 million for the six months ended June 30, 1997, compared
to the prior year period. The decreased expenses during the second quarter were
the result of the Company's expense reductions in March 1997.
Severance and lease rationalization costs include expenses related to the
reduction in employees and the elimination or reduction of certain lease
obligations undertaken at the end of March 1997.
Net interest income was $0.4 and $0.8 million for the three and six months
ended June 30, 1997, respectively, as compared to $0.6 and $1.2 million in the
three and six months ended June 30, 1996, respectively. The lower net interest
income resulted from lower average cash balances.
INCOME TAXES
The Company did not have provisions for income taxes in 1997 and 1996 as a
result of its losses during those periods.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company's principal sources of liquidity consisted
of $27.1 million of cash and cash equivalents. During the six months ended June
30, 1997, cash utilized by operating activities was $7.2 million, compared to
$6.5 million for the six months ended June 30, 1996. Cash utilized during the
six-month period ended June 30, 1997 primarily reflected the Company's net loss.
Capital expenditures during the first six months of 1997 were $1.0 million,
compared to $1.2 million for the same period in 1996.
In June 1997, the Company amended its $5 million unsecured bank credit
agreement to revise certain financial covenants. As of June 30, 1997, there were
no amounts outstanding under this agreement, and the Company was in compliance
with the covenants.
10
<PAGE>
The Company entered into a new seven-year real estate lease and relocated
its primary operations during the fourth quarter of 1996. Therefore, lease,
operating and maintenance costs will be greater in 1997 than in 1996.
The Company believes that its available cash and cash equivalents will be
sufficient to meet its working capital requirements at least through 1997.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that, except for the historical information contained
therein, the previous discussion under "Results of Operations" and "Liquidity
and Capital Resources" constitutes forward-looking statements that are dependent
on certain risks and uncertainties which may cause actual results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company. The following is a description of certain of the major
risks and uncertainties.
HISTORY OF LOSSES; SIGNIFICANT FLUCTUATIONS IN OPERATING RESULTS; UNCERTAIN
PROFITABILITY
The Company has experienced operating losses since inception, with, in
recent years, operating losses of $1.2 million in 1994, $2.4 million in 1995,
$11.7 million in 1996 and $9.2 million for the six months ended June 30, 1997.
As of June 30, 1997, the Company had an accumulated deficit of approximately
$31.6 million. The Company has 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
in the past caused, or may in the future cause, the Company's 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 of the Company's products; the market conditions in the networking
industry; the rate at which Tylink operations become integrated with Sync
operations; the timing of capital expenditures by Sync's target market
customers; competition and pricing in the industry; the Company's success in
developing, introducing and shipping new products; new product introductions by
the Company's competitors; announcements by IBM relating to products, services
or pricing relevant to the Company; the rate of migration of large IBM customers
to frame relay; production or quality problems; changes in material costs;
disruption in sources of supply; 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, the Company generally
realizes a higher gross margin on direct sales than on sales through its channel
partners and other resellers. Accordingly, as channel partners and other
resellers continue to account for a substantial majority of the Company's net
revenues, gross profit as a percentage of net revenues may decline.
The Company's 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 the Company'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, the Company has in the past encountered, and may in the future
encounter, subsequent delays between initial orders and network-wide deployment.
There can be no assurance that average sales cycles will not increase in future
periods. Further, due to the Company's focus on its channel partner marketing
strategy, the Company's revenues in any period are highly dependent upon the
sales efforts and success of Sync's channel partners and other resellers, which
are not within the control of the Company. There can be no assurance that the
Company's channel partners and other resellers will give a high priority to the
marketing of the Company's products as compared to competitive products or
alternative networking solutions or that Sync's channel partners and other
resellers will continue to offer the Company's products. Significant portions of
the Company's expenses are relatively fixed in advance, based in large part on
the Company's forecasts of future sales. If sales are below expectations in any
given period, the adverse effect of a shortfall in sales on the Company's
11
<PAGE>
operating results may be magnified by the Company's inability to adjust spending
to compensate for such shortfall. The Company has 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 Company will be able to attain or sustain profitability on a quarterly or an
annual basis. In addition, if the Company's operating results fall below the
expectations of public market analysts and investors, the price of the Company's
common stock would likely be materially and adversely affected.
UNCERTAIN MARKET ACCEPTANCE OF FRAME RELAY FOR MISSION-CRITICAL APPLICATIONS
The market for SNA-over-frame relay products is relatively new and still
evolving. The success of the Company and its channel partners in generating
significant sales of frame relay access products will depend in part on their
ability to educate end users about the benefits of the Company's technology and
convince end users to switch their mission-critical applications to frame relay.
In addition, broad acceptance of frame relay services will also depend upon the
tariffs for such services, which are determined by carriers. If the tariff
structure for dedicated leased lines becomes more favorable relative to tariffs
for a comparable network utilizing frame relay, the market for frame relay
networking products could be adversely affected. There can be no assurance that
the market will adopt frame relay for mission-critical applications to any
significant extent. The failure of such adoption to occur could have a material
adverse effect on the Company's business, operating results and financial
condition.
UNCERTAIN MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS; PRODUCT CONCENTRATION
The Company currently derives substantially all of its revenues from its
frame relay access, circuit management, transmission and other products and
expects that revenues from these products will continue to account for
substantially all of its revenues for the foreseeable future. Broad market
acceptance of, and continuing demand for, these products, is, therefore,
critical to the Company's future success. Factors that may affect the market
acceptance of the Company's products include the extent to which frame relay is
adopted for mission-critical applications, the availability and price of
competing products and technologies, announcements by IBM relating to products,
services or pricing relevant to the Company, the success of the sales efforts of
the Company and its resellers and tariff rates for carrier services. Moreover,
the Company's operating history in the WAN internetworking market and its
resources are limited relative to those of certain of its current and potential
competitors. The Company's future performance will also depend in part on the
successful development, introduction and market acceptance of new and enhanced
products. Failure of the Company's products to achieve market acceptance could
have a material adverse effect on the Company's business, operating results and
financial condition.
DEPENDENCE ON CHANNEL PARTNERS AND OTHER RESELLERS
The Company's channel partners and other resellers currently account, and
are expected to continue to account, for a substantial majority of the Company's
net revenues, including virtually all of its sales outside of the United States.
Sales through channel partners and other resellers accounted for 85.7%, 88.1%,
and 79.6% of net revenues of the Company in 1996, 1995 and 1994, respectively.
The Company currently maintains OEM, marketing and sales arrangements with
communications and networking companies such as IBM and 3Com, as well as
carriers such as Sprint, Ameritech, MCI and AT&T. The Company's agreements with
its channel partners and other resellers do not restrict the sale of products
that compete with those of the Company. In addition, these agreements generally
provide for discounts based on expected or actual volumes of products purchased
or resold by the reseller in a given period, do not require minimum purchases,
and prohibit distribution of certain products by the Company through certain
categories of third parties under certain conditions. The agreements also
specify that certain of the channel partners and other resellers will be
provided manufacturing rights and access to certain of the Company's source code
upon the occurrence of specified conditions or defaults.
12
<PAGE>
Certain of the Company's channel partners offer alternative solutions,
designed by themselves or third parties, for SNA internetworking or have
pre-existing relationships with current or potential competitors of the Company.
Certain of the Company's channel partners have in the past developed competitive
products and terminated their relationships with the Company, and such
developments could occur in the future. Many of the Company's resellers offer
competitive products manufactured either by third parties or by themselves. For
example, NET and Racal, which accounted for, respectively, 6.6% and 4.4% of the
Company's net revenues in 1996, have developed competitive products and product
strategies. Moreover, the product lines acquired in the TyLink merger compete
with certain Racal products. Thus, Sync expects product revenues from NET and
Racal to continue to decline. Sales to 3Com accounted for 19.2%, 17.9% and 6.5%
of net revenues of the Company in 1996, 1995 and 1994, respectively. The Company
believes the relative amount of revenues derived from sales to 3Com will likely
decline as competitive products impact the conversion product business.
The Company generally realizes a higher gross margin on direct sales than on
sales through its channel partners and other resellers. Accordingly, as channel
partners and other resellers continue to account for a substantial majority of
the Company's net revenues, gross profit as a percentage of net revenues may
decline. Each of the Company's channel partners or other resellers can cease
marketing the Company's products at the reseller's option, under certain
conditions, with limited notice and with little or no penalty. There can be no
assurance that the Company will retain its current channel partners or other
resellers or that it will be able to recruit additional or replacement channel
partners. The loss of one or more of the Company's channel partners or other
resellers could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, there can be no
assurance that the Company's channel partners and other resellers will give
priority to the marketing of the Company's products as compared to competitive
products or alternative networking solutions or that Sync's channel partners and
other resellers will continue to offer the Company's products. Any reduction or
delay in sales of the Company's products by its channel partners could have a
material adverse effect on the Company's business, operating results and
financial condition.
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's success will depend to a substantial degree upon its ability to
develop and introduce in a timely fashion enhancements to its existing products
and new products that meet changing customer requirements and emerging industry
standards. The development of new, technologically advanced products is a
complex and uncertain process requiring high levels of innovation, as well as
the accurate anticipation of technological and market trends. There can be no
assurance that the Company will be able to identify, develop, manufacture,
market or support new products successfully, that such new products will gain
market acceptance or that the Company will be able to respond effectively to
technological changes, emerging industry standards or product announcements by
competitors. In addition, the Company has on occasion experienced delays in the
introduction of product enhancements and new products. There can be no assurance
that in the future the Company will be able to introduce product enhancements or
new products on a timely basis. Further, from time to time, the Company may
announce new products, capabilities or technologies that have the potential to
replace or shorten the life cycle of the Company's existing product offerings.
There can be no assurance that announcements of product enhancements or new
product offerings will not cause customers to defer purchasing existing Company
products or cause resellers to return products to the Company. Failure to
introduce new products or product enhancements effectively and on a timely
basis, customer delays in purchasing products in anticipation of new product
introductions and any inability of the Company to respond effectively to
technological changes, emerging industry standards or product announcements by
competitors could have a material adverse effect on the Company's business,
operating results and financial condition.
13
<PAGE>
PRODUCT ERRORS
Products as complex as those offered by the Company may contain undetected
software or hardware errors when first introduced or as new versions are
released. Such errors have occurred in the past, and there can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in new or enhanced products 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 Company's products, additional
warranty expense, diversion of engineering and other resources from the
Company's product development efforts or the loss of credibility with Sync's
channel partners and other resellers, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
INTENSE COMPETITION
The market for communications products is intensely competitive and subject
to rapid technological change and emerging industry standards. The Company's
current competitors include internetworking companies, such as Cisco and Bay
Networks; FRAD providers, such as Hypercom, Motorola ISG and Cabletron; and
circuit management providers such as Visual Networks and Frontier Software.
Competitors for the TyLink group of digital transmission products include
Digital Link, Racal, AT&T Paradyne and Adtran, among others. Potential
competitors include other internetworking and WAN access and transmission
companies, frame relay switch providers, IBM and the Company's other channel
partners. Certain of these companies have recently announced products and
intentions to enter the frame relay access or circuit management market. Many of
the Company's 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, than does the Company.
As a result, they 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 than the Company. Many also have long-standing customer relationships
with large enterprises that are part of the Company's target market, and these
relationships may make it more difficult to complete sales of the Company's
products to these enterprises. Further, certain of the Company's channel
partners have in the past developed competitive products and terminated their
relationships with the Company, and such developments could occur in the future.
As a consequence of all these factors, the Company expects 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 Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully in the future.
DEPENDENCE ON THE IBM CUSTOMER BASE
The Company's products are targeted at the large installed base of IBM
customers utilizing SNA networks. Thus, the Company faces the risks associated
with a relatively concentrated customer base, including the possibility that
larger IBM customers may migrate to frame relay at a slower-than-expected rate,
if at all, and the possibility that IBM customers may purchase IBM-sponsored
frame relay products other than Sync products. There can be no assurance that
IBM will continue to support frame relay, that IBM will not develop or promote
SNA-over-frame relay products competitive with the Company's products, that the
relationship between the Company and IBM will be successful, that IBM will not
terminate the relationship or that IBM will not endorse the products of
competitors or networking solutions not offered by the Company. Any of these
events could have a material adverse effect on the Company's business, operating
results and financial condition.
14
<PAGE>
DEPENDENCE ON CONTRACT MANUFACTURERS
The Company's manufacturing operations consist primarily of materials
planning and procurement, light assembly, system integration, testing and
quality assurance. The Company entered into an arrangement with a contract
manufacturer in 1995 to outsource substantial portions of its procurement,
assembly and system integration operations. The Company has recently contracted
with a second supplier to diversify purchasing commitments while maintaining the
outsource strategy. There can be no assurance that these independent contract
manufacturers will be able to meet the Company's future requirements for
manufactured products or that such independent contract manufacturers will not
experience quality problems in manufacturing the Company's products. The
inability of the Company's contract manufacturers to provide the Company with
adequate supplies of high quality products could have a material adverse effect
upon the Company's business, operating results and financial condition. The loss
of any of the Company's contract manufacturers could cause a delay in Sync's
ability to fulfill orders while the Company identifies a replacement
manufacturer. Such an event could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company's manufacturing procedures may in certain instances create a
risk of excess or inadequate inventory if orders do not match forecasts. The
Company increased manufacturing capacity in 1995 and 1996 through the expansion
of its relationships with contract manufacturers and internal manufacturing
resources. Any manufacturing delays, excess manufacturing capacity or
inventories or inability to increase manufacturing capacity, if required, could
have a material adverse effect on the Company's business, operating results and
financial condition.
DEPENDENCE ON SUPPLIERS
Certain key components used in the manufacture of the Company'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, DRAMs,
printed circuit boards and selected integrated circuits. The Company generally
relies upon contract manufacturers to buy component parts that are incorporated
into board assemblies. The Company buys directly final assembly parts, such as
plastics and metal covers, cables and other parts used in final configurations.
The Company generally does not have long-term agreements with any of these
single or limited sources of supply. Any loss in a supplier, increase in
required lead times, increase in price of component parts, interruption in the
supply of any of these components, or the inability of the Company to procure
these components from alternate sources at acceptable prices and within a
reasonable time, could have a material adverse effect upon the Company's
business, operating results and financial condition. If orders do not match
forecasts, the Company 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 the Company has
experienced shortages of certain components and has paid above-market prices to
acquire such components on an accelerated basis or has 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 Company's business, operating results and financial condition.
15
<PAGE>
DEPENDENCE ON AND RISKS ASSOCIATED WITH INTERNATIONAL SALES
Sales to customers outside of the United States accounted for approximately
19.7%, 12.7%, 10.7% and 6.3% of the Company's net revenues in the six months
ended June 30, 1997 and in fiscal years 1996, 1995 and 1994, respectively.
However, these percentages may understate sales of the Company's products to
international end users because certain of the Company's U.S.-based channel
partners market the Company's products abroad. In addition, the Company
currently anticipates that international sales may increase as a percentage of
the Company's net revenues in future periods. Historically, the Company's
international sales have been conducted primarily through independent
country-specific distributors. The Company intends to market its products in
foreign countries in the future increasingly through its channel partners.
Failure of these resellers to market the Company's products internationally or
the loss of any of these resellers could have a material adverse effect on the
Company's business, operating results and financial condition. In addition, the
Company's ability to increase sales of its products to international end users
may be limited if the carrier services, such as frame relay, or protocols
supported by the Company's products are not widely adopted internationally. A
number of additional risks are inherent in international transactions. The
Company's international sales currently are U.S. dollar-denominated. As a
result, an increase in the value of the U.S. dollar relative to foreign
currencies could make the Company's products less competitive in international
markets. International sales may also be limited or disrupted by the imposition
of governmental controls, export license requirements, restrictions on the
export of critical technology, currency exchange fluctuations, political
instability, trade restrictions and changes in tariffs. In addition, sales in
Europe and certain other parts of the world typically are adversely affected in
the third quarter of each year as many customers and end users reduce their
business activities during the summer months. These international factors could
have a material adverse effect on future sales of the Company's products to
international end users and, consequently, the Company's business, operating
results and financial condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's future success depends, in part, upon its proprietary
technology. The Company 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 in its products. There can be no assurance
that the steps taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. In the event that protective
measures are not successful, the Company's business, operating results and
financial condition could be materially and adversely affected. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
to the same extent as do the laws of the United States. The Company is also
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 the
Company's current or future products or that any such claims will not require
the Company 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 extremely expensive and
time-consuming and could have a material adverse effect on the Company's
business, operating results and financial condition regardless of the outcome of
such litigation.
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 effect on the Company's business. For example, should tariffs for frame
relay
16
<PAGE>
services increase in the future relative to tariffs for dedicated leased lines,
the cost-effectiveness of the Company's products could be reduced, which could
have a material adverse effect on the Company's business, operating results and
financial condition. In addition, the Company's products must meet industry
standards and receive certification for connection to certain public
telecommunications networks prior to their sale. In the United States, the
Company's products must comply with various regulations defined by the Federal
Communications Commission and Underwriters Laboratories. Internationally, the
Company's products must comply with standards established by telecommunications
authorities in various countries as well as with recommendations of the
Consultative Committee on International Telegraph and Telephony. In addition,
carriers require that equipment connected to their networks comply with their
own standards, which in part reflect their currently installed equipment. Some
public carriers have installed equipment that does not fully comply with current
industry standards, and this noncompliance must be addressed in the design of
the Company's products. 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 Company's business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends, to a significant degree, upon the continued
contributions of its key management, sales, marketing, research and development
and manufacturing personnel. The Company maintains a key person life insurance
policy only on John H. Rademaker, the Company's founder. The Company believes
its future success will also depend in large part upon its ability to attract
and retain highly skilled engineering, managerial, sales and marketing
personnel, and development engineers. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting
and retaining such personnel. In March 1997, the Company implemented significant
expense reductions, including a reduction in force, with the goal of enabling
the Company to achieve profitability at lower revenues. The loss of the services
of any of the Company's key personnel or the failure to attract or retain
qualified personnel in the future could have a material adverse effect on the
Company's business, operating results or financial condition.
GENERAL ECONOMIC CONDITIONS
Demand for the Company's products depends 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 Company will not experience a decline in demand for its
products due to general economic conditions. Any such decline could have a
material adverse effect on the Company's business, operating results and
financial condition.
VOLATILITY OF STOCK PRICE
Factors such as announcements of technological innovations or the
introduction of new products by the Company or its competitors, as well as
market conditions in the technology sector, may have a significant effect on the
market price of the Company's common stock. 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 the Company's common
stock.
ANTI-TAKEOVER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In addition, certain provisions
of the Company's charter documents, including provisions eliminating cumulative
voting, eliminating the ability of stockholders to take actions by written
17
<PAGE>
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 the Company, which could have
an adverse effect on the market price of the Company's common stock. Certain of
the Company's stock option and purchase plans provide for assumption of such
plans, or, alternatively, immediate vesting upon a change of control or similar
event. In addition, the Company has entered into severance agreements with its
officers, pursuant to which they are entitled to specified severance payments if
they are actually or constructively terminated within specified time periods
following a change of control of the Company. In April 1997, the Board approved
an amendment to these agreements to provide that upon a change of control of the
Company, fifty percent (50%) of the officer's unvested options shall immediately
vest. The Board of Directors has 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 the
Company, thereby delaying, deferring or preventing a change in control of the
Company. 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. The Company has no present plan to issue shares of preferred
stock.
18
<PAGE>
SYNC RESEARCH, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1997, the Company held its annual meeting of stockholders. At
the annual meeting, the Company's stockholders approved the following matters by
the following votes:
1. Election of the following directors of the Company:
<TABLE>
<CAPTION>
NOMINEES FOR AGAINST ABSTENTIONS BROKER NONVOTES
- ------------------------------------------------------------- ------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Gregorio Reyes............................................... 14,720,233 146,083 0 0
Roger A. Dorf................................................ 14,726,951 139,365 0 0
Charles A. Haggerty.......................................... 14,734,104 132,212 0 0
William J. O'Meara........................................... 14,733,104 133,212 0 0
John H. Rademaker............................................ 14,745,304 121,012 0 0
</TABLE>
2. Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS BROKER NONVOTES
------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C>
14,769,156 36,200 60,960 0
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<C> <S>
3.3 Amended Bylaws
10.15b Amendments to Loan and Security Agreement between the Company and Silicon
Valley Bank dated June 10, 1997, October 6, 1996, and July 3, 1996.
10.24 Revised Form of Severance Agreement between the Company and each of John
Rademaker and Roger Dorf, dated May 1997 (supercedes previous Exhibit
10.24).
10.25 Revised Form of Severance Agreement between the Company and other Company
executive officers, dated May 1997 (supercedes previous Exhibit 10.25).
*10.27 1996 Non-Executive Stock Option Plan.
11.1 Computation of Earnings (Loss) per Share.
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated by reference from the Company's Registration Statement on Form
S-8 (Registration No. 333-28045), filed with the Securities and Exchange
Commission on May 30, 1997.
(B) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended June 30, 1997.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SYNC RESEARCH, INC.
Date: August 14, 1997 By: /s/ WILLIAM K. GUERRY
-----------------------------------------
William K. Guerry
VICE PRESIDENT OF FINANCE AND
ADMINISTRATION
AND CHIEF FINANCIAL OFFICER
(DULY AUTHORIZED SIGNATORY AND PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------
<C> <S> <C>
3.3 Amended Bylaws
10.15b Amendments to Loan and Security Agreement between the Company and Silicon Valley Bank
dated June 10, 1997, October 6, 1996 and July 3, 1996.
10.24 Revised Form of Severance Agreement between the Company and each of John Rademaker and
Roger Dorf, dated May 1997 (supercedes previous Exhibit 10.24).
10.25 Revised Form of Severance Agreement between the Company and other Company Executive
Officers, dated May 1997 (supercedes previous Exhibit 10.25).
*10.27 1996 Non-Executive Stock Option Plan.
11.1 Computation of Earnings (Loss) per Share.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated by reference from the Company's Registration Statement on Form
S-8 (Registration No. 333-28045), filed with the Securities and Exchange
Commission on May 30, 1997.
22
<PAGE>
BYLAWS
OF
SYNC RESEARCH, INC.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
ARTICLE I CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . 3
2.4 NOTICE OF STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . 3
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES. . . . . . . . . . . 4
2.6 MANNER OF GIVING NOTICE, AFFIDAVIT OF NOTICE. . . . . . . . 4
2.7 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . 5
2.9 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . 5
2.10 VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . 5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE, VOTING;
GIVING CONSENTS . . . . . . . . . . . . . . . . . . . . . . 6
2.13 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTOR. . . 7
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . 7
3.5 PLACE OF MEETINGS, MEETINGS BY TELEPHONE. . . . . . . . . . 8
3.6 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . 8
3.7 SPECIAL MEETINGS; NOTICE. . . . . . . . . . . . . . . . . . 8
3.8 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . 9
3.11 FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . . . . . 9
3.12 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . .10
3.13 REMOVAL OF DIRECTORS. . . . . . . . . . . . . . . . . . . .10
ARTICLE IV COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . .10
4.2 COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . .11
4.3 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . .11
-i-
<PAGE>
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.1 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .11
5.2 APPOINTMENT OF OFFICERS . . . . . . . . . . . . . . . . . .12
5.3 SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . .12
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . .12
5.5 VACANCIES IN OFFICES. . . . . . . . . . . . . . . . . . . .12
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . .12
5.7 CHIEF EXECUTIVE OFFICER . . . . . . . . . . . . . . . . . .13
5.8 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . .13
5.9 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . .13
5.10 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . .13
5.11 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . .14
5.12 REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS . . . . . .14
5.13 AUTHORITY AND DUTIES OF OFFICERS. . . . . . . . . . . . . .14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . .15
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . .15
6.3 PAYMENT OF EXPENSES IN ADVANCE. . . . . . . . . . . . . . .15
6.4 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . .15
6.5 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . .16
6.6 CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE VII RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . .16
7.1 MAINTENANCE AND INSPECTION OF RECORDS . . . . . . . . . . .16
7.2 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . .17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS. . . . . . . . . . . . . .17
ARTICLE VIII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . .17
8.1 CHECKS. . . . . . . . . . . . . . . . . . . . . . . . . . .17
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. . . . . .17
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES. . . . . . . . . . .17
8.4 SPECIAL DESIGNATION ON CERTIFICATES . . . . . . . . . . . .18
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . .18
8.6 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . .19
8.7 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . .19
8.8 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . .19
8.9 SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8.10 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . .19
8.11 STOCK TRANSFER AGREEMENTS . . . . . . . . . . . . . . . . .19
8.12 REGISTERED STOCKHOLDERS . . . . . . . . . . . . . . . . . .19
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ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE X DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE XI CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES . . . . . . . .21
11.2 DUTIES OF CUSTODIANS. . . . . . . . . . . . . . . . . . . .21
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BYLAWS
OF
SYNC RESEARCH, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held each year on a date
and at a time designated by the Board of Directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
(b) Nominations of persons for election to the Board of Directors of
the corporation and the proposal of business to be transacted by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
corporation who
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was a stockholder of record at the time of giving of the notice provided for
in this Section 2.2, who is entitled to vote at the meeting and who has
complied with the notice procedures set forth in this Section 2.2.
(c) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (b) of
this Section 2.2, the stockholder must have given timely notice thereof in
writing to the secretary of the corporation and such business must be a
proper matter for stockholder action under the General Corporation Law of
Delaware. To be timely, a stockholder's notice shall be delivered to the
secretary at the principal executive offices of the corporation not less than
twenty (20) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is more than
thirty (30) days prior to or more than sixty (60) days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the ninetieth (90th) day prior to such annual meeting and not later than
the close of business on the later of the twentieth (20th) day prior to such
annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected);
(ii) as to any other business that the stockholder proposes to bring before
the meeting, a brief description of such business, the reasons for conducting
such business at the meeting and any material interest in such business of
such stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made
(A) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner and (B) the class and
number of shares of the corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(d) Only persons nominated in accordance with the procedures set forth
in this Section 2.2 shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set
forth in this Section 2.2. The chairman of the meeting shall determine
whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any
proposed nomination or business has not been properly brought before the
meeting, the chairman shall declare that such proposed business or nomination
shall not be presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service.
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(f) Nothing in this Section 2.2 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 SPECIAL MEETING
(a) A special meeting of the stockholders may be called at any time by the
Board of Directors, or by the chairman of the board, or by the president or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the chairman of the board or by the president, the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice.
The officer receiving the request shall cause notice to be promptly given to
the stockholders entitled to vote, in accordance with the provisions of
Sections 2.4 and 2.5 of these Bylaws, that a meeting will be held at the time
requested by the person or persons who called the meeting, not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after the
receipt of the request, the person or persons requesting the meeting may give
the notice. Nothing contained n this paragraph of this Section 2.3 shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with the provisions of Section 2.3(b).
Nominations of persons for election to the Board of Directors may be made at
a special meeting of stockholders at which directors are to be selected
pursuant to such notice of meeting (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the corporation who is a stockholder
of record at the time of giving of notice provided for in this Section
2.3(c), who shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in this Section 2.3(c). Nominations by
stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice required
by Section 2.2(c) shall be delivered to the secretary at the principal
executive offices of the corporation not earlier than the ninetieth (90th)
day prior to such special meeting and not later than the close of business on
the later of the twentieth (20th) day prior to such special meeting or the
tenth (10th) day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed by the Board
of Directors to be selected at such meeting.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these Bylaws not
less than ten (10) nor more than sixty
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(60) days before the date of the meeting to each stockholder entitled to vote
at such meeting. The notice shall specify the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors or by any stockholder of the corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 2.5. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
meeting; provided, however, that in the event that less than sixty (60) days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
and (b) as to the stockholder giving the notice (1) the name and address, as
they appear on the corporation's books, of such stockholder and (2) the class
and number of shares of the corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated
by the Board of Directors for election as a director shall furnish to the
secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section 2.5.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he
or she shall so declare to the meeting and the defective nomination shall be
disregarded.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his or her address as it appears on the records of the
corporation. An affidavit of the secretary or an assistant secretary or of the
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transfer agent of the corporation that the notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction
of business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting or
(ii) the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
is present or represented. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.9 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.10, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
2.11 WAIVER OF NOTICE
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Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive any payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to
any other action.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders for any other
purpose (other than determining stockholders entitled to consent to corporate
action in writing without a meeting) shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a record date for the
adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by a written proxy,
signed by the stockholder and filed with the secretary of the corporation,
but no such proxy shall be voted or acted upon after three (3) years from its
date, unless the proxy provides for a longer period. A proxy shall be deemed
signed if the stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The
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revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Section 212(c) of the General Corporation
Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of five (5) persons until changed by a
proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTOR
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not to be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention of
the secretary of the corporation.
Subject to the rights of the holders of any class or series of Preferred
Stock, and except as otherwise determined by the Board of Directors or
required by law, newly created directorships resulting from any increase in
the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, or the sole remaining director;
directors so chosen shall hold office for a term
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expiring at the next annual meeting of stockholders and until such director's
successor shall have been duly elected and qualified.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or
these Bylaws, or may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation
Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors
then in office as aforesaid, which election shall be governed by the
provisions of Section 211 of the General Corporation Law of Delaware as far
as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the
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notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice
is delivered personally or by telephone or by telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight
(48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director
or to a person at the office of the director who the person giving the notice
has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the
meeting is to be held at the principal executive office of the corporation.
3.8 QUORUM
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
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Unless otherwise restricted by the certificate of incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. No such compensation shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors; provided,
however, that, so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no
director may be removed without cause if the votes cast against his or her
removal would be sufficient to elect him or her if then cumulatively voted at
an election of the entire Board of Directors.
No reduction in the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors or in the Bylaws of
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the corporation, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of
Directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation or fix the
number of shares of any series of stock or authorize the increase or decrease
of the shares of any series), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the Bylaws of the corporation; and,
unless the board resolution establishing the committee, the Bylaws or the
certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance
of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these Bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.6
(regular meetings), Section 3.7 (special meetings and notice), Section 3.8
(quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a
meeting), with such changes in the context of those Bylaws as are necessary
to substitute the committee and its members for the Board of Directors and
its members; PROVIDED, however, that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may
also be called by resolution of the Board of Directors and that notice of
special meetings of committees shall also be given to all alternate members,
who shall have the right to attend all meetings of the committee. The Board
of Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these Bylaws.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these Bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall
be appointed by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or empower the chief executive officer
or the president to appoint, such other officers and agents as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the Board of Directors.
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5.6. CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these Bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these Bylaws.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the chairman of the board, the chief executive officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers
of the corporation. The chief executive officer shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a
chairman of the board, at all meetings of the Board of Directors. The chief
executive officer shall have the general powers and duties of management
usually vested in the office of chief executive officer of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors or these Bylaws.
5.8 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the chairman of the board or the chief executive officer, the
president shall have general supervision, direction, and control of the
business and other officers of the corporation. The President shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.9 VICE PRESIDENTS
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by
the Board of Directors or, if not ranked, a vice president designated by the
Board of Directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors, these Bylaws, the president or the
chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors,
committees of directors, and stockholders. The minutes shall show the time
and place of each meeting, the names of those present at directors' meetings
or
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committee meetings, the number of shares present or represented at
stockholders, meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares
held by each, the number and date of certificates evidencing such shares, and
the number and date of cancellation of every certificate surrendered. for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law
or by these Bylaws. The secretary shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. The chief financial officer shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all his or her transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the Board of Directors or the
Bylaws.
5.12 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority granted herein may be exercised either by such person directly or
by any other person authorized to do so by proxy or power of attorney duly
executed by such person having the authority.
5.13 AUTHORITY AND DUTIES OF OFFICERS
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In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
6.1 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.
6.2 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.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately
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be determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 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.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive offices or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and
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addresses and the number and class of shares held by each stockholder, a copy
of these Bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the
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name of and on behalf of the corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board
of Directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or vice
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; PROVIDED,
HOWEVER, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may
be set forth on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests
the powers, the designations, the preferences, and the relative,
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participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
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Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of Directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in
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accordance with the provisions of Section 275 of the General Corporation Law
of Delaware and setting forth the names and residences of the directors and
officers shall be executed, acknowledged, and filed and shall become
effective in accordance with Section 103 of the General Corporation Law of
Delaware. Upon such certificate's becoming effective in accordance with
Section 103 of the General Corporation Law of Delaware, the corporation shall
be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the Board of Directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
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The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
OF
SYNC RESEARCH, INC.
CERTIFICATE OF ADOPTION
The undersigned hereby certifies that he is the incorporator of SYNC
RESEARCH, INC. and that the foregoing Bylaws, comprising twenty-one (21) pages,
were adopted as the Bylaws of the corporation on September 13, 1995, by the
incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 13th day of September, 1995.
_____________________________________
Michael A. Morrissey, Incorporator
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CERTIFICATE OF AMENDMENT OF BYLAWS
OF
SYNC RESEARCH, INC.
The undersigned, Mark Medearis, hereby certifies that:
1. He is the duly elected and incumbent Assistant Secretary of Sync
Research, Inc. (the "Company").
2. At a meeting of the Board of Directors of the Company on
March 31, 1997, the first sentence of Section 3.2 of the Bylaws of the Company
was amended to read as follows, effective June 13, 1997:
"The Board of Directors shall consist of five (5) persons until
changed by a proper amendment of this Section 3.2."
3. The matters set forth in this certificate are true and correct of
my own knowledge.
Date: June 13, 1997
____________________________________
Mark Medearis, Assistant Secretary
<PAGE>
SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 7 STUDEBAKER
IRVINE, CALIFORNIA 92718
DATED AS OF: JUNE 10, 1997
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated September 18, 1991, as amended by that Extension Agreement dated August 3,
1992, by that Amendment to Loan Agreement dated October 20, 1992, by that
Amendment to Loan Agreement dated August 23, 1993, by that Amendment to Loan
Agreement dated February 10, 1994, by that Amendment to Loan Agreement dated
July 18, 1994, by that Amendment to Loan Agreement dated September 20, 1994, by
that Amendment to Loan and Security Agreement dated August 31, 1995, by that
Amendment to Loan and Security Agreement (the "October 1995 Amendment") dated
October 5, 1995, by that Amendment to Loan Agreement dated July 3, 1996, and by
that Amendment to Loan Agreement dated October 6, 1996 (the "Loan Agreement"),
as follows. (Capitalized terms used but not defined in this Agreement, shall
have the meanings set forth in the Loan Agreement.)
1. REVISED ADVANCE RATE. The first paragraph of the "Credit Limit
(Section 1.1)" set forth in the Schedule to Loan Agreement is hereby amended to
read as follows:
CREDIT LIMIT
(Section 1.1): An amount not to exceed $5,000,000 at any one time
outstanding; PROVIDED, HOWEVER, that upon a Post-IPO
Default (as defined in Section 2.2 of the Loan
Agreement as set forth in the Amendment to Loan and
Security Agreement dated October 5, 1995 between
Silicon and Borrower), the Credit Limit shall be an
amount not to exceed the lesser of: (i) $5,000,000 at
any one time outstanding; or (ii) 70% of the Net Amount
of Borrower's accounts, which Silicon in its discretion
deems eligible for borrowing. "Net Amount" of an
account means the gross amount of the account, minus
all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances
of any nature granted or claimed.
The remainder of the "Credit Limit (Section 1.1)" remains unchanged.
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2. REVISED TANGIBLE NET WORTH FINANCIAL COVENANT. The Tangible Net Worth
Financial Covenant set forth under "Financial Covenants (Section 4.1)" in the
Schedule to Loan Agreement is hereby amended in its entirety to read as follows:
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of
not less than $34,000,000, provided that tangible
net worth shall be computed excluding loans by the
Borrower to its officers.
3. DELETION OF PROFITABILITY FINANCIAL COVENANT. The Profitability
Financial Covenant set forth under "Financial Covenants (Section 4.1)" in the
Schedule to Loan Agreement which currently reads as follows:
PROFITABILITY: Borrower shall not incur a loss (after taxes) for the
fiscal year ending December 31, 1997.
is hereby deleted.
4. FEE. Borrower shall pay to Silicon a facility fee in the amount of
$250 concurrently, which shall be in addition to all interest and all other
amounts payable under the Loan Agreement, and which shall not be refundable.
5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, as so amended, and all other documents and
agreements between Silicon and the Borrower shall continue in full force and
effect and the same are hereby ratified and confirmed.
BORROWER: SILICON:
SYNC RESEARCH, INC. SILICON VALLEY BANK
BY_______________________________ BY_______________________________
PRESIDENT OR VICE PRESIDENT TITLE__________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
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<PAGE>
SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 7 STUDEBAKER
IRVINE, CALIFORNIA 92718
DATED AS OF: OCTOBER 6, 1996
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated September 18, 1991, as amended by that Extension Agreement dated August 3,
1992, by that Amendment to Loan Agreement dated October 20, 1992, by that
Amendment to Loan Agreement dated August 23, 1993, by that Amendment to Loan
Agreement dated February 10, 1994, by that Amendment to Loan Agreement dated
July 18, 1994, by that Amendment to Loan Agreement dated September 20, 1994, by
that Amendment to Loan and Security Agreement dated August 31, 1995, by that
Amendment to Loan and Security Agreement (the "October 1995 Amendment") dated
October 5, 1995, and by that Amendment to Loan Agreement dated July 3, 1996 (the
"Loan Agreement"), as follows. (Capitalized terms used but not defined in this
Agreement, shall have the meanings set forth in the Loan Agreement.)
1. REVISED SCHEDULE. The Schedule to Loan Agreement is hereby replaced
in its entirety with the Schedule to Loan Agreement as attached hereto.
2. FEE. Borrower shall pay to Silicon a facility fee in the amount of
$25,000 concurrently, which shall be in addition to all interest and all other
amounts payable under the Loan Agreement, and which shall not be refundable.
3. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, as so amended, and all other documents and
agreements
-1-
<PAGE>
between Silicon and the Borrower shall continue in full force and effect and the
same are hereby ratified and confirmed.
BORROWER: SILICON:
SYNC RESEARCH, INC. SILICON VALLEY BANK
BY_______________________________ BY_______________________________
PRESIDENT OR VICE PRESIDENT TITLE__________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
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<PAGE>
SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 7 STUDEBAKER
IRVINE, CALIFORNIA 92718
DATED AS OF: OCTOBER 6, 1996
CREDIT LIMIT
(Section 1.1): An amount not to exceed $5,000,000 at any one time
outstanding; PROVIDED, HOWEVER, that upon a Post-IPO
Default (as defined in Section 2.2 of the Loan
Agreement as set forth in the Amendment to Loan and
Security Agreement dated October 5, 1995 between
Silicon and Borrower), the Credit Limit shall be an
amount not to exceed the lesser of: (i) $5,000,000 at
any one time outstanding; or (ii) 80% of the Net Amount
of Borrower's accounts, which Silicon in its discretion
deems eligible for borrowing. "Net Amount" of an
account means the gross amount of the account, minus
all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances
of any nature granted or claimed.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following will not be
deemed eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date, accounts
subject to any contingencies, accounts owing from any
government agency (unless Borrower completes such
assignment of claims documentation and other
documentation that Silicon determines is necessary or
desirable to perfect and protect the interest of
Silicon therein), accounts owing from an account debtor
outside the United States (unless pre-approved by
Silicon in its discretion, or backed by a letter of
credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), accounts owing from one
account debtor to the extent they exceed 25% of the
total eligible accounts outstanding*, accounts owing
from an affiliate of Borrower**, and accounts owing
from an account debtor to whom Borrower is or may be
liable for goods purchased from such account debtor or
otherwise. In addition, if more than 50% of the
accounts owing from an account debtor are outstanding
more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts
owing from that account debtor will be deemed
ineligible for borrowing.
*PROVIDED THAT ACCOUNTS OWING FROM AT&T, IBM, 3 COM,
AND RACAL-DATACOM SHALL BE DEEMED INELIGIBLE TO THE
EXTENT ANY
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<PAGE>
SUCH ACCOUNTS EXCEED 40% OF THE TOTAL ELIGIBLE ACCOUNTS
OUTSTANDING
** (OTHER THAN 3 COM)
Silicon, in its reasonable discretion, will from time
to time during the term of this Agreement issue letters
of credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $500,000, upon the request of
the Borrower, provided that, on the date the Letters of
Credit are to be issued, Borrower has available to it
Accounts Loans in an amount equal to or greater than
the face amount of the Letters of Credit to be issued.
Prior to the issuance of any Letters of Credit,
Borrower shall execute and deliver to Silicon
Applications for Letters of Credit and such other
documentation as Silicon shall specify (the "Letter of
Credit Documentation"). Fees for the Letters of Credit
shall be as provided in the Letter of Credit
Documentation. Letters of Credit may have a maturity
date up to twelve months beyond the Maturity Date in
effect from time to time, provided that if on the
Maturity Date, or on any earlier effective date of
termination, there are any outstanding letters of
credit issued by Silicon or issued by another
institution based upon an application, guarantee,
indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon
cash collateral in an amount equal to the face amount
of all such letters of credit plus all interest, fees
and cost due or to become due in connection therewith,
to secure all of the Obligations relating to said
letters of credit, pursuant to Silicon's then standard
form cash pledge agreement.
The Credit Limit set forth above and the Loans
available under this Agreement at any time shall be
reduced by the face amount of Letters of Credit from
time to time outstanding.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" in effect from time to
time, per annum, calculated on the basis of a 360-day
year for the actual number of days elapsed. "Prime
Rate" means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and it
is not necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
FACILITY FEE
(Section 1.3): As per the Amendment to Loan Agreement of even date.
MATURITY DATE
(Section 5.1): OCTOBER 5, 1997
PRIOR NAMES OF BORROWER
(Section 3.2): FALLON & ASSOCIATES, SPECTRUM COMMUNICATIONS, INC.
TRADE NAMES OF BORROWER
(Section 3.2): SYNCVIEW, INTERNETWORKING SNA
OTHER LOCATIONS AND
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<PAGE>
ADDRESSES (Section 3.3): 1875 SO. GRANT STREET, SUITE 1020, SAN MATEO, CA
94402;
274 QUASSETT ROAD, P.O. BOX 40, POMFRET CENTER, CT
06259;
36 NEW STREET, SHARON, CT 06069;
4176 CONWAY PLACE CIRCLE, ORLANDO, FL 32812;
2100 MANCHESTER RD., SUITE 900, WHEATON, IL 60187;
8400 NORMANDALE LAKE BLVD. #920, BLOOMINGTON, MN
55437;
3607 GARFIELD AVE., SO. MINNEAPOLIS, MN 55409;
8050 EAGLE TRAIL, DALLAS, TX 75238;
555 REPUBLIC DRIVE, SUITE 200, PLANO, TX 75074;
12020 SUNRISE VALLEY DRIVE #100, RESTON, VA 22091;
THE OLD SHIRE HOUSE, THE FORBURY READING, BERKSHIRE,
ENGLAND RG1 3EB
MATERIAL ADVERSE
LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-
EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may
do the following, provided that, after giving effect
thereto, no Event of Default has occurred and no event
has occurred which, with notice or passage of time or
both, would constitute an Event of Default, and
provided that the following are done in compliance with
all applicable laws, rules and regulations: (i)
repurchase shares of Borrower's stock pursuant to any
employee stock purchase or benefit plan, provided that
the total amount paid by Borrower for such stock does
not exceed $250,000 in any fiscal year.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the
end of each fiscal quarter, except as otherwise
specifically provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 5.0 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of not
less than $45,000,000, provided that tangible net worth
shall be computed excluding loans by the Borrower to
its officers.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities
to tangible net worth of not more than .40 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes) for the
fiscal year ending December 31, 1997.
DEFINITIONS: "Current assets," and "current liabilities" shall have
the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be
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<PAGE>
classified as intangible assets under generally
accepted accounting principles, including without
limitation goodwill, licenses, patents, trademarks,
trade names, copyrights, and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful
accounts).
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants
do not include indebtedness which is subordinated to
the indebtedness to Silicon under a subordination
agreement in form specified by Silicon or by language
in the instrument evidencing the indebtedness which is
acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
After the occurrence of a Post-IPO Default, within 20
days after the end of each month thereafter (including
any month in which the Post-IPO Default occurs),
Borrower shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall specify, and
an aged listing of Borrower's accounts receivable and
accounts payable.
3. INDEBTEDNESS. Without limiting any of the
foregoing terms or provisions of this Agreement,
Borrower shall not in the future incur indebtedness for
borrowed money, except for (i) indebtedness to Silicon,
and (ii) indebtedness incurred in the future for the
purchase price of or lease of equipment in an aggregate
amount not exceeding $300,000 at any time outstanding.
4. [RESERVED.]
5. NEGATIVE PLEDGE. Borrower shall not grant a
security interest in any of its present or future
Collateral, other than for specific liens on capital
equipment relating to obligations incurred pursuant to
paragraph 3 above and a lien in favor of Silicon.
6. AGREEMENT TO TERMINATE SECURITY INTEREST UPON IPO;
POST-IPO DEFAULT UCCS; ETC. Due to the completion of
the IPO Consummation, Silicon has agreed to terminate
its security interest in the Collateral.
Notwithstanding the foregoing, upon the occurrence of a
Post-IPO Default, Borrower agrees that Borrower shall
be deemed to have granted to Silicon a security
interest in the Collateral as set forth in Section 2.2
hereof at such time, and that Borrower agrees to
execute and deliver to Silicon forthwith such UCC
financing statements, instruments and other
documentation as Silicon determines is necessary or
desirable in connection therewith in order to perfect
and otherwise protect its security interest in the
Collateral.
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<PAGE>
BORROWER:
SYNC RESEARCH, INC.
BY_______________________________
RESIDENT OR VICE PRESIDENT
BY_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE____________________________
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<PAGE>
SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 7 STUDEBAKER
IRVINE, CALIFORNIA 92718
DATE: JULY 3, 1996
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated September 18, 1991, as amended by that Extension Agreement dated August 3,
1992, by that Amendment to Loan Agreement dated October 20, 1992, by that
Amendment to Loan Agreement dated August 23, 1993, by that Amendment to Loan
Agreement dated February 10, 1994, by that Amendment to Loan Agreement dated
July 18, 1994, by that Amendment to Loan Agreement dated September 20, 1994, by
that Amendment to Loan and Security Agreement dated August 31, 1995, and by that
Amendment to Loan and Security Agreement dated October 5, 1995 (the "Loan
Agreement"), as follows. (Capitalized terms used but not defined in this
Agreement, shall have the meanings set forth in the Loan Agreement.)
1. REVISED SCHEDULE. The Schedule to Loan Agreement is hereby replaced
in its entirety with the Schedule to Loan Agreement as attached hereto.
2. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
3. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, as so amended, and all other documents and
agreements
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<PAGE>
between Silicon and the Borrower shall continue in full force and effect and the
same are hereby ratified and confirmed.
BORROWER: SILICON:
SYNC RESEARCH, INC. SILICON VALLEY BANK
BY_______________________________ BY_______________________________
PRESIDENT OR VICE PRESIDENT TITLE__________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
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<PAGE>
SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: SYNC RESEARCH, INC.
ADDRESS: 7 STUDEBAKER
IRVINE, CALIFORNIA 92718
DATE: JULY 3, 1996
CREDIT LIMIT
(Section 1.1): An amount not to exceed $3,000,000 at any one time
outstanding; PROVIDED, HOWEVER, that upon a Post-IPO
Default, the Credit Limit shall be an amount not to
exceed the lesser of: (i) $3,000,000 at any one time
outstanding; or (ii) 80% of the Net Amount of
Borrower's accounts, which Silicon in its discretion
deems eligible for borrowing. "Net Amount" of an
account means the gross amount of the account, minus
all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances
of any nature granted or claimed.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following will not be
deemed eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date, accounts
subject to any contingencies, accounts owing from any
government agency (unless Borrower completes such
assignment of claims documentation and other
documentation that Silicon determines is necessary or
desirable to perfect and protect the interest of
Silicon therein), accounts owing from an account debtor
outside the United States (unless pre-approved by
Silicon in its discretion, or backed by a letter of
credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), accounts owing from one
account debtor to the extent they exceed 25% of the
total eligible accounts outstanding*, accounts owing
from an affiliate of Borrower**, and accounts owing
from an account debtor to whom Borrower is or may be
liable for goods purchased from such account debtor or
otherwise. In addition, if more than 50% of the
accounts owing from an account debtor are outstanding
more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts
owing from that account debtor will be deemed
ineligible for borrowing.
*PROVIDED THAT ACCOUNTS OWING FROM AT&T, IBM, 3 COM,
AND RACAL-DATACOM SHALL BE DEEMED INELIGIBLE TO THE
EXTENT ANY SUCH ACCOUNTS EXCEED 40% OF THE TOTAL
ELIGIBLE ACCOUNTS OUTSTANDING
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<PAGE>
** (other than 3 COM)
Silicon, in its reasonable discretion, will from time
to time during the term of this Agreement issue letters
of credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $500,000, upon the request of
the Borrower, provided that, on the date the Letters of
Credit are to be issued, Borrower has available to it
Accounts Loans in an amount equal to or greater than
the face amount of the Letters of Credit to be issued.
Prior to the issuance of any Letters of Credit,
Borrower shall execute and deliver to Silicon
Applications for Letters of Credit and such other
documentation as Silicon shall specify (the "Letter of
Credit Documentation"). Fees for the Letters of Credit
shall be as provided in the Letter of Credit
Documentation. Letters of Credit may have a maturity
date up to twelve months beyond the Maturity Date in
effect from time to time, provided that if on the
Maturity Date, or on any earlier effective date of
termination, there are any outstanding letters of
credit issued by Silicon or issued by another
institution based upon an application, guarantee,
indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon
cash collateral in an amount equal to the face amount
of all such letters of credit plus all interest, fees
and cost due or to become due in connection therewith,
to secure all of the Obligations relating to said
letters of credit, pursuant to Silicon's then standard
form cash pledge agreement.
The Credit Limit set forth above and the Loans
available under this Agreement at any time shall be
reduced by the face amount of Letters of Credit from
time to time outstanding.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" in effect from time to
time, plus .50% per annum, calculated on the basis of a
360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and it
is not necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
FACILITY FEE
(Section 1.3): As per the Amendment to Loan Agreement of even date.
MATURITY DATE
(Section 5.1): OCTOBER 5, 1996
PRIOR NAMES OF BORROWER
(Section 3.2): FALLON & ASSOCIATES, SPECTRUM COMMUNICATIONS, INC.
TRADE NAMES OF BORROWER
(Section 3.2): SYNCVIEW, INTERNETWORKING SNA
OTHER LOCATIONS AND
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<PAGE>
ADDRESSES (Section 3.3): 1875 SO. GRANT STREET, SUITE 1020, SAN MATEO, CA
94402;
274 QUASSETT ROAD, P.O. BOX 40, POMFRET CENTER, CT
06259;
36 NEW STREET, SHARON, CT 06069;
4176 CONWAY PLACE CIRCLE, ORLANDO, FL 32812;
2100 MANCHESTER RD., SUITE 900, WHEATON, IL 60187;
8400 NORMANDALE LAKE BLVD. #920, BLOOMINGTON, MN
55437;
3607 GARFIELD AVE., SO. MINNEAPOLIS, MN 55409;
8050 EAGLE TRAIL, DALLAS, TX 75238;
555 REPUBLIC DRIVE, SUITE 200, PLANO, TX 75074;
12020 SUNRISE VALLEY DRIVE #100, RESTON, VA 22091;
THE OLD SHIRE HOUSE, THE FORBURY READING, BERKSHIRE,
ENGLAND RG1 3EB
MATERIAL ADVERSE
LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-
EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may
do the following, provided that, after giving effect
thereto, no Event of Default has occurred and no event
has occurred which, with notice or passage of time or
both, would constitute an Event of Default, and
provided that the following are done in compliance with
all applicable laws, rules and regulations: (i)
repurchase shares of Borrower's stock pursuant to any
employee stock purchase or benefit plan, provided that
the total amount paid by Borrower for such stock does
not exceed $250,000 in any fiscal year.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the
end of each fiscal quarter commencing with the quarter
ending March 31, 1996, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick Assets" to
current liabilities of not less than 6.0 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of not
less than $50,000,000, provided that tangible net worth
shall be computed excluding loans by the Borrower to
its officers.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities to
tangible net worth of not more than .40 to 1.
PROFITABILITY Borrower shall not incur a loss (after taxes) for the
fiscal year ending December 31, 1996.
DEFINITIONS: "Current assets," and "current liabilities" shall have
the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be
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<PAGE>
classified as intangible assets under generally
accepted accounting principles, including without
limitation goodwill, licenses, patents, trademarks,
trade names, copyrights, and franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful
accounts).
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants
do not include indebtedness which is subordinated to
the indebtedness to Silicon under a subordination
agreement in form specified by Silicon or by language
in the instrument evidencing the indebtedness which is
acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
After the occurrence of a Post-IPO Default, within 20
days after the end of each month thereafter (including
any month in which the Post-IPO Default occurs),
Borrower shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall specify, and
an aged listing of Borrower's accounts receivable and
accounts payable.
3. INDEBTEDNESS. Without limiting any of the
foregoing terms or provisions of this Agreement,
Borrower shall not in the future incur indebtedness for
borrowed money, except for (i) indebtedness to Silicon,
and (ii) indebtedness incurred in the future for the
purchase price of or lease of equipment in an aggregate
amount not exceeding $300,000 at any time outstanding.
4. ANNUAL CLEAN UP PERIOD. Borrower agrees that
during the term of October 6, 1995 through October 5,
1996 there shall be a 30 day period within which no
Obligations shall be outstanding other than with
respect to any possible Letters of Credit that may be
outstanding.
5. NEGATIVE PLEDGE. Borrower shall not grant a
security interest in any of its present or future
Collateral, other than for specific liens on capital
equipment relating to obligations incurred pursuant to
paragraph 3 above and a lien in favor of Silicon.
6. AGREEMENT TO TERMINATE SECURITY INTEREST UPON IPO;
POST-IPO DEFAULT UCCS; ETC. Due to the completion of
the IPO Consummation, Silicon agrees to terminate its
security interest in the Collateral. Notwithstanding
the foregoing, upon the occurrence of a Post-IPO
Default, Borrower agrees that Borrower shall be deemed
to have granted to Silicon a security interest in the
Collateral as set forth in Section 2.2 hereof at such
time, and that Borrower agrees to execute and deliver
to Silicon forthwith such UCC financing statements,
instruments and other documentation as Silicon
determines is
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<PAGE>
necessary or desirable in connection therewith in order
to perfect and otherwise protect such security interest
in the Collateral.
BORROWER:
SYNC RESEARCH, INC.
BY_______________________________
PRESIDENT OR VICE PRESIDENT
BY_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE____________________________
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<PAGE>
SYNC RESEARCH, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Amended and Restated Change of Control Severance Agreement (the
"AGREEMENT") is made and entered into by and between [EmployeeName] (the
"EMPLOYEE") and Sync Research, Inc., a Delaware corporation (the "COMPANY"),
effective as of May __, 1997.
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "BOARD") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control that provide the Employee with enhanced financial security and
incentive and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. For the reasons set forth in these recitals, the Company and Employee
entered into a Change of Control Severance Agreement dated September 30, 1996
(the "1996 SEVERANCE AGREEMENT"). The Company and Employee desire to amend and
restate the 1996 Severance Agreement in its entirety hereby.
E. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree to amend and restate the 1996 Severance Agreement
in its entirety as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation)
<PAGE>
any termination prior to a Change of Control, the Employee shall not be
entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Agreement or as may otherwise be available in
accordance with the Company's established employee plans and practices or
pursuant to other agreements with the Company.
3. STOCK VESTING ON CHANGE OF CONTROL.
(a) ACCELERATION UPON CHANGE OF CONTROL. Upon a Change of Control,
fifty percent (50%) of the Employee's options to purchase Common Stock of the
Company and/or shares of restricted stock of the Company that are unvested as of
the date of the Change of Control (the "UNVESTED SHARES") shall immediately
become vested.
(b) VESTING OF REMAINING UNVESTED SHARES. Upon a Change of Control,
the remainder of the Unvested Shares for which vesting was not accelerated
pursuant to Section 3(a) shall continue to vest at the same monthly rate as
prior to the Change of Control (i.e., if 200 shares vested per month prior to
the Change of Control, the remaining Unvested Shares will continue to vest at
the rate of 200 shares per month after the Change of Control) and in accordance
with the applicable stock option or restricted stock purchase agreement.
4. CONSULTING ARRANGEMENT.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates as a result of Involuntary Termination other than for
Cause at any time within twelve (12) months following a Change of Control, then,
subject to Section 6, the Employee and the Company shall enter into a consulting
arrangement on the following terms:
(1) CONSULTING ENGAGEMENT. Effective as of the Termination
Date, and subject to the terms of this Agreement, the Company agrees to retain
the Employee as a consultant to perform such services (the "CONSULTING
SERVICES") for the Company as may be reasonably requested from time to time by
an officer of the Company (the "CONSULTING ARRANGEMENT"). The term of this
Consulting Arrangement shall commence on the Termination Date and expire on the
earlier of (i) the date the employee is working as a salaried employee of or
consultant to another person, company or entity which is actually or potentially
in competition with any business conducted by the Company, as determined by the
Company in its sole discretion, (ii) at the Employee's option, the date the
Employee is working as a salaried employee of or consultant to another person,
company or entity, or (iii) 18 months following the Termination Date. As
consideration for the Employee's services under the Consulting Arrangement, the
Company shall pay in cash to Employee an amount equal to 1/12th of the
Employee's Annual Compensation on the last day of each full month following the
Termination Date during which the Consulting Arrangement is in effect. The
Employee's stock options and/or restricted stock shall continue to vest during
the term of the Consulting Arrangement pursuant to Section 3(b).
Notwithstanding the foregoing, the Consulting Arrangement may be terminated
earlier by either party upon five days written notice of termination if the
other party fails to cure any material breach of its obligations hereunder
within 10 days after receipt of notice specifying such breach.
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<PAGE>
(2) CONTINUED INSURANCE COVERAGE. Subject to the provisions
of this Section 4(a)(2), the Employee shall be entitled to one hundred
percent (100%) Company-paid health, dental and life insurance coverage at the
same level of coverage as was provided to such Employee immediately prior to
the Change of Control (the "COMPANY-PAID COVERAGE"). If such coverage
includes the Employee's dependents immediately prior to the Change of
Control, such dependents shall also be covered at Company expense.
Company-Paid Coverage shall continue until the earlier of (i) termination of
the Consulting Arrangement or (ii) the date that the Employee and his or her
dependents become covered under another employer's group health, dental or
life insurance plans that provide Employee and his or her dependents with
comparable benefits and levels of coverage. For purposes of Title X of the
Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the date of the
"qualifying event" for Employee and his or her dependents shall be the date
upon which the Company-Paid Coverage terminates.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive payments for consulting
services or other benefits under Section 4(a) except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive payments for consulting services or other
benefits under Section 4(a) except for those (if any) as may then be
established under the Company's then existing severance and benefits plans
and practices or pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall not be entitled to receive payments
for consulting services or other benefits under Section 4(a) except for those
(if any) as may then be established under the Company's existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
5. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
6. LIMITATION ON PAYMENTS. In the event that the payments and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 6, would be subject to the excise tax
-3-
<PAGE>
imposed by Section 4999 of the Code (or any corresponding provisions of state
income tax law), then the Employee's benefits under Section 4(a) shall be
either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax-basis, of the greater amount of
benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 6
shall be made in writing by the Company's independent public accountants (the
"ACCOUNTANTS"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section 6, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 6. In the event that
subsection (a) above applies, then Employee shall be responsible for any excise
taxes imposed with respect to such benefits. In the event that subsection (b)
above applies, then each benefit provided hereunder shall be proportionately
reduced to the extent necessary to avoid imposition of such excise taxes.
7. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) ANNUAL COMPENSATION. "ANNUAL COMPENSATION" means an amount equal
to (i) Employee's Company salary for the twelve months preceding the Change of
Control, and (ii) Employee's maximum target bonus for the year in which the
Change of Control occurs.
(b) CAUSE. "CAUSE" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's committing and being convicted of a felony, (iii) a
willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company or an act of fraud by Employee against the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his or her duties, continued violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
-4-
<PAGE>
(c) CHANGE OF CONTROL. "CHANGE OF CONTROL" means the occurrence of
any of the following events:
(i) Any "PERSON" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"BENEFICIAL OWNER" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "INCUMBENT DIRECTORS" shall mean directors who either
(A) are directors of the Company elected at the annual meeting of stockholders
of the Company to be held on June 13, 1997, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) DISABILITY. "DISABILITY" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "INVOLUNTARY TERMINATION" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites
-5-
<PAGE>
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction by the Company in the base salary
of the Employee as in effect immediately prior to such reduction; (iv) a
material reduction by the Company in the kind or level of employee benefits,
including bonuses, to which the Employee was entitled immediately prior to
such reduction with the result that the Employee's overall benefits package
is significantly reduced; (v) the relocation of the Employee to a facility or
a location more than thirty (30) miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in Section 8(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute, constitute a constructive termination of the
Employee.
(f) TERMINATION DATE. "TERMINATION DATE" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
8. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
8(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
-6-
<PAGE>
9. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him or her at the home
address which he or she most recently communicated to the Company in writing.
In the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation and any Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 9(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
10. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source, subject to the termination provisions of Section 4(a)(1).
(b) WAIVER. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. The 1996 Severance Agreement is hereby
terminated, and this Agreement supersedes the 1996 Severance Agreement in its
entirety. This Agreement represents the entire agreement between the Employee
and the Company with respect to the matters set forth herein. No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as
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<PAGE>
applied to agreements entered into and performed within California solely by
residents of that state.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY: SYNC RESEARCH, INC.
By:
-------------------------------------
Title:
----------------------------------
EMPLOYEE: ----------------------------------------
Signature
----------------------------------------
Please print name
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<PAGE>
SYNC RESEARCH, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Amended and Restated Change of Control Severance Agreement (the
"AGREEMENT") is made and entered into by and between [EmployeeName] (the
"EMPLOYEE") and Sync Research, Inc., a Delaware corporation (the "COMPANY"),
effective as of May __, 1997.
RECITALS
A. It is expected that th Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "BOARD") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control that provide the Employee with enhanced financial security and
incentive and encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. For the reasons set forth in these recitals, the Company and Employee
entered into a Change of Control Severance Agreement dated September 30, 1996
(the "1996 SEVERANCE AGREEMENT"). The Company and Employee desire to amend and
restate the 1996 Severance Agreement in its entirety hereby.
E. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree to amend and restate the 1996 Severance Agreement
in its entirety as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation)
<PAGE>
any termination prior to a Change of Control, the Employee shall not be
entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Agreement or as may otherwise be available in
accordance with the Company's established employee plans and practices or
pursuant to other agreements with the Company.
3. STOCK VESTING ON CHANGE OF CONTROL.
(a) ACCELERATION UPON CHANGE OF CONTROL. Upon a Change of Control,
fifty percent (50%) of the Employee's options to purchase Common Stock of the
Company and/or shares of restricted stock of the Company that are unvested as of
the date of the Change of Control (the "UNVESTED SHARES") shall immediately
become vested.
(b) VESTING OF REMAINING UNVESTED SHARES. Upon a Change of Control,
the remainder of the Unvested Shares for which vesting was not accelerated
pursuant to Section 3(a) shall continue to vest at the same monthly rate as
prior to the Change of Control (i.e., if 200 shares vested per month prior to
the Change of Control, the remaining Unvested Shares will continue to vest at
the rate of 200 shares per month after the Change of Control) and in accordance
with the applicable stock option or restricted stock purchase agreement.
4. CONSULTING ARRANGEMENT.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Employee's
employment terminates as a result of Involuntary Termination other than for
Cause at any time within twelve (12) months following a Change of Control, then,
subject to Section 6, the Employee and the Company shall enter into a consulting
arrangement on the following terms:
(1) CONSULTING ENGAGEMENT. Effective as of the Termination
Date, and subject to the terms of this Agreement, the Company agrees to
retain the Employee as a consultant to perform such services (the "CONSULTING
SERVICES") for the Company as may be reasonably requested from time to time
by an officer of the Company (the "CONSULTING ARRANGEMENT"). The term of
this Consulting Arrangement shall commence on the Termination Date and expire
on the earlier of (i) the date the employee is working as a salaried employee
of or consultant to another person, company or entity which is actually or
potentially in competition with any business conducted by the Company, as
determined by the Company in its sole discretion, (ii) at the Employee's
option, the date the Employee is working as a salaried employee of or
consultant to another person, company or entity, or (iii) 12 months
following the Termination Date. As consideration for the Employee's services
under the Consulting Arrangement, the Company shall pay in cash to Employee
an amount equal to 1/12th of the Employee's Annual Compensation on the last
day of each full month following the Termination Date during which the
Consulting Arrangement is in effect. The Employee's stock options and/or
restricted stock shall continue to vest during the term of the Consulting
Arrangement pursuant to Section 3(b). Notwithstanding the foregoing, the
Consulting Arrangement may be terminated earlier by either party upon five
days written notice of termination if the other party fails to cure any
material breach of its obligations hereunder within 10 days after receipt of
notice specifying such breach.
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<PAGE>
(2) CONTINUED INSURANCE COVERAGE. Subject to the provisions of
this Section 4(a)(2), the Employee shall be entitled to one hundred percent
(100%) Company-paid health, dental and life insurance coverage at the same level
of coverage as was provided to such Employee immediately prior to the Change of
Control (the "COMPANY-PAID COVERAGE"). If such coverage includes the Employee's
dependents immediately prior to the Change of Control, such dependents shall
also be covered at Company expense. Company-Paid Coverage shall continue until
the earlier of (i) termination of the Consulting Arrangement or (ii) the date
that the Employee and his or her dependents become covered under another
employer's group health, dental or life insurance plans that provide Employee
and his or her dependents with comparable benefits and levels of coverage. For
purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
("COBRA"), the date of the "qualifying event" for Employee and his or her
dependents shall be the date upon which the Company-Paid Coverage terminates.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive payments for consulting
services or other benefits under Section 4(a) except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive payments for consulting services or other
benefits under Section 4(a) except for those (if any) as may then be established
under the Company's then existing severance and benefits plans and practices or
pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall not be entitled to receive payments
for consulting services or other benefits under Section 4(a) except for those
(if any) as may then be established under the Company's existing severance and
benefits plans and practices or pursuant to other agreements with the Company.
5. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
6. LIMITATION ON PAYMENTS. In the event that the payments and other
benefits provided for in this Agreement or otherwise payable to the Employee
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 6, would be subject to the excise tax
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<PAGE>
imposed by Section 4999 of the Code (or any corresponding provisions of state
income tax law), then the Employee's benefits under Section 4(a) shall be
either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax-basis, of the
greater amount of benefits, notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code. Unless the Company
and the Employee otherwise agree in writing, any determination required under
this Section 6 shall be made in writing by the Company's independent public
accountants (the "ACCOUNTANTS"), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 6, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 6. In the
event that subsection (a) above applies, then Employee shall be responsible
for any excise taxes imposed with respect to such benefits. In the event
that subsection (b) above applies, then each benefit provided hereunder shall
be proportionately reduced to the extent necessary to avoid imposition of
such excise taxes.
7. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) ANNUAL COMPENSATION. "ANNUAL COMPENSATION" means an amount equal
to (i) Employee's Company salary for the twelve months preceding the Change of
Control, and (ii) Employee's maximum target bonus for the year in which the
Change of Control occurs.
(b) CAUSE. "CAUSE" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) Employee's committing and being convicted of a felony, (iii) a
willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company or an act of fraud by Employee against the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his or her duties, continued violations by the
Employee of the Employee's obligations to the Company which are demonstrably
willful and deliberate on the Employee's part.
-4-
<PAGE>
(c) CHANGE OF CONTROL. "CHANGE OF CONTROL" means the occurrence of
any of the following events:
(i) Any "PERSON" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"BENEFICIAL OWNER" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "INCUMBENT DIRECTORS" shall mean directors who either
(A) are directors of the Company elected at the annual meeting of stockholders
of the Company to be held on June 13, 1997, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) DISABILITY. "DISABILITY" shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Employee's employment. In the event that the Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) INVOLUNTARY TERMINATION. "INVOLUNTARY TERMINATION" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites
-5-
<PAGE>
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction by the Company in the base salary
of the Employee as in effect immediately prior to such reduction; (iv) a
material reduction by the Company in the kind or level of employee benefits,
including bonuses, to which the Employee was entitled immediately prior to
such reduction with the result that the Employee's overall benefits package
is significantly reduced; (v) the relocation of the Employee to a facility or
a location more than thirty (30) miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in Section 8(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute, constitute a constructive termination of the
Employee.
(f) TERMINATION DATE. "TERMINATION DATE" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
8. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
8(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
-6-
<PAGE>
9. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him or her at the home
address which he or she most recently communicated to the Company in writing.
In the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation and any Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 9(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
10. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source, subject to the termination provisions of Section 4(a)(1).
(b) WAIVER. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. The 1996 Severance Agreement is hereby
terminated, and this Agreement supersedes the 1996 Severance Agreement in its
entirety. This Agreement represents the entire agreement between the Employee
and the Company with respect to the matters set forth herein. No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as
-7-
<PAGE>
applied to agreements entered into and performed within California solely by
residents of that state.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable income and employment taxes.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY: SYNC RESEARCH, INC.
By:
----------------------------------
Title:
-------------------------------
EMPLOYEE: -------------------------------------
Signature
-------------------------------------
Please print name
-9-
<PAGE>
EXHIBIT 11.1
SYNC RESEARCH, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1997 1996 1997 1996
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NET LOSS PER SHARE:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,983) $(2,513) $(9,162) $(4,086)
Accretion of cumulative dividend and redemption
value of mandatorily redeemable preferred stock. . . . . . ----- (222) ---- (533)
--------- --------- -------- ---------
Net loss attributable to common stockholders . . . . . . . . $(2,983) $(2,735) $(9,162) $(4,619)
--------- --------- -------- ---------
--------- --------- -------- ---------
Shares outstanding for computing net loss per share:
Weighted average common and common equivalent shares
outstanding used in calculating net loss per common
share in accordance with generally accepted
accounting principles. . . . . . . . . . . . . . . . . 17,173 16,069 17,079 16,010
--------- --------- -------- ---------
Net loss per share . . . . . . . . . . . . . . . . . . . . . $(0.17) $(0.17) $(0.54) $(0.29)
--------- --------- -------- ---------
--------- --------- -------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-1-1997 JAN-1-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996<F1>
<CASH> 27,133 31,848
<SECURITIES> 0 11,757
<RECEIVABLES> 5,755 9,894
<ALLOWANCES> (220) (551)
<INVENTORY> 7,271 6,060
<CURRENT-ASSETS> 40,536 59,691
<PP&E> 8,270 5,320
<DEPRECIATION> (3,519) (2,409)
<TOTAL-ASSETS> 45,331 62,962
<CURRENT-LIABILITIES> 5,178 5,247
<BONDS> 0 0
0 5,591
0 0
<COMMON> 17 16
<OTHER-SE> 40,006 51,711
<TOTAL-LIABILITY-AND-EQUITY> 45,331 62,962
<SALES> 11,373 16,664
<TOTAL-REVENUES> 11,373 16,664
<CGS> 7,295 9,891
<TOTAL-COSTS> 7,295 9,891
<OTHER-EXPENSES> 14,048 12,094
<LOSS-PROVISION> 147 284
<INTEREST-EXPENSE> (808) (1,235)
<INCOME-PRETAX> (9,162) (4,086)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (9,162) (4,086)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,162) (4,086)
<EPS-PRIMARY> (0.54) (0.29)
<EPS-DILUTED> (0.54) (0.29)
<FN>
<F1>Amounts as of and for the six months ended June 30, 1996 have been restated
to reflect the merger of Sync Research and Tylink Corporation consummated on
August 23, 1996 and accounted for as a pooling of interests.
</FN>
</TABLE>
