<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SYNC RESEARCH, INC.
(Name of Registrant as Specified in Its Charter)
SYNC RESEARCH, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
<PAGE>
SYNC RESEARCH, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 13, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sync
Research, Inc. (the "Company") will be held on Friday, June 13, 1997, at
2:00 p.m., local time, at the Marriott Suites, 500 Bayview Circle, Newport
Beach, California 92660 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1997; and
3. To transact such other business as may properly come before the
meeting or any postponement or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 16, 1997, are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the postage-
prepaid envelope.
FOR THE BOARD OF DIRECTORS
/s/ Ronald J. Scioscia
------------------------------
Ronald J. Scioscia,
Secretary
Irvine, California
April 30, 1997
<PAGE>
SYNC RESEARCH, INC.
----------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of Sync
Research, Inc. (the "Company"), for use at the annual meeting of stockholders
to be held on Friday, June 13, 1997 (the "Annual Meeting"), at 2:00 p.m., local
time, or at any postponement or adjournment(s) thereof, for the purpose set
forth herein and in an accompanying Notice of Annual Meeting of Stockholders.
The Annual Meeting will be held at the Marriott Suites, 500 Bayview Circle,
Newport Beach, California, 92660. The Company's principal executive offices
are located at 40 Parker, Irvine, California 92618. The Company's telephone
number at that location is (714) 588-2070.
THE COMPANY WILL PROVIDE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES (BUT NOT EXHIBITS) WITHOUT CHARGE TO EACH
STOCKHOLDER UPON WRITTEN REQUEST TO RONALD J. SCIOSCIA, VICE PRESIDENT OF
FINANCE AND ADMINISTRATION AND CHIEF FINANCIAL OFFICER, SYNC RESEARCH, INC., 40
PARKER, IRVINE, CALIFORNIA 92618 (TELEPHONE NUMBER (714) 588-2070). EXHIBITS TO
THE ANNUAL REPORT MAY BE OBTAINED ON WRITTEN REQUEST TO MR. SCIOSCIA AND PAYMENT
OF THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS.
SOLICITATION
These proxy solicitation materials were mailed on or before April 30, 1997
to all stockholders entitled to vote at the meeting. The costs of soliciting
these proxies will be borne by the Company. These costs will include the
expenses of preparing and mailing proxy materials for the Annual Meeting and
reimbursement paid to brokerage firms and others for their expenses incurred in
forwarding solicitation material regarding the Annual Meeting to beneficial
owners of the Company's Common Stock. The Company may conduct further
solicitation personally, telephonically or by facsimile through its officers,
directors and regular employees, none of whom will receive additional
compensation for assisting with the solicitation.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use either (i) by delivering to the Company
(Attention: Ronald J. Scioscia) a written notice of revocation or a duly
executed proxy bearing a later date or (ii) by attending the meeting of
stockholders and voting in person.
VOTING
Each share of Common Stock entitles its holder to one vote on matters to be
acted upon at the meeting, including the election of directors.
<PAGE>
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
Any proxy that is returned using the form of proxy enclosed and which is not
marked as to a particular item will be voted (i) for the election of the
directors indicated; (ii) for ratification of the appointment of the designated
independent public accountants; and (iii) as the proxy holders deem advisable on
other matters that may come before the meeting. A stockholder may indicate on
the enclosed proxy or its substitute that it is abstaining from voting on a
particular matter (an "abstention"). A broker may indicate on the enclosed
proxy or its substitute that it does not have discretionary authority as to
certain shares to vote on a particular matter (a "broker non-vote").
Abstentions and broker non-votes are each tabulated separately. The Inspector
of Elections will determine whether or not a quorum is present at the Annual
Meeting. In general, Delaware law provides that a majority of the shares
entitled to vote, present in person or represented by proxy, constitutes a
quorum. Abstentions and broker non-votes of shares that are entitled to vote
are treated as shares that are present in person or represented by proxy for
purposes of determining the presence of a quorum. Except with respect to the
election of directors and except in certain other specific circumstances, the
affirmative vote of the majority of shares entitled to vote and present in
person or represented by proxy at a duly held meeting at which a quorum is
present is required under Delaware law for approval of proposals presented to
stockholders. In determining whether a proposal has been approved, abstentions
of shares that are entitled to vote are treated as present in person or
represented by proxy, but not as voting for such proposal, and hence have the
same effect as votes against such proposal, while broker non-votes of shares
that are entitled to vote are not treated as present in person or represented by
proxy for purposes of voting on such proposal, and hence have no effect on the
vote for such proposal.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on April 16, 1997, are
entitled to notice of and to vote at the meeting. At the record date,
17,093,150 shares of the Company's Common Stock, with a par value of $.001 per
share, were issued and outstanding.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting of Stockholders must
be received by the Company no later than Wednesday, December 31, 1997 in order
that they may be considered for inclusion in the proxy statement and form of
proxy relating to that meeting.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws currently provide for a Board of Directors of seven
members, however the bylaws have been amended to decrease the size of the Board
to five members effective immediately prior to the Annual Meeting in order to
reflect the resignations of Douglas Carlisle and Robert J. Finocchio, Jr., who
are not standing for reelection to the Board at the Annual Meeting. A board of
five directors will be elected at the meeting. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the nominees named
below, regardless of whether any other names are placed in nomination by anyone
other than one of the proxy holders. In the event that any such nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxy holders will vote in their discretion for a substitute nominee. It is
not expected that any nominee will be unavailable. The term of office of
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each person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified.
The names of the nominees, their ages as of March 14, 1997, and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- -----
<S> <C> <C> <C>
Gregorio Reyes 56 Chairman of the Board of Directors 1995
John H. Rademaker 49 Chief Executive Officer and Director 1981
Roger A. Dorf 54 President, Chief Operating Officer and Director 1996
Charles A. Haggerty 55 Chairman, President and Chief Executive Officer of 1995
Western Digital Corp.
William J. O'Meara 59 Investor 1995
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years.
MR. REYES has served as Chairman of the Company's Board of Directors since
January 1995. From 1990 to August 1994, he served as Chairman and Chief
Executive Officer of Sunward Technologies, Inc., a provider of rigid disk
magnetic recording head products for the data storage industry. Previously, he
was Chairman and Chief Executive Officer of American Semiconductor Equipment
Technologies, a wafer stepper company. Mr. Reyes currently also serves as a
director of Diamond Multimedia Systems, Inc., C-Cube Microsystems, Inc. and
several privately-held companies. Mr. Reyes received a B.S. in Mechanical
Engineering from Rensselaer Polytechnic Institute and an M.S. in Management from
the Stevens Institute of Technology.
MR. RADEMAKER, a founder of the Company, has served as the Company's Chief
Executive Officer and as a director since the Company's inception in 1981, and
as President from inception to March 1996. Mr. Rademaker received his B.S. in
Sociology from the University of California, Berkeley.
MR. DORF joined the Company as President and Chief Operating Officer in
March 1996. From February 1994 to March 1996, Mr. Dorf was President of AT&T
Network Systems Group (Caribbean and Latin America), a networking systems
company. Previously, he was Vice President of Sales and Marketing of AT&T
Paradyne, a networking systems company, from March 1993 to January 1994, and
Chief Operating Officer of AT&T Paradyne, from August 1991 to February 1993.
From 1965 to 1986, Mr. Dorf held a variety of positions with International
Business Machines Corporation ("IBM"), including Site General Manager of Entry
Systems Division. Mr. Dorf holds a B.S. in Mechanical Engineering from
University of Missouri, Rolla and received a Masters of Science in Manufacturing
Engineering from Boston University.
MR. HAGGERTY has served as a member of the Company's Board of Directors
since June 1995. He has served as Chairman, President and Chief Executive
Officer of Western Digital Corp. ("Western Digital"), a manufacturer of disk
drives, since July 1992. From June 1992 through June 1993, Mr. Haggerty served
as President and Chief Operating Officer of Western Digital. Mr. Haggerty also
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<PAGE>
serves as a director of Pentair, Inc. and Beckman Instruments. He received a
B.A. in Business and Social Science from the University of St. Thomas.
MR. O'MEARA has served as a member of the Company's Board of Directors
since January 1995. From July 1995 to February 1997, Mr. O'Meara served as Vice
Chairman of C-Cube Microsystems, Inc. ("C-Cube"), a provider of digital video
compression solutions, and he served as a director of C-Cube from 1991 to
February 1997. In addition, Mr. O'Meara served as President and Chief Executive
Officer of C-Cube from September 1991 to June 1995. In February 1997, Mr.
O'Meara resigned as Vice Chairman and a director of C-Cube. Previous positions
include Chairman, Chief Executive Officer and President of Headland Technology,
Inc., an entity affiliated with LSI Logic Corporation ("LSI Logic"), a
semiconductor company. Mr. O'Meara co-founded LSI Logic in January 1981 and
served as Vice President of Worldwide Sales and Marketing until founding
Headland Technology. Mr. O'Meara holds a B.S. in Military Sciences from the
U.S. Military Academy in West Point, New York.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of twelve meetings during the fiscal
year ended December 31, 1996. The Board of Directors has an Audit Committee and
a Compensation Committee. It does not have a nominating committee or a
committee performing the functions of a nominating committee.
During 1996, the Audit Committee of the Board of Directors consisted of
Robert J. Finocchio, Jr. and Gregorio Reyes, two of the Company's non-employee
directors. Mr. Finocchio is not standing for re-election as a member of the
Board at the Annual Meeting. The Audit Committee had one meeting during 1996.
The members of the Audit Committee also meet informally periodically with
management and the Company's independent public accountants to review internal
auditing procedures and the adequacy of internal controls.
During 1996, the Compensation Committee of the Board of Directors consisted
of Douglas C. Carlisle, Charles Haggerty, William O'Meara and Gregorio Reyes
(all of whom are currently outside directors) until August 22, 1996, when
Mr. Reyes resigned from the Compensation Committee. (In addition, Mr. Carlisle
is not standing for re-election as a member of the Board at the Annual Meeting.)
The Compensation Committee met three times during 1996. The Compensation
Committee, in conjunction with the Board of Directors, establishes salaries,
incentives and other forms of compensation for directors, officers and other
employees, administers the various incentive compensation and benefit plans
(including the Company's stock purchase and stock option plans) and recommends
policies relating to such plans. The Compensation Committee has exclusive
authority to award grants of options or restricted stock to executive officers
of the Company, pursuant to the 1991 Stock Plan.
During 1996, no incumbent director attended fewer than 75% of the aggregate
number of meetings of the Board of Directors and of the committees of the Board
of Directors on which he serves.
COMPENSATION OF DIRECTORS
Mr. Reyes, the Chairman of the Board of Directors, received $72,000 ($6,000
per month) during 1996 pursuant to a consulting agreement with the Company.
Directors are reimbursed for out-of-pocket travel expenses associated with their
attendance at Board meetings. Nonemployee directors of the Company will
automatically be granted options to purchase shares of the Company's Common
Stock pursuant to the terms of the Company's 1995 Directors' Stock Option Plan
(the "Directors' Plan").
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<PAGE>
Under the Directors' Plan, each nonemployee director who is elected to the Board
for the first time on or after November 9, 1995 will receive an option to
purchase 20,000 shares of Common Stock on the date on which he or she first
becomes a nonemployee director. Thereafter, on the date of each annual
stockholders meeting each nonemployee director, including directors who were
serving on the Board prior to November 9, 1995, shall be granted an additional
option to purchase 5,000 shares of Common Stock if, on such date, he or she has
served on the Board for at least six months and remains a director as of the end
of such date. Each option becomes exercisable at the rate of 25% of the total
number of shares subject to such option on the first annual anniversary of the
grant date, and 1/48th of the total number of shares at the end of each month
thereafter. Options granted under the Directors' Plan have an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant and a term of ten years. Messrs. Carlisle, Finocchio, Haggerty, O'Meara
and Reyes each received options to purchase 5,000 shares pursuant to the
Directors' Plan in 1996. Subject to their election to the Board of Directors by
the stockholders at the Annual Meeting, Messrs. Haggerty, O'Meara and Reyes will
each be automatically granted an option to purchase 5,000 shares of Common Stock
on the date of the Annual Meeting. There are no family relationships among the
directors or executive officers of the Company.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The five nominees receiving the highest number of affirmative votes of
shares of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote shall be elected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED ABOVE TO SERVE AS DIRECTORS FOR THE ENSUING YEAR AND
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
PROPOSAL NO. 2: APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1997, and recommends that stockholders
vote for ratification of this appointment. In the event the stockholders do not
ratify such appointment, the Board of Directors will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required for approval of the ratification of the appointment
of Ernst & Young LLP as the Company's independent public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1997.
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<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 18, 1997, as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the four other most
highly compensated executive officers who earned salary and bonus in excess of
$100,000 in 1996 (the "Named Executive Officers") and (iv) all directors and
executive officers as a group.
SHARES BENEFICIALLY
5% STOCKHOLDERS, DIRECTORS, NAMED EXECUTIVE OWNED(1)
OFFICERS, AND DIRECTORS AND -------------------
EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT
------------------------------------------- ------ -------
John H. Rademaker (2) 803,804 4.7%
40 Parker
Irvine, CA 92618
Louis Zimmerman (3) 946,813 5.6%
40 Parker
Irvine, CA 92618
3Com Corporation (4) 1,050,000 6.2%
5400 Bayfront Plaza
Santa Clara, CA 95052
Gregorio Reyes (5) 281,459 1.7%
Douglas C. Carlisle (6) 90,970 *
Robert J. Finocchio, Jr. (7) 1,050,000 6.2%
Nicholas Redding (8) 114,583 *
Charles A. Haggerty 50,000 *
William J. O'Meara 50,000 *
Todd Krautkremer (9) 67,928 *
Roger A. Dorf (10) 150,187 *
Dominic Genovese (11) 50,000 *
All directors and executive officers as a group 2,786,243 15.9%
(13 persons) (2)(5)(6)(7)(8)(9)(10)(11)(12)
- ---------------
* Less than 1 percent.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days after March 18,
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<PAGE>
1997 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Includes 200,000 shares held in trusts or by custodians for the benefit of
Mr. Rademaker's children. Mr. Rademaker disclaims beneficial ownership of
such shares.
(3) Includes 40,000 shares held in trust for the benefit of Mr. Zimmerman's
children. Mr. Zimmerman disclaims beneficial ownership of such shares.
(4) Robert J. Finocchio, Jr., a director of the Company, was an officer of 3Com
Corporation ("3Com") at March 18, 1996. Due to his position with 3Com,
Mr. Finocchio may be deemed to be a beneficial owner of shares held by
3Com. Mr. Finocchio disclaims beneficial ownership of such shares. On
April 14, 1997, 3Com announced that Mr. Finocchio was leaving 3Com for
personal reasons and would complete his transition out of the Company on
May 31, 1997. Mr. Finocchio is not standing for re-election as a member of
the Board at the Annual Meeting.
(5) Consists of 281,459 shares held in the name of Gregorio Reyes & Vanessa F.
Reyes, Trustees of the Gregorio Reyes and Vanessa F. Reyes Trust, u/a dtd
April 22, 1983.
(6) Includes 50,000 shares held by MV Management IV, L.P. Douglas C. Carlisle,
a director of the Company, is a general partner of MV Management IV, L.P.
Mr. Carlisle may be deemed to be a beneficial owner of such shares, but
disclaims beneficial ownership of such shares, except to the extent of his
interest in MV Management IV, L.P. Mr. Carlisle is not standing for re-
election as a member of the Board at the Annual Meeting.
(7) Consists of 1,050,000 shares held by 3Com, including 50,000 shares
transferred to 3Com by Mr. Finocchio subsequent to his purchase of such
shares from the Company. Mr. Finocchio disclaims beneficial ownership of
all such shares. On April 14, 1997, 3Com announced that Mr. Finocchio was
leaving 3Com for personal reasons and would complete his transition out of
the Company on May 31, 1997. Mr. Finocchio is not standing for re-election
as a member of the Board at the Annual Meeting.
(8) Consists of 114,583 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 18, 1997. Mr. Redding resigned
from the Company, effective March 31, 1997.
(9) Consists of 67,928 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 18, 1997.
(10) Includes 142,187 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 18, 1997.
(11) Consists of 50,000 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 18, 1997.
(12) Includes 460,010 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 18, 1997.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH ON PAGE 12 SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF COMPENSATION COMMITTEE
During 1996, the Compensation Committee of the Board consisted of
Messrs. Carlisle, Haggerty, O'Meara and Reyes, each of whom are nonemployee
directors, until August 22, 1997, when Mr. Reyes resigned from the Compensation
Committee. (In addition, Mr. Carlisle is not standing for re-election to the
Board.) The Compensation Committee, in conjunction with the Board of Directors,
establishes salaries, incentives and other forms of compensation for directors,
officers and other employees, administers the various incentive compensation and
benefit plans (including the Company's stock purchase and stock option plans)
and recommends policies relating to such plans. The Compensation Committee also
has the exclusive responsibility for granting options and stock purchase rights
under the 1991 Stock Plan to executive officers and eligible directors. The
Compensation Committee will annually evaluate the performance and determine
compensation and long-term equity incentives of the Chief Executive Officer (the
"CEO"), and will review and approve the CEO's compensation recommendation for
other executive officers of the Company.
The Company's executive compensation program consists of three main
components: (1) base salary, (2) potential for a quarterly or annual bonus
based on overall Company performance as well as individual performance and
(3) stock and/or option grants which provide the executive officers with the
opportunity to build a meaningful stake in the Company, and which stock and/or
options are granted with the objective of aligning executive officers' long-
range interests with those of the stockholders and encouraging the achievement
of superior results over time. The second and third elements of the
compensation program constitute the "at risk" components.
The Company believes that, in order to attract and retain talented
individuals, it is important to set the base salaries of its executives at
levels that are competitive with those of companies in similar industries, of
comparable size and in the Company's same geographic area. As an aid in setting
executive compensation for 1997, the Company analyzed the American Electronics
Association 1996 Executive Compensation Survey with particular emphasis on
companies in the telecommunications industry with similar sales levels. The
Company views these companies as an appropriate peer index for executive
compensation because it expects to continue to draw its executives from this
industry and because these companies represent the Company's principal
competitors for qualified executive-level employees. Due to the substantial
decline in fair market value of the Company's Common Stock over the last year,
Mr. Dorf, the President and Chief Operating Officer, has requested that his 1997
annual base salary be reduced by ten percent (10%) from his 1996 base salary and
that his base salary remain at such level until the Company achieves
profitability. The Compensation Committee has implemented Mr. Dorf's request.
ANNUAL OR QUARTERLY CASH BONUSES
The Company historically has not had a formal cash bonus program for
executive officers, although cash bonuses have been paid from time to time in
the past to selected executive officers in
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recognition of superior individual performance. For fiscal 1996, Messrs.
Genovese and Berlin and Ms. Ratta received bonuses based upon the Company's
achievement of certain sales and operational milestones during the year. None
of the other executive officers of the Company earned bonuses during fiscal
1996. The Company currently anticipates that Mr. Krautkremer and one other
marketing officer may earn bonuses in 1997 equal to a certain percent of their
respective salaries if they meet certain revenue objectives.
Because stock options and stock grants provide an incentive for executives
to maximize stockholder value over time, stock options and stock grants are a
key means of aligning the interests of management and stockholders. Value
accrues to executives only as the value of the Company's stock appreciates. The
Company's standard vesting schedule for all employee options (including options
granted to executive officers) is as follows: 25% of the total number of shares
subject to the option vest one year after the date of grant and 1/48th of the
total number of shares subject to the option vest at the end of each month
thereafter. These vesting schedules are intended to encourage a long-term
commitment to the Company by its executive officers. The number of shares owned
by, or subject to options held by, each executive officer is periodically
reviewed and additional awards are considered based upon past performance of the
executive and the relative holdings of other executives in the Company and at
other companies in the telecommunications industry. In 1996, the Company
granted incentive stock options under the 1991 Stock Plan to three new executive
officers, Messrs. Dorf (525,000 shares), Genovese (200,000 shares) and Berlin
(130,000 shares), and to two other executive officers, Mr. Krautkremer (50,000
shares) and Ms. Ratta (40,000 shares). These options, along with other employee
and consultant options, were repriced in April 1997. See discussion below under
"Option Repricing."
The Compensation Committee will meet during the year and will consult as
needed with the Company's CEO to establish the compensation program for the next
year and to evaluate the effectiveness of the Company's compensation program in
meeting its objectives. Additionally, the Compensation Committee may hold
special meetings to approve the compensation of a newly hired executive or an
executive whose scope of responsibility has significantly changed. Compensation
for executive officers will be based on compensation surveys and assessments as
to the demonstrated and sustained performance of the individual executives.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee evaluates the performance of the Company's Chief
Executive Officer, sets his base compensation and determines bonuses and awards
stock or option grants, if any.
John H. Rademaker has served as CEO of the Company since its inception in
1981 and, as a founder of the Company, owns a significant number of shares of
Common Stock of the Company (representing approximately 4.7% of the outstanding
shares of Common Stock as of March 18, 1997), all of which shares are currently
vested. The Board of Directors has historically considered Mr. Rademaker's
significant ownership stake in the Company to be a very important element of his
compensation, with the value of such equity accruing to Mr. Rademaker only as
the value of the Company's stock appreciates. The Board of Directors has
periodically reviewed Mr. Rademaker's cash compensation. Mr. Rademaker's base
salary was most recently revised in 1994, when it was increased to $175,000 per
year. Mr. Rademaker has never received a cash bonus. In addition, given the
number of shares of Common Stock owned by Mr. Rademaker, he has not received
additional stock or option grants subsequent to the founding of the Company.
-9-
<PAGE>
The Compensation Committee determines the CEO's base salary after
evaluating a number of factors, including comparative salaries of chief
executive officers of companies of comparable size in the telecommunications
industry, the Chief Executive Officer's individual performance and the Company's
performance.
OPTION REPRICING
In April 1997, the Board of Directors (including the Compensation
Committee) determined that it was in the best interest of the Company to offer
to reprice the then-outstanding stock options of the Company with exercise
prices in excess of the then-current fair market value of the Company's Common
Stock. The objectives of the 1991 Stock Plan and the Company's other stock
option plans are to promote the interests of the Company by providing employees
and consultants an incentive to acquire a proprietary interest in the Company
and to continue to render services to the Company. Given the substantial decline
in fair market value of the Company's Common Stock in the approximately twelve
months prior to April 1997, and the fact that many of the Company's employees
had commenced work at the Company during that period, a large number of the
Company's employees held stock option grants, before the repricing, with
exercise prices substantially in excess of the fair market value of the
Company's Common Stock in April 1997. It was the view of the Committee that
stock options with exercise prices substantially above the current market price
of the Company's Common Stock were viewed negatively by most optionees of the
Company, and provided little, if any, equity incentive to the optionees. The
Committee thus concluded that such option grants seriously undermined the
specific objectives of the 1991 Stock Plan and the Company's other stock option
plans and should be repriced.
In this context, the Committee decided that effective April 14, 1997 (the
"Grant Date") all optionees, except for Roger A. Dorf and the non-employee
directors, holding stock options with exercise prices in excess of the fair
market value of the Company's Common Stock should receive one-for-one repricing
of their then-existing unexercised stock options with a new exercise price set
at $3.9375 per share, the closing sales price and fair market value of the
Company's Common Stock on the Grant Date. The new options were subject to the
same vesting rate as the canceled options, but the optionees who elected to
participate in the repricing agreed to suspend vesting of these options for a
period of six months after the Grant Date. Included in the repricing actions
were certain of the options held by four of the Company's executive officers:
Dominic Genovese, Vice President of Sales, Otto Berlin, Vice President of
International Sales, Todd Krautkremer, Vice President of Marketing, and Karen
Ratta, Vice President of Manufacturing. In addition, on April 18, 1997, the
Board resolved to reprice certain options to purchase shares of Common Stock
held by Roger A. Dorf, the Company's President and Chief Operating Officer. The
Board determined not to reprice Mr. Dorf's options on the same one-to-one basis
as other option holders. Rather, in exchange for the cancellation of his
original option to purchase 525,000 shares of Common Stock, Mr. Dorf received a
repriced option to purchase 80% of such shares (420,000 shares) of Common Stock.
In addition, the Board determined that the exercise price for Mr. Dorf's
repriced option would be the greater of: (i) the closing sale price of the
Company's Common Stock on the effective grant date of April 22, 1997 ($2.9375),
and (ii) the closing sale price of the Company's Common Stock on April 14, 1997,
which other option holders had previously received in the repricing ($3.9375).
Thus, Mr. Dorf's new option has a per share exercise price of $3.9375, which is
higher than the fair market value of the Company's Common Stock on the date of
his grant. The new option includes vested shares as of the grant date equal to
80% of the number of shares that were then vested under Mr. Dorf's cancelled
option. In addition, Mr. Dorf agreed to suspend vesting on this new option for
a period of six months after April 22, 1997, at which time vesting will resume
at the rate of 1/48th of the total number of 420,000 shares per month. In
determining to reprice options, the Committee also considered the fairness of
such a determination in relation to other stockholders. For this
-10-
<PAGE>
reason, the outside directors' options were not repriced. It is the opinion of
the Board of Directors that this program helped build optionee morale and
provided new incentives for the Company's employees and management and that the
continued retention and motivation of the Company's employees and management is
in the best interests of the Company's stockholders.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. However,
compensation which qualifies as "performance-based" is excluded from the
$1 million limit if, among other requirements, the compensation is payable upon
attainment of pre-established, objective performance goals under a plan approved
by the stockholders.
The compensation to be paid to the Company's executive officers for the
1996 fiscal year did not exceed the $1 million limit per officer, nor is it
expected that the compensation to be paid to the company's executive officers
for fiscal 1997 will exceed that limit. The Company's 1991 Stock Plan is
structured so that any compensation income realized by an executive officer as a
result of the exercise of an outstanding option or the sale of option shares
under the 1991 Stock Plan will qualify as "performance-based" compensation which
will not be subject to the $1 million limitation. Because it is very unlikely
that the cash compensation payable to any of the Company's executive officers in
the foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Compensation Committee will continue to monitor the compensation
levels potentially payable under the Company's cash compensation programs, but
intends to retain the flexibility necessary to provide total cash compensation
in line with competitive practice, the Company's compensation philosophy and the
Company's best interests.
COMPENSATION COMMITTEE
Douglas C. Carlisle
Charles A. Haggerty
William J. O'Meara
-11-
<PAGE>
PERFORMANCE GRAPH
The following graph summarizes cumulative total stockholder return
(assuming reinvestment of dividends) for the period beginning on the date the
Company's stock was first registered under Section 12 of the Securities Exchange
Act of 1934 (November 9, 1995) and ending at December 31, 1996.
The graph assumes that $100 was invested on November 9, 1995 in: (i) the
Common Stock of Sync Research, Inc., (ii) the Nasdaq Market Index and (iii) the
MG Communications Index (provided by Media General Financial Services, Inc.).
The stock price performance on the following graph is not necessarily indicative
of future stock price performance.
[GRAPHIC CHART]
The following data points of the performance graph are supplied in
accordance with Rule 304(d) of Regulation S-T.
<TABLE>
<CAPTION>
11/9/95 12/31/95 12/31/96
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sync Research, Inc. Common Stock $100.00 $102.84 $31.25
Nasdaq Market Index $100.00 $101.13 $125.67
MG Communications Index $100.00 $105.73 $106.91
</TABLE>
-12-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation earned or received by the
Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company whose total annual salary and bonus earned
during 1996 exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ -----------------------------------------
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION
--------------------------- ---- --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
John H. Rademaker 1996 $175,000
Chief Executive Officer 1995 $175,000 - - $829 (1)
1994 $173,439
Roger A. Dorf 1996 $176,250 - 525,000(3) $31,970 (1)(2)
President and Chief Operating
Officer
Todd J. Krautkremer 1996 $131,250
Vice President of Marketing 1995 $130,859 - 50,000(4) $66,015 (1)(2)
Nicholas Redding(5) 1996 $150,000 - - $295 (1)
Vice President of Engineering 1995 $106,250
Dominic Genovese 1996 $100,000 $34,044(6) 200,000(4) $3,220 (1)(2)
Vice President of Sales
</TABLE>
- ---------------
(1) Includes life insurance premiums paid pursuant to a program generally
available to all employees in the amount of $829 for Mr. Rademaker, $1,532
for Mr. Dorf, $216 for Mr. Krautkremer, $295 for Mr. Redding and $843 for
Mr. Genovese.
(2) Includes temporary living allowances and other relocation expenses in the
amount of $30,438 for Mr. Dorf, $65,799 for Mr. Krautkremer and $2,377 for
Mr. Genovese.
(3) On March 11, 1996, Mr. Dorf was granted an option to purchase 525,000
shares of Common Stock at $18.00 per share. In an option repricing
approved by the Board on April 18, 1997 and effected on April 22, 1997,
this option was canceled and exchanged for an option to purchase 420,000
shares at $3.9375 per share, which was the higher of the closing sale price
of the Company's Common Stock on Mr. Dorf's grant date of April 22, 1997
and April 14, 1997 (the effective date of repricing for other optionees).
As consideration for the exchange, Mr. Dorf agreed to suspend the vesting
on this new option during the six month period after April 22, 1997.
(4) On April 10, 1996, Mr. Krautkremer was granted options to purchase 50,000
shares of Common Stock at $22.25 per share. On May 28, 1996, Mr. Genovese
was granted options to purchase 200,000 shares of Common Stock at $18.25
per share. In an option repricing, which was effective April 14, 1997,
both of these options were canceled and exchanged for new options with an
exercise price of $3.9375 per share, the closing sale price of the
Company's Common Stock on April 14, 1997. As consideration for the
exchange, Messrs. Krautkremer and Genovese
-13-
<PAGE>
agreed to suspend the vesting on these new options during the six month
period after April 14, 1997.
(5) Mr. Redding resigned from the Company, effective March 31, 1997.
(6) Consists of $21,544 in sales commissions and $12,500 in bonus.
The following tables set forth information for the Named Executive Officers
with respect to grants of options to purchase Common Stock of the Company made
in the fiscal year ended December 31, 1996, and the value of all options held by
such Named Executive Officers on December 31, 1996.
OPTION/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (3)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED(1) FISCAL YEAR (2) ($/SH) DATE 5%($) 10%($)
---- -------------- ------------------- ----------- ------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
John H. Rademaker - - - - - -
Roger A. Dorf 525,000(4) 28.1% $ 18.00(4) 3/11/06 $5,943,054 $15,060,866
Todd J. Krautkremer 50,000 2.7% $ 22.25(5) 10/10/06 $ 699,645 $ 1,773,038
Nicholas Redding(6) - - - - - -
Dominic Genovese 200,000 10.7% $ 18.25(5) 11/28/06 $2,295,465 $ 5,817,160
</TABLE>
- ---------------
(1) All options were granted pursuant to the Company's 1991 Stock Plan and
become exercisable at the rate of one fourth of the shares subject to the
option on the first annual anniversary of the vesting commencement date and
1/48th at the end of each month thereafter. No stock purchase rights were
granted during 1996.
(2) Options to purchase a total of 1,869,273 shares of Common Stock were
granted to employees in 1996, including options to purchase 504,000 shares
of Common Stock pursuant to the Company's 1996 Non-Executive Option Plan
(the "1996 Stock Plan"), 1,291,300 shares under the Company's 1991 Stock
Plan and 79,973 shares under the Company's Assumed TyLink 1994 Stock Plan
(of which 69,173 shares had been granted during 1996 prior to the TyLink
acquisition). The 1996 Stock Plan was adopted by the Board of Directors on
August 27, 1996. As of April 16, 1997, options to purchase a total of
1,177,072 shares had been authorized for issuance under the 1996 Plan,
1,079,340 of which were issued and outstanding at a weighted average
exercise price of $ 3.9375 per share (after giving effect to the Company's
option repricing program, which was effected April 14, 1997). All grants
under the 1996 Plan have a per share exercise price equal to the fair
market value of the Company's common stock on the date of grant. None of
the executive officers or directors of the Company is eligible to
participate in the 1996 Plan.
(3) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall market
conditions. There is no assurance that the amounts reflected will be
realized.
-14-
<PAGE>
(4) On April 18, 1997, the Board approved the cancellation and repricing of Mr.
Dorf's option to purchase 525,000 shares, effective April 22, 1997. Mr.
Dorf received a new option to purchase 420,000 shares of Common Stock (80%
of the shares subject to his original option) with an exercise price equal
to $3.9375, the higher of: (i) the closing sale price of the Company's
Common Stock on April 14, 1997 ($3.9375), the date on which other
employees' options were repriced, and (ii) the closing sale price of the
Company's Common Stock on his grant date, April 22, 1997 ($2.9375). As
consideration for the exchange, Mr. Dorf agreed to suspend the vesting on
his new option for the six month period after April 22, 1997, at which time
vesting will resume at the rate of 1/48th of the total number of 420,000
shares per month.
(5) On April 10, 1996, Mr. Krautkremer was granted options to purchase 50,000
shares of Common Stock at $22.25 per share. On May 28, 1996, Mr. Genovese
was granted options to purchase 200,000 shares of Common Stock at $18.25
per share. Both of these grants were canceled and exchanged for new
options with an exercise price of $3.9375, the closing sale price of the
Company's Common Stock on April 14, 1997, the effective grant date of the
Company's option repricing program. As consideration for the exchange,
Messrs. Krautkremer and Genovese agreed to suspend the vesting of these new
options during the six month period after April 14, 1997.
(6) Mr. Redding resigned from the Company, effective March 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996
AND OPTION/SAR VALUES AT END OF FISCAL YEAR 1996
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT 12/31/96(1): IN-THE-MONEY OPTIONS
ON VALUE EXERCISABLE/ AT 12/31/96(2)($):
NAME EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
NAME
John H. Rademaker - - - -
Roger A. Dorf - - -/525,000 -/$0
Todd J. Krautkremer 3,500 $60,235 46,311/90,189 $628,250/$544,561
Nicholas Redding(3) - - 91,666/128,334 $1,242,074/$1,738,926
Dominic Genovese - - -/200,000 -/$0
</TABLE>
- ---------------
(1) No stock appreciation rights (SARs) were outstanding during 1996.
(2) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 31, 1996 of $13.75. See "Executive
Compensation and Related Information -- Compensation of Executive Officers
-- Option/SAR Grants in Fiscal Year 1996," footnotes 4 and 5, for
discussion of option repricing program which was effected in April 1997.
(3) Mr. Redding resigned from the Company, effective March 31, 1997.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
On September 30, 1996, the Company entered into Change of Control Severance
Agreements with each of its officers. Effective April 23, 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 remaining unvested options shall continue to vest
at the
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<PAGE>
same rate as the officer's original vesting schedule, so that the same number of
options continue to vest per month as did prior to the change in control. In
addition, the amendments to the agreements provide that the Company will enter
into consulting arrangements with each such officer if he or she is involuntary
terminated without cause or has his or her duties significantly reduced or is
otherwise constructively terminated within twelve (12) months after a change of
control of the Company. These consulting arrangements will last for up to
twelve months (eighteen months in the case of Roger A. Dorf and John H.
Rademaker) after such officer's termination. The agreements will provide that
the officer will continue to receive compensation at the rate at which he or she
was previously compensated during the twelve months prior to such termination.
In addition, the terminated officer's unvested options will continue to vest
during the consultancy period.
The 1991 Plan provides that in the event of a merger or sale of all or
substantially all of the assets of the Company, the Administrator of the 1991
Plan will either accelerate the vesting of options and stock purchase rights
held by all employees, including executive officers, or shall accomplish the
assumption or substitution of such options and stock purchase rights by the
successor corporation.
REPORT ON REPRICING OF OPTIONS/SARS
The following table sets forth all repricings of options held by the
Company's executive officers. See "Report of Compensation Committee -- Option
Repricing."
<TABLE>
<CAPTION>
10-YEAR OPTION/SAR REPRICING
-----------------------------------------------------------------------------------------------
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK AT EXERCISE PRICE TERM REMAINING
OPTIONS/SARS TIME OF AT TIME OF AT DATE
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE OF REPRICING
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) OR AMENDMENT
---- ---- ------------ ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Dorf 4/22/97 420,000 $2.9375 $18.00 $3.9375 9 years
President and Chief
Operating Officer
Todd J. Krautkremer 4/14/97 50,000 $3.9375 $22.25 $3.9375 9 years
Vice President of
Marketing
Dominic Genovese 4/14/97 200,000 $3.9375 $18.25 $3.9375 9.1 years
Vice President of
Sales
Karen Ratta 4/14/97 40,000 $3.9375 $22.25 $3.9375 9 years
Vice President of
Manufacturing
Otto Berlin 4/14/97 130,000 $3.9375 $18.25 $3.9375 9.1 years
Vice President of
International
Sales
</TABLE>
-16-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sales to 3Com, which owns more than 5% of the outstanding voting securities
of the Company, accounted for 19.2% of net revenues of the Company in 1996.
Robert J. Finocchio, Jr., a director of the Company, served as an officer of
3Com during 1996. On April 14, 1997, 3Com announced Mr. Finocchio's resignation
from 3Com, effective May 31, 1997. Mr. Finocchio is not standing for reelection
as a member of the Board at the Annual Meeting.
On March 30, 1993, the Company loaned to John H. Rademaker, the President
and Chief Executive Officer, $240,000 pursuant to a promissory note bearing
interest at an annual rate of 5.88% and secured by 945,000 shares of the
Company's Common Stock. On May 28, 1993, the Company loaned Mr. Rademaker
$60,000 in connection with the purchase of a house, secured by a deed of trust
on such house, and bearing interest at an annual rate of 5.46%. The largest
aggregate amount outstanding under both of these loans during 1996 was $315,000,
and both of these loans were repaid in full during 1996.
In January 1995, the Company entered into a Consulting Agreement with
Gregorio Reyes, the Chairman of the Board of Directors. This agreement provides
for a monthly consulting fee of $6,000 per month to be paid to Mr. Reyes. For
the year ended December 31, 1996, the Company paid Mr. Reyes $72,000 under this
contract. This agreement may be terminated by either party upon thirty days'
prior written notice.
Pursuant to offer letters to each of Ronald Scioscia, the Company's Chief
Financial Officer and Vice President of Finance and Administration, and Roger A.
Dorf, the Company's President and Chief Operating Officer, the Company agreed to
continue paying each of their salaries for one year and to accelerate the
vesting of options to purchase shares of Common Stock initially granted to each
of them by twelve months in the event either of them is terminated other than
for "cause" within one year after a Change in Control (as defined therein) of
the Company.
In September 1996, the Company entered into change-of-control severance
agreements with each of its officers. On April 23, 1997, the Board approved
certain amendments to these agreements. See "Employment Contracts, Termination
of Employment and Change-in-Control Arrangements."
The Company has granted shares of restricted stock and options to purchase
stock to certain executive officers and outside directors. See "-- Compensation
of Executive Officers," and "-- Compensation of Directors."
The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify its officers and directors against certain liabilities that
may arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
In April 1997, the Company repriced certain options to purchase Common
Stock granted to employees, including executive officers. See "Executive
Compensation and Related Information -- Report of Compensation Committee" and "-
- - Report on Repricing of Options/SARs."
-17-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, directors Reyes, Carlisle, Haggerty and O'Meara comprised the
Compensation Committee of the Board of Directors until August 22, 1996, when
Mr. Reyes resigned from the Compensation Committee. (Mr. Carlisle is not
standing for re-election as a member of the Board of Directors at the Annual
Meeting.) None of these persons has ever been an officer or employee of the
Company or any of its subsidiaries. There were no compensation committee
interlocks or other relationships during 1996 requiring disclosure under Item
402(j) of Regulation S-K of the Securities and Exchange Commission.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended December 31, 1996, all Reporting Persons complied with all applicable
filing requirements, except as follows: Roger Dorf, the Company's President and
Chief Operating Officer and a director, filed one Form 4 late with respect to
his open market purchase of 5,000 shares of the Company's Common Stock on
July 25, 1996, and John Rademaker, the Company's Chief Executive Officer, filed
one Form 5 late with respect to the exercise by certain third parties of options
to purchase the Company's Common Stock which Mr. Rademaker had previously
granted to such third parties. Options to purchase 10,000 shares of the
Company's Common Stock were exercised by such third parties on July 15, 1996,
and options to purchase 6,946 shares of Common Stock were exercised by such
third parties on September 27, 1996
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
-18-
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the
persons named in the enclosed form of proxy will vote the shares they represent
in such manner as the Board may recommend.
By Order of the Board of Directors
/s/ Ronald J. Scioscia
------------------------------
Ronald J. Scioscia
SECRETARY
Dated: April 30, 1997
-19-
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SYNC RESEARCH, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Sync Research, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated April 30, 1997, and hereby appoints John H.
Rademaker and Ronald J. Scioscia or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual
Meeting of Stockholders of Sync Research, Inc. to be held on June 13, 1997
at 2:00 p.m. local time, at the Marriott Suites, 500 Bayview Circle, Newport
Beach, California, 92660, and at any adjournment or postponement thereof, and
to vote all shares of Common Stock which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth on the
reverse side and, in their discretion, upon such other matter or matters that
may properly come before the meeting and any adjournment(s) thereof.
SEE
REVERSE
SIDE
<PAGE>
<TABLE>
<CAPTION>
<S><C>
/ X / PLEASE MARK YOUR / /
VOTES AS IN THIS
EXAMPLE
FOR ALL WITHHOLD
NOMINEES AUTHORITY TO
LISTED TO THE VOTE FOR ALL
RIGHT NOMINEES
(EXCEPT AS (EXCEPT TO THE
INDICATED) RIGHT) FOR AGAINST ABSTAIN
1. Election / / / / NOMINEES: Gregorio Reyes, John 2. Proposal to ratify the / / / / / /
of H. Rademaker, Roger appointment of Ernst &
Directors A. Dorf, Charles A. Young LLP as the
Haggerty, William J. independent public
O'Meara accountants of the
Company for the year
ending December 31, 1997
/ /
------------------------------
For all nominees except as
noted above.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR
THE ELECTION OF DIRECTORS; (2) FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING.
SIGNATURE(S) DATE
--------------------------------------------- -------------- Mark here for
address change / /
NOTE: This Proxy should be marked, dated, signed by the stockholder(s) exactly and note at left.
as his or her name appears hereon, and returned in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
</TABLE>
-2-
