<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section240.14a-11(c) or
Section240.14a-12
SYNC RESEARCH, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SYNC RESEARCH, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 12, 1998
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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 12, 1998, 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 approve an amendment to the Company's 1991 Stock Plan to increase
the number of shares reserved for issuance thereunder by an additional
750,000 shares.
3. To approve a series of amendments to the Company's 1995 Directors'
Stock Option Plan, including an increase to the number of shares reserved
for issuance thereunder by an additional 100,000 shares.
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998;
and
5. 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 17, 1998, 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
[SIG]
William K. Guerry
Secretary
Irvine, California
April 30, 1998
<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 12, 1998 (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, 1997, INCLUDING FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES (BUT NOT EXHIBITS) WITHOUT CHARGE TO EACH
STOCKHOLDER UPON WRITTEN REQUEST TO WILLIAM K. GUERRY, 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. GUERRY AND PAYMENT OF
THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS.
SOLICITATION
These proxy solicitation materials were mailed on or before April 30, 1998
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: William K. Guerry) 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.
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 the amendment to the Company's 1991 Stock Plan;
(iii) for the amendments to the Company's 1995 Directors' Stock Option Plan;
(iv) for ratification of the appointment of the designated independent public
accountants; and (v) 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
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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 17, 1998, are
entitled to notice of and to vote at the meeting. At the record date, April 17,
1998, 17,367,791 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 1999 Annual Meeting of Stockholders must
be received by the Company no later than Thursday, December 31, 1998 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 four
members. William O'Meara has resigned and is not standing for reelection to the
Board at the annual meeting. The Board of Directors recently elected Mr. William
Schroeder to the Board to replace Mr. O'Meara and Mr. Schroeder is standing for
election at the annual 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 each person elected as a
director will continue until the next Annual Meeting of Stockholders or until
his successor has been elected and qualified.
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The names of the nominees, their ages as of March 13, 1998, 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 ....................... 57 Office of the Chief Executive Officer 1995
and Chairman of the Board of
Directors
John H. Rademaker .................... 50 Office of the Chief Executive Officer 1981
and Vice Chairman of the Board of
Directors
Charles A. Haggerty .................. 56 Chairman, President and Chief 1995
Executive Officer of Western Digital
Corp.
William J. Schroeder ................. 53 President and Chief Executive Officer 1998
of Diamond Multimedia Systems, Inc.
</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 in the Office of the Chief Executive Officer of the
Company since October 1997 and 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.,
Stormedia, Inc. and several privately-held companies. Mr. Reyes received a B.S.
in Mechanical Engineering from Rensselaer Polytechnic Institute and a M.S. in
Management from the Stevens Institute of Technology.
MR. RADEMAKER, a founder of the Company, has served in the Office of the
Chief Executive Officer of the Company since October 1997, as the Vice Chairman
of the Company's Board of Directors since May 1997 and as a director since the
Company's inception in 1981. In addition, Mr. Rademaker served as President from
inception to March 1996 and as Chief Executive Officer from inception to May
1997. Mr. Rademaker received his B.S. in Sociology from the University of
California, Berkeley.
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
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. SCHROEDER has served as a member of the Company's Board of Directors
since April 1998. Mr. Schroeder has served as President and Chief Executive
Officer and Director of Diamond Multimedia Systems, Inc. since May 1994. Mr.
Schroeder was employed by Conner Peripherals, Inc. ("Conner") from 1986 to 1994,
initially as President and, from 1989, as Vice Chairman of the Board of
Directors. He was also President of Conner's New Products Group from 1989 to
1990, President of Archive Corporation (a Conner subsidiary) from January 1993
to November 1993, and CEO of Arcada Software, Inc. (a Conner subsidiary) from
November 1993 to May 1994. Mr. Schroeder is also a director of Xircom, Inc. and
CNF
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Transportation, Inc. He received his M.B.A. from Harvard Business School and
M.S.E.E. and B.E.E. from Marquette University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of eight meetings during the fiscal year
ended December 31, 1997. 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.
From January through May 1997, the Audit Committee of the Board of Directors
consisted of Robert J. Finocchio, Jr. and Gregorio Reyes. As of June 1997, the
Audit Committee consisted of Charles Haggerty, William O'Meara and Gregorio
Reyes. In October 1997, Mr. Reyes resigned from the Audit Committee. The Audit
Committee consisted of non-employee directors of the Company. The Audit
Committee had two meetings during 1997, both of which included meetings with the
Company's independent auditors to review internal accounting policies and
adequacy of internal controls. The members of the Audit Committee also met
informally periodically with the Company's management during 1997.
During 1997, the Compensation Committee of the Board of Directors consisted
of Douglas C. Carlisle (through June 1997), Charles Haggerty, and William
O'Meara (all of whom were or are currently non-employee directors). Mr. Carlisle
did not stand for re-election as a member of the Board at the Company's 1997
Annual Meeting. The Compensation Committee met three times during 1997. 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 and 1996 Stock Plans.
During 1997, 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, earned $72,000 ($6,000
per month) during 1997 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"). Under the Directors' Plan, each non-employee 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. After the initial grant, on the
date of each annual stockholders meeting each nonemployee director, including
directors who were serving on the Board prior to November 9, 1995, will 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. Pursuant to Proposal No. 3, the
stockholders are being asked to approve an amendments to the Directors' Plan to
increase the initial grant to non-employee directors from 20,000 to 40,000
shares and increase each subsequent grant from 5,000 to 10,000 shares. 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. Haggerty, O'Meara and Reyes each received options to
purchase 5,000 shares pursuant to the Directors' Plan in 1997. Subject to his
election to the Board of Directors by the stockholders at the Annual Meeting and
subject to stockholder approval of Proposal
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No. 3, Mr. Haggerty will be automatically granted an option to purchase 10,000
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 four 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 AMENDMENT TO THE 1991 STOCK PLAN
At the Annual Meeting, stockholders are being asked to approve an amendment
to the 1991 Stock Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 750,000 shares to an aggregate of 5,058,985 shares.
GENERAL
The Company's 1991 Stock Plan was adopted by the Board of Directors in July
1991 and was approved by the Company's stockholders in November 1991. On January
30, 1998 the Board of Directors approved an amendment to increase the number of
shares reserved for issuance under the 1991 Stock Plan by 750,000 shares to a
total of 5,058,985 shares, for which stockholder approval is being requested.
The 1991 Stock Plan, as amended, provides for the granting to employees
(including officers and employee directors) of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and for the granting of nonstatutory stock options to employees and
consultants including non-employee directors. Stock purchase rights may also be
granted under the 1991 Stock Plan. See "United States Federal Income Tax
Information" below for information concerning the tax treatment of incentive
stock options, nonstatutory stock options and stock purchase rights.
As of March 17, 1998, 1,791,228 shares had been issued upon exercise of
options granted under the 1991 Stock Plan, options to purchase 2,208,023 shares
were outstanding, and 309,734 shares remained available for future grants. Of
the options outstanding, options to purchase 823,567 shares were held by current
executive officers of the Company, no options were held by current directors who
are not executive officers and options to purchase 1,384,456 shares were held by
employees of the Company who are not executive officers. As of March 17, 1998,
the fair market value of all shares of Common Stock subject to outstanding
options under the 1991 Stock Plan was $5,652,539 based on the closing sale price
of $2.56 for the Company's Common Stock as reported on the Nasdaq National
Market System on such date.
The 1991 Stock Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
The Board of Directors believes that in order to provide additional
compensation and incentives to eligible individuals whose present and potential
contributions are important to the continued success of the Company, to afford
such persons an opportunity to acquire a proprietary interest in the Company and
to enable the Company to continue to attract and retain the best available
talent for the successful conduct of its business in a competitive marketplace
it is necessary to amend the 1991 Stock Plan to reserve an additional 750,000
shares of Common Stock for issuance thereunder. The Company does not believe
that the shares currently available for grant under the 1991 Stock Plan are
sufficient to attract new employees and retain existing employees. The increase
sought at the Annual Meeting is expected to provide sufficient
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additional stock to continue the Company's policy of using equity incentives to
attract and retain the services of key individuals essential to the Company's
long-term success.
PURPOSE
The purposes of the 1991 Stock Plan are to attract and retain the best
available personnel for the Company, and to provide additional incentive to
employees and consultants and to promote the success of the Company's business.
ADMINISTRATION
If permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable securities
laws and the Code (collectively, the "Applicable Laws"), grants under the 1991
Stock Plan may (but need not) be made by different administrative bodies with
respect to employees or consultants who are also officers or directors and
employees who are neither directors nor officers.
With respect to grants of options to employees or consultants who are also
officers or directors of the Company, grants under the 1991 Stock Plan shall be
made by (A) the Board of Directors, if the Board of Directors may make grants
under the 1991 Stock Plan in compliance with Rule 16b-3 of the Exchange Act and
Section 162(m) of the Code as the latter applies so as to qualify grants of
options to "covered employees" as performance-based compensation, or (B) a
committee designated by the Board of Directors to make grants under the 1991
Stock Plan, which committee shall be constituted in such a manner as to permit
grants under the 1991 Stock Plan to comply with Rule 16b-3, to qualify grants of
options to "covered employees" as performance-based compensation under Section
162(m) of the Code and otherwise so as to satisfy the Applicable Laws.
With respect to grants of options to employees or consultants who are
neither directors nor officers of the Company, the 1991 Stock Plan will be
administered by (A) the Board of Directors or (B) a committee designated by the
Board of Directors, which committee will be constituted in such a manner so as
to satisfy the Applicable Laws. The Board of Directors or the committee
designated by the Board of Directors to administer the 1991 Stock Plan is
referred to in this Proxy Statement as the " Administrator." The Administrator
receives no additional compensation for its services in connection with the
administration of the 1991 Stock Plan.
ELIGIBILITY
The 1991 Stock Plan provides that nonstatutory stock options and stock
purchase rights may be granted to employees (including officers and directors
who are also employees) and consultants of the Company. Incentive stock options
may be granted only to employees. The Administrator selects the participants and
determines the number of shares and the exercise price to be associated with
each option or purchase right (except in the case of a participant-employee who
is also a director, in which case the Compensation Committee alone determines
the number of shares and the exercise price to be associated with each option).
In making such determination, there are taken into account the duties and
responsibilities of the participant, the value of the participant's services,
the participant's present and potential contribution to the success of the
Company, and other relevant factors. All employees of the Company are eligible
to be selected by the Administrator to receive options or stock purchase rights.
The 1991 Stock Plan provides that the maximum number of shares of Common
Stock which may be granted under options or stock purchase rights to any one
employee during any fiscal year is 525,000, subject to adjustment as provided in
the 1991 Stock Plan. There is also a limit on the aggregate market value of
shares subject to all incentive stock options that may be granted to an optionee
during any calendar year.
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TERMS OF OPTIONS
The terms of options granted under the 1991 Stock Plan are determined by the
Administrator. Each option is evidenced by a stock option agreement between the
Company and the optionee and is subject to the following additional terms and
conditions:
EXERCISE OF THE OPTION. The optionee must earn the right to exercise the
option by continuing to work for the Company. The Administrator determines when
options are exercisable. As a general rule, options granted under the 1991 Stock
Plan become exercisable to the extent of 25% of the shares subject to the option
on the first anniversary of the grant date and 1/48th of the shares subject to
the option at the end of each month thereafter, provided the optionee continues
to work for the Company. An option is exercised by giving written notice of
exercise to the Company specifying the number of full shares of Common Stock to
be purchased, and by tendering payment of the purchase price to the Company. The
method of payment of the exercise price of the shares purchased upon exercise of
an option is determined by the Administrator.
EXERCISE PRICE. The exercise price of options granted under the 1991 Stock
Plan is determined by the Administrator, subject to the following limitations:
(i) the exercise price of incentive stock options granted to an employee shall
be at least 100% of the fair market value on the date of grant, unless such
employee owns more than 10% of the voting power of all classes of stock of the
Company or any parent or subsidiary (a "10% stockholder"), in which case the
exercise price shall be at least 110% of the fair market value on the date of
the grant, and (ii) the exercise price of nonstatutory stock options granted to
a person shall be at least 85% of the fair market value of the shares on the
date of the grant unless (a) such person is the Chief Executive Officer or one
of the four other most highly compensated executive officers who earned salary
and bonus in excess of $100,000 in 1997 (a "Named Executive Officer), in which
case the exercise price of such options shall be at least 100% of the fair
market on the date of grant or (b) such person is a 10% stockholder in which
case the exercise price shall be at least 110% of the fair market value on the
date of grant. Fair market value of the Common Stock is the closing sales price
as reported by Nasdaq National Market on the date of grant.
The consideration to be paid for shares upon exercise of options granted
under the 1991 Stock Plan, including the method of payment, is determined by the
Administrator and in the case of incentive stock options such determination must
be made at the date of grant. Such consideration may consist of cash, check,
promissory note, shares of the Company's Common Stock having a fair market value
on the date of exercise equal to the exercise price (subject to certain
limitations) or assignment of the proceeds of a sale of some or all of the
shares being acquired upon exercise of the option. The Administrator may also
authorize payments by any combination of the above methods.
TERMINATION OF EMPLOYMENT. If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or
total and permanent disability, options under the 1991 Stock Plan may be
exercised not later than thirty days (or such other period of time not exceeding
three months in the case of an incentive stock option as is determined by the
Administrator) after the date of such termination to the extent the option was
exercisable on the date of such termination. In no event may an option be
exercised by any person after the expiration of its term.
DISABILITY. If an optionee's employment or consulting relationship with the
Company is terminated due to his or her total and permanent disability, options
may be exercised within twelve months after the date of termination, but only to
the extent the option was exercisable on the date of termination, and PROVIDED
FURTHER that in no event may the option be exercised after its termination date.
DEATH. In the event of the death of an optionee the option may be exercised
at any time within twelve months after the date of death by the optionee's
estate or by a person who acquired the right to exercise the option by bequest
or inheritance, but only to the extent the optionee was entitled to exercise
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the option at the date of death, and PROVIDED FURTHER that in no event may the
option be exercised after its termination date.
TERMINATION OF OPTIONS. Incentive stock options granted under the 1991
Stock Plan expire ten years from the date of grant unless a shorter period is
provided in the option agreement, PROVIDED HOWEVER that incentive stock options
granted to stockholders owning more than 10% of the voting power of all classes
of stock of the Company or any parent or subsidiary may not have a term of more
than five years.
NONTRANSFERABILITY OF OPTIONS. Options are nontransferable by the optionee,
other than by will or the laws of descent and distribution, and are exercisable
only by the optionee during his or her lifetime or, in the event of death, by a
person who acquires the right to exercise the option by bequest or inheritance
or by reason of the death of the optionee.
OTHER PROVISIONS. The option and stock purchase agreements may contain such
other terms, provisions and conditions not inconsistent with the 1991 Stock Plan
as may be determined by the Administrator.
TERMS OF STOCK PURCHASE RIGHTS
RIGHTS TO PURCHASE. The Administrator determines the terms, conditions and
restrictions related to the offer of a stock purchase right, including the
number of shares that the recipient shall be entitled to purchase, the price to
be paid (which price shall not be less than 85% of the fair market value of the
Common Stock as of the date of the offer for stock purchase rights granted to
employees who are not Named Executive Officers and not less than 100% of the
fair market value of the Common Stock as of the date of the offer for stock
purchase rights granted to employees who are Named Executive Officers), and the
time within which such person must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator. Common Stock purchased pursuant to the grant of
a stock purchase right shall be referred to herein as "Restricted Stock."
REPURCHASE OPTION. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). As a
general rule, 20% of the Restricted Stock held by a purchaser is released from
the Company's repurchase option each year, provided the purchaser's employment
or consulting relationship has not been terminated prior to the date of such
release. The purchase price for Common Stock repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cash or cancellation of purchase money indebtedness
of the purchaser to the Company.
OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the 1991 Stock
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
RIGHTS AS A STOCKHOLDER. Once the stock purchase right is exercised, the
purchaser shall have the rights equivalent to those of a stockholder, and shall
be a stockholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTIONS
CHANGES IN CAPITALIZATION. In the event any change is made in the Company's
capitalization from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company (except for the conversion of convertible
securities), proportional adjustment shall be made in the price per share of
each option or stock purchase right, the number of shares
8
<PAGE>
subject to each option or stock purchase right, the annual limitation on grants
to employees, as well as the number of shares available for issuance under the
1991 Stock Plan.
CORPORATE TRANSACTIONS. In the event of a proposed dissolution or
liquidation of the Company, options and stock purchase rights shall terminate,
unless the Administrator in its discretion permits the exercise (including the
accelerated vesting) of any option or stock purchase right. In the event of a
merger of the Company with or into another corporation or the sale of all or
substantially all of the Company's assets, the Administrator shall accomplish a
substitution or assumption of options and stock purchase rights by the successor
corporation or the parent or a subsidiary of such successor corporation or, in
its discretion, permit the exercise (including the accelerated vesting) of any
option or stock purchase right. If the Administrator elects to accelerate
vesting of options and stock purchase rights in lieu of assumption or
substitution in the event of a merger or sale of assets of the Company, the
Administrator shall notify the optionee or stockholder and such person shall
have 15 days from the date of such notice to exercise his or her options, at the
end of which notice period the option or stock purchase right shall terminate.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1991 Stock Plan at any time or from
time to time or may terminate it without approval of the stockholders, but no
amendment, alteration, suspension or discontinuation shall be made which would
impair the rights of any optionee under any grant theretofore made, without his
or her consent. Stockholder approval is required for any amendment to the 1991
Stock Plan that: (i) increases the number of shares that may be issued under the
1991 Stock Plan, (ii) modifies the standards of eligibility, (iii) modifies the
limitation on grants to employees described in the 1991 Stock Plan or results in
other changes which would require stockholder approval to qualify options
granted under the 1991 Stock Plan as performance-based compensation under
Section 162(m) of the Code, or (iv) so long as the Company has a class of equity
securities registered under Section 12 of the Exchange Act, materially increases
the benefits to participants that may accrue under the 1991 Stock Plan. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or with
Section 162(m) or 422 of the Code (or any other applicable law or regulation,
including the requirements of the National Association of Securities Dealers,
Inc. or an established stock exchange), the Company shall obtain stockholder
approval of any 1991 Stock Plan amendment in such a manner and to such a degree
as required. The 1991 Stock Plan shall terminate in June 2005, provided that any
options then outstanding under the 1991 Stock Plan shall remain outstanding
until they expire by their terms.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the U.S. federal income tax consequences
of options transactions under the 1991 Stock Plan based on federal income tax
laws in effect on the date of this Proxy Statement. This summary is not intended
to be exhaustive and does not address all matters which may be relevant to a
particular optionee based on his or her specific circumstances. The summary
addresses only current U.S. federal income tax law and expressly does not
discuss the income tax laws of any state, municipality or foreign taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
law. The Company advises all optionees to consult their own tax advisor
concerning the tax implications of option grants and exercises and the
disposition of stock acquired upon such exercises under the 1991 Stock Plan.
OPTIONS. Options granted under the 1991 Stock Plan may be either incentive
stock options, which are intended to qualify for the special tax treatment
provided by Section 422 of the Code, or nonstatutory stock options, which will
not so qualify. If an option granted under the 1991 Stock Plan is an incentive
stock option, the optionee will recognize no income upon grant of the incentive
stock option and will incur no tax liability due to the exercise except to the
extent that such exercise causes the optionee to incur alternative minimum tax.
(See discussion below). The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an incentive stock option
regardless of the applicability of
9
<PAGE>
the alternative minimum tax. Upon the sale or exchange of the shares more than
two years after grant of the option and one year after exercise of the option by
the optionee, any gain by the optionee will be treated as a long-term capital
gain under U.S. tax laws. If both of these holding periods are not satisfied,
the optionee will recognize ordinary income under U.S. tax laws equal to the
difference between the exercise price and the lower of the fair market value of
the stock at the date of the option exercise or the sale price of the Common
Stock. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain or loss recognized on a
disposition of the shares prior to completion of both of the above holding
periods in excess of the amount treated as ordinary income will be characterized
under U.S. tax laws as long-term capital gain if the sale occurs more than one
year after exercise of the option or as short term capital gain if the sale is
made earlier. For individual taxpayers, the current U.S. federal income tax rate
on long term capital gains is alternatively 28% (in the case of shares held more
than one year but less than 18 months after exercise) and 20% (in the case of
shares held more than 18 months after exercise), whereas the maximum rate on
other income is 39.6%. Capital losses for individual taxpayers are allowed under
U.S. tax laws in full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income under U.S. tax laws at the time he or she is granted a
nonstatutory stock option. However, upon its exercise, under U.S. tax laws the
optionee will recognize ordinary income for tax purposes measured by the excess
of the fair market value of the shares over the exercise price. The income
recognized by an optionee who is also an employee of the Company will be subject
to income and employment tax withholding by the Company by payment in cash by
the optionee or out of the optionee's current earnings. Upon the sale of such
shares by the optionee, any difference between the sale price and the fair
market value of the shares as of the date of exercise of the option will be
treated under U.S. tax laws as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than one year from the date of exercise.
ALTERNATIVE MINIMUM TAX. The exercise of an incentive stock option may
subject the optionee to the alternative minimum tax under Section 55 of the
Code. The alternative minimum tax is calculated by applying a tax rate of 26% to
alternative minimum taxable income of joint filers up to $175,000 ($87,500 for
married taxpayers filing separately) and 28% to alternative minimum taxable
income above that amount. Alternative minimum taxable income is equal to (i)
taxable income adjusted for certain items, plus (ii) items of tax preference
less (iii) an exclusion of $45,000 for joint returns, $33,750 for individual
returns and $22,500 in the case of married taxpayers filing separately (which
exemption amounts are phased out for upper income taxpayers). Alternative
minimum tax will be due if the tax determined under the foregoing formula
exceeds the regular tax of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock option. As a
result, the optionee recognizes alternative minimum taxable income equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the option exercise price. Because the alternative minimum tax calculation may
be complex, optionees should consult their own tax advisers prior to exercising
incentive stock options.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
STOCK PURCHASE RIGHTS. Stock purchases under the 1991 Stock Plan will
generally be taxed in the same manner as the exercise of a nonstatutory stock
option.
10
<PAGE>
REQUIRED VOTE
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 to approve the amendment to the 1991 Stock Plan to
reserve an additional 750,000 shares of Common Stock for issuance thereunder.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 1991 STOCK PLAN TO RESERVE AN ADDITIONAL 750,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 3: APPROVAL OF AMENDMENTS TO 1995 DIRECTORS' STOCK OPTION PLAN
At the annual meeting, stockholders are being asked to approve amendments to
the 1995 Directors' Stock Option Plan to (i) increase the number of shares
reserved for issuance thereunder by 100,000 shares to an aggregate of 200,000
shares, (ii) increase the number of options to purchase Common Stock a non-
employee director shall receive as an initial grant from 20,000 shares to 40,000
shares and (iii) increase the number of options to purchase Common Stock a
non-employee director shall receive upon re-election to the Board of Directors
from 5,000 shares to 10,000 shares. In addition, the amendments provide that a
non-employee director appointed by the Board between January 30, 1998 and June
12, 1998 shall receive an option to purchase an additional 20,000 shares of
Common Stock upon election to the Board by the stockholders of the Company at
the Annual Meeting.
GENERAL
The Company's 1995 Directors' Stock Option Plan (the "Directors' Stock
Option Plan") was adopted by the Board of Directors in September 1995 and
approved by the stockholders effective as of November 1995. A total of 100,000
shares of Common Stock have been reserved for issuance under the Directors'
Stock Option Plan. As of March 17, 1998 options to purchase 30,000 shares were
outstanding and 70,000 shares of Common Stock remain available for grant under
the Directors' Stock Option Plan.
Options granted under the Directors' Stock Option Plan are non-statutory
options and do not qualify as "incentive stock options," as defined in the Code.
See the section below entitled "Federal Income Tax Aspects of the Directors'
Stock Option Plan" for information concerning the tax treatment of non-statutory
stock options.
The Directors' Stock Option Plan is not a qualified deferred compensation
plan under Section 401(a) of the Code and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
The amendments are designed to assure that a sufficient reserve of Common
Stock is available under the Directors' Stock Option Plan to provide equity
incentives to new and returning non-employee directors. The amendments will also
enhance the Company's ability to attract and retain the services of highly
qualified directors essential to the Company's long-term success. At the Annual
Meeting of Stockholders, the stockholders are being asked to approve the above
amendments to the Directors' Stock Option Plan.
PURPOSE
The purposes of the Directors' Stock Option Plan are to attract and retain
the best available personnel for service as directors of the Company, to provide
additional incentive to non-employee directors of the Company to serve as
directors, and to encourage their continued service on the Board.
11
<PAGE>
ADMINISTRATION
The Directors' Stock Option Plan is designed to work automatically, without
administration. However, to the extent administration is necessary, it will be
provided by the Board of Directors. The interpretation and construction of any
provision of the Directors' Stock Option Plan by the Board of Directors shall be
final and conclusive.
Members of the Board of Directors receive no additional compensation for
their services in connection with the administration of the Directors' Stock
Option Plan. All directors currently hold office until the annual meeting of
stockholders of the Company following their election, or until their successors
are duly elected and qualified. Directors may be removed from office by the vote
or written consent of the majority of outstanding shares pursuant to the
provisions of Section 141 of the Delaware General Corporation Law (except that
no director may be removed (unless the entire Board is removed) if the votes
cast against removal would be sufficient to elect the director under cumulative
voting) or by court order.
ELIGIBILITY
The Directors' Stock Option Plan provides for the grant of non-statutory
options to non-employee directors of the Company. Currently the Directors' Stock
Option Plan provides that each such director shall be automatically granted an
option to purchase 20,000 shares of Common Stock on the date on which such
person first becomes a non-employee director, whether through election by the
stockholders or appointment by the Board of Directors to fill a vacancy (the
"First Option"). In addition, each non-employee director is automatically
granted an option to purchase 5,000 shares of Common Stock on the date such
director is re-elected to the Board by the Company's stockholders or otherwise
(a "Subsequent Option") if, on such date, such director has served on the
Company's Board for at least six (6) months. Subject to receiving stockholder
approval pursuant to this Proxy Statement, the Directors' Stock Option Plan will
provide that the First Option shall be for 40,000 shares and each Subsequent
Option shall be for 10,000 shares.
TERMS AND CONDITION OF OPTIONS
Options granted under the Directors' Stock Option Plan have a term of 10
years. Each option is evidenced by a stock option agreement between the Company
and the director to whom such option is granted and is subject to the following
additional terms and conditions:
EXERCISE OF THE OPTION. Each Option shall become exercisable for 25% of the
shares subject to the Option on the first anniversary of the date of grant of
each such Option, and at the rate of 1/48 of the shares subject to such Option
for each month thereafter, provided, in each case, that the holder thereof
remains an Eligible Director as of such date.
An option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased and
tendering payment to the Company of the purchase price. The consideration to be
paid for shares issued upon exercise of options granted under the Directors'
Stock Option Plan, including the method of payment, shall be determined by the
Company's Board of Directors and may consist entirely of: 1) cash; 2) check; 3)
other shares of Common Stock having a fair market value on the date of surrender
equal to the aggregate exercise price of the shares for which the option is
being exercised (provided, however, that if the shares being surrendered were
acquired from the Company, they must have been held for at least six months); or
4) any combination of the foregoing methods of payment.
PURCHASE PRICE. The purchase price of the shares subject to each Option
shall be their fair market value determined based on the closing sales price for
shares or the closing bid if no sales were reported, as
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<PAGE>
quoted on the Nasdaq National Market, on the Grant Date of such Option, or on
the last preceding business day if such Grant Date is not a business day.
TERMINATION OF STATUS AS A DIRECTOR. The Directors' Stock Option Plan
provides that if the optionee ceases to serve as a director of the Company, for
any reason, the option may be exercised within 30 days after the date he or she
ceases to be a director as to all or part of the shares that the director was
entitled to exercise at the date of such termination. Notwithstanding the
foregoing, in no event may an option be exercised after its 10-year term has
expired. To the extent that the director was not entitled to exercise an option
at the date of such termination, or does not exercise an option that he or she
was entitled to exercise within the time specified, the option shall terminate.
TERMINATION OR SUSPENSION OF PLAN. The Board of Directors at any time may
suspend or terminate the Directors' Stock Option Plan. The Directors' Stock
Option Plan, unless sooner terminated, shall terminate on the tenth anniversary
of its adoption by the Board of Directors. No Option may be granted under the
Directors' Stock Option Plan while the Directors' Stock Option Plan is suspended
or after it is terminated. Suspension or termination of the Directors' Stock
Option Plan shall not affect the rights of the holder of any option, except with
that holder's consent. No option is exercisable by any person after the
expiration of 10 years after the date the option was granted.
TRANSFERABILITY. No option shall be transferable otherwise than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order (as defined by the Code or the rules thereunder).
RULE 16b-3. Options granted to directors must comply with the applicable
provisions of Rule 16b-3 or any successor thereto and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Securities Exchange Act of
1934, as amended, with respect to Directors' Stock Option Plan transactions.
OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Stock Option Plan
as may be determined by the Company's Board of Directors.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTIONS
CHANGES IN CAPITALIZATION. If any change is made in the shares subject to
the Directors' Stock Option Plan or subject to any option granted under the
Directors' Stock Option Plan, through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise, the Board of Directors shall make
appropriate adjustments as to the maximum number of shares subject to the
Directors' Stock Option Plan, the number of shares covered by any option grant,
the maximum number of shares for which options may be granted to any Eligible
Director, and the number of shares and price per share covered by outstanding
options.
CORPORATE TRANSACTIONS. In the event of (i) a dissolution or liquidation of
the Company, (ii) a sale of all or substantially all of the Company's assets,
(iii) a merger or consolidation in which the Company is not the surviving
corporation, or (iv) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, the
Company is obligated to give each optionee, at the time of adoption of the plan
for liquidation, dissolution, sale, merger, consolidation or reorganization,
either a reasonable time thereafter within which to exercise his or her option
(including any part of an option that would not otherwise be exercisable), prior
to the effectiveness of such liquidation, dissolution, sale, merger,
consolidation or reorganization, at the end of which time the option will
terminate, or the right to exercise the option (or receive a substitute option
with comparable terms) as
13
<PAGE>
to an equivalent number of shares of stock of the corporation succeeding the
Company or acquiring its business by reason of such liquidation, dissolution,
sale, merger, consolidation or reorganization.
AMENDMENT AND TERMINATION
The Company's Board of Directors may amend the Directors' Stock Option Plan
at any time, provided that any amendment which increases the number of shares as
to which options may be granted, modifies the requirements as to eligibility for
participation, materially increases the benefits accruing under the Plan or
otherwise must be approved by stockholders to comply with Rule 16b-3 of the
Exchange Act, shall be subject to obtaining stockholder approval. No amendment
shall affect the rights of the holder of any option, except with that holder's
consent. Notwithstanding anything to the contrary in the Directors' Stock Option
Plan, provisions of the Directors' Stock Option Plan that affect the formula
award terms required to be specified by Rule 16b-3) shall not be amended more
than once every six (6) months, other than to comply with changes in the Code,
the Employee Retirement Income Security Act of 1974, or the rules thereunder.
The Directors' Stock Option Plan will terminate in July 2005 unless earlier
terminated as described above.
FEDERAL INCOME TAX ASPECTS OF THE DIRECTORS' STOCK OPTION PLAN
The following is a brief summary of the effect of federal income taxation
upon the director optionee and the Company with respect to the grant of options
and purchase and disposition of shares under the Directors' Stock Option Plan
based on federal securities and income tax laws currently in effect. This
summary does not purport to be complete. The Company advises an optionee to
consult his or her own tax advisor regarding the taxation of option grants and
exercises, and the disposition of shares acquired upon such exercises, under
applicable provisions of the Code. In addition, this summary does not discuss
the provisions of the income tax laws of any municipality, state or foreign
country in which the participant may reside.
Options granted under the Directors' Stock Option Plan are non-statutory
options. A director optionee will not recognize any taxable income under U.S.
tax laws at the time he or she is granted a non-statutory option. However, upon
its exercise, under U.S. tax laws the optionee will recognize ordinary income
for tax purposes measured by the excess of the then fair market value of the
shares over the exercise price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the sale of
shares acquired upon exercise of an option could subject the director to suit
under Section 16 of the Exchange Act, the date of taxation under U.S. tax laws
may be deferred unless the director files an election with the Internal Revenue
Service under Section 83(b) of the Code. Upon sale of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated
under U.S. tax laws as capital gain or loss, and will qualify for long-term
capital gain or loss treatment if the shares have been held for more than one
year. For individual taxpayers, the current U.S. federal income tax rate on
long-term capital gains is alternatively 28% (in the case of shares held more
than one year but less than 18 months after exercise) and 20% (in the case of
shares held more than 18 months after exercise), whereas the maximum rate on
other income is 39.6%. Capital losses are allowed in full under U.S. tax laws
against capital gains plus $3,000 of other income.
The Company will be entitled to a tax deduction in the amount and at the
time that the director recognizes ordinary income with respect to shares
acquired upon exercise of a non-statutory option.
REQUIRED VOTE
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 to approve the amendment to the Directors' Stock
Option Plan.
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<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENTS TO THE 1995 DIRECTORS' STOCK OPTION PLAN.
PROPOSAL NO. 4: 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, 1998, 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, 1998.
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 17, 1998, 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) the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers
who earned salary and bonus in excess of $100,000 in 1997 and two persons who
served as an executive officer during a portion of fiscal 1997 but were no
longer executive officers as of December 31, 1997 (the "Named Executive
Officers") and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
5% STOCKHOLDERS, DIRECTORS, NAMED EXECUTIVE OFFICERS, -----------------------
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
John H. Rademaker(2) ................................................... 803,804 4.6%
40 Parker
Irvine, CA 92618
Louis Zimmerman(3) ..................................................... 946,813 5.5%
40 Parker
Irvine, CA 92618
3Com Corporation ....................................................... 1,027,083 5.9%
5400 Bayfront Plaza
Santa Clara, CA 95052
Wisdom Tree Capital .................................................... 852.400 5.5%
1633 Broadway 38th Floor
New York, NY 10019
Caanan Venture Limited Partnership ..................................... 958,181 5.5%
105 Rowayton Ave.
Rowayton, CT 06853
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
5% STOCKHOLDERS, DIRECTORS, NAMED EXECUTIVE OFFICERS, -----------------------
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
Gregorio Reyes(4) ...................................................... 283,854 1.6%
Charles A. Haggerty(5) ................................................. 52,395 *
William J. O'Meara(5) .................................................. 32,395 *
William J. Schroeder ................................................... 0 *
Roger A. Dorf(6) ....................................................... 158,000 *
Todd Krautkremer(7) .................................................... 80,776 *
James D. McNally(8) .................................................... 191,564 1.1%
Otto Berlin(9) ......................................................... 56,250 *
Dominic Genovese(10) ................................................... 70,833 *
Karen Ratta(11) ........................................................ 66,079 *
Richard M. White(12) ................................................... 26,830 *
All directors and executive officers as a group (13
persons)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12).......................... 1,823,404 10.2%
</TABLE>
- ------------------------
* 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 17, 1998 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) 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 and 2,395 shares issuable upon the exercise of options to
purchase common stock within 60 days of March 17, 1998
(5) Includes 2,395 shares issuable upon the exercise of options to purchase
Common Stock within 60 days of March 17, 1998.
(6) Includes 150,000 shares issuable upon the exercise of options to purchase
Common Stock within 60 days of March 17, 1998. Mr. Dorf resigned as an
officer of the Company, effective October 27, 1997.
(7) Includes 80,441 shares issuable upon exercise of options to purchase Common
Stock within 60 days after March 17, 1998.
(8) Includes 86,770 shares issuable upon exercise of options to purchase Common
Stock within 60 days after March 17, 1998.
16
<PAGE>
(9) Consists of 56,250 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 17, 1998. Mr. Berlin resigned as an
officer of the Company, effective November 16, 1997.
(10) Consists of 70,833 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 17, 1998. Mr. Genovese resigned as
an officer of the Company, effective October 31, 1997.
(11) Includes 45,000 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 17, 1998.
(12) Consists of 26,830 shares issuable upon exercise of options to purchase
Common Stock within 60 days after March 17, 1998.
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 1997, the Compensation Committee of the Board consisted of Douglas
Carlisle, Charles A. Haggerty, and William O'Meara, each of whom are
non-employee directors, until June 13, 1997 when Mr. Carlisle resigned from the
Compensation Committee and 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 and/or annual bonuses
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 1998, the Company analyzed the American Electronics
Association 1997 Executive Compensation Survey with particular emphasis on
companies in the telecommunications industry with sales levels similar to those
of the Company. 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.
17
<PAGE>
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 recognition of superior individual
performance. For fiscal 1997, Messrs. McNally, White, Genovese and Berlin
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 1997. The Company currently anticipates
that Mr. McNally may earn bonuses in 1998 equal to a certain percentage of his
respective salary if the Company meets 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 typical 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 1997, the Company granted
stock options under the 1996 Non-Executive Stock Option Plan (the 1996 Stock
Plan) to two new executive officers, Messrs. Alini (200,000 shares) and Guerry
(140,000 shares) and stock options under the 1991 Stock Plan to seven other
executive officers, Messrs. Dorf (420,000 shares), Genovese (200,000 shares) and
Berlin (160,000 shares), McNally (145,000), Krautkremer (50,000 shares), and
White (85,000 shares) and Ms. Ratta (40,000 shares). Options granted in 1997
include options that 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. 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.
John H. Rademaker served as CEO of the Company from its inception in 1981 to
May 1997 and, as a founder of the Company, owns a significant number of shares
of Common Stock of the Company (representing approximately 4.6% of the
outstanding shares of Common Stock as of March 17, 1998), all of which shares
are currently vested. In October 1997, Mr. Rademaker was named to the Office of
the CEO of the Company. 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. In June
1997, Mr. Rademaker
18
<PAGE>
was granted a non-qualified option under the 1991 plan for 100,000 shares and in
January 1998 his base salary was increased to $200,000 per year. Mr. Rademaker
has never received a cash bonus.
Gregorio Reyes has served as the Company's Chairman of the Board since
January 1995 and was named to the Office of the CEO of the Company in October
1997. In connection with such appointment, Mr. Reyes was granted a non-statutory
stock option under the 1991 Stock Plan for 300,000 shares. Mr. Reyes works on a
part-time consulting basis in his capacity of Co-CEO and does not receive any
additional compensation over the consulting arrangement he has with the Company.
See discussion above under "--Compensation of Directors."
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 five 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, Richard
White, Vice President of Customer Service 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, then
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 had 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 included 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 would resume at the rate
19
<PAGE>
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 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 1997
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
1998 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 or the 1996 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
20
<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, 1997.
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SYNC RESEARCH, INC. NASDAQ MG COMMUNICATIONS
<S> <C> <C> <C>
Common Stock Market Index Index
11/9/95 $100.00 $100.00 $100.00
12/31/95 102.84 101.13 105.73
12/31/96 31.25 125.67 106.91
12/31/97 8.1 153.73 137.18
</TABLE>
<TABLE>
<CAPTION>
11/9/95 12/31/95 12/31/96 12/31/97
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sync Research, Inc. Common Stock.................. $ 100.00 $ 102.84 $ 31.25 $ 8.10
Nasdaq Market Index............................... $ 100.00 $ 101.13 $ 125.67 $ 153.73
MG Communications Index........................... $ 100.00 $ 105.73 $ 106.91 $ 137.18
</TABLE>
21
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation earned or received during 1997 by
(i) all persons who served as the Company's Chief Executive Officer, (ii) the
four other most highly compensated executive officers of the Company whose total
annual salary and bonus earned during 1997 exceeded $100,000 and (iii) two
persons who served as executive officers of the Company during a portion of
fiscal 1997 but are no longer executive officers as of December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------------------- RESTRICTED OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK AWARDS (#) COMPENSATION
- --------------------------------------- --------- --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregorio Reyes ........................ 1997 $ -- -- -- 305,000 $ 72,000(10)
Chief Executive Officer 1996 $ -- -- -- 5,000 $ 72,000(10)
1995 $ -- -- $ 0(11) -- $ 72,000(10)
John H. Rademaker ..................... 1997 $ 171,250 -- -- 100,000 $ 1,766(1)
Chief Executive Officer 1996 $ 175,000 -- -- -- $ 829(1)
1995 $ 175,000 -- -- -- $ 1,044(1)
Roger A. Dorf ......................... 1997 $ 221,292 -- -- 420,000(4) $ 96,042(1)(2)(3)
Chief Executive Officer 1996 $ 176,250 -- -- 525,000(4) $ 31,970(1)(2)
Otto Berlin ........................... 1997 $ 135,000 $ 68,307(6) -- 160,000(5) $ 1,980(1)
Vice President of International Sales 1996 $ 85,933 $ 33,750(6) -- 130,000(5) $ 50,778(1)(2)
Dominic Genovese ...................... 1997 $ 150,000 $ 36,819(7) -- 200,000(5) $ 4,055(1)(3)
Vice President of Sales 1996 $ 100,000 $ 34,044(7) -- 200,000(5) $ 3,220(1)(2)
James D. McNally ...................... 1997 $ 160,000 $ 8,762(8) -- 145,000 $ 4,799(1)(3)
Senior Vice President of Sales 1996 $ 150,000 $ 20,553(8) -- -- $ 2,500(1)(3)
1995 $ 139,910 $ 57,690(8) -- 15,000 $ 1,560(1)(3)
Todd J. Krautkremer ................... 1997 $ 140,000 -- -- 50,000(5) $ 2,459(1)(3)
Vice President of Marketing 1996 $ 131,250 -- -- 50,000(5) $ 66,015(1)(2)
1995 $ 130,859 -- -- 6,000 251(1)
Karen Ratta ........................... 1997 $ 131,667 -- -- 40,000(5) $ 2,706(1)(3)
Vice President of Manufacturing 1996 $ 120,000 $ 5,000 -- 40,000(5) $ 638(1)(3)
1995 $ 88,388 -- -- 100,000 $ 22,621(1)(2)
Richard White ......................... 1997 $ 102,208 $ 15,902(9) -- 85,000(5) $ 2,431(1)(3)
Vice President of Customer Service 1996 $ 93,000 $ 22,083(9) -- 26,576(5) --
1995 $ 93,919 -- -- 2,130 --
</TABLE>
- --------------------------
(1) Includes life insurance premiums pursuant to a program generally available
to all employees paid in 1997 in the amount of $1,766 for Mr. Rademaker,
$3,533 for Mr. Dorf, $1,980 for Mr. Berlin, $2,250 for Mr. Genovese, $2,430
for Mr. McNally, $303 for Mr. Krautkremer, $731 for Ms. Ratta and $898 for
Mr. White; paid in 1996 in the amount of $829 for Mr. Rademaker, $1,532 for
Mr. Dorf, $1,155 for Mr. Berlin, $2,250 for Mr. McNally, $216 for Mr.
Krautkremer, $388 for Ms. Ratta, and $843 for Mr. Genovese; and paid in
1995 in the amount of $1,310 for Mr. McNally, $1044 for Mr. Rademaker, $251
for Mr. Krautkremer and $255 for Ms. Ratta.
(2) Includes temporary living allowances and other relocation expenses paid in
1997 in the amount of $90,403 for Mr. Dorf; paid in 1996 in the amount of
$30,438 for Mr. Dorf, $49,623 for Mr. Berlin, $65,799 for Mr. Krautkremer
and $2,377 for Mr. Genovese and paid in 1995 in the amount of $22,366 for
Ms. Ratta in 1995.
22
<PAGE>
(3) Includes defined contribution retirement plan contributions made by the
Company in 1997 in the amount of $2,106 for Mr. Dorf, $1,805 for Mr.
Genovese, $2,369 for Mr. McNally, $2,156 for Mr. Krautkremer, $1,975 for
Ms. Ratta and $1,533 for Mr. White; in 1996 in the amount of $250 for Mr.
McNally, and $250 for Ms. Ratta; and in 1995 in the amount of $250 for Mr.
McNally.
(4) 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.
(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. On May 28, 1996, Mr. Berlin was granted options to purchase
130,000 shares of Common Stock at $18.25 per share. On April 10, 1996, Ms.
Ratta was granted options to purchase 40,000 shares of Common Stock at
$22.25 per share. On August 27, 1996, Mr. White was granted options to
purchase 25,000 shares of Common Stock at $13.25 per share and on January
14, 1997, Mr. White was granted options to purchase 15,000 shares of common
stock at $14.87 per share. In an option repricing, which was effective
April 14, 1997, 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, Genovese and Berlin agreed to suspend the
vesting on these new options during the six month period after April 14,
1997.
(6) Consists of $36,481 in sales commissions and $31,826 in bonus in 1997 and
$33,750 in bonus in 1996.
(7) Consists of $17,500 in sales commissions and $19,319 in bonus in 1997 and
$21,544 in sales commissions and $12,500 in bonus in 1996.
(8) Consists of sales commissions.
(9) Consists of $9,800 in sales commissions and $6,102 in bonus in 1997 and
$22,083 in bonus in 1996.
(10) Consists of payments pursuant to a consulting agreement with the Company
under which Mr. Reyes is paid a fee of $6,000 per month. See discussion
above under "--Compensation of Directors."
(11) Mr. Reyes purchased 384,069 shares of Common Stock of the Company at a
purchase price of $0.20 per share pursuant to a Common Stock Purchase
Agreement dated January 30, 1995. Pursuant to this agreement, eighty-five
percent of the shares were subject to repurchase by the Company upon
voluntary or involuntary termination of Mr. Reyes' status as consultant to
the Company as of January 1, 1995. The agreement provides that 2.3611% of
the 384,069 shares shall be released from the Company's repurchase option
at the end of each month after January 1, 1995, provided that Mr. Reyes
continues to provide consulting services to the Company as of the date of
such release, and all of the 384,069 shares shall be released from the
repurchase option upon a merger or acquisition of the Company or a sale of
all or substantially all of the assets of the Company.
23
<PAGE>
The following tables set forth information for the Named Executive Officers
with respect to grants of options to purchase Common Stock of the Company made
in the fiscal year ended December 31, 1997, and the value of all options held by
such Named Executive Officers on December 31, 1997.
OPTION/SAR GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERM(3)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
- --------------------------------- ------------- ----------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gregorio Reyes................... 5,000 0.1% $ 4.875 6/13/07 $ 15,329 $ 38,847
300,000(4) 6.8% $ 4.31 10/24/07 $ 813,161 $ 2,060,709
John H. Rademaker................ 100,000 2.3% $ 4.875 6/13/07 $ 306,586 $ 776,949
Roger A. Dorf(7)................. 420,000(5) 9.5% $ 3.9375 4/22/07 $ 1,040,035 $ 2,635,652
Otto Berlin(8)................... 130,000(6) 2.9% $ 3.9375 4/14/07 $ 321,915 $ 815,797
30,000 0.7% $ 3.375 4/18/07 $ 63,676 $ 161,366
Dominic Genovese(9).............. 200,000(6) 4.5% $ 3.9375 4/14/07 $ 495,255 $ 1,255,072
James D. McNally................. 70,000 1.6% $ 3.375 4/18/07 $ 148,576 $ 376,522
75,000 1.7% $ 3.9375 12/9/07 $ 185,720 $ 470,652
Todd J. Krautkremer.............. 50,000(6) 1.1% $ 3.9375 4/4/07 $ 123,814 $ 313,768
Karen Ratta...................... 40,000(6) 0.9% $ 3.9375 4/14/07 $ 99,051 $ 251,014
Richard White.................... 15,000 0.3% $ 14.875 1/14/07 $ 140,322 $ 355,604
40,000(6) 0.9% $ 3.9375 4/14/07 $ 99,051 $ 251,014
30,000 0.7% $ 3.375 4/18/07 $ 63,676 $ 161,366
</TABLE>
- --------------------------
(1) All options were granted pursuant to the Company's 1991 and 1996 Stock Plans
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 of the shares at the end of each month thereafter.
(2) Options to purchase a total of 4,438,484 shares of Common Stock were granted
to employees in 1997, including options to purchase 2,725,512 shares of
Common Stock pursuant to the Company's 1996 Stock Plan, 1,395,030 shares
under the Company's 1991 Stock Plan and 2,942 shares under the Company's
Assumed TyLink 1994 Stock Plan. The 1996 Stock Plan was adopted by the Board
of Directors on August 27, 1996. As of March 17, 1998, stock options to
purchase a total of 1,852,219 shares had been authorized for issuance under
the 1996 Stock Plan, 1,827,719 of which were issued and outstanding at a
weighted average exercise price of $3.86 per share. All grants under the
1996 Stock Plan have a per share exercise price equal to the fair market
value of the Company's common stock on the date of grant. Except for initial
grants upon hiring, none of the executive officers or directors of the
Company is eligible to participate in the 1996 Stock 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.
(4) These options 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 of the shares at the end of each month
thereafter. The vesting of these options is subject to acceleration upon the
occurrence of certain events, including appointment of a new Chief Executive
Officer and the achievement of certain net income milestones by the Company.
(5) 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,
24
<PAGE>
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.
(6) 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. On May 28, 1996, Mr. Berlin was granted options to purchase 130,000
shares of Common Stock at $18.25 per share. On April 10, 1996, Ms. Ratta was
granted options to purchase 40,000 shares of Common Stock at $22.25 per
share. On January 14, 1997 and August 27, 1996, Mr. White, was granted
options to purchase 15,000 and 25,000 shares of Common Stock at $14.87 and
$13.25 per share, respectively. All 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, these officers agreed to suspend the vesting of these new
options during the six month period after April 14, 1997.
(7) Mr. Dorf resigned as an officer of the Company effective October 27, 1997.
Pursuant to a settlement agreement between Mr. Dorf and the Company, Mr.
Dorf agreed to serve as an employee of the Company until the earlier of July
31, 1998 or such time as he commences other employment. The settlement
agreement provides that any options held by Mr. Dorf will continue to vest
until the date of his termination of employment with the Company and vested
options shall be exercisable for 60 days after termination. Mr. Dorf's stock
options will expire if they are not exercised on or before September 29,
1998.
(8) Mr. Berlin resigned as an officer of the Company effective as of November
16, 1997. Pursuant to a settlement agreement between Mr. Berlin and the
Company, Mr. Berlin agreed to serve as an employee of the Company until the
earlier of May 16, 1998 or such time as he commences other employment. The
settlement agreement provides that any options held by Mr. Berlin will
continue to vest until the date of his termination of employment with the
Company and vested options shall be exercisable for 60 days after
termination. Mr. Berlin's options will expire if they are not exercised on
or before July 15, 1998.
(9) Mr. Genovese resigned as an officer of the Company effective as of October
31, 1997. Pursuant to a settlement agreement between Mr. Genovese and the
Company, Mr. Genovese agreed to serve as an employee of the Company until
the earlier of April 30, 1998 or such time as he commences other employment.
The settlement agreement provides that any options held by Mr. Genovese will
continue to vest until the date of his termination of employment with the
Company and vested options shall be exercisable for 60 days after
termination. Mr. Genovese's options will expire if they are not exercised on
or before June 29, 1998.
25
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997
AND OPTION/SAR VALUES AT END OF FISCAL YEAR 1997
<TABLE>
<CAPTION>
SECURITIES UNDERLYING
NUMBER OF UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SHARES 12/31/97(1): IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE EXERCISABLE/ 12/31/97(2)($):
NAME EXERCISE REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------ ----------- ----------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Gregorio Reyes............................ -- -- 1,979/308,021 --/--
John H. Rademaker......................... -- -- --/100,000 --/--
Roger A. Dorf(3).......................... -- -- 120,000/300,000 --/--
Otto Berlin(3)............................ -- -- 35,208/124,792 --/$5,550
Dominic Genovese(3)....................... -- -- 54,166/145,834 --/--
James D. McNally.......................... -- -- 65,625/150,625 $224,700/$31,850
Todd J. Krautkremer....................... 12,100 $ 44,022 68,774/55,626 $187,082/$67,902
Karen Ratta............................... 19,583 $ 57,586 30,416/57,501 $63,000/$98,001
Richard White............................. -- -- 10,952/72,207 $28,775/$6,411
</TABLE>
- ------------------------
(1) No stock appreciation rights (SARs) were outstanding during 1997.
(2) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 31, 1997 of $3.56. See "Executive
Compensation and Related Information-- Compensation of Executive
Officers--Option/SAR Grants in Fiscal Year 1997," footnotes 4 and 5, for
discussion of option repricing program which was effected in April 1997.
(3) Mssrs. Dorf, Genovese, and Berlin resigned as officers of the Company
effective October 27, 1997, October 31, 1997 and November 16, 1997,
respectively.
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. 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 remaining unvested options shall continue to vest at the 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 John H. Rademaker) after such officer's
termination. The agreements provide that, during the consultation period, 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.
On October 24, 1997, the Company entered into a Change of Control Severance
Agreement with Gregorio Reyes, Chairman of Board of Directors and Consultant to
the Company. Pursuant to this agreement, if Mr. Reyes is terminated without
cause or otherwise involuntarily terminated within twelve (12) months following
a change of control of the Company, one hundred percent (100%) of Mr. Reyes'
unvested options shall immediately vest.
On August 23, 1996, the Company entered into an Employment Agreement with
Richard M. White, Vice President of Customer Service. This agreement provides
that if Mr. White is terminated by the Company prior to August 23, 1998 without
cause or Mr. White terminates his employment with the
26
<PAGE>
Company as a result of (a) a reduction in salary, (b) failure to provide
benefits commensurate with that of other of the Company's employees at a similar
level of seniority, (c) relocation to an office more than fifty miles from the
current location or (d) material reduction in duties, Mr. White shall be
entitled to severance payments equal to his monthly salary for the period
beginning on the date of such termination through August 23, 1998. After August
23, 1998, Mr. White's is not entitled to severance benefits upon termination.
On October 27, 1997, the Company entered into a Settlement Agreement and
Mutual Release with Roger A. Dorf, then Chief Executive Officer of the Company.
Pursuant to this agreement, in consideration for the release of all claims
against the Company, the Company agreed to pay Mr. Dorf $19,583.33 each month
through July 31, 1998. In addition, the Company agreed to allow the vesting of
Mr. Dorf's options to purchase shares of Common Stock granted to him under the
1991 Plan, to continue through July 31, 1998. Pursuant to this agreement, Mr.
Dorf agreed to perform such projects as may be reasonably requested by the
Chairman of the Board of the Company for up to 20 hours a week until the earlier
of July 31, 1998 or such time as he commences other employment.
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
In April 1997 the Company allowed all employees except Roger A. Dorf to
cancel outstanding options that had not yet been exercised and that had an
exercise price in excess of the then-current fair market value and replace them
with new options for an equal number of shares with an exercise price equal to
such fair market value. Such new options were granted at a price of $3.9375 per
share, the closing sales price and fair market value of the Company's Common
Stock on the effective date of the repricing, April 14, 1997. 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 (6) months after April 14, 1997. On April 22, 1997,
Mr. Dorf, in exchange for the cancellation of his original option to purchase
525,000 shares of Common Stock, received a repriced option to purchase 80% of
such shares (420,000 shares) of Common Stock. Mr. Dorf's new option had a per
share exercise price of $3.9375, which is higher than the fair market value of
the Company's Common Stock on the date of his grant. Mr. Dorf agreed to suspend
vesting on this new option for a period of six months after April 22, 1997, at
which time vesting would resume at the rate of 1/48th of the total number of
420,000 shares per month. See "Report of Compensation Committee--Option
Repricing." The following table sets
27
<PAGE>
forth all repricings of options held by the Company's executive officers since
the Company's initial public offering.
<TABLE>
<CAPTION>
10-YEAR OPTION/SAR REPRICING
----------------------------------------------------------------------
MARKET
NUMBER OF PRICE OF LENGTH OF
SECURITIES STOCK AT ORIGINAL
UNDERLYING TIME OF EXERCISE OPTION TERM
OPTIONS/SARS REPRICING PRICE AT TIME REMAINING AT
REPRICED OR OR OF REPRICING DATE OF
AMENDED AMENDMENT OR AMENDMENT NEW EXERCISE REPRICING OR
NAME DATE (#) ($) ($) PRICE($) 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
Karen Ratta ................... 4/14/97 40,000 $ 3.9375 $22.25 $ 3.9375 9 years
Vice President of
Manufacturing
Richard White ................. 4/14/97 25,000 $ 3.9375 $13.25 $ 3.9375 8.5 years
Vice President of Customer 4/14/97 15,000 $ 3.9375 $14.8725 $ 3.9375 9.75 years
Service
Dominic Genovese .............. 4/14/97 200,000 $ 3.9375 $18.25 $ 3.9375 9.1 years
Vice President of Sales
Otto Berlin ................... 4/14/97 130,000 $ 3.9375 $18.25 $ 3.9375 9.1 years
Vice President of
International Sales
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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, 1997, Mr. Reyes earned $72,000 under this contract.
This agreement may be terminated by either party upon thirty days' prior written
notice.
On October 27, 1997, the Company entered into a Settlement Agreement and
Mutual Release with Roger A. Dorf, then Chief Executive Officer of the Company.
See "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements."
On August 23, 1996 the Company entered into an employment agreement with
Richard M. White, Vice President of Customer Service. See "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements."
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.
28
<PAGE>
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."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, directors Carlisle, Haggerty and O'Meara comprised the
Compensation Committee of the Board of Directors until June 13, 1997, when Mr.
Carlisle resigned from the Compensation Committee. (Mr. Carlisle did not stand
for re-election as a member of the Board of Directors at the 1997 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 1997 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, 1997, all Reporting Persons complied with all applicable
filing requirements, except as follows: on March 21, 1997, Roger Dorf, who was
then the Company's President and Chief Operating Officer filed one Form 4 late
with respect to his open market purchase of 3,000 shares of the Company's Common
Stock on February 21, 1997, and on July 1, 1997, Karen Ratta, the Company's Vice
President of Manufacturing, filed one Form 4 late with respect to her exercise
of 19,583 shares of the Company's Common Stock on March 31, 1997.
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
[SIG]
William K. Guerry
Secretary
Dated: April 30, 1998
29
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SYNC RESEARCH, INC.
1998 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, 1998, and
hereby appoints John H. Rademaker and William K. Guerry 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 1998 Annual Meeting of Stockholders of Sync
Research, Inc. to be held on June 12, 1998 at 2:00 p.m. local time, at
the Marriott Suites located at 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 SEE
REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE REVERSE
SIDE SIDE
------- -------
<PAGE>
PLEASE MARK
/X/ VOTES AS IN THIS
EXAMPLE.
1. Election of Directors.
NOMINEES: Gregorio Reyes, John H. Rademaker,
Charles A. Haggerty, William J. Schroeder
FOR WITHHELD
/ / ALL / / FROM ALL
NOMINEES NOMINEES
MARK HERE FOR
- --------------------------------------------- ADDRESS CHANGE / /
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR AND NOTE BELOW
ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE(S)
NAME(S) ON THE LINE ABOVE.
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to the
Company's 1991 Stock Plan to increase / / / / / /
the number of shares reserved for
issuance thereunder by an additional
750,000 shares.
FOR AGAINST ABSTAIN
3. Proposal to approve a series of amendments
to the Company's 1995 Directors' Stock Option / / / / / /
Plan including an increase in the number of
shares reserved for issuance thereunder by
an additional 100,000 shares.
FOR AGAINST ABSTAIN
4. Proposal to ratify the appointment of
Ernst & Young LLP as the independent / / / / / /
public accountants of the Company for the
year ending December 31, 1998.
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 APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1991 STOCK PLAN; (3) FOR
APPROVAL OF THE AMENDMENTS TO THE COMPANY'S 1995 DIRECTORS' STOCK OPTION PLAN;
(4) 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.
NOTE: This Proxy should be marked, dated, signed by the stockholder(s)
exactly 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.
SIGNATURE ______________ DATE:________ SIGNATURE ______________ DATE:________
