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                                                                 EXHIBIT 10.39

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SETTLEMENT AGREEMENT AND MUTUAL RELEASE

         This Settlement Agreement and Mutual Release ("Agreement") is entered
into by and between SYNC RESEARCH, INC., a Delaware corporation (the "Company"),
and James D. McNally ("Employee").

         WHEREAS, Employee has been employed by the Company;

         WHEREAS, the Company and Employee have entered into an agreement
regarding confidential information and ownership of inventions (the "Employee
Agreement");

         WHEREAS, the Company and Employee have mutually agreed to terminate the
employment relationship and to release each other from any claims arising from
or related to the employment relationship;

         NOW, THEREFORE, in consideration of the mutual promises made herein,
the Company and Employee (collectively referred to as the "Parties") hereby
agree as follows:

         1. RESIGNATION AND TERMINATION. The Company and Employee acknowledge
and agree that Employee will resign as Senior Vice President of Sales and
Service and as an Officer of the Company effective April 15, 1999 (the
"Resignation Date"). The Company agrees to retain Employee as an employee, and
Employee agrees to serve as an employee, until the earlier of October 15, 1999
or such time as Employee commences other employment (the "Termination Date"). As
part of such employment, Employee agrees to perform such projects as may be
reasonably requested by the Chairman of the Board of the Company, but in no
event shall such projects require more than 20 hours of service per week. For
purposes of this Agreement, "other employment" is defined as any employment
exceeding 20 hours per week. The parties acknowledge that the Company has paid
Employee's regular salary through the date of this Agreement in accordance with
the Company's normal payroll practices, has paid Employee any accrued vacation
pay as of the Resignation Date and has reimbursed all expenses appropriately
incurred by Employee on the Company's behalf. Any payments made under this
Agreement shall be subject to withholding for taxes to the extent required under
applicable law. Following the date of this Agreement, Employee shall not be
entitled to any other employee benefits, including vacation, except as expressly
set forth above and in Section 5 below.

         2. CONSIDERATION. In consideration for the release of claims set forth
below and other obligations under this Agreement, the Company agrees to pay
Employee $16,666.67 (less applicable tax withholding) each month through the
Termination Date, in accordance with the Company's normal payroll practices.

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         3. STOCK OPTIONS. In consideration of the Employee's willingness to
avail himself to the Company through the Termination Date, vesting of
Employee's options to purchase shares of Common Stock granted to Employee
under the Company's Stock Option Plan that have not been exercised as of the
date of this Agreement, shall continue through the Termination Date. No
additional option shares shall vest after such date. In accordance with the
terms of the Option Agreement(s) issued to Employee, vested options will be
exercisable until 60 days after the Termination Date.

         4. TERMINATION OF CHANGE OF CONTROL AGREEMENT. Effective with the
Resignation Date, the Amended and Restated Change of Control Severance
Agreement dated June 5, 1997 between the Company and Employee is hereby
terminated.

         5. BENEFITS.

                   (a)  Employee shall continue to receive the Company's
standard medical and dental benefits through the Termination Date. After such
date, Employee shall have the right to continue, at his own expense, coverage
under the Company's health insurance as provided by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA").

                   (b)  Employee shall be entitled to participate in the
Company's 401(k) Plan and Section 125 Plan until the Termination Date.

                   (c)  Employee shall not continue to accrue vacation after
the Resignation Date.

         6. NONCOMPETITION. Except as mutually agreed by both parties in
writing, through the Termination Date, Employee will not, individually or as
an employee, partner, officer, director or shareholder or in any other
capacity whatsoever of or for any person, firm, partnership, company or
corporation, other than the Company or its subsidiaries, own, manage,
operate, sell, control or participate in the ownership, management,
operation, sales or control of any business engaged, in the geographical
areas referred to below, in research, development, marketing, sales or other
activities substantially similar to or competitive with the Company's
development, manufacture, marketing, sales or distribution of Frame Relay
Access Devices, Frame Relay Access Probes, CSU/DSUs and network management
software and other products. The geographical areas in which the restrictions
provided for in the foregoing sentence apply include all cities, counties and
states of the United States and all other countries in which the Company has
engaged in sales or otherwise conducted business or selling efforts at any
time. For a period extending until one year following the Termination Date,
Employee will not, directly or indirectly, recruit, attempt to hire, solicit,
assist others in recruiting or hiring, or refer to others concerning
employment, any person who is an employee of the Company or any of its
subsidiaries or induce or attempt to induce any such employee to terminate
such employee's employment with the Company or any of its subsidiaries.

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         7. NO OTHER PAYMENTS DUE. Employee acknowledges and agrees that he
has received all salary, accrued vacation, commissions, bonuses,
compensation, shares of stock, options therefor and other such sums due to
Employee, other than amounts to be paid pursuant to Sections 2, 3 and 5 of
this Agreement. In light of the payment by the Company of all wages due, or
to become due to the Employee, the Parties further acknowledge and agree that
California Labor Code Section 206.5 is not applicable to the Parties hereto.
That section provides in pertinent part as follows:

                        No employer shall require the execution of any release
                        of any claim or right on account of wages due, or to
                        become due, or made as an advance on wages to be earned,
                        unless payment of such wages has been made.

         8. SYNC OWNED EQUIPMENT. Except as provided for in this section, the
Employee agrees to return all Sync owned equipment in the possession or
control of the Employee. Such equipment includes but is not limited to all
personal computers, cellular phones, pagers, fax machines, office furniture,
and office equipment or other items provided to the Employee by Sync or
otherwise paid for by Sync including those items for which Sync reimbursed
the Employee the purchase price for such equipment in connection with the
Employee's expense report submittals. Sync shall pay the freight, shipping or
other transportation costs associated with shipping the equipment. The
Equipment shall be returned to Sync by April 30, 1999. If the equipment is
not returned to Sync, Sync may withhold the original purchase cost of such
equipment from the payment of obligations of Sync to the Employee including
those provided for in this Agreement in lieu of the return of the equipment.

         Sync agrees to allow Employee to use the Sync provided AT&T calling
card and to reimburse Employee for his Phoenix office telephone service
(maximum of $100 per month) for purposes of providing assistance to Sync
through the Termination Date, unless otherwise returned to Sync or canceled
by Employee prior to the Termination Date. Employee agrees to utilize calling
card and telephone service for Sync business purposes only and costs related
to any usage for non-Sync purposes shall be reimbursed by Employee to Sync.
Sync also agrees to allow Employee to use a Sync owned laptop computer and to
provide Employee with continued remote email access through Sync's network
server through the Termination Date, unless otherwise returned by Employee
prior to the Termination Date. Employee agrees to utilize the email for Sync
business purposes only and costs related to any usage for non-Sync purposes
shall be reimbursed by Employee to Sync. Notwithstanding the above, Sync, at
it sole discretion, has the right to cancel the AT&T calling card and network
access at any time if it deems usage to be excessive or inappropriate.

         9. RELEASE OF CLAIMS. Employee agrees that the foregoing
consideration represents settlement in full of all outstanding obligations
owed to Employee by the Company. Employee and the Company, on behalf of
themselves, and their respective heirs, executors, officers, directors,
employees, investors, shareholders, administrators, predecessor and successor
corporations and assigns, hereby fully and forever release each other and
their respective heirs, executors, officers, directors, employees, investors,
shareholders, administrators, predecessor

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and successor corporations and assigns from any claim duty, obligation or
cause of action relating to any matters of any kind, whether known or
unknown, suspected or unsuspected, that either of them may possess arising
from any omissions, acts or facts that have occurred up until and including
the Effective Date of this Agreement including, without limitation:

                   (a)  any and all claims relating to or arising from
Employee's employment relationship with the Company and termination of that
relationship;

                   (b)  any and all claims relating to, or arising from,
Employee's right to purchase, or actual purchase of shares of stock of the
Company;

                   (c)  any and all claims for wrongful discharge of
employment; breach of contract, both express and implied; breach of a
covenant of good faith and fair dealing, both express and implied; negligent
or intentional infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; and defamation;

                   (d)  any and all claims for violation of any federal,
state or municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967,
and the California Fair Employment and Housing Act.

                   (e)  any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination; and

                   (f)  any and all claims for attorney's fees and costs.

The Company and Employee agree that the release set forth in the section
shall be and remain in effect in all respects as a complete and general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement.

         10. ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. Employee
acknowledges that he is waiving and releasing any rights he may have under
the Age Discrimination in Employment Act of 1967 ("ADEA") and that the waiver
and release is knowing and voluntary. Employee and the Company agree that the
waiver and release does not apply to any rights or claims that may arise
under ADEA after the Effective Date of this Agreement. Employee acknowledges
that the consideration given for this waiver and release Agreement is in
addition to anything of value to which Employee was already entitled.
Employee further acknowledges that he has been advised by the writing that
(a) he should consult with an attorney PRIOR to executing this Agreement; (b)
he has at least twenty-one (21) days within which to consider this Agreement;
(c) he has a least seven (7) days following the execution of this Agreement
by the parties to revoke this Agreement; and (d) this Agreement shall not be
effective until the revocation period has expired.

         11. CIVIL CODE SECTION 1542. The parties represent that they are not
aware of any claim by either of them other than the claims that are released
by this Agreement. Employee

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and the Company acknowledge that they are familiar with the provisions of
California Civil Code Section 1542 which provides as follows:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

         Employee and the Company, being aware of such code section, agree to
waive any rights they may have thereunder, as well as under any other stature
or common law principles of similar effect.

         12. TAX CONSEQUENCES. The Company makes no representations or
warranties with respect to the tax consequences of the payment of any such
sums to Employee under the terms of this Agreement. Employee agrees and
understand that he is responsible for payment, if any, of local, state and/or
federal taxes on the sums paid hereunder by the Company and any penalties or
assessments thereon. Employee further agrees to indemnify and hold the
Company harmless from any claims, demands, deficiencies, penalties,
assessments, executions, judgments, or recoveries by any government agency
against the Company for any amounts claimed due on account of Employee's
failure to pay federal or state taxes or damages sustained by the Company by
reason of any such claims, including reasonable attorney's fees.

         13. CONFIDENTIALITY. The parties agree to use their best efforts to
maintain in confidence the existence of this Agreement, the contents and
terms of this Agreement, and the consideration for this Agreement.
Notwithstanding the foregoing, the Employee shall be permitted to discuss
provisions of this Agreement in confidence with his attorneys, accountants,
tax advisors and spouse.

         14. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION.
Employee shall continue to maintain the confidentiality of all confidential
and propriety information of the Company as provided by the Employee
Agreement previously entered into between the Company and the Employee, a
copy of which is attached hereto as Exhibit A. Employee agrees that at all
times hereafter, Employee shall not intentionally divulge, furnish or make
available to any party any of the trade secrets, patents, patent
applications, price decisions or determinations, inventions, customers,
proprietary information or other intellectual property rights of the Company,
until after such time as information has become publicly known otherwise than
by act of collusion of Employee. Employee further agrees that he will return
all the Company's property and confidential and proprietary information in
his possession to the Company within five business days after the Resignation
Date.

         15. BREACH OF THIS AGREEMENT. Employee acknowledges that upon breach
of the confidential and proprietary information provision contained in
Section 13 of this Agreement, the Company would sustain irreparable harm from
such breach, and, therefore, Employee agrees that in addition to any other
remedies which the Company may have for any breach of

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this Agreement or otherwise, including termination of the Company's
obligations to provide benefits to Employee as described in Sections 2, 3 and
5 of this Agreement, the Company shall be entitled to obtain equitable
relief, including specific performance and injunctions, restraining Employee
from committing or continuing any such violation of this Agreement.

         16. NON-DISPARAGEMENT. Each party agrees to refrain from any
disparagement, criticism, defamation, slander of the other, or tortuous
interference with the contracts and relationships of the other.

         17. AUTHORITY. The Company represents and warrants that the
undersigned has the authority to act on behalf of the Company and to bind the
Company and all who may claim through it to the terms and conditions of this
Agreement. Employee represents and warrants that he has the capacity to act
on his own behalf and on behalf of all who might claim through him to bind
them to the terms and conditions of this Agreement. Each Party warrants and
represents that there are no liens or claims of lien or assignments in law or
equity or otherwise of or against any of the claims or causes of action
released herein.

         18. NO REPRESENTATIONS. Each party represents that it has carefully
read and understands the scope and effect of the provisions of this
Agreement. Neither party has relied upon any representations nor statements
made by the other party which are not specifically set forth in this
Agreement.

         19. COSTS. The Parties shall each bear their own costs, attorneys'
fees and other fees incurred in connection with this Agreement.

         20. SEVERABILITY. In the event that any provision hereof becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision.

         21. ENTIRE AGREEMENT. This Agreement represents the entire agreement
and understanding between the Company and Employee concerning Employee's
separation from the Company and supersedes and replaces any and all prior
agreements and understandings concerning Employee's relationship with the
Company and his compensation by the Company other than any option agreement
as described in Section 3 and other than the Employee Agreement as described
in Section 12.

         22. NO ORAL MODIFICATION. This Agreement may only be amended in
writing signed by Employee and the Company.

         23. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California.

         24. EFFECTIVE DATE. This Agreement shall be effective once it has
been signed by both parties and such date is referred to herein as the
"Effective Date".

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         25. COUNTERPARTS. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective binding agreement on the part of each of the
undersigned.

         26. ASSIGNMENT. This Agreement may not be assigned by Employee or
the Company without the prior consent of the other party. Notwithstanding the
foregoing, this Agreement may be assigned by the Company to a corporation
controlling, controlled by or under common control with the Company without
the consent of Employee.

         27. VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf
of the parties hereto, with the full intent of releasing all claims. The
parties acknowledge that:

                   (a)  They have read this Agreement;

                   (b)  They have been represented in the preparation,
negotiation and execution of this Agreement by legal counsel of their own
choice or that they have voluntarily declined to seek such counsel;

                   (c)  They understand the terms and consequences of this
Agreement and of the releases it contains; and

                   (d)  They are fully aware of the legal and binding effect
of this Agreement.

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         IN WITNESS WHEREOF, the parties have executed this Agreement on the
respective dates set forth below.

                                                  SYNC RESEARCH, INC.


                                                  By:   /s/ William K. Guerry:
                                                     -------------------------
                                                  Title: VP Finance, CFO
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                                                  Dated:      4/13/99
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                                                  EMPLOYEE

                                                     /s/ James D. McNally
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                                                  Signature

                                                      James D. McNally
                                                  ----------------------------
                                                  Print Name

                                                  Dated:    4/13/99
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