-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SXB/P3qMUwSl6vQOUBpXO3wguiJCepyPbny6ZGMPGZ6qPasjIa2L4r40f5bsIGlQ 5VNZ4DUpH8nzEnhUf8S0Dw== /in/edgar/work/0001012870-00-005712/0001012870-00-005712.txt : 20001114 0001012870-00-005712.hdr.sgml : 20001114 ACCESSION NUMBER: 0001012870-00-005712 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMMETRICOM INC CENTRAL INDEX KEY: 0000082628 STANDARD INDUSTRIAL CLASSIFICATION: [3661 ] IRS NUMBER: 951906306 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02287 FILM NUMBER: 761792 BUSINESS ADDRESS: STREET 1: 2300 ORCHARD PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95131-1017 BUSINESS PHONE: 4084287813 MAIL ADDRESS: STREET 1: 2300 ORCHARD PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95131-1017 FORMER COMPANY: FORMER CONFORMED NAME: SILICON GENERAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: REDCOR CORP DATE OF NAME CHANGE: 19820720 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-2287 SYMMETRICOM, INC. (Exact name of registrant as specified in our charter) California No. 95-1906306 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2300 Orchard Parkway, San Jose, CA 95131-1017 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 943-9403 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ _____ Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _______ No _______ Applicable Only to Corporate Issuers: Indicate number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: CLASS OUTSTANDING AS OF November 7, 2000 _____ __________________________________ Common Stock 23,513,260 (adjusted proforma for the three-for two stock split effective August 18,2000) SYMMETRICOM, INC. FORM 10-Q INDEX
Page ____ PART I. FINANCIAL INFORMATION ______________________________ Item 1. Financial Statements: Condensed Consolidated Balance Sheets - September 30, 2000 and June 30, 2000 3 Consolidated Statements of Income - Three months ended September 30, 2000 and 1999 4 Consolidated Statements of Cash Flows - Three months ended September 30, 2000 and 1999 5 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 PART II. OTHER INFORMATION ___________________________ Item 1. Legal Proceedings 18 Item 2. Not Applicable 18 Item 3. Not Applicable 19 Item 4. Not Applicable 19 Item 5. Not Applicable 19 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20
-2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements SYMMETRICOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
September 30, June 30, 2000 2000 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 23,011 $ 19,283 Short-term investments 39,506 36,016 -------- -------- Cash and investments 62,517 55,299 Accounts receivable, net 24,124 19,588 Inventories 27,796 22,357 Other current assets 918 909 -------- -------- Total current assets 115,355 98,153 Property, plant and equipment, net 19,068 19,960 Other assets, net 16,107 16,556 -------- -------- $150,530 $134,669 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,521 $ 8,407 Accrued liabilities 25,114 22,969 Current maturities of long-term obligations 416 391 -------- -------- Total current liabilities 37,051 31,767 Long-term obligations 7,562 7,679 Deferred income taxes 369 203 Shareholders' equity: Preferred stock, no par value; 500,000 shares authorized, none -- -- issued Common stock, no par value; 32,000,000 shares authorized, 23,513,260 and 22,913,510 shares issued and outstanding 22,856 20,503 Unrealized gain on securities, net 12,896 10,204 Retained earnings 69,796 64,313 -------- -------- Total shareholders' equity 105,548 95,020 -------- -------- $150,530 $134,699 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -3- SYMMETRICOM, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Three Months Ended September 30, ----------------------- 2000 1999 ------- ------- Net sales $35,999 $19,617 Cost of sales 20,579 10,578 ------- ------- Gross profit 15,420 9,039 Operating expenses: Research and development 3,155 3,303 Selling, general and administrative 7,198 5,057 ------- ------- Operating income 5,067 679 Gain on sale of investment 1,821 -- Interest income 592 677 Interest expense (169) (176) ------- ------- Earnings before income taxes 7,311 1,180 Income taxes 1,828 295 ------- ------- Net earnings $ 5,483 $ 885 ======= ======= Earnings per share - basic $ .24 $ .04 ======= ======= Weighted average shares outstanding - basic 23,115 22,508 ======= ======= Earnings per share - diluted $ .22 $ .04 ======= ======= Weighted average shares outstanding - diluted 24,967 23,118 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. -4- SYMMETRICOM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended September 30, ----------------------- 2000 1999 -------- -------- Cash flows from operating activities: Net earnings $ 5,483 $ 885 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,660 1,197 Deferred income taxes 166 113 Gain on disposition of assets (1,920) -- Changes in assets and liabilities: Accounts receivable (3,872) 275 Inventories (5,439) (282) Accounts payable 3,114 (133) Accrued liabilities (1,156) 118 Other 1,270 170 -------- -------- Net cash provided by (used for) operating activities (694) 2,343 -------- -------- Cash flows from investing activities: Purchases of short-term investments (11,057) (10,096) Maturities of short-term investments 10,586 13,000 Proceeds from sale of Parthus stock 3,288 -- Purchases of plant and equipment, net (589) (889) Other (67) (210) -------- -------- Net cash provided by investing activities 2,161 1,805 -------- -------- Cash flows from financing activities: Proceeds from issuance of common stock 2,353 1,085 Repayment of long-term obligations (92) (68) -------- -------- Net cash provided by financing activities 2,261 1,017 -------- -------- Net increase in cash and cash equivalents 3,728 5,165 Cash and cash equivalents at beginning of period 19,283 44,897 -------- -------- Cash and cash equivalents at end of period $ 23,011 $ 50,062 ======== ======== Non-cash investing and financing activities: Unrealized gain on securities, net $ 2,692 $ 860 Deferred taxes on unrealized gain (1,794) (1,110) Cash payments for: Interest $ 169 $ 176 Income taxes 386 219
-5- Detail of sale of antenna division: Cash to be received subject to escrow $ 664 $ -- Equity interest in Sarantel Limited -- -- Tangible assets sold (337) -- Liabilities incurred (228) -- ----- ---- Gain on sale $ 99 $ -- ===== ====
The accompanying notes are an integral part of these consolidated financial statements. -6- SYMMETRICOM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation. The consolidated financial statements included --------------------- herein have been prepared by Symmetricom, Inc. ("Symmetricom", the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Although we believe that the disclosures, which are made, are adequate to fairly present the financial information, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. In the opinion of the management, these unaudited statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company at September 30, 1999 and 2000, the results of operations for the three-month period then ended and our cash flows for the three-month period then ended. The results of operations for the periods presented are not necessarily indicative of those that may be expected for the full year. Fiscal period. Symmetricom presents each fiscal quarter on a calendar quarter ending basis. However our fiscal quarter ends on the Sunday closest to the quarter ending month. All references to calendar quarter refer to our fiscal quarter, namely, fiscal quarter ended September 2000 ended on October 1, 2000, September 1999 ended on September 26, 1999, and fiscal year ended June 2000 ended on July 2, 2000. 2. Net Earnings (Loss)per share. Basic earnings (loss) per share is computed ---------------------------- by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common shares outstanding and common equivalent shares from dilutive stock options using the treasury method except when antidilutive. The following table reconciles the number of shares utilized in the earnings (loss) per share calculations.
Three months ended September 30, -------------------- (In thousands, except per share amounts) 2000 1999 ------- ------- Earnings from continuing operations $ 5,483 $ 885 Earnings (loss) from discontinued operations -- -- ------- ------- Net earnings (loss) $ 5,483 $ 885 ------- ------- Weighted average shares outstanding - basic 23,115 22,508 Dilutive stock options 1,852 610 ------- ------- Weighted average shares outstanding - diluted 24,967 23,118 ------- ------- Basic earnings (loss) per share $ 0.24 $ 0.04 Diluted earnings (loss) per share $ 0.22 $ 0.04
-7- On August 18, 2000, the company effected a three-for-two stock split in the form of a common stock dividend. Shareholders of record as of August 7, 2000 received three shares of common stock for every two shares they owned on the record date. Share and per share data for all periods presented herein have been adjusted to give effect to the three-for-two stock split Reclassifications. Certain reclassifications have been made to the prior year consolidated financial statements to conform to the fiscal year 2001 presentation. Such reclassifications have no effect on previously reported results of operations, or retained earnings. 3. Acquisition. On September 30, 1999 Symmetricom acquired certain assets of ----------- Hewlett-Packard Company's Communications Synchronization Business ("HP Product Line business") for $19.4 million in cash. The acquisition has been accounted for under the purchase method of accounting. The net purchase price of $19.8 million, which includes cash paid of $19.0 million, transaction costs of $0.4 million and assumed liabilities of $0.4 million was allocated to tangible assets acquired of $1.4 million, capitalized developed technology of $8.0 million, other intangible assets of $6.9 million and in-process research and development ("IP R&D") of $3.5 million. Approximately $14.9 million of goodwill and other intangible assets are being amortized as follows; $0.4 million over five years, $9.9 million over seven years, and $4.6 million over ten years, and is included in general and administrative expense. Pursuant to this transaction, Symmetricom recorded $6.8 million of non-recurring charges, $3.5 million for IP R&D and $3.3 million for recruiting and employee expenses. 4. Sale. On September 29, 2000, we sold our United Kingdom based dielectric ---- Antenna Division to a joint venture called Sarantel Limited for approximately $0.6 million cash subject to an escrow agreement. Symmetricom maintains a nearly 19% investment stake in Sarantel Limited. We realized a gain of $0.1 million or $0.08 million after taxes related to the sale of the Antenna Division. On March 30, 2000, we sold our GPS division to Silicon Systems, Ltd., ("SSL") for $9.5 million in cash. Additionally, Symmetricom made an irrevocable application for subscription shares of SSL for $3.0 million. We realized a gain of $6.7 million, or $4.2 million after taxes related to the sale of the GPS division. SSL changed its name to Parthus Technologies plc ("Parthus") prior to completing an initial public offering in May 2000. On April 14, 1999, we sold our Linfinity Microelectronics Inc. ("Linfinity") semiconductor subsidiary to Microsemi Corporation for $24.1 million in cash, of which $1.1 million is subject to an escrow agreement. The per share consideration paid to shareholders of Linfinity was $2.96 per preferred share and $1.46 per common share. The outstanding capital stock of Linfinity comprised of 6,000,000 shares of preferred stock and 4,197,824 shares of common stock. There were stock options outstanding to purchase 121,449 and 109,000 shares of Linfinity's common stock at the option exercise of $0.50 and $0.80 per share, respectively. The holders of these options were entitled to receive in cash the difference between $1.46 and the option exercise price. Of the $24.1 million aggregate purchase price, $23.6 million was paid to Symmetricom (including amounts currently held in escrow) and $0.5 million was paid to former minority shareholders and option holders of Linfinity. -8- 5. Inventories. Inventories are stated at the lower of cost (first-in, ----------- first-out) or market. Inventories consist of (in thousands):
September 30, June 30, 2000 2000 ------- ------- Raw materials $15,634 $12,094 Work-in-process 6,516 4,710 Finished goods 5,646 5,553 ------- ------- $27,796 $22,357 ======= =======
6. Recent Accounting Pronouncements. In March 2000 the FASB issued -------------------------------- Interpretation No. 44 (FIN No. 44), Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB 25. FIN No. 44 clarifies (i) the definition of employee for purposes of applying APB Opinion No. 25, (ii) the criteria for determining whether a plan qualifies as a non compensatory plan, (iii) the accounting consequences of various modifications to the terms of a previously fixed stock option or award, and (iv) the accounting for an exchange of stock compensation awards in a business combination. FIN No. 44 was effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. The adoption of certain of the conclusions of FIN No. 44 covering events occurring during the period after December 15, 1998 or January 12, 2000 did not materially affect our business. Management does not expect that the adoption of the remaining conclusions will materially affect our business. In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. Management does not expect that SAB No. 101 will materially impact its revenue recognition policies. However, there is no guarantee that future events, industry practices, or future interpretations of SAB 101 will not impact our revenues. In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," was issued, which defines derivatives, requires all derivatives be carried at fair value, and provides for hedging accounting when certain conditions are met. The adoption of this statement in July 2000 did not have a material impact on our financial position and results of operations. 7. Contingencies. In January 1994, a securities class action complaint was ------------- filed against us and certain of our present and former officers or directors in the United States District Court, Northern District of California. The action was filed on behalf of a putative class of purchasers of the Company's stock during the period April 6, 1993 through November 10, 1993. The complaint sought unspecified money damages and alleges that we and certain of our former officers or directors violated federal securities laws in connection with various public statements made during the putative class period. The Court granted summary judgment to us and our former officers and directors in August 2000. The plaintiff has filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. The Company and its former officers believe that the complaint is without merit, and will continue to defend the action vigorously if necessary. We are also a party to certain other claims in the normal course of our operations. While the results of such claims cannot be predicted with any certainty, we believe that the final outcome of such matters will not have an adverse effect on our financial position and results of operations. -9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The trend analyses and other non-historical information contained in Form 10-Q are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor provisions of those Sections. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and similar expressions identify such forward looking statements. Such forward looking statements include, without limitation, statements concerning the markets for our products, operating results, our Broadband Access division, amortization of goodwill, customer concentration, competition and pricing pressure, the effective tax rate, gross margins, production activities, availability of key components, research and development expense, accounting pronouncements, liquidity and capital resources and market risk in interest rates and foreign currency exchange rates. Overview Symmetricom designs, manufactures and markets advanced network synchronization systems and intelligent access systems for the global telecommunications market. Synchronization is an essential requirement for modern telecommunications service providers as they move to high capacity and high-speed digital transmission technologies. Our core synchronization products consist of Digital Clock Distributors based on quartz, rubidium and Global Positioning System ("GPS") technologies, which provide highly accurate and uninterruptible timing. The products are marketed to public network providers, ILEC's, Post Telephone and Telegraph companies (PTTs), Competitive Local Exchange Carriers (CLEC's), other telephone companies, wireless service providers, cable TV operators, ISPs and communications OEMs. On September 29, 2000, we sold our United Kingdom based dielectric Antenna Division to a joint venture called Sarantel Limited for approximately $0.6 million cash, subject to an escrow agreement. Symmetricom maintains a nearly 19% investment stake in Sarantel Limited. We realized a gain of $0.1 million, or $0.08 million after taxes, related to the sale of the Antenna Division. See Note 4 of the Notes to Consolidated Financial Statements. On March 30, 2000, we sold our GPS division to Silicon Systems, Ltd., ("SSL") for $9.5 million in cash. Additionally, Symmetricom made an irrevocable application for subscription shares of SSL for $3.0 million. We realized a gain of $6.7 million, or $4.2 million after taxes related to the sale of the GPS division. SSL changed its name to Parthus Technologies plc ("Parthus") prior to completing an initial public offering in May 2000. See Note 4 of the Notes to Consolidated Financial Statements. On September 30, 1999, Symmetricom acquired certain assets of Hewlett-Packard Company's Communications Synchronization Business ("HP Product Line business") for $19.4 million in cash. The acquisition has been accounted for under the purchase method of accounting. The net purchase price of $19.8 million, which includes cash paid of $19.0 million, transaction costs of $0.4 million and assumed liabilities of $0.4 million, was allocated to tangible assets acquired of $1.4 million, capitalized developed technology of $8.0 million, other intangible assets of $6.9 million and in-process research and development ("IP R&D") of $3.5 million. As part of the acquisition of the HP Product Line business, goodwill of approximately $14.9 million will be amortized as follows; $0.4 million over five years, $9.9 million over seven years, and $4.6 million over ten years, and is included in general and administrative expense. Pursuant to this transaction, we recorded $6.8 million of non-recurring charges, $3.5 million for IP R&D and $3.3 million for recruiting and employee expenses. See Note 3 of the Notes to Consolidated Financial Statements. -10- On April 14, 1999, we sold our Linfinity Microelectronics Inc. ("Linfinity") semiconductor subsidiary to Microsemi Corporation for $24.1 million in cash, of which $1.1 million is subject to an escrow agreement. The per share consideration to be paid to shareholders of Linfinity is $2.96 per Preferred Share and $1.46 per common Share. The outstanding capital stock of Linfinity comprised of 6,000,000 shares of preferred stock and 4,197,824 shares of common stock. There were stock options outstanding to purchase 121,449 and 109,000 shares of Linfinity's common stock at the option price of $0.50 and $0.80 per share, respectively. The holders of these options were entitled to receive in cash the difference between $1.46 and the option exercise price. Of the $24.1 million aggregate purchase price, $23.6 million was paid to Symmetricom (including amounts currently held in escrow) and $0.5 million was paid to former minority shareholders and option holders of Linfinity. The Linfinity business has been accounted for as a discontinued operation and, accordingly, our net assets disposed have been segregated from continuing operations in the consolidated balance sheets and the results of operations have been excluded for all periods from the results discussed below, except where specifically stated otherwise. See Note 4 of the Notes to Consolidated Financial Statements. Results of Operations Our net sales increased by $16.4 million (84%) to $36.0 million in the first quarter of fiscal 2001 from $19.6 million in the first quarter of fiscal 2000. The increase in net sales in the first quarter of fiscal 2001 compared to the corresponding period of fiscal 2000 was primarily due to revenues from the wireless products acquired from the HP's product line business, including NetSync and wireless OEM products, as well as higher sales of synchronization shelves and cards. Our gross profit, as a percentage of net sales, was 42.8% in the first quarter of fiscal 2001, compared to 46.1% in the corresponding period of fiscal 2000, respectively. Our gross profit decrease in the first quarter of fiscal 2001 compared to the corresponding period of fiscal 2000 was primarily due to lower margins on the HP Product Line products. Research and development expense was $3.2 million (or 8.8% of net sales) in the first quarter of fiscal 2001, compared to $3.3 million (or 16.8% of net sales) in the corresponding period of fiscal 2000. The decrease as a percentage of net sales is primarily due to scales of economy achieved through the acquisition of Hewlett-Packard products. Selling, general and administrative expense was $7.2 million (or 20% of net sales) in the first quarter of fiscal 2001, respectively, compared to $5.1 million (or 25.8% of net sales) in the corresponding period of fiscal 2000. The increase was primarily due to higher marketing and sales expense associated with increased sales, goodwill amortization and higher administrative expenses. As a part of the acquisition of the HP Product Line business, goodwill of approximately $14.9 million will be amortized as follows; $0.4 million over five years, $9.9 million over seven years, and $4.6 million over ten years, and is included in the general and administrative expense. In August 2000, we recorded a non-recurring gain on sale of investment (Parthus stock) of $1.8 million (or 5.1% of net sales). Interest income was $0.6 million in the first quarter of fiscal 2001 compared to $0.7 million in the corresponding period of fiscal 2000. The decrease was primarily due to the $19.4 million cash expenditure to acquire the HP Product Line business, which resulted in lower invested cash balances. Interest expense was flat at $0.2 million in the first quarters of fiscal 2001 and fiscal 2000. The interest expense is predominantly associated with the capital lease on the Company's building in San Jose. -11- Our effective tax rate was 25% in the first quarter of fiscal 2001, compared to 21% in the corresponding period of fiscal 2000. Our effective tax rate is affected by the percentage of qualified Puerto Rico earnings compared to our total earnings as most of our Puerto Rico earnings are taxed under Section 936 of the U.S. Internal Revenue Code, which exempts qualified Puerto Rico earnings from federal income taxes. The increase in effective tax rate for first quarter, fiscal 2001, is primarily due to our expectation that a higher percentage of total earnings will be subject to the full federal tax rate. The federal 936 exemption is subject to wage-based limitations and expires at the end of fiscal 2006. In addition, this exemption will be subject to further limitations during fiscal years 2003 through 2006. As a result of the factors discussed above, net earnings from continuing operations in the first quarter of fiscal 2001 were $5.5 million or $.22 per share (diluted) compared to $0.9 million or $.04 per share (diluted) in the same period of fiscal 2000 Liquidity and Capital Resources Working capital increased to $78.3 million at September 30, 2000 from $66.4 million at June 30, 2000, and the current ratio remained flat at 3.1. During the same period, cash, cash equivalents, and short-term investments increased to $62.5 million from $55.3 million, primarily due to the $1.8 million gain from the sale of Parthus stock, $4.5 million in unrealized gains on securities, $2.4 million in proceeds from issuance of common stock, offset by $0.7 million used for operating activities, and $0.8 million used for other investing and financing activities. At September 30, 2000 we had approximately $7.0 million of unused credit available under our bank line of credit. We believe that cash, cash equivalents, funds generated from operations, investments, financing activities, and funds available under our bank line of credit will be sufficient to satisfy working capital requirements and capital expenditures over the near term. At September 30, 2000, we had no outstanding commitments to purchase capital equipment. However we expect to begin implementation of an ERP system during the second half of fiscal 2001. Factors That May Affect Future Operating Results Our actual results could differ materially from those discussed in the forward looking statements, due to a number of factors, including the factors listed below. Fluctuations in Operating Results. Our quarterly and annual operating results have fluctuated in the past and may continue to fluctuate in the future, due to several factors, including, without limitation : (a) the ability to integrate successfully and timely the Communications Synchronization business, products and employees acquired from Hewlett- Packard with our employees including the transfer of Korea production lines to our Puerto Rico facility; (b) the ability to obtain sufficient supplies of GPS products from SSL; (c) the ability to obtain sufficient supplies of sole or limited source components; (d) changes in the product or customer mix of sales; (e) the ability to manage fluctuations in manufacturing yields and other factors; (f) increases in the prices of the components that we purchase; (g) the ability to manage the level and value of inventories; (h) the ability to accurately anticipate both the volume and timing of customer orders, including current and planned Communications Synchronization products; -12- (i) the cancellation or rescheduling of customer orders; (j) the gain or loss of significant customers; (k) the ability to introduce new products on a timely and cost-effective basis; (l) the timing of new product introductions and that of our competitors; (m) customer delays in qualification of new products; (n) the ability to manage increased competition and competitive pricing pressures; (o) the ability to manage fluctuations, especially declines, in the average selling prices of products; (p) market acceptance of new or enhanced versions of our products and our competitors' products; (q) the ability to manage the long sales cycle associated with our products; (r) the ability to manage cyclical conditions in the telecommunications industry; (s) the ability to maintain quality levels for the product's, and (t) reduced rates of growth of telecommunications services and high- bandwidth applications. A significant portion of our operating and manufacturing expenses are relatively fixed in nature and planned expenditures are based in part on anticipated orders. If we are unable to adjust spending in a timely manner to compensate for any unexpected future sales shortfall, it may harm our business. Our operations entail a high level of fixed costs and require an adequate volume of production and sales to achieve and maintain reasonable gross profit margins and net earnings. Therefore, any significant decline in demand for our products or reduction in our average selling prices, or any material delay in customer orders may harm our business, financial condition and results of operations. In addition, our future results depend in large part on growth in the markets for our products. The growth in each of these markets may depend on, among other things, changes in general economic conditions, or conditions which relate specifically to the markets in which we compete, changes in regulatory conditions, legislation, export rules or conditions, interest rates and fluctuations in the business cycle for any particular market segment. If our quarterly or annual operating results do not meet the expectations of securities analysts and investors, the trading price our common stock could significantly decline. Uncertainty of Timing of Product Sales; Limited Backlog. A substantial portion of our quarterly net sales depend on orders received and shipped during that quarter, of which a significant portion may be received during the last month or even the last days of that quarter. The timing of the receipt and shipment of even one large order may have a significant impact on our net sales and results of operations for such quarter. Furthermore, most orders in backlog can be rescheduled or canceled without significant penalty. As a result, it is difficult to predict our quarterly results even during the final days of a quarter. Delays in Obtaining Needed Standard Parts, Single Source Components and Services from Suppliers. Delays in standard parts and services from our suppliers are due to an overall worldwide parts shortage which has resulted in longer lead times for certain key parts. Additionally, we have experienced delays in our single source components from time to time. The inability to obtain sufficient key components as required could result in delays or reductions in product shipments, which could harm our business. For example we will discontinue our IDST products line because components are no longer available from our suppliers. Customer Concentration. A relatively small number of customers have historically accounted for, and is expected to continue to account for, a significant portion of our net sales in any given fiscal period. Samsung accounted for 18.3% of our net sales in the first quarter of fiscal 2001. The timing and level of sales to our largest customers have fluctuated significantly in the past and is expected to continue to fluctuate significantly from quarter to quarter and year to year in the future. For example our sales to Samsung was $10.7 million in fiscal 2000 compared to zero in fiscal 1999 and 1998, primarily due to the acquisition of wireless business from the HP Product Line business. We cannot be sure as to the timing or -13- level of future sales to our customers. The loss of one or more of our significant customers, or a significant reduction or delay in sales to any such customer may harm our business. New Product Development. The market for our products is characterized by: (a) rapidly changing technology; (b) evolving industry standards and changes in end-user requirements and (c) frequent new product introductions. Technological advancements could render our products obsolete and unmarketable. Our success will depend on our ability to respond to changing technologies and customer requirements and on our ability to develop and introduce new and enhanced products, in a cost-effective and timely manner. We recently established a Broadband Access division and have not yet commercially shipped the GoLong solution. The development of new or enhanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends. We may experience design, manufacturing, marketing and other difficulties that could delay or prevent the development, introduction or marketing of new products and enhancements. The introduction of new or enhanced products also requires that we manage the transition from older products in order to minimize disruption in customer ordering patterns and ensure that adequate supplies of new products can be delivered to meet anticipated customer demand. In the future, we expect to develop certain new products, that we may not successfully develop, introduce, or manage the transition of these new products. Furthermore, products such as those we currently offer may contain undetected or unresolved errors when they are first introduced, or as new versions are released. Despite testing, errors may be found in new products or upgrades after commencement of commercial shipments. These errors could result in delays; or loss of market acceptance and sales; diversion of development resources; injury to our reputation and increased service and warranty costs. Delays in new product development or delays in production startup could harm our business. Product Performance and Reliability. Our customers establish demanding specifications for product performance and reliability. Our products are complex and often use state of the art components, processes and techniques. Undetected errors and design flaws have occurred in the past and could occur in the future. In addition to higher product service, warranty and replacement costs, such product defects may seriously harm our customer relationships and industry reputation, further magnifying the harm to our business. Competition; Pricing Pressure. We believe that competition in the telecommunications industry in general, and in the new and existing markets served by us in particular, is intense and likely to increase substantially. Our ability to compete successfully in the future will depend on, among other things: (a) the cost effectiveness, quality, price, service and market acceptance our products; (b) our response to the entry of new competitors or the introduction of new products by our competitors; (c) our ability to keep pace with changing technology and customer requirements; (d) the timely development or acquisition of new or enhanced products; and (e) the timing of new product introductions by us or our competitors. We believe that our primary competitor is Datum Inc. Incumbent Local Exchange Carriers (ILECs), may increasingly become significant competitors due in part to the enactment of The Telecommunications Act of 1996, which permit Incumbent Local Exchange Carriers (ILECs), among our largest customers, to manufacture telecommunications equipment. Many of our competitors, or potential competitors, are more established than us and have greater financial, manufacturing, technical and marketing resources. Furthermore, we expect: -14- (a) our competitors to continually improve their design and manufacturing capabilities and to introduce new products and services with enhanced performance characteristics and/or lower prices and (b) to continue to experience pricing pressures in all of our markets and to continue to experience price erosion in several of our product lines. Proprietary Technology. Our success will depend, in part, on our ability to protect trade secrets, obtain or license patents and operate without infringing on the rights of others. We rely on a combination of trademark, copyright and patent registration, contractual restrictions and internal security to establish and protect our proprietary rights. There can be no assurance that such measures will provide meaningful protection for our trade secrets or other proprietary information. We have United States and international patents and patent applications pending that cover certain technology used by our operations. However, while we believe that our patents have value, we rely primarily on innovation, technological expertise and marketing competence to maintain our competitive position. The telecommunications industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. While we intend to continue our efforts to obtain patents whenever possible, there can be no assurance that patents will be issued, or that new, or existing patents will not be challenged, invalidated or circumvented, or that the rights granted will provide any commercial benefit to us. We are also subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others. Although we are not currently party to any intellectual property litigation, from time to time we have received claims asserting that we have infringed the proprietary rights of others. There can be no assurance that third parties will not assert infringement claims against us in the future, or that any such claims will not result in costly litigation or require us to obtain a license for such intellectual property rights regardless of the merit of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. Business Acquisition and Integration. The acquisition of Hewlett-Packard's Communications Synchronization business resulted in the use of significant amounts of cash, dilutive issuances of stock options, and amortization expense related to goodwill and other intangible assets. In addition, the acquisition involves numerous risks, including: (a) the ability to integrate the acquired operations, technologies and products; (b) the ability to successfully transfer the subcontractor manufacturing lines in Korea to our Puerto Rico facility; (c) potential disruption in sales and marketing; (d) the diversion of management's attention from other business concerns; (e) risks of entering markets in which we have no or limited direct prior experience and (f) the potential loss of key employees of the acquired company. Potential Acquisition. As part of our strategy, we expect to review acquisition or disposition alternatives to buy other businesses or technologies that would complement our current products, expand our market coverage, enhance our technical capabilities, and offer growth opportunities. In the event of any future transactions, we could: (a) issue stock that would dilute our current shareholders' percentage ownership; (b) incur debt; (c) assume liabilities or (d) incur significant one-time write-offs. -15- These transactions also involve numerous risks, including: (a) problems combining the acquired operations, technologies or products; (b) unanticipated costs; (c) diversion of management's attention from our core business; (d) adverse effects on existing business relationships with suppliers and customers; (e) risks associated with entering markets in which we have no or limited prior experience and (f) potential loss of key employees of purchased organizations. We cannot assure that we will be able to successfully integrate any business, products, technologies or personnel that we might purchase in the future. Environmental Matters. Our operations are subject to numerous federal, state and local environmental regulations related to the storage, use, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our manufacturing process. While we have not experienced any significant effects on our operations from environmental regulations, there can be no assurance that changes in such regulations will not impose the need for additional capital equipment or other requirements or restrict our ability to expand our operations. Failure to comply with such regulations could result in suspension or cessation of our operations, or could subject us to significant liabilities. Although we periodically review our facilities and internal operations for compliance with applicable environmental regulations, such reviews are necessarily limited in scope and frequency and, therefore, there can be no assurance that such reviews have revealed, or will reveal, all potential instances of noncompliance. The liabilities arising from any noncompliance with such environmental regulations could materially harm our business. Governmental Regulations. Federal and state regulatory agencies, including the Federal Communications Commission and the various state public utility commissions and public service commissions, regulate most of our domestic telecommunications customers. Similar government oversight also exists in the international market. Although we are not directly affected by such legislation, the effects of such regulation on our customers may, in turn, harm our business. For instance, the sale of our products may be affected by the imposition upon certain of our customers of common carrier tariffs and the taxation of telecommunications services. These regulations are continuously reviewed and subject to change by the various governmental agencies. Changes in current or future laws or regulations, in the United States or elsewhere, could materially harm our business. Risks Associated with International Sales. Our export sales, which are primarily to Western Europe, Latin America, the Far East, and Canada accounted for 31% of net sales in first quarter of fiscal 2001 and 25% of net sales in the corresponding first quarter of fiscal 2000, respectively. International sales subject us to increased risks including: (a) foreign currency fluctuations; (b) export restrictions; (c) longer payment cycles; (d) unexpected changes in regulatory requirements or tariffs; (e) protectionist laws and business practices that favor local competition; (f) dependence on local vendors; (g) reduced or limited protections of intellectual property rights and (h) political and economic instability. -16- To date, almost none of our international revenue and cost obligations have been denominated in foreign currencies. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive and thus less competitive in foreign markets. A portion of our international revenues may be denominated in foreign currencies in the future, including the Euro, which will subject us to risks associated with fluctuations in these foreign currencies. We do not currently engage in foreign currency hedging activities or derivative arrangements, but may do so in the future to the extent that such obligations become more significant. Inventory Risks. Although we believe that we currently have appropriate provisions for inventory that has declined in value, become obsolete, or is in excess of anticipated demand, there can be no assurance that such provisions will be adequate. Our business could be materially affected, if significant inventories become obsolete, or are otherwise not able to be sold at favorable prices. Changes to Effective Tax Rate. Our effective tax rate is affected by the percentage of qualified Puerto Rico earnings compared to total earnings as most of our Puerto Rico earnings are taxed under Section 936 of the U.S. Internal Revenue Code, which exempts qualified Puerto Rico earnings from federal income taxes. This results in an overall lower effective tax rate for us. This exemption is subject to certain wage-based limitations and expires at the end of fiscal 2006. In addition, this exemption will be subject to further limitations during fiscal years 2003 through 2006. Fluctuations in Stock Price. Our stock price has been and may continue to be subject to significant volatility. Many factors, including any shortfall in sales or earnings from levels expected by securities analysts and investors, could have an immediate and significant effect on the trading price of our common stock. -17- Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risk related to fluctuations in interest rates and in foreign currency exchange rates: Interest Rate Exposure. The Company's exposure to market risk due to fluctuations in interest rates relates primarily to its short-term investment portfolio, which consists of corporate debt securities, which are classified as available-for-sale and were reported at an aggregate fair value of $39.5 million as of September 30, 2000. These available-for-sale securities are subject to interest rate risk inasmuch as their fair value will fall if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from the levels prevailing at September 30, 2000, the fair value of the portfolio would not decline by a material amount. Additionally, a 10% decrease in the market interest rates would not materially impact the fair value of the portfolio. The Company does not use derivative financial instruments to mitigate the risks inherent in these securities. However, the Company does attempt to reduce such risks by typically limiting the maturity date of such securities to no more than nine months, placing its investments with high credit quality issuers and limiting the amount of credit exposure with any one issuer. In addition, the Company believes that it currently has the ability to hold these investments until maturity, and therefore, believes that reductions in the value of such securities attributable to short-term fluctuations in interest rates would not materially harm our business. Foreign Currency Exchange Rate Exposure. The Company's exposure to market risk due to fluctuations in foreign currency exchange rates relates primarily to the foreign denominated balances, including, intercompany balance with its U.K. subsidiary. Although the company transacts business with various foreign countries, settlement amounts are usually based on U.S. currency. Transaction gains or losses have not been significant in the past and there is no hedging activity on pound sterling or other currencies. Based on the company's foreign denominated net receivables of $0.3 million at September 30, 2000, a hypothetical 10% adverse change in sterling against U.S. dollars would not result in a material foreign exchange loss. Consequently, the Company does not expect that reductions in the value of such intercompany balances or of other accounts denominated in foreign currencies, resulting from even a sudden or significant fluctuation in foreign exchange rates, would have a direct material impact on the Company's business. Notwithstanding the foregoing analysis of the direct effects of interest rate and foreign currency exchange rate fluctuations on the value of certain of the Company's investments and accounts, the indirect effects of such fluctuations could have a materially harmful effect on the Company's business. For example, international demand for the Company's products is affected by foreign currency exchange rates. In addition, interest rate fluctuations may affect the buying patterns of the Company's customers. Furthermore, interest rate and currency exchange rate fluctuations have broad influence on the general condition of the U.S., foreign and global economies, which could materially harm our business. PART II. OTHER INFORMATION Item 1. Legal Proceedings The information required by this item is disclosed in Note 7 of Notes to Consolidated Financial Statements set forth in Item 1 of Part I, above. The text of such Note is hereby incorporated herein by reference. Item 2. Not Applicable -18- Item 3. Not Applicable Item 4. Not Applicable Item 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.5 Amended Articles of Incorporation (as to be filed with the California Secretary of State) 3.6 Amended Bylaws 10.41 Employment offer letter by and between the Company and William Slater dated August 7, 2000. 27.1 Financial Data Schedule. (b) The Company filed no reports on Form 8-K this quarter. -19- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized. SYMMETRICOM, INC. (Registrant) DATE: November 13, 2000 By: ------------------- /s/ William Slater ------------------- William Slater Chief Financial Officer (for Registrant and as Principal Financial and Accounting Officer) 20 EX-3.5 2 0002.txt AMENDED ARTICLES OF INCORPORATION EXHIBIT 3.5 CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF SYMMETRICOM, INC. The undersigned, Thomas W. Steipp and William Slater, do hereby certify: 1. They are the duly elected and acting Chief Executive Officer and Secretary, respectively, of Symmetricom, Inc., a California corporation (the "Corporation"). 2. Article 3(a) of the Articles of Incorporation of the Corporation is amended to read as follows: "This corporation is authorized to issue two classes of stock, which shall be designated Common Stock and Preferred Stock, respectively. The total number of shares which this corporation is authorized to issue is One Hundred Fifty Million and Five Hundred Thousand (150,500,000) shares, consisting of One Hundred and Fifty Million (150,000,000) shares of Common Stock and Five Hundred Thousand (500,000) shares of Preferred Stock." 3. The foregoing amendment of the Articles of Incorporation has been duly approved by the board of directors. 4. The foregoing amendment of the Articles of Incorporation has been duly approved by the required vote of the shareholders in accordance with Section 902 and 903 of the California Corporations Code. The total number of outstanding shares of the Corporation entitled to vote with respect to the amendment is 23,306,217 shares of Common Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was a majority of the outstanding shares of Common Stock. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Dated: October 31, 2000 /s/ Thomas W. Steipp Thomas W. Steipp, Chief Executive Officer /s/ William Slater William Slater, Secretary CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF SILICON GENERAL, INC. William D. Rasdal and J. Scott Kamsler certify that: 1. They are the Chairman of the Board and Secretary, respectively, of Silicon General, Inc., a California corporation. 2. Article 1 of the Articles of Incorporation of this corporation is amended to read in full as follows: "(1) The name of this corporation is Symmetricom, Inc." 3. The foregoing amendment of Articles of Incorporation has been duly approved by the Board of Directors. 4. The foregoing amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 of the California Corporations Code. The total number of outstanding shares of Common Stock of the corporation entitled to vote with respect to this matter is 13,841,870. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50% of the outstanding shares of Common Stock. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Date: October 21, 1993 /s/ William D. Rasdal -------------------------------------------------- William D. Rasdal, Chairman of the Board /s/ J. Scott Kamsler, Secretary -------------------------------------------------- J. Scott Kamsler, Secretary CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF SILICON GENERAL, INC. William D. Rasdal and J. Scott Kamsler certify that: 1. They are the duly elected and acting President and Secretary, respectively, of Silicon General, Inc., a California corporation (the "Company"). 2. Article 7 of the Restated Articles of Incorporation of the Company shall be amended to read as follows: "(7) The corporation is authorized to indemnify the directors and officers of the corporation to the fullest extent permissible under California law." 3. The following provision shall be added to the Restated Articles of Incorporation of the Company as Article (8): "(8) Any repeal or modification of the foregoing provisions of these Articles of Incorporation regarding limitation of liability and indemnification shall not adversely affect any right of limitation of liability or indemnification of an agent of this corporation relating to acts or omissions occurring prior to such repeal or modification." 4. The foregoing amendments of the Restated Articles of Incorporation of the Company have been duly approved by the Board of Directors. 5. The foregoing amendments of the Restated Articles of Incorporation of the Company have been duly approved by the required vote of the shareholders in accordance with Section 902 of the California Corporations Code. The total number of outstanding shares of the Company entitled to vote with respect to the amendments is 12,308,593 shares of Common Stock, no par value. The number of shares voting in favor of the amendments equalled or exceeded the vote required. The percentage vote required was a majority of the outstanding shares of Common Stock. We declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate of Amendment are true and correct of our own knowledge. Dated: December 6, 1990 /s/ William D. Rasdal ------------------------------------------------- William D. Rasdal, President /s/ J. Scott Kamsler, Secretary ------------------------------------------------- J. Scott Kamsler, Secretary RESTATED ARTICLES OF INCORPORATION OF SILICON GENERAL, INC. --------------------- A California Corporation WILLIAM D. RASDAL and JOHN L. KEHOE certify that: 1. They are the duly elected and acting President and Secretary, respectively, of Silicon General, Inc., a California corporation ("the Company"). 2. The Articles of Incorporation of said company shall be amended and restated to read in full as follows: "(1) The name of this corporation is: SILICON GENERAL, INC. (2) The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. (3)(a) This corporation is authorized to issue two classes of stock, which shall be designated Preferred Stock and Common Stock, respectively. The total number of shares which this corporation is authorized to issue is Thirty-two Million Five Hundred Thousand (32,500,000) shares, consisting of Thirty-two Million (32,000,000) shares of Common Stock and Five Hundred Thousand (500,000) shares of Preferred Stock. (b) The Preferred Stock may be issued from time to time in one or more series. Prior to or simultaneously with the creation and/or issuance of any such series, the Board of Directors is hereby authorized to fix the rights, preferences, privileges, and relative priorities thereof to the full extent permitted by the laws of the State of California, unless such rights, preferences, privileges or relative priorities are otherwise established by these Articles of Incorporation. Without limitation, the foregoing authority shall include the right to create, determine, fix and/or alter: (i) dividend rights; (ii) dividend rate; 1 (iii) conversion rights; (iv) voting rights; (v) rights and terms of redemption (including sinking fund provisions); (vi) redemption price or prices; (vii) liquidation preferences of any series over any other series theretofore or thereafter issued; and (viii) the number of shares and the designation or title of any wholly unissued series of said Preferred Stock, and all or any of the foregoing, provided that all shares in any single series shall have the same rights, preferences and privileges. Said authority shall also include the right to increase or decrease the number of shares of any such series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. All shares of any series redeemed, repurchased or otherwise reacquired, as well as shares of a series authorized but not yet issued, shall thereupon, without further action by the Board of Directors, be or become authorized but unissued shares subject to all of the authority of the Board of Directors in this paragraph (b) provided. The foregoing powers of the Board of Directors shall be exercised in accordance with the provisions of Section 401 of the California Corporations Code. (4) Authority is hereby granted to the holders of the shares of this corporation to change from time to time the authorized number of directors of this corporation. (5) The corporation elects to be governed by all of the provisions of the General Corporation Law (as added to the California Corporations Code effective January 1, 1977, and as subsequently amended) not otherwise applicable to this corporation under Chapter 23 of said General Corporation Law. (6) The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. 2 (7) The corporation is authorized to provide indemnification of Agents (as defined in Section 317 of the Corporations Code) for breach of duty to the corporation and its shareholders through By-Law provisions, agreements with the Agents, vote of shareholders or disinterested directors or otherwise in excess of the indemnification otherwise expressly permitted by Section 317 of the Corporations Code, subject to the limits on such indemnification set forth in Section 204 of the Corporations Code or as to circumstances in which indemnity is expressly prohibited by Section 317." 3. The foregoing amendment and restatement of the Articles of Incorporation of the Company has been duly approved by the Board of Directors. 4. The foregoing amendment and restatement of the Articles of Incorporation of the Company has been duly approved by the required vote of shareholders in accordance with Section 902 of the Corporations Code. The total number of outstanding shares of the Company is 12,187,424 shares of Common Stock, no par value. The number of shares voting in favor of the amendment equalled or exceeded the vote required. The percentage vote required was more than fifty percent of both classes. We declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate are true and correct of our own knowledge. Date: _______________, 1989 /s/ William D. Rasdal ---------------------------------------- William D. Rasdal, President /s/ John L. Kehoe, Secretary ---------------------------------------- John L. Kehoe, Secretary 3 EX-3.6 3 0003.txt AMENDED BYLAWS EXHIBIT 3.6 CERTIFICATE OF AMENDMENT OF THE BYLAWS OF SYMMETRICOM, INC. The undersigned, Thomas W. Steipp and William Slater, do hereby certify: 1. They are the duly elected and acting Chief Executive Officer and Secretary, respectively, of Symmetricom, Inc., a California corporation (the "Corporation"). 2. Section 2 (Number of Directors) of the Bylaws of the Corporation is amended to read as follows: "(a) The number of directors shall be not less than a minimum of five nor more than a maximum of eight. After adoption or amendment of this bylaw by the shareholders, the exact number of directors shall be fixed, within the limits specified in this bylaw, by the following bylaw which may be amended from time to time by the Board of Directors. The indefinite number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and two-thirds percent (16- 2/3%) of the outstanding shares entitled to vote thereon. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1). (b) The number of directors of the corporation shall be presently set at 7." 3. The foregoing amendment of the Bylaws of Incorporation has been duly approved by the board of directors. 4. Th foregoing amendment of the Bylaws of Incorporation has been duly approved by the required vote of the shareholders in accordance with Section 211 and 212 of the California Corporations Code. The total number of outstanding shares of the Corporation entitled to vote with respect to the amendment is 23,306,217 shares of Common Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was a majority of the outstanding shares of Common Stock. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Dated: October 31, 2000 /s/ Thomas W. Steipp --------------------------------------------- Thomas W. Steipp, Chief Executive Officer /s/ William Slater --------------------------------------------- William Slater, Secretary -2- BYLAWS OF SYMMETRICOM, INC. (As amended through October 23, 2000) TABLE OF CONTENTS
Page ---- ARTICLE I OFFICES.................................................................. 1 Section 1. PRINCIPAL OFFICES................................................ 1 Section 2. OTHER OFFICES.................................................... 1 ARTICLE II MEETINGS OF SHAREHOLDERS................................................ 1 Section 1. PLACE OF MEETINGS................................................ 1 Section 2. ANNUAL MEETING................................................... 1 Section 3. SPECIAL MEETING.................................................. 2 Section 4. NOTICE OF SHAREHOLDERS' MEETING.................................. 2 Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..................... 3 Section 6. QUORUM........................................................... 3 Section 7. ADJOURNED MEETING; NOTICE........................................ 4 Section 8. VOTING........................................................... 4 Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS............... 4 Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......... 5 Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS.. 5 Section 12. PROXIES.......................................................... 6 Section 13. INSPECTORS OF ELECTION........................................... 6 ARTICLE III DIRECTORS.............................................................. 7 Section 1. POWERS........................................................... 7 Section 2. NUMBER OF DIRECTORS.............................................. 7 Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS......................... 8 Section 4. VACANCIES........................................................ 8 Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE...................... 9 Section 6. ANNUAL MEETING................................................... 9 Section 7. OTHER REGULAR MEETINGS........................................... 9 Section 8. SPECIAL MEETINGS................................................. 9 Section 9. QUORUM........................................................... 10 Section 10. WAIVER OF NOTICE................................................. 10 Section 11. ADJOURNMENT...................................................... 10 Section 12. NOTICE OF ADJOURNMENT............................................ 10 Section 13. ACTION WITHOUT MEETING........................................... 10 Section 14. FEES AND COMPENSATION OF DIRECTORS............................... 10 Section 15. APPROVAL OF LOANS TO OFFICERS.................................... 11
-i- ARTICLE IV COMMITTEES.............................................................. 11 Section 1. COMMITTEE OF DIRECTORS........................................... 11 Section 2. MEETINGS AND ACTION OF COMMITTEES................................ 11 ARTICLE V OFFICERS................................................................. 12 Section 1. OFFICERS......................................................... 12 Section 2. ELECTION OF OFFICERS............................................. 12 Section 3. SUBORDINATE OFFICERS............................................. 12 Section 4. REMOVAL AND RESIGNATION OF OFFICERS.............................. 12 Section 5. VACANCIES IN OFFICES............................................. 13 Section 6. CHAIRMAN OF THE BOARD............................................ 13 Section 7. PRESIDENT........................................................ 13 Section 8. VICE PRESIDENTS.................................................. 13 Section 9. SECRETARY........................................................ 13 Section 10. CHIEF FINANCIAL OFFICER; TREASURER............................... 14 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS.................................................................. 14 Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS........................ 14 Section 2. INDEMNIFICATION OF OTHERS........................................ 15 Section 3. PAYMENT OF EXPENSES IN ADVANCE................................... 15 Section 4. INDEMNITY NOT EXCLUSIVE.......................................... 15 Section 5. INSURANCE INDEMNIFICATION........................................ 15 Section 6. CONFLICTS........................................................ 15 ARTICLE VII RECORDS AND REPORTS.................................................... 16 Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER..................... 16 Section 2. MAINTENANCE AND INSPECTION OF BYLAWS............................. 16 Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS............ 17 Section 4. INSPECTION BY DIRECTORS.......................................... 17 Section 5. ANNUAL REPORT TO SHAREHOLDERS.................................... 17 ARTICLE VIII GENERAL CORPORATE POWERS.............................................. 17 Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............ 17 Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS........................ 18 Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED................ 18 Section 4. CERTIFICATE FOR SHARES........................................... 18 Section 5. LOST CERTIFICATES................................................ 18 Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS................... 18 Section 7. CONSTRUCTION AND DEFINITIONS..................................... 19
-ii- ARTICLE IX AMENDMENTS.............................................................. 19 Section 1. AMENDMENTS BY SHAREHOLDERS....................................... 19 Section 2. AMENDMENT BY DIRECTORS........................................... 19
-iii- BYLAWS OF SYMMETRICOM, INC. (a California corporation) ARTICLE I OFFICES Section 1. PRINCIPAL OFFICES. The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the board of directors shall fix and designate a principal business office in the State of California. Section 2. OTHER OFFICES. The board of directors or officers of the corporation may at any time establish branch or subordinate offices at any place or places wherein such board or officers shall deem advisable. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside of the State of California designated by the board of directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation. Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be held each year on the date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Thursday of October in each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At each annual meeting directors shall be elected, and any other proper business may be transacted. -1- Section 3. SPECIAL MEETING. A special meeting of shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting. If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board, then, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held. Section 4. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) (or, if sent by third-class mail pursuant to Section 5 of this Article II, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted), or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the following paragraph of this Section 4 of Article II, any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) an amendment to the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal. Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Written notice of any meeting of shareholders given shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section 605 of the Code) on the record -2- date for the shareholders' meeting, or (iv) telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice. An affidavit of mailing or other means of giving any notice of any shareholders' meeting shall be executed by the secretary, assistant secretary, or any transfer agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation, and shall be prima facie evidence of the giving of such notice. Section 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned -3- meeting the corporation may transact any business which might have been transacted at the original meeting. Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders' vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. Except as provided in the last paragraph of this Section 8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and voting on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes or cumulative voting is required by California General Corporation Law or by the articles of incorporation or by these bylaws. At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more ---- candidates a number of votes greater than the number of the shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect. Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of the shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the -4- waiver of notice or consent shall state the general nature of the proposal. All such waivers, consent, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting. Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy on the board of directors (provided that the vacancy was not created by removal of a director and that it has not been filled by the directors) by a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders' proxy holders, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary. If the consents of all shareholders entitled to vote have not been solicited in writing, and if the unanimous written consent of all such shareholders shall not have been received, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) indemnification of agents of the corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval. Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the board of directors may fix, -5- in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later. The record date for any other purpose shall be as provided in Article VIII of these bylaws. Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Corporations Code of California. Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the board of directors may appoint any person or persons other than nominees for office to act as an inspector or inspectors of election at the meeting or its adjournment. If no inspectors of election are -6- so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill that vacancy. These inspectors shall: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; (b) Receive votes, ballots or consents; (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine when the polls shall close; (f) Determine the result; and (g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. ARTICLE III DIRECTORS Section 1. POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to the action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. Section 2. NUMBER OF DIRECTORS. (a) The number of directors shall be not less than a minimum of five nor more than a maximum of eight. After adoption or amendment of this bylaw by the shareholders, the exact number of directors shall be fixed, within the limits specified in this bylaw, by the following bylaw -7- which may be amended from time to time by the Board of Directors. The indefinite number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote thereon. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1). (b) The number of directors of the corporation shall be seven (7). Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. No reduction of the authorized number of directors shall have the effect of removing any director before the director's term of office expires. Section 4. VACANCIES. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary, or the board of directors, unless the notice specifies a later time for that -8- resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective. No reduction of the authorized number of directors shall have the effect of removing any director before that director's terms of office expires. Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting. Section 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required. Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice. Section 8. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board or the president or any vice president or the secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4,) days before the time of the holding of the meeting. In case notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation. -9- Section 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees), and Section 317(e) of that Code (as to indemnification of directors), the articles of incorporation, and other applicable laws. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. Section 10. WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice to that director. Section 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of adjournment. Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as an unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services. -10- Section 15. APPROVAL OF LOANS TO OFFICERS. The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the California Corporations Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors. ARTICLE IV COMMITTEES Section 1. COMMITTEE OF DIRECTORS. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) the approval of any action which, under the General Corporation Law of California, also requires shareholders' approval or approval of the outstanding shares; (b) the filling of vacancies on the board of directors or in any committee; (c) the fixing of compensation of the directors for serving on the board or on any committee; (d) the amendment or repeal of bylaws or the adoption of new bylaws; (e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable; (f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or (g) the appointment of any other committees of the board of directors or the members of these committees. Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 5 (place of meetings) Section 7 (regular meetings), Section 8 (special -11- meetings and notice), Section 9 (quorum), Section 10 (waiver of notice), Section 11 (adjournment), Section 12 (notice of adjournment) and Section 13 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee; special meetings of committees may also be called by resolution of the board of directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS Section 1. OFFICERS. The officers of the corporation shall be a chairman of the board or a president, or both, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chief executive officer, a chief operating officer, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment. Any contract of employment with an officer shall be unenforceable unless in writing and specifically authorized by the board of directors. Section 3. SUBORDINATE OFFICERS. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine. Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of any officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be -12- necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office. Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such officer be elected, shall, if present, preside at meeting of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or prescribed by the bylaws. If there is no president or chief executive officer, the chairman of the board shall act as chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V. Section 7. PRESIDENT. Subject to any supervisory powers, if any, as may be given by the board of directors to the chairman of the board and/or chief executive officer, if there be such an officer or officers, the president shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the affairs of the corporation. In the absence of the chairman of the board, or if there be none, he shall preside at all meetings of the shareholders and at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. Section 8. VICE PRESIDENTS. In the absence or disability of the chairman of the board, the chief executive officer and the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the such officers, and when so acting shall have all the powers of, and be subject to all the restrictions upon, such officers. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, the chairman of the board, the chief executive officer, or the president. Section 9. SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and action of the directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice given, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number -13- and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by the bylaws. Section 10. CHIEF FINANCIAL OFFICER; TREASURER. The chief financial officer or, if there be none, the treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer (or the treasurer) shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chairman of the board, the chief executive officer, the president and board of directors, whenever they request it, an account of all of his transactions as chief financial officer (or treasurer) and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws. Should there be no one serving in the capacity of chief financial officer, the treasurer (or, in his absence, the assistant treasurer) shall exercise all of the duties and assume all of the responsibilities of the chief financial officer. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which -14- was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. Section 2. INDEMNIFICATION OF OTHERS. The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. Section 3. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI. Section 4. INDEMNITY NOT EXCLUSIVE. The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation. Section 5. INSURANCE INDEMNIFICATION. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI. Section 6. CONFLICTS. No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears: (1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of -15- the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. ARTICLE VII RECORDS AND REPORTS Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least once percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors may (i) inspect and copy the records of the shareholders' names and addresses and shareholdings during usual business hours on five (5) days' prior written demand on the corporation and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent's usual charges for such list, a list of the shareholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand. Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business in this state, the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date. -16- Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interest as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation. Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. Section 5. ANNUAL REPORT TO SHAREHOLDERS. The corporation shall prepare and send to its shareholders an annual report to shareholders as required by Section 1501 of the California General Corporation Law. ARTICLE VIII GENERAL CORPORATE POWERS Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution, or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later. -17- Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. Section 4. CERTIFICATE FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue. Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the board of directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other -18- corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers. Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. ARTICLE IX AMENDMENTS Section 1. AMENDMENTS BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation. Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended, or repealed by the board of directors. -19- EX-10.41 4 0004.txt EMPLOYMENT OFFER LETTER ================================================================================ EXHIBIT 10.41 Personal and Confidential November 10, 2000 Bill Slater 13744 Camino Rico Saratoga, CA 95070 Dear Bill I am pleased to confirm Symmetricom, Inc.'s, offer of employment to you. Symmetricom's advanced network products, the "Heartbeat of the Net/TM/", play a critical role in the operation and quality of service of global wireless and wireline telecommunications networks. Global customers include network operators, network service providers, and network equipment manufactures. Symmetricom's synchronization and timing equipment is deployed in tens of thousands of central offices and wireless base stations in more than 100 countries around the world. The decision to join our company is an important one. We believe that success in this position is as important to your future as it is to ours. From the interview process you should have gained an understanding of our VISION for the future, as well as the culture and values that frame our actions. We also want you to have a clear understanding of the position that you will be accepting. If you have questions regarding any of these areas, please feel free to contact us. Symmetricom has developed a set of core values that are key to our success (see attached document--Guided by Values). Each employee has the responsibility of exhibiting these values in day-to-day work behaviors. Prior to accepting this offer, it is important that you understand and agree to uphold these values as an integral part of your employment with Symmetricom. On behalf of Tom Steipp, President and CEO, we offer the exempt position of Chief Financial Officer. As Tom indicated, your starting base salary will be $4,807.69 per week (which on an annualized basis is approximately $250,000). Formal performance evaluations are normally conducted on an annual basis beginning one year from your date of hire. Salary increases may be granted commensurate with your level of performance and in accordance with company guidelines. Since you will be involved in making decisions that will have a considerable effect on the productivity and profitability of the Company, we are pleased to recommend an option of 150,000 shares of Symmetricom, Inc. stock for you. Upon becoming an employee, you will receive this option under the terms and conditions of the Company's Stock Option Plans; at the fair market value on the day of the grant. In addition to your base salary you will be eligible to participate in the Symmetricom Incentive Compensation Program "ICP". Accomplishment of our FY01 business plan revenue and PBT numbers fund the plan to the 100% level for target earnings. Your target earnings level under the FY01 ICP will be 50% of your annual base salary on record at the beginning of the fiscal year. The ICP is subject to change with each fiscal year and must be approved by the board of directors. A Plan document covering the details of the FY01 Plan will be distributed within the next several weeks. Also, as a member of the executive staff, you are eligible to participate in our Executive Health Care Plan. I have enclosed a plan summary for your review. Please feel free to contact me with questions. As an enhancement to our benefit program you will be eligible to accrual vacation at the rate of four weeks vacation for each complete year of service with Symmetricom. Under our current vacation benefit plan this is the maximum accrual rate. This offer is valid until August 16, 2000, and is conditional upon proof of eligibility to legally work in the United States under the Immigration Reform and Control Act of 1986 (IRCA). Please refer to the I-9 Explanation which explains IRCA and the documents you must bring to orientation on your first day of work. In addition, it is understood that your employment with Symmetricom is voluntarily entered into and is for no specified term. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the company is free to make changes in any aspect or to conclude it's at will employment relationship with you at any time, with or without cause. It is also understood that you will not violate any previously signed agreements covering proprietary information and that you will exercise utmost diligence to protect and guard the confidential information of our company as stated in the enclosed Invention Assignment and Secrecy Agreement. Bill, enclosed is a copy of this letter on which you may signify your acceptance by indicating your start date, signing it, along with the Invention Assignment & Secrecy Agreement, and returning both to our Human Resources Department (please indicate "Attn: Human Resources Department - CONFIDENTIAL" on the envelope). Tom, and I are looking forward to your joining us as soon as possible, as we feel that the tools and resources we have available, combined with your desire to succeed, provide opportunities for professional growth and personal challenge. We also feel that a person with your skills will make significant contributions to Symmetricom's continued success. If you have any questions, please feel free to call us. Sincerely, Symmetricom, Inc. /s/ Debbie Mackie Vice President, Human Resources and Facilities 2 Enclosures: Letter copy Invention Assignment & Secrecy Agreement Application/EEO (If applicable) Guided by Values Highlight of Benefits I-9 Explanation Insider Trading Policy Employee Handbook (Employment Guidelines) Exec-u-care Plan Summary cc: Tom Steipp Human Resources File EMPLOYMENT OFFER AGREED TO AND ACCEPTED I understand that this agreement sets forth our entire agreement respecting the terms of my employment with Symmetricom, Inc. and supersedes any prior representations or agreements, whether written or oral. I further understand that this agreement may not be modified, except in writing signed by the Chief Executive Officer of Symmetricom, Inc. and me. [_] Checking this box and signing below indicates I have received, understood and agreed to comply with the following enclosed company policies: Invention Assignment and Secrecy Agreement Insider Trading Policy Employee Handbook (Employment Guidelines) Guided by Values BY /s/ ------------------------------------------------------- Please sign full name (William Slater) START DATE ----------------------------------------- Monday is preferred 3 EX-27.1 5 0005.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-2001 JUL-01-2000 SEP-30-2000 23,011 39,506 24,501 377 27,796 115,355 39,531 20,463 150,530 37,051 0 0 0 22,856 12,896 150,530 35,999 35,999 20,579 20,579 8,532 0 169 7,311 1,828 5,483 0 0 0 5,483 0.24 0.22 EPS calculations reflect a three-for-two forward stock dividend effected August 18, 2000. Prior period financial data schedules have not been restated to reflect the stock dividend.
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