UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
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 its charter)
California No. 95-1906306
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
85 West Tasman Drive, San Jose, California 95134-1703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 943-9403
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
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
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ($229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant at September 1, 1995 was approximately $329,074,808. The
number of shares outstanding of the registrant's Common Stock at September
1, 1995 was 15,403,269.
Documents Incorporated by Reference
Excerpts of the SymmetriCom, Inc. 1995 Annual Report (Exhibit 13.1
hereto) are incorporated by reference into Parts I, II, and IV of this
Annual Report on Form 10-K. With the exception of those excerpts which are
specifically incorporated by reference in this Annual Report on Form 10-K,
the SymmetriCom, Inc. 1995 Annual Report is not to be deemed filed as part
of this Report.
Portions of the SymmetriCom, Inc. Proxy Statement for the 1995 Annual
Meeting of Shareholders filed with the Commission on
or about September 22, 1995 are incorporated by reference into
Part III of this Annual Report on Form 10-K.
PART I
ITEM 1. Business
SymmetriCom, Inc. (the "Company") was incorporated in California in
1956. The Company conducts its business through two separate operations,
Telecom Solutions and Linfinity Microelectronics Inc. (Linfinity). Each
operates in a different industry segment. Telecom Solutions principally
designs, manufactures and markets specialized transmission, synchronization
and intelligent access systems for both domestic and international
telecommunications service providers. Linfinity principally designs,
manufactures and markets linear and mixed signal integrated circuits for use
in intelligent power management, motion control and signal conditioning
applications in commercial, industrial, and defense and space markets.
Telecom Solutions
Telecom Solutions offers a broad range of time reference, or
synchronization, products and digital terminal products for the
telecommunications industry. Reliable synchronization is fundamental to
telecommunications services as the orderly and error free transmission of
data would be impossible without it. The Company's core synchronization
products consist principally of quartz and rubidium based Digital Clock
Distributors (DCDs), which provide highly accurate and uninterruptible
clocks that meet the synchronization requirements of digital networks.
Telecom Solutions has established itself as a leader in telephone digital
network synchronization and has introduced a series of DCDs and related
products. These products provide the critical timing which enables
telecommunications service providers to synchronize precisely such diverse
telephone network elements as digital switches, digital cross-connect
systems and multiplexers for customers who are dependent upon high quality
data transmission.
Customer requirements for synchronization are increasing in complexity
as telecommunications service providers implement new transmission
technologies. During fiscal 1994, Telecom Solutions developed a new
synchronization platform, the DCD500 Series, in response to evolving network
requirements, such as new digital services being provided, the Synchronous
Optical Network (SONET) and the Signaling System Seven (SS7) network.
Additionally, the platform meets the international standards required for
deployment in a Synchronous Digital Hierarchy network. During fiscal 1995,
the Company significantly enhanced the DCD500 Series by adding network
management functionality and performance monitoring capabilities. Such
capabilities include network alarm surveillance, central location monitoring
and additional clock functions.
A second synchronization platform was also developed in fiscal 1994,
the DCD Local Primary Reference (LPR), which provides the ability to cost
effectively use Global Positioning System (GPS) and Long Range Navigation
(LORAN-C) satellite and land navigation services to provide direct Stratum 1
traceable synchronization at offices equipped with DCD systems. The DCD
Integrated Local Primary Reference (ILPR), introduced in fiscal 1995,
integrates the LPR and the DCD in a single package. Additionally, a primary
reference clock was introduced in fiscal 1994 as Telecom Solutions first
Master Clock for telecommunications networks.
Telecom Solutions synchronization systems are typically priced from
$3,000 to $40,000.
In the first quarter of fiscal 1994, the Company acquired Navstar
Limited, a United Kingdom company, and its U.S. affiliate (collectively
"Navstar"). Navstar develops and manufactures systems that use global
positioning technology to determine precise geographic locations and
elevations to an accuracy of a few centimeters. GPS receivers are used
internally in the Company's synchronization products, such as the LPR and
ILPR. Navstar products are also sold in the survey, positioning and
location markets. Navstar products are typically priced from $300 to
$10,000.
Telecom Solutions digital terminal products include the Integrated
Digital Services Terminal (IDST) and Secure 7. The IDST is a network access
system designed for use in telephone company central and end offices.
Customers have deployed the IDST primarily as a transmission, monitoring and
test access vehicle for SS7 networks, which provides maintenance personnel
with flexible, centralized remote access to SS7 links for troubleshooting
and performance verification, resulting in a comprehensive solution in the
monitoring and transport of links requiring increased reliability. The IDST
can also be deployed as an intelligent digital terminal, an intelligent
network element providing connectivity between the transport network and
customer-serving side of the network. The IDST enhances the network with
distributed digital cross-connect functionality and provides subrate,
multipoint, test and surveillance capabilities to the subscriber loop.
Secure 7, a new product introduced in fiscal 1995, and to be shipped in
fiscal 1996, is a multi-bandwidth digital transmission terminal designed for
critical networks, such as SS7 data links, E911 services and customer data
communications networks. By design, Secure 7 is highly reliable and
provides network access and system automatic route diversity for these
critical data applications.
Digital terminal products are typically priced at less than $20,000 for
a small system to more than $300,000 for a large system.
The Company supplies its synchronization systems and digital terminal
products predominantly to the seven Regional Bell Operating Companies
(RBOCs), independent telephone companies, interexchange carriers and
international telecommunications service providers. Navstar predominantly
sells it products to Telecom Solutions, the U.S. Government, original
equipment manufacturers (OEMs) and international customers.
Linfinity Microelectronics Inc.
During July 1993, substantially all of the assets and liabilities of
the Company's Semiconductor Group were transferred to Linfinity, a newly-
formed subsidiary of the Company. Linfinity products principally include
linear and mixed signal, standard and custom integrated circuits (ICs)
primarily for use in intelligent power management, motion control and signal
conditioning applications in the commercial, industrial, and defense and
space markets. Linfinity derives a substantial portion of its sales from
power management products including pulse width modulators which shape and
manage the characteristics of voltage, linear voltage regulators which
control the power supply output levels, supervisory circuits which monitor
power supply and power factor correction ICs which reduce energy consumption
in fluorescent lighting and other applications. Additionally, a significant
portion of Linfinity sales is attributable to motion control ICs for the
computer disk drive industry. These ICs control the rotation of the disk
and the position of the read-write head. Signal conditioning ICs are a
relatively new product line for Linfinity. Signal conditioning ICs
translate and buffer analog signals from sensors in a variety of industrial,
computer, communications and automotive systems.
Linfinity manufactures linear and mixed signal ICs utilizing bipolar
and bipolar complementary metal oxide silicon (BiCMOS) wafer fabrication
processes. Linfinity also sells ICs utilizing CMOS wafer fabrication
processes. Linfinity's strategy is to continue development of more market
driven standard products which are primarily used in computer and data
storage, lighting, automotive, communications equipment, test equipment,
instrumentation, and defense and space equipment. Linfinity products are
generally priced from $0.30 to $5.00 for commercial and industrial
applications, $2.50 to $22.00 for defense applications and $200 to $500 for
high reliability defense and space applications.
Linfinity sells its products in the commercial, industrial, and defense
and space markets to OEMs and distributors.
Industry Segment Information
Information as to net sales, operating income and identifiable assets
attributable to each of the Company's two industry segments for each year in
the three-year period ended June 30, 1995, is contained in Note L of the
Notes to Consolidated Financial Statements included in the Company's 1995
Annual Report (the "Annual Report"), which Note is incorporated herein by
reference to Excerpts of the Annual Report.
Marketing
In the United States, Telecom Solutions markets and sells most of its
products through its own sales force to telephone and telecommunications
service providers. Internationally, Telecom Solutions markets and sells its
products through its own sales operation in the United Kingdom and
independent sales representatives and distributors elsewhere. In the United
States and internationally, Linfinity sells its products through its own
sales force and independent sales representatives to original equipment
manufacturers and distributors.
Licensing and Patents
The Company incorporates a combination of trademark, copyright and
patent registration, contractual restrictions and internal security to
establish and protect its proprietary rights. The Company has United States
patents and patent applications pending covering certain technology used by
its Telecom Solutions and Linfinity operations. In addition, both
operations use technology licensed from others. However, while the Company
believes that its patents have value, the Company relies primarily on
innovation, technological expertise and marketing competence to maintain its
competitive advantage. The telecommunications and semiconductor industries
are both characterized by the existence of a large number of patents and
frequent litigation based on allegations of patent infringement. The
Company intends to continue its efforts to obtain patents, whenever
possible, but there can be no assurance that any patents obtained will not
be challenged, invalidated or circumvented or that the rights granted will
provide any commercial benefit to the Company. Additionally, if any of the
Company's processes or designs are identified as infringing upon patents
held by others, there can be no assurances that a license will be available
or that the terms of obtaining any such license will be acceptable to the
Company.
Manufacturing
The Telecom Solutions manufacturing process consists primarily of in-
house electrical assembly and test performed by the Company's wholly-owned
subsidiary in Aguada, Puerto Rico. Additionally, the Company's wholly-owned
subsidiary, Navstar, in England performs in-house electrical assembly and
test of its GPS receivers.
The Linfinity manufacturing process consists primarily of bipolar and
BiCMOS wafer fabrication, component assembly and final test. Its ICs are
principally fabricated in the Company's wafer fabrication facility in Garden
Grove, California. However, Linfinity also utilizes outside services to
perform certain operations during the fabrication process. In addition,
most of Linfinity's ICs utilizing CMOS wafer processes are currently
manufactured by outside semiconductor foundries. Component assembly and
final test are performed in the Far East by independent subcontract
manufacturers or in Garden Grove by employees.
The Company primarily uses standard parts and components and standard
subcontract assembly and test, which are generally available from multiple
sources. The Company, to date, has not experienced any significant delays
in obtaining needed standard parts, single source components or services
from its suppliers but there can be no assurance that such problems will not
develop in the future. Additionally, the Company believes that the
semiconductor industry's IC production may not meet the demand for complex
components from the telecommunications and automotive industries in the near
future. However, the Company maintains a reserve of certain ICs, certain
single source components and seeks alternative suppliers where possible.
The Company believes that a lack of availability of ICs or single source
components would have an adverse effect on the Company's operating results.
Backlog
The Company's backlog was approximately $21,600,000 at June 30, 1995,
compared to approximately $18,000,000 at June 30, 1994. Backlog consists of
orders which are expected to be shipped within the next twelve months.
However, the Company does not believe that current or future backlog levels
are meaningful indicators of future revenue levels. Furthermore, most
orders in backlog can be rescheduled or canceled without significant
penalty. Telecom Solutions backlog was approximately $5,100,000 at both
June 30, 1995 and 1994. Historically, a substantial portion of Telecom
Solutions net sales in any fiscal period has been derived from orders
received during that period. Linfinity backlog was approximately $16,500,000
and $12,900,000 at June 30, 1995 and 1994, respectively. Linfinity backlog
is dependent on the cyclical nature of customer demand in each of its
markets.
Key Customers and Export Sales
One of Telecom Solutions' customers, Southwestern Bell Telephone,
accounted for 11% of the Company's net sales in fiscal 1995. No customer
accounted for 10% or more of net sales in fiscal years 1994 or 1993. Export
sales, primarily to the Far East, Canada and Western Europe accounted for
24%, 19% and 13% of the Company's net sales in fiscal years 1995, 1994 and
1993, respectively.
International sales may be subject to certain risks, including but not
limited to, foreign currency fluctuations, export restrictions, longer
payment cycles and unexpected changes in regulatory requirements or tariffs.
Gains and losses on the conversion to U.S. dollars of foreign currency
accounts receivable and accounts payable arising from international
operations may in the future contribute to fluctuations in the Company's
business and operating results. Sales and purchase obligations denominated
in foreign currencies have not been significant. Accordingly, the Company
does 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. Additionally, currency fluctuations
could have an adverse effect on the demand for the Company's products in
foreign markets.
Competition
The businesses in which the Company is engaged are highly competitive.
A number of the Company's competitors or potential competitors have been in
operation for a much longer period of time than the Company, have greater
financial, manufacturing, technical and marketing resources, and are able to
or could offer much broader lines of products than are presently marketed by
the Company.
Telecom Solutions competes primarily on product reliability and
performance, adherence to standards, customer service and, to a lesser
extent, price. The Company believes that Telecom Solutions generally
competes favorably with respect to these factors.
Linfinity competes primarily on price, product reliability and
performance, delivery time, and customer service. Linfinity has a broad
spectrum of customers predominantly in North America, the Far East and
Europe. Large multinational companies as well as smaller, focused niche
companies compete with Linfinity in North America. Primarily large
multinational companies compete with Linfinity in the Far East and Europe.
The Company believes that Linfinity generally competes favorably with
respect to these factors.
There can be no assurance that either Telecom Solutions or Linfinity
will be able to compete successfully in the future. The Company's ability
to compete successfully is dependent upon its response to changing
technology and customer requirements, development or acquisition of new
products, continued improvement of existing products, cost effectiveness and
market acceptance of the Company's products.
Research and Development
The Company has actively pursued the application of new technology in
the industries in which it competes and has its own staff of engineers and
technicians who are responsible for the design and development of new
products. In fiscal years 1995, 1994 and 1993, the Company's overall
research and development expenditures were $13,407,000, $11,454,000, and
$8,355,000, respectively. All research and development expenditures were
expensed as incurred. At June 30, 1995, 76 engineering and engineering
support employees were engaged in development activities. Telecom Solutions
focused its development efforts in fiscal year 1995 on enhancement of the
DCD500 Series and related synchronization products. Network management
functionality and monitoring capabilities were added to the DCD500 Series.
Additionally, the new digital terminal product, Secure 7, was designed and
introduced in fiscal 1995, and expected to be shipped in fiscal 1996.
Telecom Solutions research and development expenditures were $8,457,000,
$7,821,000 and $6,374,000 in fiscal years 1995, 1994 and 1993, respectively.
Linfinity continued to focus its development efforts in fiscal year 1995 on
improving its design capabilities, improving its bipolar and BiCMOS process
technologies and new product development. New products, which include but
are not limited to low drop out regulators, power factor correction circuits
and spindle drivers for use in power management, motion control and signal
conditioning applications are currently in the production stage.
Enhancement of these products incorporating increased functionality, and
additional new products are in the development stage. Linfinity research
and development expenditures were $4,950,000, $3,633,000 and $1,981,000 in
fiscal years 1995, 1994 and 1993, respectively. The Company will continue
to make significant investments in product development, although there can
be no assurance that the Company will be able to develop proprietary
products in the future which will be accepted in its markets.
Government Regulation
The telecommunications industry is subject to government regulatory
policies regarding pricing, taxation and tariffs which may adversely impact
the demand for the Company's telecommunications products. These policies
are continuously reviewed and subject to change by the various governmental
agencies. The Company is also subject to government regulations which set
installation and equipment standards for newly installed hardware.
Furthermore, there is certain legislation before the United States Congress
which, if enacted, would remove the current legal restrictions on the RBOCs
that prohibit them from manufacturing telecommunications equipment and
providing certain interexchange and long-distance services.
Environmental Regulation
The Company's 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 its
manufacturing process. Failure to comply with such regulations could result
in suspension or cessation of the Company's operations, could require
significant capital expenditures, or could subject the Company to
significant future liabilities.
Employees
At June 30, 1995, the Company had 651 employees, including 387 in
manufacturing, 100 in engineering and 164 in sales, marketing and
administration. At June 30, 1995, Telecom Solutions had 413 employees and
Linfinity had 238 employees. The Company believes that its future success
is highly dependent on its ability to attract and retain highly qualified
management, sales, marketing and technical personnel. Accordingly, the
Company maintains employee incentive and stock plans for certain of its
employees. Additionally, Linfinity maintains a separate employee stock
option plan for certain Linfinity employees. No Company employees are
represented by a labor union, and the Company has experienced no work
stoppages. The Company believes that its employee relations are good.
Operating Results and Stock Price Volatility
Future Company operating results will largely depend upon (i) the
Company's ability to implement new technologies and develop new products,
(ii) the Company's ability to market and sell new products, (iii) the
Company's response to increased competition, (iv) changes in product mix and
(v) manufacturing efficiencies. Future Telecom Solutions operating results
for a fiscal period will continue to be, as past results have been, highly
dependent upon the receipt and shipment of customer orders during that
fiscal period. Future Linfinity operating results will also be subject to
the cyclical nature of the semiconductor industry.
The Company's 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 adverse effect on the trading price of the
Company's common stock.
ITEM 2. Properties
The following are the principal facilities of the Company as of June
30, 1995:
Approximate Owned/Lease
Principal Floor Area Expiration
Location Operations (Sq. Ft.) Date
San Jose, California Corporate Offices,
and Telecom Solutions
administration,
sales, engineering
and manufacturing 47,000 July 1997
Aguada, Puerto Rico Telecom Solutions
manufacturing 22,000 September 2000
Aguada, Puerto Rico Telecom Solutions
manufacturing 23,000 September 1999
Northampton, Navstar administration,
England sales, engineering and
manufacturing 18,000 April 1999
Garden Grove, Linfinity administration,
California sales, engineering
and manufacturing 96,000 Owned
Garden Grove, Linfinity wafer
California fabrication 9,000 Owned
The 96,000 square foot facility located in Garden Grove, California is
subject to an encumbrance as described in Note E of the Notes to
Consolidated Financial Statements which information is incorporated herein
by reference to Excerpts of the Annual Report. The Company believes that
its current facilities are well maintained and generally adequate to meet
short-term requirements.
ITEM 3. Legal Proceedings
In January 1994, a complaint was filed in the United States District
Court for the Northern District of California against the Company and three
of its officers, by one of the Company's shareholders. The plaintiff
requested that the court certify him as representative of a class of persons
who purchased shares of the Company's common stock during a specified period
in 1993. The complaint alleges that false and misleading statements made
during that period artificially inflated the price of the Company's common
stock in violation of federal securities laws. There is no specific amount
of damages requested in the complaint. Limited discovery has occurred and
no trial date has been set. The Company and its officers believe that the
complaint is entirely without merit, and intend to vigorously defend against
the action. The Company is also a party to certain other claims which are
normal in the course of its operations. While the results of such claims
cannot be predicted with certainty, management, after consultation with
counsel, believes that the final outcome of such matters will not have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders of the
Company during the last quarter of the fiscal year ended June 30, 1995.
Executive Officers of the Company
Following is a list of the executive officers of the Company and brief
summaries of their business experience. All officers, including executive
officers, are elected annually by the Board of Directors at its meeting
following the annual meeting of shareholders. The Company is not aware of
any officer who was elected to the office pursuant to any arrangement or
understanding with another person.
Name Age Position
William D. Rasdal 62 Chairman of the Board and Chief
Executive Officer
Paul N. Risinger 62 Vice Chairman and Assistant Secretary
J. Scott Kamsler 47 Vice President, Finance, Chief
Financial Officer and Secretary
D. Ronald Duren 52 President and Chief Operating Officer,
Telecom Solutions
Dale Pelletier 44 Vice President, Operations,
Telecom Solutions
Brad P. Whitney 41 President and Chief Operating Officer,
Linfinity Microelectronics Inc.
Mr. Rasdal has served as Chairman of the Board of the Company since
July 1989 and as Chief Executive Officer since joining the Company in
November 1985. From November 1985 until July 1989, Mr. Rasdal was President
and a Director of the Company. From March 1980 until March 1985, Mr. Rasdal
was associated with Granger Associates, a manufacturer of telecommunications
products. His last position with Granger Associates was President and Chief
Operating Officer. From November 1972 to January 1980, Mr. Rasdal was
employed by Avantek as Vice President and Division Manager for Avantek's
microwave integrated circuit and semiconductor operations. For the thirteen
years prior to joining Avantek, he was associated with TRW in various
management positions.
Mr. Risinger has served as Vice Chairman of the Company since August
1990 and as a Director of the Company since March 1989. From November 1985,
when Mr. Risinger joined the Company, until August 1990, he served as
Executive Vice President, Advanced Marketing and Technology (AMAT). From
April 1981 to May 1985, Mr. Risinger served as Executive Vice President,
AMAT, for Granger Associates and was responsible for the development of new
businesses for the Digital Signal Processing Division. For four years prior
thereto, he served as Executive Vice President and Chief Operating Officer
of the Safariland Companies, a manufacturer of equipment and accessories in
the public safety field. Prior to joining Safariland, Mr. Risinger was
associated with TRW in various management roles in marketing, research and
development, and general management for seventeen years.
Mr. Kamsler has served as Vice President, Finance, Chief Financial
Officer and Secretary since joining the Company in October 1989. Mr.
Kamsler has also served as a Director of DSP Technology Inc., a manufacturer
of computer automated measurement and control instrumentation, since
November 1988. Prior to October 1989, Mr. Kamsler served as Vice President,
Finance and Chief Financial Officer of Solitec, Inc. (January 1984 to
September 1989), a manufacturer of semiconductor production equipment, DSP
Technology Inc. (April 1984 to September 1989), a former affiliate of
Solitec, and E-H International, Inc. (March 1982 to January 1984), a
manufacturer of automatic test equipment, disk and tape drive controllers,
and printed circuit boards. From November 1977 until January 1982, Mr.
Kamsler held various finance positions with Intel Corporation.
Mr. Duren has served as President and Chief Operating Officer, Telecom
Solutions since August 1990. From August 1988 until August 1990, Mr. Duren
served as Vice President, Sales, Telecom Solutions. From July 1986, when
Mr. Duren joined the Company, until August 1988, he held the position of
Director of Marketing and Sales, Telecom Solutions. For three years prior
to joining the Company, Mr. Duren served as Vice President, Telco Sales for
Granger Associates. Previously, Mr. Duren served in various management
positions with AT&T for seventeen years.
Mr. Pelletier has served as Vice President, Operations, Telecom
Solutions since November 1993. From July 1993 until November 1993, Mr.
Pelletier served as Vice President and General Manager, Telecom Solutions.
From July 1992 until July 1993, Mr. Pelletier served as General Manager,
Synchronization Division, Telecom Solutions. From August 1990 until July
1992, he served as Synchronization Division Manager, Telecom Solutions.
From August 1989 until August 1990, Mr. Pelletier served as Operations
Manager, Telecom and Analog Solutions Divisions. From August 1986, when Mr.
Pelletier joined the Company, until August 1989, he held the position of
Manufacturing Manager, Telecom Solutions. Previously, Mr. Pelletier served
in various finance and manufacturing positions for nine years with several
manufacturing companies.
Mr. Whitney joined the Company in November 1992 as President and Chief
Operating Officer for Linfinity Microelectronics Inc. and has served in such
capacity since that date. He joined the Company after twelve years with
Texas Instruments (TI), an electronics company. From November 1990 to
November 1992, Mr. Whitney was the Standard Linear Products Manager,
Semiconductor Group at TI. From December 1985 to November 1990, Mr. Whitney
was the Op Amps Product Manager, Semiconductor Group. From November 1983
through November 1985, Mr. Whitney held various positions within the Voltage
Regulator Product Group at TI. For the three years prior to working in the
Semiconductor Group, Mr. Whitney was associated with the Consumer Products
Group. His last position in this Group was as IC Development Manager, Home
Computer Division. Prior to joining TI, Mr. Whitney was an Engineering
Supervisor and Instructor for the University of Southwestern Louisiana
Departments of Computer Science and Electrical Engineering.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The information set forth under the caption "Quarterly Results and
Stock Market Data (unaudited)" is incorporated herein by reference to
Excerpts of the Annual Report.
ITEM 6. Selected Financial Data
The information set forth under the captions "Financial Highlights,"
"Five Year Selected Financial Data" and the fourth sentence of footnote A to
the information set forth under the caption "Quarterly Results and Stock
Market Data (unaudited)" is incorporated herein by reference to Excerpts of
the Annual Report.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" is
incorporated herein by reference to Excerpts of the Annual Report.
ITEM 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the report thereon
of Deloitte & Touche LLP dated July 25, 1995, are incorporated herein by
reference to Excerpts of the Annual Report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information regarding directors appearing under the caption "Proposal
No. One - Election of Directors--Nominees" on pages 2 and 3 of the Company's
Proxy Statement for the 1995 Annual Meeting of Shareholders filed with the
Commission on September 22, 1995, (the "Proxy Statement") is incorporated
herein by reference.
Information regarding executive officers is included in Part I hereof
under the heading "Executive Officers of the Company" immediately following
Item 4 in Part I hereof.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, is incorporated herein by reference from
the section entitled "Other Information--Compliance with Section 16 of the
Securities Exchange Act of 1934" appearing on page 15 of the Proxy
Statement.
ITEM 11. Executive Compensation
Incorporated herein by reference to the Proxy Statement under the
captions "Proposal No. One - Election of Directors--Nominees" on pages 2 and
3, "Executive Officer Compensation" on pages 17, 18 and 19, "Proposal No.
One - Election of Directors--Director Compensation" on page 4 and "Certain
Transactions" on page 19.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the Proxy Statement under the
caption "Other Information--Share Ownership by Principal Shareholders and
Management" on pages 15 and 16.
ITEM 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Proxy Statement under the
caption "Certain Transactions" on page 19.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules
The following documents are filed as part of this report:
1. Financial Statements*:
Consolidated Balance Sheets at June 30, 1995 and 1994
Consolidated Statements of Operations for the years ended June
30, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1995,
1994 and 1993
Consolidated Statements of Cash Flows for the years ended June
30, 1995, 1994 and
1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
* Incorporated herein by reference to Excerpts of the Company's 1995
Annual Report
2. Financial Statement Schedules:
Independent Auditors' Report
For the three fiscal years ended June 30, 1995, Schedule II,
Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because they are not applicable,
not required, or the required information is included in the Consolidated
Financial Statements or notes thereto.
3. Exhibits:
See Item 14(c) below.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
fiscal year ended June 30, 1995.
(c) Exhibits
The exhibits listed on the accompanying index immediately
following the signature page are filed as a part of this report.
(d) Financial Statement Schedules
See Item 14(a) above.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
SymmetriCom, Inc.
We have audited the consolidated financial statements of SymmetriCom,
Inc. as of June 30, 1995 and 1994, and for each of the three years in the
period ended June 30, 1995, and have issued our report thereon dated July
25, 1995; such financial statements and report are included in your 1995
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of SymmetriCom, Inc.
listed in Item 14(a)2. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
_________________________
DELOITTE & TOUCHE LLP
San Jose, California
July 25, 1995
SCHEDULE II
SYMMETRICOM, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
Balance Charged
at to Costs Balance
Beginning and Deductions at
of Year Expenses (1) End of
Year
Year ended June 30, 1995:
Accrued warranty expense $ 2,071 $ 1,021 $ 572 $ 2,520
Allowance for doubtful accounts $ 242 $ 122 $ 25 $ 339
Year ended June 30, 1994:
Accrued warranty expense $ 2,136 $ 386 $ 451 $ 2,071
Allowance for doubtful accounts $ 114 $ 155 $ 27 $ 242
Year ended June 30, 1993:
Accrued warranty expense $ 1,047 $ 1,646 $ 557 $ 2,136
Allowance for doubtful accounts $ 109 $ 8 $ 3 $ 114
(1) Deductions represent amounts written off against the reserve or
allowance.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SYMMETRICOM, INC.
Date: September 22, 1995 By: /s/ J. Scott Kamsler
____________________
(J. Scott Kamsler)
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board and
Chief Executive Officer
/s/ William D. Rasdal (Principal Executive Officer) September 22, 1995
(William D. Rasdal)
Vice President, Finance and
Chief Financial Officer
/s/ J. Scott Kamsler (Principal Financial
(J. Scott Kamsler) and Accounting Officer) September 22, 1995
/s/ Howard Anderson Director September 22, 1995
(Howard Anderson)
/s/ Paul N. Risinger Director September 22, 1995
(Paul N. Risinger)
/s/ Roger A. Strauch Director September 22, 1995
(Roger A. Strauch)
/s/ Robert M. Wolfe Director September 22, 1995
(Robert M. Wolfe)
Exhibit
Number Index of Exhibits
3.1(1) Restated Articles of Incorporation.
3.2(2) Certificate of Amendment to Restated Articles of
Incorporation filed December 11, 1990.
3.3(10) Certificate of Amendment to Restated Articles of Incorporation
filed October 27, 1993.
3.4(10) By-Laws, as amended July 21, 1993.
4.1(3) Common Shares Rights Agreement dated December 6, 1990,
between Silicon General, Inc. and Manufacturers
Hanover Trust Company of California, including the form of
Rights Certificate and the Summary of Rights attached thereto as
Exhibits A and B, respectively.
4.2(4) Amendment to the Common Shares Rights Agreement dated
February 5, 1993 between Silicon General, Inc.
and Chemical Trust Company of California, formerly
Manufacturers Hanover Trust Company of California, including the
form of Rights Certificate and the Summary of Rights
attached thereto as Exhibits A and B, respectively.
10.1(5)(12) Amended and Restated Employees' Stock Option Plan (1980),
with form of Stock Option Agreement (1980 Plan).
10.2(5)(12) Amended and Restated Non-Qualified Stock Option Plan
(1982), with form of Employee Non-Qualified
Stock Option (1982 Plan).
10.3(5)(12) Amended and Restated Employee Stock Option Plan (1983),
with form of Stock Option Under Incentive Stock
Option Plan 1983.
10.4(12) 1990 Director Option Plan (as amended through October 25, 1995).
10.5(5)(12) Form of Director Option Agreement.
10.6(12) 1990 Employee Stock Plan (as amended through October 25, 1995).
10.7(5)(12) Forms of Stock Option Agreement, Restricted Stock Purchase
Agreement, Tandem Stock Option/SAR Agreement,
and Stock Appreciation Right Agreement for use under
the 1990 Employee Stock Plan.
10.8(11)(12) 1995 Employee Stock Purchase Plan, with form of
Subscription Agreement.
10.9(2) Loan Agreements between the Company and the John Hancock Mutual
Life Insurance Company, dated October 18, 1990,
including exhibits thereto.
10.10(6) Lease Agreement by and between the Company and Menlo
Tasman Investment Company dated June 16,
1986, and Amendment to Lease dated March 27, 1987.
10.11(2) Lease Agreement by and between Zeltex Puerto Rico, Inc., a
subsidiary of the Company, and Puerto
Rico Industrial Development Company dated January 22, 1991.
10.12(10) Lease Agreement by and between Telecom Solutions Puerto
Rico, Inc., a subsidiary of the Company, and
Puerto Rico Industrial Development dated August 9, 1994.
10.13(10) Lease Agreement by and between Navstar Systems Limited, a
subsidiary of the Company, and Baker
Hughes Limited dated April 22, 1994.
10.14(10) Revolving Credit Loan Agreement between the Company and
Comerica Bank-Detroit dated December 1, 1993.
10.15 First Amendment to the Revolving Credit Loan Agreement
between the Company and Comerica Bank-Detroit
dated April 20, 1995.
10.16(7) Form of Indemnification Agreement.
10.17(9) Linfinity Microelectronics Inc. Common Stock and Series A
Preferred Stock Purchase Agreement dated June 28, 1993.
10.18(9) Tax Sharing Agreement between Linfinity Microelectronics
Inc. and the Company dated June 28, 1993.
10.19(9) Intercompany Services Agreement between Linfinity
Microelectronics Inc. and the Company dated June 28, 1993.
10.20(9)(12) Linfinity Microelectronics Inc. 1993 Stock Option Plan
with form of Stock Option Agreement.
10.21(9) Linfinity Microelectronics Inc. Form of Indemnification
Agreement.
10.22(9)(12) Employment offer letter by and between the Company and
Brad P. Whitney, President and Chief Operating
Officer, Linfinity Microelectronics Inc. dated November 20, 1992.
10.23(8) Agreement for Sale and Purchase of the Navstar Business of
Radley Services Limited.
10.24(8) Agreement for the Sale and Purchase of Certain Assets of
Navstar Electronics, Inc.
13.1 SymmetriCom, Inc. Excerpts of the 1995 Annual Report.
21.1 Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
27.1 Financial Data Schedule.
Footnotes to Exhibits
(1) Incorporated by reference from Exhibits to Annual Report
on Form 10-K for the fiscal year ended July 2,
1989.
(2) Incorporated by reference from Exhibits to Annual Report
on Form 10-K for the fiscal year ended June 30, 1991.
(3) Incorporated by reference from Exhibits to Registration
Statement on Form 8-A filed with the Securities
and Exchange Commission on December 8, 1990.
(4) Incorporated by reference from Exhibits to Registration
Statement on Form 8-A filed with the Securities
and Exchange Commission on February 11, 1993.
(5) Incorporated by reference from Exhibits to Registration
Statement on Form S-8 filed with the Securities
and Exchange Commission on December 24, 1990.
(6) Incorporated by reference from Exhibits to Annual Report
on Form 10-K for the fiscal year ended June 28, 1987.
(7) Incorporated by reference from Exhibits to the 1990 Proxy
Statement.
(8) Incorporated by reference from Exhibits to Current Report
on Form 8-K filed with the Securities and
Exchange Commission on September 2, 1993.
(9) Incorporated by reference from Exhibits to Annual Report
on Form 10-K for the fiscal year ended June 30, 1993.
(10) Incorporated by reference from Exhibits to Annual Report on Form
10-K for the fiscal year ended June 30, 1994.
(11) Incorporated by reference from Exhibits to Registration
Statement on Form S-8 filed with the Securities
and Exchange Commission on January 4, 1995.
(12) Indicates a management contract or compensatory plan or
arrangement.
EXHIBIT 21.1
SYMMETRICOM, INC.
SUBSIDIARIES OF THE COMPANY
Analog Solutions, Inc., a California corporation
Telecom Solutions, Inc., a Delaware corporation
Telecom Solutions Puerto Rico, Inc., a Delaware corporation
Linfinity Microelectronics Inc., a Delaware corporation
Telecom Solutions (Europe) Limited, a United Kingdom Corporation
Navstar Systems Ltd., a United Kingdom Corporation
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-38384 on Form S-8, Post-Effective Amendment No. 2
to Registration Statement No. 33-3456 on Form S-8, Post Effective
Amendment No. 2 to Registration Statement No. 33-11317 on Form S-8,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70291
on Form S-8, Registration Statement No. 33-56042 on Form S-8 and
Registration Statement No. 33-57163 on Form S-8 of our report dated
July 25, 1995, appearing in and incorporated by reference in this
Annual Report on Form 10-K of SymmetriCom, Inc. for the year ended
June 30, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
San Jose, California
September 22, 1995
SYMMETRICOM, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts)
Year ended June 30,
1995 1994 1993
_______ _______ _______
Net sales:
Telecom Solutions $ 62,814 $59,215 $57,031
Linfinity Microelectronics 40,294 39,170 30,882
________ _______ _______
Total 103,108 98,385 87,913
Operating income 10,868 8,331 7,940
Earnings before income taxes 11,599 8,125 7,724
Net earnings 10,346 6,551 6,001
Net earnings per common and common
equivalent share .66 .43 .40
Cash and cash equivalents, and
short-term investments 33,205 21,250 18,232
Working capital 50,739 38,503 29,348
Total assets 85,326 69,054 58,954
Shareholders' equity 60,125 46,786 38,102
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30,
1995 1994
_______ _______
ASSETS
Current assets:
Cash and cash equivalents $19,354 $21,250
Short-term investments 13,851
Accounts receivable, net of allowance for
doubtful accounts of $339 and $242 11,845 12,277
Inventories 17,855 15,811
Other current assets 3,715 2,405
_______ _______
Total current assets 66,620 51,743
Property, plant and equipment, net 16,978 14,930
Other assets, net 1,728 2,381
_______ _______
$85,326 $69,054
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,308 $ 4,224
Accrued liabilities 11,521 8,969
Current maturities of long-term debt 52 47
_______ _______
Total current liabilities 15,881 13,240
Long-term debt, less current maturities 5,766 5,818
Deferred rent 231 430
Deferred income taxes 3,323 2,780
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized - 500 shares
Issued - none
Common stock, no par value:
Authorized - 32,000 shares
Issued and outstanding - 15,097
and 14,071 shares 19,062 16,069
Retained earnings 41,063 30,717
_______ _______
Total shareholders' equity 60,125 46,786
_______ _______
$85,326 $69,054
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year ended June 30,
1995 1994 1993
________ _______ _______
Net sales $103,108 $98,385 $87,913
Cost of sales 56,047 57,165 52,984
________ _______ _______
Gross profit 47,061 41,220 34,929
Operating expenses:
Research and development 13,407 11,454 8,355
Selling, general and
administrative 22,786 21,435 18,634
________ _______ _______
Operating income 10,868 8,331 7,940
Interest income 1,341 397 392
Interest expense (610) (603) (608)
________ _______ _______
Earnings before income taxes 11,599 8,125 7,724
Income taxes 1,253 1,574 1,723
________ _______ _______
Net earnings $ 10,346 $ 6,551 $ 6,001
======== ======= =======
Net earnings per common and common
equivalent share $ .66 $ .43 $ .40
======= ======= =======
Weighted average common and common
equivalent shares outstanding 15,714 15,370 15,036
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Total
Share-
Common Stock Retained holders'
Shares Amount Earnings Equity
______ _______ _______ _______
Balances at June 30, 1992 12,869 $12,020 $18,165 $30,185
Issuance of common stock:
Stock option exercises, net
of shares tendered upon
exercise 859 1,916 1,916
Net earnings 6,001 6,001
______ _______ _______ _______
Balances at June 30, 1993 13,728 13,936 24,166 38,102
Issuance of common stock:
Stock option exercises 343 977 977
Tax benefits from stock
option plans 1,156 1,156
Net earnings 6,551 6,551
______ _______ _______ _______
Balances at June 30, 1994 14,071 16,069 30,717 46,786
Issuance of common stock:
Stock option exercises, net
of shares tendered upon
exercise 910 1,611 1,611
Employee stock purchase plan 18 188 188
Net exercise of warrant 98
Tax benefits from stock
option plans 1,194 1,194
Net earnings 10,346 10,346
______ _______ _______ _______
Balances at June 30, 1995 15,097 $19,062 $41,063 $60,125
====== ======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended June 30,
1995 1994 1993
________ _______ _______
Cash flows from operating activities:
Cash received from customers $103,800 $97,514 $85,433
Cash paid to suppliers and employees (86,910) (87,805) (73,446)
Interest received 1,303 407 359
Interest paid (610) (603) (608)
Income taxes paid (725) (1,273) (896)
________ _______ _______
Net cash provided by operating
activities 16,858 8,240 10,842
________ _______ _______
Cash flows from investing activities:
Purchases of short-term investments (16,754)
Maturities of short-term investments 2,903
Capital expenditures, net (6,629) (3,606) (4,573)
Acquisition of other assets (26) (539) (61)
Purchase of Navstar (2,012)
________ _______ _______
Net cash used for investing
activities (20,506) (6,157) (4,634)
________ _______ _______
Cash flows from financing activities:
Repayment of long-term debt (47) (42) (38)
Proceeds from issuance of common stock 1,799 977 1,916
________ _______ _______
Net cash provided by financing
activities 1,752 935 1,878
________ _______ _______
Net increase (decrease) in cash and
cash equivalents (1,896) 3,018 8,086
Cash and cash equivalents at
beginning of year 21,250 18,232 10,146
________ _______ _______
Cash and cash equivalents at end
of year $ 19,354 $21,250 $18,232
======== ======= =======
Reconciliation of net earnings to
net cash provided by operating
activities:
Net earnings $ 10,346 $ 6,551 $ 6,001
Adjustments (net of effects of 1994
Navstar purchase):
Depreciation and amortization 5,260 5,789 4,945
Net deferred income taxes (712) (656) 674
(Increase) decrease in accounts
receivable 432 (1,060) (2,516)
Increase in inventories (2,044) (2,430) (515)
(Increase) decrease in other
current assets (55) (194) 83
Increase (decrease) in accounts
payable 84 275 (323)
Increase in accrued liabilities 3,746 139 2,634
Decrease in deferred rent (199) (174) (141)
________ _______ _______
Net cash provided by operating
activities $ 16,858 $ 8,240 $10,842
======== ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A Summary of Significant Accounting Policies
Business. SymmetriCom, Inc. (the Company) conducts its business through
two separate operations, Telecom Solutions and Linfinity Microelectronics
Inc. (Linfinity). Each operates in a different industry segment.
Telecom Solutions principally designs, manufactures and markets
telecommunications equipment. Linfinity designs, manufactures and
markets linear and mixed signal integrated circuits.
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions are eliminated.
Fiscal Period. The Company's fiscal year ends on the Sunday closest to
June 30. For presentation purposes, however, each fiscal year is
presented as if it ended on June 30. All references to years refer to
the Company's fiscal years. Fiscal years 1995 and 1993 consisted of 52
weeks and fiscal year 1994 consisted of 53 weeks.
Cash Equivalents. The Company considers all highly liquid debt
investments purchased with an original maturity of three months or
less to be cash equivalents.
Short-term Investments. Effective July 1, 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." This statement
requires the Company to classify debt and equity securities with readily
determinable market values as held-to-maturity, available-for-sale or
trading. Adoption of SFAS No. 115 did not have a significant effect on
the Company's financial position or results of operations. Short-term
investments, consisting of corporate debt securities which mature through
November 1995, are reported at fair value which approximates amortized
cost and are classified as available-for-sale. Unrealized gains and
losses, if significant, are excluded from earnings and included as a
component of shareholders' equity. The cost of securities sold is based
on the specific identification method.
Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, Plant and Equipment. Property, plant and equipment are stated
at cost. Depreciation and amortization are computed using the straight-
line method based on the estimated useful lives of the assets (three to
thirty years) or the lease term if shorter.
Intangible Assets. Intangible assets, primarily purchased technology,
are included in other assets and amortized over five years.
Revenue Recognition. Sales are recognized upon shipment. Provisions are
made for warranty costs, sales returns and price protection.
Foreign Currency Translation. Foreign currency translation gains and
losses and the effect of foreign currency exchange rate fluctuations have
not been significant.
Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally
of cash equivalents, short-term investments and accounts receivable. The
Company places its investments with high-credit-quality corporations and
financial institutions. Accounts receivable are derived primarily from
sales to telecommunications service providers and to original equipment
manufacturers. Management believes that its credit evaluation, approval
and monitoring processes substantially mitigate potential credit risks.
Net Earnings Per Common and Common Equivalent Share. Net earnings per
common and common equivalent share is computed using the weighted average
number of common shares outstanding and dilutive stock options, using the
treasury stock method.
Reclassifications. Certain 1994 and 1993 balances have been reclassified
to conform to the 1995 presentation.
Note B Acquisition
In August 1993, the Company acquired, in a purchase transaction,
substantially all the assets of Navstar Limited, a U.K. company, and
its U.S. affiliate (collectively "Navstar") for $2,012,000 in cash and
the assumption of $1,035,000 in liabilities. The fair value of assets
acquired included purchased technology of $1,756,000, tangible assets of
$1,071,000 and goodwill of $220,000. Navstar designs, manufactures and
markets Global Positioning System receivers.
Note C Linfinity Microelectronics Inc.
In July 1993, substantially all of the assets and liabilities of the
Company's Semiconductor Group were transferred to Linfinity, a newly-
formed subsidiary, in exchange for 6,000,000 shares of Linfinity Series A
preferred stock and 2,000,000 shares of Linfinity common stock. No other
Linfinity capital stock has been issued except for shares issued under
Linfinity's employee stock option plan. Each Series A preferred share is
convertible into one share of common stock. Linfinity has reserved
2,000,000 shares of common stock for issuance under its employee stock
option plan. Options have been granted at fair market value at the date
of grant as determined by Linfinity's Board of Directors based upon
independent appraisal; accordingly, no compensation expense has been
recorded. Outstanding stock options vest 25% per year from date of grant
and expire no later than ten years from date of grant. At June 30, 1995,
options to purchase 1,784,000 shares of Linfinity's common stock had been
granted and were outstanding at exercise prices of $.50 to $2.65 per
share, options to purchase 2,000 shares had been exercised at prices of
$.50 to $.80 per share, 214,000 shares were available for grant and
options to purchase 487,000 shares were exercisable at prices of $.50 to
$.80 per share.
Note D Balance Sheet Information
June 30,
1995 1994
_______ _______
(In thousands)
Inventories:
Raw materials $ 5,433 $ 7,677
Work-in-process 6,910 5,110
Finished goods 5,512 3,024
_______ _______
$17,855 $15,811
======= =======
Property, Plant and Equipment, net:
Land $ 1,247 $ 1,247
Buildings and improvements 8,666 7,991
Machinery and equipment 30,369 26,452
Leasehold improvements 2,173 2,268
_______ _______
42,455 37,958
Accumulated depreciation and amortization (25,477) (23,028)
_______ _______
$16,978 $14,930
======= =======
Accrued Liabilities:
Employee compensation and benefits $ 5,954 $ 3,769
Accrued warranty expense 2,520 2,071
Other 3,047 3,129
_______ _______
$11,521 $ 8,969
======= =======
Note E Borrowing Arrangements
The Company has a $7,000,000 unsecured bank line of credit which
expires in December 1996 and bears interest at the bank's prime rate,
9% at June 30, 1995. The line of credit agreement requires that the
Company maintain certain financial ratios and prohibits an operating
loss in two consecutive quarters. At June 30, 1995, the Company had
available credit of $7,000,000.
Long-term debt consists of a 10.25% note, payable in monthly
installments of approximately $54,000, including interest, until
November 1997 when the balance of the principal is due. The note is
collateralized by land, building and related personal property. At
June 30, 1995, maturities of long-term debt were $52,000 in 1996,
$57,000 in 1997 and $5,709,000 in 1998.
Note F Income Taxes
Income tax expense consists of:
Year ended June 30,
1995 1994 1993
_______ _______ _______
(In thousands)
Current:
Federal $ 1,341 $ 1,366 $ 183
State 159 778 151
Puerto Rico 466 86 715
_______ _______ _______
1,966 2,230 1,049
_______ _______ _______
Deferred:
Federal (532) (1,144) (767)
State (373) 104 370
Puerto Rico 192 384 1,071
_______ _______ _______
(713) (656) 674
_______ _______ _______
$ 1,253 $ 1,574 $ 1,723
======= ======= =======
Deferred income tax expense (benefit) is recorded when income and
expenses are recognized in different periods for financial reporting and
tax purposes. The significant components of deferred income tax expense
(benefit) are as follows:
Year ended June 30,
1995 1994 1993
_______ _______ _______
(In thousands)
Net operating loss and credit carryforwards $ (813) $ 642 $ 421
Reserves and accruals 631 (548) (815)
Depreciation and amortization (263) (639) (678)
Deferred taxes on Puerto Rico earnings 204 1,339 1,441
Change in valuation allowance (472) (1,450) 1,072
Reduction of taxes provided in prior years (767)
_______ _______ _______
$ (713) $ (656) $ 674
======= ======= =======
The Company's effective income tax rate differs from the federal
statutory income tax rate as follows:
Year ended June 30,
1995 1994 1993
_______ _______ _______
Federal statutory income tax rate 35.0% 35.0% 34.0%
Change in valuation allowance (17.6) (17.8) (9.5)
Federal tax benefit of Puerto Rico
operations (12.9) (8.9) (20.0)
Puerto Rico taxes 5.7 5.8 23.1
Research and development tax credit (2.6) (1.6) (1.0)
State income taxes, net of federal benefit 1.2 5.9 4.5
Reduction of taxes provided in prior years (9.9)
Other 2.0 1.0 1.1
_______ _______ _______
Effective income tax rate 10.8% 19.4% 22.3%
======= ======= =======
During 1993, the Company reduced previously provided federal taxes
by $767,000 as a result of the resolution of all outstanding Internal
Revenue Service examinations. Also in 1993, the Company's tax provision
included a non-recurring charge of approximately $980,000 for prior
years unremitted Puerto Rico earnings.
The principal components of the Company's deferred tax assets and
liabilities are as follows:
June 30,
1995 1994
_______ _______
(In thousands)
Deferred tax assets:
Net operating loss and credit carryforwards $ 5,404 $ 4,591
Reserves and accruals 2,724 3,355
_______ _______
8,128 7,946
Valuation allowance (4,308) (4,780)
_______ _______
3,820 3,166
_______ _______
Deferred tax liabilities:
Depreciation and amortization 908 1,171
Unremitted Puerto Rico earnings 2,984 2,780
_______ _______
3,892 3,951
_______ _______
Net deferred tax liability $ 72 $ 785
======= =======
Based on the Company's assessment of future realizability of
deferred tax assets, a valuation allowance has been provided due to the
uncertainty of the realization of certain temporary differences and tax
credit carryforwards. Additionally, at June 30, 1995, approximately
$3,950,000 of the valuation allowance was attributable to the potential
tax benefit of stock option transactions, which will be credited
directly to common stock when realized.
At June 30, 1995, for federal income tax purposes, the Company had
net operating loss carryforwards of approximately $3,500,000 which
expire in the years 2003 through 2010, research and development and
investment tax credit carryforwards of approximately $2,900,000 which
expire in the years 1999 through 2010 and alternative minimum tax credit
carryforwards of approximately $800,000 which have no expiration date.
Additionally, for state income tax purposes, the Company had research
and development tax credit carryforwards of approximately $500,000 which
have no expiration date.
The Company operates a subsidiary in Puerto Rico under a grant
providing for partial exemption from Puerto Rico taxes through the
year 2008. During 1993, the Company elected to have this subsidiary
taxed under Section 936 of the U.S. Internal Revenue Code which exempts
qualified Puerto Rico source earnings from federal income taxes.
The Omnibus Budget Reconciliation Act of 1993 included changes which
limit the amount of income that is exempt from federal income tax.
Since enactment, there has been no effect on the Company resulting from
this Act. However, future earnings of the Puerto Rico operation may
receive less favorable tax treatment. Appropriate taxes have been
provided on this subsidiary's earnings which are intended to be remitted
to the parent company. At June 30, 1995, total unremitted earnings and
the related tax liability of this subsidiary were approximately
$24,000,000 and $2,984,000, respectively.
Note G Commitments
The Company leases certain facilities and equipment under operating
lease agreements which expire at various dates through September 2000.
Rental expense charged to operations was $1,554,000 in 1995, $1,859,000
in 1994 and $2,015,000 in 1993. Future minimum payments due under
noncancelable leases at June 30, 1995, were $1,555,000 in 1996,
$1,261,000 in 1997, $307,000 in 1998, $193,000 in 1999, $60,000 in 2000,
and $12,000 thereafter.
Note H Contingencies
In January 1994, a complaint was filed in the United States District
Court for the Northern District of California against the Company and
three of its officers, by one of the Company's shareholders. The
plaintiff requests that the court certify him as representative of a
class of persons who purchased shares of the Company's common stock
during a specified period in 1993. The complaint alleges that false and
misleading statements made during that period artificially inflated the
price of the Company's common stock in violation of federal securities
laws. There is no specific amount of damages requested in the
complaint. Limited discovery has occurred and no trial date has been
set. The Company and its officers believe that the complaint is
entirely without merit, and intend to vigorously defend against the
action. The Company is also a party to certain other claims which are
normal in the course of its operations. While the results of such
claims cannot be predicted with certainty, management, after
consultation with counsel, believes that the final outcome of such
matters will not have a material adverse effect on the Company's
financial position or results of operations.
Note I Related Party Transactions
During 1995 and 1994, the Company paid $36,000 in each year for
marketing research to a firm whose Managing Director is a director of
the Company. During 1995, certain executive officers exercised stock
options in exchange for notes of $43,000. These notes bear interest at
approximately 6% per annum, payable annually. The notes are
collateralized by the stock issued upon exercise of the stock options
and are due in July 1997. The notes are offset against common stock.
During 1993, the Company made a $95,000 unsecured loan to an
executive officer. The loan bears interest at approximately 5% per
annum, payable quarterly. The loan is due and payable in April 1998.
At June 30, 1995, the loan balance outstanding was $23,000.
Note J Employee Benefit Plans
The Company's U.S. and Puerto Rico employees are eligible to
participate in the Company's 401(k) plans. The Company's discretionary
contributions vest immediately and were $101,000, $89,000 and $63,000 in
1995, 1994 and 1993, respectively.
Note K Shareholders' Equity
Stock Options. The Company has an employee stock option plan under
which employees and consultants may be granted non-qualified and
incentive options to purchase shares of the Company's authorized but
unissued common stock. Stock appreciation rights may also be granted
under this plan, however, none have been granted. In addition, the
Company has a director stock option plan under which non-employee
directors are granted options each January to purchase 10,000 shares of
the Company's authorized but unissued common stock. In July 1995, the
Company's Board of Directors amended its stock option plans, subject to
shareholder approval; the number of shares reserved for issuance was
increased by 650,000 shares, and beginning in July 1996 and annually
thereafter, the number of shares reserved for issuance under the
employee stock option plan will increase by an amount equal to 3% of the
Company's outstanding shares. All options have been granted at the fair
market value of the Company's common stock on the date of grant.
Options expire no later than ten years from the date of grant and are
generally exercisable in annual installments of 25%, 25% and 50% at the
end of each of the first three years following the date of grant. In
July 1994, the Company exchanged options for certain employees, other
than executive officers, to purchase 235,000 shares of the Company's
common stock with exercise prices greater than $8.9375 per share for new
options with an exercise price of $8.9375. These options began re-
vesting in July 1994. Stock option activity for the three years ended
June 30, 1995, is as follows:
Shares Options Outstanding
Available Number Price
For Grant of Shares Per Share
_________ _________ ______________
(In thousands, except per share amounts)
Balances at June 30, 1992 194 2,864 $1.50 to 5.69
Authorized 1,000
Granted (316) 316 4.88 to 13.00
Exercised (867) 1.50 to 5.69
Canceled 58 (58) 1.50 to 10.13
Canceled under closed plans (24) 1.63 to 3.63
_____ _____
Balances at June 30, 1993 936 2,231 1.50 to 13.00
Granted (489) 489 7.63 to 17.75
Exercised (343) 1.50 to 7.50
Canceled 92 (92) 2.50 to 17.75
_____ _____
Balances at June 30, 1994 539 2,285 1.63 to 17.75
Granted (591) 591 8.94 to 16.75
Exercised (967) 1.63 to 13.00
Canceled 332 (332) 3.13 to 17.75
_____ _____
Balance at June 30, 1995 280 1,577 $1.63 to 17.75
===== ===== ==============
Exercisable at June 30, 1995 751 $1.63 to 17.75
===== ==============
Employee Stock Purchase Plan. The Company has an employee stock
purchase plan under which eligible employees may authorize payroll
deductions of up to 10% of their compensation to purchase shares of the
Company's common stock at 85% of the fair market value at certain
specified dates. At June 30, 1995, 432,000 shares of common stock were
reserved for issuance under this plan.
Common Share Purchase Rights. The Company has a shareholder rights plan
which authorizes the issuance of one common share purchase right for
each share of common stock. The rights expire in December 2000 and are
not exercisable or transferable apart from the common stock until the
occurrence of certain events. Such events include the acquisition of
20% or more of the Company's outstanding common stock or the
commencement of a tender or exchange offer for 30% or more of the
Company's outstanding common stock. If the rights become exercisable,
each right entitles its holder to purchase one new share of common stock
at an exercise price of $25.00, subject to certain antidilution
adjustments. Additionally, if the rights become exercisable, a holder
will be entitled, under certain circumstances, to purchase, for the
exercise price, shares of common stock of the Company or in other cases,
of the acquiring company, having a market value of twice the exercise
price of the right. Under certain conditions, the Company may redeem
the rights for a price of $.01 per right or exchange each right not held
by the acquirer for one share of the Company's common stock.
Warrants. In connection with the exercise of a warrant to purchase
common stock at $3.375 per share during March 1995, the Company issued
98,000 shares of common stock, net of 27,000 shares tendered upon
exercise.
Note L Business Segment Information
Industry Segment Information. Information relating to the Company's
industry segments is as follows:
Year ended June 30,
1995 1994 1993
________ _______ _______
(In thousands)
Net sales:
Telecom Solutions $ 62,814 $59,215 $57,031
Linfinity 40,294 39,170 30,882
________ _______ _______
$103,108 $98,385 $87,913
======== ======= =======
Operating income:
Telecom Solutions $ 6,222 $ 3,588 $ 7,877
Linfinity 4,646 4,743 63
________ _______ _______
$ 10,868 $ 8,331 $ 7,940
======== ======= =======
Identifiable assets:
Telecom Solutions $ 55,098 $43,223 $37,258
Linfinity 30,228 25,831 21,696
________ _______ _______
$ 85,326 $69,054 $58,954
======== ======= =======
Depreciation and amortization expense:
Telecom Solutions $ 2,841 $ 2,917 $ 1,965
Linfinity 2,419 2,872 2,980
________ _______ _______
$ 5,260 $ 5,789 $ 4,945
======== ======= =======
Capital expenditures:
Telecom Solutions $ 2,102 $ 2,017 $ 2,475
Linfinity 4,527 1,589 2,098
________ _______ _______
$ 6,629 $ 3,606 $ 4,573
======== ======= =======
Major Customers and Export Sales. One of Telecom Solutions' customers
accounted for 11% of the Company's net sales in 1995. No customer
accounted for 10% or more of net sales in 1994 or 1993. Export sales,
primarily to the Far East (11% in 1995), Canada and Western Europe
accounted for 24%, 19% and 13% of the Company's net sales in 1995, 1994
and 1993, respectively.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
SymmetriCom, Inc.
We have audited the accompanying consolidated balance sheets of
SymmetriCom, Inc. and subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended June 30,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
SymmetriCom, Inc. and subsidiaries at June 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the three
years in the period ended June 30, 1995 in conformity with generally
accepted accounting principles.
San Jose, California
July 25, 1995
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto.
Results of Operations
The Company conducts its business through two separate operations,
Telecom Solutions, which designs, manufactures and markets
telecommunications equipment, and Linfinity Microelectronics Inc.
(Linfinity), which designs, manufactures and markets linear and mixed
signal integrated circuits.
Net sales increased by $4.7 million (5%) to $103.1 million in fiscal
1995 and by $10.5 million (12%) to $98.4 million in fiscal 1994. The
increase in fiscal 1995 sales was due to higher sales at both Telecom
Solutions and Linfinity. The increase in fiscal 1994 sales was
primarily due to higher unit volume at Linfinity and to the addition of
sales from Navstar, which was acquired in August 1993.
Telecom Solutions net sales increased by $3.6 million (6%) to $62.8
million in fiscal 1995 and by $2.2 million (4%) to $59.2 million in
fiscal 1994. The increase in fiscal 1995 sales primarily resulted from
sales of new Synchronization products which more than offset substantial
declines in sales of Analog products and mature Synchronization
products. Future Analog sales are not expected to be significant. The
increase in fiscal 1994 sales principally resulted from sales added by
Navstar and slightly higher Integrated Digital Services Terminal (IDST)
and Analog sales, which more than offset a decline in Synchronization
sales.
Linfinity net sales increased by $1.1 million (3%) to $40.3 million
in fiscal 1995 and by $8.3 million (27%) to $39.2 million in fiscal
1994. The increases were primarily due to higher unit volume which more
than offset a shift in sales to lower priced products.
The gross profit margin, as a percentage of net sales, was 46%, 42%
and 40% in fiscal 1995, 1994 and 1993, respectively. In fiscal 1995,
the higher gross profit margin percentage resulted primarily from
increased manufacturing efficiencies at both operations and to a shift
to higher margin products at Telecom Solutions. In fiscal 1994, the
gross profit margin increase was principally attributable to increased
unit volume and other manufacturing efficiencies at Linfinity which
offset a shift to lower margin products and decreased manufacturing
efficiencies at Telecom Solutions. Future gross profit margins will
largely depend on product mix and manufacturing efficiencies.
Research and development expense increased to $13.4 million (or 13%
of sales) in fiscal 1995 from $11.5 million (or 12% of sales) and $8.4
million (or 10% of sales) in fiscal 1994 and 1993, respectively. The
increases were primarily due to the Company's continued emphasis on new
product development, with proportionately higher increases at Linfinity.
Selling, general and administrative expense increased by 6% to $22.8
million (or 22% of sales) in fiscal 1995 from $21.4 million (or 22% of
sales) in fiscal 1994 and by 15% in fiscal 1994 from $18.6 million (or
21% of sales) in fiscal 1993. The increase in fiscal 1995 was
principally due to higher incentive compensation resulting from improved
performance. The increase in fiscal 1994 was due to continued
development of a Telecom Solutions international presence, establishment
of a Linfinity marketing department and higher selling expenses
associated with increased sales.
Operating income of $10.9 million in fiscal 1995 increased by 30%
from operating income in fiscal 1994 of $8.3 million which increased by
5% from operating income in fiscal 1993 of $7.9 million. The increase
in fiscal 1995 was entirely due to higher Telecom Solutions operating
income as Linfinity operating income declined slightly. The increase in
fiscal 1994 was due to higher Linfinity operating income which more than
offset the decrease in Telecom Solutions operating income. See Note L
of Notes to Consolidated Financial Statements.
Fiscal 1994 fourth quarter operating income declined to $1.4 million
(or 6% of sales) from $2.1 million (or 9% of sales) in the third quarter
of fiscal 1994 principally due to higher Telecom Solutions research and
development expense, increased trade show activity and higher commission
expense.
Interest income increased by $.9 million to $1.3 million in fiscal
1995 from $.4 million in fiscal 1994 and 1993 essentially due to an
increase in cash available for investment and higher interest rates.
Interest expense was $.6 million in fiscal 1995, 1994 and 1993.
The Company's effective tax rate was 11%, 19% and 22% in fiscal
1995, 1994 and 1993, respectively. The effective tax rate was lower
than the combined federal and state tax rate essentially due to a
reduction in the valuation allowance for deferred tax assets based on
the Company's assessment of future realizability of such assets, to the
benefit of lower income tax rates on income earned in Puerto Rico and to
state and federal research and development tax credits. Certain
provisions of the Omnibus Budget Reconciliation Act of 1993 may result
in less favorable tax treatment for the Puerto Rico operation in
subsequent years. In future years, the Company expects the effective
tax rate to increase substantially over the tax rates in the prior three
fiscal years, and to more closely approximate the combined federal and
state tax rate reduced by any available tax credits and any benefit that
may be derived from the Company's operation in Puerto Rico.
As a result of the factors discussed above, net income in fiscal
1995 was $10.3 million, or $.66 per share, compared to net income of
$6.6 million, or $.43 per share, in fiscal 1994 and net income of $6.0
million, or $.40 per share, in fiscal 1993.
Effective July 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." There was no
material impact on the Company's financial position or results of
operations due to the adoption of this new standard.
Management does not believe inflation has had a significant effect
on operations.
Future Company operating results will largely depend upon (i) the
Company's ability to implement new technologies and develop new
products, (ii) the Company's response to increased competition, (iii)
changes in product mix and (iv) manufacturing efficiencies. Future
Telecom Solutions operating results for a fiscal period will continue to
be, as past results have been, highly dependent upon the receipt and
shipment of customer orders during that fiscal period. Future Linfinity
operating results will also be subject to the cyclical nature of the
semiconductor industry.
The Company's 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 adverse effect on the trading
price of the Company's common stock.
Liquidity and Capital Resources
Working capital increased by $12.2 million to $50.7 million at June
30, 1995, from $38.5 million at June 30, 1994, while the current ratio
increased to 4.2 to 1.0 from 3.9 to 1.0. During the same period, cash
and cash equivalents, and short-term investments increased to $33.2
million from $21.3 million primarily due to $16.9 million in cash
provided by operating activities and $1.8 million in proceeds from the
issuance of common stock, offset by $6.6 million used for capital
expenditures. At June 30, 1995, the Company had $7.0 million of unused
credit available under its bank line of credit.
The Company believes that cash and cash equivalents, short-term
investments, funds generated from operations and funds available under
its bank line of credit will be sufficient to satisfy working capital
and capital equipment requirements in fiscal 1996. At June 30, 1995,
the Company had no material outstanding commitments to purchase capital
equipment.
QUARTERLY RESULTS AND STOCK MARKET DATA (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
_______ _______ _______ _______ ________
(In thousands, except per share amounts)
Fiscal Year 1995:
Net sales $24,181 $25,590 $26,261 $27,076 $103,108
Gross profit 10,821 11,380 12,463 12,397 47,061
Operating income 2,371 2,419 2,924 3,154 10,868
Earnings before
income taxes 2,444 2,547 3,152 3,456 11,599
Net earnings 1,999 2,412 2,786 3,149 10,346
Net earnings per
common and common
equivalent share .13 .15 .18 .20 .66
Common stock
price range (A):
High 12 13-5/8 17 21-3/4 21-3/4
Low 8 10-7/8 13-1/8 15-1/2 8
Fiscal Year 1994:
Net sales $24,034 $25,011 $24,368 $24,972 $98,385
Gross profit 10,420 10,811 9,911 10,078 41,220
Operating income 2,428 2,402 2,100 1,401 8,331
Earnings before
income taxes 2,380 2,307 2,032 1,406 8,125
Net earnings 1,723 1,670 1,471 1,687 6,551
Net earnings per
common and common
equivalent share .11 .11 .10 .11 .43
Common stock
price range (A):
High 18-1/8 17 10-1/2 8-5/8 18-1/8
Low 13-1/2 7-7/8 7-1/2 6-5/8 6-5/8
(A) The Company's common stock trades on The Nasdaq Stock Market
under the symbol SYMM. At June 30, 1995, there were approximately 1,544
shareholders of record. Common stock prices are closing prices as
reported on the Nasdaq Stock Market System. The Company has not paid
cash dividends during the last two fiscal years and has no present plans
to do so.
FIVE YEAR SELECTED FINANCIAL DATA
Year ended June 30,
1995 1994 1993 1992 1991
________ _______ _______ _______ _______
(In thousands, except per share amounts)
Operating Results:
Net sales:
Telecom Solutions $ 62,814 $59,215 $57,031 $42,094 $28,950
Linfinity
Microelectronics
Inc. 40,294 39,170 30,882 26,704 33,018
________ _______ _______ _______ _______
Total 103,108 98,385 87,913 68,798 61,968
Operating income 10,868 8,331 7,940 3,136 2,574
Earnings before
income taxes 11,599 8,125 7,724 2,825 2,055
Net earnings 10,346 6,551 6,001 2,194 1,801
Net earnings per
common and common
equivalent share .66 .43 .40 .16 .14
Balance Sheet:
Cash and cash equivalents,
and short-term
investments 33,205 21,250 18,232 10,146 7,482
Working capital 50,739 38,503 29,348 20,661 16,092
Total assets 85,326 69,054 58,954 48,231 43,097
Long-term debt 5,766 5,818 5,865 5,907 5,945
Shareholders' equity 60,125 46,786 38,102 30,185 27,264
CORPORATE DIRECTORY
Directors Telecom Solutions Officers
William D. Rasdal 1 D. Ronald Duren
Chairman of the Board President and Chief Operating
and Chief Executive Officer Officer
SymmetriCom, Inc.
M.J. Narasimha, Ph.D.
Vice President, Technology
Paul N. Risinger
Vice Chairman Dale Pelletier
SymmetriCom, Inc. Vice President, Operations
Howard Anderson 2,3
Managing Director Rick Stroupe
The Yankee Group Vice President, Sales
Roger A. Strauch 2,3 Toney C. Warren
President, Chief Executive Vice President, Strategic
Officer and Director Planning
TCSI Corporation
Linfinity Microelectronics
Inc. Officers
Robert M. Wolfe 1,2,3 Brad P. Whitney
Telecommunications President and Chief Operating
Network Consultant Officer
1 Member, Executive Committee Ralph Brandi
2 Member, Audit Committee Vice President, Sales
3 Member, Stock Option and
Compensation Committee
Shufan Chan
Corporate Officers Vice President, Development
William D. Rasdal
Chairman of the Board Mark Granahan
and Chief Executive Officer Vice President, Marketing
Paul N. Risinger Kelly Jones
Vice Chairman Vice President, Manufacturing
J. Scott Kamsler
Vice President, Finance, Corporate Counsel
Chief Financial Officer
and Secretary Wilson, Sonsini, Goodrich &
Rosati
Palo Alto, California
Independent Auditors
Deloitte & Touche LLP
San Jose, California
Transfer Agent & Registrar
Chemical Mellon Shareholder
Services
San Francisco, California
Locations
SymmetriCom, Inc.
Corporate Headquarters
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-943-9403
Fax: 408-428-7896
Telecom Solutions
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-433-0910
Fax: 408-428-7897
NavSymm Positioning Systems
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-433-1905
Fax: 408-428-7972
Linfinity Microelectronics Inc.
11861 Western Avenue
Garden Grove, California 92641-2119
Telephone: 714-898-8121
Fax: 714-898-2781
Telecom Solutions Puerto Rico, Inc.
Industrial Park, Building 7
P.O. Box 1046
Aguada, Puerto Rico 00602-1046
Telephone: 809-868-3535
Fax: 809-868-4466
Telecom Solutions (Europe) Limited
2 The Billings
Walnut Tree Close
Guildford, Surrey, GU1 4UL
England
Telephone: 44-1483-451122
Fax: 44-1483-451133
Navstar Systems Ltd.
Mansard Close
Westgate
Northampton NN5 5DL
England
Telephone: 44-1604-585588
Fax: 44-1604-585599
Form 10-K
Shareholders may obtain a copy of
SymmetriCom's 1995 annual report on
Form 10-K as filed with the
Securities and Exchange Commission,
without charge, by writing to:
Investor Relations, SymmetriCom, Inc.,
85 West Tasman Drive, San Jose,
California 95134-1703
FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
This AMENDMENT, dated the 20th day of April, 1995 between SYMMETRICOM, INC., a
California corporation, (herein referred to as the "Borrower") and COMERICA
BANK-California (herein referred to as the "Bank").
WITNESSETH:
WHEREAS, the Bank and the Borrower on December 1, 1993 entered into a certain
Revolving Credit Loan Agreement (the "Agreement"), a certain Revolving Credit
Master Note (the "Revolving Credit Note"), a certain Guaranty, a certain
Corporate Resolution Authorizing Execution of Guaranty, a certain Loan
Disbursement Order, and a certain Advance & Repayment Agreement (collectively
the "Loan Documents"); and
WHEREAS, the Borrower desires to borrow up to Seven Million and 00/100 Dollars
($7,000,000.00) from the Bank from time to time for the working capital needs
of the Borrower; and
WHEREAS, the modifications to the Agreement and to the Revolving Credit Note
contemplated hereby are in the best interest of, and will mutually benefit,
the parties hereto; and
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Borrower and the Bank agree to amend the Agreement in
the manner and to the extent hereinafter set forth:
1. In Section 1.1 titled "Definitions", delete the following section:
"Termination Date".
2. In Section 1.1 titled "Definitions", add the following section:
"'Termination Date' shall mean December 1, 1996 (or such earlier date on which
the Borrower shall permanently terminate the Bank's commitment under Section
2.8.1 of this Agreement)".
3. Replace Section 6.5 with the following: "Maintain Tangible Net Worth.
On a consolidated basis, maintain a Tangible Net Worth for it of not less than
the amount specified during the period specified below:
(a) $40,000,000.00 from the date of this Amendment and at all
times thereafter".
4. Replace the first paragraph of the Revolving Credit Master Note with the
following: FOR VALUE RECEIVED, the undersigned promises to pay to the order
of COMERICA BANK-CALIFORNIA (the "Bank") at Pier 33 South Bulkhead, San
Francisco, California, on December 1 , 1996, the principal sum or so much of
the principal sum of Seven Million Dollars ($7,000,000.00) as may from time to
time have been advanced and be outstanding under that certain Revolving Credit
Loan Agreement dated December 1 , 1993, between the undersigned and the Bank
(the "Agreement") plus all accrued but unpaid interest thereon.
IN ADDITION, in consideration of the premises and the mutual promises herein
contained, the Borrower and the Bank agree to amend the Revolving Credit Note
and the Loan Documents in the manner and to the extent hereinafter set forth:
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the
Agreement and the Revolving Credit Note to be executed and delivered by their
duly authorized officers on the day and year first written above.
By: /s/ William D. Rasdal By: /s/ J. Scott Kamsler
William D. Rasdal J. Scott Kamsler
Its: Chief Executive Officer
Its: Chief Financial Officer
COMERICA BANK -CALIFORNIA
By: /s/ Greg H. Atkinson
Greg H. Atkinson
Its: Assistant Vice President
SYMMETRICOM, INC.
1990 EMPLOYEE STOCK PLAN
(as amended through October 25, 1995)
1. Purposes of the Plan. The purposes of this Employee Stock
Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional
incentive to Employees and Consultants of the Company and its
Subsidiaries and to promote the success of the Company's business.
Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of
an option and subject to the applicable provisions of Section 422
of the Code, as amended, and the regulations promulgated thereunder.
Stock appreciation rights ("SARs") and stock purchase rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(d) "Common Stock" means the Common Stock of the Company.
(e) "Company" means Symmetricom, Inc., a California
corporation.
(f) "Committee" means a Committee, if any, appointed by
the Board in accordance with paragraph (a) of Section 4 of the Plan.
(g) "Consultant" means any person, including an advisor,
who is engaged by the Company or any Parent or Subsidiary to render
services and is compensated for such services, provided the term
Consultant shall not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant"
means the absence of any interruption or termination of the employ-
ment or consulting relationship by the Company or any Subsidiary.
Continuous Status as an Employee or Consultant shall not be consid-
ered interrupted in the case of: (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Board,
provided that such leave is for a period of not more than ninety
(90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the
case of transfers between locations of the Company or between the
Company, its Subsidiaries or its successor.
(i) "Disability" means total and permanent disability, as
defined in Section 22(e)(3) of the Code.
(j) "Employee" means any person, including officers and
directors, employed by the Company or any Subsidiary. The payment
of directors' fees by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(l) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any estab-
lished stock exchange or a national market system, including without
limitation the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the
Fair Market Value of a Share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the day of
determination, as reported in the Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly
quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock shall be
the mean between the high and low asked prices for the Common Stock
on the day of determination, as reported in the Wall Street Journal
or such other source as the Administrator deems reliable;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Administrator.
(m) "Incentive Stock Option" means an Option that
satisfies the provisions of Section 422A of the Code.
(n) "Nonstatutory Stock Option" means an Option that is
not an Incentive Stock Option.
(o) "Option" means an Option granted pursuant to the
Plan.
(p) "Optioned Stock" means the Common Stock subject to an
Option or Right.
(q) "Optionee" means an Employee or Consultant who
receives an Option or Right.
(r) "Parent" corporation shall have the meaning defined
in Section 425(e) of the Code.
(s) "Plan" means this 1990 Employee Stock Plan.
(t) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under
Section 8 below.
(u) "Right" means and includes SARs and Stock Purchase
Rights granted pursuant to the Plan.
(v) "SAR" means a stock appreciation right granted
pursuant to Section 7 below.
(w) "Share" means the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(x) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 8.
(y) "Subsidiary" corporation shall have the meaning
defined in Section 425(f) of the Code.
In addition, the terms "Rule 16b-3" and "Applicable Laws," the
term "Insiders," the term "Tax Date," and the terms "Change of Con-
trol" and "Change of Control Price," shall have the meanings set
forth, respectively, in Sections 4, 7, 9 and 11 below.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the total number of Shares reserved and
available for distribution pursuant to awards made under the Plan
shall be two million, two hundred thousand (2,200,000), increased on
the first day of each fiscal year of the Company, beginning with the
fiscal year commencing July 1, 1996, by a number equal to 3.0% of
the number of shares outstanding as of the last trading day of the
Company's immediately preceding fiscal year. The maximum number of
Shares reserved and available for issuance pursuant to Incentive
Stock Options is 2,200,000. The Shares may be authorized but
unissued, or reacquired stock.
If an Option or Right should expire or become unexer-
cisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan
shall have been terminated, become available for other Options or
Rights under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options or Rights to Employees
who are also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan
in compliance with Rule 16b-3 promulgated under the Exchange Act or
any successor rule ("Rule 16b-3") with respect to a plan intended to
qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitu-
tion therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan.
(ii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options or Rights to
Employees or Consultants who are neither directors nor officers of
the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the legal requirements,
if any, relating to the administration of incentive stock option
plans under California corporate and securities laws and under the
Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise direc-
ted by the Board. From time to time the Board may increase the size
of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.
(iii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with
respect to directors, non-director officers and Employees who are
neither directors nor officers and Consultants who are not
directors.
(b) Powers of the Administrator. Subject to the provi-
sions of the Plan and in the case of a Committee, the specific
duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options and Rights may from time to time be
granted hereunder;
(iii) to determine whether and to what extent
Options and Rights or any combination thereof, are granted
hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, the share price and
any restriction or limitation, or any vesting acceleration or
waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall
determine, in its sole discretion);
(vii) to determine whether and under what circum-
stances an Option may be settled in cash under subsection
7(a)(vii) instead of Common Stock;
(viii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option shall have declined
since the date the Option was granted; and
(x) to determine the terms and restrictions appli-
cable to Options and Rights and any Restricted Stock acquired
pursuant to Rights.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be
final and binding.
5. Eligibility.
(a) Nonstatutory Stock Options and Rights may be granted
only to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee who has been granted an
Option or Right may, if he or she is otherwise eligible, be granted
additional Options or Rights. Each Option shall be evidenced by a
written Option agreement, which shall expressly identify the Options
as Incentive Stock Options or as Nonstatutory Stock Options, and
which shall be in such form and contain such provisions as the
Administrator shall from time to time deem appropriate. Without
limiting the foregoing, the Administrator may, at any time, or from
time to time, authorize the Company, with the consent of the
respective recipients, to issue Options in exchange for the
surrender and cancellation of any or all outstanding Options, other
options, or Rights.
(b) Neither the Plan nor any Option or Right agreement
shall confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in
any way with the Optionee's right or the Company's right to
terminate the Optionee's employment at any time.
(c) The following limitations shall apply to grants of
Options and Rights to Employees:
(i) No Employee shall be granted, in any fiscal year
of the Company, Options and Rights to purchase more than an
aggregate of 250,000 Shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options and Rights to
purchase up to an additional 250,000 Shares in the aggregate which
shall not count against the limit set forth in subsection (i) above.
(iii)The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 11.
(iv) If an Option or Right is cancelled in the same
fiscal year of the Company in which it was granted (other than in
connection with a transaction described in
Section 11), the cancelled Option or Right will be counted against
the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option or Right is reduced, the
transaction will be treated as a cancellation of the Option or Right
and the grant of a new Option or Right.
6. Term of Plan. Subject to Section 17 of the Plan, the Plan
shall become effective upon the earlier to occur of its adoption by
the Board or its approval by the shareholders of the Company as
described in Section 17. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 13 of the
Plan.
7. Options and SARs.
(a) Options. The Administrator, in its discretion, may
grant Options to eligible participants and shall determine whether
such Options shall be Incentive Stock Options or Nonstatutory Stock
Options. Each Option shall be evidenced by a written Option agree-
ment which shall expressly identify the Options as Incentive Stock
Options or as Nonstatutory Stock Options, and be in such form and
contain such provisions as the Administrator shall from time to time
deem appropriate. Without limiting the foregoing, the Administrator
may, at any time, or from time to time, authorize the Company, with
the consent of the respective recipients, to issue Options or Rights
in exchange for the surrender and cancellation of any or all
outstanding Options or Rights. Option agreements shall contain the
following terms and conditions:
(i) Option Price; Number of Shares. The per Share
exercise price for the Shares issuable pursuant to an Option shall
be such price as is determined by the Administrator, but shall in no
event be less than 85% of the Fair Market Value of Common Stock,
determined as of the date of grant of the Option. In the event that
the Administrator shall reduce the exercise price, the exercise
price shall be no less than 85% of the Fair Market Value as of the
date of that reduction.
The Option agreement shall specify the number of
Shares to which it pertains.
(ii) Waiting Period and Exercise Dates. At the
time an Option is granted, the Administrator will determine the
terms and conditions to be satisfied before Shares may be purchased,
including the dates on which Shares subject to the Option may first
be purchased. The Administrator may specify that an Option may not
be exercised until the completion of the service period specified at
the time of grant. (Any such period is referred to herein as the
"waiting period.") At the time an Option is granted, the Admin-
istrator shall fix the period within which the Option may be exer-
cised, which shall not be less than the waiting period, if any, nor,
in the case of an Incentive Stock Option, more than ten (10) years,
from the date of grant.
(iii) Form of Payment. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Administrator
(and, in the case of an Incentive Stock Option, shall be determined
at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the
case of Shares acquired upon exercise of an Option either have been
owned by the Optionee for more than six months on the date of sur-
render or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed
exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan pro-
ceeds required to pay the exercise price, (6) delivery of an irre-
vocable subscription agreement for the Shares which irrevocably
obligates the Optionee to take and pay for the Shares not more than
twelve months after the date of delivery of the subscription agree-
ment, (7) any combination of the foregoing methods of payment, or
(8) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws.
(iv) Termination of Employment or Consulting
Relationship. In the event an Optionee's Continuous Status as an
Employee or Consultant terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise his or her Option,
but only within such period of time as is determined by the Admin-
istrator at the time of grant, not to exceed six (6) months (three
(3) months in the case of an Incentive Stock Option) from the date
of such termination, and only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no
event later than the expiration of the term of such Option as set
forth in the Option Agreement). To the extent that Optionee was not
entitled to exercise an Option at the date of such termination, and
to the extent that the Optionee does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein,
the Option shall terminate.
(v) Special Incentive Stock Option Provisions. In
addition to the foregoing, Options granted under the Plan which are
intended to be Incentive Stock Options under Section 422A of the
Code shall be subject to the following terms and conditions:
(A) Exercise Price. The per share exercise
price of an Incentive Stock Option shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
(B) Dollar Limitation. To the extent that the
aggregate Fair Market Value of (i) the Shares with respect to which
Options designated as Incentive Stock Options plus (ii) the shares
of stock of the Company, Parent and any Subsidiary with respect to
which other incentive stock options are exercisable for the first
time by an Optionee during any calendar year under all plans of the
Company and any Parent and Subsidiary exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For
purposes of the preceding sentence, (i) Options shall be taken
into account in the order in which they were granted, and (ii) the
Fair Market Value of the Shares shall be determined as of the time
the Option or other incentive stock option is granted.
(C) 10% Shareholder. If any Optionee to whom
an Incentive Stock Option is to be granted pursuant to the pro-
visions of the Plan is, on the date of grant, the owner of Common
Stock (as determined under Section 425(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary, then the following special
provisions shall be applicable to the Option granted to such
individual:
(1) The per Share Option price of Shares
subject to such Incentive Stock Option shall not be less than 110%
of the Fair Market Value of Common Stock on the date of grant; and
(2) The Option shall not have a term in
excess of five (5) years from the date of grant.
Except as modified by the preceding provisions of this subsec-
tion 7(a)(v) and except as otherwise limited by Section 422A of the
Code, all of the provisions of the Plan shall be applicable to the
Incentive Stock Options granted hereunder.
(vi) Other Provisions. Each Option granted under
the Plan may contain such other terms, provisions, and conditions
not inconsistent with the Plan as may be determined by the
Administrator.
(vii) Buyout Provisions. The Administrator may at
any time offer to buy out for a payment in cash or Shares, an Option
previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the
time that such offer is made.
(b) SARs.
(i) In Connection with Options. At the sole
discretion of the Administrator, SARs may be granted in connection
with all or any part of an Option, either concurrently with the
grant of the Option or at any time thereafter during the term of the
Option. The following provisions apply to SARs that are granted in
connection with Options:
(A) The SAR shall entitle the Optionee to exer-
cise the SAR by surrendering to the Company unexercised a portion of
the related Option. The Optionee shall receive in exchange from the
Company an amount equal to the excess of (x) the Fair Market Value
on the date of exercise of the SAR of the Common Stock covered by
the surrendered portion of the related Option over (y) the exercise
price of the Common Stock covered by the surrendered portion of the
related Option. Notwithstanding the foregoing, the Administrator
may place limits on the amount that may be paid upon exercise of an
SAR; provided, however, that such limit shall not restrict the
exercisability of the related Option.
(B) When an SAR is exercised, the related
Option, to the extent surrendered, shall cease to be exercisable.
(C) An SAR shall be exercisable only when and
to the extent that the related Option is exercisable and shall
expire no later than the date on which the related Option expires.
(D) An SAR may only be exercised at a time when
the Fair Market Value of the Common Stock covered by the related
Option exceeds the exercise price of the Common Stock covered by the
related Option.
(ii) Independent of Options. At the sole
discretion of the Administrator, SARs may be granted without related
Options. The following provisions apply to SARs that are not
granted in connection with Options:
(A) The SAR shall entitle the Optionee, by
exercising the SAR, to receive from the Company an amount equal to
the excess of (x) the Fair Market Value of the Common Stock covered
by the exercised portion of the SAR, as of the date of such exer-
cise, over (y) the Fair Market Value of the Common Stock covered by
the exercised portion of the SAR, as of the last market trading date
prior to the date on which the SAR was granted; provided, however,
that the Administrator may place limits on the aggregate amount that
may be paid upon exercise of an SAR.
(B) SARs shall be exercisable, in whole or in
part, at such times as the Administrator shall specify in the
Optionee's SAR agreement.
(iii) Form of Payment. The Company's obligation
arising upon the exercise of an SAR may be paid in Common Stock or
in cash, or in any combination of Common Stock and cash, as the
Administrator, in its sole discretion, may determine. Shares issued
upon the exercise of an SAR shall be valued at their Fair Market
Value as of the date of exercise.
(iv) Section 16 Restrictions. SARs granted to per-
sons who are subject to Section 16 of the Exchange Act ("Insiders")
shall be subject to any additional restrictions applicable to SARs
granted to such persons in compliance with Rule 16b-3. An Insider
may only exercise an SAR during such time or times as are permitted
by Rule 16b-3.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a Share-
holder. Any Option or SAR granted hereunder shall be exercisable at
such times and under such conditions as determined by the
Administrator and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a
Share.
An Option or SAR shall be deemed to be exercised when
written notice of such exercise has been given to the Company in
accordance with the terms of the Option or SAR by the person
entitled to exercise the Option or SAR and full payment for the
Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Administrator (and, in the case of an Incentive Stock Option,
determined at the time of grant) and permitted by the Option Agree-
ment consist of any consideration and method of payment allowable
under subsection 7(a)(iii) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall be avail-
able, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the Option is exercised.
Exercise of an SAR in any manner shall, to the extent the SAR is
exercised, result in a decrease in the number of Shares which
thereafter shall be available for purposes of the Plan, and the SAR
shall cease to be exercisable to the extent it has been exercised.
(ii) Rule 16b-3. Options and SARs granted to
Insiders must comply with the applicable provisions of Rule 16b-3
and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
(iii) Termination of Employment or Consulting
Relationship. In the event an Optionee's Continuous Status as an
Employee or Consultant terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise his or her Option or
SAR, but only within such period of time as is determined by the
Administrator at the time of grant, not to exceed six (6) months
(three (3) months in the case of an Incentive Stock Option) from the
date of such termination, and only to the extent that the Optionee
was entitled to exercise it at the date of such termination (but in
no event later than the expiration of the term of such Option or SAR
as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date
of such termination, and to the extent that the Optionee does not
exercise such Option or SAR (to the extent otherwise so entitled)
within the time specified herein, the Option or SAR shall terminate.
(iv) Disability of Optionee. In the event an
Optionee's Continuous Status as an Employee or Consultant terminates
as a result of the Optionee's Disability, the Optionee may exercise
his or her Option or SAR, but only within six (6) months from the
date of such termination, and only to the extent that the Optionee
was entitled to exercise it at the date of such termination (but in
no event later than the expiration of the term of such Option or SAR
as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date
of such termination, and to the extent that the Optionee does not
exercise such Option or SAR (to the extent otherwise so entitled)
within the time specified herein, the Option or SAR shall terminate.
(v) Death of Optionee. In the event of an
Optionee's death, the Optionee's estate or a person who acquired the
right to exercise the deceased Optionee's Option or SAR by bequest
or inheritance may exercise the Option or SAR, but only within six
(6) months following the date of death, and only to the extent that
the Optionee was entitled to exercise it at the date of death (but
in no event later than the expiration of the term of such Option or
SAR as set forth in the Option or SAR Agreement). To the extent
that Optionee was not entitled to exercise an Option or SAR at the
date of death, and to the extent that the Optionee's estate or a
person who acquired the right to exercise such Option does not
exercise such Option or SAR (to the extent otherwise so entitled)
within the time specified herein, the Option or SAR shall terminate.
8. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards
granted under the Plan and/or cash awards made outside of the Plan.
After the Administrator determines that it will offer Stock Purchase
Rights under the Plan, it shall advise the offeree in writing of the
terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to purchase,
the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and
the time within which the offeree must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which
the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock
Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator deter-
mines otherwise, the Restricted Stock purchase agreement shall grant
the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the
Company for any reason (including death or Disability). The pur-
chase price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the purchaser
and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as
the Administrator may determine.
(c) Other Provisions. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Admin-
istrator in its sole discretion. In addition, the provisions of
Restricted Stock purchase agreements need not be the same with
respect to each purchaser.
(d) Section 16 Restrictions. Stock Purchase Rights
granted to Insiders, and Shares purchased by Insiders in connection
with Stock Purchase Rights, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b-3. An Insider may
only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a
Stock Purchase Right, during such time or times as are permitted by
Rule 16b-3.
(e) Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent
to those of a shareholder, and shall be a shareholder when his or
her purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in
Section 11 of the Plan.
9. Stock Withholding to Satisfy Withholding Tax Obligations.
At the discretion of the Administrator, Optionees may satisfy
withholding obligations as provided in this Section 9. When an
Optionee incurs tax liability in connection with the an Option or
Right, which tax liability is subject to tax withholding under
applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws,
the Optionee may satisfy the withholding tax obligation by electing
to have the Company withhold from the Shares to be issued upon
exercise of the Option, or the Shares to be issued in connection
with the Right, if any, that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax
Date").
All elections by an Optionee to have Shares withheld for this
purpose shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option or Right as to which the
election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is an Insider, the election must
comply with the applicable provisions of Rule 16b-3 and shall
be subject to such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan
transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the
Optionee shall receive the full number of Shares with respect to
which the Option or Right is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
10. Non-Transferability of Options. Options and Rights may
not be sold, pledged, assigned, hypothecated, transferred or dis-
posed of in any manner other than by will or by the laws of descent
or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of
the Company, the number of Shares covered by each outstanding Option
and Right, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options or Rights have
yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option or Right, as well as the
price per Share covered by each such outstanding Option or Right,
shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the aggregate
number of issued Shares effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no
issuance by the Company of Shares of stock of any class, or
securities convertible into Shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option or
Right.
In the event of the proposed dissolution or liqui-
dation of the Company, all outstanding Options and Rights will
terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that
any Option or Right shall terminate as of a date fixed by the Board
and give each Optionee the right to exercise his Option or Right as
to all or any part of the Optioned Stock or Right, including Shares
as to which the Option or Right would not otherwise be exercisable.
Subject to the provisions of paragraph (b) hereof, in
the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into
another corporation, each outstanding Option and Right shall be
assumed or an equivalent option or Right shall be substituted by
such successor corporation or a parent or subsidiary of such suc-
cessor corporation, unless the Board determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option or
Right as to all of the Optioned Stock, including Shares as to which
the Option or Right would not otherwise be exercisable. If the
Board makes an Option or Right fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of
assets, the Company shall notify the Optionee that the Option or
Right shall be fully exercisable for a period of fifteen (15) days
from the date of such notice, and the Option or Right will terminate
upon the expiration of such period. For purposes of this paragraph,
an Option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the Option confers the right
to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each
Share held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of
consideration chosen by the holders if a majority of the outstanding
Shares); provided, however, that if such consideration received in
the sale of assets or merger was not solely Common Stock of the
successor corporation or its parent, the Board may, with the consent
of the successor corporation and the participant, provide for the
consideration to be received upon exercise of the Option or Right to
be solely Common Stock of the successor corporation or its parent
equal in Fair Market Value to the per share consideration received
by holders of Common Stock in the sale of assets or merger.
(b) In the event of a "Change in Control" of the Company,
as defined in paragraph (c) below, any or all or none of the
following acceleration and valuation provisions shall apply, as the
Board, in its discretion, shall determine prior to such Change of
Control:
(i) Any Options and Rights outstanding as of the
date such Change in Control is determined to have occurred that
are not yet exercisable and vested on such date shall become
fully exercisable and vested;
(ii) To the extent they are exercisable and vested,
the value of all outstanding Options and Rights shall, unless
otherwise determined by the Board at or after grant, shall be
cashed out at the Change in Control Price, reduced by the
exercise price applicable to such Options or Rights. The cash
out proceeds shall be paid to the Optionee or, in the event of
death of an Optionee prior to payment, to the estate of the
Optionee or to a person who acquired the right to exercise the
Option or Right by bequest or inheritance.
(c) Definition of "Change in Control". For purposes of
this Section 11, a "Change in Control" means the happening of any of
the following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the
Company, a Subsidiary or a Company employee benefit plan,
including any trustee of such plan acting as trustee) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) The occurrence of a transaction requiring
shareholder approval, and involving the sale of all or
substantially all of the assets of the Company or the merger of
the Company with or into another corporation.
(d) Change in Control Price. For purposes of this
Section 11, "Change in Control Price" shall be, as determined by the
Board, (i) the highest closing sale price of a Share of Common Stock
as reported by the NASDAQ System and as appearing in the Wall Street
Journal (or, in the event the Common Stock is listed on a stock
exchange, the highest closing price on such exchange as reported on
the Composite Transaction Reporting System), at any time within the
60 day period immediately preceding the date of determination of the
Change in Control Price by the Board (the "60-Day Period"), or
(ii) the highest price paid or offered, as determined by the Board,
in any bona fide transaction or bona fide offer related to the
Change in Control of the Company, at any time within the 60-Day
Period, or (iii) some lower price as the Board, in its discretion,
determines to be a reasonable estimate of the fair market value of a
share of Common Stock.
12. Time of Granting Options and Rights. The date of grant of
an Option or Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Right.
Notice of the determination shall be given to each Employee or
Consultant to whom an Option or Right is so granted within a
reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment,
alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary
and desirable to comply with Rule 16b-3 under the Exchange Act or
under Section 422A of the Code (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amend-
ment or termination of the Plan shall not affect Options or Rights
already granted and such Options and Rights shall remain in full
force and effect as if this Plan had not been amended or terminated.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an Option or Right unless the exercise of
such Option or Right and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or the
issuance of Shares on exercise of an Option or Right, the Company
may require the person exercising such Option or Right to represent
and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the
Plan.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the non-issuance or sale of such Shares as
to which such requisite authority shall not have been obtained.
16. Agreements. Options and Rights shall be evidenced by
written agreements in such form as the Board shall approve from time
to time.
17. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve
(12) months before or after the date the Plan is adopted as provided
in Section 6. Such shareholder approval shall be obtained in the
degree and manner required under applicable state and federal law.
SYMMETRICOM, INC.
1990 DIRECTOR OPTION PLAN
(as amended through October 25, 1995)
1. Purposes of the Plan. The purposes of this 1990 Director
Option Plan are to attract and retain the best available personnel
for service as Directors of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board.
All options granted hereunder shall be "non-statutory
stock options".
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Symmetricom, Inc., a California
corporation.
(e) "Continuous Status as a Director" means the absence
of any interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of
the Company. The payment of a Director's fee by the Company shall
not be sufficient in and of itself to constitute "employment" by the
Company.
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(i) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the
Fair Market Value of a Share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Board deems
reliable;
(ii)If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly
quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock shall be
the mean between the high and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, as
reported in the Wall Street Journal or such other source as the
Board deems reliable, or;
(iii)In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Board.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means an Outside Director who receives an
Option.
(m) "Outside Director" means a Director who is not an
Employee.
(n) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 425(e) of the Internal
Revenue Code of 1986.
(o) "Plan" means this 1990 Director Option Plan.
(p) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 425(f) of
the Internal Revenue Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of
Section 10 of the Plan, the maximum aggregate number of Shares which
may be optioned and sold under the Plan is three hundred thousand
(300,000) Shares (the "Pool") of Common Stock. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares
which were subject thereto shall, unless the Plan shall have been
terminated, become available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein,
the Plan shall be administered by the Board. No discretion con-
cerning decisions regarding the Plan shall be afforded to any person
who is not a "disinterested person" (as defined in Rule 16b-3 under
the Exchange Act).
(b) Procedure for Grants. All grants of Options
hereunder shall be automatic and non-discretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside
Directors.
(ii)Each Outside Director shall be automa-
tically granted an Option to purchase 10,000 Shares (the "First
Option") on the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the
Company or appointment by the Board to fill a vacancy; provided,
however, that no First Option shall be granted to an Outside
Director who, immediately prior to becoming an Outside Director, was
a Director. After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 10,000 Shares on January 1 of each
year, if on such date, he or she shall have served on the Board for
at least six (6) months.
(iii)The terms of each Option granted hereunder
shall be as follows:
(A) the term of the Option shall be ten
(10) years.
(B) the Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as
set forth in Section 8 hereof.
(C) the exercise price per Share shall be 100%
of the Fair Market Value per Share on the date of grant of the
Option.
(D) the Option shall become exercisable in
installments cumulatively as to twenty-five percent (25%) of the
Optioned Stock one year after the date of grant and as to an addi-
tional twenty-five percent (25%) of the Optioned Stock two years
after the date of grant and as to an additional fifty percent (50%)
of the Optioned Stock three years after the date of grant, so that
100% of the Optioned Stock granted under an individual Option shall
be exercisable three years after the date of grant of the Option.
(iv)In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding
Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall
be for that number of Shares determined by dividing the total number
of Shares remaining available for grant by the number of Outside
Directors on the automatic grant date. No further grants shall be
made until such time, if any, as additional Shares become available
for grant under the Plan through action of the shareholders to
increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted
hereunder.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information
and in accordance with Section 2(i) of the Plan, the Fair Market
Value of the Common Stock; (ii) to interpret the Plan; (iii) to
prescribe, amend and rescind rules and regulations relating to the
Plan; (iv) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option
previously granted hereunder; and (v) to make all other
determinations deemed necessary or advisable for the administration
of the Plan.
(d) Effect of Board's Decision. All decisions, deter-
minations and interpretations of the Board shall be final.
5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance
with the terms set forth in Section 4(b) hereof. An Outside
Director who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options in accordance
with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to
serve as a Director, nor shall it interfere in any way with any
rights which the Director or the Company may have to terminate his
directorship at any time.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 16 of the Plan.
It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 11 of the Plan.
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for
Optioned Stock shall be 100% of the Fair Market Value per Share on
the date of grant of the Option.
(b) Form of Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Board and may
consist entirely of (i) cash, (ii) check, (iii) promissory note,
(iv) other shares which (x) in the case of Shares acquired upon
exercise of an Option either have been owned by the Optionee for
more than six (6) months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised, (v) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds required
to pay the exercise price, (vi) delivery of an irrevocable subscrip-
tion agreement for the Shares which irrevocably obligates the
Optionee to take and pay for the Shares not more than twelve (12)
months after the date of delivery of the subscription agreement,
(vii) any combination of the foregoing methods of payment, or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted under applicable law.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are
set forth in Section 4(b) hereof; provided, however, that no Options
shall be exercisable until shareholder approval of the Plan in
accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment
may consist of any consideration and method of payment allowable
under Section 7(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to
the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors
must comply with the applicable provisions of Rule 16b-3 promulgated
under the Exchange Act or any successor thereto and shall contain
such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.
(c) Termination of Continuous Status as a Director. In
the event an Optionee's Continuous Status as a Director terminates
(other than upon the Optionee's death or total and permanent dis-
ability (as defined in Section 22(e)(3) of the Code)), the Optionee
may exercise his or her Option, but only within three (3) months
from the date of such termination, and only to the extent that the
Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise
an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall
terminate.
(d) Disability of Optionee. In the event Optionee's
Continuous Status as a Director terminates as a result of total and
permanent disability (as defined in Section 22(e)(3) of the Code),
the Optionee may exercise his or her Option, but only within six (6)
months from the date of such termination, and only to the extent
that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten
(10) year term). To the extent that the Optionee was not entitled
to exercise an Option at the date of termination, or if he or she
does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance may exercise the
Option, but only within six (6) months following the date of death,
and only to the extent that the Optionee was entitled to exercise it
at the date of death (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the
extent that the Optionee's estate or a person who acquired the right
to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option
shall terminate.
9. Non-Transferability of Options. The Option may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or dis-
tribution and may be exercised, during the lifetime of the Optionee,
only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of
the Company, the number of Shares covered by each outstanding
Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share covered by
each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued Shares resulting
from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or
decrease in the aggregate number of issued Shares effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of Shares of
stock of any class, or securities convertible into Shares of stock
of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject
to an Option.
In the event of the proposed dissolution or liquidation of
the Company, all outstanding Options will terminate immediately
prior to the consummation of such proposed action, unless otherwise
provided by the Board. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall termi-
nate as of a date fixed by the Board and give each Optionee the
right to exercise his Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise
be exercisable.
Subject to the provisions of paragraph (b) hereof, in the
event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another
corporation, each outstanding Option shall be assumed or an equiv-
alent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation. In the event
that the successor corporation does not agree to assume the Option
or to substitute an equivalent option, each outstanding Option shall
become fully vested and exercisable, including as to Shares as to
which it would not otherwise be exercisable. If an Option becomes
fully vested and exercisable in the event of a merger or sale of
assets, the Company shall notify the Optionee that the Option shall
be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Option shall terminate upon the expiration
of such period. For purposes of this paragraph, an Option granted
under the Plan shall be deemed to be assumed if, following the sale
of assets or merger, the Option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior
to the sale of assets or merger, the consideration (whether stock,
cash or other securities or property) received in the sale of assets
or merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if such holders were offered
a choice of consideration, the type of consideration chosen by the
holders if a majority of the outstanding Shares).
(b) In the event of a "Change in Control" of the Company,
as defined in paragraph (c) below, any Options outstanding as of the
date such Change in Control is determined to have occurred that are
not yet exercisable and vested on such date shall become fully
exercisable and vested.
(c) Definition of "Change in Control". For purposes of
this Section 10, a "Change in Control" means when any "person," as
such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, a Subsidiary or a Company employee benefit
plan, including any trustee of such plan acting as trustee) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment,
alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary
and desirable to comply with Rule 16b-3 under the Exchange Act (or
any other applicable law or regulation), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. Any such amend-
ment or termination of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with
Section 4(b) hereof. Notice of the determination shall be given to
each Outside Director to whom an Option is so granted within a
reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to
such compliance.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the afore-
mentioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any lia-
bility in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the
Plan.
15. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company at or prior
to the first annual meeting of shareholders held subsequent to the
granting of an Option hereunder. Such shareholder approval shall be
obtained in the degree and manner required under applicable state
and federal law.
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