SYMMETRICOM INC, 10-Q, 1999-02-04

SYMMETRICOM INC
10-Q, 1999-02-04
TELEPHONE & TELEGRAPH APPARATUS

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 1998

[ ] 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.)

2300 Orchard Parkway, San Jose, CA 95131-1017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code: (408) 943-9403

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _______
-----

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _______ No _______

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:

CLASS OUTSTANDING AS OF February 2, 1999
----- ----------------------------------
Common Stock 15,097,712

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SYMMETRICOM, INC.

FORM 10-Q

INDEX

<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
- -----------------------------

Item 1. Financial Statements:

Consolidated Balance Sheets
December 31, 1998 and June 30, 1998 3

Consolidated Statements of Operations -
Three and six months ended December 31, 1998 and 1997 4

Consolidated Statements of Cash Flows -
Six months ended December 31, 1998 and 1997 5

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8

Item 3. Quantitative and Qualitative Disclosures About Market Risk 19

PART II. OTHER INFORMATION
- --------------------------

Item 4. Submission of Matters to a Vote of Security Holders 20

Item 6. Exhibits and Reports on Form 8-K 21

SIGNATURES 22
</TABLE>

2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

December 31, June 30,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,533 $ 31,369
Short-term investments 13,916 2,973
-------- --------
Cash and investments 36,449 34,342
Accounts receivable, net 16,164 16,347
Inventories 15,157 16,798
Other current assets 8,790 8,257
-------- --------
Total current assets 76,560 75,744

Property, plant and equipment, net 36,287 38,334
Other assets, net 1,133 815
-------- --------
$113,980 $114,893
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,479 $ 5,585
Accrued liabilities 16,200 14,388
Current maturities of long-term obligations 553 215
-------- --------
Total current liabilities 22,232 20,188

Long-term obligations 8,525 8,368
Deferred income taxes 1,954 1,980

Shareholders' equity:
Preferred stock, no par value:
Authorized 500 shares
Issued none -- --
Common stock, no par value:
Authorized 32,000 shares
Issued and outstanding 15,042 and 15,772 shares 19,810 23,892
Retained earnings 61,459 60,465
-------- --------
Total shareholders' equity 81,269 84,357
-------- --------
$113,980 $114,893
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

3
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SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $31,004 $34,337 $60,202 $68,320
Cost of sales 18,182 17,621 35,487 35,423
------- ------- ------- -------
Gross profit 12,822 16,716 24,715 32,897
Operating expenses:
Research and development 4,679 5,017 9,281 9,620
Selling, general and
administrative 7,599 7,411 14,764 15,552
------- ------- ------- -------
Operating income 544 4,288 670 7,725
Interest income 471 461 948 981
Interest expense (180) (182) (360) (474)
------- ------- ------- -------
Earnings before income taxes 835 4,567 1,258 8,232
Income taxes 178 1,134 264 2,116
------- ------- ------- -------
Net earnings $ 657 $ 3,433 $ 994 $ 6,116
======= ======= ======= =======

Basic earnings per share $ .04 $ .22 $ .06 $ .39
======= ======= ======= =======
Weighted average shares
outstanding-basic 15,406 15,852 15,604 15,878
======= ======= ======= =======

Diluted earnings per share $ .04 $ .21 $ .06 $ .38
======= ======= ======= =======
Weighted average shares
outstanding-diluted 15,432 16,089 15,630 16,166
======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

4
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SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 59,696 $ 66,768
Cash paid to suppliers and employees (52,915) (62,602)
Interest received 977 644
Interest paid (360) (474)
Income taxes refund (paid) 573 (1,926)
-------- --------
Net cash provided by operating activities 7,971 2,410
-------- --------
Cash flows from investing activities:
Purchases of short-term investments (24,943) (8,682)
Maturities of short-term investments 14,000 13,500
Purchases of plant and equipment, net (1,914) (3,771)
Other (363) (4)
-------- --------
Net cash provided by (used for) investing activities (13,220) 1,043
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term obligations 595 --
Repayment of long-term obligations (100) (5,651)
Proceeds from issuance of common stock 402 1,101
Repurchase of common stock (4,484) (2,951)
-------- --------
Net cash used for financing activities (3,587) (7,501)
-------- --------
Net decrease in cash and cash equivalents (8,836) (4,048)
Cash and cash equivalents at beginning of period 31,369 28,203
-------- --------
Cash and cash equivalents at end of period $ 22,533 $ 24,155
======== ========

Reconciliation of net earnings to net cash provided by
operating activities:
Net earnings $ 994 $ 6,116
Depreciation and amortization 4,029 4,170
Net deferred income taxes 11 (1,004)
Changes in assets and liabilities:
Accounts receivable,net 183 (811)
Inventories 1,641 (4,269)
Accounts payable (106) (203)
Accrued liabilities 1,812 (1,606)
Tax benefit from employee stock plan -- 500
Other (593) (483)
-------- --------
Net cash provided by operating activities $ 7,971 $ 2,410
======== ========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

5
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SYMMETRICOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation. The consolidated financial statements included
---------------------
herein have been prepared by Symmetricom, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures which are made are adequate to make
the information presented not misleading, it is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended June 30, 1998.

In the opinion of the management, these unaudited statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Company at December 31, 1998, the
results of operations for the three and six month periods then ended and its
cash flows for the six month period then ended. The results of operations for
the periods presented are not necessarily indicative of those that may be
expected for the full year.

2. Inventories. Inventories are stated at the lower of cost (first-in, first-
-----------
out) or market. Inventories consist of:

<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
---- ----
(In thousands)
<S> <C> <C>
Raw materials $ 2,732 $ 3,875
Work-in-process 6,725 6,215
Finished goods 5,700 6,708
------- -------
$15,157 $16,798
======= =======
</TABLE>

3. Recent Accounting Pronouncements. Effective September 30, 1998, the
--------------------------------
Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income," which requires the Company to report and
display certain information related to comprehensive income. Comprehensive
income includes net income and other comprehensive income. Other comprehensive
income is classified separately into foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments in
debt and equity securities. At December 31, 1998 and 1997, and for the three
and six month periods then ended, other comprehensive income did not have any
material impact on the Company's financial position and results of operations.

In June 1997, Statement of Financial Accounting Standards No. 131 (SFAS
131), "Disclosures about Segments of an Enterprise and Related Information," was
issued, which requires the Company to report and display certain information
related to operating segments. The statement is effective for fiscal years
beginning after December 15, 1997. Accordingly, the Company will adopt SFAS 131
starting with its fiscal year ending June 30, 1999. It is not expected that the
adoption of this statement will have any material impact on the Company's
financial position and results of operations.

In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," was
issued, which defines derivatives, requires all derivatives be carried at fair
value, and provides for hedging accounting when certain conditions are met.

6
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This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Although the Company has not fully assessed the
implications of this new statement, the Company does not believe adoption of
this statement will have a material impact on the Company's financial position
and results of operations.

4. Contingencies. In January 1994, a securities class action complaint was
-------------
filed against the Company and certain of its present and former officers or
directors in the United States District Court, Northern District of California.
The action was filed on behalf of a putative class of purchasers of the
Company's stock during the period April 6, 1993 through November 10, 1993. The
complaint seeks unspecified money damages and alleges that the Company and
certain of its present or former officers or directors violated federal
securities laws in connection with various public statements made during the
putative class period. The Court dismissed the first and second amended
complaints with leave to amend. The plaintiff filed a third amended corrected
complaint in August 1997. The Company filed a motion to dismiss this third
amended complaint, which was denied in January 1998. Discovery is proceeding.
The Company and its officers believe that the complaint is entirely without
merit, and intend to continue to defend the action vigorously. The Company is
also a party to certain other claims in the normal course of its operations.
While the results of such claims cannot be predicted with any 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 and results of operations.

7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

BUSINESS OUTLOOK AND RISK FACTORS

The trend analyses and other non-historical information contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations are "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the safe harbor provisions
of those Sections. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," and similar expressions identify such forward
looking statements. Such forward looking statements include, without limitation,
statements concerning the Company's future net sales, net earnings and other
operating results. The Company's actual results could differ materially from
those discussed in the forward looking statements, due to a number of factors,
including the factors listed below.

Fluctuations in Operating Results. The Company's quarterly and annual
operating results have fluctuated in the past and may continue to fluctuate in
the future, due to several factors, including, without limitation, the volume
and timing of orders from customers and shipments to customers, the cancellation
or rescheduling of customer orders, changes in the product or customer mix of
sales, the gain or loss of significant customers, the Company's ability to
introduce new products on a timely and cost-effective basis, level and value of
the Company's inventories, the timing of new product introductions by the
Company and its competitors, customer delays in qualification of new products,
increased competition and competitive pricing pressures, fluctuations,
especially declines, in the average selling prices received for its products,
market acceptance of new or enhanced versions of the Company's and its
competitors' products, the long sales cycle associated with the Company's
products, cyclical conditions in the telecommunications and semiconductor
industries, fluctuations in manufacturing yields and other factors. For
example, net sales for the second quarter of fiscal 1999 were $31.0 million,
compared to $34.3 million for the second quarter of fiscal 1998, due in part to
factors described above. A significant portion of the Company's operating and
manufacturing expenses are relatively fixed in nature and planned expenditures
are based in part on anticipated orders. If the Company is unable to adjust
spending in a timely manner to compensate for any unexpected future sales
shortfall, the Company's business, financial condition and results of operations
could be materially and adversely affected. The Company's operations entail a
high level of fixed costs and require an adequate volume of production and sales
to achieve and maintain reasonable gross profit margins and net earnings.
Accordingly, any significant decline in demand for the Company's products or
reduction in the Company's average selling prices, or any material delay in
customer orders would have a material adverse effect on the Company's business,
financial condition and results of operations. For example, when net sales
declined to $31.0 million for the second quarter of fiscal 1999 from $34.3
million for the second quarter of fiscal 1998, the Company's earnings before
income taxes fell to $0.8 million for the second quarter of fiscal 1999 from
earnings before income taxes of $4.6 million for the second quarter of fiscal
1998, due in part to the factors described above. In addition, the Company's
future results depend in large part on growth in the markets for the Company's
products. The growth in each of these markets may depend on, among other
things, changes in general economic conditions, or conditions which relate
specifically to the markets in which the Company competes, changes in regulatory
conditions, legislation, export rules or conditions, interest rates and
fluctuations in the business cycle for any particular market segment.

Uncertainty of Timing of Product Sales; Limited Backlog. A substantial
portion of the Company's quarterly net sales is often dependent upon orders
received and shipped during that quarter, of which, a significant portion may be
received during the last month or even the last days of that quarter. The
semiconductor industry has recently experienced a change towards significantly
shorter lead times resulting

8
<PAGE>

in an increased dependence by the Company's Linfinity Microelectronics Inc.
subsidiary ("Linfinity") upon orders received and shipped during the same
quarter. The timing of the receipt and shipment of even one large order may have
a significant impact on the Company's net sales and results of operations for
such quarter. Furthermore, most orders in backlog can be rescheduled or canceled
without significant penalty. As a result, it is difficult to predict the
Company's quarterly results even during the final days of a quarter.

Risks Associated with Linfinity Microelectronics Strategic Partner Initiative.
In July 1998, the Company began the process to identify alternatives to provide
greater financial resources for executing Linfinity's marketing strategy. The
Company engaged BT Alex.Brown Inc. to assist Symmetricom in executing this
element of its business strategy. Although the Company has current negotiations
in process with respect to this strategic partner initiative, there can be no
assurance that such initiative will occur, or that if such initiative does occur
that it would not result in significant one-time write-offs or contingent
liabilities, any of which could materially adversely affect the Company's
business, financial condition, results of operations and the price of the
Company's common stock. Additionally, the Company's success is highly dependent
upon Linfinity's ability to attract and retain its key personnel during this
inherently disruptive process. The competition for such employees is intense.
The Company's failure to attract, retain and motivate qualified personnel could
have a material adverse effect on the strategic partner initiative and on the
Company's business, financial condition and results of operations.

Customer Concentration. A relatively small number of customers has
historically accounted for, and is expected to continue to account for, a
significant portion of the Company's net sales in any given fiscal period. In
fiscal 1997, AT&T Corporation (AT&T), a customer of the Company's Telecom
Solutions division ("Telecom Solutions"), accounted for 16% of the Company's
total net sales. No customer accounted for 10% or more of net sales in fiscal
years 1998 and 1996. The timing and level of sales to the Company's largest
customers have fluctuated significantly in the past and are expected to continue
to fluctuate significantly from quarter-to-quarter and year-to-year in the
future. For example, the Company's sales to AT&T increased to $22.5 million in
fiscal 1997 from $2.6 million in fiscal 1996, but decreased to $8.1 million in
fiscal 1998. There can be no assurance as to the timing or level of future
sales to the Company's customers. The loss of one or more of the Company's
significant customers or a significant reduction or delay in sales to any such
customer, could have a material adverse effect on the Company's business,
financial condition and results of operations.

New Product Development. The market for the Company's products is
characterized by rapidly changing technologies, frequent new product
introductions, evolving industry standards and changes in end-user requirements.
Technological advancements could render the Company's products obsolete and
unmarketable. The Company's success will depend on its ability to respond to
changing technologies and customer requirements and on its ability to develop
and introduce new and enhanced products, in a cost-effective and timely manner.
Delays in new product development or delays in production startup could have a
material adverse effect on the Company's business, financial condition and
results of operations. Such delays have happened in the past, and there can be
no assurance that such delays will not recur, or that the Company will
successfully respond to technological changes and develop and introduce new or
enhanced products, or that such new or enhanced products will achieve market
acceptance.

Product Performance and Reliability. The Company's customers establish
demanding specifications for product performance and reliability. The Company's
products are complex and often use state of the art components, processes and
techniques. Undetected errors and design flaws have occurred in the past and
there can be no assurance that new products or enhancements of existing products
will not contain undetected errors, design flaws or other failures due to the
complexities of such products. In addition to higher product service, warranty
and replacement costs, such product defects may seriously harm the

9
<PAGE>

Company's customer relationships and industry reputation, further magnifying the
adverse impact of such defects. Any such product performance or reliability
problems could have a material adverse effect on the Company's business,
financial condition and results of operations.

Competition; Pricing Pressure. The Company believes that competition in the
telecommunications and semiconductor industries in general, and in the new and
existing markets served by the Company in particular, is intense and likely to
increase substantially. The Company's ability to compete successfully in the
future will depend on, among other things: the cost effectiveness, quality,
price, service and market acceptance of the Company's products; its response to
the entry of new competitors or the introduction of new products by the
Company's competitors; its ability to keep pace with changing technology and
customer requirements; the timely development or acquisition of new or enhanced
products; and the timing of new product introductions by the Company or its
competitors. In the telecommunications market, Telecom Solutions' primary
competitors are Datum Inc. and Hewlett-Packard Company. In addition, due in
part, to the enactment of The Telecommunications Act of 1996, which permits
Regional Bell Operating Companies (RBOCs), which are among Telecom Solutions'
largest customers, to manufacture telecommunications equipment, RBOCs may
increasingly become significant competitors of Telecom Solutions. In the
semiconductor market, Linfinity competes with a number of large multinational
companies and smaller niche companies. In addition, as part of its license and
supply agreement with Linfinity, IMP, Inc. has the right to manufacture, market,
and sell the small computer system interface (SCSI) terminators line of products
through its own sales force in direct competition with Linfinity. Many of the
Company's competitors or potential competitors are more established than the
Company and have greater financial, manufacturing, technical and marketing
resources. Furthermore, the Company expects its competitors to continually
improve their design and manufacturing capabilities and to introduce new
products and services with enhanced performance characteristics and/or lower
prices. The Company continues to experience significant pricing pressures in all
of its markets and has experienced price erosion in several product lines,
including low dropout regulators and pulse width modulators. In addition, the
continuing trend toward lower-priced personal computers has intensified pricing
pressures in certain related markets served by Linfinity. Linfinity's response
has been to attempt to increase the volume of units shipped and to attempt to
introduce new products with higher average selling prices, but there can be no
assurance that the Company will be able to fully offset the impact of this
severe price erosion. This competitive environment could result in significant
price reductions or the loss of orders from current and/or potential customers,
which, in each case, could materially and adversely affect the Company's
business, financial condition and results of operations.

Dependence on Foundries, Assembly and Test Services. Although Linfinity uses
its own semiconductor fabrication facility to manufacture bipolar wafers, it
utilizes IMP, Inc., an independent semiconductor foundry located in San Jose,
California, to supply most of its bipolar complementary metal oxide
semiconductor (BiCMOS) wafers. However, while reliance on an outside foundry may
reduce capital expenditures and fixed costs, it increases certain risks
significantly, including limited control of: delivery schedules, manufacturing
yields, production costs, and wafer supply, particularly during periods of
rapidly fluctuating demand. In the event that Linfinity's outside foundry, as a
result of financial or operating difficulties or otherwise, is unable or
unwilling to continue supplying wafers to Linfinity in the quantities and with
the yields required by Linfinity, there can be no assurance that Linfinity will
be able to identify and qualify additional manufacturing sources in a timely
manner, that any such additional manufacturing sources would be able to produce
wafers with acceptable manufacturing yields, or that Linfinity would not
experience delays in product availability, quality problems, increased costs or
disruption in product development activities. Irrespective of cause, delayed or
reduced wafer supply or reduced manufacturing yields could result in delayed
shipments or canceled orders, which, in either case, could materially and
adversely affect the Company's business, financial condition and results of
operations.

10
<PAGE>

Linfinity also increasingly relies on independent contract manufacturers in
the Far East to assemble and test a significant percentage of its integrated
circuits and most of its electronic modules. Reliance on independent
contractors can lengthen manufacturing cycle times, especially if Linfinity is
required, due to contractors' capacity constraints, to compete against others
for these contractors' services. Any inability to obtain sufficient
manufacturing capacity through existing or alternative sources at favorable
prices, if and as required, could result in delays or reductions in product
shipments which, in turn, could have a material adverse effect on the Company's
business, financial condition and results of operations.

Proprietary Technology. The Company's success will depend, in part, on its
ability to protect trade secrets, obtain or license patents and operate without
infringing on the rights of others. The Company relies on a combination of
trademark, copyright and patent registration, contractual restrictions and
internal security to establish and protect its proprietary rights. There can be
no assurance that such measures will provide meaningful protection for the
Company's trade secrets or other proprietary information. The Company has
United States and international patents and patent applications pending that
cover certain technology used by its Telecom Solutions and Linfinity operations.
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 position. 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. While the
Company intends to continue its efforts to obtain patents whenever possible,
there can be no assurance that patents will be issued or that new, or existing
patents will not be challenged, invalidated or circumvented, or that the rights
granted will provide any commercial benefit to the Company. The Company is also
subject to the risk of adverse claims and litigation alleging infringement of
the intellectual property rights of others. Although the Company is not
currently party to any intellectual property litigation, from time to time it
has received claims asserting that the Company has infringed the proprietary
rights of others. There can be no assurance that third parties will not assert
infringement claims against the Company in the future, or that any such claims
will not result in costly litigation or require the Company to obtain a license
for such intellectual property rights regardless of the merit of such claims.
No assurance can be given that any necessary licenses will be available or that,
if available, such licenses can be obtained on commercially reasonable terms.

Environmental Matters. 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. While the Company has not experienced any
materially adverse effects on its operations from environmental regulations,
there can be no assurance that changes in such regulations will not impose the
need for additional capital equipment or other requirements or restrict the
Company's ability to expand its operations. Failure to comply with such
regulations could result in suspension or cessation of the Company's operations,
or could subject the Company to significant liabilities. Although the Company
periodically reviews its facilities and internal operations for compliance with
applicable environmental regulations, such reviews are necessarily limited in
scope and frequency and, therefore, there can be no assurance that such reviews
have revealed or will reveal all potential instances of noncompliance. The
liabilities arising from any noncompliance with such environmental regulations
could materially and adversely affect the Company's business, financial
condition and results of operations.

Governmental Regulations. Federal and state regulatory agencies, including
the Federal Communications Commission and the various state public utility
commissions and public service commissions, regulate most the Company's domestic
telecommunications customers. Similar government oversight also exists in the
international market. Although the Company is generally not directly affected
by such legislation, the effects of such regulation on the Company's customers
may, in turn, adversely impact

11
<PAGE>

the Company's business, financial condition and results of operations. For
instance, the sale of the Company's products may be affected by the imposition
upon certain of the Company's customers of common carrier tariffs and the
taxation of telecommunications services. These regulations are continuously
reviewed and subject to change by the various governmental agencies. Changes in
current or future laws or regulations, in the United States or elsewhere, could
materially and adversely affect the Company's business, financial condition and
results of operations.

Risks Associated with International Sales. The Company's export sales, which
were primarily to the Far East, Western Europe, Canada and Latin America
accounted for 27%, 26% and 28% of the Company's net sales in fiscal years 1998,
1997 and 1996, respectively. Export sales to the Far East accounted for 12%,
16% and 13% of the Company's net sales in fiscal years 1998, 1997 and 1996,
respectively. International sales subject the Company to increased risks
associated with political and economic instability and changes in diplomatic and
trade relationships. For example, the Company believes that the economic
instability that continues to be experienced by certain Asian countries may
adversely affect export sales to the Far East during the third quarter of fiscal
1999 and beyond. In addition to the loss of direct sales to the region, the
economic instability in Asia could have a material adverse effect on the
Company's business, financial condition and results of operations indirectly if,
for example, the current situation in Asia adversely affects the Company's
distributors, customers and suppliers in the Asian region or elsewhere in the
world, causing more widespread reductions in sales, delays in collection and
supply difficulties.

International sales may be subject to certain additional risks, including but
not limited to, foreign currency fluctuations, export restrictions, longer
payment cycles and unexpected changes in regulatory requirements or tariffs. To
date, sales and purchase obligations denominated in foreign currencies have not
been significant. However, if, in the future, a higher portion of such sales
and purchases are denominated in foreign currencies, gains and losses on the
conversion to U.S. dollars of foreign currency accounts receivable and accounts
payable arising from international operations may contribute to fluctuations in
the Company's business and operating results. 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. There can be no
assurance that such factors will not materially and adversely affect the
Company's business, financial condition and results of operations in the future
or require the Company to modify significantly its current business practices.
In addition, the laws of certain foreign countries may not protect the Company's
proprietary technology to the same extent as do the laws of the United States.

Inventory Risks. Although the Company believes that it currently has
appropriate provisions for inventory that has declined in value, become obsolete
or is in excess of anticipated demand, there can be no assurance that such
provisions will be adequate. The Company's business, financial condition and
results of operations may be materially and adversely affected, if significant
inventories become obsolete or are otherwise not able to be sold at favorable
prices.

Uncertainties Regarding Sales to Distributors. The percentage of the
Company's sales sold through distributors, at both Linfinity and Telecom
Solutions, has generally increased over the past several years, although such
percentage fluctuates from quarter to quarter. Sales to distributors, either
contractually or by industry custom, may be subject to certain rights of return
and other allowances for which the Company maintains reserves. However, there
can be no assurance that such reserves will be adequate. The Company's
business, financial condition and results of operations may be materially and
adversely affected, if actual allowances significantly exceed amounts reserved.

12
<PAGE>

Changes to Effective Tax Rate. The Company's effective tax rate is affected
by the proportion of earnings (loss) before income taxes that the Company
derives from its Telecom Solutions operation, compared to its Linfinity
operation. The effective tax rate in fiscal 1998 was magnified by the
significant loss at Linfinity, which was subject to higher tax rates from its
United States jurisdictions, offset by the earnings at Telecom Solutions. Most
of Telecom Solutions' Puerto Rico earnings are taxed under Section 936 of the
U.S. Internal Revenue Code, which exempts qualified Puerto Rico earnings from
federal income taxes. This results in an overall lower effective tax rate for
Telecom Solutions. This exemption is subject to certain wage-based limitations
and expires at the end of fiscal 2006. In addition, this exemption will be
subject to further limitations during fiscal years 2003 through 2006.

Fluctuations in Stock Price. 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.

Year 2000 Compliance Risks. The Company is aware that many existing
information technology (IT) systems, such as computer systems and software
products, as well as non-IT systems that include embedded technology, were not
designed to correctly process dates after December 31, 1999. The Company is
currently assessing the impact of such "Year 2000" issues on its internal IT and
non-IT systems, as well as on its customers, suppliers and service providers.
The Company has formed a Year 2000 Project Team to identify and address Year
2000 compliance issues, including those related to the Company's significant
non-IT systems used in the Company's buildings, plant, equipment and other
infrastructure. The Year 2000 Project Team is continuing its testing and
evaluation of the Company's products and the Company's IT systems and is
compiling an inventory of all material Year 2000 issues related to the Company's
non-IT systems. The Company has not identified any significant areas of non-
compliance with respect to its products or IT systems and expects that the
assessment and plans for remedial action for all of its products, IT systems and
non-IT systems will be completed by the end of calendar 1999. The Company has
also initiated discussions with its significant suppliers and service providers
regarding their plans to investigate and remedy their Year 2000 issues.
Although the Company anticipates cooperation in these efforts from most of the
Company's significant suppliers and service providers, the Company is also
dependent on certain utility companies, telecommunications service companies and
other service providers that are outside the Company's control. Therefore, it
may be difficult for the Company to obtain assurances of Year 2000 readiness
from such third parties. Although the Company believes that its Year 2000
Project Team will identify all of the Company's material Year 2000 issues in the
course of its assessments, given the pervasiveness of Year 2000 issues and the
complex interrelationships among Year 2000 issues both internal and external to
the Company, there can be no assurance that the Company will be able to identify
and accurately evaluate all such issues.

The Company estimates that the expenses it has incurred to date to address
Year 2000 issues have not been material and, although it has not completed its
full assessment of its Year 2000 readiness, the Company does not expect to incur
material expenses in connection with any required remediation efforts.

13
<PAGE>

the Company's customers could have a significant adverse effect on the level and
timing of orders from such customers. Similarly, if Year 2000 problems
experienced by any of the Company's significant suppliers or service providers
cause or contribute to delays or interruptions in the delivery of products or
services to the Company, such delays or interruptions could have a material
adverse effect on the Company's business, financial condition and results of
operations. Finally, disruption in the economy generally resulting from Year
2000 issues could also materially adversely affect the Company. Although the
Year 2000 Project Team has not yet determined the most likely worst-case Year
2000 scenarios or quantified the likely impact of such scenarios, it is clear
that the occurrence of one or more of the risks described above could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company's Year 2000 Project Team's activities will include the development
of contingency plans in the event the Company has not completed all of its
remediation programs in a timely manner. In addition, the Year 2000 Project
Team will develop contingency plans in the event that any third parties who
provide goods or services essential to the Company's business, fail to
appropriately address their Year 2000 issues. The Year 2000 Project Team
expects to conclude the development of these contingency plans by the end of
calendar year 1999. Even if these plans are completed on time and put in place,
there can be no assurance that such plans will be sufficient to address any
third party failures or that unresolved or undetected internal and external Year
2000 issues will not have a material adverse effect on the Company's business,
financial condition and results of operations.

The statements set forth above regarding Year 2000 matters are "Year 2000
Readiness Disclosures," as defined in the Year 2000 Readiness Disclosure Act of
1998, enacted October 19, 1998 (Public Law 105-271).

RESULTS OF OPERATIONS

The Company operates in two different industry segments. Telecom Solutions, a
division of the Company, designs, manufactures and markets advanced network
synchronization systems and intelligent access systems for the
telecommunications industry. Linfinity Microelectronics Inc. (Linfinity), a
subsidiary of the Company, designs, manufactures and markets linear and mixed
signal integrated circuits, as well as systems-engineered modules primarily for
use in power management and communication applications in commercial,
industrial, and defense and space markets.

Net sales for the three and six month periods ended December 31, 1998 and 1997
were as follows:

<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ ------
(In millions)
<S> <C> <C> <C> <C>
Net sales:
Telecom Solutions $19.6 $19.7 $38.2 $38.2
Linfinity Microelectronics Inc. 11.4 14.6 22.0 30.1
----- ----- ----- -----
$31.0 $34.3 $60.2 $68.3
===== ===== ===== =====
</TABLE>

Net sales decreased by $3.3 million (10%) to $31.0 million in the second
quarter of fiscal 1999 from $34.3 million in the second quarter of fiscal 1998.
Net sales decreased by $8.1 million (12%) to $60.2 million in the first half of
fiscal 1999 from $68.3 million in the first half of fiscal 1998. Telecom
Solutions' net sales were basically flat in both the second quarter and first
half of fiscal 1999 compared to the corresponding periods of fiscal 1998. This
sales activity reflects flat sales of synchronization products and

14
<PAGE>

lower sales by Telecom Solutions' Navstar subsidiary in the digitally enhanced
cordless telephone (DECT) market, offset by higher sales of transmission
products. Linfinity's net sales decreased by $3.2 million (22%) to $11.4 million
and by $8.1 million (27%) to $22.0 million in the second quarter and first half
of fiscal 1999, respectively, compared to the corresponding periods of fiscal
1998. These decreases were due to increased price pressure from component
manufacturers supplying the personal computer market and a shift in sales to
lower-priced products.

Gross profit percentages for the three and six month periods ended December
31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross profit percentages:
Telecom Solutions 47% 51% 48% 51%
Linfinity Microelectronics Inc. 31% 46% 29% 44%
</TABLE>

The Company's gross profit, as a percentage of net sales, decreased to 41%
in both the second quarter and first half of fiscal 1999, compared to 49% and
48% in the second quarter and first half of fiscal 1998, respectively. Telecom
Solutions' gross profit decreased to 47% and 48% in the second quarter and first
six months of fiscal 1999, respectively, compared to 51% in both the
corresponding periods of fiscal 1998, due to less favorable manufacturing
efficiencies, lower production volumes and less favorable sales channel mix.
Linfinity's gross profit decreased to 31% and 29% in the second quarter and
first half of fiscal 1999, respectively, compared to 46% and 44% in the
corresponding periods of fiscal 1998, primarily due to increased price pressure
from component manufacturers supplying the personal computer market, a shift in
sales to lower-priced products and lower production volumes.

Research and development expense for the three and six month periods ended
December 31, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C>
Research and development expense:
Telecom Solutions $3.4 $3.3 $6.7 $6.4
Linfinity Microelectronics Inc. 1.3 1.7 2.6 3.2
---- ---- ---- ----
$4.7 $5.0 $9.3 $9.6
==== ==== ==== ====
</TABLE>

Research and development expense was $4.7 million (or 15% of net sales) and
$9.3 million (or 15% of net sales) in the second quarter and first half of
fiscal 1999, respectively, compared to $5.0 million (or 15% of net sales) and
$9.6 million (or 14% of net sales) in the corresponding periods of fiscal 1998.
Telecom Solutions' research and development expense was $3.4 million (or 17% of
net sales) and $6.7 million (or 17% of net sales) in the second quarter and
first half of fiscal 1999, respectively, compared to $3.3 million (or 17% of net
sales) and $6.4 million (or 17% of net sales) in the corresponding periods of
fiscal 1998. These increases were primarily due to continued high investment in
new products and core technology. Linfinity's research and development expense
was $1.3 million (or 11% of net sales) and $2.6 million (or 12% of net sales) in
the second quarter and first half of fiscal 1999, respectively, compared to $1.7
million (or 12% of net sales) and $3.2 million (or 11% of net sales) in the
corresponding periods of fiscal 1998.

15
<PAGE>

These decreases were primarily due to higher expense levels in the corresponding
periods of fiscal 1998 associated with new product and process developments.

Selling, general and administrative expense for the three and six month
periods ended December 31, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In million)
<S> <C> <C> <C> <C>
Selling, general and administrative expense:
Telecom Solutions $5.4 $4.5 $10.5 $ 9.2
Linfinity Microelectronics Inc. 2.2 2.9 4.3 6.4
---- ---- ----- -----
$7.6 $7.4 $14.8 $15.6
==== ==== ===== =====
</TABLE>

Selling, general and administrative expense was $7.6 million (or 25% of net
sales) and $14.8 million (or 25% of net sales) in the second quarter and first
half of fiscal 1999, respectively, compared to $7.4 million (or 22% of net
sales) and $15.6 million (or 23% of net sales) in the corresponding periods of
fiscal 1998. Telecom Solutions' selling, general and administrative expense was
$5.4 million (or 28% of net sales) and $10.5 million (or 27% of net sales) in
the second quarter and first half of fiscal 1999, respectively, compared to
$4.5 million (or 23% of net sales) and $9.2 million (or 24% of net sales) in the
corresponding periods of fiscal 1998. These increases were primarily due to
higher sales-based incentive compensation, expanded sales support and product
promotion, and higher administrative expenses. Linfinity's selling, general and
administrative expense was $2.2 million (or 19% of net sales) and $4.3 million
(or 19% of net sales) in the second quarter and first half of fiscal 1999,
respectively, compared to $2.9 million (or 20% of net sales) and $6.4 million
(or 21% of net sales) in the corresponding periods of fiscal 1998. These
decreases were primarily due to lower selling expenses associated with lower
sales and lower administrative expenses.

Interest income was basically flat at $0.5 million and $0.9 million in the
second quarter and first half of fiscal 1999, respectively, compared to the
corresponding periods of fiscal 1998.

Interest expense was flat at $0.2 million in the second quarter of fiscal
1999 and decreased to $0.4 million in the first half of fiscal 1999 compared to
$0.2 million and $0.5 million in the corresponding periods of fiscal 1998. The
interest expense decrease in the first six months of fiscal 1999 was primarily
due to Linfinity's note payable, which was repaid in full in September 1997.

The Company's effective tax rate was 21% in both the second quarter and
first half of fiscal 1999, compared to 25% and 26% in the corresponding periods
of fiscal 1998. The fiscal 1999 effective tax rate is primarily affected by the
proportion of earnings (loss) before income taxes between Telecom Solutions and
Linfinity. The effective tax rate for fiscal 1999 is also expected to be lower
than the federal tax rate, due to the benefit of lower income tax rates on
Puerto Rico earnings. The Company's effective tax rate is affected by the
percentage of qualified Puerto Rico earnings compared to total earnings as most
of the Company's Puerto Rico earnings are taxed under Section 936 of the U.S.
Internal Revenue Code, which exempts qualified Puerto Rico earnings from federal
income taxes. This exemption is subject to wage-based limitations and expires at
the end of fiscal 2006. In addition, this exemption will be further limited,
based on certain prior year Puerto Rico earnings during fiscal years 2003
through 2006.

As a result of the factors discussed above, net earnings in the second
quarter of fiscal 1999 were $0.7 million or $.04 per share (diluted) compared to
$3.4 million or $.21 per share (diluted) in the same period of

16
<PAGE>

fiscal 1998. Net earnings for the first half of fiscal 1999 were $1.0 million or
$.06 per share (diluted) compared to $6.1 million or $.38 per share (diluted) in
the same period of fiscal 1998.

Liquidity and Capital Resources

Working capital decreased to $54.3 million at December 31, 1998 from $55.6
million at June 30, 1998, and the current ratio decreased to 3.4 to 1.0 from 3.8
to 1.0. The decrease in the current ratio resulted primarily from the reduction
in inventories and increases in incentive compensation and net deferred revenue.
During the same period, cash, cash equivalents and short-term investments
increased to $36.4 million from $34.3 million, primarily due to $8.0 million in
cash provided by operating activities, $0.6 million in proceeds from issuance of
long-term obligations and $0.4 million in proceeds from issuance of common
stock, offset by $1.9 million used for capital expenditures and $4.5 million
used for the repurchase of the Company's common stock. At December 31, 1998,
the Company had $6.7 million of unused credit available under its bank line of
credit.

The Company believes that cash, 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 requirements and capital
expenditures over the near term. At December 31, 1998, the Company had no
material outstanding commitments to purchase capital equipment.

Year 2000 Issue

The Company is aware that many existing information technology (IT)
systems, such as computer systems and software products, as well as non-IT
systems that include embedded technology, were not designed to correctly process
dates after December 31, 1999. The Company is currently assessing the impact of
such "Year 2000" issues on its internal IT and non-IT systems, as well as on its
customers, suppliers and service providers. The Company has formed a Year 2000
Project Team to identify and address Year 2000 compliance issues, including
those related to the Company's significant non-IT systems used in the Company's
buildings, plant, equipment and other infrastructure. The Year 2000 Project Team
is continuing its testing and evaluation of the Company's products and the
Company's IT systems and is compiling an inventory of all material Year 2000
issues related to the Company's non-IT systems. The Company has not identified
any significant areas of non-compliance with respect to its products or IT
systems and expects that the assessment and plans for remedial action for all of
its products, IT systems and non-IT systems will be completed by the end of
calendar 1999. The Company has also initiated discussions with its significant
suppliers and service providers regarding their plans to investigate and remedy
their Year 2000 issues. Although the Company anticipates cooperation in these
efforts from most of the Company's significant suppliers and service providers,
the Company is also dependent on certain utility companies, telecommunications
service companies and other service providers that are outside the Company's
control. Therefore, it may be difficult for the Company to obtain assurances of
Year 2000 readiness from such third parties. Although the Company believes that
its Year 2000 Project Team will identify all of the Company's material Year 2000
issues in the course of its assessments, given the pervasiveness of Year 2000
issues and the complex interrelationships among Year 2000 issues both internal
and external to the Company, there can be no assurance that the Company will be
able to identify and accurately evaluate all such issues.

17
<PAGE>

As the process of compiling an inventory of non-IT systems proceeds and as
other efforts of the Year 2000 Project Team continue, the Company may identify
situations that present material Year 2000 risks and/or that will require
substantial time and material expense to address. In addition, if any
customers, suppliers or service providers fail to appropriately address their
Year 2000 issues, such failure could have a material adverse effect on the
Company's business, financial condition and results of operations. For example,
because a significant percentage of the purchase orders received from the
Company's customers are computer generated and electronically transmitted, a
failure of one or more of the computer systems of the Company's customers could
have a significant adverse effect on the level and timing of orders from such
customers. Similarly, if Year 2000 problems experienced by any of the Company's
significant suppliers or service providers cause or contribute to delays or
interruptions in the delivery of products or services to the Company, such
delays or interruptions could have a material adverse effect on the Company's
business, financial condition and results of operations. Finally, disruption in
the economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. Although the Year 2000 Project Team has not yet
determined the most likely worst-case Year 2000 scenarios or quantified the
likely impact of such scenarios, it is clear that the occurrence of one or more
of the risks described above could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company's Year 2000 Project Team's activities will include the
development of contingency plans in the event the Company has not completed all
of its remediation programs in a timely manner. In addition, the Year 2000
Project Team will develop contingency plans in the event that any third parties
who provide goods or services essential to the Company's business, fail to
appropriately address their Year 2000 issues. The Year 2000 Project Team expects
to conclude the development of these contingency plans by the end of calendar
year 1999. Even if these plans are completed on time and put in place, there can
be no assurance that such plans will be sufficient to address any third party
failures or that unresolved or undetected internal and external Year 2000 issues
will not have a material adverse effect on the Company's business, financial
condition and results of operations.

18
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk related to fluctuations in interest
rates and in foreign currency exchange rates:

Interest Rate Exposure. The Company's exposure to market risk due to
fluctuations in interest rates relates primarily to its short-term investment
portfolio, which consists of corporate debt securities, which are classified as
available-for-sale and were reported at an aggregate fair value of $13.9 million
as of December 31, 1998. These available-for-sale securities are subject to
interest rate risk inasmuch as their fair value will fall, if market interest
rates increase. If market interest rates were to increase immediately and
uniformly by 10% from the levels prevailing at December 31, 1998, the fair value
of the portfolio would not decline by a material amount. The Company does not
use derivative financial instruments to mitigate the risks inherent in these
securities. However, the Company does attempt to reduce such risks by typically
limiting the maturity date of such securities to no more than nine months,
placing its investments with high credit quality issuers and limiting the amount
of credit exposure with any one issuer. In addition, the Company believes that
it currently has the ability to hold these investments until maturity, and
therefore, believes that reductions in the value of such securities attributable
to short-term fluctuations in interest rates would not materially affect the
financial position, results of operations or cash flows of the Company.

Foreign Currency Exchange Rate Exposure. The Company's exposure to market
risk due to fluctuations in foreign currency exchange rates relates primarily to
the intercompany balance with its U.K. subsidiary. Although the Company
transacts business with various foreign countries, settlement amounts are
usually based on U.S. currency. Transaction gains or losses have not been
significant in the past and there is no hedging activity on sterling or other
currencies. Based on the intercompany balance of $2.0 million at December 31,
1998, a hypothetical 10% adverse change in sterling against U.S. dollars would
not result in a material foreign exchange loss. Consequently, the Company does
not expect that reductions in the value of such intercompany balances or of
other accounts denominated in foreign currencies, resulting from even a sudden
or significant fluctuation in foreign exchange rates, would have a direct
material impact on the Company's financial position, results of operations or
cash flows.

Notwithstanding the foregoing analysis of the direct effects of interest
rate and foreign currency exchange rate fluctuations on the value of certain of
the Company's investments and accounts, the indirect effects of such
fluctuations could have a material adverse effect on the Company's business,
financial condition and results of operations. For example, international
demand for the Company's products is affected by foreign currency exchange
rates. In addition, interest rate fluctuations may affect the buying patterns
of the Company's customers. Furthermore, interest rate and currency exchange
rate fluctuations have broad influence on the general condition of the U.S.,
foreign and global economies, which could materially and adversely affect the
Company.

19
<PAGE>

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Company's Annual Meeting of Shareholders was held on November 9,
1998.

(b) All director candidates: Richard W. Oliver, Roger A. Strauch, William
D. Rasdal, Robert M. Wolfe, Robert M. Neumeister and Krish A. Prabhu
were duly elected.

(c)(i) The votes for the director candidates were as follows:

Nominee Votes For Votes Withheld
------- --------- --------------

Richard W. Oliver 15,011,651 158,776
Roger A. Strauch 15,016,859 153,568
William D. Rasdal 14,993,455 176,972
Robert M. Wolfe 15,035,900 134,527
Robert M. Neumeister 15,017,295 153,132
Krish A. Prabhu 15,014,385 156,042

There were no abstentions or broker non-votes with respect to election
of directors.

(c)(ii) The size of the Company's Board of Directors was increased to four to
seven members. The votes were as follows:

Broker
For Against Abstain non-votes
--- ------- ------- ---------

8,522,599 197,703 54,576 6,395,549

(c)(iii) The Company's Employee Stock Purchase Plan was amended and the number
of shares of Common Stock reserved for issuance under the plan was
increased from 450,000 shares to 850,000 shares. The votes were as
follows:

Broker
For Against Abstain non-votes
--- ------- ------- ---------

14,326,088 761,261 83,078 0

(c)(iv) The shareholders ratified the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the current fiscal year. The
votes were as follows:

Broker
For Against Abstain non-votes
--- ------- ------- ---------

15,030,991 100,949 38,487 0

20
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.4 Bylaws, as amended December 1, 1998.
10.25 Employment offer letter by and between the Company and Roger
A. Strauch dated November 9, 1998.
10.26 Strategic Partner Bonus Plan between Linfinity
Microelectronics Inc. and James J. Peterson dated November
18, 1998.
10.27 Retention Bonus Plan between Linfinity Microelectronics Inc.
and James J. Peterson dated November 18, 1998.
10.28 Promissory Note issued by Thomas W. Steipp to the Company
dated January 25, 1999.
10.29 Promissory Note Secured by Deed of Trust issued by Thomas W.
Steipp to the Company dated January 25, 1999.
10.30 Rider to Deed of Trust by Thomas W. Steipp and Debra L.
Steipp, as Trustor, to First American Title Insurance
Company, as Trustee, for the benefit of Symmetricom, Inc., a
California corporation, as Beneficiary.
27.1 Financial Data Schedule.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter ended December
31, 1998.

21
<PAGE>

SIGNATURES

Pursuant to the requirements 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.
(Registrant)

DATE: February 4, 1999 By: /s/ Thomas W. Steipp
------------------------- ---------------------------------
Thomas W. Steipp
Director, Chief Executive Officer
and Chief Financial Officer (for
Registrant, Principal Executive
Officer and as Principal Financial
and Accounting Officer)

<PAGE>

BYLAWS

SYMMETRICOM, INC.

(As amended through December 1, 1998)
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I OFFICES..................................................................................................... 1

Section 1. PRINCIPAL OFFICES.......................................................................... 1
Section 2. OTHER OFFICES.............................................................................. 1

ARTICLE II MEETINGS OF SHAREHOLDERS................................................................................... 1

Section 1. PLACE OF MEETINGS.......................................................................... 1
Section 2. ANNUAL MEETING............................................................................. 1
Section 3. SPECIAL MEETING............................................................................ 1
Section 4. NOTICE OF SHAREHOLDERS' MEETING............................................................ 2
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................................... 2
Section 6. QUORUM..................................................................................... 3
Section 7. ADJOURNED MEETING; NOTICE.................................................................. 3
Section 8. VOTING..................................................................................... 4
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS......................................... 4
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................... 5
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS............................ 5
Section 12. PROXIES.................................................................................... 6
Section 13. INSPECTORS OF ELECTION..................................................................... 6

ARTICLE III DIRECTORS................................................................................................. 7

Section 1. POWERS..................................................................................... 7
Section 2. NUMBER OF DIRECTORS........................................................................ 7
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS................................................... 8
Section 4. VACANCIES.................................................................................. 8
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE................................................ 8
Section 6. ANNUAL MEETING............................................................................. 9
Section 7. OTHER REGULAR MEETINGS..................................................................... 9
Section 8. SPECIAL MEETINGS........................................................................... 9
Section 9. QUORUM..................................................................................... 9
Section 10. WAIVER OF NOTICE........................................................................... 10
Section 11. ADJOURNMENT................................................................................ 10
Section 12. NOTICE OF ADJOURNMENT...................................................................... 10
Section 13. ACTION WITHOUT MEETING..................................................................... 10
Section 14. FEES AND COMPENSATION OF DIRECTORS......................................................... 10
Section 15. APPROVAL OF LOANS TO OFFICERS.............................................................. 10
</TABLE>

-i-
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IV COMMITTEES................................................................................................ 11

Section 1. COMMITTEE OF DIRECTORS.................................................................... 11
Section 2. MEETINGS AND ACTION OF COMMITTEES......................................................... 11

ARTICLE V OFFICERS................................................................................................... 12

Section 1. OFFICERS.................................................................................. 12
Section 2. ELECTION OF OFFICERS...................................................................... 12
Section 3. SUBORDINATE OFFICERS...................................................................... 12
Section 4. REMOVAL AND RESIGNATION OF OFFICERS....................................................... 12
Section 5. VACANCIES IN OFFICES...................................................................... 12
Section 6. CHAIRMAN OF THE BOARD..................................................................... 12
Section 7. PRESIDENT................................................................................. 13
Section 8. VICE PRESIDENTS........................................................................... 13
Section 9. SECRETARY................................................................................. 13
Section 10. CHIEF FINANCIAL OFFICER; TREASURER........................................................ 13

ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS....................................... 14

Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS................................................. 14
Section 2. INDEMNIFICATION OF OTHERS................................................................. 14
Section 3. PAYMENT OF EXPENSES IN ADVANCE............................................................ 15
Section 4. INDEMNITY NOT EXCLUSIVE................................................................... 15
Section 5. INSURANCE INDEMNIFICATION................................................................. 15
Section 6. CONFLICTS................................................................................. 15

ARTICLE VII RECORDS AND REPORTS...................................................................................... 15

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.............................................. 15
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS...................................................... 16
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS..................................... 16
Section 4. INSPECTION BY DIRECTORS................................................................... 16
Section 5. ANNUAL REPORT TO SHAREHOLDERS............................................................. 17

ARTICLE VIII GENERAL CORPORATE POWERS................................................................................ 17

Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING..................................... 17
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS................................................. 17
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED......................................... 17
</TABLE>

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TABLE OF CONTENTS
(CONTINUED)

<TABLE>
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PAGE
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<S> <C>
Section 4. CERTIFICATE FOR SHARES.................................................................... 17
Section 5. LOST CERTIFICATES......................................................................... 18
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS............................................ 18
Section 7. CONSTRUCTION AND DEFINITIONS.............................................................. 18

ARTICLE IX AMENDMENTS................................................................................................ 18

Section 1. AMENDMENTS BY SHAREHOLDERS................................................................ 18
Section 2. AMENDMENT BY DIRECTORS.................................................................... 19
</TABLE>

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BYLAWS

SYMMETRICOM, INC.

(a California corporation)

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICES. The board of directors shall fix the location of
the principal executive office of the corporation at any place within or outside
the State of California. If the principal executive office is located outside
this state, and the corporation has one or more business offices in this state,
the board of directors shall fix and designate a principal business office in
the State of California.

Section 2. OTHER OFFICES. The board of directors or officers of the corporation
may at any time establish branch or subordinate offices at any place or places
wherein such board or officers shall deem advisable.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any
place within or outside of the State of California designated by the board of
directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.

Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be held
each year on the date and at a time designated by the board of directors. In the
absence of such designation, the annual meeting of shareholders shall be held on
the third Thursday of October in each year at 10:00 a.m. However, if such day
falls on a legal holiday, then the meeting shall be held at the same time and
place on the next succeeding full business day. At each annual meeting directors
shall be elected, and any other proper business may be transacted.

Section 3. SPECIAL MEETING. A special meeting of shareholders may be called at
any time by the board of directors, or by the chairman of the board, or by the
president, or by one or more
<PAGE>

shareholders holding shares in the aggregate entitled to cast not less than 10%
of the votes at that meeting.

If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then, the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 4 and 5 of this Article II, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this
Section 3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.

Section 4. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) (or, if sent by third-class mail pursuant
to Section 5 of this Article II, thirty (30)) nor more than sixty (60) days
before the date of the meeting. The notice shall specify the place, date and
hour of the meeting and (i) in the case of a special meeting, the general nature
of the business to be transacted (no business other than that specified in the
notice may be transacted), or (ii) in the case of the annual meeting, those
matters which the board of directors, at the time of giving the notice, intends
to present for action by the shareholders (but subject to the provisions of the
following paragraph of this Section 4 of Article II, any proper matter may be
presented at the meeting for such action). The notice of any meeting at which
directors are to be elected shall include the name of any nominee or nominees
whom, at the time of the notice, management intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment to the articles of incorporation, pursuant to Section 902 of that
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section
1900 of that Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.

Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Written notice
of any meeting of shareholders given shall be given either (i) personally or
(ii) by first-class mail or (iii) by third-class mail but only if the
corporation has outstanding shares held of record by five hundred (500) or more
persons (determined as provided in Section 605 of the Code) on the record date
for the shareholders' meeting, or (iv) telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid,
addressed to the shareholder at the address of that

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shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.

If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, all
future notices or reports shall be deemed to have been duly given without
further mailing if these shall be available to the shareholder on written demand
of the shareholder at the principal executive office of the corporation for a
period of one year from the date of the giving of the notice.

An affidavit of mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary,
or any transfer agent of the corporation giving the notice, and shall be filed
and maintained in the minute book of the corporation, and shall be prima facie
evidence of the giving of such notice.

Section 6. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

Section 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual
or special, whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no other business
may be transacted at that meeting, except as provided in Section 6 of this
Article II.

When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at a meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, in which case the board of directors shall set a new record
date. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.

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Section 8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 11
of this Article II, subject to the provisions of Sections 702 to 704, inclusive
of the Corporations Code of California (relating to voting shares held by a
fiduciary, in the name of a corporation, or in joint ownership). The
shareholders' vote may be by voice vote or by ballot; provided, however, that
any election for directors must be by ballot if demanded by any shareholder
before the voting has begun. Except as provided in the last paragraph of this
Section 8, or as may be otherwise provided in the articles of incorporation,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote of the shareholders. On any matter other than
elections of directors, any shareholder may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote them against
the proposal, but, if the shareholder fails to specify the number of shares
which the shareholder is voting affirmatively, it will be conclusively presumed
that the shareholder's approving vote is with respect to all shares that the
shareholder is entitled to vote. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and voting on any matter
(other than the election of directors) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes or cumulative voting is
required by California General Corporation Law or by the articles of
incorporation or by these bylaws.

At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
----
candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected; votes
against any candidate and votes withheld shall have no legal effect.

Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to a holding of the meeting, or an approval of the
minutes. The waiver of notice or consent need not specify either the business to
be transacted or the purpose of any annual or special meeting of the
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section 4
of this Article II, the waiver of notice or consent shall state the general
nature of the proposal. All such waivers, consent, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.

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Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.

Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any annual or special meting of shareholders may be
taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted. In the case of election of
directors, such a consent shall be effective only if signed by the holders of
all outstanding shares entitled to vote for the election of directors; provided,
however, that a director may be elected at any time to fill a vacancy on the
board of directors (provided that the vacancy was not created by removal of a
director and that it has not been filled by the directors) by a majority of the
outstanding shares entitled to vote for the election of directors. All such
consents shall be filed with the secretary of the corporation and shall be
maintained in the corporate records. Any shareholder giving a written consent,
or the shareholders' proxy holders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxy holders, may revoke
the consent by a writing received by the secretary of the corporation before
written consents of the number of shares required to authorize the proposed
action have been filed with the secretary.

If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
This notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 5 of
this Article II. In the case of approval of (i) contracts or transactions in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Corporations Code of California, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of that Code, and
(iv) a distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of that Code, the notice
shall be given at least ten (10) days before the consummation of any action
authorized by that approval.

Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING
CONSENTS . For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such action without a
meeting, and in this event only shareholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the

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books of the corporation after the record date, except as otherwise provided in
the California General Corporation Law.

If the board of directors does not so fix a record date:

(a) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held.

(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.

The record date for any other purpose shall be as provided in Article VIII
of these bylaws.

Section 12. PROXIES. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Corporations Code of California.

Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the board of directors may appoint any person or persons other than nominees for
office to act as an inspector or inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of the
meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a meeting
on the request of one or more shareholders or proxies, the holders of a majority
of shares or their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed

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as inspector fails to appear or fails or refuses to act, the chairman of the
meeting may, and upon the request of any shareholder or a shareholder's proxy
shall, appoint a person to fill that vacancy.

These inspectors shall:

(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;

(b) Receive votes, ballots or consents;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.

ARTICLE III

DIRECTORS

Section 1. POWERS. Subject to the provisions of the California General
Corporation Law and any limitations in the articles of incorporation and these
bylaws relating to the action required to be approved by the shareholders or by
the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.

Section 2. NUMBER OF DIRECTORS.

(a) The number of directors shall be not less than a minimum of
four nor more than a maximum of seven. After adoption or amendment of this bylaw
by the shareholders, the exact number of directors shall be fixed, within the
limits specified in this bylaw, by the following bylaw which may be amended from
time to time by the Board of Directors. The indefinite number of directors may
be changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the articles of incorporation
or by an amendment to this bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum number of
directors to a number less than five (5) cannot be adopted if the votes cast
against its

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adoption at a meeting, or the shares not consenting in the case of
an action by written consent, are equal to more than sixteen and two-thirds
percent (16-2/3%) of the outstanding shares entitled to vote thereon. No
amendment may change the stated maximum number of authorized directors to a
number greater than two (2) times the stated minimum number of directors minus
one (1).

(b) The number of directors of the corporation shall be seven.

Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified. No reduction of the authorized number
of directors shall have the effect of removing any director before the
director's term of office expires.

Section 4. VACANCIES. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute a majority of the required quorum), or by
the written consent of holders of a majority of the outstanding shares entitled
to vote. Each director so elected shall hold office until the next annual
meeting of shareholders and until a successor has been elected and qualified.

A vacancy or vacancies in the board of directors shall be deemed to exist
in the event of the death, resignation, or removal of any director, or if the
board of directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors is increased, or if the shareholders
fail, at any meeting of shareholders at which any director or directors are
elected, to elect the number of directors to be voted for at that meeting.

The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.

Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary, or the board of directors, unless
the notice specifies a later time for that resignation to become effective. If
the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective.

No reduction of the authorized number of directors shall have the effect of
removing any director before that director's terms of office expires.

Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings
of the board of directors may be held at any place within or outside the State
of California

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that has been designated from time to time by resolution of the board. In the
absence of such designation, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board shall be held
at any place within or outside the State of California that has been designated
in the notice of the meeting or, if not stated in the notice or there is no
notice, at the principal executive office of the corporation. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all directors participating in the meeting can hear one
another, and all such directors shall be deemed to be present in person at the
meeting.

Section 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers, and the transaction
of other business. Notice of this meeting shall not be required.

Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of
directors shall be held without call at such time as shall from time to time be
fixed by the board of directors. Such regular meetings may be held without
notice.

Section 8. SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two
directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least four (4,) days before
the time of the holding of the meeting. In case notice is delivered personally,
or by telephone or telegram, it shall be delivered personally or by telephone or
to the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the meeting nor
the place if the meeting is to be held at the principal executive office of the
corporation.

Section 9. QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, subject to
the provisions of Section 310 of the Corporations Code of California (as to
approval of contracts or transactions in which a director has a direct or
indirect material financial interest), Section 311 of that Code (as to
appointment of committees), and Section 317(e) of that Code (as to
indemnification of directors), the articles of incorporation, and other
applicable laws. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.

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Section 10. WAIVER OF NOTICE. The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any director who
attends the meeting without protesting before or at its commencement, the lack
of notice to that director.

Section 11. ADJOURNMENT. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.

Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 8 of this Article III, to the directors who were not present at the
time of adjournment.

Section 13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
that action. Such action by written consent shall have the same force and effect
as an unanimous vote of the board of directors. Such written consent or consents
shall be filed with the minutes of the proceedings of the board.

Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services, and
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. This Section 14 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.

Section 15. APPROVAL OF LOANS TO OFFICERS. The corporation may, upon the
approval of the board of directors alone, make loans of money or property to, or
guarantee the obligations of, any officer of the corporation or its parent or
subsidiary, whether or not a director, or adopt an employee benefit plan or
plans authorizing such loans or guaranties provided that (i) the board of
directors determines that such a loan or guaranty or plan may reasonably be
expected to benefit the corporation, (ii) the corporation has outstanding shares
held of record by 100 or more persons (determined as provided in Section 605 of
the California Corporations Code) on the date of approval by the board of
directors, and (iii) the approval of the board of directors is by a vote
sufficient without counting the vote of any interested director or directors.

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ARTICLE IV

COMMITTEES

Section 1. COMMITTEE OF DIRECTORS. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the extent provided in
the resolution of the board, shall have all the authority of the board, except
with respect to:

(a) the approval of any action which, under the General Corporation
Law of California, also requires shareholders' approval or approval of the
outstanding shares;

(b) the filling of vacancies on the board of directors or in any
committee;

(d) the amendment or repeal of bylaws or the adoption of new bylaws;

(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;

(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the board
of directors; or

(g) the appointment of any other committees of the board of directors
or the members of these committees.

Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Section 5 (place of meetings) Section
7 (regular meetings), Section 8 (special meetings and notice), Section 9
(quorum), Section 10 (waiver of notice), Section 11 (adjournment), Section 12
(notice of adjournment) and Section 13 (action without meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members, except
that the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee; special
meetings of committees may also be called by resolution of the board of
directors; and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

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<PAGE>

ARTICLE V

OFFICERS

Section 1. OFFICERS. The officers of the corporation shall be a chairman of
the board or a president, or both, a secretary and a chief financial officer.
The corporation may also have, at the discretion of the board of directors, a
chief executive officer, a chief operating officer, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article V. Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article V, shall be chosen by the board of directors, and
each shall serve at the pleasure of the board, subject to the rights, if any, of
an officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the board of directors.

Section 3. SUBORDINATE OFFICERS. The board of directors may appoint, and
may empower the president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the bylaws or as the
board of directors may from time to time determine.

Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of any officer under any contract of employment, any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting of the board, or, except in case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.

Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of receipt of that
notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to that office.

Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such
officer be elected, shall, if present, preside at meeting of the board of
directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the board of directors or prescribed by the
bylaws. If there is no president or chief executive officer, the chairman of the

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<PAGE>

board shall act as chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article V.

Section 7. PRESIDENT. Subject to any supervisory powers, if any, as may be
given by the board of directors to the chairman of the board and/or chief
executive officer, if there be such an officer or officers, the president shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the affairs of the corporation. In
the absence of the chairman of the board, or if there be none, he shall preside
at all meetings of the shareholders and at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or the bylaws.

Section 8. VICE PRESIDENTS. In the absence or disability of the chairman of
the board, the chief executive officer and the president, the vice presidents,
if any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the such officers, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, such officers. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
the chairman of the board, the chief executive officer, or the president.

Section 9. SECRETARY. The secretary shall keep or cause to be kept, at the
principal executive office or such other place as the board of directors may
direct, a book of minutes of all meetings and action of the directors,
committees of directors, and shareholders, with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at directors' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.

The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required by the bylaws or by law
to be given, and he shall keep the seal of the corporation if one be adopted, in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by the bylaws.

Section 10. CHIEF FINANCIAL OFFICER; TREASURER. The chief financial officer
or, if there be none, the treasurer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,

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<PAGE>

retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.

The chief financial officer (or the treasurer) shall deposit all moneys and
other valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the chairman of the board, the chief executive officer, the president
and board of directors, whenever they request it, an account of all of his
transactions as chief financial officer (or treasurer) and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or the bylaws.

Should there be no one serving in the capacity of chief financial officer,
the treasurer (or, in his absence, the assistant treasurer) shall exercise all
of the duties and assume all of the responsibilities of the chief financial
officer.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS

Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall, to the maximum extent and in the manner permitted by the Code, indemnify
each of its directors and officers against expenses (as defined in Section
317(a) of the Code), judgments, fines, settlements, and other amounts actually
and reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Article VI, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.

Section 2. INDEMNIFICATION OF OTHERS. The corporation shall have the power,
to the extent and in the manner permitted by the Code, to indemnify each of its
employees and agents (other than directors and officers) against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI,
an "employee" or "agent" of the corporation (other than a director or officer)
includes any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.

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<PAGE>

Section 3. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in defending
any civil or criminal action or proceeding for which indemnification is required
pursuant to Section 6.1 or for which indemnification is permitted pursuant to
Section 6.2 following authorization thereof by the Board of Directors shall be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the indemnified
party to repay such amount if it shall ultimately be determined that the
indemnified party is not entitled to be indemnified as authorized in this
Article VI.

Section 4. INDEMNITY NOT EXCLUSIVE. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, to the extent that such additional rights to indemnification are
authorized in the Articles of Incorporation.

Section 5. INSURANCE INDEMNIFICATION. The corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against or incurred by such person in such capacity or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article VI.

Section 6. CONFLICTS. No indemnification or advance shall be made under
this Article VI, except where such indemnification or advance is mandated by law
or the order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:

(1) That it would be inconsistent with a provision of the Articles of
Incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or

(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.

ARTICLE VII

RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the board of directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.

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<PAGE>

A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least once percent (1%) of such voting shares and
has filed a Schedule 14B with the Securities and Exchange Commission relating to
the election of directors may (i) inspect and copy the records of the
shareholders' names and addresses and shareholdings during usual business hours
on five (5) days' prior written demand on the corporation and (ii) obtain from
the transfer agent of the corporation, on written demand and on the tender of
such transfer agent's usual charges for such list, a list of the shareholders'
names and addresses, who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any shareholder by the transfer
agent on or before the later of five (5) days after the demand is received or
five (5) days after the date specified in the demand as the date as of which the
list is to be compiled. The record of shareholders shall also be open to
inspection on the written demand of any shareholder or holder of a voting trust
certificate, at any time during usual business hours, for a purpose reasonably
related to the holder's interests as a shareholder or as the holder of a voting
trust certificate. Any inspection and copying under this Section 1 may be made
in person or by an agent or attorney of the shareholder or holder of a voting
trust certificate making the demand.

Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep
at its principal executive office, or if its principal office is not in the
State of California, at its principal business office in this state, the
original or a copy of the bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the corporation has no principal business in this state, the
secretary shall, upon the written request of any shareholder, furnish to that
shareholder a copy of the bylaws as amended to date.

Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the board of directors and any committee or committees of the board of directors
shall be kept at such place or places designated by the board of directors, or,
in the absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any form capable of being
converted into written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder or holder of a
voting trust certificate, at any reasonable time during usual business hours,
for a purpose reasonably related to the holder's interest as a shareholder or as
the holder of a voting trust certificate. The inspection may be made in person
or by an agent or attorney, and shall include the right to copy and make
extracts. These rights of inspection shall extend to the records of each
subsidiary corporation of the corporation.

Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the corporation and each of its
subsidiary corporations. This inspection by a director

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<PAGE>

may be made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.

Section 5. ANNUAL REPORT TO SHAREHOLDERS. The corporation shall prepare and
send to its shareholders an annual report to shareholders as required by Section
1501 of the California General Corporation Law.

ARTICLE VIII

GENERAL CORPORATE POWERS

Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
before any such action, and in that case only shareholders of record on the date
so fixed are entitled to receive the dividend, distribution, or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date so
fixed, except as otherwise provided in the California General Corporation Law.

If the board of directors does not so fix a record date, the record date
for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.

Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the board of directors.

Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and this authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent, or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.

Section 4. CERTIFICATE FOR SHARES. A certificate or certificates for shares
of the capital stock of the corporation shall be issued to each shareholder when
any of these shares are fully paid, and the board of directors may authorize the
issuance of certificates or shares as partly paid provided that these
certificates shall state the amount of the consideration to be paid for them and
the

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<PAGE>

amount paid. All certificates shall be signed in the name of the corporation
by the chairman of the board or vice chairman of the board or the president or
vice president and by the chief financial officer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by the corporation
with the same effect as if that person were an officer, transfer agent, or
registrar at the date of issue.

Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
board of directors may, in case any share certificate or certificate for any
other security is lost, stolen or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the board may require,
including provision for indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft, or destruction of the certificate or the issuance of
the replacement certificate.

Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of
the board, the president, or any vice president, or any other person authorized
by resolution of the board of directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority granted to these officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.

Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
California General Corporation Law shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.

ARTICLE IX

AMENDMENTS

Section 1. AMENDMENTS BY SHAREHOLDERS. New bylaws may be adopted or these
bylaws may be amended or repealed by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided, however, that if
the articles of incorporation of the corporation set forth the number of
authorized directors of the corporation, the authorized number of directors may
be changed only by an amendment of the articles of incorporation.

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<PAGE>

Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article IX, bylaws, other than a
bylaw or an amendment of a bylaw changing the authorized number of directors
(except to fix the authorized number of directors pursuant to a bylaw providing
for a variable number of directors), may be adopted, amended, or repealed by the
board of directors.

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<PAGE>

Exhibit 10.25

May 28,1998

MR. ROGER A. STRAUCH
125 Guilford Road
Piedmont, CA 94611

Dear Roger:

I am pleased to offer you a position with Symmetricom, Inc. ("the Company")
commencing on June 1, 1998 and assuming the position of Chief Executive Officer,
commencing on June 3, 1998. This position is expected to last until December 1,
1998 unless another date is mutually agreed upon. You will receive an annual
salary of $160,000, which will be paid in accordance with the Company's normal
payroll procedures. As a Company employee, you will also be eligible to receive
standard employee benefits available to officers of the Company. Upon
termination from this position we will provide a monthly payment equal to the
current Cobra rate charged for the company group health insurance coverage and
executive medical insurance coverage. This monthly payment will be made until
you have coverage under another plan or eighteen months from date of temination,
whichever comes sooner.

We will recommend to the Board of Directors of the Company that, at the next
regularly scheduled Board meeting, you be granted a stock option entitling you
to purchase up to 160,000 shares of Common Stock of the Company at the then
current fair market value as determined by the Board at that meeting. Such
option shall be granted as an incentive stock option to the maximum extent
permissible under the law, and such option shall vest in equal monthly
installments over a four (4) month period with the first installment vesting one
month after the date the option is issued. The option shall be subject to the
terms and conditions of the Company's 1990 Employee Stock Plan and standard
stock option agreement.

Your should be aware that your employment with the Company is for no specified
period and constitutes at-will employment. As a result, you are free to resign
at any time, for any reason or for no reason. Similarly, the company is free to
conclude its employment relationship with you at any time, with or without
cause, and with or without notice.

For purposes of federal immigration law, you will be required to provide to the
Company documentary evidence of your identity and eligibility for employment in
the United States. Such documentation must be provided to us within three (3)
business days of your date of hire, or our employment relationship with you may
be terminated.

You agree that, during your employment with the Company, you will not engage in
any other employment, occupation, consulting or other business activity that
conflicts with your obligations to the Company.

As a Company employee, you will be expected to abide by company rules and
regulations. You will be expected to sign and comply with an Invention
Assignment and Secrecy Agreement in the form attached hereto as Exhibit A.
<PAGE>

In the event of any dispute or claim relating to or arising out of our
employment relationship, you and the Company agree that all such disputes shall
be fully and finally resloved by binding arbitration conducted by the American
Arbitration Association in San Jose, California. However, you and the Company
agree that this arbitration provision shall not apply to any disputes or claims
relating to or arising out of the misuse or misappropriate of the Company's
trade secrets or proprietary information.

To indicate your acceptance of the Company's offer, please sign and date this
letter in the space provided below and return it to me. A duplicate original is
enclosed for your records. This letter, along with the agreement relating to
proprietary rights between you and the Company, set forth the terms of your
employment with the Company and supersede any prior representations or
agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by an officer of the Company and by you.

We look forward to working with you at Symmetricom.

Sincerely,

SYMMETRICOM, INC.

Rick Oliver
Chairman of the Board

enclosures: Duplicate Original Letter
Invention Assignment and Secrecy Agreement

ACCEPTED AND AGREED TO

THIS ___________________ DAY OF ________________________________ 1998.

___________________________
ROGER A STRAUCH
<PAGE>

SYMMETRICOM
- --------------------------------------------------------------------------------

INVENTION ASSIGNMENT AND SECRECY AGREEMENT

In consideration of my employment and compensation paid to me by SymmetriCom,
Inc., (collectively referred to as "Employer"), I agree to the following:

ASSIGNMENT OF INTEREST

I agree to assign, and do hereby assign, to Employer all interest which I may
have in all patentable and/or unpatentable ideas and/or inventions made or
conceived by me solely or jointly with others in the course of working on
matters relating to the business of Employer. This assignment shall not apply to
any idea or invention developed by me while not working on matters relating to
the business of Employer without equipment, supplies, facilities, or trade
secret information of Employer.

THIS AGREEMENT DOES NOT APPLY TO ANY INVENTION WHICH QUALIFIES FULLY UNDER THE
PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870.

DISCLOSURE OF IDEAS OR INVENTIONS

I agree to promptly disclose in writing to an Executive Vice President of my
Employer all inventions developed by me solely or jointly with others in the
course of working on matters relating to the business of Employer, whether or
not such inventions are patentable, unpatentable or assignable under this
Agreement. Employer agrees to maintain said disclosure in confidence.

LIST OF INVENTIONS

I acknowledge and understand that, if I obtained any proprietary knowledge,
inventions, or other trade secret information from a former employer, I am
prohibited from using such trade secret information during the course and scope
of my employment with Employer, unless I have obtained written consent from my
former employer to utilize such information and I have fully disclosed such
written consent to Employer. I further agree that I shall indemnify Employer
against all claims for my use of any trade secret information obtained from a
former employer. Attached hereto as Exhibit A is a complete list of all
patented or unpatented ideas and inventions conceived by me or anyone else
jointly with myself, prior to the date I signed this Agreement. My failure to
attach Exhibit A shall be deemed to constitute an affirmative acknowledgment by
me that no such ideas or inventions exist.

ASSISTANCE IN OBTAINING PATENT

During the term of my employment with Employer and for three (3) years
thereafter, I agree to perform any lawful act which Employer considers necessary
or advisable for the preparation, prosecution, issuance, procurement and
maintenance of patent applications and patents of the United States and foreign
countries, and will execute any and all papers and lawful documents required or
necessary to vest to Employer full and exclusive title in such inventions,
patent applications, patents and interest for any invention or idea assignable
to Employer under this Agreement. In the event that Employer calls upon me to
assist in procuring or maintaining a patent after termination of my employment,
I shall be compensated for time actually spent in providing that assistance at
my base rate of compensation, at time of termination.

NON-DISCLOSURE OF TRADE SECRETS

I agree not to disclose to others, or take or use for my own purposes or
purposes of others, any trade secrets, confidential information, knowledge or
data used in the operation of Employer's business, except as required in the
course of employment with Employer. I agree that these restrictions also shall
apply to: (1) information, knowledge, trade secrets, or data belonging to third
parties in Employer's possession; and (2) information, knowledge, trade secret
or data conceived, originated, discovered or developed by myself.
<PAGE>

INVENTION ASSIGNMENT AND SECRECY AGREEMENT
Page 2

I recognize that this obligation applies not only to technical information, but
also to any business information that the Employer treats, or has designated, as
confidential. Any information of Employer which is not readily available to the
public shall be considered to be a trade secret covered by this Agreement.

RETURN OF EMPLOYER PROPERTY

I agree that upon termination of employment, I will immediately return to
Employer all property belonging to Employer which may be in my possession,
including but not limited to, all original documents and copies of documents
containing Employer's trade secrets, confidential information, knowledge or data
in my possession or control. Upon termination, I also agree to sign and deliver
to Employer a termination certificate, attached hereto as Exhibit B.

OBLIGATIONS TO EMPLOYER

During the course of my employment and for one (1) year thereafter, I will not
induce, hire or encourage any employees of Employer to terminate their
employment with Employer or to directly or indirectly solicit the retention or
employment of employees or contractors of Employer.

MISCELLANEOUS PROVISIONS

A. Nothing in the Invention Assignment and Secrecy Agreement shall act to modify
Employer's policy that employment is on an at-will basis or confer upon me
the right to continue in the employ of Employer for a specified term. Nor
shall this Agreement be construed to curtail or restrict Employer's right to
terminate my employment at Employer's discretion.
B. The provisions of this Agreement will be binding upon my heirs, executors,
administrators and other legal representatives and will be for the benefit of
the Employer, it successors, and assignees.
C. This Agreement constitutes the entire agreement between Employer and me, and
shall supersede all previous agreements by and between Employer and me
relating to the subject matter hereof. This Agreement may be modified only
upon a written agreement duly signed by an Executive Vice President of
Employer and me.
D. The parties to this Agreement agree that the laws of the State of California
shall apply and that if any provision of this Agreement is held to be
invalid, void or unenforceable for any reason, the remaining provision(s)
shall nevertheless continue in full force and effect.
E. My signature on the employment offer letter indicates my understanding of,
and acceptance to, the terms and conditions of this Agreement.

================================================================================

EXHIBIT A - LIST OF INVENTIONS

No entries below indicates that there are no inventions to disclose under this
Agreement. Please date and sign as an acknowledgment that this section has been
read and understood.

DATE: ________________________ SIGNATURE __________________________

TITLE OR DESCRIPTION INVENTION DATE PATENT NUMBER BRIEF DESCRIPTION
<PAGE>

IF NECESSARY, ATTACH A SEPARATE PAGE.

INVENTION ASSIGNMENT AND SECRECY AGREEMENT
Page 3

EXHIBIT B - TERMINATION CERTIFICATION

I hereby certify that I do not have in my possession nor have I failed to return
to SymmetriCom, Inc., ("Company") any records, documents, data, specifications,
drawings, blueprints, reports, proposals or other materials (including copies
thereof), equipment or other property belonging to the Company.

I further certify that I have complied with and will continue to comply with all
of the terms of my Invention Assignment and Secrecy Agreement.

I confirm that, in compliance with such Agreement, I will keep confidential all
trade secrets (as defined in such Agreement) pertaining to the business of the
Company.

Date____ Signature ________________________________

Print Name _______________________________

ACCEPTED BY
SYMMETRICOM Name _____________________________________

Position Title ___________________________

<PAGE>

Exhibit 10.26

September 9, 1998

PERSONAL & CONFIDENTIAL
- -----------------------

Jim Peterson
1044 Van Dyke Drive
Laguna Beach, Ca 92651

RE: STRATEGIC PARTNER BONUS PLAN

Dear Jim:

We are pleased to advise you that in connection with our pursuit to find a
strategic partner for Linfinity Microelectronics ("the Company"), and as a
reward for your continued valuable services to the Company, we have selected you
to participate in the Strategic Partner Bonus Plan ("the Plan"). As an incentive
for your continued employment, if the Company finds a strategic partner and
closes a transaction for the disposition of assets or a change of control while
you are still employed, you will receive a Strategic Partner Bonus on the
following basis:

The Company will create a bonus pool ("the Bonus Pool") to be distributed to
those in the Plan who are still actively employed on the date that the strategic
partner transaction closes disposing of all or substantially all of the
Company's assets or there is a change of control, whichever is earlier. The
amount of money in the Bonus Pool will be determined by first subtracting the
Company's book value as of June 30, 1998 ($23,225,000) and the amount of any
inter-company loans from the total amount of cash and cash equivalent
consideration the Company actually receives from its new strategic partner. This
sum will be called "The Base". The Company will contribute a percentage of The
Base into the Bonus Pool. If The Base is under ten million dollars
($10,000,000.00), the Company will contribute 17.5% of The Base into the Bonus
Pool. If The Base exceeds ten million dollars, the Company will contribute 17.5%
of the first ten million dollars and 10% of the amount in excess of ten million
dollars into the Bonus Pool. By way of example, if, after subtracting the
Company's book value and inter-company loans, The Base is twelve million
dollars, the Bonus Pool will be $1.95 million dollars (17.5% of the first ten
million dollars, plus 10% of the remaining two million dollars).
<PAGE>

You will receive 20% of the Bonus Pool within twenty-one (21) days of the
Company's receipt of the cash and cash equivalent consideration from its new
strategic partner, provided you are actively employed by the Company on the date
that the transaction closes with the Company's strategic partner disposing of
all or substantially all, or effectuating a change of control of the Company
assets. You will continue to participate in the Company's discretionary bonus
plan. However, any payment received under this Plan will be credited against any
payment due to you under the Company's discretionary bonus plan for Fiscal Year
1999. Similarly, any payment received under the Fiscal Year 1999 discretionary
bonus plan before a payment is due to you under this Plan will be credited
against any payment due to you under this Plan. Nothing in this Agreement shall
change, modify or alter your at-will employment status.

As you know, this Agreement, your knowledge about the pursuit of a strategic
partner, and any potential sale or other disposition of the Company and/or its
assets is confidential, non-public information. In exchange for participating in
the Plan and by signing this Agreement, you agree to keep confidential any and
all information regarding the terms of this Agreement. You shall not disclose
the terms of this Agreement to anyone except your immediate family, attorney,
accountant or any governmental taxing authority, or as may be required by law,
or in the enforcement of this Agreement. You also acknowledge that any failure
to comply with this provision may result in the termination of your employment
and participation in the Plan.

Your services here are unique and personal. Accordingly, you may not assign any
of your rights or delegate any of your duties or obligations under this
Agreement. The Company shall have the right to assign this Agreement to any
purchaser in connection with the disposition of the Company's assets provided
the purchaser assumes the Company's obligations hereunder.

This Agreement shall be interpreted under California law. If any provision is
declared by any court to be invalid, the validity of the remaining provisions
shall not be affected. If it is necessary to file suit to enforce this
Agreement, the prevailing party shall recover its reasonable costs of
enforcement, including costs and reasonable attorneys' fees.
<PAGE>

All disputes with respect to this Agreement or related in any way to this
employer-employee relationship shall be submitted to final and binding
arbitration under the Employment Dispute Rules of the American Arbitration
Association. Any such dispute shall be submitted within 90 days of the event
giving rise to the dispute, or else the matter is waived and deemed non-
arbitrable.

When signed by you, this Agreement constitutes our complete agreement with
respect to all matters pertaining to your participation in the Plan. It fully
supersedes any prior agreements or understandings, if any, pertaining to these
matters. It may only be modified by a writing signed by you and an authorized
representative of the Company. Your signature below shall serve as your
acknowledgement that you represent that you have signed this letter voluntarily
with the intent to be bound, and that before signing this Agreement you have
taken whatever time you deem appropriate to have this letter reviewed by a
representative of your own selection.

We look forward to your continued employment on the terms and conditions
outlined herein. If you have any questions or concerns, please feel free to call
Mary A. Rorabaugh at 408-428-7814.

Sincerely,

Roger Strauch
Chief Executive Officer
SymmetriCom, Inc.

Accepted and Agreed this
_______ day of September, 1998

_______________________
Jim Peterson

<PAGE>

Exhibit 10.27

September 9, 1998

PERSONAL & CONFIDENTIAL
- -----------------------

Mr. Jim Peterson
1044 Van Dyke Drive
Laguna Beach, Ca 92651

Dear Mr. Peterson:

It is my pleasure to inform you that in connection with our pursuit of a
strategic partner for Linfinity Microelectronics ("the Company"), and as an
incentive for your continued valued employment, the Company is offering you the
opportunity to participate in a special Retention Bonus Plan ("the Plan")
designed specifically for you. Your ability to receive this bonus pursuant to
the Plan is conditioned upon your compliance with, and the fulfillment by you
of, each and every provision set forth below.

You will receive a bonus of Two Hundred and Fifty Thousand Dollars ($250,000.00)
and the Company will forgive your current loan of One Hundred and Fifty Thousand
Dollars ($150,000.00) if the Company terminates your employment for any reason
other than good cause before February 15, 1999. For purposes of this Agreement,
the term good cause shall be defined as fraud, dishonesty, embezzlement, theft,
attempted theft or any other crime, gross neglect of duty or a violation of your
obligations under this Agreement. If you remain employed until February 15,
1999 and have provided written notice of your intended departure on that date at
least thirty (30) days in advance of your departure, you will receive a bonus of
One Hundred Thousand Dollars ($100,000) and the Company will forgive your
current loan of One Hundred and Fifty Thousand Dollars ($150,000) upon your
actual resignation.
<PAGE>

If you remain employed with the Company beyond February 15, 1999 and the Company
terminates your employment for any reason other than good cause before August
15, 1999, upon your separation, the Company will forgive your current loan and
shall pay to you a bonus of Two Hundred and Fifty Thousand Dollars ($250,000.00)
plus an additional Seven Thousand Six Hundred and Ninety Two Dollars ($7,692.00)
for each full week you remain employed with the Company beyond February 15,
1999, up to a maximum of Four Hundred and Fifty Thousand Dollars ($450,000.00).
If you remain employed until August 15, 1999 and have provided written notice of
your intended departure at least thirty (30) days in advance, you will receive a
bonus of Two Hundred Thousand Dollars ($200,000) and the Company will forgive
your current loan of One Hundred and Fifty Thousand Dollars ($150,000) upon your
actual resignation.

If you remain employed with the Company beyond August 15, 1999, you will receive
no cash bonus under this Agreement. However, the Company will forgive your
current loan of One Hundred and Fifty Thousand Dollars ($150,000.00) on August
15, 1999, and you will receive any bonus earned under the Company's
discretionary bonus plan for Fiscal Year 1999.

You are expected to continue to perform your duties to the best of your ability
and to cooperate and assist in the continued operation and possible sale or
other disposition of the assets of the Company. No payments will be made
hereunder if you are terminated for reasons constituting good cause. Upon
termination of your employment, you shall enter into a Separation Agreement in
the form attached to this letter, wherein you will provide the Company a full
general release of all claims.

As you know, you are also eligible to participate in the Strategic Partner Bonus
Plan. If you meet the terms of both bonus plans, you will be entitled to
receive payment only under one of the plans, not both. You will receive payment
under whichever plan yields a greater payout to you. Similarly, your
participation in this plan is in lieu of your participation in the Company's
discretionary bonus plan for fiscal year 1999, except as otherwise provided
above where you remain employed beyond August 15, 1999. Nothing in this
Agreement shall change, modify or alter your at-will employment status.
<PAGE>

This Agreement, your knowledge about the pursuit of a strategic partner, and any
potential sale or other disposition of the Company and/or its assets is
confidential, non-public information. In exchange for participating in the Plan
and by signing this Agreement, you agree to keep confidential any and all
information regarding the terms of this Agreement. You shall not disclose the
terms of this Agreement to anyone except your immediate family, attorney,
accountant or any governmental taxing authority, or as may be required by law,
or in the enforcement of this Agreement. You also acknowledge that any failure
to comply with this provision shall constitute good cause for termination of
this Agreement and may result in the termination of your employment and
participation in the Plan.

Your services here are unique and personal. Accordingly, you may not assign any
of your rights or delegate any of your duties or obligations under this
Agreement.

All disputes with respect to this Agreement or related in any way to this
employer-employee relationship shall be submitted to final and binding
arbitration under the Employment Dispute Rules of the American Arbitration
Association. Any such dispute shall be submitted within 30 days of the event
giving rise to the dispute, or else the matter is waived and deemed non-
arbitrable.

We hope that you will sign this Agreement and continue your employment on the
terms and conditions outlined herein. If you have any questions or concerns,
please feel free to call Mary A. Rorabaugh at 408-428-7814.

Sincerely,

Roger Strauch
Chief Executive Officer
SymmetriCom, Inc.

Accepted and Agreed this
____ day of September, 1998

___________________________
Jim Peterson
<PAGE>

SEPARATION AGREEMENT

This Separation Agreement (hereinafter "Agreement") is entered into by
and between Jim Peterson (hereinafter "Mr. Peterson") and Linfinity
Microelectronics, Inc. (hereinafter "Linfinity"). The term "Parties" or "Party"
used herein shall refer to Mr. Peterson, Linfinity, or both, as may be
appropriate.

WHEREAS, Linfinity has agreed to provide Mr. Peterson with the
consideration of participation in a Retention Bonus Plan and forgiveness of Mr.
Peterson's current loan of $150,000, as set forth in the attached letter to Mr.
Peterson dated September __, 1998 (hereinafter the "Separation Letter," attached
hereto as Exhibit 1 and incorporated by reference), in consideration of Mr.
Peterson's agreement to sign this Agreement and abide by the terms of this
Agreement and the Separation Letter; and

WHEREAS, Mr. Peterson acknowledges that with the exception of the
consideration set forth in the Separation Letter, Mr. Peterson has been provided
all monies owed to Mr. Peterson by Linfinity and that Linfinity has satisfied
all obligations to Mr. Peterson arising out of or related to Mr. Peterson's
employment with Linfinity and/or any business entity or person released herein,
and the separation from such employment;

WHEREAS, Linfinity expressly denies that it engaged in any wrongful or
actionable conduct whatsoever against Mr. Peterson; and

WHEREAS, the Parties, in order to avoid the uncertainty, delay and
expense of time consuming litigation, have agreed to settle fully and finally
settle all differences whatsoever between them that are in existence now or that
may arise in the future based upon or arising out of events, acts or omissions,
occurring prior to their execution of this Agreement; and

WHEREAS, the Parties hereby acknowledge, represent and warrant that
the terms and conditions in this Agreement are fair, reasonable, adequate and in
their mutual best interest; and

WHEREAS, the Parties acknowledge that they are waiving significant
legal rights or claims by signing this Agreement and voluntarily enter into this
Agreement after consultation with legal counsel, with a full and complete
understanding of its terms and legal effect, and with the intent to be bound
thereby.
<PAGE>

NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained, it is agreed as follows:

1. COMPLETE RELEASE. Mr. Peterson, on behalf of himself and his successors and
-----------------
assigns, and each of them, does hereby unconditionally release and forever
discharge Linfinity and SymmetriCom, Inc., and all of their respective parents,
subsidiaries, divisions and affiliates or related business entities, including
each of their respective shareholders, officers, directors, owners, partners,
attorneys, employees, agents, successors and assigns, and each of them
(collectively the "Releasees"), from any and all known or unknown claims,
demands, actions or causes of action that now exist or that may arise in the
future, based upon events occurring or omissions on or before the date of Mr.
Peterson's execution of this Agreement. This release specifically includes, but
is not limited to any and all claims whatsoever against Linfinity or any
Releasee, including, by way of example: (1) any and all claims whatsoever
pertaining in any way to Mr. Peterson's employment with Linfinity or the
termination of his employment; (2) all claims whatsoever arising under any
express or implied contract or under any federal, state or local law, ordinance
or regulation, or the Constitution of California or the United States; and (3)
any and all claims for unpaid wages, fringe benefits, vacation pay or other
compensation. Mr. Peterson also intends that this Agreement operate as a waiver
of all unknown claims. Thus, Mr. Peterson expressly waives the provisions of
Section 1542 of the Civil Code of the State of California, which reads: "A
--
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
- -----------------------------------------------------------------------------
SUSPECT TO EXIST IN EMPLOYEE'S FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
- --------------------------------------------------------------------------------
IF KNOWN BY EMPLOYEE MUST HAVE MATERIALLY AFFECTED EMPLOYEE'S SETTLEMENT WITH
- -----------------------------------------------------------------------------
THE DEBTOR." For purposes of this Agreement, the term "debtor" refers to
- ------------
Releasees. The term "creditor" refers to Mr. Peterson. Mr. Peterson warrants
that he currently is unaware of any such claim, demand, action, or cause of
action against Linfinity or any Releasee which Mr. Peterson has not released
pursuant to this paragraph.

2. NO OTHER FILINGS. Mr. Peterson warrants that he has not filed a lawsuit or
----------------
otherwise initiated adversarial proceedings against Linfinity or any person or
entity released herein, based upon or related in any way to any act, omission or
event occurring prior to his execution of this Agreement. Mr. Peterson further
agrees not to do so in the future.

3. CONFIDENTIALITY. Mr. Peterson agrees that the terms of this Agreement are
---------------
completely confidential. Without the prior written authorization of the
President of Linfinity, Mr. Peterson shall not disclose the terms of this
Agreement to anyone. This Agreement shall not prohibit Mr. Peterson from making
required confidential disclosures to his attorney, accountant or to any
governmental taxing authority, or discussing the matter with his immediate
family.
<PAGE>

4. NON-ADMISSION OF LIABILITY. Mr. Peterson and Linfinity acknowledge and
--------------------------
agree that this Agreement and the consideration given hereunder is not to be
construed or used as an admission by either party of any liability whatsoever,
nor shall it be construed or used as an admission of any act or fact whatsoever.

5. NO REPRESENTATIONS. Mr. Peterson warrants that except as expressly set
------------------
forth herein, no representations of any kind or character have been made to Mr.
Peterson by Linfinity or any agent, representative, employee or attorney of a
person or entity released herein (or anyone else purporting to act in such
capacity) to induce Mr. Peterson to execute this Agreement. Mr. Peterson hereby
acknowledges that he has had an adequate opportunity to have this Agreement
reviewed by an attorney or other representative of his choice before signing the
Agreement, and that Mr. Peterson fully understands the contents and intends to
be bound thereby.

6. OLDER WORKERS BENEFIT PROTECTION ACT. In compliance with the Older Workers
------------------------------------
Benefit Protection Act, Linfinity and Mr. Peterson do hereby acknowledge that:
(A) Mr. Peterson fully understands this Agreement; (B) This Agreement
specifically applies to any rights or claims Mr. Peterson may have against
Linfinity or any party released herein under the federal Age Discrimination in
Employment Act of 1967, as amended; (C) This Agreement does not purport to waive
rights or claims that may arise from acts or events occurring after the date
that this Agreement is executed by the parties; (D) The consideration provided
for in this Agreement and the provisions of this paragraph are in addition to
that to which Mr. Peterson is already entitled; (E) Mr. Peterson has been
advised of the right to consult with any attorney prior to signing this
Agreement and that Mr. Peterson has been given a period of twenty-one (21) days
within which to consider whether to sign this Agreement; and (F) This Agreement
shall be revocable for the seven (7) day period following execution of this
Agreement by Mr. Peterson. Accordingly, this Agreement shall not become
effective or enforceable until the expiration of this seven (7) day revocation
period.

7. MISCELLANEOUS. This Agreement is executed by Mr. Peterson in the State of
-------------
California and shall be interpreted under the procedural and substantive laws of
California existing as of the date of execution. Should any provision of this
Agreement be declared or determined by any court to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and any said illegal or invalid part, term or provision shall be deemed
not to be a part of this Agreement. This Agreement sets forth the entire
agreement between the parties hereto relating to the subject matters herein, and
fully supersedes any and all prior agreements or understandings between the
parties hereto, if
<PAGE>

any, pertaining to the subject matter hereof. In any action brought to enforce
any provision(s) of this Agreement, in addition to any other relief granted, the
prevailing party shall recover its reasonable costs of enforcement, including
but without limitation, costs and reasonable attorneys' fees incurred therein.

Executed: __________________ ______________________________
DATE JIM PETERSON

LINFINITY MICROELECTRONICS

Executed: __________________ By:___________________________
DATE Roger Strauch
Chief Executive Officer
SymmetriCom, Inc.

<PAGE>

Exhibit 10.28

PROMISSORY NOTE
---------------

$300,000 San Jose, California
January ___, 1999

FOR VALUE RECEIVED, the undersigned, Thomas W. Steipp ("Employee") and
Debra L. Steipp, husband and wife ("Borrowers"), promise to pay to Symmetricom,
Inc., a California corporation (the "Company"), or order, the principal amount
of Three Hundred Thousand Dollars ($300,000) together with interest on the
outstanding principal balance at the rate of five percent (5%) per annum.

The outstanding principal amount and all accrued and unpaid interest on the
outstanding principal amount, to the extent not forgiven pursuant to the terms
hereof, shall be due and payable to the holder hereof at 2300 Orchard Parkway,
San Jose, California 95131, or such other place as the holder hereof may
designate, upon the earlier of the following dates (collectively, "Maturity
Events"):

(i) Five (5) days following the date that Employee resigns from the
Company.

(ii) Five (5) days following the date that Employee's employment with the
Company is terminated for cause. The term "termination for cause" includes,
without limitation, dishonesty, commission of a felony, a breach of Employee's
fiduciary duty or willful failure to follow a directive of the Company or the
Board of Directors of the Company.

(iii) Three hundred sixty (360) days following the date that Employee's
employment with the Company is terminated without cause.

(iv) The date of any sale, conveyance, assignment, alienation or any
other form of transfer, whether voluntary or involuntary, of that certain real
property commonly known as 15560 Shannon Road, Los Gatos, California (the
"Property"), or any part thereof or interest therein; except that the following
transfers of the Property shall not be deemed to be a Maturity Event:

a) A transfer upon the death of Employee to Employee's surviving
spouse (provided the surviving spouse is an obligor hereunder) or to Employee
upon the death of Employee's surviving spouse;

b) A transfer by an obligor hereof whereby such obligor's spouse
becomes a co-owner of the Property;

c) A transfer resulting from a decree of dissolution of the
marriage or legal separation of Employee and Debra L. Steipp or from a property
settlement agreement incidental to such a decree which requires the obligor
spouse to assume responsibility for the obligations under this Note and the Deed
of Trust (hereinafter defined) and pursuant to which Employee or Debra L. Steipp
(whoever is the obligor) becomes the sole owner of the Property; or

d) A transfer by one or both obligors under the Note into an inter
vivos trust in which one or both obligors are beneficiaries.
<PAGE>

(v) March 25, 2008.

Notwithstanding the foregoing to the contrary, on each of June 25, 1999,
June 25, 2000 and June 25, 2001 (each, a "Forgiveness Date"), so long as there
is then no uncured default hereunder or a default under that certain Promissory
Note between Borrower and the Company of even date herewith with an original
principal amount of $500,000 (the "Other Note"), or the deed of trust securing
the Other Note, Employee is still employed by the Company, and no Maturity Event
shall have occurred, the principal amount hereof shall be automatically reduced
by the sum of One Hundred Thousand Dollars ($100,000) and all accrued and unpaid
interest on the outstanding principal amount shall be automatically forgiven,
without fee or penalty, and on each such date Borrowers shall be released and
relieved from the obligation to repay such amounts to the holder hereof.

Any portion of the outstanding principal amount and all accrued and unpaid
interest which is not forgiven pursuant to this paragraph shall be due and
payable as otherwise set forth in this Note.

In the event that any of the following occurs, then unless otherwise
prohibited by law, the holder hereof shall have the option, without demand or
notice, to declare the entire outstanding principal balance of this Note,
together with all accrued and unpaid interest thereon to be immediately due and
payable: (i) Borrowers default in the payment of principal or interest when due
pursuant to the terms hereof; (ii) any representation or warranty contained in
this Note or any other agreement or instrument executed in connection with the
loan proves to have been false or misleading in any material respect; (iv)
Borrowers default in their obligation to pay any indebtedness or to perform any
other obligation hereunder; or (v) Borrowers default in their obligation to pay
any indebtedness evidenced by any promissory note executed by Borrowers and
payable to the holder hereof or there occurs any other default under any deed of
trust, mortgage or other document securing repayment of such indebtedness.

In the event any amount owed by Borrowers pursuant to this Note is not paid
when due, such unpaid amount shall bear interest from the due date until paid at
a rate equal to the lower of: (i) ten percent (10%) per annum; or (ii) the
maximum rate permitted by law. After such due date, all payments shall be
credited first to accrued interest and then to principal.

If an action is instituted for collection of this Note, the Borrowers agree
to pay court costs and reasonable attorneys' fees incurred by the holder
thereof.

This Note may be amended or modified, and provisions hereof may be waived,
only by the written agreement of Borrowers and the holder hereof. No delay or
failure by the holder hereof in exercising any right, power or remedy hereunder
shall operate as a waiver of such right, power or remedy, and a waiver of any
right, power or remedy on any one occasion shall not operate as a bar or waiver
of any such right, power or remedy on any other occasion. Without limiting the
generality of the foregoing, the delay or failure by the holder hereof for any
period of time to enforce collection of any amounts due hereunder shall not be
deemed to be a waiver of any rights of the holder hereof under contract or under
law. The rights of the Company under this Note are in addition to any other
rights and remedies which the holder hereof may have.

This Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the principles of conflicts of laws
of that State.

This Note may be prepaid at any time without penalty.
<PAGE>

THIS NOTE AND ALL RELATED DOCUMENTATION ARE EXECUTED VOLUNTARILY AND WITHOUT ANY
DURESS OR UNDUE INFLUENCE ON THE PART OR BEHALF OF THE PARTIES HERETO, WITH THE
FULL INTENT OF CREATING THE OBLIGATIONS HEREIN. THE PARTIES ACKNOWLEDGE THAT:
(a) THEY HAVE READ SUCH DOCUMENTATION; (b) THEY HAVE BEEN REPRESENTED IN THE
PREPARATION, NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL COUNSEL OF
THEIR OWN CHOICE OR THAT THEY HAVE VOLUNTARILY DECLINED TO SEEK SUCH COUNSEL;
(c) THEY UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS NOTE, AND THE OBLIGATIONS
THEY CREATE; AND (d) THEY ARE FULLY AWARE OF THE LEGAL AND BINDING EFFECT OF
THIS NOTE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWERS HEREBY
ACKNOWLEDGE THAT THE COMPANY HAS MADE NO REPRESENTATION OR WARRANTY TO BORROWERS
CONCERNING THE INCOME TAX CONSEQUENCES OF THE LOAN TO BORROWERS, AND BORROWERS
SHALL BE SOLELY RESPONSIBLE FOR ASCERTAINING AND BEARING SUCH TAX CONSEQUENCES.
BORROWERS FURTHER ACKNOWLEDGE THAT (i) THE COMPANY MAY, IN ITS SOLE DISCRETION,
DETERMINE THAT IT IS REQUIRED UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE RULES AND REGULATIONS PROMULGATED BY THE INTERNAL
REVENUE SERVICE ("IRS") THEREUNDER, TO IMPUTE INTEREST ON THE PRINCIPAL OF THIS
NOTE AT THE RATE SET BY THE IRS, (ii) THE AMOUNT OF ANY SUCH IMPUTED INTEREST
WOULD BE DEEMED TO BE COMPENSATION INCOME TO EMPLOYEE WHICH WOULD BE SUBJECT TO
TAX WITHHOLDING, AND (iii) IF SO DETERMINED BY THE COMPANY, THE COMPANY WOULD
REPORT AND WITHHOLD THE REQUIRED AMOUNT OUT OF THE CURRENT COMPENSATION PAID TO
EMPLOYEE IN ACCORDANCE WITH THE CODE AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.

BORROWERS:

___________________________
Thomas W. Steipp

___________________________
Debra L. Steipp

<PAGE>

Exhibit 10.29

PROMISSORY NOTE
SECURED BY DEED OF TRUST

$500,000.00 January __, 1999

San Jose, California

FOR VALUE RECEIVED, the undersigned, Thomas W. Steipp ("Employee") and
Debra L. Steipp, husband and wife (jointly and severally, the "Borrower"),
promise to pay to Symmetricom, Inc., a California corporation ("Lender" and
"Company"), at 2300 Orchard Parkway, San Jose, CA 95131 (or at such other place
as Lender may from time to time designate by written notice to Borrower), in
lawful money of the United States, the principal sum of FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00), on the following terms:

1. PAYMENT:
-------

Upon the occurrence of a Maturity Event (as defined herein), the
entire principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) shall be
immediately due and payable in lawful money of the United States.

2. SECURITY: This Note is secured by a deed of trust of even date
--------
herewith made by Borrower, as trustor, to First American Title Insurance
Company, as trustee, (the "Trustee") for Lender, as beneficiary, (the "Deed of
Trust") which (i) shall be executed and delivered by Borrower to Lender
concurrently upon the execution of this Note, and (ii) shall be recorded by
Lender or Trustee in the official records of the County of Santa Clara, State of
California as soon as possible following the close of escrow for the Property
(defined below), encumbering certain real property commonly known as 15560
Shannon Road, Los Gatos, California, County of Santa Clara, State of California
(the "Property"), described with particularity in the Deed of Trust, which
Borrower intends to occupy as his principal place of residence.

3. MATURITY EVENT: Upon the occurrence of a Maturity Event (as
--------------
hereinafter defined), the entire principal amount of the Loan and any other sums
due hereunder, shall become immediately due and payable without further demand
or notice to Borrower. To the extent permitted by law, any of the following
events shall be a "Maturity Event" under this Note and the Deed of Trust:

(i) Five (5) days following the date that Employee resigns from the
Company.

(ii) Five (5) days following the date that Employee's employment with the
Company is terminated for cause. The term "termination for cause" includes,
without limitation, dishonesty,
<PAGE>

commission of a felony, a breach of Employee's fiduciary duty or willful failure
to follow a directive of the Company or the Board of Directors of the Company.

(iii) Three hundred sixty (360) days following the date that Employee's
employment with the Company is terminated without cause.

a) A transfer upon the death of Employee to Employee's surviving
spouse (provided the surviving spouse is an obligor hereunder) or to Employee
upon the death of Employee's surviving spouse;

b) A transfer by an obligor hereof whereby such obligor's spouse
becomes a co-owner of the Property;

d) A transfer by one or both obligors under the Note into an inter
vivos trust in which one or both obligors are beneficiaries.

(v) March 25, 2008.

In the event that any of the following occurs, then unless otherwise
prohibited by law, the holder hereof shall have the option, without demand or
notice, to declare the entire outstanding principal balance of this Note,
together with all accrued and unpaid interest thereon to be immediately due and
payable: (i) Borrower defaults in the payment of principal or interest when due
pursuant to the terms hereof; (ii) Borrower defaults in his performance of any
obligation contained in the deed of trust encumbering the Property and securing
this Note (the "Deed of Trust"), any other deed of trust, security agreement or
other agreement (including any amendment, modification or extension thereof)
which may hereafter be executed by Borrowers for the purpose of securing this
Note, or the "First Deed of Trust"; (iii) any representation or warranty
contained in this Note, the Deed of Trust, or any other agreement or instrument
executed in connection with the loan proves to have been false or misleading in
any m aterial respect; (iv) Borrowers default in their obligation to pay any
indebtedness or to perform any other obligation which is secured by a deed of
trust or other lien on the Property or default under any deed of
<PAGE>

trust securing such indebtedness; or (v) Borrowers default in their obligation
to pay any indebtedness evidenced by any promissory note executed by Borrowers
and payable to the holder hereof or there occurs any other default under any
deed of trust, mortgage or other document securing repayment of such
indebtedness.

4. INTEREST: In the event any amount owed by Borrower pursuant to this
--------
Note is not paid when due, such unpaid amount shall bear interest from the due
date until paid at a rate equal to the lower of: (i) ten percent (10%) per
annum; or (ii) the maximum rate permitted by law. After such due date, all
payments shall be credited first to accrued interest and then to principal.

5. BORROWER'S REPRESENTATIONS: Borrower hereby makes the following
--------------------------
representations and warranties to the Lender and acknowledges that Lender is
relying on such representations in making the loan:

(a) As of the date of the close of escrow for the Property and as of
the date of recording of the Deed of Trust, Borrower shall have good and
marketable title to the Property free and clear of any security interests,
liens or encumbrances other than the First Deed of Trust, as defined in
Paragraph 8 below.

(b) As of the date of the close of escrow for the Property and as of
the date of recording of the Deed of Trust, the consent of no other person
or entity is required to grant the security interest in the Property to the
Lender evidenced by the Deed of Trust.

(c) There are no actions, proceedings, claims or disputes pending or,
to the Borrower's actual knowledge threatened against or affecting the
Borrower or the Property.

6. BORROWER'S ADDITIONAL OBLIGATIONS: Borrower shall take any and all
---------------------------------
further actions that may from time to time be required to ensure that the Deed
of Trust creates a valid lien on the Property in favor of the Lender, which
shall secure the Note and be junior in priority only to the First Deed of Trust.
Borrower shall furnish evidence reasonably satisfactory to the Lender that: (i)
Borrower has good and marketable title to the Property; (ii) the consent of no
other person or entity is required to grant a security interest in the Property
to the Lender; and (iii) there is no other deed of trust, mortgage or
encumbrance against the Property other than the First Deed of Trust. If it
should be hereafter determined that there are defects against title or matters
which could result in defects against title to the Property, or that the consent
of another person or entity is required to grant to and perfect in the Lender a
valid second-priority lien on the Property, Borrower shall promptly take all
action necessary to remove such defects and to obtain such consent and grant (or
cause to be granted) and perfect such lien on the Property. Failure of Borrower
to comply with the provisions of this Paragraph 6 shall be deemed a default
under the Note and the Deed of Trust.
<PAGE>

7. DEED OF TRUST: As used herein, "Deed of Trust" shall mean the deed of
-------------
trust constituting a second-priority lien against the Property by Borrower to
First American Title Insurance Company, as trustee, (the "Trustee") for the
benefit of Lender, as beneficiary, to be recorded by Lender or Trustee following
close of escrow for the Property in the Official Records of the County of Santa
Clara, State of California, securing a loan in the original principal amount of
FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).

8. FIRST DEED OF TRUST: As used herein, "First Deed of Trust" shall mean
-------------------
the deed of trust constituting a first-priority lien against the Property, by
Borrower to Equitable Deed Company, as trustee, for the benefit of Bank of
America, Federal Savings Bank, as beneficiary, recorded December 30, 1998 under
Recorder's Serial Number 14574954 in the Official Records of the County of Santa
Clara, State of California securing a loan in a principal amount not in excess
of EIGHT HUNDRED FIFTY THOUSAND DOLLARS ($850,000),

9. NOTICE: This Note is subject to Section 2924(i) of the California
------
Civil Code which provides that the holder of this Note, shall give written
notice to the trustor or his successor-in-interest, of prescribed information at
least ninety (90) days and not more than one hundred and fifty (150) days before
any balloon payment is due.

10. ATTORNEYS' FEES: In the event of Borrower's default hereunder,
---------------
Borrower shall pay all costs of collection, including reasonable attorneys' fees
incurred by the holder hereof on account of such collection, whether or not suit
is filed hereon.

11. WAIVER: The waiver by Lender of any breach of or default under any
------
term, covenant or condition contained herein or in any other agreement referred
to above shall not be deemed to be a waiver of any subsequent breach of or
default under the same or any other such term, covenant or condition.

12. NO USURY: Borrower hereby represents and warrants that at no time
--------
shall the proceeds of the indebtedness evidenced hereby be used "primarily for
personal, family, or household purposes" as that term is defined and used in
Article XV of the California Constitution (as amended from time to time).
Anything in this Note to the contrary notwithstanding, it is expressly
stipulated and agreed that the intent of Borrower and Lender is to comply at all
times with all usury and other laws relating to this Note. If the laws of the
State of California would now or hereafter render usurious, or are revised,
repealed or judicially interpreted so as to render usurious, any amount called
for under this Note, or contracted for, charged or received with respect to the
loan evidenced by this Note, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by law, then it is
Borrower's and Lender's express intent that all excess amounts theretofore
collected by Lender be credited to the principal balance of this Note (or, if
this Note has been paid in full, refunded to Borrower), and the provisions of
<PAGE>

this Note immediately be deemed reformed and the amounts therefor collectible
hereunder reduced, without the necessity of execution of any new document, so as
to comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder.

13. PREPAYMENT: Borrower may prepay all or any portion of this Note at any
----------
time prior to the stated maturity date, with no premium or penalty.

14. GENERAL PROVISIONS: This Note shall be governed by and construed in
------------------
accordance with the laws of the State of California. The maker of this Note
hereby waives presentment for payment, protest and demand, notice of protest,
demand and dishonor and nonpayment of this Note, and consents that Lender may
extend the time for payment or otherwise modify the terms of payment or any part
of the whole of the debt evidenced by this Note, at the request of any person
liable hereon, and such consent shall not alter nor diminish the liability of
any person. Borrower hereby waives the defense of the statute of limitations in
any action on this Note to the extent permitted by law.

15. THIS NOTE, THE DEED OF TRUST AND ALL RELATED DOCUMENTATION ARE
EXECUTED VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE ON THE PART OF OR
ON BEHALF OF THE PARTIES HERETO, WITH THE FULL INTENT OF CREATING THE
OBLIGATIONS AND SECURITY INTERESTS DESCRIBED HEREIN AND THEREIN. THE PARTIES
ACKNOWLEDGE THAT: (a) THEY HAVE READ SUCH DOCUMENTATION; (b) THEY HAVE BEEN
REPRESENTED IN THE PREPARATION, NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION
BY LEGAL COUNSEL OF THEIR OWN CHOICE OR THAT THEY HAVE VOLUNTARILY DECLINED TO
SEEK SUCH COUNSEL; (c) THEY UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS NOTE,
THE DEED OF TRUST AND ALL RELATED DOCUMENTATION AND THE OBLIGATIONS THEY CREATE;
AND (d) THEY ARE FULLY AWARE OF THE LEGAL AND BINDING EFFECT OF THIS NOTE, THE
DEED OF TRUST AND THE OTHER DOCUMENTS CONTEMPLATED BY THIS AGREEMENT. BORROWERS
FURTHER ACKNOWLEDGE THAT (i) THE COMPANY MAY, IN ITS SOLE DISCRETION, DETERMINE
THAT IT IS REQUIRED UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), AND THE RULES AND REGULATIONS PROMULGATED BY THE INTERNAL REVENUE
SERVICE ("IRS") THEREUNDER, TO IMPUTE INTEREST ON THE PRINCIPAL OF THIS NOTE AT
THE RATE SET BY THE IRS, (ii) THE AMOUNT OF ANY SUCH IMPUTED INTEREST WOULD BE
DEEMED TO BE COMPENSATION INCOME TO EMPLOYEE WHICH WOULD BE SUBJECT TO TAX
WITHHOLDING, AND (iii) IF SO DETERMINED BY THE COMPANY, THE COMPANY WOULD REPORT
AND WITHHOLD THE REQUIRED AMOUNT OUT OF THE CURRENT
<PAGE>

COMPENSATION PAID TO EMPLOYEE IN ACCORDANCE WITH THE CODE AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.

AS BORROWER:

_______________________________________
Thomas W. Steipp

_______________________________________
Debra L. Steipp

<PAGE>

Exhibit 10.30

RIDER TO DEED OF TRUST BY
THOMAS W. STEIPP AND DEBRA L. STEIPP, AS TRUSTOR,
TO FIRST AMERICAN TITLE INSURANCE COMPANY, AS TRUSTEE, FOR THE
BENEFIT OF SYMMETRICOM, INC., A CALIFORNIA CORPORATION,
AS BENEFICIARY

The Promissory Note which is secured by this Deed of Trust provides for the
following:

"The outstanding principal amountand all accrued and unpaid interest on the
outstanding principal amount, to the extent not forgiven pursuant to the terms
hereof, shall be due and payable to the holder hereof at 2300 Orchard Parkway,
San Jose, California 95131, or such other place as the holder hereof may
designate, upon the earlier of the following dates (collectively, "Maturity
Events"):

(i) Five (5) days following the date that Employee resigns from the
Company.

(iii) Three hundred sixty (360) days following the date that Employee's
employment with the Company is terminated without cause.

(iv) The date of any sale, conveyance, assignment, alienation or any other
form of transfer, whether voluntary or involuntary, of that certain real
property commonly known as 15560 Shannon Road, Los Gatos, California (the
"Property"), or any part thereof or interest therein; except that the following
transfers of the Property shall not be deemed to be a Maturity Event:

a) A transfer upon the death of Employee to Employee's surviving
spouse (provided the surviving spouse is an obligor hereunder) or to Employee
upon the death of Employee's surviving spouse;

b) A transfer by an obligor hereof whereby such obligor's spouse
becomes a co-owner of the Property;

c) A transfer resulting from a decree of dissolution of the marriage
or legal separation of Employee and Debra L. Steipp or from a property
settlement agreement incidental to such a decree which requires the obligor
spouse to assume responsibility for the obligations under this Note and the Deed
of Trust (hereinafter defined) and pursuant to which Employee or Debra L. Steipp
(whoever is the obligor) becomes the sole owner of the Property; or

d) A transfer by one or both obligors under the Note into an inter
vivos trust in which one or both obligors are beneficiaries.

(v) March 25, 2008."

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 22,533
<SECURITIES> 13,916
<RECEIVABLES> 18,152
<ALLOWANCES> 1,988
<INVENTORY> 15,157
<CURRENT-ASSETS> 76,560
<PP&E> 79,210
<DEPRECIATION> 42,923
<TOTAL-ASSETS> 113,980
<CURRENT-LIABILITIES> 22,232
<BONDS> 0
0
0
<COMMON> 19,810
<OTHER-SE> 61,459
<TOTAL-LIABILITY-AND-EQUITY> 113,980
<SALES> 60,202
<TOTAL-REVENUES> 60,202
<CGS> 35,487
<TOTAL-COSTS> 35,487
<OTHER-EXPENSES> 24,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360
<INCOME-PRETAX> 1,258
<INCOME-TAX> 264
<INCOME-CONTINUING> 994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 994
<EPS-PRIMARY> .06
<EPS-DILUTED> .06

</TABLE>