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<SEC-DOCUMENT>/in/edgar/work/20000731/0001095811-00-002169/0001095811-00-002169.txt : 20000921
<SEC-HEADER>0001095811-00-002169.hdr.sgml : 20000921
ACCESSION NUMBER:		0001095811-00-002169
CONFORMED SUBMISSION TYPE:	S-3/A
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20000731

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FRANKLIN TELECOMMUNICATIONS CORP
		CENTRAL INDEX KEY:			0000722572
		STANDARD INDUSTRIAL CLASSIFICATION:	 [3576
]		IRS NUMBER:				953733534
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			0630
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		S-3/A
			SEC ACT:		
			SEC FILE NUMBER:	333-35834
			FILM NUMBER:		681723
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		733 LAKEFIELD RD
				CITY:			WESTLAKE VILLAGE
				STATE:			CA
				ZIP:			91361
				BUSINESS PHONE:		8053738688
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		733 LAKEFIELD ROAD
					CITY:			WESTLAKE VILLAGE
					STATE:			CA
					ZIP:			91361
</MAIL-ADDRESS>

					FORMER COMPANY:	
						FORMER CONFORMED NAME:	ABM COMPUTER SYSTEMS
						DATE OF NAME CHANGE:	19870317
</FORMER-COMPANY>

						FORMER COMPANY:	
							FORMER CONFORMED NAME:	AUTOMATED BUSINESS MACHINES INC
							DATE OF NAME CHANGE:	19830802
</FORMER-COMPANY>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3/A
<SEQUENCE>1
<FILENAME>s-3a.txt
<DESCRIPTION>AMENDMENT NO. 2 TO FORM S-3
<TEXT>

<PAGE>   1

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 2000


                                                    REGISTRATION NO. 333-35834
================================================================================

                        SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ----------------------

                                AMENDMENT NO. 2

                                       TO
                                    FORM S-3

                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933


                        FRANKLIN TELECOMMUNICATIONS CORP.
- --------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>

           CALIFORNIA                         3670                      95-3733534
- -------------------------------    ----------------------------    ----------------------
<S>                                <C>                             <C>
(STATE OR OTHER JURISDICTION OF    (PRIMARY STANDARD INDUSTRIAL      (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)    IDENTIFICATION NUMBER)
</TABLE>


             733 LAKEFIELD ROAD, WESTLAKE VILLAGE, CALIFORNIA 91361
                                 (805) 373-8688
- --------------------------------------------------------------------------------
   ADDRESS AND TELEPHONE NUMBER, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)


                                 FRANK W. PETERS
             733 LAKEFIELD ROAD, WESTLAKE VILLAGE, CALIFORNIA 91361
                                 (805) 373-8688
- --------------------------------------------------------------------------------
            (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)


                                    COPY TO:

                             ROBERT J. ZEPFEL, ESQ.
                               HADDAN & ZEPFEL LLP
                         4685 MACARTHUR COURT, SUITE 220
                         NEWPORT BEACH, CALIFORNIA 92660
                                 (949) 752-6100

         APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Amendment to Registration Statement is declared effective.

If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================
  Title of each                             Proposed        Proposed
    Class of                                Maximum         Maximum
   Securities              Securities      Offering         Aggregate      Amount of
     to be                   to be         Price Per        Offering     Registration
   Registered             Registered(1)     Unit(3)          Price            Fee
- -------------------------------------------------------------------------------------
<S>                       <C>              <C>             <C>           <C>
  Common Stock            6,274,001(2)       $1.32         $8,281,681     $2,186.36
=====================================================================================
</TABLE>

(1) Pursuant to Rule 416 under the Securities Act of 1933, there are also being
    registered such indeterminate number of additional shares of common stock as
    may be issuable upon the exercise of the common stock purchase warrants
    described herein pursuant to the antidilution provisions thereof. Shares
    issuable pursuant to the Protective Warrant, (as defined in this
    Registration Statement) are not covered by Rule 416. The proposed maximum
    offering price per share and maximum aggregate offering price for the shares
    being registered hereby is calculated in accordance with Rule 457(c) under
    the Securities Act.

(2) The number of shares registered is based on 125% of the shares issued to the
    Selling Shareholders, including shares issuable upon exercise of the Term
    Warrants. The additional shares are intended to cover any shares issuable
    pursuant to the Protective Warrant.

(3) Based on the closing price of the Common Stock on the American Stock
    Exchange on April 24, 2000.

         The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================
<PAGE>   2

PROSPECTUS

                               6,274,001 SHARES

                      FRANKLIN TELECOMMUNICATIONS CORP.

                                 COMMON STOCK

         These shares of common stock are being offered by certain of our
current shareholders. We issued the shares, or reserved the shares for issuance,
to the shareholders in connection with investments made in the Company in March
2000.

         The selling shareholders may sell the shares covered by this Prospectus
on the American Stock Exchange and in ordinary brokerage transactions, in
negotiated transactions or otherwise, at prevailing market prices at the time of
sale or at negotiated prices, and may engage brokers or dealers to sell the
shares. For additional information on the selling shareholders' possible methods
of sale, you should refer to the section of this prospectus entitled "Plan of
Distribution." The selling shareholders may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with the sale of their
shares. We will not receive any proceeds from the sale of the shares, but will
bear the costs relating to the registration of the shares.

         Our common stock is traded on American Stock Exchange under the symbol
"FCM."

         The shares offered in this prospectus involve a high degree of risk.
You should carefully consider the "Risk Factors" beginning on page 2 in
determining whether to purchase shares of our common stock.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
       COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES, OR DETERMINED IF
         THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
                       THE CONTRARY IS A CRIMINAL OFFENSE.


                THE DATE OF THIS PROSPECTUS IS           , 2000.

<PAGE>   3
         You should rely only on information contained or incorporated by
reference in this prospectus. See "Information Incorporated by Reference."
Neither we nor the selling shareholders have authorized any other person to
provide you with information different from that contained in this prospectus.

         The information contained in this prospectus is correct only as of the
date on the cover, regardless of the date this prospectus was delivered to you
or the date on which you acquired any of the shares.

                           FORWARD-LOOKING STATEMENTS

         This prospectus contains "forward-looking statements." These
forward-looking statements include, without limitation, statements about our
market opportunity, our strategies, competition, expected activities and
expenditures as we pursue our business plan, and the adequacy of our available
cash resources. Actual results could differ materially from those expressed or
implied by these forward-looking statements as a result of various factors,
including the risk factors described above and elsewhere in this prospectus.

                                  THE BUSINESS

         Franklin Telecommunications Corp. designs, builds and sells Internet
Telephony equipment and other high speed communications products and subsystems.
Our products are marketed through Original Equipment Manufacturers ("OEMs") and
distributors, as well as directly to end users. In addition, through our
majority-owned subsidiary, FNet Corp., we provide Internet Protocol telephony
services and Internet access to businesses and individuals. Franklin was formed
in 1981. Our address is 733 Lakefield Road, Westlake Village, California 91361,
and our telephone number is (805) 373-8688.

                                  RISK FACTORS

         You should carefully consider the following factors and other
information in this prospectus before deciding to invest in the shares. You
should not purchase any of the shares unless you can afford a complete loss of
your investment.

WE HAVE A HISTORY OF OPERATING LOSSES.

         We have incurred operating losses in each of the last three fiscal
years, and have a significant accumulated deficit. Our operating losses have
resulted from a number of factors, including reduced demand for original
hardware products, higher expenses for the development of new hardware products
and for installing the infrastructure for the Internet telephony and Internet
services business of FNet, and increasing sales and marketing expenses to
promote new products and services. Much of the operating capital during this
period has been derived from equity financings, rather than from operations. We
have been dependent on these equity financings to sustain our ongoing
operations. Thus, an investment in the shares is highly speculative and we
cannot assure you that you will realize any return on your investment or that
you will not lose your entire investment.

THE ARRANGEMENTS WITH THE SELLING SHAREHOLDERS COULD CAUSE DILUTION OF EXISTING
SHAREHOLDERS


         We issued warrants to the selling shareholders that are designed to
protect the selling shareholders against short-term declines in the value of our
stock, but which could cause significant dilution of existing shareholders. The
warrants cover the period between the date the selling shareholders purchased
their shares (March 27, 2000) and the date our Registration Statement is
declared effective by the SEC. The warrants are triggered if the market price of
our shares is below $1.50 on the effective date. If the warrants are triggered,
the selling shareholders would be entitled to acquire additional shares for a
nominal price ($.01 per share). The maximum number of shares issuable under
these warrants is 2,011,350.

         Since these shares would be issued for a nominal price of $.01 per
share, the issuance would be substantially dilutive of existing shareholders.

         The total number of shares issued to the selling shareholders in the
transaction was 4,022,700, and they received warrants to purchase an additional
1,005,675 shares. When added to the maximum number of shares that could be
issued upon exercise of the protective warrants, the aggregate maximum number
of shares that could be issued is 7,039,725. This represents approximately 20%
of the Common Stock issued and outstanding as of June 30, 2000.

         For a complete description of the terms of the warrants, and any other
transactions with the Selling Shareholders, see "The Selling Shareholders."


                                       2
<PAGE>   4



         On ________, 2000, the effective date of the Registration Statement of
which this Prospectus is a part, the market price was $____, so the Protective
Warrant will become exercisable in accordance with the terms described above.

OUR SUBSIDIARY, FNET, POSES CERTAIN RISKS.

         Several years ago we organized FNet, which offers Internet Protocol
telephony services and Internet access. We have devoted significant resources
and management time to the organization and development of FNet. We currently
own approximately 70% of the common stock of FNet, with the balance owned by
members of management, including Franklin's CEO, and certain investors. We
believe that the growth of FNet will benefit Franklin through increased demand
for our communications hardware as well as the value of our interest in FNet.
However, FNet may adversely affect our principal business in the short term due
to competing demands on our resources and management. Also, the fact that
members of Franklin's management, including our CEO, hold a direct interest in
FNet may pose conflicts of interest. FNet is a relatively new business venture,
and it can be expected that its operations will be subject to many of the
expenses, delays and risks inherent in the establishment of a new business.

WE DEPEND ON SEVERAL MAJOR CUSTOMERS.

         Our sales have been concentrated in a relatively small number of
customers, who account for a significant portion of our revenues. During the
fiscal year ended June 30, 1999, a single customer represented 76% of sales. The
loss of any major customer could adversely affect the Company. The Company has
no ongoing supply contracts with any of its major customers.

WE MAY HAVE DIFFICULTIES IN MANAGING OUR GROWTH.

         Our growth has placed a significant strain on our personnel and
systems. To accommodate our current size and manage growth, we must improve our
operational, financial and information systems, and expand, train and manage our
employee base. This problem may be more serious if we acquire additional
businesses, as each such business must then be integrated into our operations
and systems.

         As we expand our customer base, we will experience greater demands on
our network infrastructure, technical staff and resources. If such demand
results in difficulties satisfying the needs of our customers, it could
negatively affect us by causing subscribers or potential subscribers to utilize
competitive long distance telephone service providers and Internet service
providers. We believe that our ability to provide timely access for customers,
and adequate customer and technical support, will mainly depend on our ability
to attract, train, integrate and retain qualified employees.

IT IS LIKELY WE WILL REQUIRE ADDITIONAL CAPITAL.

         All of the proceeds of this offering will be received by the selling
shareholder. While we may receive cash from the exercise of warrants covered by
this Prospectus, we can't be sure that we will derive any specific amount from
this offering. We may require additional capital to sustain our business as
presently operated, and developments in our business and possible expansion into
other markets could indicate that we need to raise additional capital.


                                       3

<PAGE>   5

OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY.

         Our quarterly operating results may vary significantly due to a variety
of factors, including the availability and cost of materials and components, the
introduction of new products, the timing of our marketing efforts, pricing
pressures, general economic and industry conditions that affect customer demand,
and other factors.

OUR FUTURE GROWTH DEPENDS UPON AN INCREASE IN THE USE OF INTERNET PROTOCOL
TELEPHONY AS A MEDIUM FOR VOICE COMMUNICATIONS.

         The Internet Protocol telephony business has little operating history,
and is evolving rapidly. Until very recently, the sound quality of Internet
telephony calls was poor, and the technology is still in the early stages of
development. As the industry has grown, substantial improvements to sound
quality have been made but technological impediments still need to be overcome.
In addition, the capacity constraints of the public Internet network could
hinder further development of Internet telephony if callers experience delays,
errors in transmissions or other difficulties. We have attempted to reduce this
risk by utilizing private leased lines, international private lines, Frame Relay
lines and T-1 lines for voice traffic, while using the Internet primarily for
fax and data traffic and only secondarily for voice traffic. As is typical in
the case of a new and rapidly evolving industry, demand and market acceptance
for our services are subject to a high level of uncertainty and risk. In
particular, the Internet must be accepted as a viable alternative to traditional
telephony service. Customers that have already invested substantial resources in
integrating traditional telephony service with their operations may be
particularly reluctant or slow to adopt a new technology that makes their
existing infrastructure obsolete. Because this market is new and evolving, it is
difficult to predict the size of this market and its growth rate. If the
Internet telephony market fails to develop, develops more slowly than we expect
or becomes saturated with competitors, then our business, results of operations
and financial condition will be materially adversely affected.

OUR BUSINESS IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID TECHNOLOGICAL CHANGES.

         The Internet telephony, data communications and telecommunications
industry is extremely competitive. Our principal competitors in the manufacture
of communications hardware are Lucent Technologies, Nokia, HyperCom, Clarent,
Ascend Communications and Cisco Systems. Most of these companies have
substantially greater marketing, financial, technical and field support
resources. In addition, we could face strong competition from a number of
established computer and telecommunications firms which may enter the market in
the future.

         The fields of Internet telephony and data communications are marked by
rapid changes in technology, which can cause products to become obsolete over
very short time frames. Thus, our performance will depend on our ability to
develop and market new hardware products and services to meet changing
technology, pricing considerations and other market factors. The business could
be severely impacted if the Company were to experience delays in developing new
hardware products and services or enhancements.

         The market for Internet telephony services has been extremely
competitive, and is expected to be so for the foreseeable future. Many companies
offer Internet telephony products and services, and many of these companies have
a substantial presence in this market. Most of the current Internet telephony
products permit voice communications over the Internet between two parties that
are both connected to the Internet with sound-equipped personal computers and
where both parties are using identical Internet telephony software products.
Current product offerings include VocalTec Communications' Internet Phone,
QuarterDeck's WebPhone and Microsoft's NetMeeting.

         In addition, a number of large telecommunications providers and
equipment manufacturers, such as Cisco, Lucent, Northern Telecom and Dialogic,
have announced that they intend to offer server-based products. These products
are expected to allow voice communications over the Internet between parties
using a personal computer and a telephone and between two parties using
telephones. Cisco Systems has also taken a further step by recently acquiring
two companies that produce devices that help Internet


                                       4

<PAGE>   6

service providers transition voice and data traffic to cell and packet networks
while maintaining traditional phone usage and infrastructure. Internet telephony
service providers, such as ICG Communications, IPVoice.com, ITXC, RSL
Communications (through its Delta Three subsidiary) and VIP Calling, route
Internet telephony traffic to destinations on a worldwide basis. In addition,
major long distance providers, such as AT&T, Deutsche Telekom, Frontier, MCI
WorldCom, and Qwest Communications, as well as other major companies such as
Motorola and Intel, have all entered or plan to enter the Internet telephony
market. Many of our competitors are larger than and have substantially greater
financial, distribution and marketing resources than we do. We cannot be certain
that we will be able to compete successfully in the developing Internet
telephony market.

         The entry of new participants from these categories and the potential
entry of competitors from other categories (such as computer hardware
manufacturers) would result in substantially greater competition. The ability of
these competitors or others to bundle services and products with Internet
connectivity services could place FNet at a significant competitive
disadvantage. In addition, competitors in the telecommunications industry may be
able to provide customers with reduced communications costs in connection with
their long distance telephone and Internet access services, reducing the overall
cost of telephone and Internet access and significantly increasing pricing
pressures on FNet.

WE FACE PRICING PRESSURES, PARTICULARLY IN THE INTERNET TELEPHONY MARKET.

         The success of our current product and service offerings is based on
our ability to provide discounted voice communications by taking advantage of
cost savings achieved through Internet telephony. In recent years, the price of
traditional domestic and international long distance calls has been declining.
In response to these declines, many Internet telephony providers have lowered
the price of their service offerings. Should prices of traditional long distance
calls decline to a point where we no longer have a price advantage over our
competitors, we would lose a significant competitive advantage and would have to
rely on factors other than price to differentiate our product and service
offerings. If we fail to do so, our business could be materially adversely
affected.

OUR BUSINESS DEPENDS ON OUR NETWORK INFRASTRUCTURE AND CAPACITY, AND MAY BE
SUBJECT TO SYSTEM FAILURE AND SECURITY RISKS.

         The future success of FNet's business will depend on the capacity,
reliability and security of its network infrastructure. FNet will be required to
expand and improve this infrastructure as the number of customers and the amount
and type of information its customers communicate over the Internet increases,
and the means by which customers connect to the Internet evolve. Such expansion
and improvement may require substantial financial, operational and managerial
resources.

         Capacity constraints have occurred at many Internet Service Providers,
both at the level of particular "points of presence" ("POPs") (affecting only
customers attempting to use that particular POP) and in connection with
systemwide services (such as e-mail and news services, which can affect all
customers). From time to time, FNet has experienced delayed delivery from
suppliers of new telephone lines, modems, servers and other equipment used by
FNet in providing its services. Any severe shortage of new telephone lines,
modems, servers or other equipment could result in incoming access lines
becoming full during peak times, causing busy signals for customers who are
trying to connect to the Internet. Similar problems may occur if FNet is unable
to expand the capacity of its various network, e-mail, World Wide Web and other
servers quickly enough to keep pace with demand from our expanding customer
base. If the capacity of such servers is exceeded, customers will experience
delays when trying to use a particular service. Further, if FNet does not
maintain sufficient capacity in its network connections, customers will
experience a general slowdown of all services on the Internet. Any of these
events could cause customers to terminate use of FNet's services. Accordingly,
our business would be damaged if we failed to expand or enhance our network
infrastructure on a timely basis, or failed to adapt it to an expanding customer
base, changing customer requirements or evolving industry standards.


                                       5

<PAGE>   7

         FNet's operations are dependent on its ability to protect its
telecommunications and computer equipment against damage from fire, earthquake,
power loss, telecommunication failure and similar events. The occurrence of a
natural disaster or another unanticipated problem at our headquarters and
network hub or at POPs through which customers connect to the Internet could
cause interruptions in the services provided by FNet. In addition, failure of
FNet's telecommunications providers to provide the data communications capacity
required by FNet as a result of a natural disaster, operational disruption or
for any other reason could cause interruptions in the services provided by FNet.

         FNet's network infrastructure may be vulnerable to computer viruses and
other similar disruptive problems caused by its customers, other Internet users
or other third parties. Computer viruses and other problems could lead to
interruptions, delays in or cessation of service to FNet's customers, as well as
corruption of FNet's or its customers' computer systems. Inappropriate use of
the Internet by third parties could also potentially jeopardize the security of
confidential information stored in the computer systems of FNet or those of its
customers, which may cause losses to FNet or its customers, or deter certain
persons from using FNet's services. We expect that FNet's customers may
increasingly use the Internet for commercial transactions in the future. Any
network malfunction or security breach could cause these transactions to be
delayed, not completed or completed with compromised security. Alleviating
problems caused by computer viruses or other inappropriate uses or security
breaches may cause interruptions, delays or cessation in service to FNet's
customers. Customers or others could assert claims of liability against us as a
result of such events. FNet does not presently maintain redundant or backup
Internet services or backbone facilities or other redundant computing and
telecommunications facilities.

OUR BUSINESS DEPENDS ON OUR ABILITY TO PROTECT ITS TECHNOLOGY.

         Our success will depend in part on protecting our proprietary
technology. While we have patents covering certain of our products, we rely
principally on copyright law for protection of our hardware and software
designs, as well as trade secret law, confidentiality agreements and our
technical abilities and responsiveness to the demands of customers to protect
our proprietary rights.

THE TELECOMMUNICATIONS BUSINESS IS HEAVILY REGULATED, AND REGULATORY CHANGES
COULD DISRUPT OUR BUSINESS.

         Some of our products are subject to regulations of the Federal
Communications Commission. Certain regulations require that products which
reside on a customer's premises and interconnect the public switched network
meet certain standards to prevent harm to the network. Other regulations limit
the levels of electromagnetic radiation which may emanate from an electronic
device located on a customer's premises. We currently comply with these
regulations and we foresee no problem in complying with these regulations in the
future.

         The use of the Internet to provide telephone service is a recent market
development. The Federal Communications Commission is considering whether to
impose surcharges or additional regulations on certain providers of Internet
telephony. In April of 1998 the FCC issued a report on the implementation of the
universal service provisions of the Telecommunications Act. The report indicates
that the FCC plans to examine the question of whether certain forms of
"phone-to-phone" Internet telephony are information services or
telecommunications services. The FCC noted that it did not have, as of the date
of the Report, an adequate record on which to make a definitive pronouncement,
but that the record suggested that certain forms of phone-to-phone Internet
telephony appear to have the same functionality as non-Internet
telecommunications services and lack the characteristics that would render them
information services. If the FCC were to determine that certain services are
subject to FCC regulation as telecommunications services, the FCC may require
providers of Internet telephony services to make universal service
contributions, pay access charges or be subject to traditional common carrier
regulation. In addition, the FCC sets the access charges on traditional
telephony traffic and if it reduces these access charges, the cost of
traditional long distance telephone calls will probably be lowered, thereby
decreasing our competitive pricing advantage.


                                       6

<PAGE>   8

         In September 1998, two regional Bell operating companies, US West and
BellSouth, advised Internet telephony providers that the regional companies
would impose access charges on Internet telephony traffic. In addition, US West
has petitioned the FCC for a declaratory ruling that providers of interstate
Internet telephony must pay federal access charges, and has petitioned the
public utilities commissions of two states for similar rulings concerning
payment of access charges for intrastate Internet telephone calls. It is not
known whether these companies, US West and BellSouth, will actually impose
access charges or when such charges will become effective. If these companies
succeed in imposing access charges that may reduce the cost savings of using
Internet telephony as compared to traditional telephone service, the existence
of such access charges could adversely affect the development of the Company's
Internet telephony business. In February 1999, the FCC adopted an order
concerning payment of reciprocal compensation that provides support for a
possible finding by the FCC that providers of Internet telephony must pay access
charges for at least some portions of Internet telephony services. If the FCC
were to make such a finding, the payment of access charges could adversely
affect the Company's business. Many of our competitors are lobbying the FCC for
the imposition of access charges on Internet telephony traffic.

         To our knowledge, there are currently no domestic and few foreign laws
or regulations that prohibit voice communications over the Internet. State
public utility commissions may retain jurisdiction to regulate the provision of
intrastate Internet telephony services. A number of countries that currently
prohibit competition in the provision of voice telephony have also prohibited
Internet telephony. Other countries permit but regulate Internet telephony. If
Congress, the FCC, state regulatory agencies or foreign governments begin to
regulate Internet telephony, such regulation may interfere with our business.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS.

         We anticipate that a substantial portion of FNet's business will be
based outside of the United States, and international expansion is a significant
component of our strategy. We cannot assure you that we will be successful in
expanding into additional international markets. In addition to the uncertainty
regarding our ability to generate revenue from foreign operations and expand our
international presence, there are certain risks inherent in conducting a
telecommunications business on an international basis, including uncertain and
changing legal and regulatory requirements, political instability, and
subscriber fraud.

AS AN INTERNET SERVICE PROVIDER, FNET MAY BE SUBJECT TO SPECIALIZED RISKS.


         The law relating to the liability of Internet Service Providers and
online service companies for information carried on or disseminated through
their networks has not yet been definitively established. Several private
lawsuits seeking to impose such liability upon Internet Service Providers and
online services companies are currently pending. Although no such claims have
been asserted against FNet to date, there can be no assurance that such claims
will not be asserted in the future, or if asserted, will not be successful. As
the law in this area develops, the potential imposition of liability upon FNet
for information carried on and disseminated through its network could require it
to implement measures to reduce its exposure to such liability. The
implementation of such measures could require the expenditure of substantial
resources or the discontinuation of certain service offerings. Any costs that
are incurred as a result of such expenditure, contesting any such asserted
claims or the imposition of liability could have a material adverse effect on
FNet.


         Due to the increasing use of the Internet, it is possible that
additional laws and regulations may be adopted with respect to the Internet
covering issues such as content, user privacy, pricing, libel, intellectual
property protection and infringement and technology export and other controls.
Changes in the regulatory environment relating to the Internet services
industry, including regulatory changes that directly or indirectly affect
telecommunication costs or increase the likelihood or scope of competition,
could affect us.



                                       7

<PAGE>   9
OUR NETWORK DEPENDS ON UNRELATED TELECOMMUNICATIONS CARRIERS.

         We depend on other telecommunications carriers to route our telephone
traffic. All of the telephone calls made by FNet's customers are connected at
least in part through leased transmission facilities. In many of the foreign
jurisdictions in which FNet conducts or plans to conduct business, the primary
provider of transmission facilities is a governmental telephone monopoly.
Accordingly, we may be required to lease transmission capacity at artificially
high rates from a single provider. These rates may prevent us from generating a
profit on those calls. In addition, national telephone companies may not be
required by law to allow us to lease necessary transmission lines. In any event,
we may encounter delays in negotiating leases and interconnection agreements,
which would delay commencement of operations.

         In the United States, the providers of local exchange transmission
facilities are generally the incumbent local exchange carriers, including the
regional Bell operating companies. The permitted pricing of local exchange
facilities in the United States is subject to uncertainties. The Federal
Communications Commission issued an order requiring existing local exchange
carriers to price those facilities at total element long-run incremental cost,
and the United States Supreme Court recently upheld the FCC's jurisdiction to
set a pricing standard for incumbent local exchange carrier facilities provided
to competitors. However, the local exchange carriers could challenge the FCC's
total element long-run incremental cost standard and, if they succeed, the
result may be to increase the cost of local exchange carrier facilities obtained
by us.

         Many of the international telephone calls made by our customers are
transported via transmission facilities that we lease from our current and
potential competitors. We lease facilities from local exchange carriers that are
our competitors, such as the regional Bell operating companies. We generally
lease lines on a fixed-cost basis. These include leases of transmission capacity
for point-to-point circuits on a monthly or longer-term fixed-cost basis.

                            THE SELLING SHAREHOLDERS


         In March of 2000 we entered into an agreement with a group of
investors under which they purchased units, consisting of shares and warrants,
for an aggregate purchase price of $6,033,985. Each unit consisted of 10,000
shares and a warrant to purchase 2,500 shares, and the price per unit was
$15,000. We issued an aggregate of 4,022,700 shares, and warrants to purchase
an additional 1,005,675 shares, in the transaction. The warrants are
exercisable at a fixed price of $2.50 per share, and become exercisable in
March 2001. The warrants expire in March 2005.

         In addition to the regular warrants, the investors received separate
protective warrants, which are warrants designed to protect the investors
against decreases in the market value of their shares between the date the
shares were acquired (March 27, 2000) and the date the Registration Statement
is declared effective. It accomplishes this by allowing them to purchase
additional shares for a nominal consideration ($.01 per share), so that the
total value of the shares purchased by them in the initial transaction, plus
the value of the shares they receive upon exercise of the protective warrants,
equals the initial purchase price of their shares.

         The protective warrants are triggered only if the market price is below
$1.50 per share on the effective date of the registration statement. Thus, if
the market price on the effective date is $1.50 or higher, no shares are
issuable upon exercise of the protective warrants, and they expire immediately.
If the market price is below $1.50 per share, then the protective warrants
become exercisable to purchase a number of shares determined by reference to the
market price of the shares on the effective date, as compared to $1.50 per
share. The number of shares issuable is determined by subtracting the selling
shareholder's original investment, divided by 1.5, from 75% of the price on the
effective date (but in no event lower than $1.00). Thus, for example, for an
investor who paid $100,000 for the units, if the market price of our shares were
to decline to $1.40 per share, the investor's protective warrant would be
exercisable to purchase 28,571 shares at $.01 per share. If the market price
were to decline to $1.00 per share, an additional 33,334 shares would be
issuable to the investor. (See "The Selling Shareholders"). If the protective
warrants become exercisable, they are exercisable only for a period of sixty
days following the effective date of the Registration Statement.

         The maximum number of shares issuable upon exercise of the protective
warrants is 2,011,350. The issuance of these shares, as well as subsequent
sales of shares in the open market, may cause the market price of the shares to
fall and might impair our ability to raise additional capital through sales of
securities.

         The investors were introduced to us by LBE Capital, LLC, a placement
agent located in Atlanta, Georgia. In connection with the transaction, we also
issued warrants to purchase 200,000 shares to persons associated with LBE
Capital, LLC, also at an exercise price of $2.50, as a portion of the commission
payable in the transaction. These warrants are immediately exercisable and
expire in March 2005.

         All of the warrants are subject to adjustment in the event of stock
splits, stock dividends, and other capital changes.

         We are also required to register the resale of all of the shares
described above, including the shares issuable upon exercise of the warrants.


                                       8
<PAGE>   10


         The following table sets forth certain information as of March 31,
2000, regarding the ownership of shares by the selling shareholders and as
adjusted to give effect to the sale of the shares offered in this prospectus.



<TABLE>
<CAPTION>
                                                Shares Owned Prior                                 Shares Owned
                                                  To Offering(1)                                  After Offering
       Selling                              -------------------------          Shares         -----------------------
     Shareholder                              Number       Percentage        Offered(1)        Number      Percentage
     -----------                            ---------      ----------        ----------       -------      ----------
<S>                                         <C>            <C>               <C>              <C>          <C>
Crescent International, Ltd.(2)             2,263,493         6.6             1,499,914        763,579         2.2

B. Morgan Pridemore                         1,463,640         4.2             1,463,640            -0-         -0-

Merced Partners Limited Partnership           999,595         2.9               999,595            -0-         -0-

Lakeshore International, Ltd.                 500,319         1.5               500,319            -0-         -0-

Gundyco in Trust for RRSP 550-98866-19(3)     495,108         1.4               495,108            -0-         -0-

Jack C. Blankenship and Kristin Peters        400,257         1.2               400,257            -0-         -0-

Frank G. Mauro                                350,096         1.0               340,096         10,000          *

Ellis A.G.(4)                                 225,144          .7               225,144            -0-         -0-

C.H. Woodward                                 150,096          .4               150,096            -0-         -0-

Enigma Investments Limited(5)                 150,096          .4               150,096            -0-         -0-

David Kern Peteler                             10,000          *                 10,000            -0-         -0-
</TABLE>


- ------------------
 *  Less than 1%

(1) Includes 4,022,667 shares issued and outstanding, 1,005,667 shares issuable
    upon exercise of Term Warrants and 1,045,667 shares potentially issuable
    upon exercise of Protective Warrants. The shares which may be issuable upon
    exercise of the Protective Warrants are estimated, and are allocated among
    the holders of Protective Warrants on a pro rata basis.


(2) The natural persons with voting and investment power for Crescent
    International Ltd. are Melvyn Craw and Maxi Brezzi.

(3) The natural person with voting and investment power for Gundyco in Trust for
    RRSP 550-98866-19 is Mark Shoom.

(4) The natural person with voting and investment power for Ellis A.G. is George
    Dreyfus.

(5) The natural person with voting and investment power for Enigma Investments
    Limited is Sunder Avani.

         Kristin Peters is the adult daughter of Frank W. Peters, our Chief
Executive Officer, and Jack C. Blankenship is his son-in-law.

         Crescent International Ltd. purchased shares from us for $6.5 million
in a private placement in August 1999, and Frank G. Mauro received a finder's
fee for introducing Crescent to us. This finder's fee was paid by Crescent to
Mr. Mauro. Mr. Mauro also received a warrant to purchase 60,000 shares at an
exercise price of $1.5525.

         Ellis AG invested $100,000 in us in an equity private placement in
October of 1997. Swartz Investment, LLC, acted as the placement agent for that
transaction. Mr. Mauro, who was at the time a consultant for Swartz Investments,
received a finder's fee for the transaction, which fee was paid by Swartz
Investments to Mr. Mauro.

         Except as described above, neither the selling shareholders nor any of
their officers or directors have held any positions or office or had any other
material relationship with us or any of our affiliates within the past three
years.


                              PLAN OF DISTRIBUTION


         The shares are being offered on behalf of the selling shareholders, and
we will not receive any proceeds from the offering. The shares may be sold or
distributed from time to time by the selling shareholders, or by pledgees,
donees or transferees of, or other successors in interest to, the selling
shareholders, directly to one or more purchasers (including pledgees) or through
brokers, dealers or underwriters who may act solely as agent or may acquire such
shares as principals, at



                                       9

<PAGE>   11

market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may be
subject to change. The sale of the shares of common stock may be effected
through one or more of the following methods:

         o  ordinary brokers' transactions;

         o  transactions involving cross or block trades or otherwise on the
            American Stock Exchange;

         o  purchases by brokers, dealers or underwriters as principal and
            resale by such purchasers for their own accounts pursuant to this
            prospectus;

         o  "at the market" to or through market makers or into established
            trading markets, including direct sales to purchasers or sales
            effected through agents; and

         o  any combination of the foregoing, or by any other legally available
            means.

         The selling shareholders also may enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares of common stock, which shares of common stock may
be resold thereafter pursuant to this prospectus. Each of the selling
shareholders has represented that he or it does not intend to engage in short
sales of the Company's Common Stock. Two of the selling shareholders, Merced
Partners Limited Partnership and Lakeshore International, Ltd., have disclosed
that they engage in hedging transactions in the normal course of business,
including with respect to the Company's Common Stock, but that they do not
intend to use the shares for the purpose of unwinding any hedging transactions.
We cannot be certain that all or any of the shares of common stock will be sold
by the selling shareholder.


         Brokers, dealers, underwriters or agents participating in the sale of
the shares of common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the selling shareholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). The
selling shareholders and any broker-dealers or other persons who act in
connection with the sale of the common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission they receive and
proceeds of any sale of such shares may be deemed to be underwriting discounts
and commissions under the Securities Act. Neither the Company nor the selling
shareholders can presently estimate the amount of such compensation. The Company
knows of no existing arrangements between the selling shareholders and any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock.

         The selling shareholders and any other persons participating in the
sale or distribution of the common stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the common
stock by the selling shareholders or any other such persons. The foregoing may
affect the marketability of the common stock.

         We will pay substantially all of the expenses incidental to the
registration, offering and sale of the common stock to the public, other than
any commissions or discounts of underwriters, broker-dealers or agents. We and
the selling shareholders have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.

                      INFORMATION INCORPORATED BY REFERENCE
                         AND OTHER AVAILABLE INFORMATION

         This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with SEC rules.

         We file annual, quarterly and special reports and other information
with the SEC. You may read and copy the Registration Statement and any other
document that we file at the SEC's public reference rooms located at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov.

         The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC subsequent to the date of this prospectus will



                                       10

<PAGE>   12

automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the selling shareholder has sold all the shares.

         The following documents filed with the SEC are incorporated by
reference in this prospectus:

            (1) Our Annual Report on Form 10-K for the year ended June 30, 1999;
and

            (2) Our Quarterly Reports on Form 10-Q for the three months ended
September 30, 1999, December 31, 1999 and March 31, 2000; and

            (3) The description of our common stock set forth under the caption
"Description of Common Stock" in our Registration Statement on Form S-1 (File
No. 333-24791) as originally filed with the Securities and Exchange Commission
on April 9, 1997, or as subsequently amended (the "Registration Statement").

         We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, other than
exhibits to such documents. You should direct any requests for documents to
Secretary, Franklin Telecommunications Corp, 733 Lakefield Road, Westlake
Village, California 91361.


         The information relating to us contained in this prospectus is not
comprehensive and should be read together with the information contained in the
incorporated documents.


                                     EXPERTS

         The financial statements incorporated in this prospectus by reference
from our Annual Report on Form 10-K for the year ended June 30, 1999, have been
so incorporated in reliance on the report of Singer Lewak Goldstein & Greenbaum
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

                                  LEGAL MATTERS

         Certain legal matters with respect to the legality under California law
of the shares of Common Stock offered hereby will be passed upon for the Company
by Haddan & Zepfel LLP, Newport Beach, California.


                                       11

<PAGE>   13

         NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
THE COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.





            ---------------------------
                 TABLE OF CONTENTS
            ---------------------------

                                                  PAGE
                                                  ----

Forward-Looking Statements...........................2
The Business.........................................2
Risk Factors.........................................2
The Selling Shareholders.............................8
Plan of Distribution.................................9
Information Incorporated by Reference
 and Other Available Information....................10
Experts.............................................11
Legal Matters.......................................11




                        6,274,001 SHARES


                        COMMON STOCK







                        FRANKLIN TELECOMMUNICATIONS CORP.



                        ----------
                        PROSPECTUS
                        ----------




                                    , 2000



<PAGE>   14

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The expenses incurred or to be incurred by the Company in connection
with the preparation and filing of this Registration Statement are estimated to
be as follows:

         Printing and duplication expenses.........................$ 3,000
         Registration fee..........................................  2,186
         Legal fees and expenses...................................  4,500
         Accounting fees and expenses..............................  2,000
         Transfer Agent fees.......................................    300
         Miscellaneous.............................................    514
                                                                   -------
          Total....................................................$12,500
                                                                   =======

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

         The Company's Bylaws provide that the Company may indemnify its
officers and directors, and may indemnify its employees and other agents, to the
fullest extent permitted by California law. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
officers, directors or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.

ITEM 16. EXHIBITS

         The following exhibits are filed with this Registration Statement:

         EXHIBIT
         NUMBER                         DESCRIPTIONS
         -------                        ------------

          3.1*    Restated Articles of Incorporation of Franklin
                  Telecommunications Corp.

          3.2     Bylaws of Franklin Telecommunications Corp.

          5.1     Opinion of Haddan & Zepfel LLP (previously filed).

         10.1*    Employment Agreement, dated March 1, 1993 between Franklin
                  Telecommunications Corp. and Frank W. Peters.

         10.2     Form of Securities Purchase Agreement, dated as of March 16,
                  2000, between Registrant and the investors (previously filed).

         10.3     Form of Protective Warrant (previously filed).

         10.4     Form of Term Warrant (previously filed).

         10.5     Registration Rights Agreement, dated as of March 16, 2000
                  (previously filed).

         23.1     Consent of Singer, Lewak, Greenbaum & Goldstein LLP
                  (previously filed).

         23.2     Consent of Haddan & Zepfel LLP (included as part of
                  Exhibit 5.1) (previously filed).

- ----------------
*  Incorporated by reference from Registrant's Registration Statement on Form
S-1 (No. 333-24971), filed with the Commission on April 9, 1997, and
incorporated herein by reference.


                                       II-1

<PAGE>   15

Item 17. Undertakings.

         The undersigned Registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

             (i) To include any Prospectus required by Section l0(a)(3) of the
Securities Act of l933;

             (ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;

             (iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.

         (2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.


                                       II-2

<PAGE>   16

                                   SIGNATURES


         Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Westlake Village, State
of California, on July 28, 2000.


                                      FRANKLIN TELECOMMUNICATIONS CORP.


                                      By: /s/ FRANK W. PETERS
                                         -------------------------------
                                              Frank W. Peters
                                              Chief Executive Officer


                                POWER OF ATTORNEY

         The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.

         In accordance with the requirements of the Securities Act of 1933, this
Amendment to Registration Statement was signed by the following persons in the
capacities and on the dates indicated:


<TABLE>
<CAPTION>

         SIGNATURE                                     TITLE                             DATE
         ---------                                     -----                             ----
<S>                                     <C>                                         <C>
(1) Principal Executive Officer

      /s/ FRANK W. PETERS               Chief Executive Officer and a Director       July 28, 2000
- ----------------------------------
          Frank W. Peters


(2) Principal Financial and
    Accounting Officer

     /s/ THOMAS RUSSELL                 Chief Financial Officer and a Director       July 28, 2000
- ----------------------------------
         Thomas Russell

(3) Directors

     /s/ ROBERT S. HARP*                Director                                     July 28, 2000
- ----------------------------------
         Robert S. Harp

    /s/ HERB MITCHELL*                  Director                                     July 28, 2000
- ----------------------------------
        Herb Mitchell


                                        Director                                     July __, 2000
- ----------------------------------
        Sidney Smith

* By Frank W. Peters, Attorney-in-Fact
</TABLE>

                                       II-3

<PAGE>   17

                                 EXHIBIT INDEX


         EXHIBIT
         NUMBER                         DESCRIPTIONS
         -------                        ------------

          3.1*    Restated Articles of Incorporation of Franklin
                  Telecommunications Corp.

          3.2     Bylaws of Franklin Telecommunications Corp.

          5.1     Opinion of Haddan & Zepfel LLP (previously filed).

         10.1*    Employment Agreement, dated March 1, 1993 between Franklin
                  Telecommunications Corp. and Frank W. Peters.

         10.2     Form of Securities Purchase Agreement, dated as of March 16,
                  2000, between Registrant and the investors (previously filed).

         10.3     Form of Protective Warrant (previously filed).

         10.4     Form of Term Warrant (previously filed).

         10.5     Registration Rights Agreement, dated as of March 16, 2000
                  (previously filed).

         23.1     Consent of Singer, Lewak, Greenbaum & Goldstein LLP
                  (previously filed).

         23.2     Consent of Haddan & Zepfel LLP (included as part of
                  Exhibit 5.1) (previously filed).

- ----------------
*  Incorporated by reference from Registrant's Registration Statement on Form
   S-1 (No. 333-24791), filed with the Commission on April 9, 1997, and
   incorporated herein by reference.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<FILENAME>ex3-2.txt
<DESCRIPTION>EXHIBIT 3.2
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 3.2


                                    BY-LAWS
                                       OF
                       FRANKLIN TELECOMMUNICATIONS CORP.
                        (formerly ABM COMPUTER SYSTEMS)

                                   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 an 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 a date and at a time designated by the board of directors. 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 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, 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


<PAGE>   2

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, 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) 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, 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. 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. Notice of any
meeting of shareholders given shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the shareholder at the address of that shareholder appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class 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.


                                       2
<PAGE>   3

         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.

         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.

         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. 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 entitled to vote 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 is required by California General
Corporation Law or by the articles of incorporation.

         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


                                       3

<PAGE>   4

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 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.

         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 11, the waiver of notice or consent shall state the general
nature of the proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.

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

         Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting 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 that has not been filled 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.


                                       4

<PAGE>   5

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 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 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.

         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


                                       5


<PAGE>   6

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 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 persons other than nominees f6r office to
act as 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 as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall, appoint a person
to fill that vacancy.

         These inspectors shall:

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

            (b) Receive votes, ballots or consents;

            (c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;

            (d) Count and tabulate all votes or consents;

            (e) Determine when the polls shall close;

            (f) Determine the result; and

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


                                       6

<PAGE>   7

                                   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 AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be three (3) until changed by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw 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 number of directors
to a number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting, or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3% of the outstanding shares
entitled to vote. [AMENDED JUNE 3, 1983.]

         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.

         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, 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.


                                       7

<PAGE>   8

         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 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 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.


                                       8

<PAGE>   9

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

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

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

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

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

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


                                       9

<PAGE>   10

                                   ARTICLE IV

                                   COMMITTEES

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

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

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

            (c) The fixing of compensation of the directors for serving on the
board or on any committee;

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

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

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

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

         Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these by-laws, 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 by-laws 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.


                                       10

<PAGE>   11

                                    ARTICLE V

                                    OFFICERS

         Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, 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 provision's 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.

         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 by-laws 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 meetings 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
by-laws. If there is no president, the chairman of the board shall in addition
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.


                                       11

<PAGE>   12

         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, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, 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 by-laws.

         Section 8. VICE PRESIDENTS. In the absence or disability of 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 president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. 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 or the by-laws, and the president, or the chairman of the
board.


         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, commit-
tees 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 give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required by the by-laws 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 by-laws.

         Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer 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
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer 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 by-laws.


                                       12

<PAGE>   13

                                   ARTICLE VI

                     INDEMNIFICATION OF DIRECTORS, OFFICERS,

                           EMPLOYEES AND OTHER AGENTS


         The corporation shall have the power and authority to the maximum
extent permitted by the California General Corporation Law, to indemnify each of
its agents against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact any such person is or was an agent of the corporation. For
purposes of this Section, an "agent" of the corporation include's any person who
is or was a director, officer, employee, or other agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, or was a director, officer, 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.


                                   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 re-
solution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.

         A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation 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 to
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 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.


                                       13

<PAGE>   14

         Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. 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 by-laws 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 by-laws 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 pur- pose reasonably related to the holder's interest as a share-
holder or as the holder of a voting trust certificate. The inspection may be
made in person or by an agent or attorney, and shall include the right to copy
and make extracts. These rights of inspection shall extend to the records of
each subsidiary corporation of the corporation.

         Section 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. This inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the right
to copy and make extracts of documents.

         Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the board of. directors from issuing annual or other periodic
reports to the shareholders of the corporation as they consider appropriate.

         Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as of
the end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.

         If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and a


                                       14


<PAGE>   15

balance sheet of the corporation as of the end of that period, the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, this report shall likewise be delivered or mailed to
the shareholders within thirty (30) days after the request.

         The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.

         The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.

                                  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 by-laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any


                                       15


<PAGE>   16

instrument in the name of and on behalf of the corporation, and this authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent, or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.

         Section 4. CERTIFICATE FOR SHARES. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares are fully paid, and the board of directors
may authorize the issuance of certificates. or shares as partly paid provided
that these certificates shall state the amount of the consideration to be.paid
for them and the amount paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or vice chairman of the board or
the president or vice president and by the chief financial officer or an
assistant treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholder. Any
or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that officer,
transfer 'agent, or registrar before that certificate is issued, it may be
issued by the corporation with the same effect as if that person were an
officer, transfer agent, or registrar at the date of issue.

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

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


                                       16

<PAGE>   17

                                   ARTICLE IX

                                   AMENDMENTS

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

         Section 2. AMENDMENT BY DIRECTORS,. Subject to the rights of the
shareholders as provided in Section 1 of this Article IX, by-laws, other than a
by-law or an amendment of a by-law changing the authorized number of directors,
may be adopted, amended, or repealed by the board of directors.



                                       17

<PAGE>   18

                       CERTIFICATE OF ADOPTION OF BY-LAWS

         1, Hans Pufal, do hereby certify:

         1. That I am the duly elected and acting Secretary of AUTOMATED
BUSINESS MACHINES, INCORPORATED, a California corporation; and

         2. That the foregoing By-Laws comprising 22 pages, constitute the
By-Laws of said corporation as duly adopted by the Incorporator on April 21,
1982.

         IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the corporation this 12th day of May 1982.




                                            /s/ HANS PUFAL
                                            ------------------------------------
                                            Hans Pufal



[SEAL]


                                       18

<PAGE>   19

                           CERTIFICATE OF SECRETARY OF
                    AUTOMATED BUSINESS MACHINES, INCORPORATED
                             RE AMENDMENT OF BY-LAWS

         The undersigned, William F. Rinehart, certifies that:

         1. He is the duly elected and acting Secretary of Automated Business
Machines, Incorporated, a California corporation.

         2. At a special meeting of shareholders of said corporation duly held
on June 3, 1983, at which meeting all shareholders entitled to vote were present
and acting, said shareholders duly amended Article III, Section 2 of the By-Laws
of said corporation to read as follows:

         Section 2. NUMBER OF DIRECTORS.

            (a) The number of directors shall not be less than five (5) nor more
than nine (9), the exact number to be fixed within such limits by a By-Law or
amendment thereof adopted by the shareholders or by the Board.

            (b) Until changed as hereinabove provided or as provided by law, the
number of directors shall be five (5); provided, however, that no proposal to
reduce the fixed or minimum number of directors below five can be adopted if the
votes cast against its adoption or not consenting, if by written consent, are
equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote.


Dated: June 3, 1983


                                               /s/ WILLIAM F. RINEHART
                                               ---------------------------------
                                               Secretary of Automated
                                               Business Machines, Incorporated





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