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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
California Micro Devices, Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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July 20, 1995
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders on
Friday, September 15, at 9:00 a.m., at the Great America Marriott Hotel, Santa
Clara, California. Since our last shareholder meeting almost two years ago,
your Company has undergone a series of dramatic -- and traumatic -- changes.
Today, California Micro Devices Corporation is operating under new management,
and is establishing its credibility as a provider of integrated passive
components and telecommunications integrated circuits.
The Executive Committee of the Board of Directors unanimously recommends
that all shareholders vote for the election of the nominated directors, and for
the other proposals presented in this Proxy Statement. The Executive Committee
consists of five of the six directors on the Board. These five directors were
never employees of the Company; Chan Desaigoudar, the past CEO and Chairman of
the Board, is the only sitting director who is not a member of the Committee.
The Committee was created on December 1, 1994, after Mr. Desaigoudar's
employment by the Company was terminated and he refused the request of the other
Board members to resign from the Board. The Company has since filed suit
against Mr. Desaigoudar, based on his alleged breach of fiduciary duty to the
Company.
It is vital to the future success of the Company to finish the clean-up of
the problems of the past. An important step in this process is the election of
a new Board of Directors and adoption of the Stock Plans contained in this
Proxy. Your management is looking forward to a bright future for the Company
and wholeheartedly believes that the passage of the proposals contained in this
Proxy are necessary to realize that future.
Whether or not you plan to attend the Annual Meeting, PLEASE MARK, SIGN,
DATE AND RETURN your proxy card in the enclosed envelope as soon as possible.
It is imperative that we have as many shares present -- in person or by proxy --
as possible. Mr. Desaigoudar owns approximately 1.9 million shares of the
Company's Common Stock, a 22% ownership interest; if the shareholder response is
small, it is possible that Mr. Desaigoudar will have a disproportionate voice in
your Company's future. If you intend to attend the Meeting, please mark the
appropriate box on your card and fill out the remaining sections. This will
assure that your stock will be voted in accordance with the instructions you
have given in your proxy card in the event you are unable to attend. You may,
of course, attend the Annual Meeting and vote in person even if you have
previously sent in your proxy card. IT IS EXTREMELY IMPORTANT THAT EVERY
SHAREHOLDER VOTE AT THIS ANNUAL MEETING. PLEASE SEND IN YOUR PROXY CARD.
Very truly yours,
/s/ Wade Meyercord
WADE MEYERCORD
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of California Micro Devices Corporation
("CMD") will be held at the Great America Marriott Hotel, 2700 Mission College
Blvd., Santa Clara, California on September 15, 1995, at 9 a.m. The items of
business are:
1. Election of six directors of the Company, to serve until the next annual
meeting of shareholders.
2. Ratification of the Appointment of Auditors.
3. Approve the 1995 Employee Stock Purchase Plan.
4. Approve the 1995 Stock Option Plan.
5. Approve the 1995 Non-Employee Directors' Stock Option Plan.
6. Such other matters as may properly come before the meeting.
These items are more fully described in the following pages, which are
hereby made a part of this Notice.
Only shareholders of record at the close of business on July 17, 1995 will
be entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy card as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any shareholder attending the
meeting may vote in person even if he or she returned a proxy.
Sincerely,
/s/ Scott Hover-Smoot
Milpitas, California SCOTT HOVER-SMOOT
July 20, 1995 Secretary
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. GENERAL INFORMATION 1
Proxy Statement 1
Who Can Attend the Annual Meeting 1
Quorum at the Annual Meeting 1
Submission of the Proxy Card 1
Voting by Proxy Card 1
Conduct of the Annual Meeting 2
Procedure for Director Nominations by Shareholders 2
Approval of Proxy Statement Items 2
II. MATTERS TO BE VOTED ON AT THE ANNUAL MEETING 3
1. Election of Six Directors (Nominees are Dr.Angel Jordan, Jeffrey Kalb,
Wade Meyercord, Dr. C.K.N. Patel, Stuart Schube, and Dr. John Sprague) 3
2. Ratification of Ernst & Young, LLP, as the Company's Independent Accountants 5
3. Approval of the 1995 Employee Stock Purchase Plan 6
4. Approval of the 1995 Stock Option Plan 9
5. Approval of the 1995 Non-Employee Directors' Stock Option Plan 12
III. SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS 14
Directors and Officers 14
Principal Shareholders 17
IV. CORPORATE GOVERNANCE -- OFFICERS AND DIRECTORS 18
Board and Board Committees 18
Executive Compensation 18
Director Compensation 20
Compensation Committee Report 20
Compensation Committee Interlocks 21
Certain Relationships and Transactions 21
V. Five Year Stock Performance Graph 22
VI. Other Business 23
VII. Shareholder Proposals - Next Annual Meeting 23
</TABLE>
(i)
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CALIFORNIA MICRO DEVICES CORPORATION
PROXY STATEMENT
I. GENERAL INFORMATION
This Proxy Statement, the accompanying proxy/voting instruction card (the
"Proxy Card") and California Micro Devices Corporation Annual Report on Form 10-
K for the period ended March 31, 1995 (the "Annual Report"), are being
distributed to shareholders commencing on or about July 18, 1995. Whether or
not you expect to attend the Company's 1995 Annual Meeting of Shareholders (the
"Annual Meeting") in person, the Board of Directors requests that you complete
and return your Proxy Card for use at the Annual Meeting and any adjournments
thereof.
PROXY STATEMENT. This Proxy Statement consists of Sections I through
VII. These Sections are intended to be read and understood together as one
document. PLEASE CAREFULLY READ EACH SECTION.
WHO CAN ATTEND THE ANNUAL MEETING. Only shareholders of record of common
stock issued by California Micro Devices Corporation ("CMD" or the "Company") at
the close of business on July 17, 1995, the Record Date for the Annual Meeting,
are entitled to notice of and to vote at the Annual Meeting. Except as
discussed herein, such shareholders are entitled to one vote for each share on
each matter to be voted upon at the Annual Meeting.
If you are a shareholder as of the Record Date and would like to attend the
Annual Meeting, please check the appropriate box on the Proxy Card, and return
the card in the envelope provided.
QUORUM AT THE ANNUAL MEETING. As of the Record Date, CMD had issued and
outstanding 8,681,404 shares of voting Common Stock. The holders of a majority
of the outstanding shares of Common Stock, present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. The specific vote requirements for the matters being submitted to a
shareholders' vote at the Annual Meeting are provided under "Approval of Proxy
Statement Items."
SUBMISSION OF PROXY CARD. You are urged to sign and date the Proxy Card
and return it in the prepaid reply envelope provided for such purpose. THIS
WILL IN NO WAY AFFECT YOUR RIGHT TO ATTEND THE ANNUAL MEETING AND VOTE IN
PERSON. A shareholder giving a proxy has the right to revoke it at any time
before it is voted by giving notice of such revocation to the Secretary of the
Company, by attending the meeting and voting in person, or by returning a later
dated proxy.
The number of shares designated on the Proxy Card represents the total
number of shares held in your name on the Record Date.
If you receive more than one proxy card in separate mailings it is an
indication that your shares are registered differently in more than one account.
ALL Proxy Cards received by you should be signed and mailed by you to ensure
that all your shares are voted.
VOTING BY PROXY CARD. When you vote by Proxy Card, the following
procedure will apply:
If you intend to vote by Proxy Card, please cast your vote FOR or AGAINST
any proposal by marking the appropriate box. Sign your Proxy Card where
indicated, and return it in the enclosed prepaid envelope. When your Proxy Card
is returned properly marked and signed, the shares represented thereby will be
voted in accordance with your directions.
Signed proxies received by California Micro Devices Corporation on which no
contrary instruction has been given will be voted FOR Proposals 1 through 5. IF
YOU DO NOT VOTE FOR OR AGAINST A PROPOSAL, AND YOU RETURN YOUR SIGNED PROXY
CARD, YOU WILL HAVE VOTED FOR
<PAGE>
PROPOSALS 1 THROUGH 5. If you wish to vote in accordance with the Executive
Committee's recommendation, simply sign, date and return your proxy card in the
envelope provided.
As of the date of this Proxy Statement, the Board does not intend to
present any matter for action at the Annual Meeting other than the above items.
Copies of proxy solicitation material will be furnished to brokerage
houses, fiduciaries, and custodians holding shares in their names which are
beneficially owned by others (the "Record Holders") to forward to such
beneficial owners. In addition, the Company may reimburse such persons for
their cost of forwarding the solicitation material to such beneficial owners.
Original solicitation of proxies by mail may be supplemented, if deemed
desirable or necessary, by one or more of telephone, telegram, facsimile, or
personal solicitation by directors, officers, or employees of the Company or by
solicitors retained by the Company. No additional compensation will be paid to
any Company employee, officer, or director for such services. The Company
reserves the right, if deemed desirable or necessary, to retain a proxy
solicitation firm to deliver soliciting materials to Record Holders for
distribution by them to their principals and to assist the Company in collecting
proxies from such holders. The costs of these services, exclusive of out-of-
pocket costs, is not expected to exceed $12,000.
CONDUCT OF THE ANNUAL MEETING. The Annual Meeting will be conducted in
accordance with Robert's Rules of Order. For the purpose of assuring accurate
recording of proceedings, the Company intends to videotape the Annual Meeting.
PROCEDURE FOR DIRECTOR NOMINATIONS BY SHAREHOLDERS. On July 14, 1995,
the Board of Directors amended the ByLaws of the Company to require advance
notification should any shareholder seek to recommend a person as a nominee for
director. The amended ByLaws provide that the Company's Secretary must receive
written notice of any shareholder nomination for director not less than thirty
days before the date of the Annual Meeting. Pursuant to these amended ByLaws,
any shareholder may recommend any person as a nominee for director of California
Micro Devices Corporation by writing to: California Micro Devices Corporation,
Attn.: Scott Hover-Smoot, Secretary, 215 Topaz Street, Milpitas, California
95035. Recommendations must be received by August 15, 1995 (30 days before the
date set for the Company's Annual Meeting), and must be accompanied by a
statement from the nominee indicating his or her willingness to serve if elected
and disclosing his or her principal occupations or employment during the past
five years.
APPROVAL OF PROXY STATEMENT ITEMS. Only holders of shares of the
Company's Common Stock of record as at the close of business on July 17, 1995
(the "Record Date") are entitled to vote at the Annual Meeting. Except as
otherwise provided for herein, each share of Common Stock is entitled to one
vote on all matters to be voted upon. Votes cast at the Annual Meeting will be
counted by an inspector of election, appointed by the Company. The presence, in
person or by proxy duly authorized, of the holders of a majority of the voting
shares will constitute a quorum for the transaction of business at the Annual
Meeting and any continuation or adjournment thereof. Broker non-votes (i.e.
shares held by a broker or nominee which are represented at the Annual Meeting,
but with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted in determining whether a quorum is present
at the Annual Meeting. Directors are elected by a plurality of votes of the
shares present in person or represented by proxy at the Annual Meeting. As
discussed below, the Company's ByLaws provide for cumulative voting for
directors. Any shares not voted (whether by abstention, broker non-votes or
otherwise) will have no impact on the election of directors, except to the
extent that the failure to vote for an individual results in another individual
receiving a larger portion of votes. The proposals submitted to the Shareholders
in the enclosed proxy must be approved by the vote of the holders of a majority
of the votes of the shares of the Company represented in person or by proxy and
entitled to vote at the Annual Meeting. In determining whether such proposals
have been approved, abstentions and broker non-votes are not counted as votes
for or against the proposal.
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II. MATTERS TO BE VOTED ON AT THE ANNUAL MEETING
ELECTION OF SIX DIRECTORS (PROXY STATEMENT ITEM NO. 1)
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YOUR BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF
DR. ANGEL JORDAN, JEFFREY KALB, WADE MEYERCORD, DR. C.K.N. PATEL,
STUART SCHUBE, AND DR. JOHN SPRAGUE AS DIRECTORS
Six directors are to be elected to serve until the next annual meeting of
shareholders and until the election and qualification of their successors. The
Company's ByLaws provide for not less than five nor more than nine Directors,
with the current number of directors fixed at six.
Shareholders voting for the election of directors may cumulate their votes
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 each shareholder's shares are
entitled, or may distribute their votes on the same principle among as many
candidates as they choose, provided that votes cannot be cast for more than the
total number of directors to be elected at the meeting. However, no shareholder
may cumulate votes until the candidate's name has been placed in nomination
prior to the voting and at least one shareholder at the meeting has given notice
of the intention to cumulate votes prior to the voting. If such notice is
given, every shareholder present, in person or by proxy at the meeting, may
cumulate votes. UNLESS OTHERWISE INSTRUCTED, PROXY HOLDERS WILL VOTE THE
PROXIES RECEIVED BY THEM FOR THE SIX NOMINEES NAMED BELOW.
Five of the six nominees are current directors of the Company: Dr. Angel
Jordan, Wade Meyercord, Dr. C.K.N. Patel, Stuart Schube, and Dr. John Sprague.
The sixth nominee, Jeffrey Kalb, is the present Chief Executive Officer and
President of the Company. Chan Desaigoudar, the Company's former CEO, is
presently a director and is not a nominee. The Board terminated Mr.
Desaigoudar's employment on December 1, 1994, and requested that he resign from
the Board. He has refused to do so. On May 5, 1995, the Company filed suit in
Santa Clara County Superior Court against Mr. Desaigoudar for alleged breach of
his fiduciary duty to the Company, negligence in his actions as its CEO, and
other civil wrongs. Under these circumstances, the Board does not recommend the
nomination of Mr. Desaigoudar as a director of the Company.
Brief biographies of the nominees are set out below. Additional
information regarding their stock ownership and compensation can be found below
under Sections III and IV.
3
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The following table sets forth the names, ages, and principal occupations
for the periods indicated and other directorships of each of the current
nominees at the 1995 Annual Meeting.
<TABLE>
<CAPTION>
Name Age Principal Occupation for the past Five Years Director
- ---- --- -------------------------------------------- --------
and Other Directorships Since
----------------------- -----
<S> <C> <C> <C>
Angel G. Jordan 64 University Professor of Electrical & Computer Engineering 1986
since 1991; Provost from 1983 to 1991; Dean of Engineering
from 1979 to 1983, Carnegie-Mellon University.
Jeffrey C. Kalb 52 President and Chief Executive Officer since December 1994. New
President and Chief Operating Officer of MasPar Computer Nominee
Corporation (computer systems manufacturer), 1988 to 1993.
Vice President of Digital Equipment Corporation (computer
systems manufacturer), 1983 to 1987.
Wade Meyercord 54 Chairman of the Board since October 1994. 1992
Partner, Meyercord & Associates since 1987 (consulting firm).
Chief Executive Officer Read-Rite Corp. (electronic data storage
company), 1984 to 1987. Director Health Advantage Ventures
(medical venture capital company). Chairman and Director, Sun
Medical Technologies (mobile medical provider).
C.K.N. Patel 57 Vice Chancellor for Research Programs, UCLA since 1993. 1990
Former Executive Director, Research Materials Science,
Engineering and Academic Affairs Division, AT&T Bell
Laboratories since 1962. Director, Newport Corp. and MTI, Inc.
Stuart Schube 55 President, Acorn Ventures, Inc. (venture capital management), 1986
and General Partner, the Genesis Fund, Ltd. (venture capital
management company) since 1986.
John L. Sprague 65 President, John L. Sprague Associates since 1987 (consulting 1994
firm). President and Chief Executive Officer, Sprague Electric
Company (electronics company), 1981 to 1987. Various other
executive management positions at Sprague Electric Company,
1959 to 1981.
</TABLE>
There are no family relationships among any of the directors and officers.
4
<PAGE>
RATIFICATION OF ERNST & YOUNG, LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANT.
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(PROXY STATEMENT ITEM NO. 2)
----------------------------
YOUR BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young, LLP as the Company's
independent auditors for the fiscal year ending March 31, 1996, and has further
directed that management submit the selection of independent auditors for
ratification by the shareholders at the Annual Meeting. Its representatives are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions.
On January 6, 1995, the Company received a letter from Coopers & Lybrand
L.L.P. ("Coopers & Lybrand"), the Company's independent accountants, confirming
that Coopers & Lybrand was terminating its auditing relationship with the
Company.
The Coopers & Lybrand reports on the financial statements of the Company
for the two fiscal years ended June 30, 1994 did not contain an adverse opinion
or a disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles. As a result of press
releases issued by the Company, notification was made to persons who are known
to be relying upon or who are likely to rely upon, the financial statements of
the Company and the report for the year ended June 30, 1994, that such financial
statements should not be relied upon. The Coopers & Lybrand resignation did not
involve a decision by the Audit Committee of the Board of Directors of the
Company or the Board as a whole.
During the Company's two most recent fiscal years and for the subsequent
interim periods, there were no disagreements or reportable events pursuant to
Item 304(a) (1) (iv) or (v) of Regulation S-K.
On January 31, 1995 the Company received a letter from Coopers & Lybrand
confirming that it agrees with the foregoing statements.
On January 31, 1995 the Company appointed Ernst & Young, LLP as its new
independent accountants.
Shareholder ratification of the selection of Ernst & Young, LLP as the
Company's independent auditors is not required by the Company's ByLaws or
otherwise. The Board of Directors is submitting the selection of Ernst & Young,
LLP to the shareholders for ratification as a matter of good corporate practice.
In the event the shareholders fail to ratify the selection, the Board of
Directors will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board of Directors in its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if the Board of Directors determines that such a change could be in the
best interests of the Company and its shareholders.
5
<PAGE>
APPROVAL OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
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(PROXY STATEMENT ITEM NO. 3)
----------------------------
YOUR BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors on February 10, 1995 subject to ratification
by the Shareholders of the Company at the 1995 Annual Meeting. A total of
250,000 shares of Common Stock have been reserved for issuance under the
Purchase Plan.
At the Annual Meeting, the Shareholders are being requested to ratify the
adoption of the Purchase Plan. The affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present, or represented and
entitled to vote at the Annual Meeting, will be required to ratify the adoption.
The Board of Directors believes that this Purchase Plan is necessary to enable
the Company to provide meaningful equity incentives to attract, motivate and
retain employees and recommends that the Shareholders vote for ratification of
this adoption. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS PROPOSAL
UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THOSE PROXIES.
A summary of the principal provisions of the Purchase Plan is set forth
below.
PURPOSE. The purpose of the Purchase Plan is to attract and retain the
best available personnel, to provide additional incentives to the employees of
the Company and its subsidiaries, to promote the success of the Company's
business and to enable the employees to share in the growth and prosperity of
the Company by providing them with an opportunity to purchase stock in the
Company on favorable terms through payroll deductions.
ADMINISTRATION. The Purchase Plan is administered by a committee of the
Board of Directors formed pursuant to the Purchase Plan (the "Committee").
Members of the Committee are ineligible to participate under the Purchase Plan.
All questions of interpretation of the Purchase Plan are determined in the sole
discretion of the Committee, and its determinations are final and binding upon
all participants.
ELIGIBILITY. Any person who is employed by the Company (or any of its
majority-owned subsidiaries) at least 20 hours per week and more than five
months in a calendar year is eligible to participate in the Purchase Plan,
provided that the employee is employed on the first day of an offering period
and subject to certain limitations imposed by section 423(b) of the Code. Based
upon the number of employees as of June 30, 1995, approximately 230 employees
will be eligible to participate in the Purchase Plan.
OFFERING DATES. The Purchase Plan is implemented by establishing option
periods. Option periods may be any period up to 27 months. The Board of
Directors may alter the duration of the option periods without shareholder
approval. The Company has not yet commenced any offering pursuant to the
Purchase Plan.
PURCHASE PRICE. The purchase price per share at which shares are sold
under the Purchase Plan is 85% of the lower of the fair market value of the
Common Stock (a) on the date an option is granted or (b) on the date of
purchase. The determination of the fair market value of the Common Stock on a
grant date is based upon the closing price listed on a stock exchange or on the
Nasdaq National Market System as of such date or the immediately preceding
trading day, if the applicable valuation date is not a trading day.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS. The purchase price of the
shares is accumulated by payroll deductions during the offering period. The
deductions may not exceed 15% of a participant's eligible compensation.
Eligible compensation is interpreted to mean total compensation, including
bonuses and commissions, but excluding special payments (such as moving
expenses) and income with respect to stock options or other stock purchases.
Payroll deductions generally commence on the first
6
<PAGE>
payday following the offering date, and continue at the same rate until the last
payday of the offering period unless sooner terminated as provided in the
Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION. The maximum number of shares
placed under option to a participant in an offering is that number determined by
dividing the amount of the participant's total payroll deductions which are
accumulated during the offering period (not to exceed an amount equal to 15% of
the participant's actual eligible compensation during the offering period) by
the lower of 85% of the fair market value of the Common Stock at the beginning
or end of the offering period, and subject to the further limitation that the
number of shares subject to any option granted to an employee shall not exceed
the maximum number of shares set by the Board of Directors prior to the
beginning of the offering period.
In no event shall an employee be entitled to accrue rights to purchase
shares under the Plan at a rate which exceeds $25,000 of the fair market value
of such stock (determined at the time the option is granted) for any calendar
year in which such option is outstanding at any time, and the maximum shares
subject to any option in any one calendar year shall in no event exceed 10,000.
WITHDRAWAL. A participant's interest in a given offering may be
terminated in whole, but not in part, by signing and delivering to the Company a
notice of withdrawal from the plan. Such withdrawal may be elected at any time
prior to the end of the applicable option period. Any withdrawal by the
participant of accumulated payroll deductions for a given offering automatically
terminates the participant's participation in that offering. The failure to
remain in the continuous employ of the Company for at least 20 hours per week
during an offering period will be deemed to be a withdrawal from that offering.
In the event of withdrawal, payroll deductions will be returned to a
participant, without interest.
CAPITAL CHANGES. In the event any change is made in the Company's
capitalization, such as a stock split or stock dividend, which results in an
increase or decrease in the number of outstanding shares of Common Stock without
receipt of consideration by the Company, appropriate adjustments will be made by
the Board of Directors in the shares subject to purchase under the Purchase Plan
and in the purchase price per share.
NON-ASSIGNABILITY. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be pledged, assigned or transferred for
any reason and any such attempt may be treated by the Company as an election to
withdraw from the Purchase Plan.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any
time amend or terminate the Purchase Plan, except that such termination shall
not affect options previously granted nor may any amendment make any change in
an option granted prior thereto which adversely affects the rights of any
participant. No amendment may be made to the Purchase Plan without prior
approval of the shareholders of the Company if such amendment would increase the
number of shares reserved under the plan, materially modify the eligibility
requirements or materially increase the benefits which may accrue under the
plan.
FEDERAL TAX INFORMATION. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to qualify under the
provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant at the time of grant of the option or
purchase of shares. Upon disposition of the shares, the participant will be
subject to tax and the amount of the tax will depend upon the holding period.
If the shares are disposed of by the participant at least two years after the
date of option grant (the beginning of the Offering Period) and at least one
year after the date of option exercise (the date on which the shares were
purchased by the participant), the lesser of (a) the excess of the fair market
value of the shares at the time of such disposition over the option price, or
(b) the excess of the fair market value of the shares at the time the option was
granted over the option price (which option price will be computed as of the
grant date) will be treated as ordinary income, and any further gain will be
long-term capital gain. If the shares are disposed of by the participant before
two years after the date of option grant or one year after the date of option
exercise (a disqualifying disposition), the participant will be taxed in the
same manner as holders of nonstatutory options. (See discussion under the 1995
Stock Option Plan.) The
7
<PAGE>
Company is not entitled to a deduction for amounts taxed as ordinary income to a
participant except to the extent of ordinary income reported by participants
upon a disqualifying disposition of shares.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to shares purchased under the
Purchase Plan and does not purport to be complete, and does not discuss the
income tax laws of any municipality, state or foreign country in which an
optionee may reside.
8
<PAGE>
APPROVAL OF THE 1995 STOCK OPTION PLAN
--------------------------------------
(PROXY STATEMENT ITEM NO. 4)
----------------------------
YOUR BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE 1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "1995 Plan") was adopted by the
Board on February 10, 1995 subject to ratification by the shareholders of the
Company at the 1995 Annual Meeting. A total of 1,600,000 shares of Common Stock
have been reserved for issuance under the 1995 Plan. This represents the
approximate number of shares remaining in the Company's previously approved 1981
and 1987 Option Plans that are not subject to option grants. Thus, the net
number of option shares approved remains essentially unchanged. Upon approval of
the 1995 Plan, no additional option grants will be made to employees through the
1981 and 1987 Plans. Options may be granted pursuant to the 1995 Plan for ten
years, until February 10, 2005; the 1995 Plan terminates for all purposes on
February 10, 2015. As of March 31, 1995, and subject to approval of the 1995
Plan terminates for all purposes on February 10, 2015. As of March 31, 1995, and
subject to approval of the 1995 Plan by the shareholders of the Company at the
Annual Meeting, options to purchase approximately 823,000 shares have been
granted.
The affirmative vote of the holders of the majority of the Company's shares
present or represented by proxy and entitled to vote at the meeting will be
required to adopt the 1995 Plan. The Board believes that this plan is necessary
to enable the Company to provide meaningful equity incentives to attract,
motivate, and retain officers and key employees and recommends that the
shareholders vote for ratification of this plan. PROXIES SOLICITED BY THE BOARD
WILL BE VOTED FOR THIS PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THOSE
PROXIES.
A summary of the principal provisions of the 1995 Plan is set forth below.
PURPOSES. The purpose of the Company's stock option plans is to attract
and retain talented key employees and to align their personal financial
interests with those of the Company's shareholders. Generally, options are
granted with an exercise price equal to the market price of the Common Stock on
the date of grant and generally vest over a four year period. This approach is
designed to focus key employees on sustainable growth of the Company and the
creation of shareholder value over the long term. Stock options are a major
component of the compensation package of executive management.
ADMINISTRATION. The 1995 Plan is administered by a committee of
directors, consisting of at least two "disinterested persons" as that term is
defined in Rule 16b-3 of the Exchange Act (the "Committee"). The Committee and
the Board have the authority to determine the persons to whom options are
granted, the number of shares covered by each option, the type of option, the
times at which an option may be exercised, the exercise price, the method of
payment, and certain other terms. The interpretations and construction of any
provision of the 1995 Plan is within the sole discretion of the Committee, whose
determination is final and binding. Eligible employees are generally granted
options upon commencement of employment and are reconsidered for additional
options periodically thereafter. In awarding stock options the Committee
considers individual performance, overall contribution to the Company,
retention, the number of unvested stock options and the total number of stock
options to be granted.
ELIGIBILITY. Options may be granted to any person, including officers
and consultants, employed by the Company or any of its subsidiaries or its
successors, but not to any person who, at the time of the grant, is a
nonemployee director of the Company. The Committee selects the optionees and
determines the number of shares to be subject to each option granted under the
1995 Plan.
TERMS OF OPTIONS. Options granted under the 1995 Plan may be either
Incentive Stock Options ("ISOs") as defined in Section 422 of the Internal
Revenue Code (the "Code"), or nonstatutory stock options and become exercisable
in accordance with terms established at the time of grant. Subject to the
provisions of the 1995 Plan, all options granted are exercisable on such terms
and conditions as the Committee determines. Each option is evidenced by a stock
option agreement between the Company and the optionee setting forth the terms
and conditions of the option. The term of an option granted under the plan may
not
9
<PAGE>
exceed ten years. The maximum term of ISOs granted to holders of more than 10%
of the outstanding stock of the Company is five years. Each option becomes
exercisable in installments as approved by the Committee, and may be exercised
on a cumulative basis at any time before expiration. The Company's current
standard form of stock option agreement provides for the vesting of the shares
subject to the option over a four-year basis with one-quarter vesting one year
following the date of grant and the remainder vesting on a quarterly basis over
the succeeding three-year period. The Company has however, from time to time,
granted options with vesting schedules that are different from the standard
vesting described above.
The exercise price for ISOs may not be less than 100% of the fair market
value of a share of the Company's common stock on the date of grant; the
exercise price for nonqualified options may be as low as 85% of fair market
value on that date. If the Optionee, at the time an ISO is granted, owns stock
possessing more than 10% of the total voting power of all classes of stock, the
exercise price may not be less than 110% of the fair market value on the date of
grant. The 1995 Plan permits the payment of the exercise price in cash or other
property acceptable to the Committee (including shares of the Company's stock).
The 1995 Plan provides that options are nonassignable and nontransferable,
other than by will or the laws of descent and distribution, and may be exercised
only by the employee while he or she is employed by the Company. Unless
otherwise determined by the Committee, options may be exercised only within
three months after termination of employment, or within 12 months following
termination of employment due to a permanent and total disability, or by the
employee's estate within 12 months after his or her death, provided that such
options were exercisable on the date of death or termination of employment
CAPITAL CHANGES. The 1995 Plan provides for appropriate adjustments of
the number of shares subject to outstanding options, the exercise price thereof,
and the number of shares available for future grants, in the event the Company's
Common Stock is changed by reason of a subdivision or consolidation of shares,
stock split, or other similar corporate transaction. If the Company merges with
or into another corporation, and is not the surviving corporation, and each
outstanding option under the 1995 Plan is not assumed by the continuing or
surviving corporation, then the vesting of all unvested options shall be
accelerated and all options will become immediately exercisable.
AMENDMENT AND TERMINATION OF THE 1995 PLAN. The 1995 Plan terminates on
February 10, 2015, or the date when all shares subject to or which may become
subject to the 1995 Plan have been purchased under options granted under the
1995 Plan, whichever is earlier, and no further exercise of options may be made
after that date. However, all options granted under the 1995 Plan will remain
in effect until such options have been satisfied by the issuance of shares or
terminated in accordance with the 1995 Plan.
The Board may from time to time suspend, terminate, or amend the 1995 Plan
in any respect; provided, however, that the Board may not, without the consent
of the optionee, amend any outstanding option, or without the approval of the
shareholders, materially increase the benefits accruing to participants under
1995 Plan or materially modify the requirement as to eligibility for
participation in the 1995 Plan.
FEDERAL INCOME TAX INFORMATION. If an option granted under the 1995 Plan
is an ISO, the optionee will recognize no income upon grant of the option and
incur no tax liability due to the exercise of the option unless the optionee is
subject to alternative minimum tax. The Company will not be allowed a deduction
for federal income tax purposes as a result of the exercise of an ISO regardless
of the applicability of the alternative minimum tax. Upon the sale or exchange
of the shares at least two years after grant of the option and one year after
exercise of the option, a gain will be treated as long-term capital gain. If
these holding periods are not satisfied, the optionee will recognize ordinary
income equal to the difference between the exercise price and the lower of the
fair market value of the stock at the date of the option exercise or the sale
price of the stock. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is an officer, director, or 10%
shareholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee. Any gain
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as long-term capital gain if
the sale occurs more than one year after exercise of the option or as
10
<PAGE>
short-term capital gain if the sale is made earlier. Under current law, the
maximum long-term capital gain tax rate for individuals is 28% while the maximum
ordinary income tax rate for individuals is 39.6%.
All options which do not qualify as ISOs are referred to as nonstatutory
options. An optionee will not recognize any taxable income at the time he or
she is granted a nonstatutory option. However, upon its exercise, the optionee
will recognize ordinary income for tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired, the date of taxation may be deferred unless the optionee files an
election with the Internal Revenue Service under Section 83(b) of the Code
within 30 days after the date of exercise. The income recognized by an optionee
who is also an employee of the Company will be subject to tax withholding by the
Company by payment of cash or out of the current earnings paid to the optionee.
Upon resale of such shares by the optionee, any difference between the sale
price and the exercise price, to the extent not recognized as ordinary income as
provided above, will be treated as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than one year. The Company will be entitled to a deduction in the same amount
as the ordinary income recognized by the optionee.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1995 Plan, and does not purport to be complete. The foregoing
does not discuss the income tax laws of any municipality, state, or foreign
country in which an optionee may reside.
11
<PAGE>
APPROVAL OF THE 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
---------------------------------------------------------------
(PROXY STATEMENT ITEM NO. 5)
----------------------------
YOUR BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The 1995 Non-Employee Directors' Stock Option Plan (the "Directors' Plan")
was adopted by the Board of Directors on February 10, 1995 subject to
ratification by the shareholders of the Company at the 1995 Annual Meeting. The
Directors' Plan is designed to provide non-employee directors with an equity
incentive through their proprietary interest in the Company and to encourage
them to continue to serve as directors of the Company. Upon the adoption of
this plan by the Board on February 10, 1995, each non-employee director
received a grant of 10,000 shares. A total of 150,000 shares of Common Stock
have been reserved for issuance under the Directors' Plan.
The affirmative vote of the holders of the majority of the Company's shares
present or represented by proxy and entitled to vote at the meeting will be
required to ratify this plan. The Board believes that approval of the
Directors' Plan is necessary to enable the Company to provide meaningful equity
incentives to attract, motivate and retain non-employee directors and recommends
that the shareholders vote for approval of the Directors' Plan. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED FOR THIS PROPOSAL UNLESS SHAREHOLDERS
SPECIFY OTHERWISE IN THOSE PROXIES.
A summary of the principal provisions of the Directors' Plan are set forth
below.
PURPOSE. The purpose of the Directors' Plan is to secure for the Company
and its shareholders the benefits of the incentive inherent in increased Common
Stock ownership by the members of the Board who are not employees of the Company
or any of its subsidiaries and align directors interest with those of the
shareholders.
ADMINISTRATION. The Directors' Plan is designed to work automatically.
Following the Annual Meeting at which the Shareholders approve the Directors'
Plan, each director elected or reelected at an Annual Meeting is entitled to
receive a grant of 10,000 shares as of the date of the Annual Meeting. The Plan
grants each director 10,000 shares upon the adoption of the Plan by the Board,
subject to shareholder approval. A director joining the Board for the first
time receives an option for 15,000 shares. Where administration is necessary,
it will be provided by the board of Directors, or the Board may delegate the
administration of the Plan to a committee of the Board. The Board has not yet
delegated the administration of this Plan. No discretion concerning decisions
regarding the Director's Plan is afforded to any person who is not a
"disinterested" person under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The interpretation and construction of
any provision of the Directors' Plan by the plan's administrator is final and
conclusive. Members of the Board receive no additional compensation for their
services in connection with the administration of the Directors' Plan.
ELIGIBILITY. The Directors' Plan provides for the grant of nonstatutory
stock options to non-employee directors of the Company.
TERMS OF OPTIONS. Each option is evidenced by a stock option agreement
between the Company and the optionee setting forth the terms and conditions of
the option. The term of an option granted under the plan may not exceed ten
years. The option vests as to one-fourth of the shares at the end of the fourth
full calendar quarter following the date the option was granted, and as to one-
sixteenth of the shares at the end of each of the full calendar quarters
thereafter.
The exercise price for nonstatutory options granted under the Directors'
Plan shall be the fair market value of a share of the Company's Common Stock on
the date of grant. The Directors' Plan permits the payment of the exercise
price in cash, in exchange for other shares of the Company's stock, by
promissory note or other property acceptable to the Committee.
12
<PAGE>
The Directors' Plan provides that options are nonassignable and
nontransferable, except pursuant to a qualified domestic relations order or by
will or the laws of descent and distribution, and may be exercised only by the
optionee. If the optionee ceases to be a Director for any reason other than his
or her death or disability, the optionee shall have the right to exercise any
option held at any time within six months after the date he or she ceases to be
a Director as to all or part of the shares that the optionee was entitled to
exercise at the date of such termination. In the event of the death of an
optionee, the option may be exercised at any time within five years after death,
but only to the extent that the option would have been exercisable at the time
of death. If an optionee is unable to continue his or her service as a director
of the Company as a result of his or her total and permanent disability, the
option may be exercised at any time within one year after the date of his or her
termination, but only to the extent he or she was entitled to exercise it at the
date of such termination.
CAPITAL CHANGES. The Directors' Plan provides for appropriate
adjustments of the number of shares subject to outstanding options, the exercise
price thereof, and the number of shares available for future grants, in the
event the Company's shares are changed by reason of a subdivision or
consolidation of shares, stock split, or other similar corporate transaction.
AMENDMENT AND TERMINATION OF THE DIRECTORS' PLAN. The Directors' Plan
terminates on February 10, 2015, or the date when all shares subject to, or
which may become subject to, the Directors' Plan have been purchased under
options granted under the Directors' Plan, whichever is earlier and no further
exercise of options may be made after that date. However, all options granted
under the Directors' Plan will remain in effect until such options have been
satisfied by the issuance of shares or terminated in accordance with the
Directors' Plan.
The Board may amend, alter, suspend or discontinue the Directors' Plan at
any time, but such amendment, alteration, suspension or discontinuation shall
not adversely affect any stock options then outstanding under the Directors'
Plan, without the optionee's consent. Shareholder approval is required for any
amendment to the Directors' Plan which would increase the number of shares
reserved under the plan, materially modify the eligibility requirements or
materially increase the benefits which may accrue under the plan. Except as
otherwise may be required under applicable tax, securities or corporate law,
other amendments may be adopted solely with the approval of the Board.
FEDERAL INCOME TAX INFORMATION. Options granted under the Directors'
Plan are nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. However, upon
its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess, if any, of the then fair market value of the shares over
the exercise price. Upon resale of such shares by the optionee, any difference
between the sale price and the exercise price, to the extent not recognized as
ordinary income as provided above, will be treated as capital gain or loss, and
will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year. The Company will be entitled to a deduction
in the same amount as the ordinary income recognized by the optionee.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan and does not purport to be complete. Further,
this summary does not discuss the income tax effect of any municipality, state
or foreign country in which an optionee may reside.
13
<PAGE>
III. SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the Company's
directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jeffrey C. Kalb 52 President and Chief Executive Officer
John E. Trewin 48 Vice President and Chief Financial Officer
Richard W. Helfrich 47 Vice President, Marketing and Sales
Dr. P. R. Hariharan 56 Vice President, Product Development
Scott Hover-Smoot 41 General Counsel and Corporate Secretary
Arieh Schifrin 57 Vice President, Operations
Chan Desaigoudar 56 Director
Angel G. Jordan(1)(2) 64 Director
Wade Meyercord(1)(3) 54 Chairman of the Board
C.K.N. Patel(1)(2) 57 Director
Stuart Schube(1)(3) 55 Director
John L. Sprague(1)(2) 65 Director
</TABLE>
______
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
Jeffrey C. Kalb has been President and Chief Executive Officer of the
Company since December 1994. He was President and Chief Operating Officer of
MasPar Computer Corporation, a computer systems manufacturer, from 1988 to 1993.
He was Vice President with Digital Equipment Corporation, a computer systems
manufacturer, from 1983 to 1987.
John E. Trewin has been Vice President and Chief Financial Officer since
January 1995. He was Vice President and Chief Financial Officer of O'Brien
Corporation, a coatings manufacturer, from 1990 to 1994 and Vice President and
Chief Financial Officer of Ampex Corporation, a magnetic recording equipment and
media manufacturer, from 1986 to 1989.
Richard W. Helfrich has been Vice President of Marketing and Sales since
August 1994. He was President and CEO of Multinational Electronics Services
Corporation, an electronics equipment distributor and management consulting
company, from 1990 to 1994 and Manager of Market Development at Advanced Micro
Devices Corporation, a semiconductor manufacturing company, from 1986 to 1990.
Dr. P. R. Hariharan has been Vice President of Product Development since
August 1994. He was employed from 1967 to 1994 at Magnavox Electronics Systems
Company, a defense electronics systems company, where he was Director of CAE
Systems from 1991 to 1994.
14
<PAGE>
Arieh Schifrin has been Vice President, Operations since February 1995. He
was a management consultant for high technology companies from 1991 to 1995. He
has been an Executive Vice President for Catalyst Semiconductor, a semiconductor
company, from 1989 to 1991; Executive Vice President of Xicor, Inc., a
semiconductor manufacturing company, from 1980 to 1989; and Operations Manager
for Data General Corp., a computer company, from 1977 to 1980.
Scott R. Hover -Smoot has been Secretary and Corporate General Counsel
since July 1994. He was Associate and Senior Associate at Berliner, Cohen, a
law firm, from 1986 to 1994.
Chan M. Desaigoudar is a Director of the Company. He served as Chairman of
the Board and Chief Executive Officer from 1980 to 1994.
Angel G. Jordan has been a Director of the Company since 1986. Mr. Jordan
has been a Professor of Electrical & Computer Engineering at Carnegie-Mellon
University since 1966. He was Provost from 1983 to 1991, Dean from 1979 to
1983. He is a Director of Keithley Instruments, Inc., a measurement test
instrumentation company.
Wade Meyercord is Chairman of the Board of Directors of the Company and has
served on the Board of Directors since 1992. Mr. Meyercord is also President of
Meyercord & Associate, a consulting company, since 1987. He was Chief Executive
Officer of Read-Rite Corp., an electronic data storage products company, from
1984 to 1987. He is a Director of Health Advantage Ventures, a medical venture
capital company, and Sun Medical Technologies, a medical service provider.
C.K.N. Patel has been a Director of the Company since 1990. Mr. Patel has
been Vice Chancellor for Research Programs at UCLA since 1993. He was Executive
Director for Research Materials Science, Engineering and Academic Affairs
Division, AT&T Bell Laboratories. He is a Director of Newport Corp., an optical
components company, and Accuwave Corporation, a holographic devices
manufacturer.
Stuart Schube has been a Director of the Company since 1986. He has been
President of Acorn Ventures, Inc., a venture capital management firm, and
General Partner of the Genesis Fund, Ltd., a venture capital investment company,
since 1986.
John L. Sprague has been a Director of the Company since January 1994. He
has been President of John L. Sprague Associates, a consulting company, since
1987. He was President and Chief Executive Officer of Sprague Electric Company,
an electronics company, from 1981 to 1987.
15
<PAGE>
STOCK OPTION TABLES
The following table shows for each of the Named Executive Officers (as
described in Part IV) certain information with respect to stock options granted
during the last fiscal period.
Option Grants In Last Fiscal Year
---------------------------------
(Nine Months Ended March 31, 1995)
----------------------------------
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- -------------------------------------------------------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g)
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Share) Date 5% ($) 10% ($)
- --------------- ------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Kalb 400,000 36.6% $3.93 2/10/05 $988,600 $2,505,000
Chan M.
Desaigoudar 10,000 .9% $3.93 2/10/05 $ 24,700 $ 62,600
</TABLE>
The above options are exercisable over a four year period, with 25%
execisable one year after date of grant and the balance exercisable in quarterly
installments thereafter. Mr. Desaigoudar's options were granted pursuant to the
1995 Non-Employee Directors' Stock Option Plan.
The following table sets forth as to each of the Named Executive Officers,
certain information with respect to stock options exercised during the last
fiscal year (nine months ended March 31, 1995) and unexercised options held as
of March 31, 1995. Subsequent to March 31, 1995, the 370,000 of outstanding
options held by Mr. Desaigoudar were terminated unexercised.
Aggregated Options Exercises In Last Fiscal Year
------------------------------------------------
and FY-End Options Values
-------------------------
<TABLE>
<CAPTION>
Shares Number of Shares Value of
Acquired Underlying Unexercised Unexercised In-The-Money
On Value Options at FY-End (#) Options at FY-End ($)
--------------------- ---------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Kalb 0 0 0 400,000 0 $178,000
Chan M.
Desaigoudar 0 0 370,000(1) 0 $641,250(1) 0
</TABLE>
(1) Terminated unexercised.
16
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 31, 1995, (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially 5% or more of the Company's Common Stock, (ii) each of the
Company's directors, (iii) the Named Executive Officers, and (iv) all directors
and executive officers as a group. Except as otherwise noted, the persons or
entities in this table have sole voting and investment power with respect to all
the shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Shares Beneficially
-------------------
Beneficial Owner (1) Owned(2) Percent(3)
-------------------- -------- ----------
<S> <C> <C>
Chan Desaigoudar(4)
490 Santa Rosa Drive
Los Gatos, CA 95030 1,933,774 22.3%
Hitachi Metals, Ltd.
2-1-2 Marunouchi
Chiyoda-ku, Tokyo 100 Japan 980,000 11.3%
Stuart Schube(5) 38,334 *
Angel G. Jordan(5) 35,161 *
C.K.N. Patel(5) 23,334 *
Wade Meyercord(5) 7,800 *
John L. Sprague(5) 5,000 *
Richard Helfrich(5) 4,000 *
John E. Trewin(5) 2,000 *
Directors and Executive Officers 2,049,403 23.6
as a group (12 persons)
</TABLE>
____________
* Less than 1%.
(1) Based solely beneficial owners with upon the information Securities
furnished by and such Exchange individuals Commission. or contained in
filings made by such
(2) Includes shares subject to options exercisable within 60 days after July
17, 1995.
(3) Total shares calculation does not include the 1,500,000 shares held in
trust for Class Action
Shareholders litigation.
(4) Based solely upon information furnished by First Interstate Bank of
California, record date May 31, 1995. Mr. Desaigoudar did not respond to
the Company's Directors' and Officers' Questionnaire.
(5) 215 Topaz Street, Milpitas, California 95035.
17
<PAGE>
IV. CORPORATE GOVERNANCE -- OFFICERS AND DIRECTORS
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1995 ("Fiscal 1995"), the Board of
Directors held 3 regular meetings and 7 special meetings. Each director
attended at least 80% of the meetings held during Fiscal 1995 which occurred on
or after the initiation of their term as a director. Each director who served
on the Compensation Committee also attended at least 100% of the Committee
meetings held during Fiscal 1995 which occurred on or after the initiation of
his term as a director.
During Fiscal 1995 the Board of Directors of the Company had an Executive
Committee, an Audit Committee, and a Compensation Committee. The Company does
not have a Nominating Committee nor a committee that performs equivalent
functions of a Nominating Committee.
The Executive Committee consists of Messrs. Jordan, Meyercord, Patel,
Schube and Sprague. The Executive Committee has all of the authority of the
Board of Directors to act on any matter except with respect to (i) the approval
of any action for which shareholder approval is required under the California
Corporations Code; (ii) the filling of vacancies on the Board of Directors or on
any committee thereof; (iii) the fixing of compensation for directors; (iv) the
adoption, amendment or repeal of any bylaw; (v) the amendment or appeal of any
resolution of the Board of Directors which by its terms is not so amendable or
repealable; (vi) any distribution to shareholders except at a rate or within a
price range determined by the Board of Directors; and (vii) the appointment of
other committees of the Board of Directors or the members thereof. The
Executive Committee held 6 meetings during Fiscal 1995.
The Audit Committee oversees the Company's accounting and financial
reporting policies and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board of Directors regarding
appointment of independent auditors. Prior to December 1, 1994 the Audit
Committee consisted of Chan Desaigoudar, Wade Meyercord, and Stuart Schube.
That Audit Committee held 1 meeting during Fiscal 1995. The present Audit
Committee, elected on February 10, 1995, consists of Wade Meyercord and Stuart
Schube.
Prior to December 1, 1994, the Compensation Committee consisted of Angel
Jordan, C.K.N. Patel and Chan Desaigoudar. The present Compensation Committee
consists of Angel Jordan, C.K.N. Patel, and John Sprague. The principal
functions of this committee are to recommend to the Board the compensation of
directors and officers of the Company, to oversee the administration of the
Company's stock option plans, and to perform such other duties regarding
compensation for employees and consultants as the Board may delegate from time
to time. See also "Compensation Committee Report." The Compensation Committee
held 3 meetings during Fiscal 1995.
EXECUTIVE COMPENSATION
The Company has changed its fiscal year to end on March 31. Accordingly,
the following tables sets forth all reportable compensation for the fiscal nine
months ended March 31, 1995 and the fiscal years ended June 30, 1994 and 1993.
Primarily because most members of senior management joined the Company during
fiscal 1995, the compensation for each does not exceed $100,000 for the period
and is not reportable, except for the position of CEO.
The other executive officers as a group (five officers, excluding the CEO),
presently receive base compensation totaling $569,000 on a twelve month basis.
In addition, a bonus plan provides the opportunity to achieve an additional 25%
of compensation based on performance. No other reportable compensation, other
than stock option grants and employee benefits and 401(k) matching available to
all employees, is currently provided to the executive officers. Total options
for Common Stock granted to executive officers other than the CEO totaled
290,000 shares.
18
<PAGE>
The following table presents the reportable compensation for persons who
held the position of CEO during the nine months ended March 31, 1995 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
Other Securities All
Annual Underlying Other
Name and Compen- Options Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) (#) sation ($)(1)
- --------------------- ---- ----------- --------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Kalb(2) 1995(3) $76,774 $20,000 None 400,000 $1,615(1)
President and
Chief Executive Officer
Chan M. Desaigoudar (4) 1995(3) 181,731 None 27,526(5) 10,000 2,331(1)
Chairman, Chief Executive
Officer, Vice Chairman, 1994(6) 250,000 None 82,769(5) 200,000(7) 4,600(1)
Director
1993(6) 250,000 None 82,479(5) 100,000(7) 4,000(1)
</TABLE>
NOTES:
- ------
(1) Company matching contributions to the 401k savings plan.
(2) Mr. Kalb joined the Company in December 1994. The Company does not have an
employment agreement with its Chief Executive Officer or any compensation
plan or arrangement with the Chief Executive Officer which results from the
resignation, retirement or other termination of employment or from a change
in control of the Company other than an agreement that if the Chief
Executive Officer is terminated by the Company without cause, he is
entitled to severance pay for nine months at the rate of $20,000 per month
plus continuation of employee benefits such as medical, dental and
disability coverage.
(3) Nine months ended March 31.
(4) As of December 2, 1994, no longer an employee of the Company.
(5) Other compensation provided Mr. Desaigoudar represents the total estimated
value as determined in the course of the investigation into the
compensation practices of the prior management. Included are the estimated
value of automobiles provided for his and his family's use, payments
towards a condominium ($20,000 in fiscal 1995) in Tempe, Arizona, country
club dues, and other personal expenses reimbursed by the Company.
(6) Twelve months ended June 30.
(7) Terminated unexercised.
19
<PAGE>
DIRECTOR COMPENSATION
Directors are entitled to be paid, in addition to their out-of-pocket
expenses, $500 per month plus $1,000 for each Board Meeting.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") recommends compensation of
Company directors and officers to the Company's Board of Directors and oversees
the administration of the Company's employee stock option plans.
Compensation Philosophy. The recent past has been a period of great
change for the Company at all levels and many members of the Company's current
management have been with the Company only a short while. The Company believes
that the new management team it has assembled is well suited to increasing
shareholder value and contributing to the long-term success of the Company, and
the Committee intends to pursue a compensation philosophy consistent with
achieving those goals. In structuring the Company's compensation programs, the
Committee's goals are to align compensation with the Company's business
objectives and performance and to attract, retain and reward executive officers
and other key employees who contribute to the long-term success of the Company.
Consistent with these goals, the Company's compensation programs include a mix
of salary, bonus and stock options. In particular, stock options are used to
link executive incentives and the creation of shareholder value.
Base Salary. The Committee intends to review annually each executive
officer's base salary. When reviewing base salaries, the Committee intends to
consider individual and corporate performance, levels of responsibility, prior
experience, breadth of knowledge and competitive pay practices. Consistent with
the Company's current size, the Committee believes current executive salaries
are comparable to the average salaries offered by competitive companies.
Bonus. The Company's bonus plan provides for bonuses to be awarded to
key employees based on specific goals achieved by the Company and the level of
contribution to achievement of the goals by the key employees. The bonus plan
is designed such that bonuses when combined with salaries create total
compensation which is comparable to the average compensation of companies
against which the Company competes in hiring and retaining key employees. Bonus
awards depend on the extent to which Company and individual performance
objectives are achieved. The Company's performance objectives include
operating, strategic and financial goals considered critical to the Company's
short and long term goals.
Options. The purpose of the Company's stock option plans is to attract and
retain talented key employees and to align their personal financial interests
with those of the Company's shareholders. Options are granted with an exercise
price equal to the market price of the Common Stock on the date of grant and
generally vest over a four year period. This approach is designed to focus key
employees on sustainable growth of the Company and the creation of shareholder
value over the long term. Stock options are a major component of the
compensation package of executive management. Eligible employees are generally
granted options upon commencement of employment and are considered for
additional options periodically thereafter. In awarding stock options the
Committee considers individual performance, overall contribution to the Company,
retention, the number of unvested stock options and the total number of stock
options to be granted.
Section 162(m) of the Internal Revenue Code (the "Code") impose a
limitations on the deductibility for federal income tax purposes of compensation
over $1 million paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million is not subject to the limitation if it is
"performance-based compensation" within the meaning of the Code. The Committee
believes that at the present time it is unlikely that the compensation paid to
any Named Executive Officer in a taxable year which is subject to the deduction
limit will exceed $1 million. Therefore, the Compensation Committee has not yet
established a policy for determining which forms of incentive compensation
awarded to its Named Executive Officers shall be designed to qualify as
"performance-based compensation." The Compensation Committee intends to
20
<PAGE>
continue to evaluate the effects of the statute and any fiscal Treasury
regulations and to comply with Code Section 162(m) in the future to the extent
consistent with the best interests of the Company.
CEO Compensation. The Committee uses the same procedures described above
in setting the annual salary, bonus and stock option awards for the CEO. The
CEO's salary is determined based on comparisons with competitive companies as
described above. The Committee believes that the CEO's salary and bonus plan is
comparable to the salaries offered to CEOs of competitive companies. In
awarding stock options, the Committee considers the CEO's performance, overall
contribution to the Company, retention, the number of unvested options and the
total number of options to be granted.
Conclusion. As a significant portion of the Company's compensation
program is linked to Company performance, the Committee believes that
compensation is closely tied to increases in long-term shareholder value.
The foregoing reports of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Only Chan Desaigoudar was concurrently a member of the Compensation
Committee and an officer and employee of the company during fiscal year 1995. No
other members of the Compensation Committee of the Company's Board of Directors
was at any time during the year ended March 31, 1995 or at any other time an
officer or employee of the Company. Currently, no executive officer of the
Company serves as a member of the Board of Directors or compensation committee
of any entity which has one or more executive officers serving as a member of
the Company's Board of Directors or Compensation Committee.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mr. Wade Meyercord, Chairman of the Board of Directors since October 27,
1994, has been actively involved in the management of the Company since that
date and has been compensated for his services to the extent that his efforts
have been over and above the normal duties of an outside director. Compensation
for these services totaled approximately $100,000 during the fiscal year ended
March 31, 1995.
21
<PAGE>
V. FIVE-YEAR STOCK PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return for
California Micro Devices Corporation ("CMD") Common Stock, the Standard & Poor's
500 Index ("S&P"), and the S&P Electronics (Semiconductors) Index (excluding
CMD).
The graph assumes $100 was invested on March 31, 1990 in CMD Common Stock
and $100 was invested at that same time in each of the S&P indexes. The
comparison assumes that all dividends are reinvested. (CMD Common Stock has not
paid dividends.)
TOTAL SHAREHOLDERS RETURNS-DIVIDENDS REINVESTED
-----------------------------------------------
<TABLE>
<CAPTION>
Annual Return Percents
YEARS ENDING
Company/Index Mar91 Mar92 Mar93 Mar94 Mar95
================================================================================
<S> <C> <C> <C> <C> <C>
S&P 500 INDEX 14.41 11.04 15.23 1.47 15.57
ELECTRONICS (SEMICONDUCTORS) 2.03 20.88 87.13 34.07 20.08
<CAPTION>
Index returns
Years Ending
Company/Index Mar90 Mar91 Mar92 Mar93 Mar94 Mar95
================================================================================
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX 100 114.41 127.05 148.39 148.55 171.68
ELECTRONICS (SEMICONDUCTORS) 100 102.03 123.33 230.79 309.41 371.58
</TABLE>
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
CMD Stock Performance
- --------------------------------------------------------------------------------
Mar90 Mar91 Mar92 Mar93 Mar94 Mar95
================================================================================
<S> <C> <C> <C> <C> <C> <C>
Closing Price $3.625 $2.500 $6.750 $7.125 $18.250 $4.375
Annual Return % NA (31.03) 170.00 5.56 156.14 (76.03)
Index Return 100 68.97 186.22 196.57 503.50 120.70
</TABLE>
Pursuant to Securities and Exchange Commission regulations, this chart is
not "soliciting material", is not deemed filed with the Securities and Exchange
Commission, and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors, and greater than ten percent shareholders were complied
with, with the exception of Chan Desaigoudar.
22
<PAGE>
VI. OTHER BUSINESS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters are properly brought before the meeting, it is
the intention of the persons named in the enclosed proxy to vote the shares they
represent in accordance with their judgment.
VII. SHAREHOLDER PROPOSALS TO BE PRESENTED AT
NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented by such shareholders at
next year's Annual Meeting must be received by the Company at its principal
office no later than March 20, 1996, and must satisfy the conditions established
by the Securities and Exchange Commission for shareholder proposals to be
included in the Company's proxy statement for that meeting.
23
<PAGE>
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the period ended
March 31, 1995 is being mailed with this proxy statement to shareholders
entitled to notice of the meeting. THE COMPANY WILL PROVIDE, UPON WRITTEN
REQUEST, AND WITHOUT CHARGE TO SUCH SHAREHOLDER, AN ADDITIONAL COPY OF THE
ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND LIST OF EXHIBITS. If exhibit
copies are requested, a copying charge of $0.20 per page will be made. Requests
should be sent to Investor Relations, California Micro Devices Corporation, 215
Topaz Street, Milpitas, California 95035-5430.
By Order of the Board of Directors
/s/ SCOTT HOVER-SMOOT
__________________________________
Scott Hover-Smoot, Secretary
Milpitas, California
24
<PAGE>
LOGO
CALIFORNIA MICRO DEVICES CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 15, 1995
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of California Micro Devices Corp. ("CMD"), hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated July 20, 1995, and hereby appoints Wade F. Meyercord and
Stuart Schube, and each of them proxies and attorneys-in-fact, with full power
to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of Shareholders of CMD to be
held at the Great America Marriott Hotel, 2700 Mission College Blvd., Santa
Clara, California on September 15, 1995 at 9:00 a.m. local time, and at any
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
1. To elect six (6) directors to serve until the next annual meeting of
shareholders and until the election and qualification of their successors.
[_] FOR all nominees listed below
(except as indicated) [_] WITHHOLD
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Dr. Angel Jordan, Jeffrey Kalb, Wade Meyercord, Dr. C.K.N. Patel, Stuart
Schube, Dr. John Sprague
2. To ratify the selection of the firm of Ernst & Young, LLP, as independent
accountants for the fiscal year ending March 31, 1996.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To approve the 1995 Stock 4. To approve the 1995 Employee Stock
Option Plan. Purchase Plan
[_] FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN
5. To approve the 1995 Non-Employee Directors' Plan
[_] FOR [_] AGAINST [_] ABSTAIN
and, in their discretion, upon such other matters which may properly come
before the meeting or any adjournment thereof.
<PAGE>
LOGO
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR ALL OF THE MATTERS SET FORTH HEREIN, INCLUDING FOR
THE ELECTION OF THE LISTED DIRECTORS, FOR THE RATIFICATION OF ERNST & YOUNG,
LLP, AS INDEPENDENT ACCOUNTANTS, FOR THE APPROVAL OF THE 1995 STOCK OPTION
PLAN, FOR THE APPROVAL OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN, FOR THE
APPROVAL OF THE 1995 NON-EMPLOYEE DIRECTORS' PLAN, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: _________________ , 1995
-------------------------------
Signature
-------------------------------
Signature
This proxy should be marked,
dated and signed by the
shareholder(s) exactly as his or
her name appears hereon, and
returned promptly in the
enclosed envelope. Persons
signing in a fiduciary capacity
should so indicate. If shares
are held by joint tenants or as
community property, both should
sign.
IF YOU INTEND TO ATTEND THE SHAREHOLDERS MEETING, PLEASE CHECK HERE
[_] Yes, I will be attending [_] No, I will not be attending
