United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934 For the Period Ended June 30, 1998
or
[ ] Transition Report Pursuant To Section 10 Or 15(d) Of The Securities
Exchange Act Of 1934 For The Transition Period From _________ To ________
Commission File Number 0-15449
CALIFORNIA MICRO DEVICES CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2672609
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Topaz Street, Milpitas, California 95035-5430
-------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 263-3214
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address, and former fiscal year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of June 30, 1998, there were outstanding 9,984,951 shares of Issuer's Common
Stock.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page Number
-----------
Item 1. Financial Statements
Statements of Operations
Three Months Ended June 30, 1998 and 1997 2
Balance Sheets
June 30, 1998 and March 31, 1998 3
Statements of Cash Flows
Three Months Ended June 30, 1998 and 1997 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
ii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
---------------------
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Net product sales $ 8,231 $ 8,108
Technology related revenues - 206
--------- ---------
Total revenues 8,231 8,314
Cost and expenses:
Cost of sales 6,550 5,265
Research and development 902 808
Selling, marketing and administrative 1,480 2,016
--------- ---------
Total costs and expenses 8,932 8,089
--------- ---------
Operating income (loss) (701) 225
Other expense (income), net 145 109
--------- ---------
Income (loss) before income taxes (846) 116
Net (loss) income $ (846) $ 116
========= ==========
Basic (loss) earnings per share $ (0.08) $ 0.01
========= ==========
Diluted (loss) earnings per share $ (0.08) $ 0.01
========= ==========
Weighted average common shares outstanding 9,983 9,756
Dilutive effect of employee stock options - 470
--------- ---------
Weighted average common shares outstanding,
assuming dilution 9,983 10,226
========= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
(Unaudited)
June 30, March 31,
1998 1998
-------- ---------
<TABLE>
<S> <C> <C>
ASSETS:
- ------
Current assets:
Cash and cash equivalents $ 887 $ 480
Short-term investments 4,661 5,110
Accounts receivable, less allowance for
doubtful accounts of $385 and $380 4,904 5,086
Inventories 8,326 8,092
Other assets 454 987
-------- ------
Total current assets 19,232 19,755
Property, plant & equipment, net 12,927 12,925
Restricted cash 3,199 2,909
Other long term assets 401 405
-------- -------
Total assets $ 35,759 $ 35,994
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY:
- -----------------------------------
Current liabilities:
Accounts payable $ 4,060 $ 3,328
Accrued salaries and benefits 1,094 1,008
Other accrued liabilities 791 802
Deferred margin on shipments to distributors 458 581
Current maturities of long-term debt and capital
Lease obligations 483 489
-------- -------
Total current liabilities 6,886 6,208
Long-term debt, less current maturities 7,185 7,185
Capital lease obligations, less current maturities 881 974
-------- -------
Total liabilities 14,952 14,367
Shareholders' equity:
Common stock - no par value; shares authorized 25,000,000;
Shares issued and outstanding 9,984,951 53,041 53,011
Accumulated deficit (32,234) (31,384)
-------- -------
Total shareholders' equity 20,807 21,627
-------- -------
Total liabilities and shareholders' equity $ 35,759 $ 35,994
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
Three Months Ended June 30,
---------------------------
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income /(loss) $ (846) $ 116
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 707 673
Net (increase) /decrease in inventories (234) (452)
Net (increase) /decrease in accounts receivable 183 45
Net (increase) /decrease in prepaid expenses
and other current assets 533 (73)
Net increase /(decrease) in trade accounts
payable and other current liabilities 807 (495)
Net decrease in other long term assets 4 4
Increase/(decrease) in deferred margin on
distributor sales (123) 54
Fixed asset write-off and other, net - -
--------- ---------
Net cash provided by (used in) operating activities 1,031 (128)
--------- ---------
Cash used in investing activities:
Securities purchases (500) (498)
Securities sales 944 803
Capital expenditures (709) (600)
Net change in restricted cash (290) (239)
--------- ---------
Net cash provided by (used in) investing activities (555) (534)
--------- ---------
Cash flows from financing activities:
Repayments of capital lease obligations (99) (35)
Repayments of long-term debt - -
Proceeds from issuance of common stock 30 449
--------- ---------
Net cash provided by (used in ) financing activities (69) 414
--------- ---------
Net increase /(decrease) in cash and cash equivalents 407 (248)
Cash and cash equivalents at beginning of period 480 343
--------- ---------
Cash and cash equivalents at end of period $ 887 $ 95
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 228 $ 246
Income taxes paid $ 1 $ -
Supplemental disclosures of non-cash investing and financing activities:
Unrealized gain/(loss) on securities $ 4 $ 27
Capital expenditures financed through
capital lease obligations $ - $ 92
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
Notes to Financial Statements
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly California Micro Devices Corporation's
(the "Company") financial position as of June 30, 1998, results of operations
for the three month periods ended June 30, 1998 and 1997, and cash flows for
the three-month periods ended June 30, 1998 and 1997. Results for the quarter
are not necessarily indicative of fiscal year results.
The condensed financial statements should be read in conjunction with the
financial statements included with the Company's annual report on Form 10-K for
the fiscal year ended March 31, 1998.
2. Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Inventories
-----------
The components of inventory consist of the following (amounts in thousands):
<TABLE>
<S> <C> <C>
June 30, March 31,
1998 1998
------- --------
Raw materials $ 918 $ 775
Work-in-process 5,044 5,480
Finished goods 2,364 1,837
------- -------
$ 8,326 $ 8,092
======= =======
</TABLE>
4. Litigation
----------
Reference should be made to the Company's filings with the SEC, including its
report on Form 10-K for its fiscal year ended March 31, 1998.
The Company is a party to or target of lawsuits, claims, investigations, and
proceedings, including commercial and employment matters, which are being
handled and defended in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the financial condition or overall trends in the results of
operation of the Company.
The Company believes, with regard to these matters and those previously
reported, it has, to the best of its knowledge, made such adjustments to its
financial statements by means of reserves and expensing the costs thereof, that
these matters will not have any additional adverse impact on the Company's
financial condition.
5
<PAGE>
5. Net Income (Loss) Per Share
---------------------------
Basic earnings per common share are computed using the weighted-average number
of common shares outstanding during the period. Diluted earnings per common
share incorporate the incremental shares issuable upon the assumed exercise of
stock options and other dilutive securities. Diluted earnings per common share
do not differ from the Company's previously reported earnings per common and
common equivalent share.
6. Adoption of FAS 130
-------------------
Effective in the first quarter of fiscal year 1999, the Company adopted
Statement 130, Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities, which prior to adoption
were reported separately in stockholders' equity to be included in other
comprehensive income. Prior year financial statements have been reclassified
to conform to the requirements of Statement 130.
Comprehensive loss for the three months ended June 30, 1998 was $842,000 and
comprehensive income for June 30, 1997 was $143,000.
7. Adoption of FAS 131
-------------------
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"). The Company is required to adopt this Statement in fiscal 1999.
FAS 131 requires disclosure of certain information regarding operating
segments, products and services, geographic areas of operation, and major
customers. In accordance with the provisions of FAS 131, the Company has
elected not to apply the Statement to interim financial statements in the
initial year of application, but comparative information for interim periods
will be reported in the second year of application.
6
<PAGE>
ITEM 2. Management's Discussion And Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations
Product sales for the quarter ended June 30, 1998, increased by $123,000 or 1.5%
compared to the quarter ended June 30, 1997. The increase in product sales was
primarily due to increased sales of the Company's P/Active( family of products
to the personal computer market offset by decreases in sales of other thin film
products into the computer workstation market. Thin film products accounted
for 65% of product sales for both the quarters ended June 30, 1998 and 1997.
Compared to the previous quarter ended March 31, 1998, product sales for the
quarter ended June 30, 1998 decreased by $480,000 or 5.5%. The decrease was
primarily due to reduced sales of the Company's telecommunications products.
Thin film products were 63% of product sales for the quarter ended March 31,
1998.
Technology related revenue for the quarter ended June 30, 1997 related to
engineering projects partially funded by Hitachi Metals, Ltd. ("HML"). No
revenue was received for the quarter ended June 30, 1998 as the Company and HML
are no longer participating in joint projects. The Company expects little or
no revenue from HML for joint research and development in the future.
Gross margins on net product sales decreased from the quarter a year ago from
35% to 20%, primarily due to decreased sales of higher margin computer
workstation products, increased yield losses, and increased valuation reserves
for slow-moving inventory and adjustments to lower of cost or market. In
total, the increased yield losses, the increased valuation reserves, and the
adjustments for lower of cost of market unfavorably impacted gross margins by 7
percentage points.
Research and development expenditures increased by $94,000 for the June 30,
1998, quarter compared to the year earlier period. This increase primarily
reflects higher engineering staffing levels and secondarily, higher material
costs associated with a large number of new products in development.
Compared to a year ago, a greater proportion of research and development
programs involves design-engineering efforts developing new products, as
opposed to process technology developments.
Selling, marketing, and administrative costs decreased by $535,000 compared
to a year ago. Selling and marketing headcount and advertising expense have
increased, and administrative costs have decreased, including a $575,000
decrease in legal expenses related to collection of an insurance settlement
related to old legal bills.
As a result of the factors discussed above, operating income for the quarter
ended June 30, 1998, declined by $926,000 compared to operating income for the
year earlier quarter.
Other expense for the current quarter was an expense of $145,000 as compared
to $109,000 in the 1997 quarter. This was due primarily to reduced interest
income from investments.
No income taxes were accrued for the quarters ended June 30, 1998, or June 30,
1997, due to the availability of tax loss carry forwards.
The weighted average of common shares outstanding decreased to 9,983,000 shares
and share equivalents in the June 30, 1998, quarter compared to 10,226,000
shares and share equivalents for the quarter ended June 30, 1997.
7
<PAGE>
Liquidity and Capital Resources
Net cash and short-term investments as of June 30, 1998, decreased $42,000 from
the period ending March 31, 1998. Inventory levels increased by $234,000 due
to increased finished goods for the higher-volume P/Active( products and
increased raw materials. Prepaid expenses and other assets decreased by
$533,000 primarily due to the disposal of stock from the employee stock
purchase plan and reduction of amounts due HML. Accounts payable increased
by $732,000 due to increased inventories and the higher level of production
activity in the latter part of the quarter.
The Company has a $3.0 million line of credit agreement that expires on
July 31, 1999. Under the terms of the line of credit, the Company can
borrow up to $3.0 million at prime, collateralized by short-term investments
managed by the bank. There were no bank borrowings at June 30, 1998 and 1997
and there were no borrowings during fiscal 1998 and 1997. The Company is in
compliance with its financial covenants.
The Company expects to fund its future liquidity needs through its existing
cash balances, cash flows from operations, bank borrowings, and equipment
lease and loan financing arrangements. Depending on market conditions and
the results of operations, the Company may pursue other sources of liquidity.
The Company believes that it has sufficient financial resources to fund its
operations for at least the next twelve months.
Impact of Year 2000
Many computer systems employ a two-digit date field and could experience
problems beyond the year 1999. The Company has evaluated its management
information systems (MIS) and has a plan to convert all its MIS applications to
year 2000 compliant versions by the end of calendar 1998. The Company is in
the process of evaluating computers and software utilized in its manufacturing
operations. Nothing has come to the attention of the Company that would
indicate a material impact of year 2000 issues on the Company's results of
operation or financial condition.
The Company is also evaluating the possible impact of year 2000 issues on its
key suppliers and subcontractors. Noncompliance with year 2000 issues on the
part of key suppliers and subcontractors could result in disruption of the
Company's operations. However, the potential impact and related costs are not
known at this time.
Cautionary Statement
This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Act of 1934, as amended. Except for the historical
information contained in this discussion of the business and the discussion
and analysis of financial condition and results of operations, the matters
discussed herein are forward-looking statements. Such forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking statements
regarding revenues, orders, and sales involve a number of risks and
uncertainties, including but not limited to, demand for the Company's
product, pricing pressures which could affect the Company's gross margin or
the ability to consummate sales, intense competition within the industry,
the Company's ability to attract and retain high quality people, the need
for the Company to keep pace with technological developments and respond
quickly to changes in customer needs, the Company's dependence on third
party suppliers for components for its products, year 2000 issues, and the
Company's dependence upon intellectual property rights which, if not
available to the Company, could have a material adverse effect on the
Company. These same factors, as well as others, such as the continuing
litigation involving the Company, could also affect the liquidity needs of
the Company. Actual results could differ materially from those projected
in the forward-looking statements as a result of factors set forth above
and elsewhere in this Form 10-Q.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
Reference should be made to the Company's filings with the SEC, including its
report on Form 10-K for its fiscal year ended March 31, 1998.
The Company is a party to or target of lawsuits, claims, investigations, and
proceedings, including commercial and employment matters, which are being
handled and defended in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the financial condition or overall trends in the results of
operation of the Company.
The Company has, to the best of its knowledge, made such adjustments to its
financial statements by means of reserves and expensing the costs thereof, that
these matters and those previously reported will not have any additional
adverse impact on the Company's financial condition.
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
The Company's annual meeting of stockholders, at which the proposals described
below were submitted to stockholders, was held on August 7, 1998.
Proposal No. 1 Election of Directors. The following individuals, who
---------------------
received the votes indicated, were elected as directors:
<TABLE>
<S> <C> <C>
NAME FOR WITHHELD
--------------- --------- ---------
Jeffrey Kalb 7,352,360 2,013,187
Dr. Angel Jordan 7,348,640 2,016,907
J. Daniel McCranie 7,347,856 2,017,691
Wade Meyercord 7,351,360 2,014,187
Stuart Schube 7,350,864 2,014,683
Dr. John Sprague 7,349,024 2,016,523
Donald Waite 7,348,330 2,017,217
</TABLE>
Proposal No. 2 The proposal to ratify the appointment of Ernst & Young LLP,
- --------------
as the Company's independent auditors for the current fiscal year was approved.
The results of the voting was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
7,577,516 1,708,402 79,629
Proposal No. 3 The proposal to approve the amendment of the 1995 Employee
- --------------
Stock Purchase Plan was approved. The results of the voting was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
7,167,114 1,900,673 297,760
Proposal No. 4 The proposal to approve the amendment of the 1995 Employee
- --------------
Stock Option Plan was approved. The results of the voting was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
5,622,625 3,445,482 297,440
9
<PAGE>
Proposal No. 5 The proposal to approve the amendment of the 1995 Non-
- --------------
Employee Directors' Stock Option Plan was approved. The results of the voting
was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
5,938,979 3,121,901 304,667
ITEM 6. Exhibits and Reports on Fork 8-K.
---------------------------------
(a) Exhibit Description
------- -----------
4.1 1995 Stock Option Plan - Amended As Of
July 26, 1996, July 18, 1997 and August 7,
1998.
4.2 1995 Non-Employee Directors' Stock Option
Plan - Amended As Of July 26, 1996, July
18, 1997 and August 7, 1998.
4.3 1995 Employee Stock Purchase Plan - Amended
As Of July 18, 1997 and August 7, 1998.
(b) Form 8-K None
(c) FDS Financial Data Schedule (For Edgar Filing
Only)
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALIFORNIA MICRO DEVICES CORPORATION
------------------------------------
(Registrant)
Date: August 13, 1998
/s/ John E Trewin
-------------------
John E. Trewin
Vice President and Chief Financial Officer
11
<PAGE>
EXHIBIT 4.1
1995 Stock Option Plan - Amended As Of July 26, 1996,
July 18, 1997 And August 7, 1998
CALIFORNIA MICRO DEVICES CORPORATION
1995 STOCK OPTION PLAN
----------------------
AMENDED AS OF JULY 26, 1996, JULY 18, 1997 AND AUGUST 7, 1998
-------------------------------------------------------------
1. PURPOSE.
--------
The purpose of the CALIFORNIA MICRO DEVICES CORPORATION 1995 Stock Option
Plan (the "Plan") is to advance the interests of the Corporation and its
shareholders by providing a means by which the Corporation and its Subsidiaries
shall be able to attract and retain qualified employees and consultants.
2. DEFINITIONS.
------------
(a) "Affiliate" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations that includes the Corporation
if each of such corporations, other than the last corporation in the chain,
owns at least 50% of the total voting power of one of the other corporations.
(b) "Affiliated Group" shall mean an affiliated group of
corporations, as defined in Code Section 1504, which includes the Corporation.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the committee appointed by the Board, in
accordance with Section 3(a) hereof, to administer the Plan.
(f) "Common Stock" shall mean the voting common stock of the
Corporation.
(g) "Consultant" shall mean any person who, or any employee of any
firm which, is engaged by the Company or any Affiliate to render consulting
services.
(h) "Corporation" shall mean CALIFORNIA MICRO DEVICES CORPORATION, a
California corporation.
(i) "Effective Date" shall mean February 10, 1995.
(j) "Employee" shall mean any individual who is employed, within the
meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or by any Affiliate. For purposes of the Plan and only for
purposes of the Plan, and in regard to Nonstatutory Stock Options but not
for Incentive Stock Options, a Consultant of the Corporation or any
Affiliate shall be deemed to be an Employee, and service as a Consultant
with the Corporation or any Affiliate shall be deemed to be employment, but
no Incentive Stock Option shall be granted to a Consultant who is not an
employee of the Corporation or any Affiliate within the meaning of Section
3401 of the Code and the regulations thereunder. In the case of a
Consultant, the provisions governing when a termination of employment has
occurred for purposes of the Plan shall be set forth in the written stock
option agreement between the Optionee and the corporation, or, if not
so set forth, the Committee shall have the discretion to determine when a
termination of "employment" has occurred for purposes of the Plan.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
12
<PAGE>
(l) "Exercise Price" shall mean the price per Share at which an
Option may be exercised, as determined by the Committee and as specified in the
Optionee's stock option agreement.
(m) "Fair Market Value" shall mean the value of one Share of Common
Stock, determined as follows: (i) if the Shares are traded on an exchange or on
the NASDAQ National Market System, the reported "closing price" on the date of
valuation or if no trading occurred on such date, the next preceding day on
which trading occurred; (ii) if the Shares are traded over-the-counter on the
NASDAQ System (other than on the NASDAQ National Market System), the mean
between the bid and the ask prices on said System at the close of business on
the date of valuation or if no trading occurred on such date, the next preceding
day on which trading occurred; and (iii) if neither (i) nor (ii) applies, the
fair market value as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.
(n) "Incentive Stock Option" shall mean an Option of the type
described in Section 422(b) of the Code.
(o) "Nonstatutory Stock Option" shall mean an Option of the type not
described in Section 422(b) or 423(b) of the Code.
(p) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(q) "Optionee" shall mean any person who holds an Option pursuant to
the Plan.
(r) "Outside Director" shall mean a non-employee member of the Board
who (1) is not a current employee of any member of the Affiliated Group; (2)
does not receive compensation for prior services (other than benefits under a
tax-qualified retirement plan) from any member of the Affiliated Group during a
taxable year in which he or she serves on the Committee; (3) has never been an
officer of any member of the Affiliated Group; and (4) does not receive
remuneration from any member of the Affiliated Group, either directly or
indirectly, in any capacity other than as a director.
(s) "Plan" shall mean this stock option plan as it may be amended
from time to time.
(t) "Purchase Price" shall mean at any particular time the Exercise
Price times the number of Shares for which an Option is being exercised.
(u) "Share" shall mean one share of authorized Common Stock.
3. ADMINISTRATION.
--------------
(a) The Committee.
- --------------
The Plan shall be administered by a Committee of Outside Directors which
shall consist of not less than two members, who during the one year prior to
service as an administrator of the Plan, shall not have been granted or
awarded equity securities pursuant to the Plan or any other plan of the
Corporation or any of its Affiliates except as permitted under Rule 16b-3
under the Exchange Act. The Board may from time to time designate
individuals as ineligible to participate in the Plan for a specified
period in order to become eligible to be a member of the Committee.
(b) Powers of the Committee.
- ------------------------
Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion and on behalf of the Corporation:
(i) to grant Options;
(ii) to determine the Exercise Price per Share of Options to be
granted;
(iii) to determine the Employees to whom, and the time or times at
which, Options shall be granted and the number of Shares
for which an Option will be exercisable;
13
<PAGE>
(iv) to interpret the Plan;
(iv) to prescribe, amend, and rescind rules and regulations
relating to the Plan; to determine the terms and
provisions of each Option granted and, with the consent
of the holder thereof, modify or amend each Option;
(vi) to accelerate or defer, with the consent of the Optionee,
the exercise date of any Option; (vii) to authorize any
person to execute on behalf of the Corporation any
instrument required to effectuate the grant of an Option
previously granted by the Committee;
(viii) with the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an
Option previously granted by the Committee; and
(ix) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Board's Determination of Fair Market Value.
-------------------------------------------
The Board shall have the authority to determine, upon review of
relevant information, the Fair Market Value of the Common Stock, subject to the
provisions of the Plan and irrespective of whether the Board has appointed a
Committee to administer the Plan. The Board may delegate this authority to the
Committee.
(d) Committee's Interpretation of the Plan.
---------------------------------------
The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted hereunder shall be final and
binding on all parties claiming an interest in an Option granted under the
Plan. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option.
4. PARTICIPATION.
-------------
(a) Eligibility.
------------
The Optionees shall be such persons as the Committee may select
from among the Employees, provided that Consultants are not eligible to receive
Incentive Stock Options. Notwithstanding anything to the contrary set forth
herein, members of the Board are not eligible for grants of Options.
(b) Ten Percent Shareholders.
------------------------
Any Employee who owns Stock possessing more than 10% of the total
combined voting power of all classes of outstanding stock of the Corporation or
any Affiliate shall not be eligible to receive an Option unless:
(i) the Exercise Price of the Shares subject to such Option
when granted is at least 110% of the Fair Market Value
of such Shares, and
(ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) Stock Ownership.
----------------
For purposes of Paragraph 4(b), in determining stock ownership,
an Employee shall be considered as owning the stock owned, directly or
indirectly, by or for his or her brothers and sisters, spouse, ancestors,
and lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an option shall be disregarded.
(d) Outstanding Stock.
------------------
For purposes of Section 4(b), the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant
of the Option to the Optionee but shall not include any share for which an
Option is exercisable by any person.
14
5. STOCK.
------
(a) Shares Subject to This Plan.
----------------------------
The aggregate number of Shares which may be issued upon exercise
of Options under the Plan shall not exceed Two million Six Hundred Forty Five
Thousand (2,645,000), subject to adjustment pursuant to Section 9 hereof.
(b) Options Not to Exceed Shares Available.
---------------------------------------
The number of Shares for which an Option is exercisable at any
time shall not exceed the number of Shares remaining available for issuance
under the Plan. If any Option expires or is terminated, the number of Shares
for which such Option was exercisable may be made exercisable pursuant to
other Options under the Plan. The limitations established by this Section
5(b) shall be subject to adjustment in the manner provided in Section 9
hereof upon the occurrence of an event specified therein.
(c) Limitation on Grants.
No person shall be granted in any one fiscal year options for more
than 500,000 Shares.
TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option agreements
between the Optionee and the Corporation in such form as the Committee shall
from time to time determine. No Option or purported Option shall be a valid
and binding obligation of the Corporation unless so evidenced in writing.
(b) Number of Shares.
-----------------
Each stock option agreement shall state the number of Shares for
which the Option is exercisable and shall provide for the adjustment thereof in
accordance with Section 9 hereof.
(c) Vesting.
--------
An Optionee may not exercise his or her Option for any Shares until
the Option, in regard to such Shares, has vested. Each stock option agreement
shall include a vesting schedule which shall show when the Option becomes
exercisable. The vesting schedule shall not impose upon the Corporation or any
Affiliate any obligation to retain the Optionee in its employ or under contract
for any period or otherwise change the employment-at-will status of an Optionee
who is an employee of the Corporation or any Affiliate.
(d) Lapse of Options.
-----------------
Each stock option agreement shall state the time or times when
the Option covered thereby lapses and becomes unexercisable in part or in
full. An Option shall lapse on the earliest of the following events (unless
otherwise determined by the Committee and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the Option;
(ii) The first anniversary of the Optionee's death;
(iii) The first anniversary of the date the Optionee ceases to
be an Employee due to total and permanent disability,
within the meaning of Section 22(e)(3) of the Code;
(iv) On the date provided in Section 6(h)(i), unless with
respect to a Nonstatutory Stock Option, the Committee
otherwise extends such period before the applicable
expiration date;
(v) On the date provided in Section 9 for a transaction
described in such Section;
(vi) The date the Optionee files or has filed against him or
her a petition in bankruptcy; or
(vii) The expiration date specified in an Optionee's stock
option agreement.
(e) Exercise Price.
---------------
Each stock option agreement shall state the Exercise Price for
the Shares for which the Option is exercisable. Subject to Section 4(b), the
Exercise Price of an Incentive Stock Option and a
15
<PAGE>
Nonstatutory Stock Option shall, when granted, be not less than 100% and 85% of
the Fair Market Value of the Shares for which the Option is exercisable,
respectively, and not less than the par value of the Shares.
(f) Medium and Time of Payment.
---------------------------
The Purchase Price shall be payable in full in cash upon the
exercise of an Option but the Committee may allow the Optionee to pay the
Purchase Price:
(i) by surrendering Shares in good form for transfer, owned by
the Optionee and having a Fair Market Value on the date of
exercise equal to the Purchase Price;
(ii) by delivery of a full recourse promissory note ("Note")
made by the Optionee in the amount of the Purchase Price,
bearing interest, compounded semiannually, at a rate
not less than the rate determined under Section 7872
of the Code to insure that no "foregone interest", as
defined in such section, will accrue, together with the
delivery of a duly executed standard form security
agreement securing the Note by a pledge of the Shares
purchased; or
(iii) in any combination of such consideration or such other
consideration and method of payment for the issuance of
Shares to the extent permitted under applicable law
Code as long as the sum of the cash so paid, the Fair
Market Value of the Shares so surrendered, and the
amount of any Note equals the Purchase Price.
The Committee or a stock option agreement may prescribe
requirements with respect to the exercise of Options, including the
submission by the Optionee of such forms and documents as the Committee
may require and, the delivery by the Optionee of cash sufficient to satisfy
applicable withholding requirements. The Committee may vary the exercise
requirements and procedures from time to time to facilitate, for example,
the broker-assisted exercise of Options.
(g) Nontransferability of Options.
------------------------------
During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee or the Optionee's conservator or legal
representative and shall not be assignable or transferable except pursuant
to a qualified domestic relations order as defined by the Code. In the
event of the Optionee's death, the Option shall not be transferable by the
Optionee other than by will or the laws of descent and distribution.
(h) Termination of Employment Other than by Death or Disability.
------------------------------------------------------------
(i) If an Optionee ceases to be an Employee for any reason
other than his or her death or disability, the Optionee
shall have the right, subject to the provisions of this
Section 6, to exercise any Option held by the Optionee
at any time within ninety (90) days after his or her
termination of employment, but not beyond the otherwise
applicable term of the Option and only to the extent
that on such date of termination of employment the
Optionee's right to exercise such Option had vested.
(ii) For purposes of this Section 6(h), the employment
relationship shall be treated as continuing intact
while the Optionee is an active employee of the
Corporation or any Affiliate, or is on military
leave, sick leave, or other bona fide leave of
absence to be determined in the sole discretion of
the Committee. The preceding sentence notwithstanding,
in the case of an Incentive Stock Option, employment shall
be deemed to terminate on the date the Optionee ceases
active employment with the Corporation or any
Affiliate, unless the Optionee's reemployment rights
are guaranteed by statute or contract.
(i) Death of Optionee.
------------------
If an Optionee dies while an Employee, or after ceasing to be an
Employee but during the period while he or she could have exercised an Option
under Section 6(h), any Option granted to the Optionee may be exercised, to the
extent it had vested at the time of death and subject to the Plan, at any time
within 12 months after the Optionee's death, by the executors or administrators
of his or her estate or by any person or persons who acquire the Option by will
or the laws of descent and distribution, but not beyond
16
<PAGE>
the otherwise applicable term of the Option.
(j) Disability of Optionee.
-----------------------
If an Optionee ceases to be an Employee due to becoming totally and
permanently disabled within the meaning of Section 22(e)(3) of the Code, any
Option granted to the Optionee may be exercised to the extent it had vested at
the time of cessation and, subject to the Plan, at any time within 12 months
after the Optionee's termination of employment, but not beyond the otherwise
applicable term of the Option.
(k) Rights as a Shareholder.
------------------------
An Optionee, or a transferee of an Optionee, shall have no rights as
a shareholder of the Corporation with respect to any Shares for which his or her
Option is exercisable until the date of the issuance of a stock certificate for
such Shares. No adjustment shall be made for dividends, ordinary or
extraordinary or whether in currency, securities, or other property,
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 9 hereof.
(l) Modification, Extension, and Renewal of Options.
------------------------------------------------
Within the limitations of the Plan, the Committee may modify, extend
or renew outstanding Options or accept the cancellation of outstanding Options
for the granting of new Options in substitution therefor. Notwithstanding the
preceding sentence, no modification of an Option shall, without the consent of
the Optionee, alter or impair any rights or obligations under any Option
previously granted.
(m) Other Provisions.
-----------------
The stock option agreements authorized under the Plan may contain
such other provisions which are not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option, as
the Committee shall deem advisable.
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs.
------------------------------------------------
To the extent that the Fair Market Value of Shares (determined for each
Share as of the date of grant of the Option covering such Share) subject to
Options granted under this Plan (or any other plan of the Corporation or any
Affiliate) which are designated as Incentive Stock Options and which become
exercisable by an Optionee for the first time during a single calendar year
exceeds $100,000, the Option(s) (or portion thereof) covering such Shares shall
be recharacterized (to the extent of such excess over $100,000) as a
Nonstatutory Stock Option. In determining which Option(s) shall be treated as
Nonstatutory Stock Options under the preceding sentence, the Options shall be
taken into account in the order granted, with the result that a later granted
Option shall be recharacterized as a Nonstatutory Stock Option prior to such
recharacterization of a previously granted Option.
8. TERM OF PLAN.
------------
Options may be granted pursuant to the Plan until ten years following
the Effective Date, and all Options which are outstanding on such date shall
remain in effect until they are exercised or expire by their terms. The
Plan shall expire for all purposes on the date 20 years following the
Effective Date.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
----------------------------------------------
(a) Reorganizations.
----------------
The number of Shares covered by the Plan, as provided in Section
5 hereof, and the number of Shares for which each Option is exercisable shall
be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from the payment of a Common Stock dividend, a stock
split, a reverse stock split or any other event which results in an increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Corporation, and the Exercise Price shall be
proportionately increased in the event the number of Shares subject to such
Option are decreased and shall be proportionately decreased in the event the
number of Shares subject to such Option are increased. For the purposes of
this paragraph, conversion of any convertible securities of the Corporation
shall not be
17
<PAGE>
deemed to have been "effected without receipt of consideration." Adjustments
shall be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Corporation of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.
(b) Liquidation.
------------
In the event of the dissolution or liquidation of the Corporation,
each Option shall terminate immediately prior to the consummation of such
action. The Committee shall notify the Optionee not less than fifteen (15) days
prior to the proposed consummation of a pending dissolution or liquidation, and
the Option shall be exercisable as to all Shares which are vested prior to
expiration until immediately prior to the consummation of such action.
(c) Merger.
-------
In the event of a merger or acquisition involving an acquisition
of the Corporation or an acquisition by the Corporation of another company, the
result of which is that the outstanding voting securities of the Corporation do
not represent, or are not converted into, a majority of the outstanding voting
securities of the surviving corporation, except as otherwise provided in any
particular Option agreement, the vesting of all unvested Options shall be
accelerated and all options shall be immediately exercisable. Without limiting
the generality of the foregoing, in the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option shall
terminate immediately prior to the consummation of such transaction. The
committee shall notify the Optionee not less than fifteen (15) days prior to
the proposed consummation of such transaction, and the Option shall be
exercisable as to all Shares which are subject to the Option until
immediately prior to the consummation of such transaction.
(d) Determination by Committee.
---------------------------
All adjustments described in this Section 9 shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
(e) Limitation on Rights of Optionee.
---------------------------------
Except as expressly provided in this Section 9, no Optionee shall
have any rights by reason of any payment of any stock dividend, stock split or
reverse stock split or an other increase or decrease in the number of shares of
stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of the Shares for which an Option is
exercisable. Notwithstanding the foregoing, if the Corporation shall enter
into a transaction affecting the Corporation's capital stock or distributions
to the holders of its capital stock for which a revision in the terms of each
Option is not required pursuant to this Section 9, the Committee shall have
the right, but not the obligation, to revise the terms of each Option in a
manner the Committee, in its sole discretion, deems fair and reasonable given
the transaction involved. If necessary or appropriate in connection with such
transaction, the Committee may declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his
Option in whole or in part, including exercise as to Shares to which the Option
would not otherwise be exercisable.
(f) No Restriction on Rights of Corporation.
----------------------------------------
The grant of an Option shall not affect or restrict in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate, sell, or transfer all or any part
of its business or assets.
10 SECURITIES LAW REQUIREMENTS.
----------------------------
The Corporation shall not be under any obligation to issue any Shares
upon the exercise of any
18
<PAGE>
Option unless and until the Corporation has determined that:
(i) it and the Optionee have taken all actions required to register the Shares
under the Securities Act of 1933, or to perfect an exemption from the
registration requirements thereof; (ii) any applicable listing requirement of
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) all other applicable provisions of state and Federal law have been
satisfied.
11. EXERCISE OF UNVESTED OPTIONS.
-----------------------------
The Committee may grant any Optionee the right to exercise any Option
prior to the complete vesting of such Option. Without limiting the generality
of the foregoing, the Committee may provide that if an Option is exercised
prior to having completely vested, the Shares issued upon such exercise shall
remain subject to vesting at the same rate as under the Option so exercised
and shall be subject to a right, but not an obligation, of repurchase by the
Corporation with respect to all unvested Shares if the Optionee ceases to be
an Employee for any reason. For the purposes of facilitating the enforcement
of any such right of repurchase, at the request of the Committee, the Optionee
shall enter into the Joint Escrow Instructions with the Corporation and
deliver every certificate for his or her unvested Shares with a stock power
executed in blank by the Optionee and by the Optionee's spouse, if required
for transfer.
12. AMENDMENT OF THE PLAN.
----------------------
The Board or the Committee may, from time to time, terminate, suspend
or discontinue the Plan, in whole or in part, or revise or amend it in any
respect whatsoever including, but not limited to, the adoption of any
amendment(s) deemed necessary or advisable to qualify the Options under
rules and regulations promulgated by the Securities and Exchange Commission
with respect to Employees who are subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, as amended, or to correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
Option granted thereunder, without approval of the shareholders of the
Corporation, but without the approval of the Corporation's shareholders, no
such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan, other than any
increase pursuant to Section 9;
(b) Materially modify the requirements as to eligibility for
participation in the Plan;
(c) Materially increase the benefits accruing to Optionees under the
Plan;
(d) Extend the term of the Plan; or
(e) Amend this Section to defeat its purpose.
No amendment, termination or modification of the Plan shall affect any
Option theretofore granted in any material adverse way without the consent of
the Optionee.
13. APPLICATION OF FUNDS.
---------------------
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option shall be used for general corporate
purposes.
14. APPROVAL OF SHAREHOLDERS.
-------------------------
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of all classes of the outstanding shares present and
entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan or by written consent, and in no event later
than one (1) year following the Effective Date. Prior to such approval,
Options may be granted but shall not be exercisable. Any amendment
described in Section 12 (i) to (iv) shall also be subject to approval
by the Corporation's
19
<PAGE>
shareholders.
15 WITHHOLDING OF TAXES.
---------------------
In the event the Corporation or a Affiliate determines that it is
required to withhold Federal, state, or local taxes in connection with
the exercise of an Option or the disposition of Shares issued pursuant
to the exercise of an Option, the Optionee or any person succeeding to
the rights of the Optionee, as a condition to such exercise or disposition,
may be required to make arrangements satisfactory to the Corporation or the
Affiliate to enable it to satisfy such withholding requirements.
16. RIGHTS AS AN EMPLOYEE.
----------------------
Neither the Plan nor any Option granted pursuant thereto shall be
construed to give any person the right to remain in the employ of the
Corporation or any Affiliate, or to affect the right of the Corporation or any
Affiliate to terminate such individual's employment at any time with or without
cause. The grant of an Option shall not entitle the Optionee to, or disqualify
the Optionee from, participation in the grant of any other Option under the
Plan or participation in any other benefit plan maintained by the Corporation
or any Affiliate.
17. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED
-----------------------------------------------------------------
RIGHTS.
-------
In adopting and maintaining this Plan and granting options hereunder,
neither the Corporation nor any Affiliate makes any representations or
undertakings with respect to the initial qualification or treatment of Options
under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees,
Optionees, or beneficiaries of any obligations on the part of the
Corporation, any Affiliate or the Committee, except as expressly provided
herein.
18. INSPECTION OF RECORDS.
----------------------
Copies of the Plan, records reflecting each Optionee's Option, and any
other documents and records which an Optionee is entitled by law to inspect
shall be open to inspection by the Optionee and his or her duly authorized
representative at the office of the Committee at any reasonable business hour.
19 INFORMATION TO OPTIONEES.
-------------------------
Each Optionee shall be provided with such information regarding the
Corporation as the Committee from time to time deems necessary or appropriate;
provided however, that each Optionee shall at all times be provided with such
information as is required to be provided from time to time pursuant to
applicable regulatory requirements, including, but not limited to, any
applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations and other state securities agencies.
20
<PAGE>
EXHIBIT 4.2
1995 Non-Employee Directors' Stock Option Plan -
Amended As Of July 26, 1996, July 18, 1997 And August 7, 1998
CALIFORNIA MICRO DEVICES CORPORATION
1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
----------------------------------------------
AMENDED AS OF JULY 26, 1996, JULY 18, 1997 AND AUGUST 7, 1998
-------------------------------------------------------------
1. PURPOSE.
--------
The purpose of the CALIFORNIA MICRO DEVICES CORPORATION Non-Employee
Directors' Stock Option Plan (the "Plan") is to secure for the Corporation and
its shareholders the benefits of the incentive inherent in increased common
stock ownership by the members of the Board of Directors (the "Board") of the
Corporation who are not employees of the Corporation or any of its subsidiaries.
2. DEFINITIONS.
------------
(a) "Board" shall mean the board of directors of the Corporation.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Committee" shall mean the committee appointed by the Board to
---------
administer the Plan, or if no such committee is appointed, by the Board.
(d) "Common Stock" shall mean the voting common stock, of the
Corporation.
------------
(e) "Corporation" shall mean CALIFORNIA MICRO DEVICES CORPORATION, a
-----------
California corporation.
(f) "Director" shall mean a member of the Board.
--------
(g) "Effective Date" shall mean February 10, 1995.
--------------
(h) "Exercise Price" shall mean the price per Share at which an Option
--------------
may be exercised, as determined by the Committee and as specified in the
Optionee's stock option agreement.
(i) "Fair Market Value" shall mean for any day the average of the
-----------------
closing bid and asked prices of the Stock in the over-the-counter market, as
reported through the National Association of Securities Dealers ("NASD")
Automated Quotation System or, if the Stock is listed or admitted to trading on
the Nasdaq National Market System or any national securities exchange or if the
last reported sale price of such Stock is generally available, the last
reported sale price on such system or exchange. The Fair Market Value for
any day for which there is no such bid and asked or last reported sales
price shall be the Fair Market Value of the next preceding day for which
there is such a price.
(j) "Non-Employee Director" shall mean a Director who is not an
---------------------
employee of the Corporation or any of its subsidiaries.
(k) "Option" shall mean an option to purchase Common Stock granted
------
pursuant to the Plan.
(l) "Optionee" shall mean any person who holds an Option pursuant to
----------
the Plan.
(m) "Plan" shall mean the CALIFORNIA MICRO DEVICES CORPORATION 1995
----
Non-Employee Directors' Stock Option Plan, as it may be amended from time to
time.
21
<PAGE>
(n) "Purchase Price" shall mean at any particular time the Exercise
---------------
Price times the number of Shares for which an Option is being exercised.
(o) "Share" shall mean one share of authorized Common Stock.
-----
3. ADMINISTRATION.
---------------
(a) The Committee.
--------------
The Plan shall be administered by a Committee which shall consist
of not less than three members of the Board.
(b) Powers of the Committee.
------------------------
Subject to the provisions of the Plan, the Committee shall have
the authority, in its discretion and on behalf of the Corporation shall,
subject to the provisions of the Plan, grant Options and shall have the power
to construe the Plan, to determine all questions arising thereunder and to
adopt and amend such rules and regulations for the administration of the Plan
as it may deem desirable. Any decision of the Committee in the administration
of the Plan, as described herein, shall be final and conclusive. No member of
the Committee shall be liable for anything done or omitted to be done by such
member or by any other member of the Committee in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.
4. PARTICIPATION.
--------------
Each Non-Employee Director shall be eligible to receive Options in
accordance with the Plan. The adoption of this Plan shall not be deemed to
give any director any right to be granted an option to purchase Common Stock
of the Corporation, except to the extent and upon such terms and conditions
are provided herein.
5. STOCK.
------
(a) Shares Subject to This Plan.
----------------------------
The aggregate number of Shares which may be issued upon
exercise of Options under the Plan shall not exceed Two Hundred and Eighty
Thousand (280,000) subject to adjustment pursuant to Section 8 hereof.
(b) Options Not to Exceed Shares Available.
---------------------------------------
The number of Shares for which an Option is exercisable at any
time shall not exceed the number of Shares remaining available for issuance
under the Plan. If any Option expires or is terminated, the number of Shares
for which such Option was exercisable may be made exercisable pursuant to
other Options under the Plan. The limitations established by this Section
5 shall be subject to adjustment in the manner provided in Section 8 hereof
upon the occurrence of an event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
--------------------------------
(a) Stock Option Agreements.
------------------------
Options shall be evidenced by written stock option agreements
between the Optionee and the Corporation in such form as the Committee shall
from time to time determine. No Option or purported Option shall be a valid
and binding obligation of the Corporation unless so evidenced in writing.
(b) Number of Shares.
-----------------
Each stock option agreement shall state the number of Shares for
which the Option is exercisable in accordance with the following and shall
provide for the adjustment thereof in accordance with Section 8 hereof.
22
<PAGE>
(i) Upon adoption of this Plan by the Board, and subject to the
approval of the Plan by the Shareholders of the Corporation in
accordance with Section 14 hereof, each Non-Employee Director
then in office shall, without further action required, be
granted an Option for the purchase of Ten Thousand (10,000)
Shares. Each other person appointed or elected to serve as
a Non-Employee director during the term of this Plan shall
be granted an option for Fifteen Thousand (15,000) Shares
upon his or her appointment or election.
(ii) Subject to the approval of the Plan by the Shareholders of the
Corporation in accordance with Section 14 hereof, each year,
as of the date of the Annual Meeting of Shareholders of the
Corporation, each Non-Employee Director who has been elected
or re-elected or who is continuing as a member of the Board
as of the adjournment of the Annual Meeting (other than any
Non-Employee Director eligible for a grant pursuant to
paragraph (b)(i)) shall automatically receive an Option for
Ten Thousand (10,000) shares of Common Stock.
(c) Vesting.
--------
An Optionee may not exercise his or her Option for any Shares
until the Non-Employee Director has served one year as a member of the Board
since the date the option was granted. An Optionee may exercise the Option
as to one fourth of the Shares at the end of the 4th full calendar quarter
following the date the Option was granted and as to an additional 1/16th of
the Shares at the end of each of the full calendar quarter commencing with
the 5th full calendar quarter following the date the Option was granted.
The right to exercise the Option shall be cumulative. An Optionee may buy
all, or from time to time any part, of the maximum number of shares which
are exercisable under the an Option, but in no case may Optionee exercise
the Option with regard to a fraction of a share, or for any share for which
the Stock Option is not exercisable.
(d) Lapse of Options.
-----------------
Each stock option agreement shall state the time or times when the
Option covered thereby lapses and becomes unexercisable in part or in full. An
Option shall lapse on the earliest of the following events (unless otherwise
determined by the Committee and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the Option;
(ii) The first anniversary of the Optionee's death;
(iii) The first anniversary of the date the Optionee ceases to
be a Director due to total and permanent disability,
within the meaning of Section 22(e)(3) of the Code;
(iv) Ninety (90) days after the Optionee ceases to be a
Director for any reason other than his or her death or
total and permanent disability;
(v) The date the Optionee files or has filed against him or
her a petition in bankruptcy; or
(vi) The expiration date specified in an Optionee's stock
option agreement.
(e) Exercise Price.
---------------
Each stock option agreement shall state the Exercise Price for the
Shares for which the Option is exercisable. The Exercise Price of all Options
shall be the Fair Market Value of the Shares for which the Option is
exercisable, and not less than the par value of the Shares.
(f) Medium and Time of Payment.
---------------------------
The Purchase Price shall be payable in full in cash upon the
exercise of an Option but the Committee may allow the Optionee to pay the
Purchase Price:
(i) by surrendering Shares in good form for transfer, owned by
the Optionee and having a Fair Market Value on the date of
exercise equal to the Purchase Price;
(ii) by delivery of a full recourse promissory note ("Note")
made by the Optionee in the amount of the Purchase Price,
bearing interest, compounded semiannually, at a rate not
less than the rate determined under Section 7872 of the
Code to insure that no "unstated interest", as defined in
such section will accrue, together with the delivery
23
<PAGE>
of a duly executed standard form security agreement
securing the Note by a pledge of the Shares purchased; or
(iii) in any combination of such consideration or such other
consideration and method of payment for the issuance of
Shares to the extent permitted under applicable law as
long as the sum of the cash so paid, the Fair Market
Value of the Shares so surrendered, and the amount of any
Note equals the Purchase Price.
The Committee or a stock option agreement may prescribe
requirements with respect to the exercise of Options, including the
submission by the Optionee of such forms and documents as the Committee may
require and the delivery by the Optionee of cash sufficient to satisfy
applicable withholding requirements. The Committee may vary the exercise
requirements and procedures from time to time to facilitate, for example, the
broker-assisted exercise of Options.
(g) Nontransferability of Options.
------------------------------
During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee or the Optionee's conservator or legal
representative and shall not be assignable or transferable except pursuant
to a qualified domestic relations order as defined by the Code. In the event
of the Optionee's death, the Option shall not be transferable by the Optionee
other than by will or the laws of descent and distribution.
(h) Termination of Directorship Other than by Death or Disability.
--------------------------------------------------------------
If an Optionee ceases to be a Director for any reason other than
his or her death or disability, the Optionee shall have the right, subject to
the provisions of this Section 6, to exercise any Option held by the Optionee
at any time within ninety (90) days after his or her termination as a Director,
but not beyond the otherwise applicable term of the Option and only to the
extent that on such date of termination as a Director the Optionee's right to
exercise such Option had vested.
(i) Death of Optionee.
------------------
If an Optionee dies while a Director, or after ceasing to be a
Director but during the period while he or she could have exercised an Option
under Section 6(h) hereof, any Option granted to the Optionee may be exercised,
to the extent it had vested at the time of death and subject to the Plan, at
any time within twelve (12) months after the Optionee's death, by the
executors or administrators of his or her estate or by any person or persons
who acquire the Option by will or the laws of descent and distribution, but
not beyond the otherwise applicable term of the Option.
(j) Disability of Optionee.
-----------------------
If an Optionee ceases to be a Director due to becoming totally
and permanently disabled within the meaning of Section 22(e)(3) of the Code,
any Option granted to the Optionee may be exercised to the extent it had
vested at the time of cessation and, subject to the Plan, at any time within
twelve (12) months after the termination of Optionee's position as a Director,
but not beyond the otherwise applicable term of the Option.
(k) Rights as a Shareholder.
------------------------
An Optionee, or a transferee of an Optionee, shall have no rights
as a shareholder of the Corporation with respect to any Shares for which his or
her Option is exercisable until the date of the issuance of a stock certificate
for such Shares. No adjustment shall be made for dividends, ordinary or
extraordinary or whether in currency, securities, or other property,
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 8 hereof.
(l) Other Provisions.
-----------------
The stock option agreements authorized under the Plan may contain
such other provisions which are not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option, as
the Committee shall deem advisable.
24
<PAGE>
7. TERM OF PLAN.
-------------
Options may be granted pursuant to the Plan until ten (10) years
following the Effective Date, and all Options which are outstanding on such
date shall remain in effect until they are exercised or expire by their
terms. The Plan shall expire for all purposes on the date twenty (20) years
following the Effective Date.
8. REORGANIZATIONS.
----------------
(a) Reorganizations.
----------------
The number of Shares covered by the Plan, as provided in
Section 5 hereof, and the number of Shares for which each Option is
exercisable shall be proportionately adjusted for any increase or decrease
in the number of issued Shares resulting from the payment of a Common Stock
dividend, a stock split, a reverse stock split or any other event which
results in an increase or decrease in the number of issued Shares effected
without receipt of consideration by the Corporation, and the Exercise Price
shall be proportionately increased in the event the number of Shares subject
to such Option are decreased and shall be proportionately decreased in the
event the number of Shares subject to such Option are increased. Adjustments
shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) Liquidation.
------------
In the event of the dissolution or liquidation of the
Corporation, each Option shall terminate immediately prior to the
consummation of such action. The Committee shall notify the Optionee
not less than fifteen (15) days prior to the proposed consummation of
a pending dissolution or liquidation, and the Option shall be exercisable
as to all Shares which are vested prior to expiration until immediately
prior to the consummation of such action.
(c) Merger.
-------
In the event of a merger or acquisition involving an acquisition
of the Corporation or an acquisition by the Corporation of another company, the
result of which is that the outstanding voting securities of the Corporation do
not represent, or are not converted into, a majority of the outstanding voting
securities of the surviving corporation, except as otherwise provided in any
particular Option agreement, the vesting of all unvested Options shall be
accelerated and all options shall be immediately exercisable. Without limiting
the generality of the foregoing, in the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option shall
terminate immediately prior to the consummation of such transaction. The
Committee shall notify the Optionee not less than fifteen (15) days prior to
the proposed consummation of such transaction, and the Option shall be
exercisable as to all Shares subject to such Option until immediately prior
to the consummation of such transaction.
(d) Determination by Committee.
---------------------------
All adjustments described in this Section 8 shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
(e) Limitation on Rights of Optionee.
---------------------------------
Except as expressly provided in this Section 8, no Optionee shall
have any rights by reason of any payment of any stock dividend, stock split or
reverse stock split or any other increase or decrease in the number of shares
of stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Exercise Price of the Shares for which an Option is
exercisable.
25
<PAGE>
(f) No Restriction on Rights of Corporation.
----------------------------------------
The grant of an Option shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or to dissolve, liquidate, sell, or transfer all or any part of
its business or assets.
9. SECURITIES LAW REQUIREMENTS.
----------------------------
(a) Legality of Issuance.
---------------------
No Share shall be issued upon the exercise of any Option unless
and until the Corporation has determined that:
(i) The Corporation and the Optionee have taken all actions
required to exempt the issuance of the Shares from the
registration requirements under the Securities Act of 1933,
as amended (the "Act"), or the Corporation and the Optionee
shall determine that the registration requirements of the
Act do not apply to such exercise;
(ii) Any applicable listing requirement of any stock exchange on
which the Common Stock is listed has been satisfied; and
(iii) Any other applicable provision of state or Federal law has
been satisfied.
(b) Restrictions on Transfer; Representations of Optionee; Legends.
---------------------------------------------------------------
Regardless of whether the offering and sale of Shares has been
registered under the Act or has been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge, or other transfer of such Shares, including the placement of
appropriate legends on stock certificates, if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state, or any other law. If the sale of Shares is not registered under
the Act and the Corporation shall determine that the registration requirements
of the Act apply to such sale, but an exemption is available which requires an
investment representation or other representation, the Optionee shall be
required, as a condition to purchasing Shares by exercise of his or her Option,
to represent that such Shares are being acquired for investment, and not with a
view to the sale or distribution thereof, except in compliance with the Act,
and to make such other representations as are deemed necessary or appropriate
by the Corporation and its counsel. Stock certificates evidencing Shares
acquired pursuant to an unregistered transaction to which the Act applies
shall bear such restrictive legends as are required or deemed advisable
under the Plan or the provisions of any applicable law. Any determination
by the Corporation and its counsel in connection with any of the matters set
forth in this section shall be conclusive and binding on all persons.
(c) Registration or Qualification of Securities.
--------------------------------------------
The Corporation may, but shall not be obligated to, register or
qualify the sale of Shares under the Act or any other applicable law.
(d) Exchange of Certificates.
-------------------------
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares sold hereunder is no longer
required, the Optionee or the holder of such certificate shall be entitled to
exchange such certificate for a certificate representing the same number of
Shares but lacking such legend.
10. AMENDMENT OF THE PLAN.
----------------------
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable including, but not limited to amendments
necessary to qualify for any exemption or to comply with applicable law or
regulations, provided, however, that except as provided in Section 8, the Board
may not, without further approval by the shareholders of the Corporation,
materially increase the number of shares of Common Stock as to which Options
may be granted under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements as to
eligibility for Participants in the Plan. No amendment of the Plan shall
materially and adversely affect any right of any Optionee with respect
26
<PAGE>
to any Option theretofore granted without such Optionee's written consent. The
Plan may not be amended more frequently than once every six months with respect
to the number of shares subject to Options granted to members of the Board of
Directors, the timing of such Option grants and the determination of the
exercise price of such Options other than to comport with changes in the Code,
the Employee Retirement Security Act, or the rules thereunder. Notwithstanding
anything to the contrary contained herein, this Plan shall not be amended except
in accordance with the provisions of Rule 16b-3(c) under the Securities
Exchange Act of 1934, as amended, or any successor rule thereto.
11. APPLICATION OF FUNDS.
---------------------
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option shall be used for general corporate
purposes.
12. APPROVAL OF SHAREHOLDERS.
-------------------------
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of all classes of the outstanding shares present and
entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan, and in no event later than one (1) year
following the Effective Date. Prior to such approval, Options may be granted
but shall not be exercisable.
13. WITHHOLDING OF TAXES.
---------------------
In the event the Corporation or a Subsidiary determines that it is
required to withhold Federal, state, or local taxes in connection with the
exercise of an Option or the disposition of Shares issued pursuant to the
exercise of an Option, the Optionee or any person succeeding to the rights of
the Optionee, as a condition to such exercise or disposition, may be required to
make arrangements satisfactory to the Corporation or the Subsidiary to enable it
to satisfy such withholding requirements.
14. RIGHTS AS A DIRECTOR.
---------------------
Neither the Plan nor any Option granted pursuant thereto shall be
construed to give any person the right to remain as a Director of the
Corporation or any Subsidiary.
27
<PAGE>
Exhibit 4.3
1995 Employee Stock Purchase Plan - Amended As Of
July 18, 1997 and August 7, 1998
CALIFORNIA MICRO DEVICES CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN AS AMENDED
--------------------------------------------
JULY 18, 1997 AND AUGUST 7, 1998
--------------------------------
1. PURPOSE.
--------
The purpose of this Plan is to provide an opportunity for Employees of
California Micro Devices Corporation (the "Corporation") and its Designated
Subsidiaries, to purchase Common Stock of the Corporation and thereby to have an
additional incentive to contribute to the prosperity of the Corporation. It is
the intention of the Corporation that the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended, and the Plan shall be construed in accordance with this intention.
2. DEFINITIONS.
-------------
(a) "Board" shall mean the Board of Directors of the Corporation.
-------
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
------
(c) "Committee" shall mean the committee appointed by the Board in
-----------
accordance with Section 12 of the Plan.
(d) "Common Stock" shall mean the Common Stock of the Corporation, or
--------------
any stock into which such Common Stock may be converted.
(e) "Compensation" shall mean an Employee's wages or salary and other
--------------
amounts payable to an Employee on account of personal services rendered by the
Employee to the Corporation or a Designated Subsidiary and which are reportable
as wages or other compensation on the Employee's Form W-2, plus pre-tax
contributions of the Employee under a cash or deferred arrangement (401(k)
plan) or cafeteria plan maintained by the Corporation or a Designated
Subsidiary, but excluding, however, (1) non-cash fringe benefits, (2)
special payments as determined by the Committee (e.g., moving expenses,
unused vacation, severance pay), (3) income from the exercise of stock
options or other stock purchases and (4) any other items of Compensation
as determined by the Committee.
(f) "Corporation" shall mean California Micro Devices Corporation, a
-------------
California corporation.
(g) "Designated Subsidiary" shall mean a Subsidiary which has been
-----------------------
designated by the Board as eligible to participate in the Plan.
(h) "Employee" shall mean an individual employed (within the meaning
----------
of Code section 3401(c) and the regulations thereunder) by the Corporation or a
Designated Subsidiary.
(i) "Entry Date" shall mean the first day of each Option Period. The
------------
first Entry Date shall be such date as is determined by the Committee.
(j) "Exercise Date" shall mean the last business day of each Exercise
---------------
Period.
(k) "Exercise Period" shall mean a six-month or other period as
-----------------
determined by the Committee. The first Exercise Period during an Option Period
shall commence on the first day of such Option Period.
28
<PAGE>
Subsequent Exercise Periods, if any, shall run consecutively after the
termination of the preceding Exercise Period. The last Exercise Period
in an Option Period shall terminate on the last day of such Option Period.
(l) "Fair Market Value" shall mean the value of one (1) share of Common
Stock on the relevant date, determined as follows:
(i) If the shares are traded on an exchange or on the Nasdaq
Stock Market, the reported "closing price" on the next
preceding trading day (provided that in the case of the
first Entry Date, the Fair Market Value shall be the
initial price to the public in the Company's initial
public offering);
(ii) If the shares are traded over-the-counter on the NASDAQ
System (other than on the Nasdaq Stock Market), the
mean between the bid and the ask prices on said System
at the close of business on the next preceding trading
day (provided that in the case of the first Entry Date,
the Fair Market Value shall be the initial price to the
public in the Company's initial public offering); and
(iii) If neither (1) nor (2) applies, the fair market value as
determined by the Committee in good faith. Such
determination shall be conclusive and binding on all
persons.
(m) "Option Period" shall mean a period of up to twenty-seven (27)
---------------
months as determined by the Committee.
(n) "Participant" shall mean a participant in the Plan as described
-------------
in Section 4 of the Plan.
(o) "Plan" shall mean this employee stock purchase plan.
------
(p) "Subsidiary" shall mean any corporation (other than the
------------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, as described in Code section 424(f).
3. ELIGIBILITY.
------------
Any Employee regularly employed on a full-time basis by the Corporation
or by any Designated Subsidiary on an Entry Date shall be eligible to
participate in the Plan with respect to the Option Period commencing on
such Entry Date, provided that the Committee may establish administrative
rules requiring that employment commence some minimum period (e.g., one pay
period) prior to an Entry Date to be eligible to participate with respect to
that Entry Date. An Employee shall be considered employed on a full-time
basis unless his or her customary employment is less than 20 hours per
week or five months per year. No Employee may participate in the Plan if
immediately after an option is granted the Employee owns or is considered
to own (within the meaning of section 424(d) of the Code), shares of stock,
including stock which the Employee may purchase by conversion of convertible
securities or under outstanding options granted by the Corporation,
possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Corporation or of any of its
Subsidiaries. All Employees who participate in the Plan shall have the same
rights and privileges under the Plan except for differences which may be
mandated by local law and which are consistent with Code section 423(b)(5).
The Committee may impose restrictions on eligibility and participation of
Employees who are officers and directors to facilitate compliance with
federal or state securities laws.
4. PARTICIPATION.
--------------
4.1 An Employee who is eligible to participate in the Plan in
accordance with Section 3 may become a Participant by filing, on a date
prescribed by the Committee prior to an applicable Entry Date, a completed
payroll deduction authorization and Plan enrollment form provided by the
Corporation. An eligible Employee may authorize payroll deductions at the rate
of any whole percentage of the Employee's Compensation, not to exceed fifteen
percent (15%) of the Employee's Compensation, or such lesser percentage as
specified by the Committee as applied to an Entry Date or Option Period. All
payroll deductions may be held by the Corporation and commingled with its other
corporate funds. No interest shall be paid or credited to the Participant with
respect to such payroll deductions except where required by local law as
determined by the Committee. A separate bookkeeping account for each
Participant shall be maintained by the Corporation under the Plan and the
amount of each Participant's payroll deductions shall be credited to such
account. A Participant may not make any additional payments into such account.
4.2 Under procedures established by the Committee, a Participant may
suspend or discontinue participation in the Plan or may reduce the rate of his
or her payroll deductions at any time during an Offering Period by completing
and filing a new payroll deduction authorization and Plan enrollment form with
the Corporation, provided that the Committee may, in its discretion, impose
restrictions on a Participant's ability to change the rate of payroll
deductions. A Participant may increase his or her rate of payroll deductions
only effective on an Entry Date by filing a new payroll deduction authorization
and Plan enrollment form. If a new payroll deduction authorization and Plan
enrollment form is not filed with the Corporation, the rate of payroll
deductions shall continue at the originally elected rate throughout the Option
Period unless the Committee determines to change the permissible rate.
If a Participant suspends participation during an Exercise Period, his or
her accumulated payroll deductions will remain in the Plan for purchase of
shares as specified in Section 6 on the following Exercise Date, but the
Participant will not again participate until he or she completes a new payroll
deduction authorization and Plan enrollment form. The Committee may establish
rules limiting the frequency with which Participants may suspend and resume
payroll deductions under the Plan and may impose a waiting period on
Participants wishing to resume suspended payroll deductions. If a Participant
discontinues participation in the Plan, the amount credited to the
Participant's individual account shall be paid to the Participant without
interest (except where required by local law). In the event any Participant
terminates employment with the Corporation or any Subsidiary for any reason
(including death) prior to the expiration of an Option Period, the
Participant's participation in the Plan shall terminate and all amounts
credited to the Participant's account shall be paid to the Participant or
the Participant's estate without interest (except where required by local
law). Whether a termination of employment has occurred shall be determined
by the Committee. The Committee may also establish rules regarding when
leaves of absence or change of employment status (e.g., from full-time to
part-time) will be considered to be a termination of employment, and the
Committee may establish termination of employment procedures for this Plan
which are independent of similar rules established under other benefit plans
of the Corporation and its Subsidiaries.
In the event of a Participant's death, any accumulated payroll deductions
will be paid, without interest, to the estate of the Participant.
5. OFFERING.
---------
5.1 The maximum number of shares of Common Stock which may be issued
pursuant to the Plan shall be Four Hundred Sixty Thousand (460,000) shares. The
Committee may designate any amount of available shares for offering for any
Option Period determined pursuant to Section 5.2.
5.2 Each Option Period, Entry Date and Exercise Period shall be
determined by the Committee. The Committee shall have the power to change the
duration of future Option Periods or future Exercise Periods, and to determine
whether or not to have overlapping Option Periods, with respect to any
prospective offering, without shareholder or Board approval.
5.3 With respect to each Option Period, each eligible Employee who
has elected to participate as provided in Section 4.1 shall be granted an
option to purchase that number of shares of Common Stock which may be
purchased with the payroll deductions accumulated on behalf of such
Employee (assuming payroll deductions at a rate of 15% of Compensation)
during each Exercise Period within such Option Period at the purchase
price specified in Section 5.4 below; provided, however, (1) in no event
shall the Employee be entitled to accrue rights to purchase shares under
the Plan (and all other employee stock purchase plans, as defined in Code
section 423, of the Corporation and its subsidiaries) at a rate which exceeds
$25,000 of
30
<PAGE>
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 (2) the maximum shares subject to any option shall in no event
exceed 10,000.
5.4 The option price under each option shall be the lower of: (i)
eighty-five percent (85%) of the Fair Market Value of the Common Stock on the
Entry Date on which an option is granted, or (ii) eighty-five percent (85%) of
the Fair Market Value on the Exercise Date on which the Common Stock is
purchased.
5.5 If the total number of shares of Common Stock for which options
granted under the Plan are exercisable exceeds the maximum number of shares
offered on any Entry Date, the number of shares which may be purchased under
options granted on the Entry Date shall be reduced on a pro rata basis in as
nearly a uniform manner as shall be practicable and equitable. In this event,
payroll deductions shall also be reduced or refunded accordingly. If an
Employee's payroll deductions during any Exercise Period exceeds the purchase
price for the maximum number of shares permitted to be purchased under Section
5.3, the excess shall be refunded to the Participant without interest (except
where otherwise required by local law).
5.6 In the event that the Fair Market Value of the Corporation's
Common Stock is lower on the first day of an Exercise Period within an Option
Period (subsequent "Reassessment Date") than it was on Entry Date for such
Option Period, all Employees participating in the Plan on the Reassessment Date
shall be deemed to have relinquished the unexercised portion of the option
granted on the Entry Date and to have enrolled in and received a new option
commencing on such Reassessment Date, unless the Committee has determined not to
permit overlapping Option Periods or to restrict such transfers to lower price
Option Periods.
6. PURCHASE OF STOCK.
------------------
Upon the expiration of each Exercise Period, a Participant's option
shall be exercised automatically for the purchase of that number of full
shares of Common Stock which the accumulated payroll deductions credited to
the Participant's account at that time shall purchase at the applicable price
specified in Section 5.4.
7. PAYMENT AND DELIVERY.
---------------------
Upon the exercise of an option, the Corporation shall deliver to the
Participant the Common Stock purchased and the balance of any amount of payroll
deductions credited to the Participant's account not used for the purchase.
The Committee may permit or require that shares be deposited directly with a
broker designated by the Participant (or a broker selected by the Committee),
and the Committee may utilize electronic or automated methods of share transfer.
To the extent the unused cash balance represents a fractional share, the unused
cash balance credited to the Participant's account shall be carried over to the
next Exercise Period, if the Participant is also a Participant in the Plan at
that time or refunded to the Participant, as determined by the Committee. The
Corporation shall retain the amount of payroll deductions used to purchase
Common Stock as full payment for the Common Stock and the Common Stock shall
then be fully paid and non-assessable. No Participant shall have any voting,
dividend, or other stockholder rights with respect to shares subject to any
option granted under the Plan until the option has been exercised and shares
issued.
8. RECAPITALIZATION.
-----------------
If after the grant of an option, but prior to the purchase of Common
Stock under the option, there is any increase or decrease in the number of
outstanding shares of Common Stock because of a stock split, stock dividend,
combination or recapitalization of shares subject to options, the number of
shares to be purchased pursuant to an option, the share limit of Section 5.3
and the maximum number of shares specified in Section 5.1 shall be
proportionately increased or decreased, the terms relating to the purchase
price with respect to the option shall be appropriately adjusted by the
Committee, and the Committee shall take any further actions which, in the
exercise of its discretion, may be necessary or appropriate under the
31
<PAGE>
circumstances.
The Committee, if it so determines in the exercise of its sole
discretion, also may adjust the number of shares specified in Section 5.1,
as well as the price per share of Common Stock covered by each outstanding
option and the maximum number of shares subject to any individual option,
in the event the Corporation effects one or more reorganizations,
recapitalizations, spin-offs, split-ups, rights offerings or reductions
of shares of its outstanding Common Stock.
The Committee's determinations under this Section 8 shall be conclusive
and binding on all parties.
9. MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.
----------------------------------------------------
In the event of the proposed liquidation or dissolution of the
Corporation, the Option Period will terminate immediately prior to the
consummation of such proposed transaction, unless otherwise provided by the
Committee in its sole discretion, and all outstanding options shall
automatically terminate and the amounts of all payroll deductions will be
refunded without interest to the Participants.
In the event of a proposed sale of all or substantially all of the
assets of the Corporation, or the merger or consolidation of the Corporation
with or into another corporation, then in the sole discretion of the
Committee, (1) each option shall be assumed or an equivalent option shall
be substituted by the successor corporation or parent or subsidiary of such
successor corporation, (2) a date established by the Committee on or before
the date of consummation of such merger, consolidation or sale shall be
treated as an Exercise Date, and all outstanding options shall be deemed
exercisable on such date or (3) all outstanding options shall terminate
and the accumulated payroll deductions shall be returned to the Participants.
10. TRANSFERABILITY.
----------------
Options granted to Participants may not be voluntarily or involuntarily
assigned, transferred, pledged, or otherwise disposed of in any way, and any
attempted assignment, transfer, pledge, or other disposition shall be null and
void and without effect. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan,
other than as permitted by the Code, such act shall be treated as an election
by the participant to discontinue participation in the Plan pursuant to
Section 4.2.
11. AMENDMENT OR TERMINATION OF THE PLAN.
-------------------------------------
11.1 The Plan shall continue until February 9, 2005, unless
previously terminated in accordance with Section 11.2.
11.2 The Board may, in its sole discretion, insofar as permitted by
law, terminate or suspend the Plan, or revise or amend it in any respect
whatsoever, except that, without approval of the stockholders, no such revision
or amendment shall:
(a) materially increase the number of shares subject to the
Plan other than an adjustment under Section 8 of the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan;
(c) materially increase the benefits accruing to
Participants;
(d) reduce the purchase price specified in Section 5.4,
except as specified in Section 8;
(e) extend the term of the Plan beyond the date specified in
Section 11.1; or
(f) amend this Section 11.2 to defeat its purpose.
32
<PAGE>
12. ADMINISTRATION.
---------------
The Plan shall be administered by a Committee which shall consist of at
least three members appointed by the Board. The Committee shall have full
power and authority to promulgate any rules and regulations which it deems
necessary for the proper administration of the Plan, to interpret the
provisions and supervise the administration of the Plan, and to take
all action in connection with administration of the Plan as it deems
necessary or advisable. Decisions of the Committee shall be made by a
majority of its members and shall be final and binding upon all
participants. Any decision reduced to writing and signed by a majority of
the members of the Committee shall be fully effective as if it had been
made at a meeting of the Committee duly held. The Corporation shall
pay all expenses incurred in the administration of the Plan. No Committee
member shall be liable for any action or determination made in good faith with
respect to the Plan or any option granted thereunder.
13. COMMITTEE RULES FOR FOREIGN JURISDICTIONS.
------------------------------------------
The Committee may adopt rules or procedures relating to the operation
and administration of the Plan in non-United States jurisdictions to
accommodate the specific requirements of local laws and procedures.
Without limiting the generality of the foregoing, the Committee is
specifically authorized to adopt rules and procedures regarding handling
of payroll deductions, conversion of local currency, withholding procedures
and handling of stock certificates which vary with local requirements.
14. SECURITIES LAWS REQUIREMENTS.
-----------------------------
The Corporation shall not be under any obligation to issue Common Stock
upon the exercise of any option unless and until the Corporation has determined
that: (i) it and the Participant have taken all actions required to register
the Common Stock under the Securities Act of 1933, or to perfect an exemption
from the registration requirements thereof; (ii) any applicable listing
requirement of any stock exchange on which the Common Stock is listed has been
satisfied; and (iii) all other applicable provisions of state and federal
law have been satisfied.
15. GOVERNMENTAL REGULATIONS.
-------------------------
This Plan and the Corporation's obligation to sell and deliver shares of
its stock under the Plan shall be subject to the approval of any governmental
authority required in connection with the Plan or the authorization, issuance,
sale, or delivery of stock hereunder.
16. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
----------------------------------
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ of the Corporation or any Designated
Subsidiary or to interfere with the right of the Corporation or Designated
Subsidiary to discharge any Employee at any time.
17. GOVERNING LAW.
--------------
This Plan shall be governed by California law, but shall be interpreted
to be consistent with the requirements of any employee stock purchase plan under
Code section
423.
18. EFFECTIVE DATE.
---------------
This Plan shall be effective February 10, 1995, subject to approval of
the shareholders of the Corporation within 12 months of its adoption by the
Board of Directors.
33
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> $ 887
<SECURITIES> 4,661
<RECEIVABLES> 5,289
<ALLOWANCES> (385)
<INVENTORY> 8,326
<CURRENT-ASSETS> 19,232<F1>
<PP&E> 26,232
<DEPRECIATION> (13,307)
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<BONDS> 0
0
0
<COMMON> 53,041
<OTHER-SE> (32,234)
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<SALES> 8,231
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<CGS> 6,550
<TOTAL-COSTS> 6,550
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> (846)
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<EPS-PRIMARY> (0.08)
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<FN>
<F1>Includes Prepaid expenses and other assets - 454.
<F2>Includes Restricted cash - 3,199; and Other long-term assets - 401.
<F3>Includes Long-term debt - 8,066
<F4>Includes Research and development - 902; Selling,marketing,
and administrative - 1,480; Interest (income) - (87); and
other (income)/expense - 4.
</FN>
</TABLE>
