CALIFORNIA MICRO DEVICES CORP, DEF 14A, 1999-06-16

CALIFORNIA MICRO DEVICES CORP
DEF 14A, 1999-06-16
ELECTRONIC COMPONENTS & ACCESSORIES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. )

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12

CALIFORNIA MICRO DEVICES CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)

------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transactions applies:

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

(2) Aggregate number of securities to which transactions applies:

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

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount previously paid:

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

(2) Form, Schedule or Registration Statement No.:

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(3) Filing party:

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(4) Date filed:

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<PAGE>

June 15, 1999

[GRAPHIC OMITTED] CALIFORNIA MICRO DEVICES CORPORATION

Dear Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders on
Thursday, August 5, 1999 at 1:00 p.m., at the Embassy Suites Hotel, 901 E.
Calaveras Blvd., Milpitas, California.

The Board of Directors recommends that all shareholders vote for the election of
the nominated directors, and for the other proposals presented in this Proxy
Statement.

Proposal 3 is for an amendment to the Company's employees stock purchase plan to
increase the amount of shares available under this plan. The Board of Directors
believes that this Purchase Plan is necessary to enable the Company to provide
meaningful equity incentives to attract, motivate and retain employees and
recommends that the Shareholders vote for ratification of this adoption.
California Micro Devices operates in an extremely competitive high tech job
market where unemployment is extremely low and where turnover can be very high.
In this job market, stock purchase plans are offered by the majority of the high
technology firms with whom the Company competes for talent. Your support of this
proposal is very important to the future success of your Company.

Whether or not you plan to attend the Annual Meeting, please mark, sign, date
and return your proxy card in the enclosed envelope as soon as possible. This
will assure that your stock will be voted in accordance with the instructions
you have given in your proxy card in the event you are unable to attend. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously sent in your proxy card. It is very important that every shareholder
vote. PLEASE send in your proxy card.

Very truly yours,

/s/ Wade Meyercord

WADE MEYERCORD
Chairman of the Board

<PAGE>

CALIFORNIA MICRO DEVICES CORPORATION
215 Topaz Street, Milpitas, CA 95035
Phone: (408) 263-3214

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders of California Micro Devices Corporation (the
"Company") will be held on Thursday, August 5, 1999, at 1:00 p.m., at the
Embassy Suites Hotel, 901 E. Calaveras Blvd., Milpitas, California.

The items of business are:

1. Election of seven directors of the Company, to serve until the next
annual meeting of shareholders.

2. Ratification of the Appointment of Auditors.

3. Amendment of the 1995 Employee Stock Purchase Plan to increase from
460,000 to 960,000 the number of shares reserved for issuance
thereunder.

4. Such other matters as may properly come before the meeting.

These items are more fully described in the following pages, which are
hereby made a part of this Notice.

Only shareholders of record at the close of business on June 15, 1999
will be entitled to vote at the meeting.

All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy card as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any shareholder attending the
meeting may vote in person even if he or she returned a proxy.

Sincerely,

/s/ Scott Hover-Smoot

SCOTT HOVER-SMOOT
Secretary

Milpitas, California
June 15, 1999

<PAGE>

CALIFORNIA MICRO DEVICES CORPORATION
PROXY STATEMENT

I. GENERAL INFORMATION

This Proxy Statement, the accompanying proxy/voting instruction card
(the "Proxy Card") and California Micro Devices Corporation Annual Report on
Form 10-K for the fiscal year ended March 31, 1999 (the "Annual Report"), are
being distributed to shareholders commencing on or about June 17, 1999. Whether
or not you expect to attend the Company's 1999 Annual Meeting of Shareholders
(the "Annual Meeting") in person, the Board of Directors requests that you
complete and return your Proxy Card for use at the Annual Meeting and any
adjournments thereof.

PROXY STATEMENT. This Proxy Statement consists of Sections I through
VII, and contains three proposals. These Sections are intended to be read and
understood together as one document. PLEASE CAREFULLY READ EACH SECTION.

WHO CAN ATTEND THE ANNUAL MEETING. Only shareholders of record of
common stock issued by California Micro Devices Corporation ("CMD" or the
"Company") at the close of business on June 15, 1999, the Record Date for the
Annual Meeting, are entitled to notice of and to vote at the Annual Meeting.

QUORUM AT THE ANNUAL MEETING. As of the Record Date, CMD had issued and
outstanding 10,116,144 shares of voting Common Stock. The holders of a majority
of the outstanding shares of Common Stock present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. The specific vote requirements for the matters being submitted to a
vote by shareholders at the Annual Meeting are provided under "Approval of Proxy
Statement Items," and the relevant proposals.

SUBMISSION OF PROXY CARD. You are urged to sign and date the Proxy Card
and return it in the prepaid reply envelope provided for such purpose. THIS WILL
IN NO WAY AFFECT YOUR RIGHT TO ATTEND THE ANNUAL MEETING AND VOTE IN PERSON. A
shareholder giving a proxy has the right to revoke it at any time before it is
voted by giving notice of such revocation to the Secretary of the Company, by
attending the meeting and voting in person, or by returning a later dated proxy.

The number of shares designated on the Proxy Card represents the total
number of shares held in your name on the Record Date. If you receive more than
one proxy card in separate mailings it is an indication that your shares are
registered differently in more than one account. ALL Proxy Cards received by you
should be signed and mailed by you to ensure that all your shares are voted.

VOTING BY PROXY CARD. When you vote by Proxy Card, the following
procedure will apply:

If you intend to vote by Proxy Card, please cast your vote FOR or
AGAINST any proposal by marking the appropriate box. Sign your Proxy Card where
indicated, and return it in the enclosed prepaid envelope. When your Proxy Card
is returned properly marked and signed, the shares represented thereby will be
voted in accordance with your directions.

Signed proxies received by California Micro Devices Corporation on
which no contrary instruction has been given will be voted FOR EACH OF THE
NOMINEES FOR DIRECTORS AND FOR PROPOSALS 2 THROUGH 3. IF YOU DO NOT VOTE FOR OR
AGAINST A PROPOSAL, AND YOU RETURN YOUR SIGNED PROXY CARD, YOU WILL HAVE VOTED
FOR PROPOSALS 2 THROUGH 3 AND FOR THE NOMINEES RECOMMENDED. If you wish to vote
in accordance with the Board of Directors' recommendations, simply sign, date
and return your proxy card in the envelope provided.

As of the date of this Proxy Statement, the Board does not intend to
present any matter for action at the Annual Meeting other than the above items.

Copies of proxy solicitation material will be furnished to brokerage
houses, fiduciaries, and custodians (the "Named Holders") holding shares in
their names which are beneficially owned by others to forward to such beneficial

<PAGE>

owners. The Company may reimburse such persons for their cost of forwarding the
solicitation material to such beneficial owners. Original solicitation of
proxies by mail may be supplemented, if deemed desirable or necessary, by one or
more of telephone, telegram, facsimile, or personal solicitation by directors,
officers, or employees of the Company or by proxy solicitors retained by the
Company, Corporate Investor Communications, Inc. ("CIC"). No additional
compensation will be paid to any Company employee, officer, or director for such
services. The cost of proxy solicitation services provided by CIC, exclusive of
out-of-pocket costs, is not expected to exceed $12,000.

CONDUCT OF THE ANNUAL MEETING. The Annual Meeting will be conducted in
accordance with those procedures established by the Chairman of the Board of
Directors.

The Annual Meeting will proceed in the same order as the Proposals set
out below.

PROCEDURE FOR DIRECTOR NOMINATIONS BY SHAREHOLDERS. The By-Laws of the
Company requires advance notification of the intent of any shareholder to
nominate a person for the position of Director of the Company. The Nominating
Committee will consider nominees proposed by the shareholders. The By-Laws
require that the Company's Secretary must receive written notice of the intent
of any shareholder to nominate a person as a director of the Company not less
than thirty days before the date of the Annual Meeting. Pursuant to the By-Laws,
notice of the intent to nominate must be sent in writing to: California Micro
Devices Corporation, Attn.: Scott Hover-Smoot, Secretary, 215 Topaz Street,
Milpitas, California 95035. Such notice must be received by 8:30 AM Pacific
Daylight Savings Time, July 6, 1999, and must be accompanied by a statement from
the nominee indicating his or her willingness to serve if elected and disclosing
his or her principal occupations or employment during the past five years. Any
nomination made of a person whose nominee has not complied with this advance
notification requirement will be disallowed, and no nomination of such person
shall be placed before the shareholders.

APPROVAL OF PROXY STATEMENT ITEMS. Only holders of shares of the
Company's Common Stock of record as of the close of business on June 15, 1999
(the "Record Date") are entitled to vote at the Annual Meeting. Each share if
Common Stock is entitled to one vote on all matters to be voted upon. Votes cast
at the Annual Meeting will be counted by an inspector of election, appointed by
the Company. The presence, in person or by proxy duly authorized, of the holders
of a majority of the voting shares will constitute a quorum for the transaction
of business at the Annual Meeting and any continuation or adjournment thereof.
Broker non-votes (i.e. shares held by a broker or nominee which are represented
at the Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted in determining
whether a quorum is present at the Annual Meeting.

Any shares not voted (whether by abstention, broker non-votes or
otherwise) will have no impact on the election of directors, except to the
extent that withholding the authority to vote for an individual results in
another individual receiving a larger portion of votes.

Proposals submitted to the shareholders in the enclosed proxy must be
approved by the vote of the holders of a majority of the votes of the shares of
the Company represented in person or by proxy and entitled to vote at the Annual
Meeting. In determining whether such proposals have been approved, abstentions
and broker non-votes are not counted as votes for or against the proposal.

<PAGE>

II. MATTERS TO BE VOTED ON AT THE ANNUAL MEETING

ELECTION OF SEVEN DIRECTORS (PROPOSAL NO. 1)

Your Board Recommends a Vote "FOR" the Election of
Dr. Angel Jordan, Jeffrey Kalb, J. Daniel McCranie, Wade Meyercord,
Stuart Schube, Dr. John Sprague, and Donald Waite as Directors

Seven directors are to be elected to serve until the next annual
meeting of shareholders and until the election and qualification of their
successors. The Company's By-Laws provide for not less than five nor more than
nine Directors, with the current number of directors fixed at seven.

Unless otherwise instructed, proxy holders will vote the proxies
received by them for the seven nominees named below.

All of the seven nominees are current directors of the Company: Dr.
Angel Jordan, Jeffrey Kalb, J. Daniel McCranie, Wade Meyercord, Stuart Schube,
Dr. John Sprague, and Donald Waite.

Brief biographies of the nominees are set out below. Additional
information regarding their stock ownership and compensation can be found below
under Sections III and IV.

<TABLE>
The following table sets forth the names, ages, and principal
occupations for the periods indicated and other directorships of each of the
current nominees at the 1999 Annual Meeting.

<CAPTION>
Principal Occupation for the past Five Years Director
Name Age and Other Directorships Since
---- --- ----------------------- -----
<S> <C> <C> <C>
Angel G. Jordan 68 Keithley University Professor of Electrical & Computer Engineering and Robotics 1986
at Carnegie-Mellon University since 1997; Professor of Electrical & Computer
Engineering from 1966 to 1997; Provost from 1983 to 1991; Dean of Engineering
from 1979 to 1983. Director of Magnascreen Corporation, Mirror Systems, and
SOCINTEC.

Jeffrey C. Kalb 56 President and Chief Executive Officer of the Company since December 1994. 1995
President and Chief Operating Officer of MasPar Computer Corporation (computer
systems manufacturer) from 1988 to 1993. Vice President of Digital Equipment
Corporation (computer systems manufacturer) from 1983 to 1987.

J. Daniel McCranie 55 Executive Vice President of Marketing and Sales, Cypress Semiconductor 1998
Corporation (manufacturer and supplier of integrated circuits) since 1993.
Previously Chairman and Chief Executive Officer of SEEQ Technology Incorporated
(semiconductor manufacturer) from 1989 to 1993. He joined SEEQ in 1986 as Vice
President of Sales and Marketing.

Wade Meyercord 58 Chairman of the Board since October 1994. Senior Vice President of Diamond 1992
Multimedia Systems, Inc. (multimedia and connectivity company) since December
1997. President, Meyercord & Associates, Inc. since 1987 (consulting firm).
Chief Executive Officer of Read-Rite Corp. (electronic data storage company)
from 1984 to 1987. Director ADFlex Solutions (flexible circuits) since 1996
(audit committee).

Stuart Schube 59 President, Acorn Ventures, Inc. (venture capital management company), since 1986
1986, and Director and founder of Work Process Systems, Inc. - a Houston,
Texas based developmental stage software company since 1997.

<PAGE>

John L. Sprague 68 President, John L. Sprague Associates since 1987 (consulting firm). President 1996
and Chief Executive Officer, Sprague Electric Company (electronics company),
1981 to 1987. Various other executive management positions at Sprague Electric
Company from 1959 to 1981. Director Allmerica Financial Corporation (insurance
company) since 1972 (audit committee); Director Aerovox Corporation (capacitor
company) since 1989 (audit and nominating committees); Director SIPEX
Corporation, (semiconductor corporation) since 1972 (audit and compensation
committees).

Donald L. Waite 66 Executive Vice President and Chief Administrative Officer, Seagate Technology, 1997
Inc., (manufacturer of disc drives, tape drives and storage management software)
since 1995. Joined Seagate in 1983 as Vice President of Finance and Chief
Financial Officer; promoted to Senior Vice President, Finance in 1984.
Director, CVC Holdings, Inc. (deposition equipment company) since 1995.
</TABLE>

There are no family relationships among any of the directors and officers.

<PAGE>

RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
(PROPOSAL NO. 2)

Your Board Recommends a Vote "FOR" the Ratification of
Ernst & Young LLP as the Company's Independent Auditors

The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 2000, and has further
directed that management submit the selection of independent auditors for
ratification by the shareholders at the Annual Meeting. Its representatives are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions.

During the Company's three most recent fiscal years and for the
subsequent interim periods, there were no disagreements or reportable events
pursuant to Item 304(a) (1) (iv) or (v) of Regulation S-K.

Shareholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. The Board of Directors is submitting the selection of Ernst & Young
LLP to the shareholders for ratification as a matter of good corporate practice.
In the event the shareholders fail to ratify the selection, the Board of
Directors will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board of Directors in its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if the Board of Directors determines that such a change could be in the
best interests of the Company and its shareholders.

<PAGE>

AMENDMENT OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 3)

Your board Recommends a Vote "FOR" the Amendment of
The 1995 Employee Stock Purchase Plan

This amendment is to increase from 460,000 to 960,000 the number of
shares reserved for issuance under the previously approved 1995 Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan was adopted by the Board
of Directors on February 10, 1995 and ratified by the shareholders of the
Company at the 1995 Annual Meeting. Your Board recommends amending the Purchase
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 500,000 to 960,000, to allow for the employees to continue to
share in the growth and prosperity of the Company by providing them with an
opportunity to purchase stock in the Company on favorable terms through payroll
deductions. As of March 31, 1999, 395,429 shares have been issued under the
Purchase Plan.

At the Annual Meeting, the shareholders are being requested to ratify
the amendment of the Purchase Plan. The affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present, or represented and
entitled to vote at the Annual Meeting, will be required to ratify the adoption.
The Board of Directors believes that this Purchase Plan is necessary to enable
the Company to provide meaningful equity incentives to attract, motivate and
retain employees and recommends that the Shareholders vote for ratification of
this adoption. California Micro Devices operates in an extremely competitive
high tech job market where unemployment is extremely low and where turnover can
be very high. In this job market, stock purchase plans are offered by the
majority of the high technology firms with whom the Company competes for talent.
Proxies solicited by the Board will be voted for this proposal unless
shareholders specify otherwise in those proxies.

A summary of the principal provisions of the Purchase Plan is set forth
below.

Purpose. The purpose of the Purchase Plan is to attract and retain the
best available personnel, to provide additional incentives to the employees of
the Company and its subsidiaries, to promote the success of the Company's
business and to enable the employees to share in the growth and prosperity of
the Company by providing them with an opportunity to purchase stock in the
Company on favorable terms through payroll deductions.

Administration. The Purchase Plan is administered by a committee of the
Board of Directors formed pursuant to the Purchase Plan (the "Committee").
Members of the Committee are ineligible to participate under the Purchase Plan.
All questions of interpretation of the Purchase Plan are determined in the sole
discretion of the Committee, and its determinations are final and binding upon
all participants.

Eligibility. Any person who is employed by the Company (or any of its
majority-owned subsidiaries) at least 20 hours per week and more than five
months in a calendar year is eligible to participate in the Purchase Plan,
provided that the employee is employed on the first day of an offering period
and subject to certain limitations imposed by section 423(b) of the Code. Based
upon the number of employees as of March 31, 1999, approximately 240 employees
are eligible to participate in the Purchase Plan.

Offering Dates. The Purchase Plan is implemented by establishing option
periods. Option periods may be any period up to 27 months. However, the
Company's policy has been to establish option periods of three months and the
Company's intention is to continue this policy. The Board of Directors may alter
the duration of the option periods without shareholder approval. The Company has
commenced offerings pursuant to the Purchase Plan.

Purchase Price. The purchase price per share at which shares are sold
under the Purchase Plan is 85% of the lower of the fair market value of the
Common Stock (a) on the date an option is granted or (b) on the date of
purchase. The determination of the fair market value of the Common Stock on a
grant date is based upon the closing price listed on the Nasdaq National Market
System as of such date or the immediately preceding trading day, if the
applicable valuation date is not a trading day.

Payment of Purchase Price; Payroll Deductions. The purchase price of
the shares is accumulated by payroll deductions during the offering period. The
deductions may not exceed 15% of a participant's eligible

<PAGE>

compensation. Eligible compensation is interpreted to mean total compensation,
including bonuses and commissions, but excluding special payments (such as
moving expenses) and income with respect to stock options or other stock
purchases. Payroll deductions generally commence on the first payday following
the offering date, and continue at the same rate until the last payday of the
offering period unless sooner terminated as provided in the Purchase Plan.

Purchase of Stock; Exercise of Option. The maximum number of shares
placed under option to a participant in an offering is that number determined by
dividing the amount of the participant's total payroll deductions which are
accumulated during the offering period (not to exceed an amount equal to 15% of
the participant's actual eligible compensation during the offering period) by
the lower of 85% of the fair market value of the Common Stock at the beginning
or end of the offering period, and subject to the further limitation that the
number of shares subject to any option granted to an employee shall not exceed
the maximum number of shares set by the Compensation Committee of the Board of
Directors prior to the beginning of the offering period.

In no event shall an employee be entitled to accrue rights to purchase
shares under the Purchase Plan at a rate which exceeds $25,000.00 of the fair
market value of such stock (determined at the time the option is granted) for
any calendar year in which such option is outstanding at any time, and the
maximum shares subject to any option in any one calendar year shall in no event
exceed 10,000.

Withdrawal. A participant's interest in a given offering may be
terminated in whole, but not in part, by signing and delivering to the Company a
notice of withdrawal from the Purchase Plan. Such withdrawal may be elected at
any time prior to the end of the applicable option period. Any withdrawal by the
participant of accumulated payroll deductions for a given offering automatically
terminates the participant's participation in that offering. The failure to
remain in the continuous employ of the Company for at least 20 hours per week
during an offering period will be deemed to be a withdrawal from the offering.
In the event of withdrawal, payroll deductions will be returned to a
participant, without interest.

Capital Changes. In the event any change is made in the Company's
capitalization, such as a stock split or stock dividend, which results in an
increase or decrease in the number of outstanding shares of Common Stock without
receipt of consideration by the Company, appropriate adjustments will be made by
the Board of Directs in the shares subject to purchase under the Purchase Plan
and in the purchase price per share.

Non-Assignability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be pledged, assigned or transferred for
any reason and any such attempt may be treated by the Company as an election to
withdraw from the Purchase Plan.

Amendment and Termination of the Plan. The board of Directors may at
any time amend or terminate the Purchase Plan, except that such termination
shall not affect options previously granted nor may any amendment make any
change in an option granted prior thereto which adversely affects the rights of
any participant. No amendment may be made to the Purchase Plan without prior
approval of the shareholders of the Company if such amendment would increase the
number of shares reserved under the plan, materially modify the eligibility
requirements or materially increase the benefits that may accrue under the plan.

Federal Tax Information. The Purchase Plan, and the right to
participants to make purchases thereunder, is intended to qualify under the
provisions of Section 421 and 423 of the Internal Revenue Code (the "Code").
Under these provisions, no income will be taxable to a participant at the time
of grant of the option or purchase of shares. Upon disposition of the shares,
the participant will be subject to tax and the amount of the tax will depend
upon the holding period. If the shares are disposed of by the participant at
least two years after the date of option grant (the beginning of the Offering
Period and at least one year after the date of option exercise (the date on
which the shares were purchased by the participant), the lesser of (a) the
excess of the fair market value of the shares at the time of such disposition
over the option price, or (b) the excess of the fair market value of the shares
at the time the option was granted over the option price (which option price
will be computed as of the grant date) will be treaded as ordinary income, and
any further gain will be long-term capital gain. If the participant disposes of
the shares before two years after the date of option grant or one year after the
date of option exercise (a disqualifying disposition), the participant will be
taxed in the same manner as holders of nonstatutory options. The Company is not
entitled to a deduction for

<PAGE>

amounts taxed as ordinary income to a participant except to the extent of
ordinary income reported by participants upon a disqualifying disposition of
shares.

The foregoing is only a summary of the effect of federal income
taxation upon the participant and the Company with respect to shares purchased
under the Purchase Plan and does not purport to be complete, and does not
discuss the income tax laws of any municipality, sate or foreign country in
which an optionee may reside.

<PAGE>

III. SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS

Directors and Executive Officers of the Registrant

The following table sets forth certain information concerning the
Company's current directors and executive officers:

Name Age Position
---- --- --------
Jeffrey C. Kalb(3) 56 President, Chief Executive Officer, Director
John E. Trewin 52 Vice President and Chief Financial Officer
Charles Bellavia 51 Vice President of Marketing and Sales
John Jorgensen 51 Vice President of Engineering
Scott Hover-Smoot 44 General Counsel and Corporate Secretary
Arieh Schifrin 60 Vice President, Operations
Angel G. Jordan(2) 68 Director
J. Daniel McCranie(1) 55 Director
Wade Meyercord(3) 58 Chairman of the Board
Stuart Schube(2)(3) 59 Director
John Sprague(1) 69 Director
Donald L. Waite(1)(2) 66 Director

- ------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee

Jeffrey C. Kalb has been President and Chief Executive Officer of the
Company since December 1994. He has been a director of the Company since
September 1995. He was President and Chief Operating Officer of MasPar Computer
Corporation, a computer systems manufacturer, from 1988 to 1993. He was Vice
President with Digital Equipment Corporation, a computer systems manufacturer,
from 1983 to 1987.

John E. Trewin has been Vice President and Chief Financial Officer
since January 1995. He was Vice President and Chief Financial Officer of The
O'Brien Corporation, a coatings manufacturer, from 1990 to 1994 and Vice
President and Chief Financial Officer of Ampex Corporation, an electronics
equipment and magnetic recording media manufacturer, from 1986 to 1989.

Charles F. Bellavia has been Vice President of Marketing and Sales
since April 1999. He was Vice President of Sales for the Company from November
1998 to April 1999. He was a management consultant for high technology companies
from 1996 to 1998. He was Vice President, Sales and Marketing of Adaptive Logic,
Inc., a semiconductor manufacturing company, from 1994 to 1996, Vice President,
Sales and Marketing for IXYX Corporation, a power semiconductor company, from
1991 to 1993 and Director of Worldwide Sales for Hewlett Packard's Avantek
Division (wireless equipment and devices) from 1984 to 1991. He has been a
Director of Inter-Manufacturing, Inc (IMI) a manufacturing services company,
since 1997.

John Jorgensen has been Vice President of Engineering since November
1995. He held several positions at National Semiconductor Corporation from 1972
to 1995 including Director of Corporate Business Development, Director of DSP
Business Unit, and Director of Advanced Networks Division.

<PAGE>

Arieh Schifrin has been Vice President, Operations since February 1995.
He was a management consultant for high technology companies from 1991 to 1995.
He was Executive Vice President for Catalyst Semiconductor, a semiconductor
company, from 1989 to 1991; Executive Vice President of Xicor, Inc., a
semiconductor manufacturing company, from 1980 to 1989; and Operations Manager
for Data General Corp., a computer company, from 1977 to 1980.

Scott Hover-Smoot has been Corporate Secretary and General Counsel
since July 1994. He was Associate and Senior Associate at Berliner, Cohen, a law
firm, from 1986 to 1994.

Angel G. Jordan has been a Director of the Company since 1986. Dr.
Jordan is a Keithley University Professor of Electrical & Computer Engineering
and Robotics at Carnegie-Mellon University since 1997; Professor of Electrical &
Computer Engineering from 1966 to 1997; Provost from 1983 to 1991; Dean of
Engineering from 1979 to 1983. Director of Magnascreen Corporation, Mirror
Systems, and SOCINTEC.

J. Daniel McCranie has been a Director of the Company since 1998. Mr.
McCranie is Executive Vice President of Marketing and Sales, Cypress
Semiconductor Corporation, a manufacturer and supplier of integrated circuits
since 1993. Previously he was Chairman and Chief Executive Officer of SEEQ
Technology Incorporated, a semiconductor manufacturer from 1989 to 1993. He
joined SEEQ in 1986 as Vice President of Sales and Marketing.

Wade Meyercord is Chairman of the Board of Directors of the Company and
has served on the Board of Directors since 1992. Mr. Meyercord is also President
of Meyercord & Associates, a consulting company, since 1987. He is currently a
Senior Vice President of Diamond Multimedia Systems, Inc., a multimedia and
connectivity products company. He was Chief Executive Officer of Read-Rite
Corp., an electronic data storage products company, from 1984 to 1987. Mr.
Meyercord is a member of the board of directors of ADFlex Solutions and is a
member of their audit committee.

Stuart Schube has been a Director of the Company since 1986. He has
been President of Acorn Ventures, Inc., a venture capital management firm, since
1986. He is also Director and founder of Work Process Systems, Inc. - a Houston,
Texas based developmental stage software company since 1997.

John L. Sprague has been a Director of the Company since July 1996.
Prior to that time he was a Director of the Company from January 1994 until July
1995. He has been President of John L. Sprague Associates, a consulting company,
since 1988. He was President and Chief Executive Officer of Sprague Electric
Company, an electronics company, from 1981 to 1987. Dr. Sprague is a member of
the board of directors for three companies and on various committees: Allmerica
Financial (audit committee), SIPEX Corporation (audit and compensation
committees), and Aerovox Corporation (audit and nominating committee).

Donald L. Waite has been a Director of the Company since July 1997. He
has been Executive Vice President and Chief Administrative Officer of Seagate
Technology, Inc., a manufacturer of disc drives, tape drives and storage
management software, since 1995. He joined Seagate in 1983 as Vice President of
Finance and Chief Financial Officer and was promoted to Senior Vice President,
Finance in 1984. Mr. Waite is on the board of directors of CVC Holdings, Inc., a
deposition equipment company.

<PAGE>

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 31, 1999, by (i)
each person (or group of affiliated persons) who is known by the Company to own
beneficially 5% or more of the Company's Common Stock; (ii) each of the
Company's directors; (iii) the Named Executive Officers (as defined below under
"Executive Compensation"); and (iv) all directors and executive officers as a
group. Except as otherwise noted, the persons or entities in this table have
sole voting and investment power with respect to all the shares of Common Stock
beneficially owned by them.

Shares Beneficially
Beneficial Owner(1) Owned(2) Percent
------------------- -------- -------
Chan Desaigoudar
490 Santa Rosa Drive 1,733,850 17.14%
Los Gatos, CA 95030

Citigroup, Inc.
153 East 53rd Street 1,180,000 11.66%
Legal Dept. 20th Floor
New York, NY 10043

Hitachi Metals, Ltd.
Kishimoto Bldg. 2-1 993,750 9.82%
Marunouchi 2-Chome
Chiyoda-Ku, Tokyo 100 Japan

TCW Group, Inc.
865 South Figueroa Street 522,400 5.16%
Los Angeles, CA 90017

Jeffrey C. Kalb(3) 434,498 4.30%
Wade Meyercord(3) 93,050 *
John E. Trewin(3) 90,242 *
Angel G. Jordan(3) 88,943 *
Stuart Schube(3) 62,916 *
Arieh Schifrin(3) 51,563 *
John Sprague(3) 33,750 *
Donald Waite(3) 26,562 *
John Jorgensen(3) 8,000 *
Nick Bacile(3)(4) 0 *
J. Daniel McCranie(3) 0 *
Directors and Executive Officers
as a group (13 persons) 928,124 9.17%
- ------------
* Less than 1%.
(1) Based solely upon information furnished by such individuals or
contained in filings made by such beneficial owners with the Securities
and Exchange Commission.
(2) Includes shares subject to options exercisable as of June 15, 1999.
(3) 215 Topaz Street, Milpitas, California 95035.
(4) As of April 30, 1999, Mr. Bacile is no longer an employee of the
Company.

<PAGE>

IV. CORPORATE GOVERNANCE -- OFFICERS AND DIRECTORS

Board Meetings and Committees

During the fiscal year ended March 31, 1999 ("fiscal 1999"), the Board
of Directors of the Company had an Audit Committee, a Compensation Committee,
and a Nominating Committee.

The Audit Committee oversees the Company's accounting and financial
reporting policies and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board of Directors regarding
appointment of independent auditors. The Audit Committee consisted of Angel
Jordan, Stuart Schube, and Donald Waite. That Audit Committee held one meeting
during fiscal 1999.

The Compensation Committee's principal functions are to recommend to
the Board the compensation of officers of the Company, to oversee the
administration of the Company's stock plans, and to perform such other duties
regarding compensation for employees and consultants as the Board may delegate
from time to time. In addition, the Committee reviews and approves
recommendations regarding changes in compensation of outside directors. See also
"Compensation Committee Report." The present Compensation Committee consists of
Daniel McCranie, John Sprague and Donald Waite. The Compensation Committee held
six meetings during fiscal 1999.

On April 19, 1996, the Board created a Nominating Committee for the
purpose of making recommendations to the Board of Directors regarding director
nominees to the Board. The Nominating Committee consists of Wade Meyercord,
Stuart Schube, and Jeff Kalb. The Nominating Committee did not hold any meetings
during fiscal 1999. The Nominating Committee will consider nominees proposed by
the shareholders. Any shareholder who wishes to recommend a prospective nominee
for the Board of Directors for the Nominating Committee's consideration may do
so by giving the candidate's name and qualifications in writing to the Secretary
of the Company, 215 Topaz Street, Milpitas, CA 95035. See "General Information -
Procedure for Director Nominations by Shareholders."

During fiscal 1999, the Board of Directors held nine regular and
teleconference meetings. Each director attended at least 80% of the meetings
held during fiscal 1999, which occurred on or after the initiation of their term
as a director. Each director who served on the Compensation Committee also
attended all of the Committee meetings held during fiscal 1999. Each director
who served on the Audit Committee also attended all of the Committee meetings
held during fiscal 1999, which occurred on or after the initiation of his term
as a director.

Director Compensation

Non-employee directors are entitled to be paid, in addition to their
out-of-pocket expenses, $500 per month plus $1,000 for each Board Meeting, and
$250 for each conference call.

The non-employee directors are entitled to stock option grants under
the provisions of the 1995 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan"). The stockholders have approved a total of 280,000 shares for
this plan, of which 193,125 have been issued as of May 31, 1999. The Directors'
Plan is designed to work automatically. A director joining the Board for the
first time receives an option for 15,000 shares. Each director reelected at an
Annual Meeting is entitled to receive a grant of 10,000 shares as of the date of
the Annual Meeting. The term of an option granted under the plan may not exceed
ten years. The option vests as to one-fourth of the shares at the end of the
fourth full calendar quarter following the date the option was granted, and as
to one-sixteenth of the shares at the end of each of the full calendar quarters
thereafter. The exercise price for nonstatutory options granted under the
Directors' Plan shall be the fair market value of a share of the Company's
Common Stock on the date of grant.

<PAGE>

Executive Compensation

<TABLE>
The following table presents the reportable compensation for persons
who held the position of CEO and the top four executive officers that received
compensation above $100,000 during the fiscal year ended March 31, 1999 (the
"Named Executive Officers"):

<CAPTION>
Summary Compensation Table

Long-Term
Compensation
---------------------------
Annual Compensation Securities
------------------------------------ --------------------------- All Other
Repriced Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) Options(#) Options(#) ($)(1)
- --------------------------- ---- --------- -------- ---------- ---------- ------

<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Kalb(2) 1999 $258,923 $ 38,649 110,547 40,000 $ 7,462
President and Chief 1998 $264,000 $ 40,791 -- 70,547 $ 8,855
Executive Officer, Director 1997 $268,615 $ 76,973 -- 40,000 $ 3,003

John E. Trewin(3) 1999 $170,323 $ 24,694 45,000 15,000 $ 6,511
Vice President and 1998 $160,616 $ 24,621 30,000 15,000 $ 7,380
Chief Financial Officer 1997 $158,846 $ 30,300 -- 15,000 $ 3,631

Nick Bacile(3)(4) 1999 $164,631 $ 24,505 97,500 15,000 $ 6,924
Vice President, Marketing 1998 $159,769 $ 24,943 -- 7,500 $ 4,226
1997 $ 98,908 $ 16,844 -- 90,000 --

John Jorgensen(3) 1999 $160,846 $ 24,323 97,500 15,000 $ 6,572
Vice President, Engineering 1998 $154,740 $ 24,464 75,000 7,500 $ 4,488
1997 $144,231 $ 29,625 -- 15,000 $ 4,153

Arieh Schifrin(3) 1999 $158,345 $ 24,602 45,000 15,000 $ 9,065
Vice President, Operations 1998 $159,231 $ 24,621 30,000 15,000 $ 9,543
1997 $154,685 $ 30,300 -- 15,000 $ 1,773

<FN>
- -------------------------
(1) Company matching contributions to the 401k savings plan, deferred
compensation plan, and group term life.
(2) The Company does not have an employment agreement with its Chief
Executive Officer or any compensation plan or arrangement with the
Chief Executive Officer which results from the resignation, retirement
or other termination of employment or from a change in control of the
Company other than an agreement that if the Chief Executive Officer is
terminated by the Company without cause, he is entitled to severance
pay for nine months at the rate of $20,000 per month plus continuation
of employee benefits such as medical, dental and disability coverage.
(3) Under the terms of their employment agreements, Messrs. Trewin,
Jorgensen, Bacile, and Schifrin in case of termination without cause,
relocation of work location of more than 50 miles, material reduction
in job duties, or an involuntary reduction in compensation, are
eligible to receive six months severance pay and continuation of
employee benefits.
(4) As of April 30, 1999, Mr. Bacile is no longer employed by the Company.
</FN>
</TABLE>

<PAGE>

Stock Option Tables

<TABLE>
The following table shows for each of the Named Executive Officers
certain information with respect to stock options granted during the last fiscal
period, excluding any repricing of options.

<CAPTION>
Option Grants In Last Fiscal Year
(Twelve Months Ended March 31, 1999)

Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term(1)
--------------------------------------------------------------------------------- -------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Repriced Options Employees in Base Price Expiration
Name Options Granted(#) Fiscal Year(2) ($/Share) Date 5% ($) 10% ($)
---- ------- ---------- -------------- --------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Kalb 110,547 40,000 9.3% $2.8750 9/25/08 $ 72,323 $ 183,280
John E. Trewin 45,000 15,000 3.5% $2.8750 9/25/08 $ 27,121 $ 68,730
Arieh Schifrin 45,000 15,000 3.5% $2.8750 9/25/08 $ 27,121 $ 68,730
Nick Bacile 97,500 15,000 3.5% $2.8750 9/25/08 $ 27,121 $ 68,730
John Jorgensen 97,500 15,000 3.5% $2.8750 9/25/08 $ 27,121 $ 68,730

<FN>
- -----------------
(1) Potential realizable value is disclosed in response to SEC rules that
require such disclosure for illustration only. The values disclosed are
not intended to be, and should not be, interpreted by shareholders as
representations or projections of the future value of the Company's
stock or of the stock price.
(2) Percent of total options granted calculated using fiscal 1999 grants
net of repriced options.
</FN>
</TABLE>

The above options are exercisable over a four-year period, with 25%
exercisable one year after date of grant and the balance exercisable in
quarterly installments thereafter.

<TABLE>
The following table sets forth as to each of the Named Executive
Officers, certain information with respect to stock options exercised during the
last fiscal year (twelve months ended March 31, 1999) and unexercised options
held as of March 31, 1999 including options that were repriced.

<CAPTION>
Aggregated Option Exercises In Last Fiscal Year
And FY-End Option Values

Number of Shares Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
Shares Value FY-End (#) FY-End ($)(1)
Acquired on Realized ---------------------------- ----------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Kalb 0 0 358,000 150,547 0 0
John E. Trewin 0 0 75,000 60,000 0 0
Arieh Schifrin 0 0 51,563 60,000 0 0
Nick Bacile 0 0 0 112,500 0 0
John Jorgensen 0 0 0 112,500 0 0

<FN>
- ----------------
(1) In the money options values are based on the closing market price of
March 31, 1999.
</FN>
</TABLE>

<PAGE>

On December 10, 1998, the Board of Directors ratified the decision of
the Compensation Committee to reprice all current non-officer employee stock
options with an exercise price in excess of $2.8125. The repricing was to be the
higher of $2.8125 or the closing market price of the Company's stock on the
effective date of the repricing, December 10, 1998. The closing price on
December 10 was $2.75; therefore the applicable options were repriced at
$2.8125. Pursuant to the terms of the repriced options, the repriced options may
not be exercised in whole or in part until December 10, 1999, that is, one year
after the effective date.

On December 10, 1998, the Board of Directors also ratified the decision
of the Compensation Committee to reprice all current officer employee stock
options with an exercise price in excess of $4.00. The repricing was to be the
higher of 20% above either $2.8125 or the closing market price of the Company's
stock on the effective date of the repricing, December 10, 1998. The closing
price on December 10 was $2.75; therefore the applicable options were repriced
at 20 % above the $2.8125 price or $3.30. Pursuant to the terms of the repriced
options, the repriced options may not be exercised in whole or in part until
December 10, 1999, that is, one year after the effective date.

The Board's action was in response to a decline in the market price of
the Company's stock during the preceding months which had effectively eliminated
the incentive value of options with significantly higher exercise prices. A
total of 1,325,742 options were repriced. The repricing did not apply to options
held by non-employee directors or other non-employee option holders.

<TABLE>
The following table presents information on the repricing of stock
options of any executive officer employed by the Company in the last ten fiscal
years.

<CAPTION>
NUMBER OF
SECURITIES LENGTH OF ORIGINAL
UNDERLYING MARKET PRICE OF EXERCISE PRICE OPTION TERM
OPTIONS STOCK AT TIME AT THE TIME OF NEW REMAINING AT DATE OF
REPRICED OR OF REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- ------------------- -------- ---------------- ----------------- ---------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Nick Bacile 12/10/98 90,000 $2.7500 $5.875 $3.300 7 years 228 days
12/10/98 7,500 $2.7500 $5.0313 $3.300 9 years 43 days

Robert Filiault 2/13/98 90,000 $5.0313 $8.875 $6.000 9 years 175 days
2/13/98 10,000 $5.0313 $7.500 $6.000 8 years 247 days

Scott Hover-Smoot 2/13/98 25,000 $5.0313 $7.000 $6.000 9 years 175 days
12/10/98 10,000 $2.7500 $5.875 $3.300 7 years 228 days
12/10/98 25,000 $2.7500 $6.000 $3.300 8 years 219 days

John Jorgensen 2/13/98 75,000 $5.0313 $8.875 $6.000 7 years 253 days
12/10/98 75,000 $2.7500 $6.000 $3.300 6 years 318 days
12/10/98 15,000 $2.7500 $6.000 $3.300 8 years 45 days
12/10/98 7,500 $2.7500 $5.0313 $3.300 9 years 43 days

Jeffrey C. Kalb 12/10/98 40,000 $2.7500 $8.500 $3.300 7 years 112 days
12/10/98 30,547 $2.7500 $7.625 $3.300 8 years 192 days
12/10/98 40,000 $2.7500 $7.000 $3.300 8 years 219 days

Arieh Schifrin 2/13/98 15,000 $5.0313 $8.875 $6.000 8 years 247 days
2/13/98 15,000 $5.0313 $7.000 $6.000 7 years 158 days
12/10/98 15,000 $2.7500 $5.875 $3.300 7 years 228 days
12/10/98 15,000 $2.7500 $6.000 $3.300 6 years 223 days
12/10/98 15,000 $2.7500 $6.000 $3.300 8 years 219 days

John Trewin 2/13/98 15,000 $5.0313 $8.875 $6.000 8 years 247 days
2/13/98 15,000 $5.0313 $7.000 $6.000 7 years 158 days
12/10/98 15,000 $2.7500 $5.875 $3.300 7 years 228 days
12/10/98 15,000 $2.7500 $6.000 $3.300 6 years 223 days
12/10/98 15,000 $2.7500 $6.000 $3.300 8 years 219 days
</TABLE>

<PAGE>

Board Compensation Committee Report on Executive Compensation

The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of outside directors appointed by the Board of Directors.
The Committee is responsible, on behalf of the Board, for reviewing and
approving compensation programs, policies, and plans designed to motivate
personnel to achieve Company objectives. One of the key responsibilities of the
Committee is to set the compensation annually of the Chief Executive Officer
(the "CEO"), upon his evaluation by the Board of Directors. Other
responsibilities include: review and approve recommendations from the CEO for
the compensation of officers, other senior managers, and key employees; review
and approve recommendations regarding stock option grants for specific employees
as provided under existing Company plans; review and approve the concept and
design of management incentive plans and programs for Company officers, other
senior managers, and key employees. An additional responsibility of the
Committee is to review and approve recommendations regarding changes in
compensation of outside directors.

Compensation Philosophy. The Company believes that the management team
it has assembled is well suited to increasing shareholder value and contributing
to the long-term success of the Company, and the Committee intends to pursue a
compensation philosophy consistent with achieving those goals. In structuring
the Company's compensation programs, the Committee's goals are to align
compensation with the Company's business objectives and performance and to
attract, retain and reward executive officers and other key employees who
contribute to the long-term success of the Company. Consistent with these goals,
the Company's compensation programs include a mix of salary, bonus and stock
options. In particular, stock options are used to link executive incentives and
the creation of shareholder value.

Base Salary. The Committee annually reviews each executive officer's
base salary. When reviewing base salaries, the Committee considers individual
and corporate performance, levels of responsibility, prior experience, breadth
of knowledge and competitive pay practices. Consistent with the Company's
current size, the Committee believes current executive salaries are comparable
to the average salaries offered by competitive companies.

Bonus. The Company's bonus plan provides for bonuses to be awarded to
key employees based on specific goals achieved by the Company and the level of
contribution to achievement of the goals by the key employees. The bonus plan is
designed such that bonuses when combined with salaries create total compensation
which is comparable to the average compensation of companies against which the
Company competes in hiring and retaining key employees. Bonus awards depend on
the extent to which Company and individual performance objectives are achieved.
The Company's performance objectives include operating, strategic and financial
goals considered critical to the Company's short and long term goals.

Options. The purpose of the Company's stock option plans is to attract
and retain talented key employees and to align their personal financial
interests with those of the Company's shareholders. Options are generally
granted with an exercise price equal to the market price of the Common Stock on
the date of grant and generally vest over a four-year period. This approach is
designed to focus key employees on sustainable growth of the Company and the
creation of shareholder value over the long term. Stock options are a major
component of the compensation package of executive management. Eligible
employees are generally granted options upon commencement of employment and are
considered for additional options periodically thereafter. In recommending stock
options the Committee considers individual performance, overall contribution to
the Company, retention, the number of unvested stock options and the total
number of stock options to be granted.

<PAGE>

higher of 20% above either $2.8125 or the closing market price of the Company's
stock on the effective date of the repricing, December 10, 1998. The closing
price on December 10 was $2.75; therefore the applicable options were repriced
at 20 % above the $2.8125 price or $3.30. Pursuant to the terms of the repriced
options, the repriced options may not be exercised in whole or in part until
December 10, 1999, that is, one year after the effective date.

Section 162(m) of the Code imposes a limitations on the deductibility
for federal income tax purposes of compensation over $1 million paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million is not
subject to the limitation if it is "performance-based compensation" within the
meaning of the Code. The Committee believes that at the present time it is
unlikely that the compensation paid to any Named Executive Officer in a taxable
year that is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any fiscal Treasury regulations and to comply with Code Section
162(m) in the future to the extent consistent with the best interests of the
Company.

CEO Compensation. The Committee uses the same procedures described
above in setting the annual salary, bonus, and making recommendations regarding
stock option awards for the CEO. The CEO's salary is determined based on
comparisons with competitive companies as described above. The Committee
believes that the CEO's salary and bonus plan is comparable to the salaries
offered to CEOs of competitive companies. In recommending stock options, the
Committee considers the CEO's performance, overall contribution to the Company,
retention, the number of unvested options and the total number of options to be
granted.

Conclusion. As a significant portion of the Company's compensation
program is linked to Company performance, the Committee believes that
compensation is closely tied to increases in long-term shareholder value.

Members of the Compensation Committee

Daniel McCranie
Dr. John Sprague
Donald Waite

The foregoing report of the Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the Acts.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee of the Company's Board of
Directors was at any time during the year ended March 31, 1999, or at any other
time an officer or employee of the Company. Currently, no executive officer of
the Company serves as a member of compensation committee.

<PAGE>

V. FIVE-YEAR STOCK PERFORMANCE GRAPH

The following graph compares the five-year cumulative total return on
California Micro Devices Common Stock, the Standard & Poor's 500 Index ("S&P"),
and the S&P Electronics (Semiconductors) Index (excluding the Company).

The graph assumes $100 was invested on March 31, 1994, in California
Micro Devices Common Stock and $100 was invested at that same time in each of
the S&P indexes. The comparison assumes that all dividends are reinvested.
(California Micro Devices has not paid dividends.)

[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
S & P STOCK INDEX 100 116 153 183 271 321
S & P ELECTRONICS (SEMICONDUCTORS) INDEX 100 120 132 241 263 399
CALIFORNIA MICRO DEVICES COMMON STOCK 100 24 53 40 33 14

Pursuant to Securities and Exchange Commission regulations, this chart
is not "soliciting material", is not deemed filed with the Securities and
Exchange Commission, and is not to be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representation that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors, and greater than ten percent shareholders were complied
with, with the exception of Chan Desaigoudar.

<PAGE>

VI. OTHER BUSINESS

The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters are properly brought before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent in accordance with their judgment.

VII. SHAREHOLDER PROPOSALS TO BE PRESENTED AT
NEXT ANNUAL MEETING

Proposals of shareholders intended to be presented by such shareholders
at next year's Annual Meeting must be received by the Company at its principal
office no later than March 20, 2000, and must satisfy the conditions established
by the Securities and Exchange Commission for shareholder proposals to be
included in the Company's proxy statement for that meeting.

<PAGE>

FORM 10-K

A copy of the Company's Annual Report on Form 10-K for the period ended
March 31, 1999, is being mailed with this proxy statement to shareholders
entitled to notice of the meeting. If exhibit copies are requested, a copying
charge of $0.20 per page will be made. Requests should be sent to Investor
Relations, California Micro Devices Corporation, 215 Topaz Street, Milpitas,
California 95035-5430.

By Order of the Board of Directors

/s/ Scott Hover-Smoot
------------------------------------
Scott Hover-Smoot, Secretary

Milpitas, California

<PAGE>

- --------------------------------------------------------------------------------
PROXY CALIFORNIA MICRO DEVICES CORPORATION PROXY

Proxy for Annual Meeting of Shareholders

August 5, 1999

SOLICITED BY THE BOARD OF DIRECTORS

The undersigned shareholder of California Micro Devices Corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated June 15, 1999, and hereby appoints Wade Meyercord,
Stuart Schube and John Trewin, and each of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Shareholders
of California Micro Devices Corporation to be held at the Embassy Suites Hotel,
901 E. Calaveras Blvd., Milpitas, California 95035 on August 5, 1999 at 1:00
p.m. local time, and at any adjournments thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.

(Continued, and to be signed on the other side)

- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^

<PAGE>

- --------------------------------------------------------------------------------
[X] Please mark
your votes
as this

1. To elect seven (7) directors to WITHHOLD
serve until the next annual FOR FOR ALL
meeting of shareholders and until [ ] [ ]
the election and qualification of
their successors.

*If you wish to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below: Dr. Angel Jordan, Jeffrey Kalb, J. Daniel McCranie, Wade
Meyercord, Stuart Schube, Dr. John Sprague, Donald Waite

_____________________________________
I PLAN TO ATTEND THE MEETING [ ]

2. To ratify the selection of the FOR AGAINST ABSTAIN
firm of Ernst & Young, LLP, as
independent auditors for the [ ] [ ] [ ]
fiscal year ending March 31,
2000.

3. To approve the amendment to the [ ] [ ] [ ]
1995 Employee Stock Purchase
Plan.

and, in their discretion, upon such other
matters which may properly come before the
meeting or any adjournment thereof.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
NO CONTRARY DIRECTION IS INDICATED, WILL BE
VOTED FOR ALL OF THE MATTERS SET FORTH
HEREIN, FOR THE ELECTION OF THE LISTED
DIRECTORS, FOR THE RATIFICATION OF ERNST &
YOUNG LLP, AS INDEPENDENT ACCOUNTANTS, FOR
THE APPROVAL OF THE AMENDMENT TO THE 1995
EMPLOYEE STOCK PURCHASE PLAN, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.

Signature(s) ______________________________ Title or Capacity ________________

Dated _____________, 1999

This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.

- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^