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, 1999
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, 1999, there were outstanding 10,152,692 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, 1999 and 1998 2
Balance Sheets
June 30, 1999 and March 31, 1999 3
Statements of Cash Flows
Three Months Ended June 30, 1999 and 1998 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 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
<TABLE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Net product sales $ 8,517 $ 8,231
Cost and expenses:
Cost of sales 6,209 6,550
Research and development 959 902
Selling, marketing and administrative 2,117 1,480
------- -------
Total costs and expenses 9,285 8,932
------- -------
Operating (loss) (768) (701)
Other expense, net 177 145
------- -------
(Loss) before income taxes (945) (846)
Income taxes - -
------- -------
Net (loss) $ (945) $ (846)
======= =======
Basic and diluted net (loss) per share $ (0.09) $ (0.08)
======= =======
Weighted average common shares
and share equivalents outstanding 10,117 9,983
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
<TABLE>
June 30, March 31,
1999 1999
------- ---------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and short-term securities $ 3,735 $ 4,933
Accounts receivable, less allowance for
doubtful accounts of $207 and $224 4,707 4,471
Inventories 8,668 8,438
Other assets 779 592
Total current assets 17,889 18,434
------- -------
Property, plant & equipment, net 10,882 11,540
Restricted cash 3,122 2,900
Other long term assets 791 770
------- -------
Total assets $32,684 $33,644
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,078 $ 3,239
Accrued salaries and benefits 1,045 998
Other accrued liabilities 706 554
Deferred margin on shipments to distributors 516 576
Current maturities of long-term debt and
Capital lease obligations 709 685
------- -------
Total current liabilities 6,054 6,052
Long-term debt, less current maturities 7,443 7,503
Other long-term liabilities 838 919
------- -------
Total liabilities 14,335 14,474
Shareholders' equity:
Common stock - no par value; authorized 25,000,000;
issued and outstanding 10,152,692 shares as of
June 30, 1999 and 10,116,144 as of March 31, 1999 53,398 53,328
Accumulated deficit (35,103) (34,160)
Accumulated other comprehensive income 54 2
------- -------
Total shareholders' equity 18,349 19,170
------- -------
Total liabilities and shareholders' equity $32,684 $33,644
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
June 30,
1999 1998
------- -------
<TABLE>
<C> <S> <S>
Cash flows from operating activities:
Net (loss) $ (945) $ (846)
Adjustments to reconcile net (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 757 707
Change in operating assets and liabilities:
Inventories (230) (234)
Accounts receivable (236) 183
Other assets (187) 533
Trade accounts payable and other current liabilities 38 807
Other long term assets (21) 4
Deferred margin on distributor sales (60) (123)
------- -------
Net cash (used in) provided by operating activities (884) 1,031
------- -------
Investing activities:
Securities purchases (1,247) (500)
Securities sales 2,060 944
Capital expenditures (99) (709)
Net change in restricted cash (222) (290)
------- -------
Net cash provided by (used in) investing activities 492 (555)
------- -------
Financing activities:
Repayments of capital lease obligations (63) (99)
Repayments of debt (54) -
Proceeds from issuance of common stock 70 30
------- -------
Net cash used in financing activities (47) (69)
------- -------
Net increase (decrease) in cash and cash equivalents (439) 407
Cash and cash equivalents at beginning of period 762 480
------- -------
Cash and cash equivalents at end of period $ 323 $ 887
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 230 $ 228
Income taxes paid $ 1 $ 1
Supplemental disclosures of non-cash investing and financing activities:
Unrealized gain (loss) on securities $ 54 $ 4
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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, 1999, results of operations
for the three-month periods ended June 30, 1999 and 1998, and cash flows for
the three-month periods ended June 30, 1999 and 1998. 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, 1999.
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>
June 30, March 31,
1999 1999
-------- --------
<S> <C> <C>
Raw materials $ 504 $ 428
Work-in-process 5,438 5,263
Finished goods 2,726 2,747
------- -------
$8,668 $8,438
</TABLE>
4. Litigation
----------
From August 5, 1994 through February 16, 1995, eleven purported class action
complaints were filed against the Company in the United States District Court
for the Northern District of California.
By court order dated May 20, 1997, these actions have been settled. The
Company's contribution towards the settlement consisted of the payment of
$6,000,000 in cash and the issuance of 608,696 new shares of the Company's
common stock to the class. Each new share was accompanied by a Contingent
Value Right (CVR), personal to the shareholder, that entitles the shareholder
to receive the difference between $11.50 and the highest 20 day average
trading price of the Company's common stock (assuming the average price is
less than $11.50) over a three year period. The CVR expires at the end of
that three-year period or when the $11.50 price is met, whichever occurs
first. The total amount of this settlement, $13,000,000, was expensed in
the fiscal year ended March 31, 1995. In addition, the Company has put
$2,000,000 into a restricted account as a guarantee for performance under
the CVR. The cash will cease to be restricted, without interest, if and
when the CVR is extinguished. Should any payment to the class be required
under the terms
<PAGE>
of the CVR, it will be charged to equity, since the full amount of $11.50 per
share was included in the $13,000,000 previously expensed.
On July 7, 1999, class counsel filed a motion requesting clarification of the
settlement agreement provisions regarding the CVR period. The settlement
agreement, an attachment to the settlement agreement, and notices that were
provided to the class members inconsistently described the commencement of the
CVR period. The instant motion, in which the Company joined, requests that the
CVR period begin December 7, 1997, and last for 4 years. In addition, the
motion requests that the court expressly rule on the preference right granted
to the class in the settlement agreement with respect to the $2,000,000
restricted cash fund established by the Company. The other relevant terms
of the CVR remain as stated in the settlement agreement. No ruling on this
motion has occurred to date.
The Company is a party to 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 operations of
the Company.
The Company believes that, 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. Net Loss Per Share
------------------
The Company calculates earnings per share in accordance with Financial
Accounting Standards Board Statement No. 128, "Earnings 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
dilutive stock options and other dilutive securities. Diluted earnings per
common share do not differ from the Company's basic earnings per common and
common equivalent share because the effect in periods with a net loss would be
antidilutive.
6. Comprehensive Income
--------------------
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.
Comprehensive loss for the three months ended June 30, 1999 was $891,000 and
comprehensive loss for June 30, 1998 was $842,000.
<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, 1999, increased by $286,000 or
3.5% compared to the quarter ended June 30, 1998. Unit shipments increased
by 21% to 14.5 million units in the June 30, 1999 quarter compared to 12
million units in the year-earlier period. The increase in product sales
was primarily due to increased sales of the Company's P/Active(R) family of
products to the personal computer market and increased distributor revenues,
partially offset by decreases in foundry sales. Thin film products
accounted for 64% of product sales for the quarter ended June 30, 1999
compared to 66% in the year-earlier period. Within the thin film category,
sales of the newer thin film PAC(tm)products, including the P/Active(R)
family, increased to 28% of total dollar shipments and 41% of unit shipments
comparedto 22% of dollar shipments and 35% of unit shipments in the year ago
quarter.
Gross margins on net product sales increased to 27% compared to 20% in year ago
quarter, primarily due to improved yields and secondarily to lower valuation
reserves for slow-moving inventory and adjustments to lower of cost or market.
Research and development expenditures increased by $57,000 for the June 30,
1999, quarter compared to the year earlier period. This increase primarily
reflects higher material costs associated with a large number of new products
in development.
Selling, marketing, and administrative costs increased by $637,000 compared
to a year ago. The year ago quarter included a one-time $575,000 decrease
in legal expenses due to collection of an insurance settlement related to
old legal bills. Without that unusual item selling, marketing and
administrative costs would have increased by $62,000 due to increase selling
and marketing headcount partially offset by reduced administrative expenses.
As a result of the factors discussed above, the operating loss for the quarter
ended June 30, 1999, increased by $67,000 compared to the operating loss for
the year earlier quarter.
Other expense, net, for the current quarter was $177,000 as compared to
$145,000 in the 1998 quarter. This was due primarily to reduced interest
income from investments.
No income taxes were accrued for the quarters ended June 30, 1999, or June 30,
1998, due to the availability of tax loss carry forwards.
The weighted average of common shares outstanding were 10,117,000 shares and
9,983,000 shares for the quarters ended June 30, 1999 and 1998, respectively.
Liquidity and Capital Resources
Net cash and short-term investments as of June 30, 1999, decreased $1,198,000
from the period ending March 31, 1999. The net loss of $945,000 was partially
offset by depreciation of $757,000. Receivables increased by $230,000 due to
the higher level of sales in the third month of the June quarter compared to
the March quarter. Inventory increased by $236,000 due to increased work
in process related to new products and prepaid expenses increased by
$187,000. Restricted cash increased by $222,000 due to the accumulation
of interest payments that are only made twice a year.
The Company has a $3.0 million revolving secured line of credit agreement that
expires on July 31, 2000. Under the terms of the line of credit, the Company
can borrow at prime plus one-half percent, collateralized by eligible
receivables. There were no bank borrowings at June 30, 1999 and March 31,
1999, and during the three month periods then ended. The Company is in
compliance with its financial covenants.
<PAGE>
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. Also, some systems assign special meaning to
certain dates, such as 9/9/99, and the year 2000 is a leap year, which some
systems may not recognize. To address these and other related issues, the
Company evaluated its management information systems (MIS) and developed a
plan, as described herein, to convert all of its MIS applications to year 2000
compliant versions by March 31, 1999. This plan encompassed all major
categories of systems in use by the Company, including manufacturing, sales,
finance and human resources.
California Micro Devices utilizes software packages supplied by outside vendors
for all of its mission critical applications. These software vendors have
supplied the Company with versions of their software that they have certified
to be year 2000 compliant. However, the Company recognized that relying on
certification statements alone could potentially place its systems at risk if
some level of integration and system level testing was not also performed. To
ensure that these applications work in CMD's environment, the Company completed
consolidated, system level test procedures that incorporated testing each of
the key applications. The positive results of these tests allowed the
Company to proceed with its migration to year 2000 compliant systems and
the Company was fully converted as of March 1, 1999 and has been operating
on those systems since that time. As a result of the above, the Company has
not formulated formal contingency plans regarding conversion to year 2000
compliant critical systems. Should any unforeseen difficulties arise in
the operation of these software packages, the Company could convert to
alternate software packages.
The Company has completed its evaluation of 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 has substantially completed its evaluation of the possible impact
of year 2000 issues on its key suppliers and subcontractors. Part of this
evaluation was performed based upon representations received from those key
suppliers and subcontractors. Noncompliance with year 2000 issues on the part
of key suppliers and subcontractors, or within the international transportation
system, could result in disruption of the Company's operations. Nothing has
come to the attention of the Company that would indicate a material impact on
the Company as a result of year 2000 issues at its key suppliers and
subcontractors. However, the potential impact and related costs are not known
at this time.
The Company's products are not date sensitive.
The out-of-pocket expenditures incurred to date related to these programs are
less than $300,000. The Company currently expects that the total incremental
expenditures of these programs will not exceed $500,000. Most of these
expenditures involve new capital equipment that will be amortized over a three
to five year period.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. There can be no assurance that these estimates will be
achieved and actual results could differ materially from those anticipated.
<PAGE>
The Company believes that its most reasonably likely worst-case year 2000
scenarios would relate to problems with the systems of third parties rather
than with the Company's internal systems or its products. Because the
Company has less control over assessing and correcting the year 2000 problems
of third parties, the Company believes the risks are greatest in the areas of
utility services, telecommunications, transportation supply chains and
critical suppliers of materials. Due to the large number of variables
involved, the Company cannot provide an estimate of the damage it might
suffer if any of these
scenarios were to occur.
Based on currently available information, management does not believe that the
year 2000 matters discussed above related to internal systems or products sold
to customers will have a material adverse impact on the Company's financial
condition or overall trends in results of operations. However, it is uncertain
to what extent the Company may be affected by such matters. In addition, there
can be no assurance that the failure to ensure year 2000 capability by a
supplier or another third party would not have a material adverse effect on the
Company.
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, expense reductions, 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 below and
elsewhere in this Form 10-Q.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
From August 5, 1994 through February 16, 1995, eleven purported class action
complaints were filed against the Company in the United States District Court
for the Northern District of California.
By court order dated May 20, 1997, these actions have been settled. The
Company's contribution towards the settlement consisted of the payment of
$6,000,000 in cash and the issuance of 608,696 new shares of the Company's
common stock to the class. Each new share was accompanied by a Contingent
Value Right (CVR), personal to the shareholder, that entitles the shareholder
to receive the difference between $11.50 and the highest 20 day average trading
price of the Company's common stock (assuming the average price is less than
$11.50) over a three year period. The CVR expires at the end of that three-year
period or when the $11.50 price is met, whichever occurs first. The total
amount of this settlement, $13,000,000, was expensed in the fiscal year ended
March 31, 1995. In addition, the Company has put $2,000,000 into a restricted
account as a guarantee for performance under the CVR. The cash will cease to
be restricted, without interest, if and when the CVR is extinguished. Should
any payment to the class be required under the terms of the CVR, it will be
charged to equity, since the full amount of $11.50 per share was included in
the $13,000,000 previously expensed.
On July 7, 1999, class counsel filed a motion requesting clarification of the
settlement agreement provisions regarding the CVR period. The settlement
agreement, an attachment to the settlement agreement, and notices that were
provided to the class members inconsistently described the commencement of the
CVR period. The instant motion, in which the Company joined, requests that the
CVR period begin December 7, 1997, and last for 4 years. In addition, the
motion requests that the court expressly rule on the preference right granted
to the class in the settlement agreement with respect to the $2,000,000
restricted cash fund established by the Company. The other relevant terms
of the CVR remain as stated in the settlement agreement. No ruling on this
motion has occurred to date.
The Company is a party to 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 operations of
the Company.
The Company believes that, 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.
<PAGE>
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 5, 1999.
Proposal No. 1 Election of Directors. The following individuals, who
received the votes indicated, were elected as directors:
<TABLE>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
Dr. Angel Jordan 7,576,591 937,795
Jeffrey Kalb 7,567,021 947,365
J. Daniel McCranie 7,575,620 938,766
Wade Meyercord 7,576,841 937,545
Stuart Schube 7,576,786 937,600
Dr. John Sprague 7,566,918 947,468
Donald Waite 7,577,320 937,066
</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
--- ------- --------
7,627,762 876,277 10,347
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
--- ------- --------
6,929,033 1,204,110 381,243
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibit Description
------- -----------
4.1 1995 Employee Stock Purchase Plan - Amended As Of
July 18, 1997, August 7, 1998, and August 5, 1999.
(b) Form 8-K None
(c) FDS Financial Data Schedule (For Edgar Filing Only)
<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 10, 1999 /s/ John E Trewin
------------------------------------------
John E. Trewin
Vice President and Chief Financial Officer
<PAGE>
Exhibit 4.1
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, AUGUST 7, 1998, AND AUGUST 5, 1999
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. Subsequent Exercise
Periods,
<PAGE>
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
<PAGE>
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 Nine Hundred Sixty Thousand (960,000) 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
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
<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;
<PAGE>
(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.
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.
25
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-END] JUN-30-1999
[CASH] $ 323
[SECURITIES] 3,412
[RECEIVABLES] 4,914
[ALLOWANCES] (207)
[INVENTORY] 8,668
[CURRENT-ASSETS] $17,889<F1>
[PP&E] 27,119
[DEPRECIATION] (16,237)
[TOTAL-ASSETS] $32,684<F2>
[CURRENT-LIABILITIES] $ 6,054
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 53,398
[OTHER-SE] (35,048)
[TOTAL-LIABILITY-AND-EQUITY] $32,684
[SALES] $ 8,517
[TOTAL-REVENUES] 8,517
[CGS] 6,209
[TOTAL-COSTS] 6,209
[OTHER-EXPENSES] 3,023<F3>
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 230
[INCOME-PRETAX] (945)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] $ (945)
[EPS-BASIC] $ 0.09
[EPS-DILUTED] $ 0.09
<FN>
<F1>Includes - Other assets $779K.
<F2>Includes Restricted cash $3,122K; Other long term assets $791K.
<F3>Includes - Research and development $959K; Selling, marketing,
and administrative $2,117K; Interest income ($56K);
Other expense $3k.
</FN>
</TABLE>
