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 September 30, 2000
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 September 30, 2000, there were outstanding 11,254,706 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 and Six Months Ended September 30, 2000 and 1999 2
Balance Sheets
September 30, 2000 and March 31, 2000 3
Statements of Cash Flows
Six Months Ended September 30, 2000 and 1999 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk 9
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 11
ii
<PAGE>
ITEM 1. Financial Statements.
---------------------
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2000 1999 2000 1999
------- -------- ------ -------
Net sales $16,112 $ 9,438 $30,988 $17,955
Cost and expenses:
Cost of sales 10,725 6,639 20,325 12,849
Research and development 900 769 1,710 1,727
Selling, marketing and administrative 2,857 2,032 5,663 4,149
------- ------- ------- -------
Total costs and expenses 14,482 9,440 27,698 18,725
------- ------- ------- -------
Operating income (loss) 1,630 (2) 3,290 (770)
Other expense, net 380 127 543 304
------- ------- ------- -------
Income (loss) before income taxes 1,250 (129) 2,747 (1,074)
Provision for income taxes 25 - 55 -
------- ------- ------- -------
Net income (loss) $ 1,225 $ (129) $ 2,692 $(1,074)
Net earnings/(loss) per share - basic $ 0.11 $(0.01) $ 0.24 $(0.11)
======== ======= ======= =======
Net earnings/(loss) per share - diluted $ 0.10 $(0.01) $ 0.22 $(0.11)
======== ======= ======= =======
Weighted average common shares and
share equivalents outstanding - basic 11,197 10,154 11,151 10,136
======== ======= ======= =======
Weighted average common shares and
share equivalents outstanding - diluted 12,517 10,154 12,476 10,136
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
<TABLE>
<S> <C> <C>
September 30, March 31,
2000 2000*
------------- ---------
(Unaudited)
ASSETS:
Current assets:
Cash and short-term securities $ 2,249 $ 1,490
Short-term investments 6,170 5,069
Accounts receivable, less allowance for
doubtful accounts of $220 and $219 8,674 8,875
Inventories 10,496 9,994
Prepaid expenses and other assets 1,049 980
-------- --------
Total current assets 28,638 26,408
Property, plant & equipment, net 12,334 10,637
Restricted cash 985 902
Other long term assets 1,123 1,139
-------- --------
Total assets $ 43,080 $ 39,086
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 4,297 $ 4,821
Accrued salaries and benefits 1,590 1,097
Other accrued liabilities 473 742
Deferred margin on shipments to distributors 516 516
Current maturities of long-term debt and
capital lease obligations 804 815
-------- --------
Total current liabilities 7,680 7,991
Long-term debt, less current maturities 8,189 7,342
Capital lease obligations, less current maturities 630 793
-------- --------
Total liabilities 16,499 16,126
Shareholders' equity:
Common stock - no par value; authorized
25,000,000; issued and outstanding
September 30 and March 31, 2000: 11,254,706
and 11,037,543, respectively 57,411 56,479
Accumulated deficit (30,836) (33,528)
Accumulated other comprehensive income 6 9
-------- --------
Total shareholders' equity 26,581 22,960
-------- --------
Total liabilities and shareholders' equity $ 43,080 $ 39,086
======== ========
</TABLE>
*Derived from audited financial statements.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
September 30,
----------------
2000 1999
------ ------
Cash flows from operating activities:
Net income (loss) $ 2,692 $ (1,074)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,468 1,467
Net increase in inventories (502) (309)
Net decrease /(increase) in accounts receivable 201 (1,450)
Net increase in prepaid expenses and other current assets (69) (440)
Net (decrease)/increase in trade accounts payable
and other current liabilities (300) 564
Net decrease/(increase) in other long term assets 10 (8)
Decrease in deferred margin on distributor sales - (60)
------- -------
Net cash provided by (used in) operating activities 3,500 (1,310)
------- -------
Cash flows from investing activities:
Short-term investment purchases (5,453) (1,247)
Short-term investment sales 4,348 2,040
Capital expenditures (3,157) (252)
Net change in restricted cash (83) (68)
------- -------
Net cash (used in) provided by investing activities (4,345) 473
------- -------
Cash flows from financing activities:
Repayments of capital lease obligations (204) (155)
Repayments of long-term debt (127) (82)
Borrowing of long-term debt 1,003 -
Proceeds from issuance of common stock 932 312
------- -------
Net cash provided by financing activities 1,604 75
------- -------
Net increase/(decrease) in cash and cash equivalents 759 (762)
Cash and cash equivalents at beginning of period 1,490 762
------- -------
Cash and cash equivalents at end of period $ 2,249 $ -
======= =======
Supplemental disclosures of cash flow information:
Interest paid $ 483 $ 448
Income taxes paid $ - $ 1
Supplemental disclosures of non-cash investing and
financing activities:
Unrealized loss on securities $ (3) $ (4)
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CALIFORNIA MICRO DEVICES CORPORATION
Notes to Financial Statements
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (which include only normal recurring
accruals) necessary to present fairly California Micro Devices Corporation's
(the "Company") financial position as of September 30, 2000, results of
operations for the three and six month periods ended September 30, 2000 and
1999, and cash flows for the six-month periods ended September 30, 2000 and
1999. 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, 2000.
2. Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Inventories
-----------
The components of inventory consist of the following (amounts in thousands):
<TABLE>
<S> <C> <C>
September 30, March 31,
2000 2000
------------- ------------
Raw materials $ 553 $ 452
Work-in-process 6,696 6,473
Finished goods 3,247 3,069
------- -------
$10,496 $ 9,994
</TABLE>
4. Litigation
----------
We are 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. We are not aware of any pending or threatened
legal proceedings against the Company that, individually or in the aggregate,
would have a material adverse effect on our business, operating results, or
financial condition.
5
<PAGE>
5. Earnings (Loss) Per Share
-------------------------
The following table sets forth the computation of basic and diluted income
(loss) per share:
(In thousands, except per share amounts)
<TABLE>
<S> <C> <C>
Three Months Ended Six Months Ended
September 30 September 30
------------------ ----------------
2000 1999 2000 1999
------- ------- ------- -------
Numerator:
Numerator for basic and diluted net
income per share - net income (loss) $ 1,225 $ (129) $ 2,692 $(1,074)
Denominator for basic net income (loss) per share:
Weighted average common shares used in
computing basic net income (loss)
per share 11,197 10,154 11,151 10,136
------- ------- ------- -------
Basic net income (loss) per share $ 0.11 $ (0.01) $ 0.24 $ (0.11)
------- ------- ------- -------
Denominator for diluted net income per share:
Weighted average common shares 11,197 10,154 11,151 10,136
Employee stock options to purchase
common stock 1,320 - 1,325 -
------- ------- ------- -------
Shares used in computing diluted net
income per share 12,517 10,154 12,476 10,136
------- ------- ------- -------
Diluted net income (loss) per share $ 0.10 $ (0.01) $ 0.22 $ (0.11)
------- ------- ------- -------
</TABLE>
Options to purchase 9,000 shares of common stock were outstanding during the
quarter ended September 30, 2000, but were not included in the computation of
diluted net income per share because the options' exercise price was greater
than the average market price of the common stock and, therefore, the effect
would be antidilutive. Options to purchase 819,158 shares of common stock were
outstanding during the three months ended September 30, 1999, but were not
included in the computation of diluted net loss per share as the Company
incurred a net loss and the effect of the securities would have been
antidilutive.
6. Comprehensive Income
--------------------
Comprehensive income (loss) for the three and six months ended September 30,
2000 was $1,213,000 and $2,680,000, respectively and the three and six months
ended September 30, 1999 was ($184,000) and ($1,076,000), respectively.
7. Income Taxes
------------
For the three and six months ended September 30, 2000, the Company recorded a
provision for income taxes of $35,000 and $55,000, respectively, based on the
projected effective annual tax rate of 2%. The effective tax rate for fiscal
2001 is substantially below the federal statutory rate of 35% due to the
utilization of federal and state tax loss and credit carryforwards. No similar
amounts were recorded for the three and six ended September 30, 1999 due to the
Company's net loss during the period. The Company's tax provision consisted of
federal and state alternative minimum taxes.
6
<PAGE>
ITEM 2. Management's Discussion And Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
Results of Operations
Product sales for the quarter ended September 30, 2000, increased by $6,674,000
or 71%, compared to the quarter ended September 30, 1999, with the largest
component of the increase being in products for the networking market. Unit
shipments increased 101% to 35.9 million units in the September 30, 2000
quarter compared to 17.9 million units in the year-earlier quarter. The
increase in product sales was primarily due to increased sales of new products.
Sales of the Company's new products (products introduced within the past three
years) increased by 101% in dollars and 170% in units in the quarter ended
September 30, 2000 as compared to the year-earlier quarter. Thin film products
accounted for 68% of dollar sales and 76% of units shipped for the quarter
ended September 30, 2000 as compared to 72% of dollar sales and 79% of units
shipped the year-earlier quarter. The decline in percentage of thin film units
shipped was primarily due to increased mix of single chip products, and lower
mix of dual chip products for solving the need for parallel port filtering,
termination and ESD protection. In total the number of parallel port solutions
shipped increased by 160% in the quarter ended September 30, 2000 as compared
to the year-earlier period.
Product sales for the six months ended September 30, 2000, increased by
$13,033,000 or 73%, compared to the six months ended September 30, 1999, with
the largest component of the increase being in products for the networking
market. Unit shipments increased 100% to 64.8 million units in six months
ended September 30, 2000 compared to 32.4 million units in the year-earlier
quarter. The increase in product sales was primarily due to increased sales of
new products. Sales of the Company's new products increased by 104% in dollars
and 155% in units in the six months ended September 30, 2000 as compared to the
year-earlier quarter. Thin film products accounted for 66% of dollar sales and
72% of units shipped for the six months ended September 30, 2000 as compared to
68% of dollar sales and 75% of units shipped the year-earlier period. The
decline in percentage of thin film units shipped was primarily due to increased
mix of single chip products, and lower mix of dual chip products for solving
the need for parallel port filtering, termination and ESD protection. In total
the number of parallel port solutions shipped increased by 129% in the six
months ended September 30, 2000 as compared to the year-earlier period.
Gross margins increased to 33.4% in the September 30, 2000 quarter compared to
29.7% in the year-earlier period and to 34.4% for the six months ended
September 30, 2000 compared to 28.4% in the year-earlier period, in each case
due to increased sales and manufacturing efficiencies.
Research and development (R&D) expense was $900,000 and $769,000 for the
quarters ended September 30, 2000 and 1999, respectively. The increase in
research and development expense was due to increased personnel costs as the
focus of R&D was more on product development than on process development
compared to the year-earlier period. R&D expense for the six months ended
September 30, 2000 and 1999 was $1,710,000 and $1,727,000, respectively, as
increased personnel costs were offset by decreased materials cost.
Selling, marketing and administrative expenses were $2,857,000 and $2,032,000
for the quarters ended September 30, 2000 and 1999, respectively and $5,663,000
and $4,149,000 for the six months ended September 30, 2000 and 1999,
respectively. The increases in the fiscal 2001 periods are primarily due to
increased commissions, increased personnel costs, and increased promotional
activities, including expansion of the Company's presence in the Far East and
Europe.
As a result of the factors discussed above, operating income for the quarter
ended September 30, 2000, was $1,630,000 compared to an operating loss of
$2,000 in the year-earlier quarter and operating income for the six months
ended September 30, 2000 was $3,290,000 compared to an operating loss of
$770,000 for the year-earlier period.
Other expense, net for the quarter ended September 30, 2000 and 1999, was
$380,000 and $127,000, respectively, and for the six months ended September 30,
2000 and 1999, was $543,000 and $304,000, respectively. The increases in the
fiscal 2001 periods were primarily due to was to the write-off of $250,000
7
<PAGE>
of expenses related to a secondary offering of the Company's stock that was
withdrawn in September 2000, due to market conditions.
Income tax expense of $25,000 for the quarter ended September 30, 2000 and
$55,000 for the six months then ended are provisions for estimated corporate
alternative minimum taxes, which are not covered by the Company's tax loss
carry forward. No income taxes were accrued for the three months and six
months ended September 30, 1999, due to the availability of tax loss carry
forwards.
Liquidity and Capital Resources
Total cash, short-term securities and investments as of September 30, 2000, was
$8.4 million compared to $6.6 million on March 31, 2000. Receivables decreased
to $8.7 million at September 30, 2000 compared to $8.9 million six months
earlier. Receivables days sales outstanding were 48.5 days as of September 30,
2000 as compared to 56 days at March 31, 2000. Inventories increased slightly
from the March quarter, with inventory turns improving to 4.1 turns compared to
3.5 at March 31, 2000. Capital expenditures totaled $3.2 million, reflecting
our investment in new equipment to increase production and to support our
production of chip scale products, which are expected to ramp up later this
year. These expenditures were partially offset by additional long term debt
financing of $1.0 million.
We have a $3.0 million revolving secured line of credit agreement that expires
on June 30, 2001. Under the terms of the line of credit, we can borrow at
prime plus one-half percent, collateralized by eligible receivables. We have
made no borrowings against this line. We also have a $1.0 million capital
equipment financing facility that expires on July 31, 2003; under the terms of
this facility we can borrow at prime plus 0.75%. As of September 30, 2000 we
had borrowed $1.0 million against this capital equipment financing facility.
On April 21, 2000 we secured an additional $500,000 capital equipment financing
facility under the same terms and conditions of the original facility. The new
line expires on August 31, 2003. As of September 30, 2000, we had borrowed
$203,000 against this $500,000 facility. On July 27, 2000 we secured an
additional $2.0 million equipment financing facility that expires on December
25, 2003. Under the terms of this facility we can borrow at prime plus 0.5%;
there are no borrowings against this line. We are in compliance with our
financial covenants.
We expect to fund our future liquidity needs through 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, we may pursue other sources of liquidity.
We believe we have sufficient financial resources to fund our operations for at
least the next eighteen months.
Impact of the Year 2000
We have experienced no material impact on our operations as a result of the
Year 2000 issue. Problems relating to the Year 2000 issue could still arise,
but we do not believe that they will have a material adverse effect on our
financial condition or results of operations. The Company considers its
operations to be Year 2000 functional and ready to support its customers,
however we continue to monitor our systems to watch for any potential issues in
the future.
Market Risk
The Company owns financial instruments that are sensitive to market risks as
part of its investment portfolio. The investment portfolio is used to preserve
our cash until it is required to fund operations and capital investments. None
of these market-risk sensitive instruments are held for trading purposes except
for amounts related to our non-qualified deferred compensation program. We do
not own derivative financial instruments in our investment portfolio. The
investment portfolio contains instruments that are subject to fluctuation in
interest rates.
8
<PAGE>
Our investment portfolio includes debt instruments that are primarily United
States government bonds, high-grade corporate bonds and money market funds of
less than one year in duration. These investments are subject to interest rate
risk, and could decline in value if interest rates increase. Our investment
portfolio also consists of certain commercial paper that is also subject to
interest rate risk. Due to the short duration and conservative nature of these
instruments, we do not believe that we have a material exposure to interest
rate risk.
The interest rates on nearly all of our long-term debt and capital lease
obligations are fixed and therefore not subject to interest rate fluctuations.
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, unit volumes, 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, cost 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 above and
elsewhere in this Form 10-Q.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
See discussion under the caption "Market Risk" in Item 2 above.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
We are 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. We are not aware of any pending or threatened
legal proceedings against the Company that, individually or in the aggregate,
would have a material adverse effect on our business, operating results, or
financial condition.
ITEM 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Company's annual meeting of stockholders, at which the proposals described
below were submitted to stockholders, was held on August 1, 2000.
Proposal No. 1 Election of Directors. The following individuals, who
-------------
received the votes indicated, were elected as directors:
<TABLE>
<S> <C> <C> <C>
NAME FOR WITHHELD
----------------- --------- ---------
Dr. Angel Jordan 8,392,911 1,313,773
Jeffrey Kalb 8,217,627 1,489,057
J. Daniel McCranie 8,394,252 1,312,432
Wade Meyercord 8,394,052 1,312,632
Stuart Schube 8,393,965 1,312,719
Dr. John Sprague 8,387,132 1,319,552
Donald Waite 8.393,682 1,313,002
</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
--------- ------- --------
8,728,044 968,332 10,308
Proposal No. 3 The proposal to approve the amendment of the 1995 Employee
--------------
Stock Option Plan was approved. The results of the voting was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
7,822,730 1,861,251 22,703
Proposal No. 4 The proposal to approve the Amendment of the 1995 Non-
--------------
Employee Directors' Stock Option Plan was approved. The results of the voting
was as follows:
FOR AGAINST WITHHELD
--------- --------- --------
8,115,297 1,542,923 48,464
10
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
3.1 Articles of Incorporation, as amended (filed as an
exhibit to the Registrants' Annual Report on Form 10-
K for the fiscal year ended March 31, 1995 and
incorporated herein by reference).
3.2 By-Laws, as amended (filed as an exhibit to the
Registrants' Annual Report on Form 10-K for the
fiscal year ended march 31, 1995 and incorporated
herein by reference).
4.1 1995 Employee Stock Option Plan amended as of July
26, 1996, amended as of July 18, 1997, amended as of
August 7, 1998, and amended as of August 1, 2000.
4.2 1995 Non-Employee Directors' Stock Option Plan,
amended as of July 26, 1996, amended as of July 18,
1997, amended as of August 7, 1998, and amended as of
August 1, 2000.
10.11 Amended Commitment Letter from Comerica Bank.
27.1 Financial Data Schedule (for EDGAR filing only).
(b) Reports on Form 8-K
None.
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: November 14, 2000 /s/John E. Trewin
------------------------------------------
John E. Trewin
Vice President and Chief Financial Officer
11
<PAGE>
Exhibit 4.1
CALIFORNIA MICRO DEVICES CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
AMENDED AS OF JULY 26, 1996, AMENDED AS OF JULY 18, 1997,
AMENDED AS OF AUGUST 7, 1998, and AMENDED AS OF AUGUST 1, 2000
1. PURPOSE.
The purpose of the CALIFORNIA MICRO DEVICES CORPORATION 1995 Employee Stock
Option Plan (the "Plan") is to advance the interests of the Corporation and its
shareholders by providing a means by which the Corporation and its Subsidiaries
shall be able to attract and retain qualified employees and consultants.
2. DEFINITIONS.
(a) "Affiliate" shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations that includes the Corporation if each of
such corporations, other than the last corporation in the chain, owns
at least 50% of the total voting power of one of the other corporations.
(b) "Affiliated Group" shall mean an affiliated group of corporations, as
defined in Code Section 1504, which includes the Corporation.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the committee appointed by the Board, in
accordance with Section 3(a) hereof, to administer the Plan.
(f) "Common Stock" shall mean the voting common stock of the Corporation.
(g) "Consultant" shall mean any person who, or any employee of any firm
which, is engaged by the Company or any Affiliate to render consulting services.
(h) "Corporation" shall mean CALIFORNIA MICRO DEVICES CORPORATION, a
California corporation.
(i) "Effective Date" shall mean February 10, 1995.
(j) "Employee" shall mean any individual who is employed, within the
meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or by any Affiliate. For purposes of the Plan and only for
purposes of the Plan, and in regard to Nonstatutory Stock Options but not for
Incentive Stock Options, a Consultant of the Corporation or any Affiliate shall
be deemed to be an Employee, and service as a Consultant with the Corporation
or any Affiliate shall be deemed to be employment, but no Incentive Stock
Option shall be granted to a Consultant who is not an employee of the
Corporation or any Affiliate within the meaning of Section 3401 of the Code and
the regulations thereunder. In the case of a Consultant, the provisions
governing when a termination of employment has occurred for purposes of the
Plan shall be set forth in the written stock option agreement between the
Optionee and the corporation, or, if not so set forth, the Committee shall have
the discretion to determine when a termination of "employment" has occurred for
purposes of the Plan.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" shall mean the price per Share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's stock option agreement.
12
<PAGE>
(m) "Fair Market Value" shall mean the value of one Share of Common
Stock, determined as follows: (i) if the Shares are traded on an exchange or on
the NASDAQ National Market System, the reported "closing price" on the date of
valuation or if no trading occurred on such date, the next preceding day on
which trading occurred; (ii) if the Shares are traded over-the-counter on the
NASDAQ System (other than on the NASDAQ National Market System), the mean
between the bid and the ask prices on said System at the close of business on
the date of valuation or if no trading occurred on such date, the next
preceding day on which trading occurred; and (iii) if neither (i) nor (ii)
applies, the fair market value as determined by the Committee in good faith.
Such determination shall be conclusive and binding on all persons.
(n) "Incentive Stock Option" shall mean an Option of the type
described in Section 422(b) of the Code.
(o) "Nonstatutory Stock Option" shall mean an Option of the type not
described in Section 422(b) or 423(b) of the Code.
(p) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(q) "Optionee" shall mean any person who holds an Option pursuant to
the Plan.
(r) "Outside Director" shall mean a nonemployee member of the Board
who (1) is not a current employee of any member of the Affiliated Group; (2)
does not receive compensation for prior services (other than benefits under a
taxqualified retirement plan) from any member of the Affiliated Group during a
taxable year in which he or she serves on the Committee; (3) has never been an
officer of any member of the Affiliated Group; and (4) does not receive
remuneration from any member of the Affiliated Group, either directly or
indirectly, in any capacity other than as a director.
(s) "Plan" shall mean this stock option plan as it may be amended
from time to time.
(t) "Purchase Price" shall mean at any particular time the Exercise
Price times the number of Shares for which an Option is being exercised.
(u) "Share" shall mean one share of authorized Common Stock.
3. ADMINISTRATION.
(a) The Committee.
The Plan shall be administered by a Committee of Outside Directors which
shall consist of not less than two members, who during the one year prior to
service as an administrator of the Plan, shall not have been granted or awarded
equity securities pursuant to the Plan or any other plan of the Corporation or
any of its Affiliates except as permitted under Rule 16b3 under the Exchange
Act. The Board may from time to time designate individuals as ineligible to
participate in the Plan for a specified period in order to become eligible to
be a member of the Committee.
(b) Powers of the Committee.
Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion and on behalf of the Corporation:
(i) to grant Options;
(ii) to determine the Exercise Price per Share of Options to be
granted;
(iii) to determine the Employees to whom, and the time or times at
which, Options shall be granted and the number of Shares for which an Option
will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and regulations relating
to the Plan;
(vi) to determine the terms and provisions of each Option
granted and, with the consent of the holder thereof, modify or amend each
Option;
(vii) to accelerate or defer, with the consent of the Optionee,
the exercise date of any Option;
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(viii) to authorize any person to execute on behalf of the Corporation
any instrument required to effectuate the grant of an Option previously granted
by the Committee;
(ix) with the consent of the Optionee, to reprice, cancel and regrant,
or otherwise adjust the Exercise Price of an Option previously granted by the
Committee; and
(x) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) Board's Determination of Fair Market Value.
The Board shall have the authority to determine, upon review of
relevant information, the Fair Market Value of the Common Stock, subject to the
provisions of the Plan and irrespective of whether the Board has appointed a
Committee to administer the Plan. The Board may delegate this authority to the
Committee.
(d) Committee's Interpretation of the Plan.
The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted hereunder shall be final and
binding on all parties claiming an interest in an Option granted under the
Plan. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option.
4. PARTICIPATION.
(a) Eligibility.
The Optionees shall be such persons as the Committee may select
from among the Employees, provided that Consultants are not eligible to receive
Incentive Stock Options. Nonemployee members of the Board are not eligible
for grants of Options.
(b) Ten Percent Shareholders.
Any Employee who owns Stock possessing more than 10% of the total
combined voting power of all classes of outstanding stock of the Corporation or
any Affiliate shall not be eligible to receive an Option unless:
(i) the Exercise Price of the Shares subject to such Option
when granted is at least 110% of the Fair Market Value of such Shares, and
(ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) Stock Ownership.
For purposes of Paragraph 4(b), in determining stock ownership,
an employee shall be considered as owning the stock owned, directly or
indirectly, by or for his or her brothers and sisters, spouse, ancestors, and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an option shall be disregarded.
(d) Outstanding Stock.
For purposes of Section 4(b), the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant
of the Option to the Optionee but shall not include any share for which an
Option is exercisable by any person.
5. STOCK.
(a) Shares Subject to This Plan.
The aggregate number of Shares which may be issued upon exercise
of Options under the Plan shall not exceed Three million One Hundred Fifty-Five
Thousand (3,1555,000), subject to adjustment pursuant to Section 9 hereof.
(b) Options Not to Exceed Shares Available.
The number of Shares for which an Option is exercisable at any
time shall not exceed the
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number of Shares remaining available for issuance under the Plan. If any
Option expires or is terminated, the number of Shares for which such Option was
exercisable may be made exercisable pursuant to other Options under the Plan.
The limitations established by this Section 5(b) shall be subject to adjustment
in the manner provided in Section 9 hereof upon the occurrence of an event
specified therein.
(c) Limitation on Grants.
No person shall be granted in any one fiscal year options for more
than 500,000 Shares.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option agreements
between the Optionee and the Corporation in such form as the Committee shall
from time to time determine. No Option or purported Option shall be a valid
and binding obligation of the Corporation unless so evidenced in writing.
(b) Number of Shares.
Each stock option agreement shall state the number of Shares for
which the Option is exercisable and shall provide for the adjustment thereof in
accordance with Section 9 hereof.
(c) Vesting.
An Optionee may not exercise his or her Option for any Shares until
the Option, in regard to such Shares, has vested. Each stock option agreement
shall include a vesting schedule which shall show when the Option becomes
exercisable. The vesting schedule shall not impose upon the Corporation or any
Affiliate any obligation to retain the Optionee in its employ or under contract
for any period or otherwise change the employment at will status of an Optionee
who is an employee of the Corporation or any Affiliate.
(d) Lapse of Options.
Each stock option agreement shall state the time or times when
the Option covered thereby lapses and becomes unexercisable in part or in full.
An Option shall lapse on the earliest of the following events (unless otherwise
determined by the Committee and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the Option;
(ii) The first anniversary of the Optionee's death;
(iii) The first anniversary of the date the Optionee ceases to be an
Employee due to total and permanent disability, within the meaning of Section
22(e)(3) of the Code;
(iv) On the date provided in Section 6(h)(i), unless with respect to
a Nonstatutory Stock Option, the Committee otherwise extends such period before
the applicable expiration date;
(v) On the date provided in Section 9 for a transaction described in
such Section;
(vi) The date the Optionee files or has filed against him or her a
petition in bankruptcy; or
(vii) The expiration date specified in an Optionee's stock option
agreement.
(e) Exercise Price.
Each stock option agreement shall state the Exercise Price for
the Shares for which the Option is exercisable. Subject to Section 4(b), the
Exercise Price of an Incentive Stock Option and a Nonstatutory Stock Option
shall, when granted, be not less than 100% and 85% of the Fair Market Value of
the Shares for which the Option is exercisable, respectively, and not less than
the par value of the Shares.
(f) Medium and Time of Payment.
The Purchase Price shall be payable in full in cash upon the exercise
of an Option but the Committee may allow the Optionee to pay the Purchase Price:
(i) by surrendering Shares in good form for transfer, owned by the
Optionee and having a Fair Market Value on the date of exercise equal to the
Purchase Price;
(ii) by delivery of a full recourse promissory note ("Note") made
by the Optionee in the amount of the Purchase Price, bearing interest,
compounded semiannually, at a rate not less than the rate determined under
Section 7872 of the Code to insure that no "foregone interest", as
defined in such section, will accrue, together with the delivery of a duly
executed standard form security agreement securing the Note by a pledge of the
Shares purchased; or
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(iii) in any combination of such consideration or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law Code as long as the sum of the cash so paid, the
Fair Market Value of the Shares so surrendered, and the amount of any Note
equals the Purchase Price.
The Committee or a stock option agreement may prescribe requirements
with respect to the exercise of Options, including the submission by the
Optionee of such forms and documents as the Committee may require and, the
delivery by the Optionee of cash sufficient to satisfy applicable withholding
requirements. The Committee may vary the exercise requirements and
procedures from time to time to facilitate, for example, the broker
assisted exercise of Options.
(g) Nontransferability of Options.
During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee or the Optionee's conservator or legal representative and
shall not be assignable or transferable except pursuant to a qualified domestic
relations order as defined by the Code. In the event of the Optionee's death,
the Option shall not be transferable by the Optionee other than by will or the
laws of descent and distribution.
(h) Termination of Employment Other than by Death or Disability.
(i) If an Optionee ceases to be an Employee for any reason other
than his or her death or disability, the Optionee shall have the right, subject
to the provisions of this Section 6, to exercise any Option held by the
Optionee at any time within ninety (90) days after his or her termination
of employment, but not beyond the otherwise applicable term of the Option
and only to the extent that on such date of termination of employment the
Optionee's right to exercise such Option had vested.
(ii) For purposes of this Section 6(h), the employment relationship
shall be treated as continuing intact while the Optionee is an active employee
of the Corporation or any Affiliate, or is on military leave, sick leave, or
other bona fide leave of absence to be determined in the sole discretion of
the Committee. The preceding sentence notwithstanding, in the case of an
Incentive Stock Option, employment shall be deemed to terminate on the date
the Optionee ceases active employment with the Corporation or any Affiliate,
unless the Optionee's reemployment rights are guaranteed by statute or contract.
(i) Death of Optionee.
If an Optionee dies while an Employee, or after ceasing to be an
Employee but during the period while he or she could have exercised an Option
under Section 6(h), any Option granted to the Optionee may be exercised, to the
extent it had vested at the time of death and subject to the Plan, at any time
within 12 months after the Optionee's death, by the executors or administrators
of his or her estate or by any person or persons who acquire the Option by will
or the laws of descent and distribution, but not beyond the otherwise
applicable term of the Option.
(j) Disability of Optionee.
If an Optionee ceases to be an Employee due to becoming totally
and permanently disabled within the meaning of Section 22(e)(3) of the Code,
any Option granted to the Optionee may be exercised to the extent it had vested
at the time of cessation and, subject to the Plan, at any time within 12 months
after the Optionee's termination of employment, but not beyond the otherwise
applicable term of the Option.
(k) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall have no rights
as a shareholder of the Corporation with respect to any Shares for which his or
her Option is exercisable until the date of the issuance of a stock certificate
for such Shares. No adjustment shall be made for dividends, ordinary or
extraordinary or whether in currency, securities, or other property,
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 9 hereof.
(l) Modification, Extension, and Renewal of Options.
Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options or accept the cancellation of outstanding
Options for the granting of new Options in substitution therefor.
Notwithstanding the preceding sentence, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted.
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(m) Other Provisions.
The stock option agreements authorized under the Plan may contain
such other provisions which are not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option, as
the Committee shall deem advisable.
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs.
To the extent that the Fair Market Value of Shares (determined for each
Share as of the date of grant of the Option covering such Share) subject to
Options granted under this Plan (or any other plan of the Corporation or any
Affiliate) which are designated as Incentive Stock Options and which become
exercisable by an Optionee for the first time during a single calendar year
exceeds $100,000, the Option(s) (or portion thereof) covering such Shares shall
be recharacterized (to the extent of such excess over $100,000) as a
Nonstatutory Stock Option. In determining which Option(s) shall be treated as
Nonstatutory Stock Options under the preceding sentence, the Options shall be
taken into account in the order granted, with the result that a later granted
Option shall be recharacterized as a Nonstatutory Stock Option prior to such
recharacterization of a previously granted Option.
8. TERM OF PLAN.
Options may be granted pursuant to the Plan until ten years following
the Effective Date, and all Options which are outstanding on such date shall
remain in effect until they are exercised or expire by their terms. The Plan
shall expire for all purposes on the date 20 years following the Effective
Date.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
(a) Reorganizations.
The number of Shares covered by the Plan, as provided in Section
5 hereof, and the number of Shares for which each Option is exercisable shall
be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from the payment of a Common Stock dividend, a stock
split, a reverse stock split or any other event which results in an increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Corporation, and the Exercise Price shall be
proportionately increased in the event the number of Shares subject to such
Option are decreased and shall be proportionately decreased in the event the
number of Shares subject to such Option are increased. For the purposes of
this paragraph, conversion of any convertible securities of the Corporation
shall not be deemed to have been "effected without receipt of consideration."
Adjustments shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Liquidation.
In the event of the dissolution or liquidation of the
Corporation, each Option shall terminate immediately prior to the consummation
of such action. The Committee shall notify the Optionee not less than fifteen
(15) days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option shall be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
(c) Merger.
In the event of a merger or acquisition involving an acquisition
of the Corporation or an acquisition by the Corporation of another company, the
result of which is that the outstanding voting securities of the Corporation do
not represent, or are not converted into, a majority of the outstanding voting
securities of the surviving corporation, except as otherwise provided in any
particular Option agreement, the vesting of all unvested Options shall be
accelerated and all options shall be immediately exercisable. Without limiting
the generality of the foregoing, in the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option shall
terminate immediately prior to the consummation
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of such transaction. The Committee shall notify the Optionee not less than
fifteen (15) days prior to the proposed consummation of such transaction, and
the Option shall be exercisable as to all Shares which are subject to the
Option until immediately prior to the consummation of such transaction.
(d) Determination by Committee.
All adjustments described in this Section 9 shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
(e) Limitation on Rights of Optionee.
Except as expressly provided in this Section 9, no Optionee shall
have any rights by reason of any payment of any stock dividend, stock split or
reverse stock split or any other increase or decrease in the number of shares
of stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Exercise Price of the Shares for which an Option is
exercisable. Notwithstanding the foregoing, if the Corporation shall enter
into a transaction affecting the Corporation's capital stock or distributions
to the holders of its capital stock for which a revision in the terms of each
Option is not required pursuant to this Section 9, the Committee shall have the
right, but not the obligation, to revise the terms of each Option in a manner
the Committee, in its sole discretion, deems fair and reasonable given the
transaction involved. If necessary or appropriate in connection with such
transaction, the Committee may declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his
Option in whole or in part, including exercise as to Shares to which the Option
would not otherwise be exercisable.
(f) No Restriction on Rights of Corporation.
The grant of an Option shall not affect or restrict in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate, sell, or transfer all or any part of
its business or assets.
10. SECURITIES LAW REQUIREMENTS.
The Corporation shall not be under any obligation to issue any Shares
upon the exercise of any Option unless and until the Corporation has determined
that: (i) it and the Optionee have taken all actions required to register the
Shares under the Securities Act of 1933, or to perfect an exemption from the
registration requirements thereof; (ii) any applicable listing requirement of
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) all other applicable provisions of state and Federal law have been
satisfied.
11. EXERCISE OF UNVESTED OPTIONS.
The Committee may grant any Optionee the right to exercise any Option
prior to the complete vesting of such Option. Without limiting the generality
of the foregoing, the Committee may provide that if an Option is exercised
prior to having completely vested, the Shares issued upon such exercise shall
remain subject to vesting at the same rate as under the Option so exercised and
shall be subject to a right, but not an obligation, of repurchase by the
Corporation with respect to all unvested Shares if the Optionee ceases to be an
Employee for any reason. For the purposes of facilitating the enforcement of
any such right of repurchase, at the request of the Committee, the Optionee
shall enter into the Joint Escrow Instructions with the Corporation and deliver
every certificate for his or her unvested Shares with a stock power executed in
blank by the Optionee and by the Optionee's spouse, if required for transfer.
12. AMENDMENT OF THE PLAN.
The Board or the Committee may, from time to time, terminate, suspend
or discontinue the Plan, in whole or in part, or revise or amend it in any
respect whatsoever including, but not limited to, the adoption of any
amendment(s) deemed necessary or advisable to qualify the Options under rules
and regulations promulgated by the Securities and Exchange Commission with
respect to Employees who are subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended, or to correct any defect or
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supply any omission or reconcile any inconsistency in the Plan or in any Option
granted thereunder, without approval of the shareholders of the Corporation,
but without the approval of the Corporation's shareholders, no such revision or
amendment shall:
(i) Increase the number of Shares subject to the Plan, other than any
increase pursuant to Section 9;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan;
(iii) Materially increase the benefits accruing to Optionees under the Plan;
(iv) Extend the term of the Plan; or
(v) Amend this Section to defeat its purpose.
No amendment, termination or modification of the Plan shall affect any
Option theretofore granted in any material adverse way without the consent of
the Optionee.
13. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option shall be used for general corporate
purposes.
14. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of all classes of the outstanding shares present and
entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan or by written consent, and in no event later
than one (1) year following the Effective Date. Prior to such approval,
Options may be granted but shall not be exercisable. Any amendment described
in Section 12 (i) to (iv) shall also be subject to approval by the
Corporation's shareholders.
15 WITHHOLDING OF TAXES.
In the event the Corporation or a Affiliate determines that it is
required to withhold Federal, state, or local taxes in connection with the
exercise of an Option or the disposition of Shares issued pursuant to the
exercise of an Option, the Optionee or any person succeeding to the rights of
the Optionee, as a condition to such exercise or disposition, may be required
to make arrangements satisfactory to the Corporation or the Affiliate to enable
it to satisfy such withholding requirements.
16. RIGHTS AS AN EMPLOYEE.
Neither the Plan nor any Option granted pursuant thereto shall be
construed to give any person the right to remain in the employ of the
Corporation or any Affiliate, or to affect the right of the Corporation or any
Affiliate to terminate such individual's employment at any time with or without
cause. The grant of an Option shall not entitle the Optionee to, or disqualify
the Optionee from, participation in the grant of any other Option under the
Plan or participation in any other benefit plan maintained by the Corporation
or any Affiliate.
17. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED RIGHTS.
In adopting and maintaining this Plan and granting options hereunder,
neither the Corporation nor any Affiliate makes any representations or
undertakings with respect to the initial qualification or treatment of Options
under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees,
Optionees, or beneficiaries of any obligations on the part of the Corporation,
any Affiliate or the Committee, except as expressly provided herein.
18. INSPECTION OF RECORDS.
Copies of the Plan, records reflecting each Optionee's Option, and any
other documents and records which an Optionee is entitled by law to inspect
shall be open to inspection by the Optionee and his or her duly
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authorized representative at the office of the Committee at any reasonable
business hour.
19 INFORMATION TO OPTIONEES.
Each Optionee shall be provided with such information regarding the
Corporation as the Committee from time to time deems necessary or appropriate;
provided however, that each Optionee shall at all times be provided with such
information as is required to be provided from time to time pursuant to
applicable regulatory requirements, including, but not limited to, any
applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations and other state securities agencies.
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EXHIBIT 4.2
CALIFORNIA MICRO DEVICES CORPORATION
1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
AMENDED AS OF JULY 26, 1996, AMENDED AS OF JULY 18, 1997,
AMENDED AS OF AUGUST 7, 1998, AND AMENDED AS OF AUGUST 1, 2000
1. PURPOSE.
The purpose of the CALIFORNIA MICRO DEVICES CORPORATION NonEmployee
Directors' Stock Option Plan (the "Plan") is to secure for the Corporation and
its shareholders the benefits of the incentive inherent in increased common
stock ownership by the members of the Board of Directors (the "Board") of the
Corporation who are not employees of the Corporation or any of its subsidiaries.
2. DEFINITIONS.
(a) "Board" shall mean the board of directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee appointed by the Board to
administer the Plan, or if no such committee is appointed, by the Board.
(d) "Common Stock" shall mean the voting common stock, of the Corporation.
(e) "Corporation" shall mean CALIFORNIA MICRO DEVICES CORPORATION, a
California corporation.
(f) "Director" shall mean a member of the Board.
(g) "Effective Date" shall mean February 10, 1995.
(h) "Exercise Price" shall mean the price per Share at which an Option may
be exercised, as determined by the Committee and as specified in the Optionee's
stock option agreement.
(i) "Fair Market Value" shall mean for any day the average of the
closing bid and asked prices of the Stock in the over-the-counter market, as
reported through the National Association of Securities Dealers ("NASD")
Automated Quotation System or, if the Stock is listed or admitted to trading on
the Nasdaq National Market System or any national securities exchange or if the
last reported sale price of such Stock is generally available, the last
reported sale price on such system or exchange. The Fair Market Value for
any day for which there is no such bid and asked or last reported sales price
shall be the Fair Market Value of the next preceding day for which there is
such a price.
(j) "NonEmployee Director" shall mean a Director who is not an
employee of the Corporation or any of its subsidiaries.
(k) "Option" shall mean an option to purchase Common Stock granted
pursuant to the Plan.
(l) "Optionee" shall mean any person who holds an Option pursuant to the
Plan.
(m) "Plan" shall mean the CALIFORNIA MICRO DEVICES CORPORATION 1995
NonEmployee Directors' Stock Option Plan, as it may be amended from time to
time.
(n) "Purchase Price" shall mean at any particular time the Exercise Price
times the number of Shares for which an Option is being exercised.
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(o) "Share" shall mean one share of authorized Common Stock.
3. ADMINISTRATION.
a) The Committee.
The Plan shall be administered by a Committee which shall consist of
not less than three members of the Board.
(b) Powers of the Committee.
Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion and on behalf of the Corporation shall, subject to
the provisions of the Plan, grant Options and shall have the power to construe
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. Any decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. No member of the Committee
shall be liable for anything done or omitted to be done by such member or by
any other member of the Committee in connection with the Plan, except for such
member's own willful misconduct or as expressly provided by statute.
4. PARTICIPATION.
Each NonEmployee Director shall be eligible to receive Options in
accordance with the Plan. The adoption of this Plan shall not be deemed to
give any director any right to be granted an option to purchase Common Stock
of the Corporation, except to the extent and upon such terms and conditions are
provided herein.
5. STOCK.
(a) Shares Subject to This Plan.
The aggregate number of Shares which may be issued upon exercise of
Options under the Plan shall not exceed Three Hundred and Twenty Thousand
(320,000) subject to adjustment pursuant to Section 8 hereof.
(b) Options Not to Exceed Shares Available.
The number of Shares for which an Option is exercisable at any time
shall not exceed the number of Shares remaining available for issuance under
the Plan. If any Option expires or is terminated, the number of Shares for
which such Option was exercisable may be made exercisable pursuant to other
Options under the Plan. The limitations established by this Section 5 shall
be subject to adjustment in the manner provided in Section 8 hereof upon the
occurrence of an event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option agreements
between the Optionee and the Corporation in such form as the Committee shall
from time to time determine. No Option or purported Option shall be a valid
and binding obligation of the Corporation unless so evidenced in writing.
(b) Number of Shares.
Each stock option agreement shall state the number of Shares for
which the Option is exercisable in accordance with the following and shall
provide for the adjustment thereof in accordance with Section 8 hereof.
(i) Upon adoption of this Plan by the Board, and subject to the
approval of the Plan by the Shareholders of the Corporation in
accordance with Section 14 hereof, each NonEmployee Director then
in office shall, without further action required, be granted an
Option for the purchase of Ten Thousand (10,000) Shares. Each
other person appointed or elected to serve as a NonEmployee
director during the term of this Plan shall be granted an option
for Fifteen Thousand (15,000) Shares upon his or her appointment
or election.
(ii) Subject to the approval of the Plan by the Shareholders of the
Corporation in
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accordance with Section 14 hereof, each year, as of
the date of the Annual Meeting of Shareholders of the
Corporation, each NonEmployee Director who has been elected or
reelected or who is continuing as a member of the Board as of
the adjournment of the Annual Meeting (other than any Non-
Employee Director eligible for a grant pursuant to paragraph
(b)(i)) shall automatically receive an Option for Ten Thousand
(10,000) shares of Common Stock.
(c) Vesting.
An Optionee may not exercise his or her Option for any Shares until
the NonEmployee Director has served one year as a member of the Board since the
date the option was granted. An Optionee may exercise the Option as to one
fourth of the Shares at the end of the 4th full calendar quarter following the
date the Option was granted and as to an additional 1/16th of the Shares at the
end of each of the full calendar quarter commencing with the 5th full calendar
quarter following the date the Option was granted. The right to exercise the
Option shall be cumulative. An Optionee may buy all, or from time to time any
part, of the maximum number of shares which are exercisable under the an
Option, but in no case may Optionee exercise the Option with regard to a
fraction of a share, or for any share for which the Stock Option is not
exercisable.
(d) Lapse of Options.
Each stock option agreement shall state the time or times when the
Option covered thereby lapses and becomes unexercisable in part or in full. An
Option shall lapse on the earliest of the following events (unless otherwise
determined by the Committee and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the Option;
(ii) The first anniversary of the Optionee's death;
(iii) he first anniversary of the date the Optionee ceases to be a
Director due to total and permanent disability, within the meaning of
Section 22(e)(3) of the Code;
(iv) Ninety (90) days after the Optionee ceases to be a Director for
any reason other than his or her death or total and permanent disability;
(v) The date the Optionee files or has filed against him or her a
petition in bankruptcy; or
(vi) The expiration date specified in an Optionee's stock option
agreement.
(e) Exercise Price.
Each stock option agreement shall state the Exercise Price for the
Shares for which the Option is exercisable. The Exercise Price of all Options
shall be the Fair Market Value of the Shares for which the Option is
exercisable, and not less than the par value of the Shares.
(f) Medium and Time of Payment.
The Purchase Price shall be payable in full in cash upon the
exercise of an Option but the Committee may allow the Optionee to pay the
Purchase Price:
(i) by surrendering Shares in good form for transfer, owned by the
Optionee and having a Fair Market Value on the date of exercise equal to the
Purchase Price;
(ii) by delivery of a full recourse promissory note ("Note") made by
the Optionee in the amount of the Purchase Price, bearing interest, compounded
semiannually, at a rate not less than the rate determined under Section 7872 of
the Code to insure that no "unstated interest", as defined in such section will
accrue, together with the delivery of a duly executed standard form security
agreement securing the Note by a pledge of the Shares purchased; or
(iii) in any combination of such consideration or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law as long as the sum of the cash so paid, the Fair
Market Value of the Shares so surrendered, and the amount of any Note equals
the Purchase Price.
The Committee or a stock option agreement may prescribe requirements
with respect to the exercise of Options, including the submission by the
Optionee of such forms and documents as the Committee may require and the
delivery by the Optionee of cash sufficient to satisfy applicable withholding
requirements. The Committee may vary the exercise requirements and procedures
from time to time to facilitate, for example, the broker-assisted exercise of
Options.
(g) Nontransferability of Options.
During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee or
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the Optionee's conservator or legal representative and shall not be assignable
or transferable except pursuant to a qualified domestic relations order as
defined by the Code. In the event of the Optionee's death, the Option shall
not be transferable by the Optionee other than by will or the laws of descent
and distribution.
(h) Termination of Directorship Other than by Death or Disability.
If an Optionee ceases to be a Director for any reason other than his
or her death or disability, the Optionee shall have the right, subject to the
provisions of this Section 6, to exercise any Option held by the Optionee at
any time within ninety (90) days after his or her termination as a Director,
but not beyond the otherwise applicable term of the Option and only to the
extent that on such date of termination as a Director the Optionee's right
to exercise such Option had vested.
(i) Death of Optionee.
If an Optionee dies while a Director, or after ceasing to be a
Director but during the period while he or she could have exercised an Option
under Section 6(h) hereof, any Option granted to the Optionee may be exercised,
to the extent it had vested at the time of death and subject to the Plan, at
any time within twelve (12) months after the Optionee's death, by the
executors or administrators of his or her estate or by any person or
persons who acquire the Option by will or the laws of descent and
distribution, but not beyond the otherwise applicable term of the Option.
(j) Disability of Optionee.
If an Optionee ceases to be a Director due to becoming totally and
permanently disabled within the meaning of Section 22(e)(3) of the Code, any
Option granted to the Optionee may be exercised to the extent it had vested at
the time of cessation and, subject to the Plan, at any time within twelve (12)
months after the termination of Optionee's position as a Director, but not
beyond the otherwise applicable term of the Option.
(k) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall have no rights as
a shareholder of the Corporation with respect to any Shares for which his or
her Option is exercisable until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends,
ordinary or extraordinary or whether in currency, securities, or other
property, distributions, or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided in Section
8 hereof.
(l) Other Provisions.
The stock option agreements authorized under the Plan may contain
such other provisions which are not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option, as
the Committee shall deem advisable.
7. TERM OF PLAN.
Options may be granted pursuant to the Plan until ten (10) years following
the Effective Date, and all Options which are outstanding on such date shall
remain in effect until they are exercised or expire by their terms. The Plan
shall expire for all purposes on the date twenty (20) years following the
Effective Date.
8. REORGANIZATIONS.
(a) Reorganizations.
The number of Shares covered by the Plan, as provided in Section 5
hereof, and the number of Shares for which each Option is exercisable shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from the payment of a Common Stock dividend, a stock split, a
reverse stock split or any other event which results in an increase or decrease
in the number of issued Shares effected without receipt of consideration by the
Corporation, and the Exercise Price shall be proportionately increased in the
event the number of Shares subject to such Option are decreased and shall be
proportionately decreased in the event the number of Shares subject to such
Option are increased. Adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason
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thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) Liquidation.
In the event of the dissolution or liquidation of the Corporation,
each Option shall terminate immediately prior to the consummation of such
action. The Committee shall notify the Optionee not less than fifteen (15)
days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option shall be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
(c) Merger.
In the event of a merger or acquisition involving an acquisition of
the Corporation or an acquisition by the Corporation of another company, the
result of which is that the outstanding voting securities of the Corporation do
not represent, or are not converted into, a majority of the outstanding voting
securities of the surviving corporation, except as otherwise provided in any
particular Option agreement, the vesting of all unvested Options shall be
accelerated and all options shall be immediately exercisable. Without limiting
the generality of the foregoing, in the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option shall
terminate immediately prior to the consummation of such transaction. The
Committee shall notify the Optionee not less than fifteen (15) days prior to
the proposed consummation of such transaction, and the Option shall be
exercisable as to all Shares subject to such Option until immediately prior
to the consummation of such transaction.
(d) Determination by Committee.
All adjustments described in this Section 8 shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
(e) Limitation on Rights of Optionee.
Except as expressly provided in this Section 8, no Optionee shall
have any rights by reason of any payment of any stock dividend, stock split or
reverse stock split or any other increase or decrease in the number of shares
of stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Exercise Price of the Shares for which an Option is
exercisable.
(f) No Restriction on Rights of Corporation.
The grant of an Option shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate, sell, or transfer all or any part
of its business or assets.
9. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Share shall be issued upon the exercise of any Option unless and
until the Corporation has determined that:
(i) The Corporation and the Optionee have taken all actions required
to exempt the issuance of the Shares from the registration requirements under
the Securities Act of 1933, as amended (the "Act"), or the Corporation and the
Optionee shall determine that the registration requirements of the Act do not
apply to such exercise;
(ii) Any applicable listing requirement of any stock exchange on which
the Common Stock is listed has been satisfied; and
(iii) Any other applicable provision of state or Federal law has been
satisfied.
(b) Restrictions on Transfer; Representations of Optionee; Legends.
Regardless of whether the offering and sale of Shares has been
registered under the Act or has been registered or qualified under the
securities laws of any state, the Corporation may impose
25
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restrictions upon the sale, pledge, or other transfer of such Shares, including
the placement of appropriate legends on stock certificates, if, in the judgment
of the Corporation and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state, or any other law. If the sale of Shares is not
registered under the Act and the Corporation shall determine that the
registration requirements of the Act apply to such sale, but an exemption is
available which requires an investment representation or other representation,
the Optionee shall be required, as a condition to purchasing Shares by exercise
of his or her Option, to represent that such Shares are being acquired for
investment, and not with a view to the sale or distribution thereof, except in
compliance with the Act, and to make such other representations as are deemed
necessary or appropriate by the Corporation and its counsel. Stock
certificates evidencing Shares acquired pursuant to an unregistered transaction
to which the Act applies shall bear such restrictive legends as are required or
deemed advisable under the Plan or the provisions of any applicable law. Any
determination by the Corporation and its counsel in connection with any of the
matters set forth in this section shall be conclusive and binding on all
persons.
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or
qualify the sale of Shares under the Act or any other applicable law.
(d) Exchange of Certificates.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares sold hereunder is no longer
required, the Optionee or the holder of such certificate shall be entitled to
exchange such certificate for a certificate representing the same number of
Shares but lacking such legend.
10. AMENDMENT OF THE PLAN.
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable including, but not limited to amendments
necessary to qualify for any exemption or to comply with applicable law or
regulations, provided, however, that except as provided in Section 8, the Board
may not, without further approval by the shareholders of the Corporation,
materially increase the number of shares of Common Stock as to which Options
may be granted under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements as to
eligibility for Participants in the Plan. No amendment of the Plan shall
materially and adversely affect any right of any Optionee with respect
to any Option theretofore granted without such Optionee's written consent. The
Plan may not be amended more frequently than once every six months with respect
to the number of shares subject to Options granted to members of the Board of
Directors, the timing of such Option grants and the determination of the
exercise price of such Options other than to comport with changes in the Code,
the Employee Retirement Security Act, or the rules thereunder. Notwithstanding
anything to the contrary contained herein, this Plan shall not be amended
except in accordance with the provisions of Rule 16b3(c) under the Securities
Exchange Act of 1934, as amended, or any successor rule thereto.
11. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option shall be used for general corporate
purposes.
12. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of all classes of the outstanding shares present and
entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan, and in no event later than one (1) year
following the Effective Date. Prior to such approval, Options may be granted
but shall not be exercisable.
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13. WITHHOLDING OF TAXES.
In the event the Corporation or a Subsidiary determines that it is
required to withhold Federal, state, or local taxes in connection with the
exercise of an Option or the disposition of Shares issued pursuant to the
exercise of an Option, the Optionee or any person succeeding to the rights of
the Optionee, as a condition to such exercise or disposition, may be required
to make arrangements satisfactory to the Corporation or the Subsidiary to
enable it to satisfy such withholding requirements.
14. RIGHTS AS A DIRECTOR.
Neither the Plan nor any Option granted pursuant thereto shall be
construed to give any person the right to remain as a Director of the
Corporation or any Subsidiary.
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Exhibit 10.11
Amended Commitment Letter from Comerica Bank
November 13, 2000
John Trewin
Chief Financial Officer
California Micro Devices Corp.
215 Topaz Street
Milpitas, CA 95035
Dear John,
This letter serves to outline the commitment made by Comerica Bank - California
("Bank") to California Micro Devices Corp. ("Borrower") and documented on July
27, 2000 which renewed the $3,000,000 revolving line of credit and established
a new $2,000,000 equipment loan.
FACILITY #1
TYPE/AMOUNT:
------------ $3,000,000 revolving secured accounts receivable line of
credit including a within line facility for letters of
credit up to $500,000.
PURPOSE: For short term operating needs and for letters of credit.
--------
ADVANCE:
-------- 75% of eligible receivables. Ineligible accounts are
contra, foreign not covered by a letter of credit or
credit insurance acceptable to the Bank, affiliated,
employee, government, consignment, C.O.D., over 90 day
accounts, all accounts from companies which have more
than 25% of its accounts over 90 days past due as well as
account concentrations in excess of 20% of the total.
The facility will be non-formula until the utilization,
including letters of credit, exceed $1,000,000.
PRICING:
-------- Prime rate plus .50%.
$11,500 commitment fee.
REPAYMENT:
---------- Interest is to be paid monthly. Principal is limited to
the borrowing base and is due at maturity.
EXPIRATION:
----------- 6/30/2001. Documentary and Standby Letters of Credit are
not to expire after the line expiration. If the line of
credit is not renewed then the letters of credit
outstanding are to be cash secured.
SECURITY:
--------- Perfected first security interest in all of borrower's
assets (unencumbered fixed assets) and other intangibles.
Borrower is to not have a second lien on its assets.
Borrower is not to pledge its intellectual property or
grant a non-pledge of its intellectual property to
another party.
FACILITY #2
TYPE/AMOUNT:
------------ $2,000,000 Equipment Loan.
PURPOSE:
-------- To provide financing for acceptable capital equipment.
ADVANCE:
-------- 100% of the purchase price of acceptable fixed assets,
less soft costs such as tax, installation, warranty etc.
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PRICING:
-------- Prime rate plus 0.5%.
Up front commitment fee ($5,000).
REPAYMENT:
-------- Interest only payments during a nine month drawdown
period. Amortization is to begin when drawdowns reach
$250,000 consisting of 36 equal principal payments with
interest added.
EXPIRATION:
----------- Drawdown period: to end 12/25/2000.
Loan maturity: 12/25/2003.
SECURITY:
--------- Perfected first security interest in all of borrower's
assets (unencumbered fixed assets) and other intangibles.
Borrower is to not have a second lien on its assets.
Borrower is not to pledge its intellectual property or
grant a non-pledge of its intellectual property to another
party. New facility to be cross collateralized and cross
defaulted with the existing facility.
OTHER CONDITIONS:
-----------------
This credit facility will be governed by the existing Revolving Credit Loan and
Security Agreement with the following covenants:
1) Borrower is to maintain the following financial covenants at all times:
a) Minimum monthly quick ratio of 1.25 (excludes restricted cash).
b) Maximum total liabilities to tangible net worth of 1.0.
c) Minimum tangible net worth of $20,000,000 increasing by 75% of
quarterly profits and by 100% of any new equity and/or subordinated
debt raised and return of restricted cash. (TNW excludes restricted
cash)
d) Borrower is to achieve quarterly profitability. Borrower may have
one loss quarter per fiscal year with a maximum loss of $250,000 with
no two consecutive quarterly losses.
e) (New) Minimum quarterly debt service covenant of 1.5 beginning with
the quarter ending 03/31/00 defined as follows (on a rolling two
quarter basis):
NPAT + Depreciation + Amortization
----------------------------------
current principal payments on all long term debt
2) Borrower to provide Bank with:
a) Monthly financial statements within twenty (20) days of month end if
borrowing.
b) Annual unqualified CPA audited financial statements with ninety
(90) days of FYE.
c) Monthly borrowing base certificate, accounts receivable, and payable
agings within 15 days of month end if utilization exceeds $1,000,000.
4 Quarterly borrowing base certificate, accounts receivable, and
payables agings within 15 days of quarter end if utilization exceeds
$1,000,000.
e) Budgets, sell through reports, projections or other financial
exhibits which Bank may reasonably request.
f) Satisfactory disclosure of status of legal actions against Borrower.
3) Without Bank's prior written approval, Borrower will not:
a) Pledge assets other than to the Bank except for purchase money
(lease) transactions.
b) Enter into any other direct borrowings, lend money or enter into
guarantees.
c) Enter into any merger or acquisition.
d) Repurchase stock, declare or pay cash dividends.
e) Make capital expenditures or lease equipment (purchase money
transactions) in excess of $7,000,000 per year.
4) Bank will have the right to audit the Borrower's financial records. Audit
costs are for the account of the Borrower and are on a semi-annual schedule.
5) Borrower is to provide evidence of full risk insurance covering all assets
pledged to the Bank and loss payable endorsement naming lender as loss payee.
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6) There shall be a cross default provision between this credit and any
existing or future credit arrangements.
7) Reasonable out of pocket costs, legal and filing fees are for the account
of the Borrower.
8) Borrower is to maintain its primary depository accounts with the Bank.
Sincerely,
/s/ Alan Jepsen
-------------------------------------
Alan Jepsen
Vice President and Assistant Manager
Comerica Bank - California
High Technology Division
Agreed to and accepted by:
/s/ John E. Trewin
------------------------------------
John Trewin
Chief Financial Officer
California Micro Devices Corp.
30
