-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LSdw6UxRcLKT4EobBlmCIfattGkWZtnwCScinNdu+c3XJhhPnfPwBdDjaj3tCnCq s4XG76pu4LmJ2fL4qwyWZw== 0000800460-99-000004.txt : 19990812 0000800460-99-000004.hdr.sgml : 19990812 ACCESSION NUMBER: 0000800460-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA MICRO DEVICES CORP CENTRAL INDEX KEY: 0000800460 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 942672609 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15449 FILM NUMBER: 99683742 BUSINESS ADDRESS: STREET 1: 215 TOPAZ ST CITY: MILPITAS STATE: CA ZIP: 95035-5430 BUSINESS PHONE: 4082633214 MAIL ADDRESS: STREET 1: 215 TOPAZ STREET STREET 2: 215 TOPAZ STREET CITY: MILPITAS STATE: CA ZIP: 95035-5430 10-Q 1 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. 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 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements. CALIFORNIA MICRO DEVICES CORPORATION STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) (Unaudited) Three Months Ended June 30, 1999 1998 ---- ---- 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 ======= =======
The accompanying notes are an integral part of these financial statements. CALIFORNIA MICRO DEVICES CORPORATION BALANCE SHEETS (Amounts in Thousands, Except Share Data) June 30, March 31, 1999 1999 ------- --------- (Unaudited) 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 ======= =======
The accompanying notes are an integral part of these financial statements. CALIFORNIA MICRO DEVICES CORPORATION STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited) Three Months Ended June 30, 1999 1998 ------- ------- 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
The accompanying notes are an integral part of these financial statements. 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): June 30, March 31, 1999 1999 -------- -------- Raw materials $ 504 $ 428 Work-in-process 5,438 5,263 Finished goods 2,726 2,747 ------- ------- $8,668 $8,438
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 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. 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. 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. 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. 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. 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: NAME FOR WITHHELD ---- --- -------- 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
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) 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 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, if any, shall run consecutively after the termination of the preceding Exercise Period. The last Exercise Period in an Option Period shall terminate on the last day of such Option Period. (l) "Fair Market Value" shall mean the value of one (1) share of Common Stock on the relevant date, determined as follows: (i) If the shares are traded on an exchange or on the Nasdaq Stock Market, the reported "closing price" on the next preceding trading day (provided that in the case of the first Entry Date, the Fair Market Value shall be the initial price to the public in the Company's initial public offering); (ii) If the shares are traded over-the-counter on the NASDAQ System (other than on the Nasdaq Stock Market), the mean between the bid and the ask prices on said System at the close of business on the next preceding trading day (provided that in the case of the first Entry Date, the Fair Market Value shall be the initial price to the public in the Company's initial public offering); and (iii) If neither (1) nor (2) applies, the fair market value as determined by the Committee in good faith. Such determination shall be conclusive and binding on all persons. (m) "Option Period" shall mean a period of up to twenty-seven (27) months as determined by the Committee. (n) "Participant" shall mean a participant in the Plan as described in Section 4 of the Plan. (o) "Plan" shall mean this employee stock purchase plan. (p) "Subsidiary" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, as described in Code section 424(f). 3. ELIGIBILITY. Any Employee regularly employed on a full-time basis by the Corporation or by any Designated Subsidiary on an Entry Date shall be eligible to participate in the Plan with respect to the Option Period commencing on such Entry Date, provided that the Committee may establish administrative rules requiring that employment commence some minimum period (e.g., one pay period) prior to an Entry Date to be eligible to participate with respect to that Entry Date. An Employee shall be considered employed on a full-time basis unless his or her customary employment is less than 20 hours per week or five months per year. No Employee may participate in the Plan if immediately after an option is granted the Employee owns or is considered to own (within the meaning of section 424(d) of the Code), shares of stock, including stock which the Employee may purchase by conversion of convertible securities or under outstanding options granted by the Corporation, possessing five percent(5%) or more of the total combined voting power or value of all classes of stock of the Corporation or of any of its Subsidiaries. All Employees who participate in the Plan shall have the same rights and privileges under the Plan except for differences which may be mandated by local law and which are consistent with Code section 423(b) (5). The Committee may impose restrictions on eligibility and participation of Employees who are officers and directors to facilitate compliance with federal or state securities laws. 4. PARTICIPATION. 4.1 An Employee who is eligible to participate in the Plan in accordance with Section 3 may become a Participant by filing, on a date prescribed by the Committee prior to an applicable Entry Date, a completed payroll deduction authorization and Plan enrollment form provided by the Corporation. An eligible Employee may authorize payroll deductions at the rate of any whole percentage of the Employee's Compensation, not to exceed fifteen percent (15%) of the Employee's Compensation, or such lesser percentage as specified by the Committee as applied to an Entry Date or Option Period. All payroll deductions may be held by the Corporation and commingled with its other corporate funds. No interest shall be paid or credited to the Participant with respect to such payroll deductions except where required by local law as determined by the Committee. A separate bookkeeping account for each Participant shall be maintained by the Corporation under the Plan and the amount of each Participant's payroll deductions shall be credited to such account. A Participant may not make any additional payments into such account. 4.2 Under procedures established by the Committee, a Participant may suspend or discontinue participation in the Plan or may reduce the rate of his or her payroll deductions at any time during an Offering Period by completing and filing a new payroll deduction authorization and Plan enrollment form with the Corporation, provided that the Committee may, in its discretion, impose restrictions on a Participant's ability to change the rate of payroll deductions. A Participant may increase his or her rate of payroll deductions only effective on an Entry Date by filing a new payroll deduction authorization and Plan enrollment form. If a new payroll deduction authorization and Plan enrollment form is not filed with the Corporation, the rate of payroll deductions shall continue at the originally elected rate throughout the Option Period unless the Committee determines to change the permissible rate. If a Participant suspends participation during an Exercise Period, his or her accumulated payroll deductions will remain in the Plan for purchase of shares as specified in Section 6 on the following Exercise Date, but the Participant will not again participate until he or she completes a new payroll deduction authorization and Plan enrollment form. The Committee may establish rules limiting the frequency with which Participants may suspend and resume payroll deductions under the Plan and may impose a waiting period on Participants wishing to resume suspended payroll deductions. If a Participant discontinues participation in the Plan, the amount credited to the Participant's individual account shall be paid to the Participant without interest (except where required by local law). In the event any Participant terminates employment with the Corporation or any Subsidiary for any reason (including death) prior to the expiration of an Option Period, the Participant's participation in the Plan shall terminate and all amounts credited to the Participant's account shall be paid to the Participant or the Participant's estate without interest (except where required by local law). Whether a termination of employment has occurred shall be determined by the Committee. The Committee may also establish rules regarding when leaves of absence or change of employment status (e.g., from full-time to part-time) will be considered to be a termination of employment, and the Committee may establish termination of employment procedures for this Plan which are independent of similar rules established under other benefit plans of the Corporation and its Subsidiaries. In the event of a Participant's death, any accumulated payroll deductions will be paid, without interest, to the estate of the Participant. 5. OFFERING. 5.1 The maximum number of shares of Common Stock which may be issued pursuant to the Plan shall be 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 circumstances. The Committee, if it so determines in the exercise of its sole discretion, also may adjust the number of shares specified in Section 5.1, as well as the price per share of Common Stock covered by each outstanding option and the maximum number of shares subject to any individual option, in the event the Corporation effects one or more reorganizations, recapitalizations, spin-offs, split-ups, rights offerings or reductions of shares of its outstanding Common Stock. The Committee's determinations under this Section 8 shall be conclusive and binding on all parties. 9. MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS. In the event of the proposed liquidation or dissolution of the Corporation, the Option Period will terminate immediately prior to the consummation of such proposed transaction, unless otherwise provided by the Committee in its sole discretion, and all outstanding options shall automatically terminate and the amounts of all payroll deductions will be refunded without interest to the Participants. In the event of a proposed sale of all or substantially all of the assets of the Corporation, or the merger or consolidation of the Corporation with or into another corporation, then in the sole discretion of the Committee, (1) each option shall be assumed or an equivalent option shall be substituted by the successor corporation or parent or subsidiary of such successor corporation, (2) a date established by the Committee on or before the date of consummation of such merger, consolidation or sale shall be treated as an Exercise Date, and all outstanding options shall be deemed exercisable on such date or (3) all outstanding options shall terminate and the accumulated payroll deductions shall be returned to the Participants. 10. TRANSFERABILITY. Options granted to Participants may not be voluntarily or involuntarily assigned, transferred, pledged, or otherwise disposed of in any way, and any attempted assignment, transfer, pledge, or other disposition shall be null and void and without effect. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than as permitted by the Code, such act shall be treated as an election by the participant to discontinue participation in the Plan pursuant to Section 4.2. 11. AMENDMENT OR TERMINATION OF THE PLAN. 11.1 The Plan shall continue until February 9, 2005, unless previously terminated in accordance with Section 11.2. 11.2 The Board may, in its sole discretion, insofar as permitted by law, terminate or suspend the Plan, or revise or amend it in any respect whatsoever, except that, without approval of the stockholders, no such revision or amendment shall: (a) materially increase the number of shares subject to the Plan other than an adjustment under Section 8 of the Plan; (b) materially modify the requirements as to eligibility for participation in the Plan; (c) materially increase the benefits accruing to Participants; (d) reduce the purchase price specified in Section 5.4, except as specified in Section 8; (e) extend the term of the Plan beyond the date specified in Section 11.1; or (f) amend this Section 11.2 to defeat its purpose. 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 EX-5 2 [ARTICLE] 5 [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 [PP&E] 27,119 [DEPRECIATION] (16,237) [TOTAL-ASSETS] $32,684 [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 [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 Includes - Other assets $779K. Includes Restricted cash $3,122K; Other long term assets $791K. Includes - Research and development $959K; Selling, marketing, and administrative $2,117K; Interest income ($56K); Other expense $3k.
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