-----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, UC5kX2YnUWxazzdJiCU+AK+yyfwRU4U+JWPp3kQXRiUUw4FqByMajVB4+CAUn78e /BWSAf0NcWzU4ZA4bLeK9w== 0000950005-01-500654.txt : 20020410 0000950005-01-500654.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950005-01-500654 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1934 Act SEC FILE NUMBER: 000-15449 FILM NUMBER: 1787799 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 p14639-10q.txt FORM 10-Q 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, 2001 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, 2001, there were outstanding 11,614,100 shares of Issuer's Common Stock. 0 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, 2001 and 2000 2 Balance Sheets September 30, 2001 and March 31, 2001 3 Statements of Cash Flows Six Months Ended September 30, 2001 and 2000 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosure About Market Risk 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Signature 15 1 ITEM 1. Financial Statements. CALIFORNIA MICRO DEVICES CORPORATION STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, --------------------------- --------------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net sales $ 8,638 $ 16,112 $ 14,743 $ 30,988 Cost and expenses: Cost of sales 8,986 10,725 15,644 20,325 Research and development 1,027 900 1,925 1,710 Selling, marketing and administrative 2,463 2,857 5,177 5,663 Special charges 4,110 -- 4,110 -- -------- -------- -------- -------- Total costs and expenses 16,586 14,482 26,856 27,698 -------- -------- -------- -------- Operating income (loss) (7,948) 1,630 (12,113) 3,290 Other expense, net 313 380 439 543 -------- -------- -------- -------- Income (loss) before income taxes (8,261) 1,250 (12,552) 2,747 Provision for income taxes -- 25 -- 55 -------- -------- -------- -------- Net income (loss) $ (8,261) $ 1,225 $(12,552) $ 2,692 ======== ======== ======== ======== Net earnings/(loss) per share - basic $ (0.71) $ 0.11 $ (1.09) $ 0.24 ======== ======== ======== ======== Net earnings/(loss) per share - diluted $ (0.71) $ 0.10 $ (1.09) $ 0.21 ======== ======== ======== ======== Weighted average common shares and share equivalents outstanding - basic 11,575 11,213 11,525 11,166 ======== ======== ======== ======== Weighted average common shares and share equivalents outstanding - diluted 11,575 12,578 11,525 12,548 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements.
2 CALIFORNIA MICRO DEVICES CORPORATION BALANCE SHEETS (Amounts in Thousands, Except Share Data)
September 30, March 31, 2001 2001* -------- -------- (Unaudited) ASSETS: Current assets: Cash and short-term securities $ 1,361 $ 2,309 Short-term investments 3,120 4,288 Accounts receivable, less allowance for doubtful accounts of $220 and $219 4,631 8,068 Inventories 9,025 11,716 Prepaid expenses and other assets 1,350 1,451 -------- -------- Total current assets 19,487 27,832 Property, plant & equipment, net 10,538 14,372 Restricted cash 983 914 Other long term assets 1,082 1,151 -------- -------- Total assets $ 32,090 $ 44,269 ======== ======== LIABILITIES & SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 3,369 $ 3,471 Accrued salaries and benefits 1,061 1,135 Other accrued liabilities 1,119 657 Deferred margin on shipments to distributors 519 772 Current maturities of long-term debt and capital lease obligations 1,496 1,594 -------- -------- Total current liabilities 7,564 7,629 Long-term debt, less current maturities 8,692 8,947 Capital lease obligations, less current maturities 486 533 -------- -------- Total liabilities 16,742 17,109 Shareholders' equity: Common stock - no par value; authorized 25,000,000; issued and outstanding September 30 and March 31, 2001: 11,614,100 and 11,459,503, respectively 59,260 58,509 Accumulated deficit (43,901) (31,349) Accumulated other comprehensive loss (11) -- -------- -------- Total shareholders' equity 15,348 27,160 -------- -------- Total liabilities and shareholders' equity $ 32,090 $ 44,269 ======== ======== *Derived from audited financial statements. The accompanying notes are an integral part of these financial statements.
3 CALIFORNIA MICRO DEVICES CORPORATION STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited)
Six Months Ended September 30, -------------------------- 2001 2000 -------- -------- Cash flows from operating activities: Net income (loss) $(12,552) $ 2,692 Adjustments to reconcile net income (loss) to net cash provided by/(used in) operating activities: Non-cash portion of special charges 3,395 -- Write-off of discontinued inventory 511 -- Depreciation and amortization 1,627 1,468 Net decrease/(increase) in inventories 2,180 (502) Net decrease in accounts receivable 3,437 201 Net decrease/(increase) in prepaid expenses and other current assets 101 (69) Net increase/(decrease) in trade accounts payable and other current liabilities 286 (300) Net decrease in other long term assets 14 10 Net (decrease)/increase in deferred margin on distributor sales (253) -- -------- -------- Net cash (used in)/provided by operating activities (1,254) 3,500 -------- -------- Cash flows from investing activities: Short-term investment purchases (4,772) (5,453) Short-term investment sales 5,929 4,348 Capital expenditures (1,180) (3,157) Net change in restricted cash (69) (83) -------- -------- Net cash used in investing activities (92) (4,345) -------- -------- Cash flows from financing activities: Repayments of capital lease obligations (165) (204) Repayments of long-term debt (687) (127) Borrowing of long-term debt 499 1,003 Proceeds from issuance of common stock 751 932 -------- -------- Net cash provided by financing activities 398 1,604 -------- -------- Net (decrease)/increase in cash and cash equivalents (948) 759 Cash and cash equivalents at beginning of period 2,309 1,490 -------- -------- Cash and cash equivalents at end of period $ 1,361 $ 2,249 ======== ======== Supplemental disclosures of cash flow information: Interest paid $ 463 $ 483 Income taxes paid $ -- $ -- The accompanying notes are an integral part of these financial statements.
4 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 necessary to present fairly California Micro Devices Corporation's (the "Company") financial position as of September 30, 2001, results of operations for the three and six month periods ended September 30, 2001 and 2000, and cash flows for the six-month periods ended September 30, 2001 and 2000. 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, 2001. 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): September 30, March 31, 2001 2001 ------- ------- Raw materials $ 667 $ 574 Work-in-process 5,009 6,337 Finished goods 3,349 4,805 ------- ------- $ 9,025 $11,716 ======= ======= 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 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)
Three Months Ended Six Months Ended September 30 September 30 ------------------------- ------------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Numerator: Numerator for basic and diluted net income per share - net income (loss) $ (8,261) $ 1,225 $(12,552) $ 2,692 Denominator for basic net income (loss) per share: Weighted average common shares used in computing basic net income (loss) per share 11,575 11,213 11,525 11,166 -------- -------- -------- -------- Basic net income (loss) per share $ (0.71) $ 0.11 $ (1.09) $ 0.24 -------- -------- -------- -------- Denominator for diluted net income per share: Weighted average common shares 11,575 11,213 11,525 11,166 Employee stock options to purchase common stock -- 1,365 -- 1,382 -------- -------- -------- -------- Shares used in computing diluted net income per share 11,575 12,578 11,525 12,548 -------- -------- -------- -------- Diluted net income (loss) per share $ (0.71) $ 0.10 $ (1.09) $ 0.21 -------- -------- -------- --------
Options to purchase 1,672,716 and 1,550,732 shares of common stock were outstanding during the three and six month periods ended September 30, 2001, but were not included in the computation of diluted net income per share because the Company incurred a net loss. Options to purchase 249,679 and 142,788 shares of common stock were outstanding during the three and six months 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. 6. Comprehensive Income Comprehensive (loss) income for the three and six months ended September 30, 2001 was $(8,267,000) and $(12,563,000), respectively and the three and six months ended September 30, 2000 was $1,213,000 and $2,680,000, respectively. 7. Income Taxes For the three months and six months ended September 30, 2001 there was no provision for income taxes due to the net loss for the period. For the three and six months ended September 30, 2000, the Company recorded provisions for income taxes of $25,000 and $55,000, respectively, based on the projected effective annual tax rate of 2%, substantially below the federal statutory rate of 35% due to the utilization of federal and state tax loss and credit carryforwards. The fiscal 2001 tax provisions consisted of federal and state alternative minimum taxes. 8. Restructuring & Impairment Charges In September 2001, the Company's board of directors approved a detailed plan for the implementation of our previously announced strategy to outsource a significant portion of our wafer manufacturing. The plan calls 6 for the consolidation of most of our remaining internal wafer fabrication activities into our Tempe, AZ facility with selected high-value backend manufacturing operations continuing at our Milpitas headquarters. As a result of the plan, the Company recorded restructuring and impairment charges of $4.6 million. Of the $4.6 million charge, $0.5 million was recorded in cost of goods sold and $4.1 million was included in operating expenses under the caption "Special Charges". The following table describes the nature of the restructuring charges: Provided and as at September 30, 2001, amounts in thousands:
Remaining at Cash Non-Cash September 30, Provision Payments Charges 2001 ------ ----- ------ ------ Severance & benefits $ 424 $-- $ -- $ 424 Facilities and equipment 3,686 -- 3,395 291 ------ ----- ------ ------ Special charges $4,110 $-- $3,395 $ 715 Discontinued Inventory $ 511 -- 511 --
Severance and benefits: this charge relates to the salary and fringe benefit expense for manufacturing employees who will be terminated as the outsourcing plan is implemented. Approximately 65 employees will be affected in fiscal 2002. Prior to the date of the financial statements, management with the proper level of authority, approved and committed the Company to the plan of termination, determined the benefits the terminated employees would receive and communicated the benefit package to employees in enough detail that they could determine their type and amount of benefit. No employees had been terminated as of September 30, 2001. Management anticipates that the termination of the impacted employees will be completed by June 30, 2002. Facilities and equipment: the plan calls for the Company to relocate its Milpitas facility after the consolidation of manufacturing to its owned Tempe facility. The facilities charge includes $291,000 in estimated renovation costs to restore the current Milpitas facility to its pre-lease condition. The equipment charge of $3,395,000 is related to the write-down of equipment that will be located in Tempe and continue to be used to produce approximately 25% of the Company's products. The plan calls for a decrease in the number and volume of products generated with this asset pool and as a result, management determined that these assets were impaired. The Company wrote-down the assets to their fair value. Fair value was estimated as the amounts for which the assets could be purchased in an arms-length transaction. The Company used a consultant to assist it in determining the fair value of the affected assets. Discontinued Inventory: the Company discontinued certain older products and wrote-off the related discontinued manufacturing inventory. The $511,000 charge related to the write-off of the inventory has been classified as a part of cost of goods sold in the statement of operation. 7 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, 2001, decreased by $7,474,000 or 46%, compared to the quarter ended September 30, 2000, with the largest component of the decrease being in products for the communications infrastructure market followed by lower sales into the computer market. These declines were partially offset by higher sales into the medical/other area primarily due to increased sales into a lighting application. Unit shipments decreased 44% to 20.1 million units in the September 30, 2001 quarter compared to 35.9 million units in the year-earlier quarter. Product sales for the six months ended September 30, 2001, decreased by $16,245,000 or 52%, compared to the six months ended September 30, 2000, with the largest component of the decrease being in products for the communications infrastructure market followed by lower sales into the computer market. These declines were partially offset by higher sales into the medical/other area primarily due to increased sales into a lighting application. Unit shipments decreased 39% to 39.9 million units in the six months ended September 30, 2001 compared to 64.8 million units in the year-earlier period. Gross margins decreased to a negative 4.0% in the September 30, 2001 quarter compared to positive 33.4% in the year-earlier period and to a negative 6.1% for the six months ended September 30, 2001 compared to positive 34.4% in the year-earlier period, in each case primarily due to decreased sales and decreased manufacturing efficiencies. Additionally, cost of goods sold in the three and six months ended September 30, 2001 included a $0.5 million charge related to our previously announced strategy to outsource a significant portion of our wafer manufacturing. Research and development (R&D) expense was $1,027,000 and $901,000 for the quarters ended September 30, 2001 and 2000, respectively. The increase in research and development expense was due to increased personnel costs, including the cost of opening a new design center in Austin, Texas. R&D expense for the six months ended September 30, 2001 and 2000 was $1,925,000 and $1,710,000, respectively, also due to increased personnel costs. Selling, marketing and administrative expenses were $2,463,000 and $2,857,000 for the quarters ended September 30, 2001 and 2000, respectively and $5,177,000 and $5,663,000 for the six months ended September 30, 2001 and 2000, respectively. The decreases in the fiscal 2002 periods are primarily due to decreased commissions expense, decreased personnel costs and decreased advertising, partially offset by increased legal costs. For the three and six months ended September 30, 2001, we recorded restructuring and other charges totaling $4.6 million related to our previously announced strategy to outsource a significant portion of our wafer manufacturing. As part of this strategy, we plan to consolidate all of our remaining internal wafer fabrication activities into our Tempe, AZ facility with selected high-value backend manufacturing operations continuing at our Milpitas, CA headquarters. Of the $4.6 million charge, $0.5 million was recorded in cost of goods sold and $4.1 million was included in operating expenses as "Special Charges". The Company noted that $3.9 million of the charges are non-cash in nature and the cash impact of the remaining $0.7 million will be felt in the first half of calendar 2002. 8 The following table describes the nature of the restructuring charges: Provided and as at September 30, 2001, amounts in thousands:
Remaining at Cash Non-Cash September 30, Provision Payments Charges 2001 ------ ----- ------ ------ Severance & benefits $ 424 $-- $ -- $ 424 Facilities and equipment 3,686 -- 3,395 291 ------ ----- ------ ------ Special charges $4,110 $-- $3,395 $ 715 Discontinued Inventory $ 511 -- 511 --
As a result of the factors discussed above, operating loss for the quarter ended September 30, 2001, was $7,948,000 compared to operating income of $1,630,000 in the year-earlier quarter and operating loss for the six months ended September 30, 2001 was $12,113,000 compared to operating income of $3,290,000 for the year-earlier period. Other expense, net, for the quarter ended September 30, 2001 and 2000, was $313,000 and $380,000, respectively, and for the six months ended September 30, 2001 and 2000, was $439,000 and $543,000, respectively. The decreases in the fiscal 2002 periods were primarily due to reduced interest income. For the three months and six months ended September 30, 2001 there was no provision for income taxes due to the net loss for the period. For the three and six months ended September 30, 2000, the Company recorded provisions for income taxes of $25,000 and $55,000, respectively, based on the projected effective annual tax rate of 2%, substantially below the federal statutory rate of 35% due to the utilization of federal and state tax loss and credit carryforwards. The fiscal 2000 tax provisions consisted of federal and state alternative minimum taxes. Liquidity and Capital Resources Total cash, short-term securities and investments as of September 30, 2001, was $4.5 million compared to $6.6 million on March 31, 2001. Receivables decreased to $4.6 million at September 30, 2001 compared to $8.1 million six months earlier. Receivables days sales outstanding were 48 days as of September 30, 2001 as compared to 49 days at March 31, 2001. Inventories decreased from the March quarter, with inventory turns at 3.7 compared to 3.4 at March 31, 2001. Capital expenditures for the six months ended September 30, 2001, totaled $1.2 million, reflecting primarily our investment in new equipment to support our production of chip scale products, which are expected to ramp up later this year. We have a $3.0 million revolving secured line of credit agreement that expires on June 30, 2002. 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. During fiscal 1999, we borrowed $650,000 under a credit agreement, due June 14, 2002, collateralized by certain of our equipment. The agreement extends for 42 months, carries an interest rate of 9.9%, and has a prepayment option. During fiscal 2001, we entered into an additional agreement with the same provider for $975,000 credit agreement collateralized by certain of our equipment at a 9.6% interest rate for a period of 48 months. This agreement expires on March 31, 2005. During fiscal 2000, we entered into two capital equipment financing facilities for $1.0 million and $500,000. The terms of these facilities allow us to borrow at prime plus 0.75% and expire on July 31 and August 31, 2003, respectfully. During fiscal 2000 and 2001, we borrowed the full amounts available under these facilities. At March 31, 2001, no additional funds were available under these two facilities. In July 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%. During fiscal 2001 we borrowed $997,000 against this $2.0 million facility. During fiscal 2002, we entered into a capital equipment financing facility for $500,000 collateralized by certain of our equipment. The terms of this facility allows us to borrow at prime plus 0.75% and expires on August 31, 2001. During the second quarter of fiscal 2002, we borrowed $499,000 under this facility. We are in compliance with our financial covenants. 9 We expect to use a significant portion of our cash when and if our revenues increase and for the manufacturing transition described above. There are certain scenarios for calendar 2002 in which we would require additional cash to fund our operations from sources other than our existing cash balances, bank borrowings, and equipment lease and loan financing arrangements. Therefore, depending on capital market conditions and the cash requirements of our operations, we plan to pursue other sources of liquidity such as a private equity or debt financing. There can be no assurance that we will be able to raise such financing if and when we desire and, if we are unable to raise such financing, we may need to scale our operations based upon the cash we have on hand. Restructuring. In the second quarter of fiscal 2002 we announced and began to implement a restructuring program aimed at bringing our expenses more in line with the current revenue levels and restoring long-term profitability to the Company. These actions resulted in aggregate charges of $4.6 million. The fiscal 2002 restructuring action resulted in the planned elimination of approximately 65 positions, writing down certain operating assets, a plan to vacate a leased facility and relocate to a smaller facility. In first quarter fiscal 2003, an additional 27 positions will be eliminated primarily in manufacturing. Fiscal 2002 restructuring and impairment actions were comprised of operating asset write downs of $3.4 million for fixed assets, $ 0.5 million for discontinued inventory and $ 0.7 million for severance and related expenses. We plan to vacate approximately 39,000 square feet of combined manufacturing and administration facility and relocate to a smaller facility at the end of fiscal 2002. The lease on the current facility expires on June 30, 2002. We estimate this will require in exit costs, including costs to restore the facility and relocate to a new facility of $0.3 million. Fiscal 2002 restructuring actions will resulted in the elimination of approximately 65 positions, across all levels and functions, of which 50 positions have been eliminated as of September 30, 2001. Severance payments and related charges of $424K consist primarily of salary and expected payroll taxes, extended medical benefits, and statutory legal obligations. In first quarter fiscal 2003, additional restructuring actions will result in the elimination of approximately 27 positions primarily in manufacturing. Impairment. As a result of the fiscal 2002 restructuring activities described above, we wrote down approximately $ 3.4 million of fixed assets primarily associated with production equipment no longer fully utilized. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. No material changes have occurred from the Company's report on Form 10-K for the period ending March 31, 2001. 10 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. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are not historical facts and are based on current expectations, estimates, and projections about our industry; our beliefs and assumptions; and our goals and objectives, Words such as "anticipates", "expects", "intends", "plans "believes",, "seeks", and "estimates", and variations of these words and similar expressions are intended to identify forward-looking statements. Examples of the kinds of forward-looking statements in this report include statements regarding the following (1) our expectation that our production of chip scale products will ramp up later this year, (2) our plan to fund our future liquidity needs through a private equity or debt financing to supplement existing cash balances, cash flows from operations, bank borrowings, and equipment lease and loan financing arrangements, (3) our expectation that the Company will utilize a significant portion of our cash if and when its revenues increase and for restructuring its manufacturing operations, and (4) our plan to outsource a significant portion of our wafer manufacturing and to consolidate all of our remaining internal wafer fabrication activities into our Tempe, AZ facility, with selected high-value backend manufacturing operations continuing at our Milpitas, CA headquarters. These statements are only predictions, are not guarantees of future performance, and are subject to risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include those set forth in this report and in the Company's other SEC filings, in particular its annual report on Form 10-K for fiscal 2001 ended March 31, 2001. Also, due to plans to outsource a significant portion of its wafer manufacturing to one or more third parties, additional risks are encountered due to such factors as potential inability to secure adequate and cost-effective capacity during periods when demand outstrips capacity, reduced control over delivery schedules and quality, dependence upon one, or possibly more, contractors to supply us with wafers, potential misappropriation of our intellectual property, and exposure to political and economic instability in the country or countries where our third party fabrication facilities are located Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. 11 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 2. Changes in Securities. On September 21, 2001, the Company's Board of Directors adopted a shareholder rights plan, pursuant to which one preferred stock purchase right (a "Right") was distributed for each share of Common Stock held as of October 12, 2001. Each Right, when exercisable, will entitle the holder to purchase from the Company one one-thousandth of a share of the Company's Series A Participating Preferred Stock at a price of $50.00 (the "Purchase Price"), subject to anti-dilution adjustments. In general, if a person or group (an "Acquiring Person") acquires beneficial ownership of 15% or more of the outstanding shares of Common Stock, then each Right (other than those held by an Acquiring Person) will entitle the holder to receive, upon exercise, shares of Common Stock (or, under certain circumstances, a combination of securities or other assets) having a value of twice the Purchase Price. In addition, if following the announcement of the existence of an Acquiring Person the Company is involved in a business combination or sale of 50% or more of its assets or earning power, each Right (other than those held by an Acquiring Person) will entitle the holder to receive, upon exercise, shares of common stock of the acquiring entity having a value of twice the Purchase Price. When the foregoing rights arise, any Rights owned by an Acquiring Person will immediately become void. The Board of Directors will also have the right, after there is an Acquiring Person, to cause each Right (except those that have become void) to be exchanged for Common Stock or substitute consideration. The Company may redeem the Rights at a price of $0.001 per Right before the existence of an Acquiring Person is announced. The Rights expire on September 24, 2011. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which was filed as an exhibit to the Company's Registration Statement on Form 8-A filed on September 25, 2001. 12 ITEM 4. Submission of Matters to a Vote of Security Holders. The Company's annual meeting of shareholders, at which the proposals described below were submitted to shareholders, was held on August 7, 2001. Proposal No. 1 Election of Directors. The following individuals, who received the votes indicated, were elected as directors: NAME FOR WITHHELD ---- --- -------- Robert V. Dickinson 8,629,401 942,118 Jeffrey Kalb 8,699,667 871,852 J. Daniel McCranie 6,731,958 2,839,561 Wade Meyercord 8,479,816 1,091,703 Dr. John L. Sprague 8,625,233 946,286 Donald L. Waite 8,547,933 1,023,586 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 ----------- ------- -------- 9,537,294 22,662 11,563 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 ------------ ------- -------- 6,190,683 3,299,082 81,754 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 ------------ ------- -------- 7,903,455 1,589,696 78,368 13 ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits 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, amended as of August 1, 2000 and amended as of August 7, 2001. 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, amended as of August 1, 2000 and amended as of August 7, 2001. 10.11 Amended Commitment Letter from Comerica Bank (b) Form 8-K On August 14, 2001, the Company filed a Form 8-K, under Item 5, reporting the selection of a new vice president of marketing. On September 26, 2001, the Company filed a Form 8-K, under Item 5 reporting on the adoption of the Rights Plan described in Part II, above. On November 5, 2001, the Company filed a Form 8-K, under Item 5, reporting the selection of a new vice president of sales. 14 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, 2001 /s/John E. Trewin ------------------------------------------ John E. Trewin Vice President and Chief Financial Officer 15 EX-4 3 p14639-ex41.txt EXHIBIT 4.1 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, AMENDED AS OF AUGUST 1, 2000, AND AMENDED AS OF AUGUST 7, 2001 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. 16 (l) "Exercise Price" shall mean the price per Share at which an Option may be exercised, as determined by the Committee and as specified in the Optionee's stock option agreement. (m) "Fair Market Value" shall mean the value of one Share of Common Stock, determined as follows: (i) if the Shares are traded on an exchange or on the NASDAQ National Market System, the reported "closing price" on the date of valuation or if no trading occurred on such date, the next preceding day on which trading occurred; (ii) if the Shares are traded over-the-counter on the NASDAQ System (other than on the NASDAQ National Market System), the mean between the bid and the ask prices on said System at the close of business on the date of valuation or if no trading occurred on such date, the next preceding day on which trading occurred; and (iii) if neither (i) nor (ii) applies, the fair market value as determined by the Committee in good faith. Such determination shall be conclusive and binding on all persons. (n) "Incentive Stock Option" shall mean an Option of the type described in Section 422(b) of the Code. (o) "Nonstatutory Stock Option" shall mean an Option of the type not described in Section 422(b) or 423(b) of the Code. (p) "Option" shall mean an option to purchase Common Stock granted pursuant to the Plan. (q) "Optionee" shall mean any person who holds an Option pursuant to the Plan. (r) "Outside Director" shall mean a non-employee member of the Board who (1) is not a current employee of any member of the Affiliated Group; (2) does not receive compensation for prior services (other than benefits under a tax-qualified retirement plan) from any member of the Affiliated Group during a taxable year in which he or she serves on the Committee; (3) has never been an officer of any member of the Affiliated Group; and (4) does not receive remuneration from any member of the Affiliated Group, either directly or indirectly, in any capacity other than as a director. (s) "Plan" shall mean this stock option plan as it may be amended from time to time. (t) "Purchase Price" shall mean at any particular time the Exercise Price times the number of Shares for which an Option is being exercised. (u) "Share" shall mean one share of authorized Common Stock. 3. ADMINISTRATION. (a) The Committee. The Plan shall be administered by a Committee of Outside Directors which shall consist of not less than two members, who during the one year prior to service as an administrator of the Plan, shall not have been granted or awarded equity securities pursuant to the Plan or any other plan of the Corporation or any of its Affiliates except as permitted under Rule 16b-3 under the Exchange Act. The Board may from time to time designate individuals as ineligible to participate in the Plan for a specified period in order to become eligible to be a member of the Committee. (b) Powers of the Committee. Subject to the provisions of the Plan, the Committee shall have the authority, in its discretion and on behalf of the Corporation: (i) to grant Options; (ii) to determine the Exercise Price per Share of Options to be granted; (iii) to determine the Employees to whom, and the time or times at which, Options shall be granted and the number of Shares for which an Option will be exercisable; (iv) to interpret the Plan; 17 (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; (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. Non-employee 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. 18 (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 six hundred fifty-five thousand (3,655,000), subject to adjustment pursuant to Section 9 hereof. (b) Options Not to Exceed Shares Available. The number of Shares for which an Option is exercisable at any time shall not exceed the number of Shares remaining available for issuance under the Plan. If any Option expires or is terminated, the number of Shares for which such Option was exercisable may be made exercisable pursuant to other Options under the Plan. The limitations established by this Section 5(b) shall be subject to adjustment in the manner provided in Section 9 hereof upon the occurrence of an event specified therein. (c) Limitation on Grants. No person shall be granted in any one fiscal year options for more than 500,000 Shares. 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. 19 The Purchase Price shall be payable in full in cash upon the exercise of an Option but the Committee may allow the Optionee to pay the Purchase Price: (i) by surrendering Shares in good form for transfer, owned by the Optionee and having a Fair Market Value on the date of exercise equal to the Purchase Price; (ii) by delivery of a full recourse promissory note ("Note") made by the Optionee in the amount of the Purchase Price, bearing interest, compounded semiannually, at a rate not less than the rate determined under Section 7872 of the Code to insure that no "foregone interest", as defined in such section, will accrue, together with the delivery of a duly executed standard form security agreement securing the Note by a pledge of the Shares purchased; or (iii) in any combination of such consideration or such other consideration and method of payment for the issuance of Shares to the extent permitted under applicable law Code as long as the sum of the cash so paid, the Fair Market Value of the Shares so surrendered, and the amount of any Note equals the Purchase Price. The Committee or a stock option agreement may prescribe requirements with respect to the exercise of Options, including the submission by the Optionee of such forms and documents as the Committee may require and, the delivery by the Optionee of cash sufficient to satisfy applicable withholding requirements. The Committee may vary the exercise requirements and procedures from time to time to facilitate, for example, the broker-assisted exercise of Options. (g) Nontransferability of Options. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee or the Optionee's conservator or legal representative and shall not be assignable or transferable except pursuant to a qualified domestic relations order as defined by the Code. In the event of the Optionee's death, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution. (h) Termination of Employment Other than by Death or Disability. (i) If an Optionee ceases to be an Employee for any reason other than his or her death or disability, the Optionee shall have the right, subject to the provisions of this Section 6, to exercise any Option held by the Optionee at any time within ninety (90) days after his or her termination of employment, but not beyond the otherwise applicable term of the Option and only to the extent that on such date of termination of employment the Optionee's right to exercise such Option had vested. (ii) For purposes of this Section 6(h), the employment relationship shall be treated as continuing intact while the Optionee is an active employee of the Corporation or any Affiliate, or is on military leave, sick leave, or other bona fide leave of absence to be determined in the sole discretion of the Committee. The preceding sentence notwithstanding, in the case of an Incentive Stock Option, employment shall be deemed to terminate on the date the Optionee ceases active employment with the Corporation or any Affiliate, unless the Optionee's reemployment rights are guaranteed by statute or contract. (i) Death of Optionee. If an Optionee dies while an Employee, or after ceasing to be an Employee but during the period while he or she could have exercised an Option under Section 6(h), any Option granted to the Optionee may be exercised, to the extent it had vested at the time of death and subject to the Plan, at any time within 12 months after the Optionee's death, by the executors or administrators of his or her estate or by any person or persons who acquire the Option by will or the laws of descent and distribution, but not beyond 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. 20 An Optionee, or a transferee of an Optionee, shall have no rights as a shareholder of the Corporation with respect to any Shares for which his or her Option is exercisable until the date of the issuance of a stock certificate for such Shares. No adjustment shall be made for dividends, ordinary or extraordinary or whether in currency, securities, or other property, distributions, or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 9 hereof. (l) Modification, Extension, and Renewal of Options. Within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options for the granting of new Options in substitution therefor. Notwithstanding the preceding sentence, no modification of an Option shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option previously granted. (m) Other Provisions. The stock option agreements authorized under the Plan may contain such other provisions which are not inconsistent with the terms of the Plan, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. 7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs. To the extent that the Fair Market Value of Shares (determined for each Share as of the date of grant of the Option covering such Share) subject to Options granted under this Plan (or any other plan of the Corporation or any Affiliate) which are designated as Incentive Stock Options and which become exercisable by an Optionee for the first time during a single calendar year exceeds $100,000, the Option(s) (or portion thereof) covering such Shares shall be recharacterized (to the extent of such excess over $100,000) as a Nonstatutory Stock Option. In determining which Option(s) shall be treated as Nonstatutory Stock Options under the preceding sentence, the Options shall be taken into account in the order granted, with the result that a later granted Option shall be recharacterized as a Nonstatutory Stock Option prior to such recharacterization of a previously granted Option. 8. TERM OF PLAN. Options may be granted pursuant to the Plan until ten years following the Effective Date, and all Options which are outstanding on such date shall remain in effect until they are exercised or expire by their terms. The Plan shall expire for all purposes on the date 20 years following the Effective Date. 9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS. (a) Reorganizations. The number of Shares covered by the Plan, as provided in Section 5 hereof, and the number of Shares for which each Option is exercisable shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from the payment of a Common Stock dividend, a stock split, a reverse stock split or any other event which results in an increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation, and the Exercise Price shall be proportionately increased in the event the number of Shares subject to such Option are decreased and shall be proportionately decreased in the event the number of Shares subject to such Option are increased. For the purposes of this paragraph, conversion of any convertible securities of the Corporation shall not be 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 21 immediately prior to the consummation of such action. The Committee shall notify the Optionee not less than fifteen (15) days prior to the proposed consummation of a pending dissolution or liquidation, and the Option shall be exercisable as to all Shares which are vested prior to expiration until immediately prior to the consummation of such action. (c) Merger. In the event of a merger or acquisition involving an acquisition of the Corporation or an acquisition by the Corporation of another company, the result of which is that the outstanding voting securities of the Corporation do not represent, or are not converted into, a majority of the outstanding voting securities of the surviving corporation, except as otherwise provided in any particular Option agreement, the vesting of all unvested Options shall be accelerated and all options shall be immediately exercisable. Without limiting the generality of the foregoing, in the event of (i) a proposed merger of the Corporation with or into another corporation, as a result of which the Corporation is not the surviving corporation and (ii) the Option is not assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, then in such case each Option shall terminate immediately prior to the consummation of such transaction. The Committee shall notify the Optionee not less than fifteen (15) days prior to the proposed consummation of such transaction, and the Option shall be exercisable as to all Shares which are subject to the Option until immediately prior to the consummation of such transaction. (d) Determination by Committee. All adjustments described in this Section 9 shall be made by the Committee, whose determination shall be conclusive and binding on all persons. (e) Limitation on Rights of Optionee. Except as expressly provided in this Section 9, no Optionee shall have any rights by reason of any payment of any stock dividend, stock split or reverse stock split or 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. 22 The Committee may grant any Optionee the right to exercise any Option prior to the complete vesting of such Option. Without limiting the generality of the foregoing, the Committee may provide that if an Option is exercised prior to having completely vested, the Shares issued upon such exercise shall remain subject to vesting at the same rate as under the Option so exercised and shall be subject to a right, but not an obligation, of repurchase by the Corporation with respect to all unvested Shares if the Optionee ceases to be an Employee for any reason. For the purposes of facilitating the enforcement of any such right of repurchase, at the request of the Committee, the Optionee shall enter into the Joint Escrow Instructions with the Corporation and deliver every certificate for his or her unvested Shares with a stock power executed in blank by the Optionee and by the Optionee's spouse, if required for transfer. 12. AMENDMENT OF THE PLAN. The Board or the Committee may, from time to time, terminate, suspend or discontinue the Plan, in whole or in part, or revise or amend it in any respect whatsoever including, but not limited to, the adoption of any amendment(s) deemed necessary or advisable to qualify the Options under rules and regulations promulgated by the Securities and Exchange Commission with respect to Employees who are subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended, or to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option granted thereunder, without approval of the shareholders of the Corporation, but without the approval of the Corporation's shareholders, no such revision or amendment shall: (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. 23 Neither the Plan nor any Option granted pursuant thereto shall be construed to give any person the right to remain in the employ of the Corporation or any Affiliate, or to affect the right of the Corporation or any Affiliate to terminate such individual's employment at any time with or without cause. The grant of an Option shall not entitle the Optionee to, or disqualify the Optionee from, participation in the grant of any other Option under the Plan or participation in any other benefit plan maintained by the Corporation or any Affiliate. 17 DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED RIGHTS. In adopting and maintaining this Plan and granting options hereunder, neither the Corporation nor any Affiliate makes any representations or undertakings with respect to the initial qualification or treatment of Options under federal or state tax or securities laws. The Corporation and each Affiliate expressly disavows the creation of any rights in Employees, Optionees, or beneficiaries of any obligations on the part of the Corporation, any Affiliate or the Committee, except as expressly provided herein. 18. INSPECTION OF RECORDS. Copies of the Plan, records reflecting each Optionee's Option, and any other documents and records which an Optionee is entitled by law to inspect shall be open to inspection by the Optionee and his or her duly authorized representative at the office of the Committee at any reasonable business hour. 19. INFORMATION TO OPTIONEES. Each Optionee shall be provided with such information regarding the Corporation as the Committee from time to time deems necessary or appropriate; provided however, that each Optionee shall at all times be provided with such information as is required to be provided from time to time pursuant to applicable regulatory requirements, including, but not limited to, any applicable requirements of the Securities and Exchange Commission, the California Department of Corporations and other state securities agencies. 24 EX-4 4 p14639-ex42.txt EXHIBIT 4.2 Exhibit 4.2 CALIFORNIA MICRO DEVICES CORPORATION 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, AMENDED AS OF AUGUST 1, 2000, AND AMENDED AS OF AUGUST 7, 2001 1. PURPOSE. The purpose of the CALIFORNIA MICRO DEVICES CORPORATION Non-Employee Directors' Stock Option Plan (the "Plan") is to secure for the Corporation and its shareholders the benefits of the incentive inherent in increased common stock ownership by the members of the Board of Directors (the "Board") of the Corporation who are not employees of the Corporation or any of its subsidiaries. 2. DEFINITIONS. (a) "Board" shall mean the board of directors of the Corporation. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the committee appointed by the Board to administer the Plan, or if no such committee is appointed, by the Board. (d) "Common Stock" shall mean the voting common stock, of the Corporation. (e) "Corporation" shall mean CALIFORNIA MICRO DEVICES CORPORATION, a California corporation. (f) "Director" shall mean a member of the Board. (g) "Effective Date" shall mean February 10, 1995. (h) "Exercise Price" shall mean the price per Share at which an Option may be exercised, as determined by the Committee and as specified in the Optionee's stock option agreement. (i) "Fair Market Value" shall mean for any day the average of the closing bid and asked prices of the Stock in the over-the-counter market, as reported through the National Association of Securities Dealers ("NASD") Automated Quotation System or, if the Stock is listed or admitted to trading on the Nasdaq National Market System or any national securities exchange or if the last reported sale price of such Stock is generally available, the last reported sale price on such system or exchange. The Fair Market Value for any day for which there is no such bid and asked or last reported sales price shall be the Fair Market Value of the next preceding day for which there is such a price. (j) "Non-Employee Director" shall mean a Director who is not an employee of the Corporation or any of its subsidiaries. (k) "Option" shall mean an option to purchase Common Stock granted pursuant to the Plan. (l) "Optionee" shall mean any person who holds an Option pursuant to the Plan. (m) "Plan" shall mean the CALIFORNIA MICRO DEVICES CORPORATION 1995 Non-Employee Directors' Stock Option Plan, as it may be amended from time to time. (n) "Purchase Price" shall mean at any particular time the Exercise Price times the number of 25 Shares for which an Option is being exercised. (o) "Share" shall mean one share of authorized Common Stock. 3. ADMINISTRATION. (a) The Committee. The Plan shall be administered by a Committee which shall consist of not less than three members of the Board. (b) Powers of the Committee. Subject to the provisions of the Plan, the Committee shall have the authority, in its discretion and on behalf of the Corporation shall, subject to the provisions of the Plan, grant Options and shall have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. No member of the Committee shall be liable for anything done or omitted to be done by such member or by any other member of the Committee in connection with the Plan, except for such member's own willful misconduct or as expressly provided by statute. 4. PARTICIPATION. Each Non-Employee Director shall be eligible to receive Options in accordance with the Plan. The adoption of this Plan shall not be deemed to give any director any right to be granted an option to purchase Common Stock of the Corporation, except to the extent and upon such terms and conditions are provided herein. 5. STOCK. (a) Shares Subject to This Plan. The aggregate number of Shares which may be issued upon exercise of Options under the Plan shall not exceed three hundred and ninety thousand (390,000) 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 Non-Employee Director then in office shall, without further action required, be granted an Option for the purchase of Ten Thousand 26 (10,000) Shares. Each other person appointed or elected to serve as a Non-Employee Director during the term of this Plan shall be granted an option for Fifteen Thousand (15,000) Shares upon his or her appointment or election. (ii) Subject to the approval of the Plan by the Shareholders of the Corporation in accordance with Section 14 hereof, each year, as of the date of the Annual Meeting of Shareholders of the Corporation, each Non-Employee Director who has been elected or re-elected or who is continuing as a member of the Board as of the adjournment of the Annual Meeting (other than any Non-Employee Director eligible for a grant pursuant to paragraph (b)(i)) shall automatically receive an Option for Ten Thousand (10,000) shares of Common Stock. (c) Vesting. An Optionee may not exercise his or her Option for any Shares until the Non-Employee Director has served one year as a member of the Board since the date the option was granted. An Optionee may exercise the Option as to one fourth of the Shares at the end of the 4th full calendar quarter following the date the Option was granted and as to an additional 1/16th of the Shares at the end of each of the full calendar quarter commencing with the 5th full calendar quarter following the date the Option was granted. The right to exercise the Option shall be cumulative. An Optionee may buy all, or from time to time any part, of the maximum number of shares which are exercisable under the an Option, but in no case may Optionee exercise the Option with regard to a fraction of a share, or for any share for which the Stock Option is not exercisable. (d) Lapse of Options. Each stock option agreement shall state the time or times when the Option covered thereby lapses and becomes unexercisable in part or in full. An Option shall lapse on the earliest of the following events (unless otherwise determined by the Committee and reflected in an option agreement): (I) The tenth anniversary of the date of granting the Option; (ii) The first anniversary of the Optionee's death; (iii) The first anniversary of the date the Optionee ceases to be a Director due to total and permanent disability, within the meaning of Section 22(e)(3) of the Code; (iv) Ninety (90) days after the Optionee ceases to be a Director for any reason other than his or her death or total and permanent disability; (v) The date the Optionee files or has filed against him or her a petition in bankruptcy; or (vi) The expiration date specified in an Optionee's stock option agreement. (e) Exercise Price. Each stock option agreement shall state the Exercise Price for the Shares for which the Option is exercisable. The Exercise Price of all Options shall be the Fair Market Value of the Shares for which the Option is exercisable, and not less than the par value of the Shares. (f) Medium and Time of Payment. The Purchase Price shall be payable in full in cash upon the exercise of an Option but the Committee may allow the Optionee to pay the Purchase Price: (I) by surrendering Shares in good form for transfer, owned by the Optionee and having a Fair Market Value on the date of exercise equal to the Purchase Price; (ii) by delivery of a full recourse promissory note ("Note") made by the Optionee in the amount of the Purchase Price, bearing interest, compounded semiannually, at a rate not less than the rate determined under Section 7872 of the Code to insure that no "unstated interest", as defined in such section will accrue, together with the delivery 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 27 exercise of Options, including the submission by the Optionee of such forms and documents as the Committee may require and the delivery by the Optionee of cash sufficient to satisfy applicable withholding requirements. The Committee may vary the exercise requirements and procedures from time to time to facilitate, for example, the broker-assisted exercise of Options. (g) Nontransferability of Options. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee or the Optionee's conservator or legal representative and shall not be assignable or transferable except pursuant to a qualified domestic relations order as defined by the Code. In the event of the Optionee's death, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution. (h) Termination of Directorship Other than by Death or Disability. If an Optionee ceases to be a Director for any reason other than his or her death or disability, the Optionee shall have the right, subject to the provisions of this Section 6, to exercise any Option held by the Optionee at any time within ninety (90) days after his or her termination as a Director, but not beyond the otherwise applicable term of the Option and only to the extent that on such date of termination as a Director the Optionee's right to exercise such Option had vested. (i) Death of Optionee. If an Optionee dies while a Director, or after ceasing to be a Director but during the period while he or she could have exercised an Option under Section 6(h) hereof, any Option granted to the Optionee may be exercised, to the extent it had vested at the time of death and subject to the Plan, at any time within twelve (12) months after the Optionee's death, by the executors or administrators of his or her estate or by any person or persons who acquire the Option by will or the laws of descent and distribution, but not beyond the otherwise applicable term of the Option. (j) Disability of Optionee. If an Optionee ceases to be a Director due to becoming totally and permanently disabled within the meaning of Section 22(e)(3) of the Code, any Option granted to the Optionee may be exercised to the extent it had vested at the time of cessation and, subject to the Plan, at any time within twelve (12) months after the termination of Optionee's position as a Director, but not beyond the otherwise applicable term of the Option. (k) Rights as a Shareholder. An Optionee, or a transferee of an Optionee, shall have no rights as a shareholder of the Corporation with respect to any Shares for which his or her Option is exercisable until the date of the issuance of a stock certificate for such Shares. No adjustment shall be made for dividends, ordinary or extraordinary or whether in currency, securities, or other property, distributions, or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 8 hereof. (l) Other Provisions. The stock option agreements authorized under the Plan may contain such other provisions which are not inconsistent with the terms of the Plan, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. 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. 28 The number of Shares covered by the Plan, as provided in Section 5 hereof, and the number of Shares for which each Option is exercisable shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from the payment of a Common Stock dividend, a stock split, a reverse stock split or any other event which results in an increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation, and the Exercise Price shall be proportionately increased in the event the number of Shares subject to such Option are decreased and shall be proportionately decreased in the event the number of Shares subject to such Option are increased. Adjustments shall be made by the Board, whose determination in that respect shall be final, binding, and conclusive. Except as expressly provided herein, no issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Liquidation. In the event of the dissolution or liquidation of the Corporation, each Option shall terminate immediately prior to the consummation of such action. The Committee shall notify the Optionee not less than fifteen (15) days prior to the proposed consummation of a pending dissolution or liquidation, and the Option shall be exercisable as to all Shares which are vested prior to expiration until immediately prior to the consummation of such action. (c) Merger. In the event of a merger or acquisition involving an acquisition of the Corporation or an acquisition by the Corporation of another company, the result of which is that the outstanding voting securities of the Corporation do not represent, or are not converted into, a majority of the outstanding voting securities of the surviving corporation, except as otherwise provided in any particular Option agreement, the vesting of all unvested Options shall be accelerated and all options shall be immediately exercisable. Without limiting the generality of the foregoing, in the event of (i) a proposed merger of the Corporation with or into another corporation, as a result of which the Corporation is not the surviving corporation and (ii) the Option is not assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, then in such case each Option shall terminate immediately prior to the consummation of such transaction. The Committee shall notify the Optionee not less than fifteen (15) days prior to the proposed consummation of such transaction, and the Option shall be exercisable as to all Shares subject to such Option until immediately prior to the consummation of such transaction. (d) Determination by Committee. All adjustments described in this Section 8 shall be made by the Committee, whose determination shall be conclusive and binding on all persons. (e) Limitation on Rights of Optionee. Except as expressly provided in this Section 8, no Optionee shall have any rights by reason of any payment of any stock dividend, stock split or reverse stock split or any other increase or decrease in the number of shares of stock of any class, or by reason of any reorganization, consolidation, dissolution, liquidation, merger, exchange, split-up or reverse split-up, or spin-off of assets or stock of another corporation. Any issuance by the Corporation of Shares, Options or securities convertible into Shares or Options shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of the Shares for which an Option is exercisable. (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: 29 (I) The Corporation and the Optionee have taken all actions required to exempt the issuance of the Shares from the registration requirements under the Securities Act of 1933, as amended (the "Act"), or the Corporation and the Optionee shall determine that the registration requirements of the Act do not apply to such exercise; (ii) Any applicable listing requirement of any stock exchange on which the Common Stock is listed has been satisfied; and (iii) Any other applicable provision of state or Federal law has been satisfied. (b) Restrictions on Transfer; Representations of Optionee; Legends. Regardless of whether the offering and sale of Shares has been registered under the Act or has been registered or qualified under the securities laws of any state, the Corporation may impose restrictions upon the sale, pledge, or other transfer of such Shares, including the placement of appropriate legends on stock certificates, if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state, or any other law. If the sale of Shares is not registered under the Act and the Corporation shall determine that the registration requirements of the Act apply to such sale, but an exemption is available which requires an investment representation or other representation, the Optionee shall be required, as a condition to purchasing Shares by exercise of his or her Option, to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, except in compliance with the Act, and to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Stock certificates evidencing Shares acquired pursuant to an unregistered transaction to which the Act applies shall bear such restrictive legends as are required or deemed advisable under the Plan or the provisions of any applicable law. Any determination by the Corporation and its counsel in connection with any of the matters set forth in this section shall be conclusive and binding on all persons. (c) Registration or Qualification of Securities. The Corporation may, but shall not be obligated to, register or qualify the sale of Shares under the Act or any other applicable law. (d) Exchange of Certificates. If, in the opinion of the Corporation and its counsel, any legend placed on a stock certificate representing Shares sold hereunder is no longer required, the Optionee or the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but lacking such legend. 10. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time to time by the Board as the Board shall deem advisable including, but not limited to amendments necessary to qualify for any exemption or to comply with applicable law or regulations, provided, however, that except as provided in Section 8, the Board may not, without further approval by the shareholders of the Corporation, materially increase the number of shares of Common Stock as to which Options may be granted under the Plan, materially increase the benefits accruing to Participants under the Plan or materially modify the requirements as to eligibility for Participants in the Plan. No amendment of the Plan shall materially and adversely affect any right of any Optionee with respect to any Option theretofore granted without such Optionee's written consent. The Plan may not be amended more frequently than once every six months with respect to the number of shares subject to Options granted to members of the Board of Directors, the timing of such Option grants and the determination of the exercise price of such Options other than to comport with changes in the Code, the Employee Retirement Security Act, or the rules thereunder. Notwithstanding anything to the contrary contained herein, this Plan shall not be amended except in accordance with the provisions of Rule 16b-3(c) under the Securities Exchange Act of 1934, as amended, or any successor rule thereto. 30 11. APPLICATION OF FUNDS. The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of an Option shall be used for general corporate purposes. 12. APPROVAL OF SHAREHOLDERS. The Plan shall be subject to approval by the affirmative vote of the holders of a majority of all classes of the outstanding shares present and entitled to vote at the first meeting of shareholders of the Corporation following the adoption of the Plan, and in no event later than one (1) year following the Effective Date. Prior to such approval, Options may be granted but shall not be exercisable. 13. WITHHOLDING OF TAXES. In the event the Corporation or a Subsidiary determines that it is required to withhold Federal, state, or local taxes in connection with the exercise of an Option or the disposition of Shares issued pursuant to the exercise of an Option, the Optionee or any person succeeding to the rights of the Optionee, as a condition to such exercise or disposition, may be required to make arrangements satisfactory to the Corporation or the Subsidiary to enable it to satisfy such withholding requirements. 14. RIGHTS AS A DIRECTOR. Neither the Plan nor any Option granted pursuant thereto shall be construed to give any person the right to remain as a Director of the Corporation or any Subsidiary. 31 EX-10 5 p14639-ex1011.txt EXHIBIT 10.11 Exhibit 10.11 Amended Commitment Letter from Comerica Bank October 18, 2001 John Trewin Chief Financial Officer California Micro Devices 215 Topaz Street Milpitas, CA 95035 Dear John, This letter serves to outline the credit restructure commitment made by Comerica Bank - California ("Bank") to California Micro Devices Corp. ("Borrower"). The following is a summary of the basis business points of the amendment. The violation of the Maximum Loss covenant for the quarter ended June 30, 2001 will be waived upon execution of this restructure. REVOLVING LINE OF CREDIT: a) Any borrowings will be under formula. Borrower can borrow up to $3,000,000 less the total outstandings of all term loans and commitment amount under corporate credit cards, provided that the Borrowing Base (75% of eligible accounts receivable) is sufficient to cover total outstandings of the term loans and the line of credit. b) Cancel the sub-limit for letters of credit. c) Interest rate of prime + 1.00% (was prime + 0.50%). d) Covenant waiver and credit modification fee of $5,000. FINANCIAL COVENANTS: Borrower is to maintain the following financial covenants: a) Monthly minimum Adjusted Quick Ratio of 0.75:1.00 increasing to 1.25:1:00 at the earlier of raising new equity or 4/30/02. Adjusted Quick Ratio is defined as unrestricted cash and equivalents plus eligible net trade accounts receivable divided by current liabilities (includes un-drawn letters of credit and credit card sublimits) plus all indebtedness to Bank. b) Monthly maximum Total Liabilities to Tangible net Worth of 1.50:1.00 decreasing to 1.00:1.00 at the earlier of raising new equity or 4/30/02. (TNW excludes restricted cash.) c) Quarterly maximum Net Loss of ($8,500,000) for Q2'02 ending 9/30/01, ($2,500,000) for Q3'02 ending 12/31/01 and ($1,000,000) for Q4'02 ending 3/31/02. Borrower is to achieve quarterly profitability thereafter and Borrower may have one loss quarter per fiscal year with a maximum loss of ($500,000) with no two consecutive quarterly losses. This covenant will be waived for Q1'02 ended 6/30/01 upon execution of loan restructure. d) Quarterly minimum Revenues of $7,000,000 for Q2'02 ending 9/30/01, $8,000,000 for Q3'02 ending 12/31/01, $10,000,000 for Q4'02 ending 3/31/02 and $11,000,000 quarterly thereafter. REPORTING REQUIREMENTS: Borrower is to provide Bank with: a) Monthly financial statements along with covenant compliance certificate within twenty-five (25) days of month end. (NEW) b) Quarterly 10-Qs within forty-five (45) days of quarter end. c) Annual unqualified CPA audited financial statements within ninety (90) days of FYE. d) Monthly borrowing base certificate, accounts receivable and payable agings within 15 days of 32 month end. (NEW) 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. OTHER CONDITIONS: a) Borrower is to obtain foreign credit insurance for its sales to foreign entities immediately but no later than 12/15/01. b) Borrower is to provide Bank with a perfected first security interest covering all assets of the borrower including intellectual property filing only to the extent that it allows Lender to collect accounts receivable. Security interest will also include a negative pledge on specific filings on Borrower's intellectual property. Borrower is not to grant negative pledge rights to any other party. c) Reasonable out of pocket costs including, without limitation, legal, audit and filing fees are for the account of the Borrower. Sincerely, /s/ Helen Huang - -------------------------------------------- Helen Huang Corporate Banking Officer Comerica Bank - California Technology & Life Sciences Division Agreed to by: /s/ John E. Trewin - -------------------------------------------- John E. Trewin Vice President & Chief Financial Officer California Micro Devices Corporation 33 -----END PRIVACY-ENHANCED MESSAGE-----