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, 2003

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 incorporation or organization)	(I.R.S. Employer Identification No.)

430 N. McCarthy Boulevard #100 Milpitas, California	95035
(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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.     Yes  ¨    No  x

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:

The number of shares of the registrant’s Common Stock outstanding as of October 31, 2003 was 18,754,735.

CALIFORNIA MICRO DEVICES CORPORATION

INDEX

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements
	Condensed Balance Sheets as of September 30, 2003 (Unaudited) and March 31, 2003	3
	Condensed Statements of Operations for the Three and Six Months Ended September 30, 2003 and 2002 (Unaudited)	4
	Condensed Statements of Cash Flows for the Six Months Ended September 30, 2003 and 2002 (Unaudited)	5
	Notes to Condensed Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 2.	Changes in Securities and Use of Proceeds	22
Item 3.	Default Upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	23
Item 6.	Exhibits and Reports on Form 8-K	23
Signature		25

ITEM 1. Financial Statements

CALIFORNIA MICRO DEVICES CORPORATION

CONDENSED BALANCE SHEETS

(amounts in thousands, except share data)

	September 30, 2003			March 31, 2003
	(Unaudited)			(1)
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	10,428		$	4,513
Accounts receivable, net		5,995			5,281
Inventories		4,361			3,577
Prepaids and other current assets		224			652
Total current assets		21,008			14,023
Property, plant and equipment, net		8,688			10,087
Restricted cash		980			880
Other long-term assets		413			415
Total assets	$	31,089		$	25,405
LIABILITIES & SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,026		$	3,195
Accrued liabilities		3,554			2,631
Deferred margin on shipments to distributors		1,357			1,873
Current maturities of long-term debt and capital lease obligations		1,659			1,603
Total current liabilities		10,596			9,302
Long-term debt and capital lease obligations, less current maturities		7,535			8,308
Other long-term liabilities		38			—
Total liabilities		18,169			17,610
Shareholders’ equity:
Common stock—no par value; 25,000,000 shares authorized; shares issued and outstanding: 18,503,343 as of September 30, 2003 and 15,881,176 as of March 31, 2003		79,903			74,240
Accumulated deficit		(66,983	)		(66,445	)
Total shareholders’ equity		12,920			7,795
Total liabilities and shareholders’ equity	$	31,089		$	25,405

(1) Derived from audited financial statements

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA MICRO DEVICES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,					Six Months Ended September 30,
	2003		2002			2003			2002
Net sales	$	14,857	$	10,761		$	26,766		$	20,129
Costs and expenses:
Cost of sales		9,986		9,061			19,142			15,467
Research and development		991		894			2,043			1,776
Selling, general and administrative		2,990		2,507			5,668			5,167
Total costs and expenses		13,967		12,462			26,853			22,410
Operating income (loss)		890		(1,701	)		(87	)		(2,281	)
Other expense, net		208		265			451			506
Net income (loss)	$	682	$	(1,966	)	$	(538	)	$	(2,787	)
Net income (loss) per share:
Basic	$	0.04	$	(0.14	)	$	(0.03	)	$	(0.20	)
Net income (loss) per share:
Diluted	$	0.04	$	(0.14	)	$	(0.03	)	$	(0.20	)
Weighted average common shares outstanding:
Basic		17,642		14,209			16,764			14,069
Diluted		17,967		14,209			16,764			14,069

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA MICRO DEVICES CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended September 30,
	2003			2002
Cash flows from operating activities:
Net loss	$	(538	)	$	(2,787	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Write-off of discontinued inventory		853			141
Write-down of capital equipment		233			—
Depreciation and amortization		1,288			1,399
Stock based compensation		94			71
Gain on the sale of fixed assets		(16	)		(3	)
Changes in assets and liabilities:
Accounts receivable		(714	)		(1,077	)
Inventories		(1,637	)		(2,864	)
Prepaids and other current assets		428			(77	)
Other long term assets		(18	)		221
Accounts payable and other current liabilities		1,754			(482	)
Other long term liabilities		38			(226	)
Deferred margin on shipments to distributors		(516	)		544
Net cash provided by (used in) operating activities		1,249			(5,140	)
Cash flows from investing activities:
Sales of short-term investments		—			300
Proceeds from sale of capital equipment		20			—
Capital expenditures		(106	)		(1,945	)
Net change in restricted cash		(100	)		(84	)
Net cash used in investing activities		(186	)		(1,729	)
Cash flows from financing activities:
Short-term borrowings		—			1,094
Repayments of capital lease obligations		(9	)		(3	)
Repayments of long-term debt		(708	)		(2,056	)
Borrowings of long-term debt		—			3,499
Proceeds from private placement of common stock, net		5,176			—
Proceeds from issuance of common stock		393			1,479
Net cash provided by financing activities		4,852			4,013
Net increase (decrease) in cash and cash equivalents		5,915			(2,856	)
Cash and cash equivalents at beginning of period		4,513			6,940
Cash and cash equivalents at end of period	$	10,428		$	4,084

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA MICRO DEVICES CORPORATION

Notes to Condensed Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of California Micro Devices Corporation (the “Company”, “we”, “us” or “our”) as of September 30, 2003, results of operations for the three and six month periods ended September 30, 2003 and 2002, and cash flows for the six month periods ended September 30, 2003 and 2002. Results for the three and six month periods are not necessarily indicative of fiscal year results.

The condensed balance sheet at March 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The condensed financial statements should be read in conjunction with the financial statements included with our annual report on Form 10-K for the fiscal year ended March 31, 2003.

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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates are based on historical experience, input from sources outside of the company, and other relevant facts and circumstances. Actual results could differ from these estimates.

3. Stock-Based Compensation

As allowed under Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock Based Compensation,” we account for our employee stock plans in accordance with the provisions of Accounting Principles Board’s Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees” and have adopted the disclosure only provisions of SFAS 123. Stock-based awards to non-employees are accounted for in accordance with SFAS 123 and EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” Fair value for these awards is calculated using the Black-Scholes option-pricing model, which requires that we estimate the volatility of our stock, an appropriate risk-free interest rate, estimated time until exercise of the option, and our dividend yield. The Black-Scholes model was developed for use in estimating the fair value of traded options that do not have specific vesting schedules and are ordinarily transferable. The calculation of fair value is highly sensitive to the expected life of the stock-based award and the volatility of our stock, both of which we estimate based primarily on historical experience. As a result, the pro forma disclosures are not necessarily indicative of pro forma effects on reported financial results for future years.

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We generally recognize no compensation expense with respect to employee stock grants. Had we recognized compensation for the grant date fair value of employee stock grants in accordance with SFAS 123, our net loss and net loss per share would have been revised to the pro forma amounts below. For pro forma purposes, the estimated fair value of our stock-based grants is amortized over the options’ vesting period for stock options granted under our stock option plans and the purchase period for stock purchases under our stock purchase plan.

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	Three Months Ended September 30,						Six Months Ended September 30,
	2003			2002			2003			2002
	(in thousands, except per share data)
Net income (loss):
As reported	$	682		$	(1,966	)	$	(538	)	$	(2,787	)
Add: Stock-based compensation expense included in reported results		74			—			94			71
Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		(590	)		(900	)		(890	)		(1,978	)
Pro forma net income (loss)	$	166		$	(2,866	)	$	(1,334	)	$	(4,694	)
Basic net income (loss) per share
As reported	$	0.04		$	(0.14	)	$	(0.03	)	$	(0.20	)
Pro-forma	$	0.01		$	(0.20	)	$	(0.08	)	$	(0.33	)
Diluted net income (loss) per share
As reported	$	0.04		$	(0.14	)	$	(0.03	)	$	(0.20	)
Pro-forma	$	0.01		$	(0.20	)	$	(0.08	)	$	(0.33	)

The fair value of our stock-based grants was estimated assuming no expected dividends and the following weighted-average assumptions:

	Employee Stock Options
	Three Months Ended September 30, 2003		Three Months Ended September 30, 2002		Six Months Ended September 30, 2003		Six Months Ended September 30, 2002
Expected life in years	3.21		4.08		3.39		4.08
Volatility	0.97		1.02		0.97		1.02
Risk-free interest rate	2.71	%	3.00	%	2.60	%	3.17	%

	Employee Stock Purchase Plan
	Three Months Ended September 30, 2003		Three Months Ended September 30, 2002		Six Months Ended September 30, 2003		Six Months Ended September 30, 2002
Expected life in years	0.38		0.49		0.39		0.49
Volatility	0.75		0.52		0.74		0.52
Risk-free interest rate	1.54	%	1.80	%	1.57	%	1.80	%

4. Net Income (Loss) Per Share

Basic and diluted net income (loss) per share is presented in conformity with Statement of Financial Accounting Standards No. 28 (“SFAS 28”), “Earnings Per Share”, for all periods presented. Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities by adding the dilutive effect of other common stock equivalents, using the treasury

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stock method, to the weighted average number of common shares outstanding during the period, if dilutive.

The following table sets forth the computation of basic and diluted income (loss) per share:

	Three Months Ended September 30,					Six Months Ended September 30,
	2003		2002			2003			2002
	(in thousands, except per share amounts)
Net income (loss)	$	682	$	(1,966	)	$	(538	)	$	(2,787	)
Weighted average common shares outstanding used in calculation of net income (loss) per share:
Basic		17,642		14,209			16,764			14,069
Effect of dilutive securities:
Employee stock options		200		—			—			—
Warrants		125		—			—			—
Diluted		17,967		14,209			16,764			14,069
Net income (loss) per share
Basic	$	0.04	$	(0.14	)	$	(0.03	)	$	(0.20	)
Diluted	$	0.04	$	(0.14	)	$	(0.03	)	$	(0.20	)

The computation of diluted net loss per share for the six month period ended September 30, 2003 excludes the impact of options to purchase 3,411,985 shares of common stock and warrants to purchase 1,290,266 shares of common stock as their inclusion would be antidilutive. Such securities, had they been dilutive, would have been included in the computation of diluted net loss per share using the treasury stock method.

The computation of diluted net loss per share for the three and six month periods ended September 30, 2002 excludes the impact of options to purchase 2,963,222 shares of common stock and warrants to purchase 59,250 shares of common stock as their inclusion would be antidilutive. Such securities, had they been dilutive, would have been included in the computation of diluted net loss per share using the treasury stock method.

5. Inventories

The components of inventory consist of the following (amounts in thousands):

	September 30, 2003		March 31, 2003
Raw materials	$	100	$	348
Work-in-process		2,131		1,166
Finished goods		2,130		2,063
	$	4,361	$	3,577

6. 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 review the current

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status of any pending or threatened proceedings with our outside counsel on a regular basis and, considering all the other known relevant facts and circumstances, recognize any loss that we consider probable and estimable as of the balance sheet date. As of September 30, 2003 and March 31, 2003, we have not recorded any significant liability on our balance sheet for pending or threatened litigation, claims, or proceedings.

We have two cases pending in the Santa Clara County, State of California Superior Court in which the amount sought by the plaintiffs has been estimated by the Company that it could be between five and ten million dollars when intangible items are quantified, and therefore a verdict in their favor would be materially adverse to our business. Although several years old, both cases have been stayed by courts until fairly recently; as a result, both cases are early in the discovery phase, making it difficult to assess the probability of the opposing parties or ourselves prevailing with a significant degree of confidence. As a result, we have not made any substantial accrual for these cases.

The first case involves counterclaims brought on August 3, 1995, by our former CEO, Chan Desaigoudar after we sued him on May 5, 1995, for fraud and breach of fiduciary duty. The counterclaims are for, among other items, wrongful termination and improper termination of his stock option. The second case involves a former employee, Tarsaim L. Batra, who sued the company and three of our former officers, Messrs. Chan Desaigoudar, Steve Henke and Surendra Gupta, on September 13, 1993, and April 19, 1994, in two cases which have been consolidated, likewise for wrongful termination of his employment and for deprivation of his stock options. The U.S. government in the past has prosecuted Messrs. Desaigoudar, Henke, and Gupta for criminal securities law violations. Mr. Gupta plead guilty before trial while Messrs. Desaigoudar and Henke were convicted; however, their convictions were overturned and a retrial was imminent when in May 2002, they each entered a guilty plea as to one or more of the counts.

We believe that we have meritorious defenses to the claims of the opposing parties in both of these cases. Currently, we intend to vigorously pursue our defenses and/or our claims against the opposing parties in these matters. Should we unexpectedly learn facts during discovery which lead us to reasonably estimate a negative outcome to these cases, or should one or both of these cases result in a verdict for the other parties, then we will provide for such liability, as appropriate.

7. Comprehensive Income (Loss)

Comprehensive loss is principally comprised of net income (loss) and unrealized gains or losses on the Company’s available-for-sale securities. Comprehensive income (loss) for the three and six month periods ended September 30, 2003 and 2002 approximated net loss for the three and six month periods ended September 30, 2003 and 2002, respectively.

8. Income Taxes

For the three and six month periods ended September 30, 2003 and 2002, there was no provision for income taxes, due to the net loss for the year to date periods.

9. Long-Term Debt

Our Industrial Revenue Bonds are collateralized by a lien on all of our land and buildings in Tempe, Arizona, and certain equipment acquired with the proceeds of the bonds, and require certain minimum annual sinking fund payments ranging from $205,000 in fiscal 2004 to $780,000 in fiscal 2018. We have the right to prepay the 10.5% Industrial Revenue Bond by redeeming all or part of the outstanding principal amounts without penalty. At September 30, 2003 and March 31, 2003, restricted cash of $980,000 and $880,000, respectively, was held in sinking fund trust accounts. Of these amounts, $800,000 is to be used for principal and interest payments in the event of default by the Company, and the balance is used for semi-annual interest and principal payments. As of September 30, 2003, $6.5 million was outstanding under this agreement. These bonds are subject to certain covenants, including a restriction on the payment

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of dividends. The financial covenants associated with these bonds are requirements to maintain minimum current and quick ratios, shareholders equity, and debt coverage, and not to exceed maximum ratios of total liabilities to equity and long-term debt to working capital. As of September 30, 2003, we were in compliance with all financial covenants. However, we had previously been out of compliance with various covenants beginning on December 31, 2001. As a result, as required by our agreements, we retained a management consulting firm which made recommendations to the Trustee and ourselves as to how we could come into compliance. As a result of previously not being in compliance with the covenants, we are subject to more frequent covenant reporting requirements which will remain in place for four successive quarters.

In June 2002, we entered into a Loan and Security Agreement (“Agreement”) that allows us to borrow up to a total of $5.0 million under an equipment line of credit and a revolving line of credit. The amount available under the Agreement is based on the amount of eligible equipment and accounts receivable. Under the Agreement, which includes a subjective acceleration clause, we are subject to certain financial covenants and restrictions and must maintain a compensating balance of $2.75 million with the bank in order to maintain our borrowing capability. The financial covenants relate to a required monthly minimum quick ratio and quarterly tangible net worth. Borrowings under the equipment line and the revolving line bear interest at an annual rate of prime plus 3.0% and prime plus 0.75%, respectively. As of September 30, 2003, the interest rate on the equipment line was 7.00%. Principal, in equal installments, and interest are due monthly for a term of 36 months for all borrowings made under the equipment line. Borrowings under the revolving credit line have a term of 12 months, with principal due at maturity and interest due in monthly installments. Borrowings under both lines are collateralized by substantially all of our assets. As of September 30, 2003, $2.2 million remained outstanding on the equipment line of credit and $2.8 million was available under the revolving line of credit. On July 31, 2003, we entered into an agreement to modify our existing Loan and Security Agreement with Silicon Valley Bank. The modification extends the term of the agreement for one additional year to July 31, 2004 and subject to compliance with various covenants allows us to borrow an additional $250,000 under the equipment line of credit and an additional $180,000 under the working capital line of credit, still subject to a combined cap of $5.0 million. The modification also reduces the compensating balance we must maintain with the bank to $2.4 million with quarterly reductions, commencing December 31, 2003, assuming we are in full compliance with the agreement. We have been in compliance with all covenants under the Agreement during the current fiscal year, although we had been out of compliance and had obtained waivers during the prior fiscal year.

In March 2001, we entered into an equipment financing agreement with Epic Funding Corporation which allowed us to finance $975,000 of equipment over a term of 4 years with interest at 9.6% payable in 48 installments of approximately $25,000 per month. The total outstanding obligation as of September 30, 2003 was approximately $410,000.

During fiscal 2003, we entered into new capital leases to finance some equipment purchases. The total outstanding capital lease obligations were $58,000 at September 30, 2003, due in monthly installments with interest rates ranging from 10.4% to 12.6%. Fixed assets purchased under capital leases and the associated accumulated depreciation were not material as of September 30, 2003 and March 31, 2003.

10. Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities”. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. The Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FASB Interpretation (“FIN”) No. 45, and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. All provisions of the Statement, except those related to forward purchases or sales of “when-issued” securities, should be applied prospectively. The Company currently has no instruments that meet the definition of a derivative, and therefore, the adoption of this Statement has had no impact on the Company’s financial position or results of operations.

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In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This Statement requires that certain instruments that were previously classified as equity on a company’s statement of financial position now be classified as liabilities. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 has not had a material effect on our financial position or results of operations.

11. Major Customers

Due to our business focus on key customers in select markets, two end customers (Motorola and Guidant) each comprised 10% or more of our revenues during the three and six month periods ended September 30, 2003. Two end customers (Motorola and Guidant) each comprised 10% or more of our revenues during the three month period ended September 30, 2002 and three end customers (Motorola, Guidant and Lumileds) each comprised 10% or more of our revenues during the six month period ended September 30, 2002. Collectively, these end customers comprised approximately 39% and 37%, and 31% and 37% of revenue for the three and six month periods ended September 30, 2003 and 2002, respectively. In addition to these end customers, a single distributor, Epco, represented 10%, or more of our revenues for the three and six month periods ended September 30, 2003.

12. Equity Financing

In July 2003, we entered into a stock and warrant purchase agreement pursuant to which we (1) sold 2,444,244 shares of common stock at $2.25 per share with net proceeds of $5.2 million and (2) granted 733,273 five-year warrants to purchase shares of common stock with an exercise price of $3.00 per share. At the Company’s option, the warrant holders, excluding our two placement agents, are obligated to exercise their warrants during the 30 days following notice from us (a “Triggering Notice) that the closing price of our stock has equaled or exceeded $5.00 for 20 consecutive trading days. To the extent the warrants are not exercised during this 30-day notice period, we may, but are not obligated to, terminate the warrants upon a follow-on notice to the warrant holders. In July 2003, we also granted an aggregate of 73,326 warrants to our two placement agents related to the stock and warrant financing. These warrants contain similar terms to the warrants granted to our investors except that such warrants are for a three-year term and cannot be exercised until six months after their date of grant. As required under the stock and warrant purchase agreements, and our engagement letter with the placement agents, we registered the shares we sold and the shares underlying the warrants we granted for resale to the public under the Federal Securities Act of 1933, as amended, pursuant to a registration statement declared effective on September 25, 2003.

13. Infrastructure Alignment Plan

On September 29, 2003, the Board of Directors approved a plan to align our internal manufacturing operations to the current business requirements. As part of the infrastructure alignment plan we identified surplus capital equipment with a total estimated loss on either sale or abandonment of approximately $384,000 of which approximately $233,000 related to equipment taken out of service during the quarter was recorded in cost of sales during the three month period ended September 30, 2003. The remaining estimated loss of approximately $151,000 will be recorded in the third fiscal quarter when the equipment is taken out of service and will be made available for sale or abandoned. The estimated loss on sale or abandonment was calculated as the difference between the estimated proceeds on the sale of the assets and the net book value of the assets. The plan also provided for the termination of approximately 61 employees for which severance costs of approximately $335,000 were recorded in cost of sales and $8,000 in selling general and administrative during the three month period ended September 30, 2003.

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In addition, on August 1, 2003 we terminated 27 employees primarily in our Tempe, Arizona facility for which approximately $67,000 of severance costs were recorded in the statements of operations during the three month period ended September 30, 2003.

14. Contingencies

Environmental

During fiscal 2003, we closed our Milpitas wafer fabrication facility. As part of the closure process, we retained a state-licensed environmental contractor familiar with this type of semiconductor manufacturing facility to prepare and implement a site closure plan and a site health and safety plan (HASP) to remove, decontaminate as necessary, and dispose of equipment and materials using approved methods and to work with the appropriate agencies to obtain certifications of closure. Upon inspection of the facility by the County of Santa Clara, one of four soil samples obtained by drilling through the floor in one room detected an elevated level of nickel. The County referred the matter to the State Department of Toxic Substances Control (DTSC), which in a June 23, 2003, letter requested that the Company conduct further soil and ground water investigation to assess the nature and extent of the contamination at the site from nickel and other substances. We submitted a work plan for a Preliminary Endangerment Assessment (“PEA”) in which we proposed to take additional soil samples and to prepare the engineering assessment. Based on the information available at this time, we do not know whether upon completion of the PEA if remediation will be required. The cost of any required remediation will depend upon the nature and extent of contamination that is ultimately found and any risks posed by such contamination. During the quarter ended September 30, 2003, we recorded an expense of approximately $72,000 for the estimated costs of the additional investigation and the preliminary endangerment assessment. See Note 15 Subsequent Events.

15. Subsequent Events

During October 2003, we gave the investors in our July private placement the Triggering Notice as described in Note 12. During October and November 2003, these investors exercised their 733,273 warrants resulting in total proceeds of approximately $2.2 million. In addition, other investors exercised an aggregate of 25,734 warrants resulting in total proceeds of approximately $112,000.

By letter dated November 4, 2003, the DTSC sent us a proposed Corrective Action Consent (“CAC”) Agreement asking us to indicate within 15 days whether we are willing to enter into the CAC Agreement form with the DTSC. The proposed CAC Agreement form requires that we implement a PEA work plan approved by the DTSC, to be followed by further investigation and to the extent determined necessary, remediation. We are evaluating the proposed CAC Agreement form. The possible outcomes at this time range from “no further action required” to a requirement for us to remediate the Site. Based on the information available at this time, we do not know whether remediation will be required. The cost of any remediation that may be required will depend upon the nature and extent of contamination that is ultimately found at the Site, and the risks posed thereby, if any.

On October 14, 2003, Ernst & Young LLP informed us that they were resigning as our independent auditors effective upon the completion of their quarterly review of our financial statements for the second quarter of our fiscal 2004 which ended on September 30, 2003, in connection with this Quarterly Report on Form 10-Q.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We design and sell application specific analog semiconductor products primarily for the mobile, computing and consumer electronics markets. We also design, sell and manufacture thin film resistor networks for the medical market. We are a leading supplier of application specific integrated passive (ASIP^™) devices and we also offer a growing portfolio of active analog semiconductors including power management and USB (Universal Serial Bus) transceiver devices. Our products provide critical signal integrity, electromagnetic interference filtering, electrostatic discharge protection, and power management solutions needed in high volume applications including personal computers, wireless communication devices and consumer electronic products. Our ASIP devices, built using proprietary manufacturing processes, integrate multiple passive components onto single chips, and in some cases enhance their functionality with the integration of active semiconductor elements, to provide single-chip solutions for densely populated, high-performance electronic systems. Our devices are significantly smaller and provide more functionality than traditional solutions using functional clusters of discrete products. With our active analog semiconductor portfolio, we seek opportunities to design standard products that are differentiated from competitive alternatives by optimizing them for specific applications. We also selectively design second source products that provide entry to new applications, complement other products in our portfolio or enhance existing customer relationships. Our active analog semiconductor solutions use industry standard manufacturing processes for cost effectiveness.

We focus our expertise on providing high volume, cost effective, general customer solutions for mobile electronics such as wireless handsets and other portable electronic devices and for notebook and desktop computer systems, computer peripherals, digital set top boxes and other consumer electronics applications. Our end-customers include original equipment manufacturers such as Acer, Cisco, Dell, Guidant, Hewlett-Packard, IBM, Kyocera Wireless, LG, Motorola, NEC, Philips, Sony and Trigem, and original design manufacturers including Arima, Compal, and Quanta and contract manufacturers, including Celestica, Foxconn, and Solectron.

We were incorporated in California in 1980 and have been a public company since 1986.

Results of Operations

Net sales. Net sales for the three and six month periods ended September 30, 2003 were $14.9 million and $26.8 million, respectively, an increase of $4.1 million or 38% and $6.7 million or 33% from the three and six month periods ended September 30, 2002. As shown in the table below, the largest component of this increase was in the mobile market followed by higher sales in the medical and computing markets.

	Three Months Ended September 30, 2003		Six Months Ended September 30, 2003		Three Months Ended September 30, 2002		Six Months Ended September 30, 2002
	(in millions)
Mobile	$	5.2	$	8.5	$	3.0	$	4.3
Computing		4.2		8.0		3.7		7.0
Medical		2.8		4.7		1.2		2.2
Other products*		2.7		5.6		2.9		6.6
	$	14.9	$	26.8	$	10.8	$	20.1

* Other products includes lighting, communications, legacy and mature products

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Our revenue from other products declined during the six month period ended September 30, 2003 versus 2002. We had expected a decrease in sales of our communications, legacy and mature products as we had previously provided our customers for many of these products with end of life purchase opportunities. We expect to substantially complete shipment of end of life product orders during our fiscal third quarter. In addition, price increases for our lighting products resulted in a significant reduction in orders and we no longer expect these products to be a significant contributor to our growth in the future.

Units shipped during the six month period ended September 30, 2003 increased to approximately 127 million units from approximately 79 million units for the six month period ended September 30, 2002. Our increased revenue resulted primarily from larger unit sales, due in part from increased sales of current products and in part from sales of newly introduced products, and to a lesser extent, from price increases effective July 1, 2003, in our medical products. Our average unit price decreased by approximately 20% during the six month period ended September 30, 2003 versus the six month period ended September 30, 2002. This decrease was predominately the result of faster growth in our lower price products which offset our medical product price increases.

Our two greater than 10% customers (Motorola and Guidant) represented 39% of our revenue for the three month period ended September 30, 2003 compared to 31% for the same period in 2002. The same two customers represented 37% of our revenue for the six month period ended September 30, 2003. Three greater than 10% customers (Motorola, Guidant and Lumileds) represented 37% of our revenue for the six month period ended September 30, 2002.

Comparison of Cost of Sales, Gross Margin and Expenses

The table below shows our cost of sales, gross margin and expenses, both in dollars and as a percentage of revenue, for the three and six month periods ended September 30, 2003 and 2002.

	Three Months Ended								Six Months Ended
	September 30, 2003		% of Revenue		September 30, 2002		% of Revenue		September 30, 2003		% of Revenue		September 30, 2002		% of Revenue
	(in thousands)
Cost of Sales	$	9,986	67	%	$	9,061	84	%	$	19,142	72	%	$	15,467	77	%
Gross margin	$	4,871	33	%	$	1,700	16	%	$	7,624	28	%	$	4,662	23	%
Research and development	$	991	7	%	$	894	8	%	$	2,043	8	%	$	1,776	9	%
Selling, general and administrative	$	2,990	20	%	$	2,507	23	%	$	5,668	21	%	$	5,167	26	%
Other expense, net	$	208	1	%	$	265	2	%	$	451	2	%	$	506	3	%

Cost of Sales. The dollar increase in cost of sales for the three month period ended September 30, 2003 versus the three month period ended September 30, 2002 was primarily due to the greater volume of products sold, which accounted for an increase of approximately $1.7 million, along with inventory reserve provisions, which accounted for an increase of approximately $269,000. The increases were partially offset by a decrease of approximately $952,000 in manufacturing capacity and spending variances. The reduction in manufacturing variances was primarily the result of an improvement of approximately $512,000 in spending variances and an improvement of approximately $339,000 in yield variances.

The increase in cost of sales for the six month period ended September 30, 2003 versus the six month period ended September 30, 2002 was due to the greater volume of products sold, inventory reserve provisions, and manufacturing capacity and spending variances. The greater volume of products sold accounted for an increase of approximately $2.8 million. Inventory reserve provisions accounted for an increase of approximately $948,000. Manufacturing capacity and spending variances accounted for an increase of approximately $185,000. The increase in manufacturing variances was primarily the result of increases of approximately $496,000 in spending variances and approximately $225,000 in capacity variances, offset by an improvement of approximately $494,000 in yield variances.

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We have, during recent quarters, benefited from the sale of previously reserved inventory due primarily to the large number of products for which we have discontinued future support by placing them in an ‘end of life’ category. These products have been primarily sold through our distributors to an erratic and unpredictable demand by end customers. As a result, we have experienced the actual sale of some products previously reserved and the requirement to further write-down certain other products for which we had expected to receive orders, which did not occur. The benefit related to sales of previously reserved inventory was approximately $454,000 and $533,000 for the three month periods ended September 30, 2003 and September 30, 2002, respectively, and approximately $767,000 and $1.0 million for the six month periods ended September 30, 2003 and September 30, 2002, respectively.

Manufacturing capacity and spending variances totaled approximately $3.5 million and $4.5 million for the three month periods ended September 30, 2003 and September 30, 2002, respectively, and approximately $7.4 million and $7.2 million for the six month periods ended September 30, 2003 and September 30, 2002, respectively. We continue to underutilize our internal manufacturing capacity due to the outsourcing of our manufacturing to our foundry partner. Included in manufacturing spending variances for the three month period ended September 30, 2003 were approximately $688,000 of infrastructure alignment charges comprised of approximately $233,000 related to the write-down of capital equipment, a gain on sale of capital equipment of approximately $16,000, employee termination charges of approximately $366,000 and approximately $105,000 associated with our previously closed Milpitas wafer fabrication facility. Cost of sales for the six month period ended September 30, 2002 included $440,000 for the manufacturing transition.

Gross Margin. Gross margin is comprised of net sales less costs of sales. The gross margin dollar and percentage increase in fiscal 2004 versus fiscal 2003 was primarily the result of a significant price increase for our medical products and the impact of higher sales volumes.

Research and Development. Research and development expenses consist primarily of compensation and related costs for employees, prototypes, masks, and other expenses for the development of new products, process technology and new packages. The dollar increase in research and development expenses for the three and six month periods ended September 30, 2003 versus the same periods in 2002 are primarily due to an increase in prototype material expenses and the reinstatement of our bonus plan. The percentage of revenues comprised by research and development expenses decreased during the same periods due to our increased revenue.

Selling, General and Administrative. Selling, general and administrative expenses consist primarily of compensation and related costs for employees, sales commissions, marketing and promotional expenses, and legal and other professional fees. The dollar increase in selling, general, and administrative expenses for the three and six month periods ended September 30, 2003 versus the same periods in 2002 are primarily due to increases in sales commissions and salaries and the reinstatement of our bonus plan and directors’ expenses. The percentage of revenues comprised by selling, general and administrative expenses decreased during the same periods due to our increased revenue.

Income Taxes. For the three and six month periods ended September 30, 2003 and 2002, there was no provision for income taxes due to the year-to-date net losses for the periods.

Net Income. Largely for the reasons explained above, our net income increased to approximately $682,000 for the three month period ended September 30, 2003 from a net loss of approximately $2.0 million for the three month period ended September 30, 2002 while our net loss for the six month period ended September 30, 2003 decreased to approximately $538,000 compared to approximately $2.8 million for the six month period ended September 30, 2002.

Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities”. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. The Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FASB Interpretation (“FIN”) No. 45, and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. All provisions of the Statement, except those related to forward purchases or sales of “when-issued” securities, should be applied prospectively. The Company currently has no instruments that meet the definition of a derivative,

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and therefore, the adoption of this Statement has had no impact on the Company’s financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This Statement requires that certain instruments that were previously classified as equity on a company’s statement of financial position now be classified as liabilities. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 has not had a material effect on our financial position or results of operations.

Critical Accounting Policies and Estimates

We described our critical accounting policies and estimates in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended March 31, 2003.

Our critical accounting policies and estimates are those that relate to financial line items that are key indicators of our financial performance and/or that require significant management judgment. Our critical accounting policies include those regarding (1) revenue recognition, (2) inventory and related reserves, (3) impairment of long-lived assets, and (4) litigation. We believe that we have consistently applied judgments and estimates and such consistent application fairly depicts our financial condition and results of operations for all periods presented. During the three month period ended September 30, 2003, there were no significant changes in the assumptions underlying the judgments and estimates made by management.

Liquidity and Capital Resources

We have historically financed our operations through a combination of debt and equity financing and cash generated from operations. Total cash, cash equivalents and short-term investments as of September 30, 2003, excluding restricted cash, were $10.4 million compared to $4.5 million at March 31, 2003. Receivables increased approximately $700,000 to $6.0 million at September 30, 2003 compared to $5.3 million at March 31, 2003, primarily as a result of increased sales. Receivables days sales outstanding were 36 and 47 days as of September 30, 2003 and March 31, 2003, respectively. Days sales outstanding were lower at September 30, 2003 due to the favorable distribution of our sales during the quarter and we expect them to return to a range of 45 to 50 days in the future. Inventories increased approximately $800,000 to $4.4 million at September 30, 2003 compared to $3.6 million at March 31, 2003, as a result of higher manufacturing activity levels necessary to support our increased revenue. Capital expenditures for the six month period ended September 30, 2003, totaled approximately $106,000. Accounts payable and other accrued liabilities increased by approximately $1.8 million to $7.6 million at September 30, 2003, compared to $5.8 million at March 31, 2003. This was primarily due to the increase in trade payables of approximately $800,000 and higher accrued salary and benefits of approximately $750,000.

Operating activities provided approximately $1.2 million of cash in the six month period ended September 30, 2003 which is comprised of our net loss for the six month period of $538,000, depreciation and amortization of approximately $1.3 million, the write-offs of discontinued inventory of approximately $853,000 and the write-down of capital equipment of approximately $233,000 and the net use of cash in other current assets and liabilities of approximately $665,000.

We used $186,000 of cash in investing activities during the six month period ended September 30, 2003, which was the result of capital expenditures of approximately $106,000, an increase in restricted cash related to our long-term debt of approximately $100,000 and proceeds from the sale of capital equipment of approximately $20,000.

Net cash provided by financing activities of $4.9 million for the six month period ended September 30, 2003 was the result of net proceeds from our private placement of common stock of approximately $5.2 million, repayment of long-term debt and capital lease obligations of $717,000 and proceeds from the issuance of common stock related to employee stock compensation plans of $393,000.

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In June 2002, we entered into a Loan and Security Agreement (“Agreement”) that allows us to borrow up to a total of $5.0 million under an equipment line of credit and a revolving line of credit. The amount available under the Agreement is based on the amount of eligible equipment and accounts receivable. Under the Agreement, which includes a subjective acceleration clause, we are subject to certain financial covenants and restrictions and must maintain a compensating balance of $2.75 million with the bank in order to maintain our borrowing capability. The financial covenants relate to a required monthly minimum quick ratio and quarterly tangible net worth. Borrowings under the equipment line and the revolving line bear interest at an annual rate of prime plus 3.0% and prime plus 0.75%, respectively. As of September 30, 2003, the interest rate on the equipment line was 7.00%. Principal, in equal installments, and interest are due monthly for the term of 36 months for all borrowings made under the equipment line. Borrowings under the revolving credit line have a term of 12 months, with principal due at maturity and interest due in monthly installments. Borrowings under both lines are collateralized by substantially all of our assets. As of September 30, 2003, $2.2 million remained outstanding on the equipment line of credit and $2.8 million was available under the revolving line of credit. On July 31, 2003, we entered into an agreement to modify our existing Loan and Security Agreement with Silicon Valley Bank. The modification extends the term of the agreement for one additional year to July 31, 2004 and subject to compliance with various covenants allows us to borrow an additional $250,000 under the equipment line of credit and an additional $180,000 under the working capital line of credit, still subject to a combined cap of $5.0 million. The modification also reduces the compensating balance we must maintain with the bank to $2.4 million with quarterly reductions, commencing December 31, 2003, assuming we are in full compliance with the agreement. We have been in compliance with all covenants under the Agreement during the current fiscal year although we had been out of compliance and had obtained waivers during the prior fiscal year.

Our Industrial Revenue Bonds are subject to certain financial covenants. The financial covenants associated with these bonds are requirements to maintain minimum current and quick ratios, shareholders equity, and debt coverage, and not to exceed maximum ratios of total liability to equity and long term debt to working capital. As of September 30, 2003, we were in compliance with all financial covenants, however we had previously been out of compliance with various covenants beginning on December 31, 2001. As a result, as required by our agreements, we retained a management consulting firm which made recommendations to the Trustee and ourselves as to how we could come into compliance. As a result of previously not being in compliance with the covenants, we are subject to more frequent covenant reporting requirements which remain in place for four successive quarters.

The following table summarized our contractual obligations at September 30, 2003.

	Total		Payments due by period (in thousands)
Contractual Obligations			1 year		2-3 years		4-5 years		More than 5 years
Long-Term Debt Obligations	$	9,136	$	918	$	2,363	$	575	$	5,280
Capital Lease Obligations	$	57	$	10	$	39	$	8	$	—
Operating Lease Obligations	$	993	$	245	$	739	$	9	$	—
Purchase Obligations	$	1,600	$	1,152	$	315	$	133	$	—
Total	$	11,786	$	2,325	$	3,456	$	725	$	5,280

In the future, it is possible that our liquidity could be impacted in order to resolve our two pending litigation matters and/or environmental issues arising out of the closure of our Milpitas wafer fabrication facility. At present, we do not have a reasonable basis to assess the likelihood of potential future costs. As to the two pending litigation matters, we will be better positioned to evaluate whether we are reasonably likely to incur additional expenses to satisfy any judgment or fund any settlement once discovery has proceeded further and any preliminary motions have been decided. As to the environmental issues, we will be better positioned to evaluate whether we are reasonably likely to incur additional expenses to remediate the subject property once we obtain additional core samples and evaluate the risks associated with any contamination they may show. The environmental issues and two litigation matters are discussed in more detail in the footnotes to our financial statements.

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Operating and capital requirements depend on many factors, including the levels at which we maintain revenue, margins, inventory, accounts receivable and operating expenses. We may wish to purchase additional production equipment to support a portion of the increases in plant capacity at our foundry and assembly test partners which may require additional equipment financing which we may not be able to obtain on terms we consider reasonable or may require us to use more of our cash resources than we currently have planned. In addition, we may wish to raise additional equity capital to provide us with cash reserves and to fund future growth such as to support the increased levels of receivables and inventory associated with any continued growth in revenue.

We currently anticipate that our existing cash, cash equivalents and short term investments will be sufficient to meet our anticipated cash needs for the next twelve months. However, we may need to raise additional funds through public or private equity or debt financing in order to expand our operations to the level we desire. The funds may not be available to us, or if available, we may not be able to obtain them on terms favorable to us.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

No material changes have occurred from our report on Form 10-K for the period ending March 31, 2003.

ITEM 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q and have determined that they are reasonable.

(b) Changes in Internal Control over Financial Reporting. In connection with their audit of our financial statements for the fiscal year ended March 31, 2003, our independent auditors informed us that they had noted a combination of factors which taken together constituted a material weakness in our internal controls. The material weakness included issues with our inventory costing systems and procedures, accounts payable cutoff, information systems user administration, and finance organization. Subsequent to March 31, 2003, we have instituted additional processes and procedures to improve our internal control over financial reporting including those identified by our independent auditors. As a result, we believe that we no longer have a material weakness in our internal control over financial reporting, although some key controls are manual and are consequently inefficient. We are continuing our efforts to improve and automate our financial processes and procedures.

Among these additional processes and procedures we instituted the following:

Inventory costing:

We have continued to use and make minor refinements to the manual valuation process in place during fiscal 2003 as augmented by supplemental manual cross check processes instituted during our fiscal 2003 audit. We added a parallel process using a database which enables us to validate and cross check the manual valuation process. We have retained IT consultants who are working with us to re-implement inventory costing in our manufacturing and cost accounting system software which is known as Workstream.

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Accounts payable cutoff:

Activity has been moved from our wafer fab facility in Tempe, Arizona to our Milpitas, California headquarters facility where all other finance functions are performed. We have hired a larger and more capable team to be responsible for accounts payable. We have instituted a supplemental process with our major subcontractors whereby they provide us with an electronic monthly statement of all charges during the first two days after each period end so that we can review and accrue any invoices that we have not previously received. We have implemented a more complete review process of open invoices for which goods and services have been received prior to the balance sheet date to accrue the costs in the correct period.

Information systems:

We have revised our user administration process to promptly change an individual’s access privileges when their status or requirements change. We have revised all user accounts and deactivated unused accounts and made sure that there is a responsible individual associated with all active accounts.

Finance Organization:

We have hired several key personnel in the finance organization, including our corporate controller.

There were no significant changes in the Company’s internal control over financial reporting that occurred during the period covered in this Form 10-Q which have materially affected, or are reasonably likely to materially affect, such control except to the extent that the foregoing were significant changes instituted during our second fiscal quarter, which materially affect such control.

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 we have meritorious defenses to pending litigations, (2) our expectation that we will substantially complete shipment of our end of life communications, legacy and mature product orders during our third quarters, (3) our anticipation that receivables days outstanding will increase back to their prior levels in the near terms, (4) our view that we may need to devote material sums we are unable to currently estimate in order to dispose of pending litigations or remediate our closed Milpitas wafer fab, (5) the possibility that we may wish to purchase additional production equipment to support a portion of the increase in plant capacity at our foundry and assembly test partners and, (6) our anticipation that our cash will be sufficient to meet our requirements for the next 12 months. 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 our other SEC filings, in particular our annual report on Form 10-K for fiscal 2003 ended March 31, 2003 and our Form 8-K current report filed on September 25, 2003. These risks and uncertainties also include whether our marketing and sales focus will enable us

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to penetrate our selected markets; whether those markets continue to exhibit demand for our products and whether there is price erosion in such markets, in part due to whether there is competition in such markets; whether our market focus, which has led to Motorola and Guidant each comprising more than 10% of our sales, will increase our customer concentration and leave us vulnerable to problems involving sourcing decisions of our larger customers; our ability to forecast our cash requirements and cash availability and our ability to stay in compliance with our bank credit line and bond covenants or else to obtain a waiver of non-compliance or default; the ability of our third party wafer fab vendors to meet in a timely manner our demand for high yield, high quality wafers; whether we will learn unexpected facts during litigation and whether the trier of fact will believe our witnesses who in once case may be convicted felons; whether core samples at our Milpitas site will display more contamination than expected, whether we run into production difficulties or higher than anticipated demand for our end of life products and whether once we cease manufacturing these products we will be able to reduce expenses as much as we anticipate. 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.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

There have been no material developments this past quarter to the litigation matters described in our Form 10-K annual report.

ITEM 2. Changes in Securities and Use of Proceeds

On July 30 and 31, 2003, we closed a private placement of our common stock and raised $5.5 million, with net proceeds of $5.2 million. We sold 2,444,244 shares of our no par value common stock to 9 investors at $2.25 per share and granted them five-year warrants to purchase 733,273 shares of our common stock at an exercise price of $3.00 per share which are immediately exercisable. Should we issue shares of stock to third parties at a price of less than $3.00 per share, other than certain exempt issuances such as for example to employees, then the exercise price of these warrants is decreased by a weighted average formula; however, the number of shares issuable upon their exercise does not increase in such circumstances. At the Company’s option, the warrant holders are obligated to exercise their warrants during the 30 days following notice from us that the closing price of our stock has equaled or exceeded $5.00 for 20 consecutive trading days. To the extent the warrants are not exercised during this 30-day notice period, we may, but are not obligated to, terminate the warrants upon a follow-on notice to the warrant holders.

The private placement was conducted without registration under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided by Section 4(2) of such Act and Rule 506 promulgated under such Section. We registered the resale of these shares and the shares issuable upon exercise of the warrants, with the Securities Exchange Commission (“SEC”) in an S-3 registration statement which was declared effective by the SEC on September 25, 2003. In addition to cash fees, on July 31, 2003, we issued the placement agents three-year warrants to purchase 73,326 shares of our no par value common stock at an exercise price of $3.00 per share, which are exercisable 6 months after July 31, 2003. These warrants were sold in reliance upon similar exemptions from registration and the shares underlying these warrants were included in the registration statement described above. These warrants do not contain anti-dilution protection but do contain a somewhat similar call feature to the investor warrants.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

The Company’s annual meeting of shareholders was held on August 8, 2003. At the meeting the following matters were acted upon.

Matter Acted Upon

A. Election of Directors

	Votes For	Votes Withheld
Robert V. Dickinson	13,161,758	682,359
Wade Meyercord	13,154,855	689,262
Dr. Edward C. Ross	9,459,153	4,384,964
Dr. John L. Sprague	13,130,301	713,816
David L. Wittrock	13,187,074	657,043

B. To ratify the selection of the firm Ernst & Young LLP as the independent auditors for the fiscal year ending March 31, 2004.

Votes For	13,781,418	Abstain	15,260
Votes Against	47,439	Broker Non-Votes	0

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C. To approve the amendment of the 1995 Employee Stock Option Plan, as subsequently amended, to increase from 4,115,000 to 4,745,000 the number of shares reserved for issuance thereunder.

Votes For	6,219,797	Abstain	40,922
Votes Against	857,643	Broker Non-Votes	6,725,755

D. To approve the amendment of the 1995 Employee Stock Option Plan, as subsequently amended, to extend the termination date of the plan from February 10, 2015 to August 7, 2023.

Votes For	6,235,009	Abstain	46,700
Votes Against	836,653	Broker Non-Votes	6,725,755

E. To approve the amendment of the 1995 Employee Stock Purchase Plan, as subsequently amended, to increase from 1,130,000 to 1,290,000 the number of shares reserved for issuance thereunder.

Votes For	6,699,180	Abstain	39,257
Votes Against	379,925	Broker Non-Votes	6,725,755

F. To approve the amendment of the 1995 Employee Stock Purchase Plan, as subsequently amended, to extend the termination date of the plan from February 9, 2005 to August 7, 2013.

Votes For	6,701,390	Abstain	40,297
Votes Against	376,675	Broker Non-Votes	6,725,755

ITEM 5. Other Information

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits. The following exhibits are included:

10.14	Stock and Warrant Purchase Agreement from July 2003 Private Placement
10.15	Amendment to Placement Agent Agreement
10.16	1995 Employee Stock Option Plan, as amended. Exhibit 4.1 from Registrant’s S-8 Registration Statement filed September 2, 2003, is hereby incorporated by reference.
10.17	1995 Employee Stock Purchase Plan, as amended. Exhibit 4.2 from Registrant’s S-8 Registration Statement filed September 2, 2003, is hereby incorporated by reference.
31.1	Certification of Robert V. Dickinson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of R. Gregory Miller pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.

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On July 16, 2003, the company filed a Report on Form 8-K which reported under Item 12 the issuance of a press release relating to preliminary results for its fiscal first quarter ended June 30, 2003.

On July 31, 2003, the company filed a Report on Form 8-K which reported under Item 5 the issuance of a press release relating to the Company’s equity private placement.

On September 18, 2003, the company filed a Report on Form 8-K which reported under Item 5 the issuance of a press release relating to anticipated results for its fiscal second quarter ended September 30, 2003.

On September 25, 2003, the company filed a Report on Form 8-K under item 5 to incorporate material from its S-3 Registration Statement into other past and future SEC filings.

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SIGNATURE

Pursuant to the requirements of the Securities 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, 2003	By:	/s/ Robert V. Dickinson
		Robert V. Dickinson, President and Chief Executive Officer (Principal Executive Officer)
		/s/ R. Gregory Miller
		R. Gregory Miller
		Vice President Finance and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.14

EXHIBIT 10.14

CALIFORNIA MICRO DEVICES CORPORATION

STOCK AND WARRANT PURCHASE AGREEMENT

July 28, 2003

TABLE OF CONTENTS

			Page
1.	Purchase and Sale of Stock and Warrants		1
	1.1	Sale and Issuance of Common Stock	1
	1.2	Sale and Issuance of Warrants	1
	1.3	Closing	1
2.	Representations and Warranties of the Company		2
	2.1	Corporate Existence and Power	2
	2.2	Authorization; No Contravention	2
	2.3	Governmental Authorization; Third Party Consents	3
	2.4	Binding Effect	3
	2.5	Litigation	3
	2.6	Compliance with Laws	4
	2.7	Capitalization	4
	2.8	No Default or Breach; Contractual Obligations	5
	2.9	Title to Properties	5
	2.10	Reports; Financial Statements	5
	2.11	Taxes	6
	2.12	No Material Adverse Change; Ordinary Course of Business	6
	2.13	Private Offering	7
	2.14	Labor Relations	7
	2.15	Employee Benefit Plans	7
	2.16	Liabilities	8
	2.17	Intellectual Property	8
	2.18	Potential Conflicts of Interest	10
	2.19	Trade Relations	10
	2.20	Outstanding Borrowing	10
	2.21	Broker’s, Finder’s or Similar Fees	10
	2.22	Disclosure	10
	2.23	Insurance	11
	2.24	Form S-3 Eligibility	11
3.	Representations and Warranties of the Investors		11
	3.1	Authorization	11
	3.2	Purchase Entirely for Own Account	11
	3.3	Reliance Upon Investor’s Representations	11
	3.4	Receipt of Information	11
	3.5	Investment Experience	12
	3.6	Accredited Investor	12
	3.7	Restricted Securities	12
	3.8	Legends	12
	3.9	Broker’s, Finder’s or Similar Fees	13

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4.	Registration of the Shares; Compliance with the Securities Act		13
	4.1	Registration Procedures and Expenses	13
	4.2	Transfer of Shares After Registration; Suspension	14
	4.3	Indemnification	15
	4.4	Termination of Conditions and Obligations	17
5.	Conditions of each Investor’s Obligations at Closing		18
	5.1	Representations and Warranties	18
	5.2	Performance	18
	5.3	Compliance Certificate	18
	5.4	Qualifications	18
	5.5	Opinion of Counsel	18
6.	Conditions of the Company’s Obligations at Closing		18
	6.1	Representations and Warranties	18
	6.2	Qualifications	18
7.	Miscellaneous		18
	7.1	Entire Agreement	18
	7.2	Survival	19
	7.3	Successors and Assigns	19
	7.4	Governing Law	19
	7.5	Counterparts	19
	7.6	Titles and Subtitles	19
	7.7	Notices	19
	7.8	Expenses	19
	7.9	Attorneys’ Fees	20
	7.10	Amendments and Waivers	20
	7.11	Severability	20
	7.12	Rights of the Investor	21
	7.13	Conflict of Interest Waiver	21
	7.14	Press Release/Form 8-K	21

Exhibits
Exhibit A	–	Form of Warrant
Exhibit B	–	Certificate of Subsequent Sale
Exhibit C	–	Form of Opinion of Company’s counsel
Exhibit D	–	Schedule of Exceptions

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CALIFORNIA MICRO DEVICES CORPORATION

STOCK AND WARRANT PURCHASE AGREEMENT

This Stock and Warrant Purchase Agreement (this “Agreement”) is made as of the 28^th day of July, 2003 (the “Effective Date”), by and among California Micro Devices Corporation, a California corporation (the “Company”), and each of the persons listed on the signature pages hereto (each of whom is herein referred to individually as an “Investor” and collectively as the “Investors”). The parties hereto agree as follows:

1. Purchase and Sale of Stock and Warrants.

1.1 Sale and Issuance of Common Stock Subject to the terms and conditions of this Agreement, each Investor severally (and not jointly and severally) agrees to purchase at the Closing (as defined below), and the Company agrees to issue and sell to each Investor at the Closing, that number of shares (the “Shares”) of common stock, no par value, of the Company (the “Common Stock”) set forth above such Investor’s name on the signature pages hereto at a price per Share equal to $2.25 (the “Purchase Price”), up to an aggregate of the lesser of (i) 2,444,444 Shares and (ii) that number of Shares such that the Company does not require approval of its shareholders for the transactions contemplated by this Agreement (the “Maximum”)..

1.2 Sale and Issuance of Warrants Subject to the terms and conditions of this Agreement, each Investor severally (and not jointly and severally) agrees to purchase at the Closing, and the Company agrees to issue and sell to each Investor at the Closing, a warrant to purchase that number of shares of Common Stock (the “Warrant”), equal to thirty percent (30%) of the number of Shares purchased by such Investor, substantially in the form attached hereto as Exhibit A.

1.3 Closings The purchase and sale of the Shares and Warrants (the “Closing”) shall occur in two closings, the first to occur no later than July 30, 2003 (the “First Closing”), and the second to occur no later than August 1, 2003 (the “Second Closing”). Any Investor in the Second Closing must have become a party to this Agreement prior to the end of the day on which the First Closing occurs. Except when specifically designated as the “First Closing” or the “Second Closing,” references to the “Closing,” the “Closings” or the “Closing Date” in this Agreement will refer to the First Closing and/or the Second Closing, as applicable by their context, and to those parties participating in the applicable Closing. The Closings will each occur at a place and time to be specified by the Company and Needham & Company, Inc. and Adams, Harkness & Hill, Inc. (collectively, the “Placement Agents”). Those Investors participating in each such Closing will be notified of such place and time not less than one (1) business day in advance by the Placement Agents.

(a) The First Closing. The First Closing shall be for the purchase and sale of the Company’s Common Stock and Warrants to Investor s affiliated with Special Situations Funds (“Special Situation Funds”) At the First Closing, after receipt of payment of $4,000,050, the Company shall arrange delivery to Special Situations Funds of one or more stock certificates representing 1,777,800 Shares, and one or more Warrants to purchase, in the aggregate, 533,340 shares of the Company’s Common Stock, each to be registered in the name of Special Situations Funds.

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(b) The Second Closing. The Second Closing shall be for the purchase and sale of up to the difference between the Maximum less 1,777,800 Shares and Warrants to purchase 30% of Shares sold in the Second Closing. The Investors who participate in the Second Closing shall be accredited institutional Investors who must be pre-approved by Special Situations Funds, except that no pre-approval is required for the funds affiliated with Columbus Capital, Gruber & McBaine, Kern Capital, Proximity Capital, Royce Associates, and T. Rowe Price. At the Second Closing, after receipt of payment for the number of shares listed above such Investor’s name on the signature pages attached hereto, the Company shall arrange delivery to such Investor of one or more stock certificates representing the number of Shares, and one or more Warrants, each to be registered in the name of the Investor.

(c) Preliminary Schedule of Investors. The parties acknowledge that, with the exception of Special Situations Funds, the schedule of Investors attached hereto as Schedule A is a preliminary schedule of investors. As soon as practicable after the Second Closing, the Company shall deliver to each Investor a completed Schedule A, listing each Investor and the amount of Shares and Warrants purchased by such Investor hereunder.

2. Representations and Warranties of the Company The Company hereby represents and warrants to each Investor that, as of the Effective Date, and except as disclosed in all reports, registration statements and other filings, together with any amendments thereto, filed by the Company with the Securities and Exchange Commission (the “SEC”) on or after June 30, 2003 and prior to the Effective Date (collectively, the “SEC Reports”), the Company’s press release dated July 16, 2003, and the Schedule of Exceptions attached hereto as Exhibit D, specifically identifying the relevant subparagraph, which exceptions shall be deemed to be representations and warranties as if made hereunder:

2.1 Corporate Existence and Power The Company, and each of the corporations or other entities of which the Company holds a majority of the voting power of the outstanding voting equity securities or a majority of the economic equity interest of such corporation or entity (collectively, the “Subsidiaries”) (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged; (c) is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction in which its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect on the Condition of the Company and (d) has the corporate power and authority to execute, deliver and perform its obligations under this Agreement.

2.2 Authorization; No Contravention The execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby and thereby (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the terms of the Articles of Incorporation or the By-laws; (c) do not violate, conflict with or result in any breach, default or contravention of (or with due notice or lapse of time or both would result

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in any breach, default or contravention of), or the creation of any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise) or preference, priority, right or other security interest or preferential arrangement (a “Lien”) under, any provision of any agreement, undertaking, contract, indenture, mortgage, deed of trust, or other instrument to which the Company is a party or by which its property is bound (a “Contractual Obligation”) of the Company or any law, statute, treaty, rule, regulation, right, privilege, qualification, license or franchise (a “Requirement of Law”) applicable to the Company except such violations or conflicts that would not reasonably be expected to have a material adverse effect on the Condition of the Company; and (d) do not violate any judgment, injunction, writ, award, decree or order of any nature (collectively, “Orders”) of the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, (a “Governmental Authority”) against, or binding upon, the Company or any of its Subsidiaries.

2.3 Governmental Authorization; Third Party Consents No approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other individual, firm, corporation, partnership, trust, association, joint venture, limited liability company, or other entity of any kind (a “Person”), and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Shares and Warrants) by, or enforcement against, the Company of this Agreement and the transactions contemplated hereby and thereby.

2.4 Binding Effect This Agreement has been duly executed and delivered by the Company, and this Agreement constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

2.5 Litigation There are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations (collectively, “Claims”) pending or, to the Knowledge of the Company’s executive officers (the “Knowledge”) of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Company or any of its Subsidiaries that seeks damages in an amount which is material to the Company’s operations, other than ordinary routine litigation incidental to the business of the Company nor is the Company aware that there is any basis for any of the foregoing. The foregoing includes, without limitation, Claims pending or, to the Knowledge of the Company, threatened or any basis therefor known by the Company involving the prior employment of any employee of the Company or any of its Subsidiaries, their use in connection with the business of the Company or any of its Subsidiaries of any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers. No Order has been issued by any court or other Governmental Authority against the Company or any of its Subsidiaries purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any of the other Transaction Documents.

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2.6 Compliance with Laws The Company and each of its Subsidiaries is in compliance in all material respects with all Requirements of Law and all Orders issued by any court or Governmental Authority against the Company in all respects. To the Company’s Knowledge, there are no Requirements of Law which could reasonably be expected to prohibit or restrict the Company or any of its Subsidiaries from, or otherwise materially adversely effect the Company or any of its Subsidiaries in, conducting its business in any jurisdiction in which it now conducts its business.

2.7 Capitalization

(a) The authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, of which 15,887,606 shares (the “Issued Stock”) were issued and outstanding as of June 26, 2003, and 10,000,000 shares of preferred stock, of which 400,000 have been designated as “Series A Participating Preferred Stock”, none of which was issued or outstanding as of March 31, 2003. As of June 26, 2003, 4,115,000 shares of Common Stock were reserved for issuance under the Company’s 1995 Employee Stock Option Plan, as amended, 450,000 shares of Common Stock were reserved for issuance under the Company’s 1995 Non-Employee Directors’ Stock Option Plan, as amended, and 1,130,000 shares of Common Stock were reserved for issuance under the Company’s 1995 Employee Stock Purchase Plan. As of March 31, 2003, 1,789,499 shares of Common Stock had been issued and 2,040,881 shares of Common Stock were issuable upon the exercise of stock options granted under the Company’s 1995 Employee Stock Option Plan, 93,681 shares of Common Stock were available for future grant under the Company’s 1995 Non-Employee Directors’ Stock Option Plan, and, as of June 26, 2003, 920,037 shares of Common Stock had been issued under the Company’s 1995 Employee Stock Purchase Plan. The Issued Stock represents all of the issued and outstanding shares of capital stock of the Company and all shares of Issued Stock have been duly authorized and validly issued and are fully paid and nonassessable. All of the shares of Issued Stock and other securities of the Company have been offered, issued and sold by the Company in compliance in all material respects with the Securities Act of 1933, as amended (“the Securities Act”) and applicable state securities laws. There are no contracts or other agreements relating to the issuance, sale or transfer of Issued Stock or any equity or other securities of the Company other than pursuant to the 1995 Employee Stock Option Plan, as amended; the 1995 Non-Employee Directors’ Stock Option Plan, as amended; the 1995 Employee Stock Purchase Plan, as amended; an unsigned Investment Letter proposed to Dan McCranie relating to a 7,500 share bonus offered to him and included as Issued Stock; a warrant for 59,750 shares of Common Stock held by Needham & Company, Inc.; the warrants issuable to the Placement Agents in connection with this Agreement; warrants to purchase 424,417 shares of Common Stock held by the investors in the Company’s Private Placement of November, 2002; warrants held by the Placment Agents to purchase an aggregate of 44,766 shares of Common Stock granted in connection with the Company’s 2002 private placement , and the Shares and Warrants issuable pursuant to this Agreement.

(b) The Shares and Warrants are duly authorized, and the Shares and shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”)when issued and delivered to the Purchasers after payment therefor, will be validly issued, fully paid and non-assessable, and assuming the accuracy of the representations and warranties of the Purchasers set forth in Section 3 of this Agreement, will be issued in compliance with the registration and

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qualification requirements of all applicable federal, state and foreign securities laws and will be free and clear of all other Liens. None of the issued and outstanding shares of Common Stock were issued in violation of any preemptive rights.

2.8 No Default or Breach; Contractual Obligations All of the Contractual Obligations to which the Company or any of its Subsidiaries is a party, whether written or oral, which are required by the Exchange Act to be disclosed in the SEC Reports (collectively, “Material Contractual Obligations”) are valid, subsisting, in full force and effect and binding upon the Company or its Subsidiary, as the case may be, and, to the Knowledge of the Company, the other parties thereto, and the Company or its Subsidiary, as the case may be, has paid in full or accrued all amounts due thereunder and has satisfied in full or provided for all of its liabilities and obligations thereunder, except for such amounts as are being contested by the Company in good faith. Neither the Company nor any of its Subsidiaries has received notice of a default and is not in default under, or with respect to, any Material Contractual Obligation nor, to the Knowledge of the Company, does any condition exist that with notice or lapse of time or both would constitute a default thereunder. To the Knowledge of the Company, no other party to any such Contractual Obligation is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by such other party thereunder.

2.9 Title to Properties The Company and each of its Subsidiaries has good, record and marketable title in fee simple to, or holds interests as lessee under leases in full force and effect in, all real property used in connection with its business or otherwise owned or leased by it, in each case free and clear of all Liens, except for Liens that would required to be described in the notes to the Financial Statements. The Company and each of its Subsidiaries owns and has good, valid and marketable title to all of its properties and assets used in its business or reflected as owned on the Financial Statements, in each case free and clear of all Liens, except for Liens that would required to be described in the notes to the Financial Statements.

2.10 Reports; Financial Statements (a) As of the respective dates of their filing with the Commission, the SEC Reports, complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, except as disclosed in the SEC Reports. Except as disclosed in the SEC Reports, the SEC Reports did not at the time they were filed with the Commission, or will not at the time they are filed with the Commission, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Company is not aware of any issues raised by the Commission with respect to any of the SEC Reports, other than those disclosed in the SEC Reports.

(b) Except as disclosed in the SEC Reports, the consolidated financial statements (including, in each case, any related schedules or notes thereto) contained in or incorporated by reference in the SEC Reports and any such reports, registration statements and other filings to be filed by the Company with the Commission prior to the Closing Date (the “Financial Statements”) (i) have been or will be prepared in accordance with the published rules and regulations of the Commission and GAAP consistently applied during the periods involved (except as may be indicated in the notes thereto) and (ii) fairly present or will fairly present in all

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material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations, statements of stockholders’ equity and cash flows for the periods indicated, except that any unaudited interim financial statements were or will be subject to normal and recurring year-end adjustments and may omit footnote disclosure as permitted by regulations of the Commission.

2.11 Taxes (a) The Company and each of its Subsidiaries has paid all federal, state, provincial, county, local, foreign and other taxes (the “Taxes”) which have come due and are required to be paid by it through the date hereof, and all deficiencies or other additions to Tax, interest and penalties owed by it in connection with any such Taxes, other than Taxes being disputed by the Company in good faith for which adequate reserves have been made in accordance with GAAP;

(b) The Company and each of its Subsidiaries has timely filed or caused to be filed all returns for Taxes that it is required to file on and through the date hereof (including all applicable extensions), and all such Tax returns are accurate and complete in all material respects;

(c) With respect to all Tax returns of the Company and each of its Subsidiaries, (i) there is no unassessed Tax deficiency proposed or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries and (ii) no audit is in progress with respect to any return for Taxes, no extension of time is in force with respect to any date on which any return for Taxes was or is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax;

(d) All provisions for Tax liabilities of the Company and each of its Subsidiaries have been disclosed in the Financial Statements and made in accordance with GAAP consistently applied, and all liabilities for Taxes of the Company and each of its Subsidiaries attributable to periods prior to or ending on the Closing Date have been adequately disclosed in the Financial Statements; and

(e) There are no Liens for Taxes on the assets of the Company or any of its Subsidiaries.

2.12 No Material Adverse Change; Ordinary Course of Business Since March 31, 2003, except as disclosed in or incorporated by reference in the SEC Reports, (a) there has not been any material adverse change, in the Condition of the Company, (b) neither the Company nor any of its Subsidiaries has participated in any transaction material to the Condition of the Company, including, without limitation, declaring or paying any dividend or declaring or making any distribution to its stockholders except out of the earnings of the Company or its Subsidiary, as the case may be, (c) neither the Company nor any of its subsidiaries has entered into any Material Contractual Obligation, other than in the ordinary course of business, (d) there has not occurred a material change in the accounting principles or practice of the Company or any of its Subsidiaries except as required by reason of a change in GAAP, and (e) there has not been any issuance of Company capital stock, or warrants, options or other rights to purchase Company capital stock, except for (a) options granted and shares issued under the Company stock option and purchase plans, (2) warrants promised to the Placement Agents in connection with the offering of the Shares and Warrants, and (3) the Shares and Warrants.

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2.13 Private Offering Neither the Company nor any authorized Person acting on its behalf has, in connection with the offer, sale, exchange or issuance of the Shares or Warrants, engaged in (i) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 502(c) under the Securities Act), (ii) any action involving a public offering within the meaning of Section 4(2) of the Securities Act, or (iii) any action that would require the registration under the Securities Act of the offering, sale, exchange or issuance of the Shares or Warrants pursuant to this Agreement or that would violate applicable state securities or “blue sky” laws. The Company has not made and will not prior to the Closing Date make, directly or indirectly, any offer or sale of the Shares, Warrants, or of securities of the same or similar class as the Shares or Warrants, if, as a result, the offer and sale contemplated hereby would fail to be entitled to exemption from the registration requirements of the Securities Act. As used herein, the terms “offer” and “sale” have the meanings specified in Section 2(3) of the Securities Act.

2.14 Labor Relations Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company: (a) neither the Company nor any of its Subsidiaries is engaged in any unfair labor practice; (b) there is no strike, labor dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries ; (c) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or contract; and (d) no union organizing activities are taking place. To the Knowledge of the Company, each of the officers and key employees of the Company and each of its Subsidiaries spends all, or substantially all, of his business time on the business of the Company or its Subsidiary, as the case may be. To the Knowledge of the Company, none of the employees of the Company or any of its Subsidiaries is resident in the United States in violation of any Requirement of Law.

2.15 Employee Benefit Plans (a) The SEC Reports list or describe each Plan that the Company or any of its Subsidiaries maintains or to which the Company or any of its Subsidiaries contributes (the “Company Plans”). Neither the Company nor any of its Subsidiaries has any liability under any Plans other than the Company Plans. Except as described in or incorporated by reference in the SEC Reports, neither the Company nor any Commonly Controlled Entity maintains or contributes to, or has within the preceding six years maintained or contributed to, or may have any liability with respect to any Plan subject to Title IV of ERISA or Section 412 of the Code or any “multiple employer plan” within the meaning of the Code or ERISA. Each Company Plan (and related trust, insurance contract or fund) has been established and administered in accordance with its terms, and complies in form and in operation with the applicable requirements of ERISA and the Code and other applicable Requirements of Law. All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each Company Plan.

(b) No Claim with respect to the administration or the investment of the assets of any Company Plan (other than routine claims for benefits) is pending.

(c) Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company, each Company Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified during the period since its adoption; each trust created under any such Plan is exempt from tax under Section 501(a) of the Code and has been so exempt since its creation.

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(d) No Company Plan is a welfare plan (as defined in Section (3)(l) of ERISA) that provides benefits to current or former employees beyond their retirement or other termination of service (other than coverage mandated by Section 4980A of the Code, commonly referred to as “COBRA”, the cost of which is fully paid by the current or former employee or his or her dependents).

(e) Neither the consummation of the transactions contemplated by this Agreement nor any termination of employment following such transactions will accelerate the time of the payment or vesting of, or increase the amount of, compensation due to any employee or former employee whether or not such payment would constitute an “excess parachute payment” under Section 280G of the Code.

(f) There are no unfunded obligations under any Company Plan which are not fully reflected in the Financial Statements.

(g) Except as could not reasonably be expected to have a material adverse effect on the Condition of the Company, the Company has no liability, whether absolute or contingent, including any obligations under any Company Plan, with respect to any misclassification of any person as an independent contractor rather than as an employee.

2.16 Liabilities Neither the Company nor any of its Subsidiaries has any direct or indirect obligation or liability (the “Liabilities”) which are not fully reflected or reserved against in the Financial Statements, other than Liabilities not exceeding $250,000 in the aggregate incurred since March 31, 2003 in the ordinary course of business. The Company has no Knowledge of any circumstance, condition, event or arrangement that could reasonably be expected to give rise hereafter to any Liabilities of the Company or any of its Subsidiaries that, individually or in the aggregate, could have a material adverse effect on the Condition of the Company.

2.17 Intellectual Property

(a) (i) The Company and each of its Subsidiaries is the owner of all, or has the license or right to use all, of the copyrights, patents, trade secrets, trademarks, internet assets, software and other proprietary rights (collectively, “Intellectual Property”) that are used in connection with its business as presently conducted, free and clear of all Liens except for a limited security interest of and a negative pledge agreement with Silicon Valley Bank.

(ii) None of the Intellectual Property is subject to any outstanding Order, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Knowledge of the Company, threatened, which challenges the validity, enforceability, use or ownership of the item.

(iii) The Company and each of its Subsidiaries has substantially performed all obligations imposed upon it under all Intellectual Property licenses, sublicenses, distributor agreements and other agreements under which the

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Company or any of its Subsidiaries is either a licensor, licensee or distributor, except such licenses, sublicenses and other agreements relating to off-the-shelf software which is commercially available on a retail basis and used solely on the computers of the Company or its Subsidiaries (collectively, the “IP Agreements”). The Company and each of its Subsidiaries is not, nor to the Knowledge of the Company is any other party thereto, in breach of or default thereunder in any respect, nor is there any event which with notice or lapse of time or both would constitute a default thereunder. All of the IP Agreements are valid, enforceable and in full force and effect, and will continue to be so on identical terms immediately following the Closing except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

(iv) To the Knowledge of the Company, none of the Intellectual Property currently sold or licensed by the Company or any of its Subsidiaries to any Person or used by or licensed to the Company or any of its Subsidiaries by any Person infringes upon or otherwise violates any Intellectual Property rights of others, except as could not reasonably be expected to have a material adverse effect on the Condition of the Company.

(b) No litigation is pending and no Claim has been made against the Company or any of its Subsidiaries or, to the Knowledge of the Company, is threatened, contesting the right of the Company or any of its Subsidiaries to sell or license to any Person or use the Intellectual Property presently sold or licensed to such Person or used by the Company or any of its Subsidiaries. To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Intellectual Property rights of the Company or any of its Subsidiaries.

(c) No former employer of any employee of the Company or any of its Subsidiaries has made a claim against the Company or any of its Subsidiaries or, to the Knowledge of the Company, against any other Person, that such employee or such consultant is utilizing Intellectual Property of such former employer.

(d) To the Knowledge of the Company, none of the trade secrets, wherever located, the value of which is contingent upon maintenance of confidentiality thereof, has been disclosed to any Person other than employees, representatives and agents of the Company or any of its Subsidiaries, except as required pursuant to the filing of a patent application by the Company or any of its Subsidiaries.

(e) It is not necessary for the business of the Company or any of its Subsidiaries to use any Intellectual Property owned by any director, officer, employee or consultant of the Company or any of its Subsidiaries (or persons the Company or any of its Subsidiaries presently intends to hire). To the Company’s Knowledge, at no time during the conception or reduction to practice of any of the Intellectual Property of the Company or any of its Subsidiaries was any developer, inventor or other contributor to such Intellectual Property operating under any grants from any Governmental Authority or subject to any employment agreement, invention

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assignment, nondisclosure agreement or other Contractual Obligation with any Person that could materially adversely affect the rights of the Company or any of its Subsidiaries to its Intellectual Property.

2.18 Potential Conflicts of Interest To the Knowledge of the Company based upon the officers and directors questionnaires distributed and completed in connection with the Company’s 2003 Proxy Statement, no officer, director or stockholder beneficially owning more than 5% of the outstanding shares of Common Stock of the Company, no spouse of any such officer, director or stockholder, and no affiliate (as defined in Rule 12b-2 of the Exchange Act) of any of the foregoing (a) owns, directly or indirectly, any interest in (excepting less than one percent (1%) stock holdings for investment purposes in securities of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, or customer of, or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any of its Subsidiaries use, in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or owes or has advanced any amount to, the Company, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the date hereof.

2.19 Trade Relations There exists no actual or, to the Knowledge of the Company, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Company or any of its subsidiaries, or the business of the Company or any of its subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Company or any of its subsidiaries are individually or in the aggregate material to the Condition of the Company.

2.20 Outstanding Borrowing The SEC Reports set forth the amount of all indebtedness of the Company and each of its Subsidiaries as of March 31, 2003, which, except for accounts payable incurred in the ordinary course of business has not changed materially through the Effective Date. No indebtedness is entitled to any voting rights in any matters voted upon by the holders of the Common Stock.

2.21 Broker’s, Finder’s or Similar Fees Except for fees payable and Company warrants issuable to the Placement Agents, there are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Company or any of its Subsidiaries in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries or any action taken by any such Person.

2.22 Disclosure This Agreement, the SEC Reports, the Company’s press release dated July 16, 2003, and the documents and certificates furnished to the Investors by the Company do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.

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2.23 Insurance The Company maintains insurance of the types, against such losses and in amounts and with such insurers as are customary in the Company’s industry and otherwise reasonably prudent, including, but not limited to, insurance covering all real property owned and leased by the Company against theft, damage, destruction, and other risks customarily insured by similarly situated companies.

2.24 Form S-3 Eligibility As of the date hereof, the Company meets the requirements for the use of Form S-3 for registration of resale of the Shares and Warrant Shares as contemplated herein.

3. Representations and Warranties of the Investors Each Investor hereby represents and warrants to the Company that, as of the Effective Date and solely as to such Investor:

3.1 Authorization The Investor has all requisite corporate power and authority to enter into this Agreement and that this Agreement constitutes a valid and legally binding obligation of the Investor, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the enforcement of creditors’ rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (c) to the extent the indemnification provisions contained in this Agreement may be limited by applicable federal or state securities laws.

3.2 Purchase Entirely for Own Account The Shares and Warrants to be purchased by the Investor, and the Warrant Shares which the Investor may purchase upon exercise of the Warrant (collectively the “Securities”), will be acquired for investment for the Investor’s own account, and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor is not a party to any contract, undertaking, agreement or arrangement with any person to sell, transfer or otherwise dispose of any of the Securities.

3.3 Reliance Upon Investor’s Representations The Investor understands that the issuance and sale of the Securities to it will not be registered under the Securities Act on the ground that such issuance and sale will be exempt from registration under the Securities Act pursuant to section 4(2) thereof, and that the Company’s reliance on such exemption is based on each Investor’s representations set forth herein. The Investor realizes that the basis for the exemption may not be present if, notwithstanding such representations, any Investor has in mind merely acquiring the Securities for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. Such Investor has no such present intention.

3.4 Receipt of Information The Investor has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance and sale of the Shares and Warrant and the business, properties, prospects and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this

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Agreement or the right of the Investor to rely thereon. No person other than the Company has been authorized to give any information other than the PPM or to give any representation not contained in this Agreement in connection with the Offering and, if given or made, such information or representation must not be relied upon as having been authorized by the Company.

3.5 Investment Experience The Investor is experienced in evaluating and investing in securities of companies and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Securities.

3.6 Accredited Investor The Investor is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act, for the reason indicated on the signature page of this Agreement.

3.7 Restricted Securities The Investor understands that the Securities may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, the Investor is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 is the availability of current information to the public about the Company.

3.8 Legends To the extent applicable, each certificate or other document evidencing any of the Securities shall be endorsed with the legends set forth below, and the Investor covenants that, except to the extent such restrictions are waived by the Company, the Investor shall not transfer the shares represented by any such certificate without complying with the restrictions on transfer described in the legends endorsed on such certificate:

(a) The following legend under the Act:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR ELSE UPON AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO CALIFORNIA MICRO DEVICES CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT OR ANOTHER APPLICABLE EXEMPTION.”

(b) Such other legends as may be required under state securities laws.

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3.9 Broker’s, Finder’s or Similar Fees There are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Investor in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Investor or any action taken by any such Person.

4. Registration of the Shares; Compliance with the Securities Act.

4.1 Registration Procedures and Expenses The Company hereby agrees that it shall:

(a) subject to receipt of necessary information from the Investors, prepare and file with the SEC on or before the date one month after the Closing Date a registration statement on Form S-3 (the “Registration Statement”) to enable the resale of the Shares and the Warrant Shares by the Investors and use reasonable best efforts to respond to comments from the SEC promptly and cause such Registration Statement to be declared effective as promptly as practicable after filing and to remain continuously effective until the earlier of (i) the second anniversary of the Closing, or (ii) such time as all Shares purchased by the Investors pursuant to this Agreement have been sold thereunder (the “Registration Period”). For each full calendar month after the First Closing that the Registration Statement is not filed with the SEC, each Investor shall be paid an amount in cash equal to one and one-half percent (1.5%) of the product of the Purchase Price times the number of Shares originally acquired by such Investor. For each full calendar month after the First Closing, starting with three (3) months after the First Closing and ending with twenty-four (24) months after the First Closing, that the Registration Statement is not declared effective by the SEC, each Investor shall be paid an amount, in cash equal to one and one-half percent (1.5%) of the product of the Purchase Price times the number of Shares originally acquired by such Investor. Each such payment shall be made within fifteen days of when the payment obligation accrued.

(b) prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective until the end of the Registration Period;

(c) notify Investors promptly upon the effectiveness of the Registration Statement and furnish to the Investors with respect to the shares of Common Stock registered under the Registration Statement such reasonable number of copies of the Registration Statement, prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares or Warrant Shares by the Investor;

(d) file documents required of the Company for normal blue sky clearance in states specified in writing by the Investor, provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

(e) use its reasonable best efforts to cause the Shares and Warrant Shares to be listed on Nasdaq in connection with the filing of the Registration Statement under Section 4.1(a);

(f) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 4.1 and the registration of the Shares and the Warrant Shares pursuant to the

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Registration Statement other than fees and expenses, if any, of counsel or other advisers to the Investors or underwriting discounts, brokerage fees and commissions incurred by the Investors, if any.

(g) provide that all Shares and Warrant Shares covered by the Registration Statement will be listed on the Nasdaq National Market or other securities market on which the Company’s Common Stock is then listed or traded.

It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 4.1 that the Investor shall furnish to the Company such information regarding itself, the shares of Common Stock to be sold by the Investor, and the intended method of disposition of such securities as shall be required to effect the registration of the Shares and the Warrant Shares.

4.2 Transfer of Shares After Registration; Suspension

(a) Subject to Section 4.4, the Investors agree that they will not offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any right (each, a “Disposition”) with respect to the Securities that would constitute a sale within the meaning of the Securities Act except pursuant to the Registration Statement referred to in Section 4.1, and that they will promptly notify the Company of any changes in the information set forth in the Registration Statement after it is prepared regarding the Investor or its plan of distribution.

(b) In addition to any suspension rights under paragraph (c) below, the Company may, upon the happening of any event, that, in the good faith judgment of Company’s board of directors upon the opinion of counsel, renders it advisable to suspend use of the prospectus for no more than sixty (60) days in the aggregate in any twelve (12) month period of time due to pending corporate developments, public filings with the SEC or similar events, suspend use of the prospectus on written notice to each Investor, in which case each Investor shall discontinue disposition of Shares or the Warrant Shares covered by the Registration Statement or prospectus until copies of a supplemented or amended prospectus are distributed to the Investors or until the Investors are advised in writing by the Company that the use of the applicable prospectus may be resumed.

(c) Subject to paragraph (d) below, in the event of: (i) any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares or the Warrant Shares for sale in any jurisdiction or the initiation of any proceeding for such purpose, (iv) any event or circumstance which necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein

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not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, then the Company shall deliver a certificate in writing to the Investors (the “Suspension Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investors will refrain from selling any Shares or Warrant Shares pursuant to the Registration Statement (a “Suspension”) until the Investors’ receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its reasonable best efforts to cause the use of the prospectus so suspended to be resumed as soon as possible within twenty (20) business days after delivery of a Suspension Notice to the Investors. In addition to and without limiting any other remedies (including without limitation at law or equity), available to the Investors, the Investors shall be entitled to specific performance in the event the Company fails to comply with the provisions of this Section 4.2(c).

(d) Provided that a Suspension is not then in effect, the Investors may sell Shares or Warrant Shares under the Registration Statement, provided that the selling Investor arranges for delivery of a current prospectus to the transferee of such Shares or Warrant Shares.

(e) In the event of a sale of Shares or Warrant Shares by an Investor, such Investor must also deliver to the Company’s transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit B, so that ownership of the Shares or Warrant Shares may be properly transferred.

(f) For so long as the Company will have a class of securities registered under Section 12(b) or Section 12(g) of the Exchange Act, the Company covenants that it will file, on a timely basis, any reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder and keep all such reports and public information current to the extent required by Rule 144 under the Securities Act for a period of two (2) years after the Closing.

4.3 Indemnification For the purpose of this Section 4.3 only, (i) the term “Registration Statement” shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 4.1(a); and (ii) the term “untrue statement” shall include any untrue statement or any omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(a) The Company agrees to indemnify and hold harmless each Investor (and each person, if any, who controls such Investor within the meaning of section 15 of the Securities Act) from and against any losses, claims, damages or liabilities to which such Investor (or such person, if any, who controls such Investor within the meaning of section 15 of the Securities Act) may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based

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upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or (ii) any failure by the Company to fulfill any undertaking included in the Registration Statement, and the Company will reimburse such Investor (and each person, if any, who controls such Investor within the meaning of section 15 of the Securities Act) for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Investor specifically for use in preparation of the Registration Statement or the failure of such Investor to comply with its covenants and agreements contained in Section 3 or 4.2 hereof or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Investor prior to the pertinent sale or sales by the Investor.

(b) Each Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) and each other Investor from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) or other Investor may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon a breach of its covenants and agreements contained in Section 3 or 4.2 hereof or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Investor prior to the pertinent sale or sales by the Investor or any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement if such untrue statement was made in reliance upon and in conformity with information furnished by or on behalf of the indemnifying Investor in writing specifically for use in preparation of the Registration Statement, and the indemnifying Investor will reimburse the Company (or such officer, director or controlling person) or other Investor, as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; providing further that, the Investor’s obligations to indemnify under this subsection (b) shall be limited to the amount received by the Investor from the sale of the Investor’s Shares hereunder.

(c) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 4.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 4.3 (except to the extent that such omission materially and adversely affects the indemnifying party’s ability to defend such action) or from any liability otherwise than under this Section 4.3. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its

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election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.

(d) If the indemnification provided for in this Section 4.3 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investors on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or an Investor on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investors agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Investors were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Investor shall be required to contribute any amount in excess of the amount by which the gross amount received by the Investor from the sale of the Shares to which such loss relates exceeds the amount of any damages which such Investor has otherwise been required to pay by reason of such untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Investors’ obligations in this subsection to contribute are several in proportion to their sales of Shares to which such loss relates and not joint.

4.4 Termination of Conditions and Obligations The conditions precedent imposed by Section 4 upon the transferability of the Shares and the shares of Common Stock underlying the Warrants shall cease and terminate as to any particular number of the shares of Common Stock when such shares shall have been effectively registered under the Securities Act and sold or otherwise disposed of in accordance with the intended method of disposition set forth in the Registration Statement covering such shares or at such time as an opinion of counsel or other evidence reasonably satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act.

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5. Conditions of each Investor’s Obligations at Closing The obligations of each Investor under subparagraph 1.1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto:

5.1 Representations and Warranties The representations and warranties of the Company contained in Section 2 shall be true and correct on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

5.2 Performance The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with on or before the Closing.

5.3 Compliance Certificate The Chief Executive Officer of the Company shall have delivered to the Investor at the Closing a certificate certifying that the conditions specified in Sections 5.1, 5.2 and 5.4 have been fulfilled.

5.4 Qualifications All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. The Company shall have obtained all necessary blue sky permits and qualifications, or have the availability of exemptions therefrom, required by any state for the offer and sale of the Shares and the Warrants.

5.5 Opinion of Counsel Investors shall have received the opinion of Pillsbury Winthrop LLP, counsel to the Company, in substantially the form of Exhibit C, attached hereto.

6. Conditions of the Company’s Obligations at Closing The obligations of the Company to each Investor under this Agreement are subject to the fulfillment (or waiver) on or before the Closing of each of the following conditions by the Investor:

6.1 Representations and Warranties The representations and warranties of such Investor contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

6.2 Qualifications All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing.

7. Miscellaneous

7.1 Entire Agreement This Agreement and the documents referred to herein and all Schedules and Exhibits thereto constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

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7.2 Survival The parties agree that, regardless of any investigation made by the parties, the warranties, representations and covenants of the Company and the Investors contained in or made pursuant to this Agreement (including, without limitation, the provisions of Section 4) shall survive the execution and delivery of this Agreement and the Closing.

7.3 Successors and Assigns Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including permitted transferees of any Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.4 Governing Law This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.

7.5 Counterparts This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7.6 Titles and Subtitles The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.7 Notices Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed given and effective when delivered personally, by telex or telecopier, or by overnight express at the following addresses or to such other address as such party may designate by written notice to the other party in accordance with the provisions of this Section:

If to the Company:	California Micro Devices Corporation 430 N. McCarthy Blvd, No. 100 Milpitas, CA 95035-5112 Attention: Robert V. Dickinson Fax: (408) 934-2990
With a copy to:	Pillsbury Winthrop LLP 2550 Hanover Street Palo Alto, CA 94304 Attention: Stephen M. Wurzburg Fax: (650) 233-4545
If to an Investor:	See the signature pages hereto

7.8 Expenses Except as set forth herein, each party will bear its own expenses related to this Agreement and the transactions contemplated therein. The Company shall pay the

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reasonable fees and expenses of counsel to Special Situations Funds not to exceed $10,000; provided that if there is no First Closing, then such payment shall only be made as required by the July 24, 2003, Term Sheet. Such expenses shall be paid not later than two (2) business days after receipt of an invoice after the First Closing. The Company shall reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the Investors, including without limitation reimbursement of attorneys’ fees and disbursements, in connection with any amendment, modification or waiver of this Agreement.

7.9 Attorneys’ Fees If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be entitled.

7.10 Amendments and Waivers Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than a majority of the Shares sold hereunder and the shares, if any, sold under similar agreements proximate in time to the Closing, provided that this Agreement and all agreements under which such other shares were sold under shall be amended identically or the observance of an identical term waived identically, as the case may be.

7.11 Severability If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

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7.12 Rights of the Investor Each Investor shall have the absolute right to exercise or refrain from exercising any right or rights that such holder may have by reason of this Agreement or any Shares or Warrants, including without limitation the right to consent to the waiver of any obligation of the Company under this Agreement and to enter into an agreement with the Company for the purpose of modifying this Agreement or any agreement effecting any such modification, and such Investor shall not incur any liability to any other Investor with respect to exercising or refraining from exercising any such right or rights.

7.13 Conflict of Interest Waiver Each party to this Agreement acknowledges that Pillsbury Winthrop LLP (“PW”), counsel for the Company, may have in the past and may continue in the future to perform legal services for certain of the Investors in matters unrelated to the transactions described in this Agreement, including the representation of such Investors in formation of other companies, venture capital financings, and other matters. Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; (b) acknowledges that PW represented the Company in the transaction contemplated by this Agreement and has not represented any individual Investor or any individual stockholder or employee of the Company in connection with such transaction, and (c) gives its informed consent to PW’s representation of certain of the Investors in such unrelated matters and to PW’s representation of the Company in connection with this Agreement and the transactions contemplated hereby and in other matters.

7.14 Press Release/Form 8-K The Company agrees to issue a press release regarding the First Closing no later than the opening of the stock market on August 1, 2003, and to issue a press release concerning the Second Closing no later than the opening of the stock market on the first business day after the Second Closing and to file a Form 8-K with the SEC prior to the closing of the stock market on the first business day after the press release, each describing the critical features of the sale of the Shares and Warrants under this Agreement, with the press release issued for the First Closing, if it does not also cover the Second Closing, to comply with SEC Rule 135c.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

CALIFORNIA MICRO DEVICES CORPORATION
By
	Robert V. Dickinson
	President and Chief Executive Officer

INVESTOR SIGNATURE PAGES TO FOLLOW

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SIGNATURE PAGE TO

STOCK AND WARRANT PURCHASE AGREEMENT

DATED AS OF JULY 28, 2003

BY AND AMONG

CALIFORNIA MICRO DEVICES CORPORATION

AND EACH INVESTOR NAMED THEREIN

The undersigned hereby executes and delivers the California Micro Devices Corporation Stock and Warrant Purchase Agreement (the “Agreement”) to which this Signature Page is attached effective as of the date of the Agreement, which Agreement and Signature Page, together with all counterparts of such signature pages of the other Investors named in such Agreement, shall constitute one and the same document in accordance with the terms of such Agreement.

Number of Shares:
Print Name of Investor
By
	Signature
Address:
Taxpayer Identification Number :

Investor is an “accredited investor” by reason of (check one):

Investor is an entity with gross assets in excess of $5,000,000.

Investor is an individual with a net worth in excess of $1,000,000

Investor is an individual and an Officer or Director of the Company

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SCHEDULE A

INVESTORS

FIRST CLOSING

Investor Name	Number of Shares Purchased from Company	Investment In Dollars
Special Situations Fund III, L.P.	933,400	$	2,100,150.00
Special Situations Private Equity Fund, L.P.	533,300		1,199,925.00
Special Situations Cayman Fund, L.P.	311,100		699,975.00
Jon D. Gruber TTEE FBO Jonathan Wyatt Gruber Trust D+D 12/30/75	11,111		24,999.75
Jon D. Gruber TTEE FBO Lindsay DeRoy Gruber Trust D+D 12/29/76	11,111		24,999.75
Jon D. Gruber & Linda W. Gruber	44,444		99,999.00
Gruber & McBaine International	111,111		249,999.75
Lagunitas Partners, LP	266,667		600,000.75
TOTAL	2,222,244	$	5,000,049.00
SECOND CLOSING
Investor Name	Number of Shares Purchased from Company	Investment In Dollars
The Millrace Fund	222,000	$	499,500
TOTAL	222,000	$	499,500
GRAND TOTAL	2,444,244	$	5,499,549

SA-1

EXHIBIT A

FORM OF WARRANT

A-1

THIS WARRANT AND THE SHARES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

No. W-        

WARRANT TO PURCHASE COMMON STOCK

OF

CALIFORNIA MICRO DEVICES CORPORATION

This certifies that, for value received as provided under a Stock and Warrant Purchase Agreement dated July     , 2003 (the “Purchase Agreement”),                                  (“Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from California Micro Devices Corporation, a California corporation (the “Company”), in whole or in part, such number of fully paid and nonassessable shares (the “Warrant Shares”) of no par value common stock of the Company (“Common Stock”) equal to three-tenths (0.30) of the number of shares of Common Stock purchased by Holder pursuant to the Purchase Agreement (the “Warrant Shares”) at the Exercise Price (as defined in Section 2). The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below and all references to “Warrant Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments. The term “Warrant” as used herein shall mean this Warrant, and any warrants delivered in substitution or exchange therefor as provided herein.

1. Term of Warrant. Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the term commencing on the date hereof and ending at 5:00 p.m., Pacific standard time, on the fifth anniversary of issue, and shall be void thereafter (the “Exercise Period”). This Warrant shall expire prior to the end of Exercise Period if and when it has been exercised in full.

2. Exercise Price. The Exercise Price shall be $3.00.

3. Exercise of Warrant. This Warrant may be exercised by the Holder only by the surrender of this Warrant to the Company, with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder appearing on the books of the Company) during the Exercise Period, and the delivery of payment to the Company, for the account of the Company, by cash, wire transfer of immediately available funds to a bank account specified by the Company, or by certified or bank cashier’s check, of the Exercise Price for the number of Warrant Shares specified in the Exercise Notice in lawful money of the United States of America.

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The Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for the Warrant Shares as aforesaid. A stock certificate or certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Holder as promptly as practicable, and in any event within ten (10) days, thereafter. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the stock certificate or certificates, deliver to the Holder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant. No adjustments shall be made on Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable to holders of record of Common Stock prior to the date as of which the Holder shall be deemed to be the record holder of such Warrant Shares. The Company shall pay all expenses, taxes, and other charges payable in connection with the preparation, execution, and delivery of stock certificates pursuant to this Section 3.

4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

6. Rights of Shareholder. Subject to Sections 9 and 11 of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance of assets, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein.

7. Transfer of Warrant.

A. Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this

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Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

B. Warrant Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(A) above, issuing the Warrant Shares or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent.

C. Transferability and Nonnegotiability of Warrant. This Warrant may be transferred to “affiliates” of the Holder, as defined in Rule 405, as promulgated by the Securities and Exchange Commission (the “SEC”) and, with the prior written consent of the Company, to other persons, provided that such transferee agrees to be bound by the other restrictions on transfer applicable to the Warrant Shares. Notwithstanding the foregoing, this Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). However, no investment representation letter or opinion of counsel shall be required for any transfer of this Warrant (or any portion thereof) or any shares of Common Stock issued upon exercise hereof in compliance with Rule 144(k) and no opinion of counsel shall be required for any transfer of this Warrant (or any portion thereof) in compliance with Rule 144A; provided that in each of the foregoing cases the transferee agrees in writing to be subject to the terms of this Section 7(C). Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the “Act”), title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

D. Exchange of Warrant Upon a Transfer. On surrender of this Warrant for transfer, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers and contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

E. Compliance with Securities Laws.

i. The Holder of this Warrant, by acceptance hereof, represents that it is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Securities Act of 1933, as amended, as presently in effect.

ii. The Holder acknowledges that this Warrant is being, and the Warrant Shares would be, acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise

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dispose of this Warrant or any Warrant Shares except under circumstances that will not result in a violation of the Act or any applicable state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Warrant Shares are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

iii. This Warrant and Warrant Shares shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

THIS WARRANT AND THE SHARES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

The Company agrees to remove promptly, upon the request of the holder of this Warrant or the Warrant Shares, the legend set forth in Section 7(E)(iii) above from the documents/certificates for such securities upon full compliance with this Agreement and either Rule 144(k) or after a sale in the public market in compliance with Rule 144.

8. Reservation of Stock. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares and, from time to time, will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock for the issuance of the Warrant Shares. The Company further covenants that all Warrant Shares, upon exercise of this Warrant and payment of the Exercise Price, all as set forth herein, will be free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein).

9. Notices.

A. In case:

i. the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

ii. of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into

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another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

iii. of any voluntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed no later than the time similar notice is mailed to the holders of Company Common Stock.

B. All such notices, advices and communications as required by the terms of this Warrant shall be made and be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of next day courier service such as Federal Express, one business day after it is delivered to the courier service for US addresses and two business days for foreign addresses, and (iii) in the case of mailing by certified mail, on the third (3rd) business day following the date of such mailing if sent to a U.S. address and on the tenth (10th) business day following the date of such mailing if sent to an address outside the U.S.

10. Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company or the Holder of the Warrant against which enforcement of such change, waiver, discharge or termination is sought. An amendment of rights, preferences, or privileges of the Common Stock, including a change in the par value of the Common Stock; an event described in Section 9A or 11A of this Warrant; or any other like action shall not be treated as an amendment of this Warrant.

11. Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows:

A. Reclassification, etc. If the Company, at any time while this Warrant, or any portion thereof, remains outstanding and unexpired, by reorganization or reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reorganization or reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 11.

B. Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a

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different number of securities of the same class, then (i) in the case of a split or subdivision, the Exercise Price for such securities shall be proportionately decreased and the securities issuable upon exercise of this Warrant shall be proportionately increased, and (ii) in the case of a combination, the Exercise Price for such securities shall be proportionately increased and the securities issuable upon exercise of this Warrant shall be proportionately decreased.

C. Adjustments for Distributions in Stock or Other Securities or Property. If while this Warrant, or any portion hereof, remains outstanding and unexpired the holders of the securities as to which purchase rights under this Warrant exist at the time shall have received, or, on or after the record date fixed for the determination of eligible Shareholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend or otherwise, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 11.

D. Mergers, Consolidation, or Asset Sale. If any merger or consolidation of the Company with or into another corporation, or the sale of substantially all of its assets to another corporation, shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive common stock, other securities, or assets with respect to or in exchange for shares of Common Stock, then, as a condition to such merger, consolidation, or asset sale, adequate provision shall be made whereby the Holder of Warrants shall thereafter have the right to receive such shares of common stock, other securities, or assets upon the exercise of the Warrant as though the Holder had exercised the Warrant in full immediately prior to such merger, consolidation, or asset sale and received Shares which were thereafter effected by the merger, consolidation, or asset sale and the resulting shares of common stock, other securities, or assets were thereafter held and effected by any subsequent events. Notwithstanding the foregoing, if only cash, assets, and/or promissory notes not convertible into equity are issued in such merger, consolidation, or asset sale, then the Company may cause the Warrants to terminate upon the consummation of such merger, consolidation, or asset sale, provided that the Company has provided the Holder with at least fifteen (15) business days notice of such merger, consolidation, or asset sale.

E. Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 11, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request, at any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant.

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F. No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. An event described above in this subsections A, B, C, and D of this Section 11 for which appropriate adjustment is made or an event described in Section 9A of which the Holder is given timely notice pursuant to Section 9, shall not be deemed under any circumstance to be an impairment of this Warrant.

12. Adjustments. Subject and pursuant to the provisions of this Section 12, the Warrant Price, but not the number of Warrant Shares subject to this Warrant, shall be subject to adjustment from time to time as set forth hereinafter.

A. For the term of this Warrant, in addition to the provisions contained above, the Warrant Price shall be subject to adjustment as provided below. An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

B. Except as provided in subsection (C) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (B)(i) through (B)(vii) hereof, deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a “Trigger Issuance”) the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to a price determined as follows:

Adjusted Warrant Price =	(A x B) + D
	A+C

where

“A” equals the number of shares of Common Stock outstanding, including Additional Shares of Common Stock (as defined below) deemed to be issued hereunder, immediately preceding such Trigger Issuance;

“B” equals the Warrant Price in effect immediately preceding such Trigger Issuance;

“C” equals the number of Additional Shares of Common Stock issued or deemed issued hereunder as a result of the Trigger Issuance; and

“D” equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance provided, however, that in no event shall the Warrant Price after giving effect to such Trigger Issuance be greater than the Warrant Price in effect prior to such Trigger Issuance.

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For purposes of this subsection (B), “Additional Shares of Common Stock” shall mean all shares of Common Stock deemed to be issued pursuant to this subsection (B), other than Excluded Issuances (as defined in subsection (C) hereof).

For purposes of this subsection (B), the following subsections (B)(i) to (B)(vii) shall also be applicable:

i. Issuance of Rights or Options. In case at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called “Options” and such convertible or exchangeable stock or securities being called “Convertible Securities”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (a) the sum (which sum shall constitute the applicable consideration) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Warrant Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price. Except as otherwise provided in subsection 12 (B)(iii), no adjustment of the Warrant Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.

ii. Issuance of Convertible Securities. In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (a) the sum (which sum shall constitute the applicable consideration) of (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (b) the total number of shares of Common Stock issuable upon the conversion or exchange of all such

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Convertible Securities) shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price, provided that (a) except as otherwise provided in subsection 12 (B)(iii), no adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Warrant Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Warrant Price have been made pursuant to the other provisions of subsection 12 (B).

iii. Change in Option Price or Conversion Rate. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 12 (B)(i) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 12 (B)(i) or 12 (B)(ii), or the rate at which Convertible Securities referred to in subsections 12 (B)(i) or 12 (B)(ii) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted (upwards or downwards) to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the termination of any Option for which any adjustment was made pursuant to this subsection 12 (B) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 12 (B) (including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the Company), the Warrant Price then in effect hereunder shall forthwith be changed to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued.

iv. Stock Dividends. Subject to the provisions of this Section 12 (B), in case the Company shall declare a dividend or make any other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or Convertible Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.

v. Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other

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than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or Convertible Securities (the “Additional Rights”) are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determined using the Black-Scholes option pricing model or another method mutually agreed to by the Company and the Warrantholder). The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder as to the fair market value of the Additional Rights. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value of the Additional Rights, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Warrantholder.

vi. Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

vii. Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection 12 (B).

C. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Warrant Price in the case of the issuance of (a) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (b) shares of Common Stock issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, (c) securities issued pursuant to the Stock and Warrant Purchase Agreements dated as of July 28, 2003, among the Company and the Investors named therein and securities issued upon the

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exercise or conversion of those securities, (d) shares of Common Stock issued, deemed issued, or issuable by reason of a dividend, stock split or other distribution on shares of Common Stock (but only to the extent that such a dividend, split or distribution results in an adjustment in the Warrant Price pursuant to the other provisions of this Warrant), (e) Common Stock issued or deemed issued to banks or leasing companies in connection with working capital or equipment lines of credit/financing, and (f) Common Stock issued or deemed issued as the payment of the purchase price of an acquisition of another entity (collectively, “Excluded Issuances”).

13. Miscellaneous.

A. This Warrant shall be governed by the internal laws of the State of California as applied to agreements entered into in the State of California by and among residents of the State of California, without reference to the conflicts of laws provisions therein.

B. In the event of a dispute with regard to the interpretation of this Warrant, the prevailing party may collect the cost of attorney’s fees, litigation expenses or such other expenses as may be incurred in the enforcement of the prevailing party’s rights hereunder.

C. This Warrant shall be exercisable as provided for herein, except that in the event that the expiration date of this Warrant shall fall on a Saturday, Sunday and or United States federally recognized Holiday, the expiration date for this Warrant shall be extended to 5:00 p.m. Pacific standard time on the business day following such Saturday, Sunday or recognized Holiday.

D. This Warrant and any document or agreements executed by the parties pursuant to this Warrant constitute the full and complete understanding of the parties hereto with respect to the subject matter hereof and supersede all previous agreements or understandings, written or oral, between the parties with respect thereto.

14. Call Provision. Notwithstanding any other provision contained herein to the contrary, in the event that the closing price of a share of Common Stock as traded on the Nasdaq (or such other exchange or stock market on which the Common Stock may then be listed or quoted) equals or exceeds $5.00 (as appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof) for twenty (20) consecutive trading days and all of the Warrant Shares have been registered for resale by Holder pursuant to a Registration Statement (as defined in Section 4.1 of the Purchase Agreement) which has been declared effective by the SEC and which is available for sales of the Warrant Shares by Holder during the “Notice Period” as defined below, the Company, upon thirty (30) days prior written notice (such thirty (30) days comprising the “Notice Period”) given to the Holder during the one-month period immediately following such twenty (20) trading day period, may demand that the Holder exercise this Warrant and purchase all of the Warrant Shares prior to the expiration of the Notice Period, and the Holder will be obligated to do so. To the extent such exercise is not effected, the Company may, but is not required to, elect to have this Warrant expire and terminate effective at the expiration of the Notice Period.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-11-

In witness whereof, California Micro Devices Corporation has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: July     , 2003

COMPANY
CALIFORNIA MICRO DEVICES CORPORATION
By
	Robert V. Dickinson, President

-12-

NOTICE OF EXERCISE

To: California Micro Devices Corporation

The undersigned hereby elects to purchase                      shares of Common Stock of California Micro Devices Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.

In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon conversion thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

(Name)

(Name)

Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

(Name)

(Date) (Signature)

-13-

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

Name of Assignee Address Number of Shares

and does hereby irrevocably constitute and appoint Attorney                                              to make such transfer on the books of California Micro Devices Corporation, maintained for the purpose, with full power of substitution in the premises.

If the Assignee is an “affiliate”, as defined in Rule 405, promulgated by the SEC, please explain the basis for such determination:                                                                                                                                                                                                                                                           .

The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws. Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.

Dated:                         .

Signature of Holder

-14-

EXHIBIT B

CALIFORNIA MICRO DEVICES CORPORATION

CERTIFICATE OF SUBSEQUENT SALE

RE: Sale of Shares of Common Stock of California Micro Devices Corporation (the “Company”) pursuant to the Company’s Prospectus dated                             , 2003 (the “Prospectus”)

Dear Sir/Madam:

The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of Selling Stockholders in the Prospectus, that the undersigned has sold the Shares pursuant to the Prospectus and in a manner described under the caption “Plan of Distribution” in the Prospectus and that such sale complies with all applicable securities laws, including, without limitation, the Prospectus delivery requirements of the Securities Act of 1933, as amended.

Selling Stockholder (the beneficial owner):                                                                                                       

Record Holder (e.g., if held in name of nominee):                                                                                               

Restricted Stock Certificate No.(s):                                                                                                                       

Number of Shares Sold:                                                                                                                                            

Date of Sale:                                                                                                                                                            

In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a stop transfer on your records with regard to such certificate.

                                                                                                                                       Very truly yours,

                                                                                                                                       By                                                              

                                                                                                                                       Print Name                                              

                                                                                                                                       Title                                                              

Dated:                     

cc: Pillsbury Winthrop LLP

2550 Hanover Street

Palo Alto, California 94304

Attn: Stephen M. Wurzburg

B-1

EXHIBIT C

OPINIONS OF COMPANY COUNSEL

C-1

Pillsbury Winthrop LLP

2550 HANOVER STREET PALO ALTO, CA 94304-1115 650.233.4500 F: 650.233.4545

July 31, 2003

To the Investors Named

on Schedule A to the

Stock and Warrant Purchase Agreement

Referred to Below:

Re: California Micro Devices Stock and Warrant Purchase Agreement

Ladies and Gentlemen:

We have acted as counsel for California Micro Devices Corporation, a California corporation (the “Company”), in connection with the Stock and Warrant Purchase Agreement dated as of July 31, 2003 (the “Agreement”), by and between the Company and each of you. This letter is provided to you in satisfaction of the requirements set forth in Section 5.5 of the Agreement. The Agreement provides, among other things, for the sale and purchase of shares (the “Shares”) of the Company’s no par value Common Stock (the “Common Stock”) and warrants (the “Warrants”) to purchase shares of Common Stock (the “Warrant Shares”). Terms not otherwise defined herein have the meanings given them in the Agreement.

In connection with the foregoing, we have examined the Agreement and its exhibits, including the form of Warrant, records of proceedings of the directors and shareholders of the Company, the Amended and Restated Articles of Incorporation, the Bylaws of the Company, certificates of officers of the Company and public officials, and such other documentation as we have deemed necessary or advisable in order to render the opinions expressed herein.

Based upon the foregoing and subject to the assumptions, qualifications, limitations and exceptions set forth below, it is our opinion that:

1. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of California and has the requisite corporate power to own its property and assets and to conduct its business as it is currently being conducted.

2. The Company has all requisite corporate power and authority to execute and deliver the Agreement and to perform its obligations under the terms of such

To the Investors Named on Schedule A

of the Stock and Warrant Purchase Agreement

July 31, 2003

Page 2

Agreement. The Agreement has been duly and validly authorized, executed and delivered by the Company and constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its respective terms, except insofar as indemnification and contribution provisions contained therein may be limited by applicable law or the application of principles of public policy.

3. The execution and delivery by the Company of the Agreement and the performance by the Company of its obligations thereunder and the issuance of the Shares and Warrants pursuant to the Agreement do not violate the Company’s Amended and Restated Articles of Incorporation or Bylaws, and do not (i) violate or contravene any governmental statute, rule or regulation applicable to the Company that in our experience is generally applicable to transactions of the type contemplated by the Agreement (without our having made any investigation concerning the applicability of any other statue, rule or regulation) or (ii) violate or contravene any order, writ, judgment, injunction, decree, determination or award known to us that has been entered against the Company.

4. We are not aware of any action, suit, proceeding or investigation pending against the Company before any court or administrative agency, or that the Company has received any written threat thereof, that questions the validity of the Agreement.

5. No approval, authorization or other action by any federal or state governmental authority or filing (other than filings solely for information purposes or to obtain action that is not the subject of governmental discretion) with any such authority that has not been obtained or accomplished is required in connection with the execution, delivery and performance by the Company of the Agreement.

6. The Shares and Warrants have been duly authorized and, the Shares and Warrant Shares, upon issuance and delivery against payment therefor in accordance with the terms of the Agreement, will be validly issued, fully paid and nonassessable.

7. Based in part upon your representations in Section 3 of the Agreement, the offer and sale of the Shares and Warrants pursuant to the terms of the Agreement are exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, and the offer and sale of the Shares, Warrants, and Warrant Shares pursuant to the terms of the Agreement are exempt from the qualification requirements of the California Corporate Securities Law of 1968, as amended.

To the Investors Named on Schedule A

of the Stock and Warrant Purchase Agreement

July 31, 2003

Page 3

The foregoing opinion is subject to such matters as are set forth in the Agreement and the following assumptions, qualifications, limitations and exceptions:

(a) We have assumed the genuineness of all signatures, the authenticity and completeness of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as photostatic or telecopied originals, the legal capacity of all natural persons, and as to documents executed by entities other than the Company, that each such entity has complied with any applicable requirement to file tax returns and pay taxes under California Franchise Tax law and had the power to enter into and perform its obligations under such documents, and that such documents have been duly authorized, executed and delivered by, and are binding upon and enforceable against such entities. We have also assumed that the representations and warranties made by the Company in the Agreement are true and correct as to matters of fact and that the representations and warranties made by each of you in the Agreement are true and correct.

(b) This opinion is limited in all respects to matters governed by the laws of the State of California and the federal laws of the United States, and we express no opinion concerning the laws or regulations of any other jurisdiction or jurisdictions. We express no opinion as to federal or state antifraud or antitrust laws or regulations or, except as expressly provided in paragraph 7 above, to the securities or blue sky law of any jurisdiction. We express no opinion in clause (i) of Paragraph 3 as to ordinances and regulations of counties and political subdivisions thereof.

(c) We assume that you know of no agreements, understandings or negotiations between the parties not set forth in the Agreement that would modify the terms or rights and obligations of the parties thereunder.

(d) Our opinion in paragraph 2 above is subject to and limited by (i) the effect of applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium or other laws affecting or relating to the rights of creditors generally, (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, whether considered in a proceeding in equity or at law, (iii) the effect of applicable court decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where

To the Investors Named on Schedule A

of the Stock and Warrant Purchase Agreement

July 31, 2003

Page 4

the breach of such covenants or provisions imposes restrictions or burdens upon a party thereto, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the other party, or the enforcement of such covenants or provisions under the circumstances would violate the covenant of good faith and fair dealing implied under applicable law, and (iv) the effect of California Civil Code Section 1698 and of statutes and rules of law that cannot be waived prospectively by an obligor.

(e) Whenever a statement herein is qualified by “to our knowledge,” “known to us,” “we are not aware,” or similar phrase, it indicates that in the course of our representation of the Company no information that would give us current actual knowledge of the inaccuracy of such statement has come to the attention of the attorneys in this firm who have rendered legal services in connection with this transaction. We have not made any independent investigation to determine the accuracy of such statement, except as expressly described herein. No inference as to our knowledge of any matters bearing on the accuracy of such statement should be drawn from the fact of our representation of the Company in other matters in which such attorneys are not involved.

This opinion is rendered solely for your information in connection with the transaction described above and may not be delivered to or relied upon by any other person for any purpose without our prior written consent.

Very truly yours,

EXHIBIT D

SCHEDULE OF EXCEPTIONS

None.

D-1

EX-10.15

EXHIBIT 10.15

California Micro Devices Corporation

430 N. McCarthy, Number 100

Milpitas, CA 95035

July 29, 2003

Needham & Company, Inc.	Adams, Harkness & Hill, Inc.
3000 Sand Hill Road, Building 2, Suite 190	Four Embarcadero
Menlo Park, California 94025	San Francisco, CA 94111

Re: Amendment to October 7, 2002 Letter Agreement

Dear Chad and Marshall:

This letter (this “Amendment”) confirms the agreement between Needham & Company, Inc. and Adams, Harkness & Hill, Inc. (the “Placement Agents”) on the one hand, and California Micro Devices Corporation (the “Company”) on the other hand, to amend their October 7, 2002 Letter Agreement (the “Original Letter Agreement”).

This Amendment will apply and be effective only with respect to the proposed private placement of up to 2,444,466 shares of the Company’s common stock, accompanied by warrant coverage of up to an additional 733,339 shares of common stock, as described in the Company’s term sheet dated July 24, 2003 (the “Offering”). The Offering is currently expected to close in one or two separate closings, with the lead investor, Special Situations Funds and its affiliated entities, closing on July 30, 2003, and additional investors closing on July 30, 2003; July 31, 2003; or August 1, 2003.

The Placement Agents and the Company hereby amend the Original Letter Agreement as follows:

The first line of Section 6(b) of the Original Letter Agreement is deleted in its entirety and replaced with the following: “An advisory fee equal to 4% of the gross proceeds on all sales of Securities made in the . . .”

The first sentence of Section 6(c) of the Original Letter Agreement is deleted in its entirety and replaced with the following: “Warrants (the “Warrants”), issuable at the first and any subsequent closing of the sales of Securities, to purchase that amount of securities equal to 3% of the Securities sold in the Offering.”

The Placement Agents further agree that, if the securities issued pursuant to the Offering, either calculated alone or in combination with the issuance of the Warrants, would otherwise result in an issuance of securities that would require the approval of the Company’s shareholders, the Company will require that the first date that the Warrants will be exercisable shall be no

Needham & Company, Inc. and Adams, Harkness & Hill, Inc.

July 29, 2003

earlier than six months after the second of the two closings. The Company currently expects that such a restriction will be necessary in order to issue the securities without a shareholder vote not only on the Warrants being issued to the Placement Agents but also perhaps on 300 of the warrants being issued to one of the investors.

Please confirm that the foregoing is in accordance with our understanding by signing and returning to us the enclosed duplicates of this letter.

Sincerely yours,

CALIFORNIA MICRO DEVICES CORPORATION
By:
	Robert V. Dickinson
	President and CEO
Agreed to and Accepted as of the date set forth above:
NEEDHAM & COMPANY, INC.		ADAMS, HARKNESS & HILL, Inc.
By:		By:
	Chad W. Keck		Marshall Jensen
	Managing Director		Managing Director

2

EX-31.1

Exhibit 31.1

California Micro Devices

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert V. Dickinson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of California Micro Devices Corporation, a California corporation (“registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 14, 2003

By: /s/ Robert V. Dickinson

Robert V. Dickinson

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

California Micro Devices

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, R. Gregory Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of California Micro Devices Corporation, a California corporation (“registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 14, 2003

By: /s/ R. Gregory Miller

R. Gregory Miller

Vice President Finance and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1¹

California Micro Devices

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the periodic report of California Micro Devices (the “Company) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, Robert V. Dickinson, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(ii) the information in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 14, 2003	By:	/s/ ROBERT V. DICKINSON
		Robert V. Dickinson Chief Executive Officer

¹ The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2¹

California Micro Devices

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the periodic report of California Micro Devices (the “Company) on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, R. Gregory Miller, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(ii) the information in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 14, 2003	By:	/s/ R. Gregory Miller
		R. Gregory Miller Chief Financial Officer

¹ The material contained in this Exhibit 32.1 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.