Urges Stockholders to Elect New, Highly Qualified Director Nominees
Whose Interests are Aligned with Stockholders NEW YORK, Aug. 4
/PRNewswire/ -- Dialectic Capital Management, LLC ("Dialectic")
announced today that it has filed with the Securities and Exchange
Commission definitive proxy materials in connection with the 2009
annual meeting of stockholders of California Micro Devices
Corporation ("CMD" or the "Company") (NasdaqGM: CAMD) to be held on
September 17, 2009. Dialectic also has sent a letter to the
Company's stockholders urging them to elect three highly qualified
and experienced director nominees, John Fichthorn, J. Michael
Gullard and Kenneth Potashner, by signing, dating and returning the
GOLD proxy card. The Dialectic group is the second largest
stockholder of the Company and beneficially owns 2,025,011 shares,
representing approximately 8.8% of the Company's outstanding common
stock. (Photo: http://www.newscom.com/cgi-bin/prnh/20090804/NY56239
) The full text of the letter follows: August 4, 2009 SUPPORT
DIALECTIC NOMINEES FOR CALIFORNIA MICRO DEVICES BOARD CURRENT
BOARD'S INTERESTS ARE NOT ALIGNED WITH STOCKHOLDERS Dear Fellow
Stockholders: We are seeking your support to elect our three highly
qualified and experienced nominees to the Board of Directors of
California Micro Devices Corporation ("CMD" or the "Company") at
the Company's September 17, 2009 annual meeting. The Dialectic
Group owns 2,025,011 shares, representing 8.8% of the Company's
outstanding common stock, and is the Company's second largest
stockholder. We have made repeated attempts to work cooperatively
and constructively with the Company to achieve our objective of
creating a Board that would truly represent the best interests of
all stockholders. Unfortunately, the Board has failed to seriously
address our concerns, and we are engaging in this election contest
as a last resort. We believe: -- the incumbent Board's minimal
equity ownership (only 88,200 shares) has created a large gap
between Board and stockholder interests, which needs to be
addressed by stockholder representation on the Board -- the Board
has overseen a stagnant business strategy and dramatic
deterioration of stockholder value, requiring immediate change --
the Dialectic Group's nominees will bring a sense of urgency and
fresh perspective to the boardroom -- our nominees have the
operational and financial expertise currently lacking from the
Board We firmly believe a reconstituted Board is vital to the
Company's future success and are therefore seeking to elect three
independent and experienced directors to represent the interests of
all CMD stockholders. We are not seeking control of the Company.
Rather, we want to ensure accountability at the Board level by
electing directors who can evaluate the opportunities and
challenges at CMD with an ownership mentality and an open mind. Our
interests are clearly aligned with yours. THE CURRENT BOARD HAS
FAILED TO TAKE DECISIVE ACTION IN THE FACE OF MANAGEMENT'S
INABILITY TO CREATE A SUSTAINABLE BUSINESS MODEL In the eight years
since Robert Dickinson was named CEO, the Company's enterprise
value has fallen from $82.7 million to less than $10 million and
its accumulated deficit has more than doubled from $31.3 million to
$65.6 million. We believe this decline in value is a direct
consequence of the inability of management, under the direction of
the current Board, to capitalize on the Company's early success
with Chip-Scale-Packaging technology, respond to competitive
dynamics within the protection industry and implement a sustainable
business model. In our view, under the current Board, CMD has been
a rudderless ship whose hopes are precariously pinned to the
uncertain business of a few large, top-tier customers. We have
already seen the failure of that business strategy with the decline
of CMD's Motorola business back in 2006, which precipitated a
string of losses in eight of the Company's 12 most recent fiscal
quarters. While CMD stockholders have suffered through
deteriorating revenues and continued losses, the Company's most
direct competitors have fared significantly better. Semtech
Corporation (SMTC) and ON Semiconductor Corporation (ONNN), which
we believe are the Company's closest comparables in the
Electrostatic Discharge space, have built durable businesses and
meaningfully outperformed the Company. Revenues at SMTC and ONNN
have expanded at five-year compound annual growth rates (CAGRs) of
10.1% and 10.9%, respectively, while CMD has grown at just 0.29%
annually. Since CMD's Motorola business began to decline, the
Company's stock price has also lagged far behind these competitors:
In the face of this underperformance, the Board has shown
complacency and has been unwilling to hold management accountable
for the Company's dismal results. We believe the Board's inaction
is in large part due to the directors' minimal equity ownership in
the Company and a lack of fresh ideas at the Board level. We
believe the election of the Dialectic Group's nominees to the Board
is the best option to bring a sense of urgency and accountability.
WE BELIEVE THAT BOARD AND MANAGEMENT INTERESTS ARE NOT PROPERLY
ALIGNED WITH THOSE OF STOCKHOLDERS We believe the evident
misalignment of interests between stockholders, on the one hand,
and the Board and management, on the other, is at the heart of the
Company's problems and demands immediate change at the Board level.
Together, the Board and senior management directly own only 88,200
shares, or 0.38% of CMD's outstanding shares. This number is
particularly striking when viewed in light of disclosure in the
Company's proxy statement that, under the Company's employee stock
purchase plan, during fiscal 2009 alone, other Company employees
purchased over 250,000 shares. Why is it that the Board and
management do not display the same degree of confidence and support
of the Company as its other employees? While the Board members have
chosen not to invest alongside their employees and other
stockholders, they have chosen to engage in a number of poor
corporate governance practices that have served to entrench and
isolate them from stockholders. These tactics include implementing
a poison pill without stockholder approval, depriving stockholders
of the ability to call special meetings and funneling stockholder
concerns through Mr. Dickinson, the Company's only non-independent
director. The Board would have you believe that we have posed
"obstacles" to their consideration of our nominees to serve on the
Board. In reality, given their insulation from stockholders and
poor corporate governance track record, it is the current directors
who continue to pose obstacles to stockholder representation on the
Board. WE BELIEVE THE CURRENT BOARD HAS ACTED TO BENEFIT ITSELF AND
MANAGEMENT AT THE EXPENSE OF STOCKHOLDERS The Board's recent
actions continue to foster a corporate culture that, in our view,
is detrimental to existing stockholders. Management's proxy
statement for the 2009 annual meeting highlights a number of the
Board's questionable executive compensation decisions, which we
believe are particularly indefensible in view of the continued
decline in the Company's financial performance. Specifically: --
For fiscal 2010, the Board simply decided to maintain the current
base salaries of the Company's executive officers despite the
economic downturn. We find it incomprehensible that, given the
Company's dismal financial performance and the current economic
environment, in which many companies have slashed compensation, the
Board (one of whose members is a compensation consultant!) could
have made such a decision without the benefit of any analysis
whatsoever. -- The Board made what it calls "minor" modifications
to the Company's bonus plan for fiscal 2009 and 2010, providing for
a portion of management bonuses (20% for fiscal 2009 and 25% for
fiscal 2010) to be determined at the discretion of the Board. In
previous years, bonuses were determined solely on the basis of
objective financial targets. The result? Despite the fact that no
bonuses were paid to the Company's senior management for fiscal
2008, as financial targets were missed, and the Company's financial
performance continued to decline in fiscal 2009, the Company's top
executives received bonuses for fiscal 2009. -- In addition, the
Board modified the bonus plan for fiscal 2009 and 2010 to provide
for quarterly, rather than annual, bonus payments. There is also no
provision for recalculating these bonuses should there be a
restatement of the Company's financial statements. We believe this
quarterly bonus structure encourages the manipulation of financial
results and rewards fluctuations in results rather than sustained
performance. -- The Board continues to hand out lucrative option
packages to senior management, granting options to purchase a total
of 325,000 shares in each of fiscal 2008 and fiscal 2009, and
determining to grant the same awards in fiscal 2010, again without
apparent regard for the Company's deteriorating financial
performance and without tying the vesting of these options to
future performance. -- In connection with the appointment of Jon
Castor to the Board on July 7, 2009 and in obvious anticipation of
our election contest, the Board amended the vesting of options to
provide that if a newly-appointed director stands for election but
is not elected to the Board prior to the vesting of the first
tranche of the director's option, that tranche would be accelerated
and vest in full. That the Board is so willing to hand out dilutive
options to a director for such limited service to stockholders
speaks volumes as to its philosophy on the value of equity-based
compensation. -- The Board doubled, to 18 and 12 months,
respectively, the length of time that the CFO and other vice
presidents of the Company would receive severance pay in the event
of a change in control, allegedly to correct an inconsistency
between the treatment of these executives and the CEO. We find the
timing of this action, which came after we had proposed a sale of
the Company and nominated our slate of directors, to be highly
suspicious. Ask yourselves: Are these the actions of a Board that
is concerned with improving the Company's financial performance and
maximizing stockholder value? We believe these actions clearly
demonstrate that the Board's primary concern is protecting its and
managements' own interests at the expense of stockholders. WE
BELIEVE THE CURRENT BOARD SHOULD NOT BE ENTRUSTED WITH THE
COMPANY'S FUTURE Is this the Board you want determining the future
direction of your Company? The Company has said on a number of
occasions that it is seeking to pursue acquisitions of other
businesses. The Company itself is on record as stating that it has
"no recent successful experience in making such acquisitions. . .",
which is clearly an understatement. The only acquisition
consummated by the Company during Mr. Dickinson's eight years as
CEO is the Arques Technology transaction, completed in fiscal 2007
for a purchase price of just $8.4 million. Less than two years
later, the Company wrote off all $5.3 million in goodwill recorded
for that acquisition. The risks of an ill-fated acquisition are
heightened by the fact that the Board and management collectively
hold approximately 2.9 million underwater stock options, which we
believe encourages the pursuit of high-risk/high-reward strategies
that are not in the best interests of stockholders. We cannot
afford to allow the Company to make another costly mistake under
the direction of the current Board. THE DIALECTIC GROUP'S NOMINEES
WILL BRING EXPERIENCE AND ACCOUNTABILITY TO THE BOARD In our view,
CMD needs new Board members with a fresh perspective to develop and
execute a successful turnaround of the Company and provide
accountability to stockholders. Two of our nominees have extensive
operational and board experience in the technology sector. We also
believe it is critically important to augment these candidates with
direct stockholder representation to promote Board action that is
in the best interests of all stockholders: -- John Fichthorn
co-founded Dialectic Capital Management, LLC, an investment
management firm and CMD's second largest stockholder, in 2003. Mr.
Fichthorn has been a technology-focused investor since 1997. -- J.
Michael Gullard is a General Partner at Cornerstone Management,
Inc., a professional turn-around and restructuring firm. Mr.
Gullard has 35 years of financial, general management and venture
capital experience in the technology industry, notably at
Telecommunications Technology, Inc. and Intel Corporation. Mr.
Gullard serves on the Board of Directors of Alliance Semiconductor
Corporation, DynTek, Inc., JDA Software Group Inc., Planar Systems
Inc. and Proxim Wireless Corporation and has valuable experience
working cohesively with incumbent directors following a successful
election contest. -- Kenneth Potashner has served as Chairman of
the Board of Newport Corporation, a leading global supplier of
advanced-technology products and systems, since September 2007 and
as a member of its Board of Directors since 1998. Mr. Potashner has
over 20 years of experience as a successful technology company
executive, including with Maxwell Technologies, Inc., a
manufacturer of ultracapacitors, microelectronics, power systems
and high voltage capacitors, and SONICblue Incorporated, a supplier
of digital media appliances and services. In addition to adding
much needed operational experience and accountability to the Board,
we believe the election of the Dialectic Group's nominees will send
a strong message to management and the remaining directors that
stockholders demand that the Board represent their best interests.
THE DIALECTIC GROUP'S NOMINEES ARE COMMITTED TO REPRESENTING ALL
STOCKHOLDERS' INTERESTS The primary objective of the Dialectic
Group's nominees is to ensure that the Company's capital is
allocated in the most efficient manner possible in order to
maximize returns to stockholders. Our nominees, with the interests
and input of stockholders in mind, will explore any viable
strategic options to achieve this goal. We believe this illustrates
the primary difference between the Dialectic Group's nominees and
the incumbent directors. The Dialectic Group's nominees are
committed to representing stockholders' interests and responding to
your concerns. As the Company's second largest stockholder, our
interests are aligned with yours to maximize stockholder value. On
the other hand, the current Board seems more preoccupied with
reacting to stockholders rather than responding to them. The latest
example of this misguided approach is the appointment of Jon Castor
to the Board. We have called on the Board to include a
representative of a significant stockholder (not just of Dialectic,
as the Board falsely claims) on the Board to correct the obvious
misalignment of Board and stockholder interests. What did the Board
do? Instead of appointing a true stockholder representative, the
directors themselves chose a new member, not recommended by any
stockholder, who holds ZERO shares. We believe Mr. Castor's
appointment does little to address the fundamental issues we have
raised or bring a fresh perspective to the Board. Apparently, Mr.
Castor agrees with us. When we asked Mr. Castor, prior to his
appointment to the Board, about his views regarding stockholder
representation on the Board, Mr. Castor said there were "more
pluses than minuses" and that he "like[s] input from smart people
who have a stake in the game." It is time for a change. You have
the opportunity to vote for directors who will be proactive and
will represent your best interests in the boardroom, not their own.
VOTE THE GOLD PROXY CARD TODAY We urge all stockholders to elect
our director nominees on the enclosed GOLD proxy card today. Vote
for much needed change at CMD by signing, dating and returning the
enclosed GOLD proxy card or you may vote by telephone or Internet
if you own through a bank or broker. We urge stockholders to
discard any proxy materials received from CMD and to vote only the
GOLD proxy card. Thank you for your support, John Fichthorn To
elect the Dialectic Group's nominees, we urge all stockholders to
sign and return the GOLD Proxy whether or not you have already
returned a white proxy sent to you by the Company. The Dialectic
Group urges all stockholders not to sign or return any white proxy
sent to you by the Company. Instead, the Dialectic Group recommends
that you use the GOLD Proxy and vote by mail or if you own your
shares through a bank or a broker, you may vote by telephone or
Internet. If you have already returned the white proxy, you can
effectively revoke it by voting the GOLD Proxy. Only your
latest-dated proxy will be counted. If you have any questions or
need assistance in voting the GOLD Proxy, please contact our proxy
solicitor, Okapi Partners, at the toll-free number or email address
listed below. Call Toll-Free: 1-877-285-5990 Or Email: About
Dialectic Capital Management, LLC Dialectic Capital Management, LLC
is a hedge fund sponsor based in New York, New York. It manages a
multi-sector long/short equity fund. CERTAIN INFORMATION CONCERNING
PARTICIPANTS Dialectic Capital Management, LLC ("DCM"), together
with the other participants named herein, has made a definitive
filing with the Securities and Exchange Commission ("SEC") of a
proxy statement and accompanying GOLD proxy card to be used to
solicit votes for the election of a slate of director nominees at
the 2009 annual meeting of stockholders of California Micro Devices
Corporation, a Delaware corporation (the "Company"). DCM ADVISES
ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND
OTHER PROXY MATERIALS IN CONNECTION WITH THE ANNUAL MEETING BECAUSE
THEY CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS ARE
AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT
http://www.sec.gov/. IN ADDITION, THE PARTICIPANTS IN THE
SOLICITATION WILL PROVIDE COPIES OF THE PROXY MATERIALS WITHOUT
CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE
PARTICIPANTS' PROXY SOLICITOR, OKAPI PARTNERS, AT ITS TOLL-FREE
NUMBER: 1-877-285-5990. The participants in the proxy solicitation
are DCM, Dialectic Capital Partners, LP ("DCP"), Dialectic
Offshore, Ltd. ("DOF"), Dialectic Antithesis Partners, LP ("DAP"),
Dialectic Antithesis Offshore, Ltd. ("DAO"), John Fichthorn, Luke
Fichthorn, J. Michael Gullard ("Mr. Gullard"), Kenneth Potashner
("Mr. Potashner") and Bryant Riley ("Mr. Riley") (collectively, the
"Dialectic Group"). As of the date hereof, DCP beneficially owns
318,631 shares of common stock of the Company, DOF beneficially
owns 186,780 shares, DAP beneficially owns 582,453 shares and DAO
beneficially owns 937,147 shares. As of the date hereof, DCM (as
the investment manager of each of DCP, DOF, DAP and DAO) and John
Fichthorn and Luke Fichthorn (as the managing members of DCM) are
deemed to be the beneficial owners of the (i) 318,631 shares owned
by DCP, (ii) 186,780 shares owned by DOF, (iii) 582,453 shares
owned by DAP and (iv) 937,147 shares owned by DAO. As of the date
hereof, Messrs. Gullard, Potashner and Riley do not directly own
any shares. Each member of the Dialectic Group, as a member of a
"group" with the other Dialectic Group members for the purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, is accordingly the beneficial owner of the shares of
common stock of the Company beneficially owned in the aggregate by
the other members of the Dialectic Group. Each member of the
Dialectic Group disclaims beneficial ownership of such shares,
except to the extent of his or its pecuniary interest therein.
http://www.newscom.com/cgi-bin/prnh/20090804/NY56239 DATASOURCE:
Dialectic Capital Management, LLC CONTACT: Salomon Kamalodine, B.
Riley & Co., LLC, +1-310-689-2217
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