SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO._____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
NVE CORPORATION
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(Name of Registrant as Specified in its Charter)
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NVE CORPORATION
11409 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
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NOTICE AND PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 19, 2001
To the Shareholders of NVE Corporation:
The Annual Meeting of Shareholders of NVE Corporation (the "Company") will be
held at the Marriott City Center Hotel, 30 South Seventh Street, Minneapolis,
Minnesota 55402, on Thursday, July 19, 2001 at 3:30 p.m. Central Daylight Time,
for the following purposes:
1. To elect five directors for a term of one year.
2. To amend the 2000 NVE Corporation Stock Option Plan
to increase the number of shares reserved for issuance
under the Plan from 2,000,000 to 5,000,000 shares.
3. To approve adoption of the 2001 NVE Employee Stock
Purchase Plan
4. To engage independent auditors for the current fiscal year.
5. To consider and act on such other business as may properly
come before the meeting or any adjournment or adjournments
thereof.
The Company's Board of Directors has fixed the close of business on June 1,
2001 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the meeting and any adjournment thereof.
By Order of the Board of Directors
Richard George
Secretary
June 15, 2001
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES.
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NVE CORPORATION
11409 VALLEY VIEW ROAD
EDEN PRAIRIE, MINNESOTA 55344
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, JULY 19, 2001
This Proxy Statement is furnished to shareholders of NVE Corporation,
a Minnesota corporation ("NVE" or the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
annual meeting of shareholders to be held on Thursday, July 19, 2001 at
3:30 p.m. Minneapolis time at the Marriott City Center Hotel, 30 South Seventh
Street, Minneapolis, Minnesota 55402,and at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. This Proxy Statement and the accompanying form of Proxy were
first mailed to shareholders of the Company on or about June 15, 2001.
SOLICITATION AND REVOCATION OF PROXIES
The costs and expenses of solicitation of proxies will be paid by the
Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and regular employees of the Company personally or by
telephone, but such persons will not be specifically compensated for such
services.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any shareholder giving a proxy in such form may revoke it either by
submitting a new proxy card or by completing a ballot at the meeting at any
time before it is exercised. Such proxies, if received in time for voting and
not revoked, will be voted at the annual meeting in accordance with the
specification indicated thereon. If no specification is indicated on a proxy,
such proxy will be voted in favor of Proposals 1, 2, 3 and 4 described herein.
VOTING SECURITIES AND RIGHTS
Only shareholders of record at the close of business on June 1, 2001
are entitled to execute proxies or to vote at the annual meeting. As of said
date there were outstanding 16,921,228 shares of the Company's common stock,
$.01 par value per share (the "Common Stock"). Each holder of Common Stock is
entitled to one vote for each share held with respect to the matters mentioned
in the foregoing Notice of Annual Meeting of Shareholders and any other matters
that may properly come before the meeting. A majority of the outstanding shares
entitled to vote are required to constitute a quorum at the meeting. The
affirmative vote of a majority of the Common Stock present, in person or by
proxy, and entitled to vote at the annual meeting, is required to approve the
matters mentioned in the foregoing Notice of Annual Meeting. Proxies indicating
abstention from a vote and broker non-votes will be counted toward determining
whether a quorum is present at the meeting, but will not be counted toward
determining if a majority of the Common Stock present has voted affirmatively.
OWNERSHIP OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information as of March 31,
2001 with respect to the Company's Common Stock beneficially owned by each
director, by each nominee for director, by each person known to the Company to
beneficially own more than five percent of the Company's Common Stock, based
solely upon filings made by such persons under Section 13 of the Securities
Exchange Act of 1934 (the "Exchange Act"), by each named executive officer set
forth in the compensation table and by all executive officers and directors as
a group.
NAME ADDRESS SHARES OWNED PERCENT
---- ------- ------------ -------
Norwest Equity Partners(1) 3600 IDS Center 7,577,434 45%
80 S. 8th St.
Minneapolis, MN 55402
James Daughton 18687 Melrose Chase 2,814,382(2) 17%
Eden Prairie, MN 55347
Motorola, Inc. c/o Don McLellan 1,750,000 10%
1303 East Allonquin Rd.
Schaumberg, IL 60196
Richard George 5145 Tifton Dr. 502,250(3) 3%
Edina, MN 55439
Robert Irish 17910-39th Place North 189,260(4) 1%
Plymouth, MN 55446-1318
Daniel A. Baker 11409 Valley View Rd.
Eden Prairie, MN 55344 177,000(5) 1%
John Myers 11409 Valley View Rd.
Eden Prairie, MN 55344 158,958(6) 1%
Alexander Templeton 11409 Valley View Rd.
Eden Prairie, MN 55344 39,375(7) *
Terrence Glarner 3600 IDS Center 31,200(8) *
80 S. 8th St.
Minneapolis, MN 55402
Herbert Goronkin 8641 S. Willow Dr. 0 *
Tempe, AZ 85284
All Company directors, officers and owners 13,239,859 78%
of more than 5% of the stock as a group (10 persons)
* Less than 1%
(1) Includes shares held by Norwest Equity Partners IV, LLP, and Norwest
Equity Partners V, LLP.
(2) Includes 113,750 shares issuable upon the exercise of options that are
currently or will become exercisable within 60 days of March 31, 2001.
Excludes unvested options to purchase up to 61,250 shares of common
stock of the Company.
(3) Includes 29,750 shares issuable upon the exercise of options that are
currently or will become exercisable within 60 days of March 31, 2001.
Excludes unvested options to purchase up to 5,250 shares of common
stock of the Company.
(4) Includes shares of common stock of the Company controlled by Mr. Irish
in various accounts. Includes 7,000 shares issuable upon the exercise
of options that are currently or will become exercisable within 60
days of March 31, 2001.
(5) Includes 175,000 shares issuable upon the exercise of options that are
currently or will become exercisable within 60 days of March 31, 2001.
Excludes unvested options to purchase up to 525,000 shares of common
stock of the Company.
(6) Consists of 158,958 shares issuable upon the exercise of options that
are currently or will become exercisable within 60 days of March 31,
2001. Excludes unvested options to purchase up to 191,042 shares of
common stock of the Company.
(7) Consists of 39,375 shares issuable upon the exercise of options that
are currently or will become exercisable within 60 days of March 31,
2001. Excludes unvested options to purchase up to 48,125 shares of
common stock of the Company.
(8) Includes 28,000 shares issuable upon the exercise of options that are
currently or will become exercisable within 60 days of March 31, 2001.
PROPOSAL 1
ELECTION OF BOARD OF DIRECTORS
The Board of Directors has set the number of directors at five. All
five directors are to be elected at the annual meeting to serve until the 2002
annual meeting of shareholders. The Board of Directors has nominated the
following persons for election:
TERRENCE GLARNER, DANIEL A. BAKER, JAMES DAUGHTON, HERBERT GORONKIN, AND
ROBERT IRISH
All of the nominees for election as directors are presently directors
of the Company. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve as a director. It is the intention of the
individuals named as proxies to vote for the nominees. If any nominee should be
unable to serve as a director, it is the intention of the individuals named as
proxies to vote for the election of such person or persons as the Board of
Directors may, in its discretion, recommend.
The affirmative vote of a majority of the Common Shares present, in
person or by proxy, and entitled to vote at the annual meeting is required to
elect each director.
Information regarding the persons nominated for election as directors
is as follows:
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
NOMINEE AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
------------------------------------------ ----- ----------------
Terrence Glarner 58 1999
President, West Concord Ventures, Inc.
Daniel A. Baker 43 2001
President and Chief Executive Officer
NVE Corporation
James Daughton 64 1989
Chief Technical Officer
NVE Corporation
Herbert Goronkin 65 1995
Vice President
Motorola Laboratories
Robert Irish 61 1992
Consultant
Terrence Glarner, Director and Chairman of the Board, age 58, has
been a director since August, 1999, and Chairman since January, 2001.
Since February, 1993, Mr. Glarner has been the President of West Concord
Ventures, Inc. Mr. Glarner also consults with Norwest Venture Capital, an
entity affiliated with Norwest Growth Fund, Inc. Prior to starting West Concord
Ventures, Inc., Mr. Glarner was the President of North Star Ventures, Inc. from
1988 to February 1993, a firm which he joined in 1976. From 1968 to 1976, Mr.
Glarner was a Securities Analyst and Vice President in the Research Department
of Dain Bosworth, Inc. Mr. Glarner has a B.A. in English from the University of
St. Thomas, a J.D. from the University of Minnesota School of Law and is a
Chartered Financial Analyst. Mr. Glarner supervised investments in
approximately 100 small companies during his involvement with North Star
Ventures. Mr. Glarner currently serves as a director on the following publicly
held companies: Aetrium, Cima Labs, Datakey, FSI, and SpectraScience. He is
also a director of Oncotech, Inc.
Daniel A. Baker, President, Chief Executive Officer and Director, age
43, was elected as an officer and director of the Company in January, 2001. He
previously served as the President, Chief Executive Officer and Director of
Printware, Inc., from 1993 to the time he joined the Company. Dr. Baker has
25 years of experience in high-tech industries and has held executive positions
with both Minntech Corporation and Percom Data Corporation. He personally holds
15 patents. Dr. Baker earned Ph.D. and M.S. degrees in engineering from the
University of Minnesota, an M.B.A. in finance from the University of Minnesota,
and a B.S. in engineering from Case Western Reserve University.
James Daughton, Chief Technical Officer and Director, age 64, has
been a director of the Company since its inception and Chief Technical Officer
since January, 2001. Prior to January 2001, Dr. Daughton had served as NVE's
Chairman and Chief Executive Officer. From 1974 to 1989, Dr. Daughton held
various positions in research and product development, including the position
of Vice President of The Solid State Development Center for Honeywell, Inc.
From 1964 to 1974, Dr. Daughton held various positions in the development of
magnetic and semiconductor memory devices for IBM Corporation. Dr. Daughton
received a doctorate in electrical engineering from Iowa State University in
1963. He is a member of advisory boards at Iowa State University and the
University of New Orleans, and is an adjunct professor of physics at the
University of Minnesota. He has more than 20 issued or pending patents,
primarily dealing with thin magnetic films and devices.
Herbert Goronkin, Director, age 65, has been a director of the Company
since 1995. From 1977 to the present, Dr. Goronkin has held various positions
including the position of Vice President and Director of the Physical Research
Laboratory at Motorola Laboratories in Phoenix, Arizona. Dr. Goronkin has more
than 25 patents and has authored numerous papers. He received B.S., M.S. and
Doctorate degrees in physics from Temple University in 1961, 1962 and 1973,
respectively. He is a Fellow of the IEEE and a member of both the American
Physical Society and Sigma Xi.
Robert Irish, Director, age 61, has been a director of the Company
since 1992. Additionally, Mr. Irish was a founding investor in NVE. Mr. Irish
recently formed the RICE Group to consult in Information Technology. Since
1994, Mr. Irish has held a number of sales, consulting and technical positions,
most recently with Compuware and Prodea Software. From 1988 to 1994, Mr. Irish
acted as a consultant and co-investor with Norwest Venture Capital. From 1981
to 1988, Mr. Irish was the Executive Vice President of Centron DPL, responsible
for technical marketing, product marketing and research and development. Prior
to that time, from 1966 to 1981, Mr. Irish worked at IBM in management, sales
and systems. Mr. Irish attended Rensselaer Polytechnic Institute and received a
B.S. in Physics from Syracuse University in 1965. He has three issued patents
dealing with magnetic intrusion detection systems.
COMMITTEES OF THE BOARD OF DIRECTORS
There were six meetings of the Board of Directors during the year
ended March 31, 2001 ("Fiscal 2001"). The Board of Directors has established
Audit and Compensation Committees. Both committees consist of Mssrs. Glarner,
Goronkin, and Irish. The Audit Committee charter is included as Exhibit A to
this statement. The Audit Committee met once in fiscal year 2001.
The Compensation Committee reviews and recommends to the Board of
Directors the compensation guidelines for executive officers and other key
personnel and the composition and levels of participation in incentive
compensation, fringe benefits and retirement benefits for all employees. In
addition, the committee oversees administration of the Company's 2000 Stock
Option Plan . The Compensation Committee was formed late in fiscal year 2001,
and did not meet in fiscal year 2001. Prior to the formation of the
Compensation Committee, the full Board of Directors acted as a compensation
committee.
Each of the directors attended at least 75% of all of the meetings of
the Board of Directors and applicable committees held while each was a director
during such fiscal year.
The Audit Committee Charter and the Report of the Audit Committee are
included as Exhibits A and B, respectively, to this Proxy Statement.
REMUNERATION OF MEMBERS OF THE BOARD OF DIRECTORS
Non-employee members of the Board of Directors receive no cash
compensation for their service on the Board. Mr. Irish is affiliated with a
consulting company which received $12,848 for services provided to the Company
in fiscal year 2001. Non-employee Directors receive an option to purchase
30,000 shares upon initial election and 10,000 on each reelection to the Board
of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid in each of the
past three fiscal years to the individuals who served as the Company's Chief
Executive Officer during Fiscal 2001 and each of the next most highly
compensated executive officers whose total annual salary and bonus for Fiscal
2001 exceeded $100,000 ("Named Executive Officers"):
ANNUAL OTHER
COMPENSATION COMPENSATION
--------------------- ------------
NAME AND TITLE FISCAL YEAR SALARY BONUS
- -------------- ----------- ------ ------
Daniel A. Baker(1) 2001 $31,186 0 $7,173(3)
President and CEO
James Daughton(2) 2001 $150,000 0 $34,500(3)
Chief Technical Officer 2000 $140,000 $80,000 $32,200(3)
1999 $145,000 $40,000 $33,350(3)
John Myers 2001 $107,600 0 $24,748(3)
Vice President 2000 $103,040 0 $23,699(3)
1999 $97,920 $25,000 $22,522(3)
Alexander Templeton(4) 2001 $100,700 0 $23,161(3)
Director, Isolator 2000 $24,700 0 $5,681(3)
Product Engineering
(1) Dr. Baker was appointed President and CEO January 29, 2001.
(2) Dr. Daughton was Chairman and CEO until assuming the position
of Chief Technical Officer January 29, 2001.
(3) Representing 2% matching contributions to the Company's Employee
Retirement 401(k), together with other fringe benefits such as
insurance premiums.
(4) Mr. Templeton joined the Company in fiscal year 2000.
The following table indicates the extent to which the company used
stock options for executive compensation purposes in Fiscal 2001 for the Named
Executive Officers:
OPTION GRANTS DURING FISCAL YEAR 2001
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED
UNDERLYING OPTIONS TO EMPLOYEES IN FISCAL EXERCISE OR EXPIRATION
NAME GRANTED (#) YEAR BASE PRICE DATE
- ------------------------ -------------------- ---------------------- ----------- ----------
Daniel A. Baker 700,000 71% $1.31562 1/29/11
President and CEO
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
There were no exercise of stock options during the last completed
fiscal year by executive officers named in the Summary Compensation Table.
EMPLOYMENT AGREEMENT
Daniel A. Baker has an employment agreement with the Company, which
sets Dr. Baker's salary initially at $175,000 per year. The agreement may be
terminated by either the Company or the employee upon thirty days written
notice. In addition, the Company may terminate Dr. Baker's employment for cause
and upon his death or incapacity. The agreement contains non-competition,
confidentiality and assignment of invention provisions benefiting the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of Common Shares and other equity securities of the Company.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all required Section 16(a) filings applicable to
officers, directors and greater than ten percent shareholders in fiscal year
2001 were timely filed, except for Mssrs. Baker, Daughton, George, Glarner,
Goronkin, and Irish, whose initial statements of beneficial ownership were
filed late.
PROPOSAL NO. 2
AMENDMENT TO THE 2000 STOCK OPTION PLAN TO INCREASE THE SHARES
RESERVED FOR ISSUANCE UNDER THE PLAN FROM 2,000,000 SHARES TO 5,000,000 SHARES
General
The 2000 Stock Option Plan (the "Plan") was approved by the Board of
Directors of the Company (the "Board") and the shareholders effective November
20, 2000. A maximum of 2,000,000 shares of common stock of the Company, $.01
par value ("Common Stock"), are currently reserved for issuance under the Plan.
On June 1, 2001, the Board unanimously approved an amendment to Section 7.1 of
the Plan, subject to shareholder approval, to increase by 3,000,000 shares the
number of shares of Common Stock reserved for issuance under the Plan (the
"Proposed Amendment").
Reasons for the Proposed Amendment
The Company relies on stock options as an essential part of its
compensation package to attract and retain experienced directors, officers and
employees. As such, the Board believes that increasing the number of shares of
Common Stock reserved for issuance under the Plan is in the best interests of
the Company and its shareholders in order for the Company to continue to
provide participating officers, directors, employees and other persons or
entities with long-term, equity based incentives. The following summary of the
Plan is qualified in its entirety by reference to the full text of the Plan, a
copy of which is attached as Exhibit C to the electronic copy of this Proxy
Statement filed with the SEC and may be accessed from the SEC's home page
(www.sec.gov). Additionally, a copy of the Plan may be obtained by making a
written request to Richard George, the Chief Financial Officer of the Company.
Summary of the Plan
Eligibility and Administration. All employees and consultants of the
Company, including officers and directors of the Company, are eligible to
receive options under the Plan. The approximate number of persons eligible to
receive options under the Plan is 35. The Plan authorizes the granting of
options to purchase up to 2,000,000 shares of Common Stock of the Company
("Stock"). The shares of Common Stock subject to the options will generally be
made available from authorized but unissued shares of Common Stock. The Board
is recommending under this Proposal No. 2 that the shareholders approve an
amendment to increase the number of shares of Common Stock reserved under the
Plan to 5,000,000 shares.
The Plan is to be administered by the Board, or a committee thereof
(the "Committee"), which consists of no less than two members of the Board,
each member being a "non-employee director," within the meaning of the
applicable rules of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee has full authority, except as limited by law,
the Articles of Incorporation or the Bylaws of the Company, to, among other
things, award options under the Plan, and determine the size, type and terms
and conditions thereof; to construe and interpret the Plan; and to take all
other action deemed appropriate for administration of the Plan.
As the Committee, in its sole discretion, determines the employees and
consultants who may participate in the Plan, as well as the amount of their
options, it is not possible to state the name or positions of, or the number of
options that may be granted to, the Company's employees and consultants in the
future.
Incentive Stock Options and Nonstatutory Options. The Plan provides
both for incentive stock options ("Incentive Stock Options"), which are
specifically tailored to the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), and for options that are not intended to qualify as
Incentive Stock Options ("Nonstatutory Options"). Options are typically
designated by the Committee at grant as Incentive Stock Options or Nonstatutory
Options, however, if an option is granted as an Incentive Stock Options and it
does not qualify as such, or ceases to qualify as such, and it is not otherwise
terminated, it will be deemed as a Nonstatutory Option for purposes of the
Plan. The term "option," as used herein, will mean both Incentive Stock
Options and Nonstatutory Options.
In order to obtain certain tax benefits, the Plan establishes special
rules for Incentive Stock Options. In particular, the Plan provides that
Incentive Stock Options may only be granted to employees, that any one
individual may not receive a grant of Incentive Stock Options exercisable for
the first time during any calendar year in excess of $100,000 (valued at the
time of grant), and that the option price per share for Incentive Stock Options
must not be less than the fair market value per share of the Common Stock on
the date of grant.
As a result of the application of tax rules limiting the deductibility
of certain compensation paid to "named executive officers," certain
restrictions also apply to Nonstatutory Options. Although such rules are
discussed more fully in the section entitled "Federal Income Tax Consequences,"
it is important to note that no optionee may be granted options to purchase a
number of shares of Common Stock in excess of 1,500,000 in any fiscal year.
Terms and Conditions of Options. Except as otherwise described in
this Proxy Statement, options may be granted under the Plan with such terms and
conditions as the Committee may from time to time determine. Options are
awarded with an exercise price equal to the fair market value of the Common
Stock on the date of grant, and no option may be exercised later than 10 years
from the date of the grant. Payment for Common Stock purchased upon the
exercise of an option may be made in cash, stock or other cash equivalents or
forms acceptable to the Committee.
Unless otherwise determined by the Committee, options granted under
the Plan may not be transferred or assigned and, during the life of the
optionee, the options may be exercised only by said optionee. If an optionee's
employment is terminated for cause, as defined in the Plan, all options
terminate immediately. Unless otherwise determined by the Committee, if an
optionee ceases continuous status as an employee or consultant for any reason
other than death or disability, the optionee's options may be exercised,
subject to the expiration date of the option, for 30 days after such
termination, but only to the extent that they were exercisable on the date of
termination. If employment is terminated because of death or disability, the
options may be exercised (subject to the expiration date of the option) for up
to six months after such termination, but only to the extent that such options
were exercisable on the date of death or disability.
Changes in Capitalization and Termination. In the event of a
subdivision of the outstanding Common Stock, a declaration of certain
dividends, a combination or consolidation of the outstanding Common Stock, a
recapitalization, spin-off or similar occurrence, the Committee may adjust the
number of shares of Common Stock available for future grants, the number of
shares of Common Stock covered by each outstanding option or the exercise price
under each outstanding option.
The Plan will terminate on November 20, 2010. The Board may, at any
time, terminate or amend the Plan, except with respect to certain amendments
which require shareholder approval under the Code and rules of the Securities
and Exchange Commission. In particular, under such rules, any amendment that
would materially increase the cost of the Plan to the Company or the benefits
to eligible employees would require shareholder approval. No amendment or
termination of the Plan by the Board may adversely affect any option previously
granted under the Plan without the consent of the optionee.
Dissolution, Liquidation, Reorganization or Exchange. The Plan
provides that in the event of dissolution or liquidation of the Company, the
options will terminate immediately prior to such dissolution or liquidation. In
the event of a merger, exchange or reorganization of the Company, the agreement
of merger, exchange or reorganization shall provide for one of the following
events: (a) continuation of the options by the Company, if the Company is the
surviving corporation; (b) assumption of the outstanding options by the
surviving corporation (or its parent or subsidiary); (c) substitution by the
surviving corporation (or its parent or subsidiary) of its own options for the
outstanding options; (d) full exercisability or vesting and accelerated
expiration of the outstanding options; or (e) settlement of the full value of
the outstanding options in cash or cash equivalents followed by cancellation of
such options.
Option Information
As of March 31, 2001, options for the purchase of an aggregate of
2,378,250 shares of Common Stock were outstanding under the Plan, held by 36
persons, with per share prices from $.036 to $1.32 per share and a weighted
average exercise price of approximately $.32 per share. The following table
sets forth as of March 31, 2001, options granted in the aggregate under the
Plan to: (i) the Named Executive Officers, (ii) all current executive officers
of the Company as a group, (iii) all current directors of the Company who are
not executive officers as a group, (iv) each nominee for election as a
director, (v) each associate of any of such directors, executive officers or
nominees, (vi) each other person who received or is to receive five percent of
such options, and (vii) all employees, including all current officers who are
not executive officers, as a group:
Name and Title No. of Options Granted
- -------------- ----------------------
Daniel A. Baker, President, CEO and Director 700,000
Richard George, Chief Financial Officer 35,000
James Daughton, Chief Technical Officer and Director 175,000
John Myers, Vice President 35,000
Sandy Templeton, Director of Isolator Product Engineering 87,500
Terrence Glarner, Chairman of the Board 28,000
Herbert Goronkin, Director -
Robert Irish, Director 7,000
All current executive officers as a group (3 persons) 910,000
All current directors who are not executive officers
as a group (3 persons) 35,000
All employees, including all current officers
who are not executive officers, as a group (33 persons) 2,378,250
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under the
Plan. This summary is not intended to be exhaustive and, among other things,
does not describe state or local tax consequences.
In general, an optionee will be subject to tax at the time a
Nonstatutory Option is exercised (but not at the time of grant), and he or she
will include in ordinary income in the taxable year in which he or she
exercises a Nonstatutory Option an amount equal to the difference between the
exercise price and the fair market value of the shares of Common Stock acquired
on the date of exercise. The Company will generally be entitled to deduct such
amount for federal income tax purposes, except as such deductions may be
limited by the Revenue Reconciliation Act of 1993 ("1993 Tax Act"), described
below. Upon disposition of shares of Common Stock, the appreciation (or
depreciation) after the date of exercise will be treated by the optionee as
either short-term or long-term capital gain or loss depending on whether the
shares of Common Stock have been held for the then-required holding period.
In general, an optionee will not be subject to tax at the time an
Incentive Stock Option is granted or exercised. Upon disposition of the shares
of Common Stock acquired upon exercise of an Incentive Stock Option, long-term
capital gain or loss will be recognized in an amount equal to the difference
between the disposition price and the exercise price, provided that the
optionee has not disposed of the Common Stock within two years of the date of
grant or within one year from the date of exercise. If the optionee disposes
of Common Stock without satisfying both holding period requirements (a
"Disqualifying Disposition"), the optionee will recognize ordinary income at
the time of such Disqualifying Disposition to the extent of the difference
between the exercise price and the lesser of the fair market value of the
Common Stock on the date the Incentive Stock Option was exercised or the date
of sale. Any remaining gain or loss is treated as short-term or long-term
capital gain or loss depending upon how long the Common Stock has been held.
The Company is not entitled to a tax deduction upon either the exercise of an
Incentive Stock Option or upon disposition of the Common Stock acquired
pursuant to such exercise, except to the extent that the optionee recognizes
ordinary income in a Disqualifying Disposition, and then only to the extent
that such deduction is not limited by the 1993 Tax Act.
If the optionee pays the exercise price, in full or in part, with
previously acquired shares of Common Stock, the exchange will not affect the
tax treatment of the exercise. If such exercise is effected using shares of
Common Stock previously acquired through the exercise of an Incentive Stock
Option, however, the exchange of the previously acquired shares of Common Stock
will be considered a disposition of such Common Stock for the purpose of
determining whether a Disqualifying Disposition has occurred.
Under the provisions of the 1993 Tax Act, the Company will be limited
as to the deduction that it may take for otherwise deductible compensation
payable to executive officers who, on the last day of the fiscal year, are
treated as "named executive officers" in the Proxy Statement. The deduction
limit on compensation will apply to all compensation, except compensation
deemed under the 1993 Tax Act to be "performance-based" and certain
compensation related to retirement and other employee benefit plans. The
determination of whether compensation related to the Plan is performance-based
for purposes of the 1993 Tax Act will be dependent upon a number of factors,
including shareholder approval of the Plan, and the exercise price at which
options are granted. The 1993 Tax Act also prescribes certain limitations and
procedural requirements in order for compensation to qualify as performance-
based, including rules which require that in the case of compensation paid in
the form of options, the option price be not less than the fair market value of
the stock at date of grant and that the plan under which the options are
granted states the maximum number of shares of Common Stock with respect to
which options may be granted during a specified period to any employee.
Required Vote; Board Recommendation
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to approve the Amendment to the Company's
2000 Stock Option Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL NO. 2.
PROPOSAL NO. 3
APPROVAL OF THE ADOPTION OF THE
2001 EMPLOYEE STOCK PURCHASE PLAN
General
On June 1, 2001, the Board of Directors of the Company unanimously
adopted, subject to shareholder approval, the 2001 Employee Stock Purchase
Plan (the "Purchase Plan"). The Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Code. The maximum
number of shares that will be reserved for issuance and available for
purchase under the Purchase Plan will be 1,000,000 shares of Common Stock,
plus an automatic annual increase equal to the lesser of 100,000 shares of
Common Stock or .5% of the shares of Common Stock outstanding on the last day
of the immediately preceding fiscal year, or such lesser amount determined by
the Board of Directors.
Reasons for Approval of the Purchase Plan
The Board of Directors of the Company believes that the continued
growth and profitability of the Company depends on its ability to maintain a
competitive position in attracting, retaining and motivating its employees
and that the adoption of the Purchase Plan furthers such objectives by
providing a method whereby employees of the Company may acquire a proprietary
interest in the Company through the purchase of Common Stock. The following
summary of the Purchase Plan is qualified in its entirety by reference to the
full text of the Purchase Plan, a copy of which is attached as Exhibit C to
the electronic copy of this Proxy Statement filed with the SEC and may be
accessed from the SEC's home page (www.sec.gov). Additionally, a copy of the
Purchase Plan may be obtained by making a written request to Richard George,
the Chief Financial Officer of the Company.
Summary of the Purchase Plan
Eligibility. Persons eligible to participate in an offering under
the Purchase Plan are generally those employees (including directors of the
Company who are employees) who (i) are customarily employed on a full-time or
part-time basis by the Company and are regularly scheduled to work more than
20 hours per week for more than five (5) months in any calendar year; (ii)
are employed by the Company for at least twelve (12) months prior to
enrolling in the Purchase Plan; and (iii) are employed by the Company on the
first day of the applicable offering period. No employee will be granted an
option to participate in the Purchase Plan: (i) if, immediately after the
grant, such employee would own capital stock of the Company and/or hold
outstanding options to purchase stock possessing five percent or more of the
total combined voting power or value of all classes of stock of the Company;
or (ii) that permits such employee's rights to purchase stock under all stock
purchase plans of the Company to accrue at a rate that exceeds $25,000 in
fair market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any
time. The approximate number of persons eligible to participate in the
Purchase Plan is 50. As participation in the Purchase Plan is voluntary, the
Company cannot determine the number of shares of Common Stock to be purchased
by any particular group or individual.
Offering Periods. The Purchase Plan consists of consecutive
offering periods with a new offering period commencing on the first trading
day on or after January 1, April 1, July 1 and October 1 of each year,
respectively, and terminating on March 31, June 30, September 30 and December
31 of such year, respectively. The Board of Directors of the Company will
have the power to change the duration and frequency of the offering periods
with respect to future offerings without shareholder approval if such change
is announced at least five (5) days prior to the scheduled beginning of the
first offering period to be affected.
Payroll Deductions. Eligible employees participating in the
Purchase Plan may request that the Company withhold up to ten percent (10%)
of their compensation to be credited to their account. No interest will
accrue on such payroll deductions and an employee may not make any additional
payments into such account. An employee may discontinue participation in the
Purchase Plan or decrease the rate of payroll deductions not more than once
during each offering period. An employee may not increase the rate of payroll
deductions during an offering period.
Grant of Option. On the offering date of each offering period, each
eligible employee participating in such offering period will be granted an
option to purchase on the purchase date up to the largest number of whole
shares of Common Stock of the Company equal to an amount determined as
follows: an amount equal to (i) the percentage of the employee's compensation
that such employee has elected to have withheld multiplied by (ii) such
employee's compensation during the period of the offering, (iii) divided by
the purchase price. The maximum number of shares of Common Stock an employee
may purchase on each purchase date is 25,000.
Exercise of Option. Unless an employee withdraws from the Purchase
Plan, an employee's option for the purchase of shares will be exercised
automatically on each purchase date. Upon exercise, the employee will
purchase the maximum number of full shares of Common Stock subject to the
option and such shares will be purchased based upon the applicable purchase
price and the accumulated payroll deductions in his or her account. No
fractional shares will be issued and any money left over in a employee's
account after the purchase date will be retained in that employee's account
for the subsequent offering period. Any other amounts left over in an
employee's account after a Purchase Date will be returned to that employee.
Purchase Price. The purchase price of the shares of Common Stock to
be sold pursuant to any given offering is equal to the lesser of (i) 85% of
the fair market value of the shares on the offering date, or (ii) 85% of the
fair market value of the shares on the purchase date.
Changes In Capitalization. In the event of a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common
Stock effected without receipt of consideration by the Company, the maximum
number of shares each employee may purchase on a purchase date and the price
per share and the number of shares of Common Stock covered by each option
under the Purchase Plan which has not yet been exercised will be
proportionately adjusted.
Corporate Transactions. In the event of the dissolution or
liquidation of the Company, any offering period then in progress will
terminate immediately prior to the consummation of such action, unless
otherwise provided by the Board of Directors of the Company. In the event of
the sale of substantially all of the property or stock of the Company, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation, or any other transaction or series of related
transactions in which the Company's shareholder's immediately prior to such
transaction own less than 50% of the voting stock of the Company immediately
after such transaction, each option outstanding under the Purchase Plan will
be assumed or the equivalent option will be substituted by the successor
corporation. In the event that the successor refuses to assume or substitute
for outstanding options, each offering period then in progress will be
shortened and a new purchase date will be set, as of which date any offering
period then in progress will terminate.
Amendment or Termination. The Board of Directors may at any time
terminate or amend the Purchase Plan. No such termination of the Purchase
Plan may affect options previously granted, provided that the Purchase Plan
or an offering period may be terminated by the Board on a purchase date or by
the Board's setting a new purchase date with respect to an offering period
then in progress if the Board determines that termination of the Purchase
Plan or an offering period is in the best interests of the Company and the
shareholders or if continuation of the Purchase Plan or an offering period
would cause the Company to incur adverse accounting charges as a result of a
change after the effective date of the Purchase Plan.
Federal Income Tax Consequences
The following is a summary of the federal income tax consequences
that generally will arise with respect to participation in the Purchase Plan
and with respect to the sale of Common Stock acquired under the Purchase
Plan. The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code and is not a qualified
plan under Section 401(a) of the Code.
Tax Consequences to Participating Employees. In general, an
employee participating in the Purchase Plan will not recognize taxable income
upon enrolling in the Purchase Plan or upon purchasing shares of Common Stock
under the Purchase Plan. Instead, if an employee sells Common Stock acquired
under the Purchase Plan at a sale price that exceeds the price at which the
employee purchased the Common Stock, then the employee will recognize taxable
income in an amount equal to the excess of the sale price of the Common Stock
over the price at which the employee purchased the Common Stock. As described
below, a portion of that taxable income will be ordinary income, and a
portion may be capital gain.
If the employee sells the Common Stock for more than the purchase
price more than one year after acquiring it and more than two years after the
grant date, then the employee will recognize ordinary compensation income in
an amount equal to the lesser of (i) fifteen percent of the fair market value
of the Common Stock on the grant date and (ii) the excess of the sale price
of the Common Stock over the price at which the employee purchased the Common
Stock. Any further income will be long-term capital gain.
If the employee sells the Common Stock for more than the purchase
price within one year after acquiring it or within two years after the grant
date, which sale is referred to as a disqualifying disposition, then the
employee will recognize ordinary compensation income in an amount equal to
the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the employee purchased the Common
Stock. The employee will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value
of the Common Stock on the date that it was purchased. This capital gain will
be a long-term capital gain if the employee has held the Common Stock for
more than one year prior to the date of the sale and will be a short-term
capital gain if the employee has held the common stock for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under
the Purchase Plan will have no immediate tax consequences to the Company. In
general, neither the purchase nor the sale of Common Stock acquired under the
Purchase Plan will have any tax consequences to the Company except that the
Company will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by an employee upon making a sale of
Common Stock prior to having owned it for at least two years from the date of
grant of the option and one year from the date of exercise of the option. Any
such deduction will be subject to the limitations of Section 162(m) of the
Code.
Withholding. The amount that a employee elects to have deducted
from his or her pay for the purchase of Common Stock under the Purchase Plan
constitutes taxable wages and is subject to withholding.
Required Vote; Board Recommendation
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is required to approve the 2001 Employee
Stock Purchase Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THIS PROPOSAL
NO. 3.
PROPOSAL 4
ENGAGEMENT OF AUDITORS
At the annual meeting, a resolution will be presented to engage Ernst
& Young, LLP, as independent auditors, to audit the financial statements of the
Company for the current fiscal year and to perform other appropriate accounting
services. Ernst & Young, LLP audited the financial statements of Nonvolatile
Electronics, Incorporated (NVE) since the statements of the Company as of and
for the year ended December 31, 1990. Prior to the Company's reverse merger
with Premis Corporation November 21, 2000, PricewaterhouseCoopers, LLP audited
the financial statements of Premis Corporation. Ernst & Young, LLP has advised
the Company that it has no direct financial interest or material indirect
financial interest in the Company.
Representatives of Ernst & Young, LLP are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement, if they
so desire, and will be available to respond to questions of the shareholders.
The affirmative vote of a majority of the Common Shares present, in
person or by proxy, and entitled to vote at the Annual Meeting is required to
approve Proposal 3.
In the event the resolution to engage Ernst & Young, LLP, as
independent auditors is approved, the Company plans to file a notice of change
in certifying accountant on Form 8-K.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THIS PROPOSAL
NO. 4.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's
next annual meeting of shareholders must be received by the Secretary of NVE
Corporation at the Company's executive offices in Eden Prairie, Minnesota, no
later than February 15, 2002 for inclusion in the Company's proxy statement and
proxy relating to that meeting. Upon receipt of any such proposal, the Company
will determine whether or not to include such proposal in its proxy statement
and proxy in accordance with regulations governing the solicitation of proxies.
MISCELLANEOUS
The Board of Directors is not aware that any matter other than those
described in the Notice of Annual Meeting of Shareholders to which this Proxy
Statement is appended will be presented for action at the meeting. If, however,
other matters do properly come before the meeting, it is the intention of the
persons named in the proxy to vote the proxied shares in accordance with their
best judgment on said matters.
It is important that proxies be returned promptly with instructions as
to voting. Shareholders who do not expect to attend the meeting in person are
urged to mark, sign, date and send in the proxies by return mail.
By Order of the Board of Directors
June 15, 2001
EXHIBIT A
NVE CORPORATION
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the NVE Corporation Audit Committee (the
committee). The committee shall review and reassess the charter at least
annually and obtain the approval of the board of directors. The committee shall
be appointed by the board of directors and shall comprise at least two
directors, a majority of whom are independent of management and the Company.
Members of the committee shall be considered independent if they have no
relationship that may interfere with the exercise of their independence from
management and the Company. All committee members shall be financially
literate, (or shall become financially literate within a reasonable period of
time after appointment to the committee,) and at least one member shall have
accounting or related financial management expertise.
Statement of Policy
The committee shall provide assistance to the board of directors in fulfilling
their oversight responsibility relating to the Company's financial statements
and the financial reporting process, the systems of internal accounting and
financial controls, and the annual independent audit of the Company's financial
statements. In so doing, the committee will encourage free and open
communication between the committee, the independent auditors and management of
the Company. In discharging its oversight role, the committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the power to retain
outside counsel or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible
for auditing those financial statements. The committee will endeavor to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices, and ethical behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as
a guide with the understanding that the committee may supplement them as
appropriate.
* The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable
to the board and the audit committee, as representatives of the Company's
shareholders. The committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The committee shall discuss with the auditors their independence from
management and the Company and the matters included in the written disclosures
required by the Independence Standards Board. Annually, the committee shall
review and recommend to the board the selection of the Company's independent
auditors, subject to shareholders' approval.
* The committee shall discuss with the independent auditors the overall scope
and plans for their respective audits including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls. Further, the committee shall meet separately with the
independent auditors, with and without management present, to discuss the
results of their examinations.
* The committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the committee may represent the entire committee for
the purposes of this review.
* The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgment about the quality, not just acceptability,
of accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the committee by the independent auditors under generally
accepted auditing standards.
Indemnification
The Audit Committee members will be indemnified by the Company to the maximum
extent provided under Minnesota law or in accordance with any indemnification
agreements between the Company and such committee members.
EXHIBIT B
AUDIT COMMITTEE REPORT
June 1, 2001
The Audit Committee reviews the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of our
audited financial statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with management
and the independent auditors the audited financial statements. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 90 (Audit Committee
Communications). In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board No. 1 (independence discussions with Audit Committees) and discussed with
them their independence from the Company and its management. The Audit Committee
has also considered whether the independent auditors provision of other
non-audit services to the Company is compatible with the auditors' independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual Report
on SEC Form 10-KSB for the year ended March 31, 2001, for filing with the
Securities and Exchange Commission.
FEES BILLED TO COMPANY BY ERNST & YOUNG, LLP DURING FISCAL 2001:
Audit Fees
Total fees of $46,500 were incurred by the Company relating to the audit of the
March 31, 2001 financial statements, review of the financial statements
included in the Company's fiscal year 2001 quarterly reports on Form 10-QSB and
other matters directly relating to the March 31, 2001 audit and filing of the
March 31, 2001 Form 10-KSB.
All Other Fees
Fees billed to the Company by Ernst & Young, LLP and associated entities
during the Company's 2001 fiscal year for all other non-audit services rendered
to the Company, including tax related services, and services related to the
Company's reverse merger with Premis Corporation totaled $32,300.
AUDIT COMMITTEE MEMBERS
- -----------------------
Terrence Glarner
Herbert Goronkin
Robert Irish
Exhibit C
NVE CORPORATION
2001 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2001 Employee Stock Purchase
Plan of NVE Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company and
its Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Code. The provisions
of the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986 as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means NVE Corporation, a Minnesota corporation.
(e) "Compensation" means total cash compensation received by an Employee from
the Company or a Designated Subsidiary. By way of illustration, but not
limitation, Compensation includes regular compensation such as salary, wages,
overtime, shift differentials, bonuses, commissions and incentive compensation,
but excludes relocation, expense reimbursements, tuition or other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated
Subsidiary.
(f) "Continuous Status as an Employee" means the absence of any interruption or
termination of service as an Employee. Continuous Status as an Employee shall
not be considered interrupted in the case of (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Administrator, provided
that such leave is for a period of not more than 90 days, unless reemployment
upon the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted from time to time;
or (iv) in the case of transfers between locations of the Company or between
the Company and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a participant
pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all of the
Company's assets, or a merger, consolidation or other capital reorganization of
the Company with or into another corporation, or any other transaction or
series of related transactions in which the Company's shareholders immediately
prior thereto own less than 50% of the voting stock of the Company (or its
successor or parent) immediately thereafter.
(i) "Designated Subsidiaries" means the Subsidiaries that have been designated
by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided however that the Board shall only have the
discretion to designate Subsidiaries if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to
incur adverse accounting charges.
(j) "Employee" means any person, including an Officer, who is an Employee for
tax purposes and who is customarily employed for at least twenty (20) hours per
week and more than five (5) months in a calendar year by the Company or one of
its Designated Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Offering Date" means the first business day of each Offering Period of the
Plan.
(m) "Offering Period" means a period of three (3) months commencing on each
January 1, April1, July 1 and October.
(n) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" means this NVE Corporation 2001 Employee Stock Purchase Plan.
(p) "Purchase Date" means the last day of each Offering Period of the Plan.
(q) "Purchase Price" means with respect to a Offering Period an amount equal to
85% of the Fair Market Value (as defined in Section 7(b) below) of a Share of
Common Stock on the Offering Date or on the Purchase Date, whichever is lower;
provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan as a result of a shareholder-
approved amendment to the Plan, and (ii) all or a portion of such additional
Shares are to be issued with respect to one or more Offering Periods that are
underway at the time of such increase ("Additional Shares"), and (iii) the Fair
Market Value of a Share of Common Stock on the date of such increase (the
"Approval Date Fair Market Value") is higher than the Fair Market Value on the
Offering Date for any such Offering Period, then in such instance the Purchase
Price with respect to Additional Shares shall be 85% of the Approval Date Fair
Market Value or the Fair Market Value of a Share of Common Stock on the
Purchase Date, whichever is lower.
(r) "Share" means a share of Common Stock, as adjusted in accordance with
Section 19 of the Plan.
(s) "Subsidiary" shall have the meaning set forth in Code Section 424(f).
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a given Offering
Period and who has had Continuous Status as an Employee for at least twelve
(12) months immediately prior to such Offering Date shall be eligible to
participate in such Offering Period under the Plan, subject to the requirements
of Section 5(a) and the limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan if: (i) immediately after the grant,
such Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own capital stock of the
Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company; or (ii) such
option would permit his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company and
its Subsidiaries to accrue at a rate that exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods.
(a) Offering Periods. The Plan shall be generally implemented by a series of
Offering Periods of three (3) months' duration, with new Offering Periods
(other than the first Offering Period) commencing on or about January 1, April
1, July 1 and October 1 of each year (or at such other time or times as may be
determined by the Board of Directors). The first Offering Period shall
commence on October 1, 2001, and continue until December 31, 2001. The Plan
shall continue until terminated in accordance with Section 18 hereof. The
Board shall have the power to change the duration and/or the frequency of
Offering Periods with respect to future offerings without shareholder approval
if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected.
(b) The last day of each Offering Period is the "Purchase Date" for such
Offering Period.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing a
subscription agreement on the form provided by the Company and filing it with
the Chief Financial Officer of the Company or the stock brokerage or other
financial services firm designated by the Company (the "Designated Broker")
prior to the applicable Offering Date, unless a later time for filing the
subscription agreement is set by the Board for all eligible Employees with
respect to a given Offering Period. The subscription agreement shall set forth
the percentage of the participant's Compensation (subject to Section 6(a)
below) to be paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first full payroll date following
the Offering Date and shall end on the last payroll paid on or prior to the
Purchase Date of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
(a) A participant shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not less than one percent (1%) and not
more than ten percent (10%) (or such other percentage as the Board may
establish from time to time before an Offering Date) of such participant's
Compensation on each payday during the Offering Period. All payroll deductions
made by a participant shall be credited to his or her account under the Plan.
A participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan as
provided in Section 10, or, unless otherwise provided by the Board, on one
occasion only during an Offering Period may decrease the rate of his or her
Contributions with respect to the ongoing Offering Period, by completing and
filing with the Company a new subscription agreement authorizing a change in
the payroll deduction rate. The change in rate shall be effective as of the
beginning of the next calendar month following the date of filing of the new
subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) herein, a participant's payroll
deductions may be decreased during any Offering Period.
7. Grant of Option.
(a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
each Purchase Date a number of Shares of the Company's Common Stock determined
by dividing such Employee's Contributions accumulated prior to such Purchase
Date and retained in the participant's account as of the Purchase Date by the
applicable Purchase Price; provided however that the maximum number of Shares
an Employee may purchase during each Offering Period shall be 25,000 Shares
(subject to any adjustment pursuant to Section 18 below), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given date (the
"Fair Market Value") shall be determined by the Board in its discretion based
on the closing sales price of the Common Stock for such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), on a national securities exchange, as reported in The Wall
Street Journal; or if such price is not so reported, the mean of the bid and
asked prices per share of the Common Stock on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date). If the Company's Common Stock is not admitted for trading on a
national securities exchange as of the date on which Fair Market Value is to be
determined, then Fair Market Value shall be determined in such manner as may be
established or specified by the Board from time to time.
8. Exercise of Options. Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. Any payroll deductions
accumulated in a participant's account that are not sufficient to purchase a
full Share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided
in Section 10 below. Any other amounts left over in the participant's account
after a Purchase Date shall be returned to the participant. The Shares
purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Purchase Date. During his or her
lifetime, a participant's option to purchase Shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
Offering Period, the number of Shares purchased by each participant upon
exercise of his or her option shall delivered to the recipient, or if
authorized by the Board, be deposited into an account established in the
participant's name with the Designated Broker.
10. Voluntary Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to each
Purchase Date by giving written notice to the Company or the Designated Broker,
as directed by the Company. All of the participant's Contributions credited to
his or her account will be paid to him or her promptly after receipt of his or
her notice of withdrawal, and his or her option for the current period will be
automatically terminated, and no further Contributions for the purchase of
Shares will be made during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an Employee
prior to the Purchase Date of an Offering Period for any reason, including
retirement or death, the Contributions credited to his or her account will be
returned to him or her or, in the case of his or her death, to the person or
persons entitled thereto under Section 14, and his or her option will be
automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as an
Employee of the Company for at least twenty (20) hours per week during the
Offering Period of which the Employee is a participant, he or she will be
deemed to have elected to withdraw from the Plan and the Contributions credited
to his or her account will be returned to him or her and his or her option
terminated.
(d) A participant's withdrawal from an offering will not have any effect upon
his or her eligibility to participate in a succeeding offering or in any
similar plan that may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the Contributions of a participant
in the Plan.
12. Stock.
(a) Subject to adjustment as provided in Section 18, the maximum number of
Shares which shall be made available for sale under the Plan shall be 1,000,000
Shares (on a post-split basis), plus an automatic annual increase on the first
day of each of the Company's fiscal years beginning in 2001 and ending in 2010
equal to the lesser of (i) 100,000 Shares (on a post-split basis), (ii) .5% of
the Shares outstanding on the last day of the immediately preceding fiscal year
or (iii) a lesser amount determined by the Board. If the Board determines
that, on a given Purchase Date, the number of shares with respect to which
options are to be exercised may exceed (i) the number of shares of Common Stock
that were available for sale under the Plan on the Offering Date of the
applicable Offering Period, or (ii) the number of shares available for sale
under the Plan on such Purchase Date, the Board may in its sole discretion
provide that the Company shall make a pro rata allocation of the Shares of
Common Stock available for purchase on such Offering Date or Purchase Date, as
applicable, in as uniform a manner as shall be practicable and as it shall
determine in its sole discretion to be equitable among all participants
exercising options to purchase Common Stock on such Purchase Date.
(b) The participant shall have no interest or voting right in Shares covered by
his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be registered
in the name of the participant or in the name of the participant and his or her
spouse.
13. Administration. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of
the Plan and not inconsistent with the Plan, to construe and interpret the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan.
14. Designation of Beneficiary.
(a) A participant may designate a beneficiary who is to receive any Shares and
cash, if any, from the participant's account under the Plan in the event of
such participant's death subsequent to the end of an Offering Period but prior
to delivery to him or her of such Shares and cash. In addition, a participant
may designate a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to the
Purchase Date of an Offering Period. Beneficiary designations under this
Section 14(a) shall be made as directed by the Chief Financial Officer of the
Company.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such Shares and/or
cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such Shares and/or cash
to the spouse or to any one or more dependents or relatives of the participant,
or if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. Transferability. Neither Contributions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive Shares
under the Plan may be assigned, transferred, pledged or otherwise disposed of
in any way (other than by will, the laws of descent and distribution, or as
provided in Section 14) by the participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Section 10.
16. Use of Funds. All Contributions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be provided to participants by the
Company or the Designated Broker at least annually, which statements will set
forth the amounts of Contributions, the per Share Purchase Price, the number of
Shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) Adjustment. Subject to any required action by the shareholders of the
Company, the number of Shares covered by each option under the Plan that has
not yet been exercised and the number of Shares that have been authorized for
issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
Common Stock that may be purchased by a participant in an Offering Period, the
number of shares of Common Stock set forth in Section 12(a)(i) above, and the
price per Share of Common Stock covered by each option under the Plan that has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock (including any such change in the number of Shares of Common Stock
effected in connection with a change in domicile of the Company), or any other
increase or decrease in the number of Shares effected without receipt of
consideration by the Company; provided however that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive.
(b) Corporate Transactions. In the event of a dissolution or liquidation of
the Company, any Offering Period then in progress will terminate immediately
prior to the consummation of such action, unless otherwise provided by the
Board. In the event of a Corporate Transaction, each option outstanding under
the Plan shall be assumed or an equivalent option shall be substituted by the
successor corporation or a parent or Subsidiary of such successor corporation.
In the event that the successor corporation refuses to assume or substitute for
outstanding options, each Offering Period then in progress shall be shortened
and a new Purchase Date shall be set (the "New Purchase Date"), as of which
date any Offering Period then in progress will terminate. The New Purchase
Date shall be on or before the date of consummation of the transaction and the
Board shall notify each participant in writing, at least ten (10) days prior to
the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10. For purposes of
this Section 18, an option granted under the Plan shall be deemed to be
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction, each holder of an option under the
Plan would be entitled to receive upon exercise of the option the same number
and kind of shares of stock or the same amount of property, cash or securities
as such holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to the transaction, the
holder of the number of Shares of Common Stock covered by the option at such
time (after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 18); provided however that if the
consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the
transaction.
The Board may, if it so determines in the exercise of its sole discretion, also
make provision for adjusting the Reserves, as well as the price per Share of
Common Stock covered by each outstanding option, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of Shares of its outstanding Common Stock, and in
the event of the Company's being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend the Plan.
Except as provided in Section 18, no such termination of the Plan may affect
options previously granted, provided that the Plan or an Offering Period may be
terminated by the Board on a Purchase Date or by the Board's setting a new
Purchase Date with respect to an Offering Period then in progress if the Board
determines that termination of the Plan and/or the Offering Period is in the
best interests of the Company and the shareholders or if continuation of the
Plan and/or the Offering Period would cause the Company to incur adverse
accounting charges as a result of a change after the effective date of the Plan
in the generally accepted accounting rules applicable to the Plan. Except as
provided in Section 18 and in this Section 19, no amendment to the Plan shall
make any change in any option previously granted that adversely affects the
rights of any participant. In addition, to the extent necessary to comply with
Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any
successor rule or provision or any applicable law or regulation), the Company
shall obtain shareholder approval in such a manner and to such a degree as so
required.
(b) Without shareholder consent and without regard to whether any participant
rights may be considered to have been adversely affected, the Board shall be
entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
determines in its sole discretion advisable that are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements
of any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan; Effective Date. The Plan shall become effective upon
approval by the Company's shareholders. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 19.
23. Additional Restrictions of Rule 16b-3. The terms and conditions of options
granted hereunder to, and the purchase of Shares by, persons subject to Section
16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-
3. The Plan shall be deemed to contain, the options granted under the Plan
shall contain, and the Shares issued upon exercise thereof shall be subject to,
such additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
[NVE CORPORATION LOGO]
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard George and Daniel A. Baker, or
either of them, the attorneys and proxies of the undersigned, with full power of
substitution, to attend the annual meeting of shareholders of NVE Corporation,
a Minnesota corporation (hereinafter called the "Company"), to be held on
Thursday, July 19, 2001 at 3:30 p.m., local time, at the Marriott City Center
Hotel, 30 South Seventh Street, Minneapolis, Minnesota 55402, and any
adjournment thereof, and thereat to vote the undersigned's shares in the
Company.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, AND 4.
1. Election of directors: To elect the management slate of directors.
01 Terrence Glarner 03 James Daughton 05 Robert Irish
02 Daniel A. Baker 04 Herbert Goronkin
[ ] Vote FOR all nominees (except as marked) [ ] Vote WITHHELD from all nominees
Instructions: To withhold authority to vote for any nominee, strike a line
through the name(s).
2. Proposal to amend the 2000 NVE Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. Proposal to approve adoption of the 2001 NVE Employee Stock Purchase Plan.
[ ] For [ ] Against [ ] Abstain
4. Proposal to engage Ernst & Young, LLP as the independent
certified public accountants to audit the financial
statements of the Company for the fiscal year ending
March 31, 2001. [ ] For [ ] Against [ ] Abstain
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned hereby acknowledges receipt of Notice of said Annual Meeting
and the accompanying Proxy Statement, each dated June 15, 2001.
Date __________________________________
Signature(s) in Box
___________________________________________
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Please sign exactly as name appears on the label. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.