-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UtiUXYzf4T2M9aVjdBWz+hwL1OQddHREFa9gizUxcBY6LBXCSiovl1JhMHFDZwLM ZYawhhvIyiNGV1Cdl2YUUg== 0000912057-00-052416.txt : 20020425 0000912057-00-052416.hdr.sgml : 20020425 ACCESSION NUMBER: 0000912057-00-052416 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001121 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 20001206 DATE AS OF CHANGE: 20001207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NVE CORP /NEW/ CENTRAL INDEX KEY: 0000724910 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 411424202 STATE OF INCORPORATION: MN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 005-59937 FILM NUMBER: 00784314 BUSINESS ADDRESS: STREET 1: 11409 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 9528299217 MAIL ADDRESS: STREET 1: 11409 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: PREMIS CORP DATE OF NAME CHANGE: 19920703 8-K 1 a2032518z8-k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): November 21, 2000 ------------------------------ NVE Corporation ---------------- (Exact name of registrant as specified in its charter) Minnesota ---------- (State or other jurisdiction of incorporation) 0-12196 41-1424202 - ------------------------------- ------------------------ Commission File Number I.R.S. Employer Identification number 11409 Valley View Road, Eden Prairie, Minnesota 55344 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip code) Issuer's telephone number, including area code: (952) 829-9217 ----------------- PREMIS Corporation 13220 County Road 6, Plymouth, Minnesota 55441 ---------------------------------------------- (Former name or former address, if changed since last report) ITEM 1. CHANGE IN CONTROL OF REGISTRANT. Effective as of November 21, 2000 (the "Effective Date"), and pursuant to that certain Agreement and Plan of Merger (the "Agreement"), dated as of September 22, 2000, by and between Nonvolatile Electronics, Incorporated (NVE), a Minnesota corporation ("Merged NVE"), and PREMIS Corporation ("Premis"), a Minnesota corporation, Merged NVE has successfully merged with and into Premis (the "Merger"), with Premis surviving under the new name NVE Corporation (the "Company"). In connection with the Merger, as of November 20, 2000 (the "Record Date"), all outstanding shares of common stock of Premis held as of the Record Date were converted in a reverse stock-split to .2 shares of common stock of Premis. Similarly, as of the Effective Date, all shares of common stock of Merged NVE outstanding immediately prior to the Effective Date were converted into 3.5 shares of stock of the Company. As this was a stock for stock transaction, no loans were utilized in connection with the Merger. A copy of the Agreement is incorporated as an exhibit to this Form 8-K by reference to the Definitive Proxy Statement on Schedule 14 filed by Premis on November 16, 2000, and is incorporated herein in its entirety. The foregoing description is modified by such reference. As of the Effective Date, and pursuant to the terms of the Agreement, the directors of the Company are James Daughton, Terrance Glarner, Herbert Goronkin and Robert Irish, the former directors of Merged NVE. Such directors have elected the following officers: James Daughton, President and Chief Executive Officer, and Richard George, Treasurer and Chief Financial Officer. Both Dr. Daughton and Mr. George held similar offices for Merged NVE. Prior to the Merger, F.T. Biermeier, the President and Chief Executive Officer of Premis, controlled Premis by holding 36.6% of the outstanding shares of common stock of Premis. As a result of the Merger, however, the controlling shareholders of Merged NVE have obtained control of the Company. Set forth below is certain information with respect to approximate beneficial ownership of the Company as of November 21, 2000, by each director, all directors and officers as a group and all persons owning more than 5% or more of the common stock of the Company. Except as otherwise noted below, each person and group identified below possesses all voting and investment discretion with respect to the shares listed below.
NAME ADDRESS SHARES OWNED PERCENT ---- ------- ------------ ------- Norwest Equity Partners(1) 3600 IDS Center 7,577,434 44.8% 80 S. 8th St. Minneapolis, MN 55402 James Daughton 18687 Melrose Chase 2,700,632(2) 16% Eden Prairie, MN 55347 Motorola, Inc. c/o Don McLellan 1,750,000 10.3% 1303 East Allonquin Rd. Schaumberg, IL 60196 Herbert Goronkin 8641 S. Willow Dr. 0 0% Tempe, AZ 85284 Richard George 5145 Tifton Dr. 472,500(3) 2.8% Edina, MN 55439 Robert Irish 17910-39th Place North 182,261(4) 1.1% Plymouth, MN 55446-1318 Terrence Glarner 3600 IDS Center 3,200(5) .02% 80 S. 8th St. Minneapolis, MN 55402 All Company directors, officers and owners 12,686,027 75% of more than 5% of the stock as a group (7 persons)
(1) Includes shares held by Norwest Equity Partners IV, LLP, and Norwest Equity Partners V, LLP. (2) Excludes options to purchase up to 175,000 shares of common stock of the Company. (3) Excluded options to purchase up to 35,000 shares of common stock of the Company. (4) Includes shares of common stock of the Company controlled by Mr. Irish in various accounts. Excludes options to purchase up to 7,000 shares of common stock of the Company. (5) Excludes options to purchase up to 29,000 shares of common stock of the Company. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS The Merger of Merged NVE with and into Premis, with the Company surviving, was a stock for stock transaction and no loans were utilized in the transaction. The consideration provided by the parties pursuant to the Agreement was negotiated between Merged NVE and Premis. In evaluating the Merger, Premis considered whether it would be in best interests of its shareholders to acquire a technology business through a merger or whether it should liquidate the corporation and distribute the remaining assets to its shareholders. Merged NVE considered the value of Premis's status as a publicly reporting company, its ability to succeed to the reporting status of Premis and the cash assets of Premis. As of the Effective Date, pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company became the successor issuer to Premis for reporting purposes under the Exchange Act and elects to report under the Exchange Act as of the Effective Date. As such, in order to comply with that certain letter dated as of April 7, 2000, addressed to the Director of Listing Qualifications of the Nasdaq Stock Exchange, Inc., by the Office of Small Business of the Securities and Exchange Commission, the Company is providing the forgoing information. FORWARD LOOKING STATEMENTS Statements included in this Current Report on Form 8-K, except for the historical information contained herein, may be forward-looking statements within the meaning of Section 21E of the Exchange Act, which are subject to the safe harbor created by that statute, and further, may contain forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "believe" or similar expressions identify forward-looking statements. Actual results may be different from those described in the forward-looking statements. Future events involve risks and uncertainties. Some of these risks and uncertainties are outside the control of management. Readers are cautioned against placing undue reliance on the forward-looking statements due to these risks and uncertainties and are cautioned to review the historical information and statements of risk contained in the Company's Securities and Exchange Commission reports. 2 DESCRIPTION OF THE BUSINESS GENERAL As a result of the Merger, the Company has acquired the business of developing, producing and marketing components that combine giant magnetoresistance (GMR) materials with integrated circuits. Merged NVE was formed in 1989 as the result of research completed by Dr. James Daughton while employed with Honeywell. Historically, Merged NVE has been a research and development (R&D) company funded largely by government contracts, and to a lesser extent by licenses, royalties and the sales of products and stock. Contract R&D has not only supplied revenues, but additionally, it has helped to supplement the R&D required for the product areas and fund operations. In each of 1999 and 1998, Merged NVE spent approximately 825,000 hours on R&D activities. In 1999, approximately $4,847,000 of the costs associated with such R&D were borne directly by the customers of Merged NVE, and in 1998, approximately $3,906,000 of the costs associated with such R&D were borne directly by the customers of Merged NVE. Merged NVE first sold and shipped products using GMR materials in 1995, and produced the first known products combining GMR materials with integrated circuits in 1998. At the time of the Merger, Merged NVE was recognized as a leader in both the development and application of GMR materials and other advanced magnetic materials. The largest customer of Merged NVE at the time of the Merger was the United States government and, although no current problems exist with respect to any government contract or with the Company's vibrant relationship with the government funding vehicles, disqualification as a vendor to the United States government would be a serious setback for the Company on a going forward basis and would likely hamper future R&D activity. Merged NVE developed the capability to deposit and optically define conductor, dielectric and metal films, and to fully integrate circuit and magnetic device design. Additionally, Merged NVE acquired certification to manufacture products under ISO 9001. Due to product sales abroad, however, Merged NVE also acquired some limited revenue risks from fluctuations in values of foreign currency. The product areas acquired by the Company, including sensors, signal isolators and nonvolatile memories, are discussed below. PRODUCTS SENSORS. Sensors combine integrated circuits with GMR material. This GMR material is deposited in layers and lithographically formed into resistors which change value when introduced to a magnetic field. The resistors are then connected together with transistors to form circuits that are sensitive to magnetic fields. These circuits are then packaged in much the same way as conventional integrated circuits. Other products developed by Merged NVE are produced by similar methods. Sensors are quite small and they are very sensitive to magnetic fields. In addition, they are able to operate at relatively high temperatures (125 degrees Centigrade and higher). This combination of attributes should allow them to be used in a variety of industrial control applications. Over the past year, Merged NVE has concentrated its marketing efforts on pneumatic cylinder position sensing. As a result, three of the top four users of sensors have started integrating the Merged NVE sensor, and several other smaller users are in the process of converting to the Merged NVE sensor. New applications the Company may target include currency detection, in-bearing sensors, pacemakers, anti-skid brake systems ("ABS"), currency detection and medical electronics. As a result of the Merger, the Company has acquired US and foreign patents for the GMR materials used in its sensor and a US patent for the circuit configuration. The Company has also 3 obtained know-how in the following areas: sputtering of the GMR materials; maintenance of process and packaging compatibility with integrated circuits; plating of thick magnetic materials for shielding and flux concentration; sensor and circuit design; and testing techniques. At this time, the Company does not know of any direct competitor that manufactures a similar sensor. Historically, Merged NVE has used a combination of distributors, manufacturers' representatives and direct sales for sales of the sensor. The Company plans to continue to use this combination for the foreseeable future. Distributors handle smaller orders (typically under $1000), while manufacturers' representatives and direct sales account for larger orders. The largest sensor order from Merged NVE totaled approximately $100,000. Prior to the Merger, Merged NVE was in the process of developing sensors for the industrial controls, ABS and currency detection markets. The Company will continue this development, as it typically takes from three to five years from start of development to sales in the automotive markets, and from one to three years from the start of development to sales in the industrial controls market. ISOLATORS. Isolators reduce or eliminate ground noise in communications carried by wire which is the result of connecting electrical circuits having independent grounds. In some cases, isolators may also provide for limited protection against electrical damage. The isolator developed by Merged NVE uses the ISOLOOP-Registered Trademark-, an integrated coil made by integrated circuit techniques that are electrically insulated from a sensor made from GMR resistors and integrated circuits, and packaged in a standard integrated circuit package. The resulting isolator is faster and smaller than any other existing known approach, as well as being very cost competitive. The two main competing technologies of which the Company is aware are opto-isolators and inductive isolators. The fastest opto-isolators currently run at frequencies below 20 million cycles per second, whereas ISOLOOP-Registered Trademark- isolators operate at 100 million cycles per second, with the potential to run ten times faster than the frequency currently achieved. Inductive isolators require special data encoding in order to transmit logic signals, whereas ISOLOOP-Registered Trademark- isolators do not require such signals. Furthermore, ISOLOOP-Registered Trademark- isolators require less board area than either the opto-isolators or the inductive isolators. Isolators are commonly used in a variety of communication networks. Differences in ground potentials between pieces of electronics gear are virtually impossible to eliminate, and the resulting noise is often much larger than the logic signals transmitted. The isolator can virtually eliminate this noise. As a result of the high speed of the ISOLOOP-Registered Trademark- isolators, signal isolation in high speed communications will be possible for systems using random signal transmission in wires. Isolation in back planes of PC's and other high speed systems may enable these systems to operate at higher speeds. As ISOLOOP-Registered Trademark- products have the potential for high growth, the Company currently anticipates that the sales of isolator products will account for a significant portion of the Company's revenues in the future. The Company has acquired Merged NVE's basic patent on the use of a magnetic sensor and integrated coils to construct an isolator. Patents containing several improvements on this basic patent have also been filed. These patents, together with know-how in the design, processing, packaging and testing of the ISOLOOP-Registered Trademark- products, are the primary barriers to those competing with the Company' isolator products. Initial distribution channels for isolators have been established in the United States, Europe, Japan, Korea, China and Taiwan. Domestically, up to the time of the Merger, Merged NVE had used direct sales and appointed distributors for distribution of its isolators, however, future distribution may include the use of 4 additional distributors or manufacturers' representatives. Additionally, the Company has participated in initial discussions with a major producer of opto-isolators who may be interested in "private labeling" of ISOLOOP-Registered Trademark-products. Prior to the Merger, sales of isolators have typically been for purposes of design analysis and low volume production. Additionally, isolators have been sold to many large electronics and semiconductor corporations for testing purposes. The Company believes that, initially, its isolators may be used in applications of data communications in the industrial and telecommunications markets. The typical time from design to production orders in these markets is one to three years. MRAM. Magnetoresistive computer memory technology ("MRAM") is a nonvolatile memory, meaning that data is retained after electrical power to the memory chip is removed, invented by Dr. Arthur Pohm and Dr. James Daughton while they were employed at Honeywell. In MRAM, data is stored in the magnetism of thin films of iron, nickel and cobalt alloys and then recovered through the magnetoresistive properties of devices made chiefly of these alloys. Dr. James Daughton founded Merged NVE with the intent to develop one or more commercial applications for MRAM and other GMR products. After the discovery of GMR, and in conjunction therewith, a considerable amount of innovative work in MRAM had been done at Merged NVE. In fact, Merged NVE invented several memory cells and modes of operation that are being adapted by several large companies including Motorola, IBM and Honeywell. Although MRAM is not currently in production at the Company or elsewhere, there are ongoing development efforts at various companies, including Motorola, Honeywell, USTC, IBM and Hewlett Packard. The advantages that MRAM has over other solid state nonvolatile memory technologies are its ability to write fast (less than 100 billionths of a second) and indefinitely (other competing technologies are limited to about one million write cycles and will wear out with continuous writing in less than a second). Applications that could potentially use these properties include: cameras and copiers, reconfigurable computing, cell phones and other "imbedded" memory applications. The Company believes that the patent coverage it acquired from Merged NVE for MRAM is broad. Not only did it acquire the intellectual property of Merged NVE relating to MRAM, but further, the Company believes that it has either acquired or will have the right to acquire a sublicense for Honeywell MRAM technology. The Company further acquired rights under license agreements with Motorola and USTC. If MRAM products are produced under the Company's license agreements, it could potentially earn significant revenues from initial payments and royalties. There is also potential for the Company to produce MRAM niche products. The Company is currently funded under a research contract to develop a memory chip for use in reconfigurable computing. As MRAM is still in development stages at the Company and elsewhere, it is difficult to forecast the potential revenues that the Company could earn from the licensing and sale of niche memory. Current forecasts anticipate minor revenues from MRAM for the next several years, however, this forecast may change if holders of MRAM licenses have success in their product development and introduction. CONTRACT R&D As was the case for Merged NVE, contract R&D will provide a majority of the Company's revenues. Contract R&D was the source of Merged NVE's underlying patents and product developments for the sensor, isolator and MRAM products. 5 The Company acquired 16 US patents and 14 patents pending, from Merged NVE. Additionally, the Company acquired 2 foreign patents and 6 foreign patents pending. The Company's issued U.S. and foreign patents are listed in exhibits 99.1 and 99.2, which are attached to this current report in Form 8-K. By virtue of a technology license agreement with Dr. James Daughton, the Company believes that it either has acquired or may acquire rights to sublicense certain of Honeywell's intellectual property in the MRAM technology. It is projected that activities in this area will result in additional intellectual property, enhancement to current product lines, license revenue and possibilities for future product areas. While contract R&D will be a very important component of the Company's business, the percentage of total revenues from contract R&D may shrink if there is significant growth in product sales. COMPETITION Three of the Company's chief competitors in sensors are Honeywell, Allegro and Phillips. Honeywell and Phillips make magnetoresistive sensors using a traditional nickel iron alloy rather than the GMR materials used by the Company. Allegro makes very cost competitive sensors using a Silicon Hall, however, Silicon Hall sensors are not as sensitive to magnetic fields as those of the Company. These competitors, as well as several other sensor producers, have greater financial resources and larger R&D budgets and more fully developed distribution systems than those of the Company. Agilient, a Hewlett Packard spin-off, is the leading producer of high speed opto-isolators. Some of the other top producers of opto-isolators are Infineon, NEC, Toshiba and Fairchild Semi-conductor. These competitors, as well as several other isolator producers, have greater financial resources and larger R&D budgets and more fully developed distribution systems than those of the Company. Motorola, IBM, Hewlett Packard, USTC and Honeywell have significant R&D efforts in MRAM technology. Hewlett Packard and USTC have stated they plan to introduce MRAM products in the next year, and Motorola has stated that it plans to introduce MRAM products within the next couple of years. Significant new inventions by larger companies with greater financial resources and R&D budgets could erode the value of the Company's MRAM technology, and the licenses thereto. EMPLOYEES The Company currently has 56 employees, 49 of which are full-time employees: one executive, four administrative employees, six sales and marketing employees, 20 technicians and 25 scientists. Nine current employees have earned doctorate degrees. No employee of the Company is represented by a labor union or is subject to a collective bargaining agreement, and the Company believes that it maintains good relations with its employees. RISK FACTORS THE LIQUIDITY OF THE COMMON STOCK OF THE COMPANY MAY BE LIMITED BY BROKER-DEALER REGULATIONS CONCERNING SALES OF "PENNY STOCK." Federal regulations promulgated under the Exchange Act regulate the trading of so-called "penny stocks" (the "Penny Stock Rules"), which are generally defined as any security not listed on a national securities exchange or Nasdaq, priced at less than $5.00 per share and offered by an issuer with limited net tangible assets and revenues. In addition, equity securities listed on Nasdaq that are priced at less than $5.00 per share are deemed penny stocks for the limited purpose of Section 15(b)(6) of the Exchange Act. Therefore, trading of common stock of the Company, if it is priced below $5.00 per share (which is consistent with current pricing), will be subject to the provisions of Section 15(b)(6) of the Exchange Act, which make it unlawful for any broker-dealer to participate in a distribution of any penny stock without the consent of the SEC if, in the exercise of reasonable care, the 6 broker-dealer is aware of or should have been aware of the participation of a previously sanctioned person. In such event, it may be more difficult for broker-dealers to sell the common stock of the Company, and purchasers of shares of common stock of the Company may experience difficulty in selling such shares in the future in secondary trading markets. So long as the common stock of the Company is not traded in the Nasdaq SmallCap Market or Nasdaq National Market, trading, if any, is subject to the Penny Stock Rules. Under Exchange Act Rule 15g-8, broker-dealers must take certain steps prior to selling a penny stock. Many brokers refrain from any trading in such stock as a result of the requirements which include: - obtaining financial and investment information from the investor; - obtaining a written suitability questionnaire and purchase agreement signed by the investor; - providing the investor with a written identification of the shares being offered and in what quantity; and - delivering to the investor a written statement setting forth the basis on which the broker-dealer approved the investor's account for the transaction. If the Penny Stock Rules are not followed, the investor has no obligation to purchase the shares. Accordingly, the application of the Penny Stock Rules makes it more difficult for broker-dealers to sell the common stock, and purchasers may have difficulty in selling the shares in secondary trading markets. EFFECTIVE ON JULY 17, 1998, THE COMMON STOCK OF THE COMPANY WAS DELISTED FROM TRADING ON THE NASDAQ NATIONAL MARKET AND THE NASDAQ SMALLCAP MARKET. The Company may apply for initial listing of its common stock on the Nasdaq SmallCap Market. To qualify, however, the Company must comply with the applicable requirements for initial inclusion on the Nasdaq SmallCap Market. Failure to comply with these requirements, which requirements are not currently being met by the Company, may result in the common stock of the Company not qualifying for listing on the Nasdaq SmallCap Market. For listing on the Nasdaq National Market, the Company would have to comply with certain initial listing requirements that are more stringent than the comparable initial listing requirements for the Nasdaq SmallCap Market. YOU MAY EXPERIENCE VOLATILITY IN THE PRICE OF THE COMMON STOCK OF THE COMPANY. The market price of the common stock of the Company may be highly volatile and could be subject to wide fluctuations in response to quarterly variations in operating results; announcements of technological innovations or new software by the Company or its competitors, services or products; changes in financial estimates by securities analysts or other events or factors; and significant sales into a low volume trading market, many of which are beyond the control of the Company. In addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of many technology and service companies and that often have been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of the common stock of the Company. In the past, following periods of volatility in the market price for a company's securities, securities class action litigation often has been instituted. Such litigation could result in substantial costs and a diversion of management attention and resources, which could have a material adverse effect on the business, financial condition and operating results of the Company. 7 THE COMPANY DOES NOT INTEND TO PAY DIVIDENDS. The Company plans to retain all earnings in the foreseeable future for continued growth and does not expect to declare or pay any cash dividends in the foreseeable future. Moreover, the ability by the Company to pay dividends in the future may be restricted by its covenants with commercial lenders and institutional investors. THE COMPANY WILL BE CONTROLLED BY A SMALL NUMBER OF SHAREHOLDERS. Currently, the directors, executive officers and certain principal shareholders of the Company beneficially own approximately 75% of the outstanding common stock. As a result, such directors, officers and certain principal shareholders may have the ability to effectively control the election of the entire Board of Directors and the affairs of the Company, including, but not limited to, all fundamental corporate transactions such as acquisitions, mergers, consolidations and the sale of substantially all of the assets of the Company. THE DIRECTORS OF THE COMPANY MAY CREATE ADDITIONAL CLASSES OF STOCK WITHOUT SHAREHOLDER ACTION. The Board of Directors of the Company may at any time, without any action by the shareholders of the Company, designate and issue such classes or series of capital stock as it deems appropriate, and establish the rights, preferences and privileges of such capital stock, including dividend, liquidation and voting rights. No shares of preferred stock or other senior security are currently designated, and there is no current plan to designate or issue any such securities. The ability of the Board of Directors of the Company to designate and issue additional classes or series of capital stock could impede or deter an unsolicited tender offer or takeover proposal regarding the Company. The issuance of additional shares having preferential rights could adversely affect the voting power and other rights of holders of the common stock of the Company. MINNESOTA LAW CONTAINS CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of Minnesota law applicable to the Company could have the effect of discouraging certain attempts to acquire the Company, which could deprive the shareholders of the Company of opportunities to sell their shares at prices higher than prevailing market prices and may also have a depressive effect on the market price of the securities of the Company. THE LIABILITY OF THE MANAGEMENT OF THE COMPANY WILL BE LIMITED. The Articles of Incorporation of the Company provide, as permitted by Minnesota law, that its directors shall have no personal liability for certain breaches of their fiduciary duties to the Company. This provision may reduce the likelihood of derivative litigation against directors and may discourage shareholders from bringing a lawsuit against directors for a breach of their duty. THE COMPANY WILL BE DEPENDENT ON KEY PERSONNEL. For the foreseeable future, the Company will place substantial reliance upon the personal efforts and abilities of Dr. James Daughton, President and Chief Executive Officer. The loss of Dr. Daughton's services likely would have a material adverse effect on the business, operations, revenues and/or prospects of the Company. The Company currently has key man life insurance covering Dr. Daughton. The success of the Company is also dependent upon its ability to retain and hire additional highly skilled personnel. Competition among technology companies for experienced personnel is intense. There can be no assurance that the Company will be able to retain such personnel or hire and retain additional qualified and skilled personnel. THE SUCCESS OF THE PROPOSED OPERATIONS OF THE COMPANY IS HIGHLY SPECULATIVE. The success of the proposed plan of operation will depend to a great extent on the operations, financial condition and management of the Company. THE COMPANY WILL DEPEND ON CONTRACTS WITH VARIOUS GOVERNMENTAL SOURCES. The contracts that the Company has with the government provide that they may be cancelled at any time for any or no 8 reason. The cancellation of any contract could mean that the Company would have to curtail or stop operations or close permanently. THERE ARE RISKS ASSOCIATED WITH MANAGEMENT OF A CHANGING BUSINESS. The Company has experienced substantial changes in and expansion of its business and operations and expects that it will continue to experience periods of rapid change in connection with the intended development of GMR material-based products. The past expansion of Merged NVE has placed, and any future expansion of the Company would place, significant demands on the administrative, operational, financial and other resources of the Company. The Company expects operating expenses and staffing levels to increase substantially in the future. In particular, the Company intends to hire a significant number of additional skilled personnel, including persons with experience in the semiconductor industry, and, in particular, persons with sales and marketing experience. Competition for such personnel is intense, and there can be no assurance that the Company will be able to attract or retain additional highly qualified senior managers and technical persons in the future. The Company also expects to expend resources with respect to future expansion of its accounting and internal management systems and the implementation of a variety of new systems and procedures. In addition, the Company expects that future expansion will continue to challenge its ability to hire, train, motivate and manage its associates. If the revenues of the Company do not increase in proportion to its operating expenses, the management systems of the Company do not expand to meet increasing demands, the Company fails to attract and retain qualified personnel or the management of the Company otherwise fails to manage the expansion of the Company effectively, there would be a material adverse effect on the business, financial condition and operating results of the Company. THERE ARE RISKS ASSOCIATED WITH ENTERING NEW MARKETS. To obtain market share in the sales of sensors and isolators requires time for manufacturers to test, design and prototype new products. New product development cycles may take several years before a product is ready for market and sold in volume. During the development period, the Company or its representatives must assist the manufacturer with samples and technical support while achieving only minimal revenues. These long manufacturer development cycles may extend beyond the financial strength of the Company or the will of its distributors to endure. THE COMPANY FACES THE RISK OF PRODUCT LIABILITY CLAIMS. The Company, like all manufacturers, faces the risk of product liability claims. The Company will obtain product liability insurance to meet its current risks and will continue to evaluate risks as sales increase and product lines expand. There is no assurance, however, that the coverage limits of the insurance policy of the Company will be adequate. Litigation could result in substantial costs to, and a diversion of effort by, the Company, but may be necessary to defend the Company against such claims. Adverse determinations in any litigation could subject the Company to significant liabilities to third parties and prevent the Company from developing, selling or using its products, any of which could have a material adverse affect on the business of the Company. THE COMPANY WILL NEED ADDITIONAL FINANCING. The Company expects that it will need to raise additional funds in order to support more rapid expansion, develop new or enhanced services and products, respond to competitive pressures, acquire complementary businesses or technologies or respond to unanticipated requirements. If additional funds are raised through the issuance of equity securities, the percentage ownership of shareholders will be reduced, shareholders may experience additional dilution in net book value per share or such equity securities may have rights, preferences or privileges senior to those of the holders of the common stock of the Company. Additional financing may not be available when needed on terms favorable to the Company, if at all. If adequate funds are not available on acceptable terms, the Company may be unable to develop or enhance its services and products, take advantage of future opportunities or respond to competitive pressures or unanticipated 9 requirements, any of which could have a material adverse effect on the business, financial condition and operating results of the Company. THE COMPANY MAY UNDERTAKE ACQUISITIONS, JOINT VENTURES AND OTHER STRATEGIC RELATIONSHIPS. While the Company has no current agreements with respect to any potential acquisitions, the Company may make acquisitions in the future. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management's attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired companies. No assurance can be given as to the ability of the Company to consummate any acquisitions or integrate successfully any operations, personnel, services or products that might be acquired in the future, and the failure of the Company to do so could have a material adverse effect on the business, financial condition and operating results of the Company. THE COMPANY WILL BE DEPENDANT UPON ITS PROPRIETARY TECHNOLOGY. The Company holds several U.S. and foreign patents, as well as several pending patents. There is no assurance that any of the pending patents will issue. Additionally, as the Company will rely on a combination of trade secret practices and non-disclosure agreements with it employees and vendors to protect its rights to its products, there can be no assurance that any steps taken by the Company will be adequate to deter misappropriation of its proprietary rights or the development of competing products. Further, there is no assurance that the products of the Company do not infringe on the legal rights of others. Any such claims, with or without merit, can be time consuming and costly to defend. THE COMPANY MAY FIND ITS MRAM PATENTS AND SUBLICENSE RIGHTS TO BE INSUFFICIENTLY BROAD TO INSURE ITS PARTICIPATION IN A SUCCESSFUL MRAM MARKET. The Company believes that the patents it has issued and applied for, and the sublicense that it has either acquired or will have the right to acquire from Honeywell, are important to MRAM technology. If MRAM becomes a successful application of GMR technology in the manufacturing of computer memory, no assurances can be given that it will require the use of the patents of the Company or Honeywell, and therefore, generate future license fees and royalties for the Company. DESCRIPTION OF PROPERTY The principal executive office of the Company is located at 11409 Valley View Road, Eden Prairie, Minnesota 55344. The Company leases this space, which consists of approximately 5950 square feet of office space, pursuant to a five year lease agreement. The lease agreement will terminate on December 31, 2003. The annual rent is $54,948, $56,604, $58,272, $ 60,048 and $61,836, respectively, which is payable in monthly installments on the first day of the month. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company are as follows:
Name Age Position - ------------------ --------- ------------------------------------------------ James Daughton 64 President, Chief Executive Officer and Director Richard George 56 Treasurer and Chief Financial Officer Terrance Glarner 57 Director Herbert Goronkin 64 Director Robert Irish 61 Director
10 James Daughton, President, Chief Executive Officer and Director, age 64, has been an officer and director of the Company since the Effective Date of the Merger. Prior to the Merger, Dr. Daughton served as a director of Merged NVE from its inception in 1989 to the Effective Date of the Merger, and the President of Merged NVE from 1992 to the Effective Date of the Merger. 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. Richard George, Treasurer and Chief Financial Officer, age 56, has been an officer of the Company since the Effective Date of the Merger. Prior to the Merger, Mr. George served as the Chief Financial Officer of Merged NVE from March, 1995 to the Effective Date of the Merger. From 1991 to 1995, Mr. George served as Controller for Merged NVE. From 1966 to 1991, Mr. George held various financial and financial management positions in the areas of operations and contracts at Honeywell Inc. Mr. George received a B.A. in economics in 1966 from the University of Minnesota, where he later took graduate courses in law and management. Terrence Glarner, Director, age 57, has been a director of the Company since the Effective Date of the Merger. Prior to the Merger, Mr. Glarner served as a director of Merged NVE from August, 1999 to the Effective Time of the Merger. 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 and FSI. He is also a director of Oncotech, Inc. Herbert Goronkin, Director, age 64, has been a director of the Company since the Effective Date of the Merger. Prior to the Merger, Mr. Goronkin served as a director of Merged NVE from 1995 to the Effective Date of the Merger. 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 the Effective Date of the Merger. Prior to the Merger, Mr. Irish served as a director of Merged NVE from 1992 to the Effective Date of the Merger. Additionally, Mr. Irish was a founding investor in Merged 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 11 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 3 issued patents dealing with magnetic intrusion detection systems. EXECUTIVE COMPENSATION The following table sets forth the compensation paid to the executive officers of Merged NVE whose compensation exceeded $100,000 per year for the years 1999, 1998 and 1997:
ANNUAL OTHER COMPENSATION COMPENSATION ------------------------------------------------------------------------- NAME AND TITLE YEAR SALARY BONUS - -------------- ---- ------ ------ James Daughton(1).................. 1999 $147,500 $80,000 $33,925(2) President and CEO 1998 $137,500 $40,000 $31,625(2) 1997 $120,000 0 $27,600(2) John Myers......................... 1999 $102,080 $15,000 $23,478(2) Vice President 1998 $96,480 $10,000 $22,190(2) 1997 $85,807 0 $19,736(2)
(1) For a description of the stock and options held by Dr. Daughton, please see the table set forth in Item 1 of this Current Report on Form 8-K regarding beneficial ownership of the Company. (2) Representing 2% matching contributions to the Company's Employee Retirement 401(k), together with other fringe benefits such as insurance premiums. It is expected that the Company will compensate outside directors with stock options of the Company under terms to be determined. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Prior to the Merger, Terrence Glarner was a member of the Boards of Directors of both Merged NVE and Premis. Mr. Glarner held shares of common stock of Premis and options to purchase shares of common stock of both Premis and Merged NVE. Furthermore, Mr. Glarner acted as an associate of Norwest Venture Capital, a significant shareholder Merged NVE. Mr. Glarner was instrumental in the introduction of Premis and Merged NVE. Mr. Glarner did not receive any special fee or other compensation in connection with the Merger and he abstained from voting on the Merger as a director of both Merged NVE and Premis. Mr. Glarner did, however, vote for the Merger on behalf of Norwest Venture Capital and individually as a shareholder of Premis. Prior to the Merger, Robert Irish, held shares of common stock of both Merged NVE and Premis. Mr. Irish voted for the Merger as both a shareholder of Merged NVE and Premis. DESCRIPTION OF SECURITIES CAPITAL STOCK The authorized capital stock of the Company consists of 50,000,000 shares, 30,000,000 shares of which are designated common stock, $.01 par value, and 20,000,000 shares of which are undesignated 12 shares, $.01 par value. As of November 21, 2000, 16,919,008 shares of common stock of the Company are issued and outstanding, all of which will be fully paid and non-assessable. COMMON STOCK Holders of common stock of the Company have no preemptive, subscription, conversion or redemption rights pertaining to the shares. The absence of preemptive rights could result in a dilution of the interest of existing shareholders, should additional shares of the common stock of the Company or other capital stock convertible into common stock of the Company be issued. Holders of shares of common stock of the Company are entitled to receive such dividends, as may be declared by the Board of Directors of the Company, out of assets legally available therefore, and to share ratably in the assets of the Company available upon liquidation. Each share of common stock of the Company entitles the holder thereof to one vote, in person or by proxy, upon all matters submitted for a vote by the shareholders of the Company. Holders of common stock of the Company do not have cumulative voting rights for the election of directors. Thus, the owners of a majority of the voting power outstanding may elect all of the directors, if they choose to do so, and the owners of the balance of such shares would not be able to elect any directors. The rights of holders of the shares of common stock of the Company may become subject in the future to prior and superior rights and preferences in the event that the Board of Directors of the Company establishes one or more additional classes of common stock, or one or more series of preferred stock. PREFERRED STOCK At present, the Company has no plans to authorize or issue any shares of preferred stock. WARRANTS AND OPTIONS As of November 21, 2000, there are options to purchase up to 1,629,314 shares of common stock of the Company, at exercise prices ranging from approximately $.125 to $25, and warrants to purchase up to 313,145 shares of common stock of the Company, at exercise prices ranging from approximately $.17 to $.57, currently outstanding. The options expire at various dates through 2007, and the warrants expire at various dates through 2001. TRANSFER AGENT The transfer agent and registrar for the common stock of the Company is Corporate Stock Transfer, Inc. The offices of Corporate Stock Transfer, Inc. are located at 3200 Cherry Creek Drive South, #430, Denver, Colorado 80209. MANAGEMENT'S DISCUSSION AND ANALYSIS OF MERGED NVE GENERAL As a result of the Merger, the Company acquired the business of developing, producing and selling components that combine certain magnetic materials with integrated circuits. Over the past several years, Merged NVE engaged in materials and device research and development funded principally by contracts and grants from agencies of the US government. Merged NVE was able to license some of its technology, principally nonvolatile memory technology, and has used license payments to establish product designs and production of sensor and isolator products. The Company will 13 seek to expand product revenue while still relying on government contracts for basic technology development. The expansion of product revenue will require additional product development and marketing expenditures as well as increased working capital to fund receivables and inventories. Further, the Company will seek investment and revenue from license agreements to fund these expenditures. RESULTS FROM OPERATIONS TWELVE MONTHS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998 Revenues for the twelve months ending December 31, 1999 were $5,802,873, a decrease of 3.47% from revenues of $6,011,293 for the year ending December 31, 1998. The decrease in revenue was due primarily to an extraordinarily high license revenue in 1998 of $1,900,000 compared with a license revenue of $500,000 in 1999. Costs of sales increased by approximately 13.8% to $4,842,677 for the year ending December 31, 1999, compared to $4,253,754 for the year ending December 31, 1998. Much of this cost of sales increase was due to matching requirements for funding under terms of an Advance Technology Program ("ATP") on isolators with the Department of Commerce. Gross Margins decreased by approximately 45.4% to $960,196 for the current quarter and for the year ending December 31, 1999, as compared to $1,757,540 for the year ending December 31, 1998. These decreases were due primarily to higher cost of sales and lower license revenue in 1999. Research and development expenses (non-contract) decreased by approximately 35.7% to $304,400 for the year ending December 31, 1999, as compared to $473,128 for the year ending December 31, 1998. These decreases were supplemented by contract funding for isolators under an ATP from the Department of Commerce. Selling, general and administrative expenses for the year ending December 31, 1999, increased by 20.1% to $1,052,538 compared to $876,614 for the year ending December 31, 1998. The increase is due in part to higher legal costs for patent activities. Other Income/Expenses showed gains of $24,566 for the year ending December 31, 1999, compared to $28,758 for the year ending December 31, 1998. Lower interest income and higher interest expense were the primary causes for the difference. Merged NVE had a net loss for the year ending December 31, 1999, of $423,333 compared to net income of $377,540 for the year ending December 31, 1998. The primary causes were a lower license revenue in 1999 compared to 1998, and an increase in costs of sales due to matching requirements on an isolator research and development contract from the Department of Commerce. INFLATION Inflation has not had a significant impact on the operations of Merged NVE since its inception. Prices for products of Merged NVE and for the materials and labor going into such products are governed by market conditions. It is possible that inflation in future years could impact both materials and labor in the production of products. Rates paid by the US Government on research and development contracts are adjustable with inflation. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY 14 The common stock of the Company is traded on the OTC Bulletin Board under the symbol, "NVEC." The following table sets forth, for the fiscal quarters indicated, a summary of the high and low closing prices of the common stock of the Company. Prices through July 17, 1998, are high and low closing sale prices as reported by the Nasdaq National Market. Effective the close of business on July 17, 1998, the common stock of Premis was delisted from the Nasdaq National Market for failure to satisfy the revised listing maintenance standards adopted by Nasdaq. Prices for the periods after July 17, 1998, represent high and low bids as reported on the OTC Bulletin Board. Such bid information reflects inter-dealer prices, without retail mark-up, mark-down or commissions and does not necessarily reflect actual transactions.
COMMON STOCK ------------ LOW HIGH --- ---- FISCAL 1998 First Quarter $1.125 $1.797 Second Quarter .75 1.406 Third Quarter .75 1.313 Fourth Quarter .375 1.00 FISCAL 1999 First Quarter $.594 $.938 Second Quarter .734 1.000 Third Quarter .250 1.282 Fourth Quarter .375 1.406 FISCAL 2000 First Quarter $.438 $1.031 Second Quarter .438 818
The Company has never paid or declared any cash dividends on its common stock. On December 4, 1999, in connection with the final sale of assets, Premis made a distribution in partial liquidation to its shareholders. As of the Effective Date of the Merger, the Company had approximately 190 shareholders of record. LEGAL PROCEEDINGS The Company is not currently a party to any pending legal proceeding nor is any property of the Company subject to such proceeding. Furthermore, the Company is not aware of any potential claims, by any governmental authority or otherwise, that may be brought against it. RECENT SALES OF UNREGISTERED SECURITIES The following sets forth information with respect to all unregistered sales of securities by Merged NVE within the past three years: In December 1997, the Company issued 10,000 shares of its common stock to an individual in connection with the purchase of vested option shares at an exercise price of $.125 per share pursuant to the Company's 1990 Stock Option Plan. 15 In 1998, the Company issued an aggregate of 39,600 shares of its common stock to four individuals in connection with the purchase of vested option shares at an exercise price ranging from $.125 to $.50 per share pursuant to the Company's 1990 Stock Option Plan. In February 1998 and March 1998, the Company issued an aggregate of 8,380 shares of its common stock to three individuals in connection with the purchase of warrant shares at an exercise price of $.60 per share. In May 1998 and December 1998, the Company issued nonqualified and incentive stock options to twelve individuals to purchase an aggregate of 157,500 shares of its common stock at an exercise price of $.60 per share, exercisable over a five-year period, pursuant to its 1990 Stock Option Plan. In April 1999 and May 1999, the Company issued an aggregate of 8,500 shares of its common stock to three individuals in connection with the purchase of vested option shares at an exercise price ranging from $.125 to $.60 per share pursuant to the Company's 1990 Stock Option Plan. In December 1999, the Company issued an aggregate of 182,836 shares of its common stock to nineteen individuals pursuant to a private offering to its employees at a purchase price of $2.00. In 1999, the Company issued nonqualified and incentive stock options to four individuals to purchase an aggregate of 23,500 shares of its common stock at an exercise price of $.60 per share, exercisable over a five-year period, pursuant to its 1990 Stock Option Plan. In 2000, the Company issued an aggregate of 87,000 shares of its common stock to six individuals in connection with the purchase of vested option shares at an exercise price ranging from $.125 to $.60 per share pursuant to the Company's 1990 Stock Option Plan. In 2000, the Company issued an aggregate of 19,020 shares of its common stock to two individuals in connection with the purchase of warrant shares pursuant to a cashless exercise provided such warrants. In 2000, the Company issued nonqualified and incentive stock options to eight individuals to purchase an aggregate of 118,500 shares of its common stock at an exercise price of $.60 per share, exercisable over a five-year period, pursuant to its 1990 Stock Option Plan. No underwriter was used with respect to any sales of the unregistered securities described herein. Exemption from registration for the sales of the securities disclosed above was claimed pursuant to Section 4(2) of the Securities Act of 1993, as amended, (the "Act") as a transaction by an issuer not involving a public offering; Regulation D of the Act as a sale of securities without registration or Rule 701 of the Act as a sale of securities pursuant to certain compensatory benefit plans and contracts relating to compensation. 16 INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company has provisions in its Articles of Incorporation and Bylaws to (i) eliminate the personal liability of its directors for monetary damages resulting from breaches of their fiduciary duty (however, such provisions do not eliminate liability for breaches of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, the improper payment of dividends or redemption of stock or for any transaction from which the director derived an improper personal benefit) and (ii) indemnify its directors and officers to the fullest extent permitted by Minnesota law, including circumstances in which indemnification is otherwise discretionary. The Company believes that these provisions are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS 17 2.1 Agreement and Plan of Merger, dated as of September 22, 2000, by and between Nonvolatile Electronics, Incorporated (NVE) and PREMIS Corporation.(1) 3.1 Articles of Incorporation of NVE Corporation.(1) 3.2 By-laws of NVE Corporation. 10.1 NVE Corporation 2000 Stock Option Plan. 24.1 Consent of Accountants.(2) 24.2 Audited Financial Statements for December 1999.(2) 24.3 Unaudited Pro Forma Balance Sheet, as of September 30, 2000.(2) 99.1 List of NVE Corporation's Issued U.S. Patents. 99.2 List of NVE Corporation's Issued Foreign Patents. - ------------------------------------------------------------------------------- (1) Incorporated by reference to the Definitive Proxy Statement on Schedule 14 filed by PREMIS Corporation on November 16, 2000. (2) No financial statements are filed herewith. The Company is required to file financial statements by amendment hereto not later than 60 days after the date that this Current Report on Form 8-K must be filed. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. NVE CORPORATION Dated: December 6, 2000 By /s/ Dr. James Daughton -------------------------------------- Dr. James Daughton Chief Executive Officer By /s/ Richard George -------------------------------------- Richard George Chief Financial Officer 19 EX-3.2 2 a2032518zex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 BYLAWS OF NVE CORPORATION ARTICLE I NAME AND ADDRESS SECTION 1. NAME. The name of the Corporation is NVE Corporation. SECTION 2. REGISTERED OFFICE AND AGENT. The address of the registered office is 5805 Amy Drive, Edina, Minnesota 55436; and the name of the registered agent at this address is James M. Daughton. ARTICLE II FISCAL YEAR SECTION 1. FISCAL YEAR. The fiscal year of this Corporation shall begin on April 1 and end on March 31. ARTICLE III SHAREHOLDERS' MEETINGS SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders shall be held at the registered office of the Corporation or at any other place the Board of Directors may from time to time select. SECTION 2. ANNUAL MEETING. The annual meeting of the shareholders shall be held on February 15 of each year, if this day is not a holiday, and if a holiday, then on the first following day that is not a legal holiday. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the Corporation. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the president, the Board of Directors, or the holders of not less than three percent of the shares outstanding and entitled to vote. SECTION 4. NOTICE OF MEETINGS & WAIVER. Written notice stating the place, day, hour of the meeting, and the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of an annual meeting and not less than 3 nor more than 60 days before the date of a special meeting, either personally or by mail, by or at the direction of the President, or other officer or persons calling the meeting, to each registered holder entitled to vote at such meeting. SECTION 5. PROXIES. A shareholder entitled to vote may cast or authorize the casting of a vote by filing a written appointment of a proxy with an officer of the Corporation on or before the meeting at which the appointment is to be effective. A proxy shall not be valid after 11 months from the date of its execution. SECTION 6. QUORUM. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum is present the affirmative votes of a majority of the shareholders in attendance shall approve the action. The shareholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 7. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer book shall be closed for a stated period but not to exceed, in any case, 50 days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, the books shall be closed for at least 10 days immediately preceding the meeting. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice or to vote at a meeting of shareholders or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring the dividend is adopted, as the case may be, shall be the record date for the determination of shareholders. SECTION 8. ACTION WITHOUT A MEETING. An action required, or permitted to be taken at a meeting of the shareholders may be taken without a meeting by written action signed by all of the shareholders entitled to vote on that action. The written action is effective when it has been signed by all of those shareholders, unless a different effective time is provided in the written action. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. NUMBER AND QUALIFICATIONS. The businesses and affairs of the Corporation shall be managed by a Board of Directors initially comprised of five members, who need not be residents of the State of Minnesota or shareholders of the Corporation. SECTION 2. ELECTION. Members of the initial Board of Directors shall hold office until the first annual meeting of shareholders and until their successors shall have been elected and qualified. At the first annual meeting of shareholders, and at each annual meeting thereafter, the shareholders shall elect Directors to hold office until the next succeeding annual meeting. Each Director shall hold office for the term for which he is elected and until his successor shall be elected and qualified. SECTION 3. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. 2 SECTION 4. COMPENSATION. The Board of Directors may fix the compensation of directors. A director may serve the Corporation in a capacity other than that of director and receive compensation for the services rendered in that other capacity. SECTION 5. REMOVAL. Any one or all of the directors may be removed at any time, with or without cause, by the vote of a majority of the shares entitled to vote at an election of directors. SECTION 6. RESIGNATION. A director may resign at any time by giving written notice to the Corporation. The resignation is effective without acceptance when the notice is given to the Corporation, unless a later effective time is specified in the notice. ARTICLE V MEETINGS OF THE BOARD SECTION 1. PLACE OF MEETINGS. Meetings of the Board of Directors may be held at the registered office of the Corporation or at any other place the board may select. SECTION 2. ANNUAL MEETING. The Board of Directors shall meet each year immediately after the annual meeting of the officers and conduct other business. SECTION 3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called at any time by the president or by any two (2) members of the board. SECTION 4. NOTICE OF MEETINGS. Notice of the annual meeting of the Board of Directors need not be given. Written notice of each special meeting, setting forth the time and place of the meeting shall be given to each director at least 10 days before the meeting. This notice may be given either personally, or by sending a copy of the notice through the United States mail or by telegram, charges prepaid, to the address of each director appearing on the books of the Corporation. SECTION 5. WAIVER OF NOTICE. A director may waive in writing notice of a special meeting of the board either before or after the meeting; and his waiver shall be deemed the equivalent of giving notice. Attendance of a director at a meeting shall constitute waiver of notice of that meeting unless he attends for the express purpose of objecting to the transaction of business because the meeting has not been lawfully called or convened. SECTION 6. QUORUM. At meetings of the Board of Directors a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business. If a quorum is present, the acts of a majority of the directors in attendance shall be the acts of the board. SECTION 7. ACTION WITHOUT A MEETING. Any action that may be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so to be taken, shall be signed by all directors. 3 ARTICLE VI THE OFFICERS SECTION 1. OFFICERS. The executive officers of the Corporation shall be chosen by the Board of Directors and shall consist of a President, who is the Chief Executive Officer and a Chief Financial Officer. Two or more offices may be held by the same person. Other officers, assistant officers, agents and employees that the Board of Directors from time to time may deem necessary may be elected or appointed by the board. Officers shall hold office until their successors are chosen and have qualified, unless they are sooner removed from office as provided in these bylaws. SECTION 2. VACANCIES. Whenever vacancies shall occur in any office by death, resignation, increase in the number of offices of the Corporation, or otherwise, the same shall be filled by the Board of Directors and the officer so elected shall hold office until his successor is chosen and qualified. SECTION 3. SALARIES. The Board of Directors shall fix the salaries of the officers of the Corporation. The salaries of other agents and employees of the Corporation may be fixed by the Board of Directors or by an officer to whom that function has been delegated by the board. SECTION 4. REMOVAL OF OFFICERS AND AGENTS. An officer or agent of the Corporation may be removed by a majority vote of the Board of Directors whenever in their judgment the best interests of the Corporation will be served by the removal. The removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 5. THE PRESIDENT (CHIEF EXECUTIVE OFFICER). The president shall: (a) Have general active management of the business of the Corporation; (b) When present, preside at all meetings of the board and of the shareholders; (c) See that all orders and resolutions of the board are carried into effect; (d) Sign and deliver in the name of the Corporation any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the Corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the articles or bylaws or by the board to some other officer or agent of the Corporation; (e) Maintain records of and, whenever necessary, certify all proceedings of the board and the shareholders; and (f) Perform other duties prescribed by the board. SECTION 6. CHIEF FINANCIAL OFFICER. The chief financial officer shall: (a) Keep accurate financial records for the Corporation; 4 (b) Deposit all money, drafts, and checks in the name of and to the credit of the Corporation in the banks and depositories designated by the board; (c) Endorse for deposit all notes, checks, and drafts received by the Corporation as ordered by the board, making proper vouchers therefor; (d) Disburse corporate funds and issue checks and drafts in the name of the Corporation, as ordered by the board; (e) Render to the chief executive officer and the board, whenever requested, an account of all transactions by the chief financial officer and of the financial condition of the Corporation; and (f) Perform other duties prescribed by the board or by the chief executive officer. SECTION 7. DELEGATION OF DUTIES. Whenever an officer is absent or whenever for any reason the Board of Directors may deem it desirable, the board may delegate the powers and duties of an officer to any other officer or officers or to any director or directors. ARTICLE VII SHARE CERTIFICATES AND THE TRANSFER OF SHARES SECTION 1. SHARE CERTIFICATES. The share certificates shall be in a form approved by the Board of Directors. Each certificate shall be signed by the president. SECTION 2. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to treat the holder of record of shares as the holder in fact and, except as otherwise provided by the laws of Minnesota, shall not be bound to recognize any equitable or other claim to or interest in the shares. SECTION 3. TRANSFER OF SHARES. Shares of the Corporation shall only be transferred on its books upon the surrender to the Corporation of the share certificates duly indorsed or accompanied by proper evidence of succession, assignment or authority to transfer. In that event, the surrendered certificates shall be canceled, new certificates issued to the person entitled to them, and the transaction recorded on the books of the Corporation. SECTION 4. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of a certificate alleged to have been destroyed or lost if the owner makes an affidavit that it is destroyed or lost. The board, in its discretion, may as a condition precedent to issuing the new certificate, require the owner to give the Corporation a bond as indemnity against any claim that may be made against the Corporation on the certificate allegedly destroyed or lost. ARTICLE VIII SPECIAL CORPORATE ACTS SECTION 1. EXECUTION OF WRITTEN INSTRUMENTS. Contracts, deeds, documents and instruments shall be executed by the president unless the Board of Directors shall in a particular situation designate another procedure for their execution. 5 SECTION 2. SIGNING OF CHECKS AND NOTES. Checks, notes, drafts, and demands for money shall be signed by the officer or officers from time to time designated by the Board of Directors. SECTION 3. VOTING SHARES HELD IN OTHER CORPORATIONS. In the absence of other arrangement by the Board of Directors, shares of stock issued by any other corporation and owned or controlled by this Corporation may be voted at any shareholders' meeting of the Corporation by the president of this Corporation or, if he is not present at the meeting, by such person as the president of the Corporation shall by duly executed proxy designate to represent the Corporation at the meeting. ARTICLE IX AMENDMENTS SECTION 1. AMENDMENTS. The power to alter, amend, or repeal the Bylaws, or to adopt new Bylaws is vested in the Board of Directors. The Bylaws may contain any provision for the regulations and management of the affairs of the Corporation not prohibited by law or the Articles of Incorporation. 6 EX-10.1 3 a2032518zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 NVE CORPORATION 2000 STOCK OPTION PLAN 1. ESTABLISHMENT AND PURPOSE. 1.1 ESTABLISHMENT. NVE Corporation, a Minnesota Corporation, is establishing this 2000 Stock Option Plan (the "PLAN") for employees and others providing services to the Company. The Plan permits the granting of both Nonstatutory Options and Incentive Stock Options. 1.2 PURPOSE. The purposes of the Plan are to enhance shareholder investment by attracting, retaining and motivating employees and consultants of the Company and to encourage stock ownership by such employees and consultants by providing them with a means to acquire a proprietary interest in the Company's success. 2. DEFINITIONS. Unless the context clearly requires otherwise, when capitalized, the following terms have the meanings set forth below. 2.1 "AFFILIATE" means a corporation that, for purposes of Section 422 of the Code, is a Parent Corporation or Subsidiary Corporation of the Company, direct or indirect. 2.2 "BOARD" means the Board of Directors of the Company. 2.3 "CODE" means the Internal Revenue Code of 1986, as amended. 2.4 "COMMITTEE" means the committee, as specified in Section 6, appointed by the Board to administer the Plan, or the Board if no Committee is appointed. If the Board delegates powers to a Committee, and if the Company is or becomes subject to Section 16 of the Exchange Act, then, if necessary to comply with Section 16, the Committee will consist initially of no less than 2 members of the Board, each member being a "non-employee director," within the meaning of the applicable rules of the Exchange Act. 2.5 "COMPANY" means NVE Corporation, a Minnesota corporation. 2.6 "CONSULTANT" means any person or entity, including an officer or director of the Company who provides consulting, director or advisory services (other than as an Employee) to the Company. 2.7 "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the absence of any interruption or termination of employment in the case of an Employee, or provision of services in the case of a Consultant. Continuous Status as an Employee or Consultant will not be deemed to be interrupted in the case of sick leave, military leave or any other absence approved by the Board; provided, however, that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. 2.8 "DATE OF EXERCISE" means the date the Company receives notice by an Optionee of the exercise of an Option under Section 10.1 of the Plan. The notice indicates the number of shares of Stock that Optionee intends to exercise an Option. 2.9 "EMPLOYEE" means any person, including an officer or director of the Company, who is employed by the Company. 2.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2.11 "EXERCISE PRICE" means the amount for which one share of Stock may be purchased upon exercise of an Option, as specified in the applicable Option Agreement. 2.12 "FAIR MARKET VALUE" means (a) if the Stock is listed or admitted to trade on a national securities exchange, the closing price of the Stock, as published in the Midwest Edition of The Wall Street Journal, of the principal national securities exchange on which the Stock is so listed or admitted to trade, on such date, or, if there is no trading of the Stock on such date, then the closing price of the Stock on the next preceding date on which there was trading in such shares; (b) if the Stock is not listed or admitted to trade on a national securities exchange, the last price for the Stock on such date, as furnished by the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National Market Reporting System or a similar organization if the NASD is no longer reporting such information; (c) if the Stock is not listed or admitted to trade on a national securities exchange and is not reported on the National Market Reporting System, the mean between the bid and asked price for the Stock on such date, as furnished by the NASD; or (d) if the Stock is not listed or admitted to trade on a national securities exchange, is not reported on the National Market Reporting System and if bid and asked prices for the Stock are not furnished by the NASD or a similar organization, the values established by any means deemed fair and reasonable by 2 the Committee for purposes of the Plan. In the event that the Fair Market Value of the Stock is established by the Committee for purposes of the Plan, the Committee's determination is final and binding on all parties. 2.13 "INCENTIVE STOCK OPTION" means an Option granted under the Plan which is designated as an Incentive Stock Option and is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. 2.14 "NONSTATUTORY OPTION" means an Option granted under the Plan that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. Except as otherwise specified, Nonstatutory Options may be granted at the times and subject to the restrictions as the Board determines without conforming to the statutory rules of Section 422 of the Code applicable to incentive stock options. An Option granted pursuant to this Plan as an Incentive Stock Option which does not qualify as an Incentive Stock Option within the meaning of Section 422 of the Code at time of grant, or ceases to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code, and is not otherwise terminated pursuant to the Plan or the Stock Option Agreement, will be a Nonstatutory Option for purposes of the Plan. 2.15 "OPTION" means the right, granted under the Plan, to purchase Stock of the Company at the Exercise Price for a specified period of time. For purposes of the Plan, an Option may be either an Incentive Stock Option or a Nonstatutory Option. 2.16 "OPTIONEE" means a person to whom an Option has been granted under the Plan. 2.17 "PARENT CORPORATION" has the meaning set forth in Section 424(e) of the Code with the Company being treated as the employer corporation for purposes of this definition. 2.18 "SUBSIDIARY CORPORATION" has the meaning set forth in Section 424(f) of the Code with the Company being treated as the employer corporation for purposes of this definition. 2.19 "SIGNIFICANT STOCKHOLDER" means an individual who, within the meaning of Section 422(b)(6) of the Code, owns Stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent Corporation or Subsidiary Corporation of the Company. In determining whether an individual is a Significant Stockholder, an individual shall be 3 treated as owning Stock owned by certain relatives of the individual and certain Stock owned by corporations in which the individual is a shareholder, partnerships in which the individual is a partner and estates or trusts of which the individual is a beneficiary, all as provided in Section 424(d) of the Code. 2.20 "STOCK" means the common stock of the Company. 3. GENDER AND NUMBER. Except when otherwise indicated by the context, any masculine terminology when used in the Plan also includes the feminine gender, and the definition of any term in the singular also includes the plural. 4. SEVERABILITY. Wherever possible, each provision of the Plan is to be interpreted to be effective and valid under applicable law. If, however, any provision of the Plan is prohibited by or invalid under applicable law, that provision is ineffective only to the extent of the prohibition or invalidity, without invalidating the remainder of the provision or the remaining provisions of the Plan. 5. ELIGIBILITY AND PARTICIPATION. 5.1 ELIGIBILITY. All Employees are eligible to participate in the Plan and receive Incentive Stock Options and/or Nonstatutory Options. All Consultants are eligible to participate in the Plan and receive Nonstatutory Options. 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all Employees and Consultants those to whom it wishes to grant Options. The Committee determines the nature of and number of shares of Stock subject to each Option. 6. ADMINISTRATION. 6.1 THE COMMITTEE. Except as provided herein, the Committee administers the Plan. The Board may authorize one or more officers or directors of the Company to assist in the administration of the Plan, acting as a secondary committee within guidelines established from time to time by the Board. Within the limitations of this Section 6.1, any reference in the Plan to the Committee includes the secondary committee. 6.2 AUTHORITY OF THE COMMITTEE. The Committee has full power except as limited by law or by the Articles of Incorporation or Bylaws of the Company, and subject to this Plan, to determine the size and types of Options; to determine the terms and conditions of the Options in a manner consistent with the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, 4 or waive rules and regulations for the Plan's administration; and (subject to the provisions of Section 13) to amend the terms and conditions of any outstanding Option to the extent that the terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee may take any other action necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities to the secondary Committee. 6.3 DECISIONS BINDING. All determinations and decisions made by the Committee under the Plan and all related orders or resolutions of the Board of Directors are final, conclusive and binding on all persons, including the Company, its shareholders, Employees, Consultants, Optionees and successors. 7. STOCK SUBJECT TO THE PLAN. 7.1 NUMBER. The total number of shares of Stock made available for grant and reserved for issuance under the Plan is 3,620,500 shares. The aggregate number of shares of Stock available under the Plan is subject to adjustment as provided in Section 14.1. 7.2 LAPSED OPTIONS. If an Option expires or terminates for any reason without having been exercised in full, the unpurchased shares of Stock become available for other Options under the Plan, unless the Plan has terminated. 8. DURATION OF THE PLAN. Subject to shareholder approval, the Plan is in effect for ten (10) years from the date of its adoption by the Board. Any Options outstanding at the end of this period remain in effect in accordance with their terms. The Plan terminates before the end of this period if all Stock subject to the Plan has been purchased by exercise of Options granted under the Plan. 9. TERMS OF STOCK OPTIONS. 9.1 GRANT OF OPTIONS. (a) COMMITTEE DISCRETION. Subject to Section 7.1, Options may be granted to Employees or Consultants at any time and from time to time as determined by the Committee, except that Consultants may only receive Nonstatutory Options. The Committee has complete discretion in determining the recipient of Options among the Employees or Consultants, the number of shares of Stock subject to an Option and the number of Options granted to each Optionee. In making these determinations, the Committee may take into account the nature of services rendered by Employees or Consultants, their present and potential contributions to the 5 Company, and any other factors as the Committee in its discretion deems relevant. The Committee also determines whether an Option is to be an Incentive Stock Option or a Nonstatutory Option. (b) $100,000 LIMIT. The Committee may not grant an Optionee Incentive Stock Options exercisable for the first time during any calendar year in excess of $100,000. This limit applies to all plans of the Company under which Incentive Stock Options may be granted, including plans of any Parent Corporations and any Subsidiary Corporations of the Company. The Fair Market Value used for this calculation is the Fair Market Value determined at the date of the grant. This paragraph does not prevent the grant of Options in excess of the maximums established this paragraph, however, such excess will be treated as a Nonstatutory Option. (c) 1,500,000 SHARE LIMIT. No Optionee may be granted Options in any fiscal year to purchase an aggregate number of shares of Stock in excess of 1,500,000 shares per Optionee, subject to adjustment under Section 14.1. (d) AUTHORITY TO AMEND. The Committee has the express authority to issue amended Options for shares of Stock subject to an Option previously granted. An amended Option amends the terms of an Option previously granted and supersedes the previous Option. (e) STOCKHOLDER APPROVAL. No Options granted under the Plan are exercisable before the approval of the Plan by the shareholders of the Company in accordance with the Bylaws of the Company. 9.2 NO TANDEM OPTIONS. Where an Option granted under the Plan is intended to be an Incentive Stock Option, the Option may not contain terms under which the exercise of the Option would affect the Optionee's right to exercise another Option, or vice versa, so that the Option intended to be an Incentive Stock Option would be deemed a tandem stock option within the meaning of the regulations under Section 422 of the Code. 9.3 OPTION AGREEMENT. (a) USE OF OPTION AGREEMENT. As determined by the Committee on the date of grant, each Option is evidenced by an Option agreement (the "OPTION AGREEMENT") that includes the nontransferability provisions of Section 12.2 and specifies: whether the Option is an Incentive Stock Option or a Nonstatutory Option; the Exercise Price; the duration of the Option; the number of shares of Stock to which the Option applies; any vesting or serial exercise restrictions 6 that the Committee may impose; and any other terms or conditions that the Committee may impose. An Option Agreement may provide that a new Option will be granted automatically to the Optionee when the Optionee exercises a prior Option and pays the Exercise Price using Stock under Section 9.7. The Committee may require an Optionee to sign the Option Agreement. (b) RESTRICTIONS ON STOCK. At the discretion of the Committee, the Company may reserve to itself and/or its assignees in the Option Agreement (a) a right of first refusal to purchase all Stock that an Optionee, or Permitted Transferee (as hereinafter defined), may propose to transfer to a third party, and/or (b) a right to repurchase a portion of or all Stock held by an Optionee following such Optionee's termination at any time within 90 days after the later to occur of the Optionee's Termination Date and the date the Optionee purchases Stock under the Plan, for cash and/or cancellation of purchase money indebtedness, at the Optionee's Exercise Price. (c) INCORPORATION BY REFERENCE. All Option Agreements incorporate the provisions of the Plan by reference, with different provisions to apply depending upon whether the Option Agreement applies to an Incentive Stock Option or to a Nonstatutory Option. 9.4 EXERCISE PRICE. No Incentive Stock Option granted under the Plan may have an Exercise Price that is less than the Fair Market Value of the Stock on the date the Option is granted. Incentive Stock Options granted to Significant Stockholders must have an Exercise Price of not less than 110% of the Fair Market Value of the Stock on the date of grant. The Exercise Price for Nonstatutory Options may be less than the Fair Market Value of Stock on the date the Option is granted and are not subject to the restrictions applicable to Incentive Stock Options. 9.5 TERM OF OPTIONS. Each Option expires at the time determined by the Committee when the Option is granted, but no Option may be exercised after the 10th anniversary date of its grant. By its terms, an Incentive Stock Option granted to a Significant Stockholder may not be exercised after the 5th anniversary date of its grant. 9.6 EXERCISE OF OPTIONS. Options granted under the Plan are exercisable at the times and subject to the restrictions and conditions as the Committee in each instance approves, which need not be the same for all Optionees. 9.7 PAYMENT. Payment for all shares of Stock must be made at the time that an Option, or any part thereof, is exercised, and no shares may be issued until full payment has been made. Payment may be made in cash, cash equivalents or other form acceptable to the Committee, including without 7 limitation, in Stock having a Fair Market Value at the time of the exercise equal to the Exercise Price, provided that the Optionee has held such Stock for more than six months and such Stock has been paid for within the meaning of Rule 144 of the Securities Act of 1933, as amended, or the Optionee obtained such Stock in the public market. In the case of an Incentive Stock Option, the form of payment cannot prevent the Option from qualifying for treatment as an "incentive stock option" within the meaning of the Code. In addition, the Company may establish a cashless exercise program in accordance with Federal Reserve Board Regulation T. 10. WRITTEN NOTICE, ISSUANCE OF STOCK CERTIFICATES, STOCKHOLDER PRIVILEGES 10.1 WRITTEN NOTICE. An Optionee wishing to exercise an Option gives written notice to the Chief Executive Officer of the Company, in the form and manner prescribed by the Committee. 10.2 ISSUANCE OF STOCK CERTIFICATES. As soon as practicable after the receipt of written notice and payment, the Company delivers to the Optionee, or to a nominee of the Optionee, a certificate or certificates for the shares of Stock. The certificate may bear a legend restricting transfer if required under Section 15. 10.3 RIGHTS OF A STOCKHOLDER. An Optionee or any other person entitled to exercise an Option under the Plan does not have dividend rights, voting rights or other rights or privileges of a shareholder with respect to any Stock covered by an Option until the date of issuance of a stock certificate for the Stock. No adjustment is made for cash dividends or other rights for which the record date is before the issuance date, except as expressly provided in the Plan. 10.4 ESCROW. To enforce any restrictions on an Optionee's Stock, the Committee may require the Optionee to deposit all certificates representing Stock, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. 11. TERMINATION OF EMPLOYMENT. 11.1 DEATH. (a) Unless otherwise determined by the Committee, if an Optionee's employment in the case of an Employee, or provision of services in the case of a Consultant, terminates by reason of death, and prior to 8 his or her death the Employee or Consultant had been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised at any time before the expiration date of the Option or within six months after the date of the death, whichever period is shorter, by the person or persons entitled to do so under the Optionee's will. (b) If an Optionee's employment in the case of an Employee, or provision of service in the case of a Consultant, terminates by reason of death within 30 days after such Employee or Consultant terminates his or her Continuous Status as an Employee or Consultant, the Option may be exercised at any time before the expiration date of the Option or within six months after the date of the death, whichever period is shorter, by the person or persons entitled to do so under the Optionee's will. (c) If the Optionee fails to make a testamentary disposition of an Option or dies intestate, the Optionee's legal representative may exercise the Option. Options are exercisable only to the extent that they were exercisable as of the date of death. 11.2 TERMINATION OTHER THAN FOR CAUSE OR DUE TO DEATH. (a) TERMINATION. In the event of an Optionee's termination of Continuous Status as an Employee or Consultant, except when an Employee becomes a Consultant, other than by reason of death or for cause (as defined in Section 11.3), the Optionee may exercise the portion of his Option that was exercisable by the Optionee at the date of the termination (the "TERMINATION DATE") at any time within 30 days after the Termination Date. In any event, the Option cannot be exercised after the expiration of the term of the Option. Options terminate if not exercised within the applicable period. (b) DISABILITY. If the termination of Continuous Status as an Employee or Consultant occurs due to a disability, as defined in the Code, the Optionee may exercise the portion of any Option that was exercisable by such Optionee on Optionee's Termination Date within six months after such Termination Date. In any event, the Option cannot be exercised after the expiration of the term of the Option. Options terminate if not exercised within the applicable period. 11.3 TERMINATION FOR CAUSE. 9 (a) TERMINATION OF OPTIONS. If the Company terminates the employment, in the case of an Employee, or the provision of services, in the case of a Consultant, for cause (as defined below), any Option or Options held by the Optionee under the Plan, to the extent not exercised before the termination, terminate immediately. (b) DEFINITION OF "CAUSE." The term "cause" means: (i) Optionee's conviction of a felony which would materially damage the reputation of the Company; or (ii) material misappropriation by Optionee of the Company's property or other material acts of dishonesty by Optionee against the Company; or (iii) Optionee's gross negligence or willful misconduct in the performance of Optionee's duties that has a material adverse effect on the Company. 12. RIGHTS OF OPTIONEES. 12.1 SERVICE. Nothing in the Plan interferes with or limits in any way the right of Company to terminate any Employee's employment, or any Consultant's services, at any time, nor confers upon any Employee any right to continue in the employ of the Company, or upon any Consultant any right to continue to provide services to the Company. 12.2 RESTRICTIONS ON TRANSFER. (a) NONTRANSFERABLE. Except as otherwise provided by this Section 12.2, all Options granted under the Plan are nontransferable by the Optionee, other than by will or the laws of descent and distribution, and are exercisable during the Optionee's lifetime only by the Optionee. (b) COMMITTEE DISCRETION. The Committee may, in its sole discretion and with the consent of the Optionee: (i) grant Nonstatutory Options which are transferable within the restrictions of this Section 12.2; (ii) amend a then-existing Nonstatutory Option to allow for transferability of an Option within the restrictions of this Section 12.2; or 10 (iii) amend a then-existing Incentive Stock Option (whereby an Option will become a Nonstatutory Option) to allow for transferability of an Option within the restrictions of this Section 12.2 (collectively, the "TRANSFERABLE OPTIONS"). (c) LIMITED TRANSFERABILITY. Subject to the conditions in subsection (d) below, the Committee may, in its sole discretion, authorize all or a portion of the Transferable Options to be on terms that permit transfer of an Option by the initial Optionee of the Option (the "INITIAL OPTIONEE") to: (i) the spouse, children, step-children, grandchildren, step-grandchildren, siblings or parents of the Initial Optionee ("IMMEDIATE FAMILY MEMBERS"); (ii) a trust or trusts for the exclusive benefit of the Immediate Family Members; (iii) a partnership or other entity in which the Immediate Family Members are the only partners or equity owners; or (iv) a former spouse of the Initial Optionee under a qualified domestic relations order (collectively, a "PERMITTED TRANSFEREE"). (d) CONDITIONS OF TRANSFER. A transfer under Section 12.2(c) is subject to the following conditions: (i) there may be no consideration for the transfer; (ii) the Option Agreement under which the Options are granted, or any amendment thereto, is approved by the Committee, and expressly provides for transferability in a manner consistent with this Section 12.2; (iii) any Option or portion transferred by an Initial Optionee to a Permitted Transferee may be exercised by the Permitted Transferee only to the same extent as the Initial Optionee would have been entitled to exercise it, and remains subject to all of the terms and conditions that would have applied to the Option under the provisions of the Plan and Option Agreement, if the Initial Optionee had not transferred the Option or portion to the Permitted Transferred; (iv) subsequent transfers of transferred Options (including sale, assignment, pledge or other transfer) are prohibited except by will or the laws of descent and distribution; 11 (v) the Initial Optionee remains subject to applicable withholding taxes upon exercise of options transferred to a Permitted Transferee; (vi) the Company has no obligation to notify the Permitted Transferee of the expiration or early termination of any Option; (vii) the Committee may, in its sole discretion, require as a condition to the transfer of an Option, that the Permitted Transferee execute an agreement under which the Permitted Transferee would become a party to the applicable Option Agreement and agree that in the event the Company merges into or consolidates with another entity, the Company sells all or a substantial part of its assets, or the Company's Stock is subject to a tender or exchange offer, the Permitted Transferee will consent to the transfer or assumption of the Option, or accept a new option in substitution, if the Company requests the Permitted Transferee to do so; and (viii) the transfer is not effective unless and until the Initial Optionee has furnished the Committee written notice of the transfer, copies of all requested documents evidencing the transfer, and any other agreements as may be required by the Committee. 13. AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. 13.1 AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. The Board may at any time terminate, and from time to time may amend or modify, the Plan, except that without stockholder approval, the Board may not: (a) increase the total amount of Stock that may be purchased through Options granted under the Plan, except as provided in Section 14.1; (b) change the class of Employees or Consultants eligible to receive Options; or (c) change the provisions of Section 9.1 above to allow an Optionee to be granted Options in any fiscal year to purchase an aggregate number of shares of Stock in excess of 1,500,000 shares per Optionee, subject to adjustment under Section 14.1. 13.2 OPTIONS PREVIOUSLY GRANTED. No amendment, modification or termination of the Plan shall in any manner adversely affect any 12 outstanding Option under the Plan without the consent of the Optionee holding the Option. 14. CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, REORGANIZATION 14.1 ADJUSTMENTS. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Stock, a declaration of a dividend payable in a form other than Stock in an amount that has a material effect on the value of the Stock, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of shares of Stock, a recapitalization, a spin-off or a similar occurrence, the Committee may adjust as appropriate, in its sole discretion, one or more of: (a) the number of shares of Stock available for future grants under Section 7; (b) the number of shares of Stock covered by each outstanding Option; or (c) the Exercise Price under each outstanding Option. 14.2 OPTIONEE RIGHTS. Except as provided in this Section 14, an Optionee shall have no rights by reason of any issue by the Company of any class of capital stock or securities convertible into capital stock of any class, any subdivision or consolidation of shares of capital stock of any class, the payment of any capital stock dividend or any other increase or decrease in the number of shares of capital stock of any class. 14.3 DISSOLUTION OR LIQUIDATION. To the extent not previously exercised, Options terminate immediately before the dissolution or liquidation of the Company. 14.4 MERGER, EXCHANGE OR REORGANIZATION. In the event that the Company is a party to a merger, exchange or reorganization, outstanding Options are subject to the agreement of merger, exchange or reorganization. The agreement must provide for: (a) the continuation of the outstanding Options by the Company, if the Company is a surviving corporation; (b) the assumption of the outstanding Options by the surviving corporation or its parent or subsidiary; 13 (c) the 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 the Options. 14.5 ASSET SALE. In no event are any Option exercisable during the period immediately following the announcement of the sale and until all revenue resulting from a sale of assets has been distributed to the shareholders. In the event of the sale of all or substantially all of the Company's assets, at the discretion of the Company, the Options will: (a) remain outstanding; (b) be substituted for the options of the acquiring corporation or its parent or subsidiary; (c) become fully vested immediately prior to the sale and cancelled upon closing of the sale; or (d) be cancelled in exchange for payment of full value of the outstanding Options with cash or cash equivalents. 15. SECURITIES REGISTRATION. In the event that the Company deems it necessary or desirable to register under the Securities Act of 1933, as amended, or any other applicable statute, any Options or any Stock with respect to which an Option may be or has been granted or exercised, or to qualify any such Options or Stock under the Securities Act of 1933, as amended, or any other statute, then the Optionee must cooperate with the Company and take such action as is necessary to permit registration or qualification of the Options or Stock. Unless the Company has determined that the following representation is unnecessary, each person exercising an Option under the Plan may be required by the Company, as a condition to the issuance of the shares pursuant to exercise of the Option, to make a representation in writing: (a) that he or she is acquiring such shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part; and (b) that before any transfer in connection with the resale of the shares, he or she will obtain the written opinion of counsel for the Company, or other counsel acceptable to the Company, that the shares may be transferred. The Company may also require that the certificates representing the shares contain legends reflecting the foregoing. The Company will only require the foregoing investment representation from an Optionee, 14 inscription of a legend on the Optionee's share certificate and placement of a stop order with the Company's transfer agent if a registration statement is not in effect with respect to the shares issued under the Plan at the time the Optionee exercises the Option. 16. TAX WITHHOLDING. 16.1 TAX WITHHOLDING. Company has the power and the right to deduct or withhold, or require an Optionee to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Optionee's FICA obligation) required by law to be withheld with respect to any grant, exercise or payment made under or as a result of the Plan. The Company is not required to issue any Stock under the Plan until these obligations are satisfied. 16.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options, or upon any other taxable event hereunder, Optionees may elect, subject to the approval of the Committee and compliance with applicable laws and regulation, to satisfy the minimum withholding requirement, in whole or in part, by having the Company withhold shares having a Fair Market Value, on the date the tax is to be determined, equal to the minimum withholding requirement. 17. INDEMNIFICATION. To the extent permitted by law, each person who is or will have been a member of the Committee or of the Board is indemnified by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement, with the Company's approval, or paid by him in satisfaction of judgment in any action, suit, or proceeding against him, if he gives the Company an opportunity, at its own expense, to handle and defend before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification is not exclusive of any other rights of indemnification to which these persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them. 18. REQUIREMENTS OF LAW 18.1 REQUIREMENTS OF LAW. The granting of Options and the issuance of shares of Stock upon the exercise of an Option is subject to all applicable laws, rules and regulations, and to approvals by any governmental agencies or national securities exchanges, as may be required. 15 18.2 GOVERNING LAW. To the extent not preempted by federal law, the Plan, and all agreements under the Plan, are governed by the laws of the State of Minnesota. 18.3 COMPLIANCE WITH THE EXCHANGE ACT AND THE CODE. The Plan is intended to comply in all respects with applicable law and regulations including (a) with respect to those Optionees who are officers or directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the Securities and Exchange Commission, if applicable, and (b) with respect to Incentive Stock Options, Code Section 422. If any provision of the Plan is susceptible to more than one interpretation, the interpretation should be given as is consistent with all applicable law (including Rule 16b-3 and Code Section 422). Notwithstanding anything herein to the contrary, with respect to Optionees who are officers and directors of the Company for purposes of Section 16 of the Exchange Act, no grant of an Option will permit unrestricted ownership of Stock by the Optionee for at least six months from the date of the grant of such Option, unless the Board determines that the grant of such Option otherwise satisfies the then current Rule 16b-3 requirements. 19. EFFECTIVE DATE OF PLAN. Subject to Stockholder Approval of the Plan, the Plan shall be effective as of November 20, 2000, the date of its adoption by the Board. 16 EX-99.1 4 a2032518zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 NVE CORPORATION ISSUED US PATENTS OFFSET MAGNETORESISTIVE MEMORY STRUCTURES US Patent No. 5,251,170 Issued 10/5/93 J. Daughton, A. Pohm 14 Claims METHOD FOR SENSING DATA IN A MAGNETORESISTIVE MEMORY USING LARGE FRACTIONS OF MEMORY CELL FILMS FOR DATA STORAGE US Patent No. 5,420,819 Issued 5/30/95 A. Pohm 14 Claims METHOD FOR FORMING OFFSET MAGNETORESISTIVE MEMORY STRUCTURES US Patent No. 5,424,236 Issued 6/13/95 J. Daughton, A. Pohm 7 Claims MAGNETORESISTIVE STRUCTURE COMPRISING FERROMAGNETIC THIN FILMS AND INTERMEDIATE LAYERS OF LESS THAN 30 ANGSTROMS FORMED OF ALLOYS HAVING IMMISCIBLE COMPONENTS US Patent No. 5,569,544 Issued 10/29/96 J. Daughton 42 Claims MAGNETORESISTIVE STRUCTURE WITH OF ALLOY LAYER HAVING TWO SUBSTANTIALLY IMMISCSIBLE COMPONENTS US Patent No. 5,595,830 Issued 1/21/97 J. Daughton, 50 Claims MAGNETORESISTIVE STRUCTURE COMPRISING FERROMAGNETIC THIN FILMS AND INTERMEDIATE ALLOY LAYER HAVING MAGNETIC CONCENTRATOR AND SHIELDING PERMEABLE MASSES US Patent No. 5,617,071 Issued 4/1/97 J. Daughton, 16 Claims MAGNETORESISTIVE MEMORY USING LARGE FRACTIONS OF MEMORY CELL FILMS FOR DATA STORAGE US Patent No. 5,636,159 Issued 6/3/97 A. Pohm 15 Claims MAGNETIC FIELD SENSORS INDIVIDUALIZED FIELD REDUCERS US Patent No. 5,729,137 Issued 3/17/98 J.Daughton, Theodore M. Hermann 22 Claims MAGNETORESISTIVE MEMORY USING LARGE FRACTIONS OF MEMORY CELL FILMS FOR DATA STORAGE US Patent No. 5,768,180 Issued 6/16/98 A. Pohm 22 Claims MAGNETIC CURRENT SENSOR US Patent No. 5,831,426 Issued 11/3/98 William C. Black, Theodore M Hermann 17 Claims MAGNETORESISTIVE MEMORY USING LARGE FRACTION OF MEMORY CELLS FILMS FOR STORAGE US Patent No. 5,892,708 Issued 4/6/99 A. Pohm 10 Claims GIANT MAGNETORESISTIVE EFFECT MEMORY CELL US Patent No. 5,949,707 Issued 9/7/99 A. Pohm, B. Everitt 45 Claims GIANT MAGNETORESISTIVE EFFECT MEMORY CELL US Patent No. 5,966,322 Issued 10/12/99 A. Pohm, B. Everitt 40 Claims SPIN DEPENDENT TUNNELING MEMORY US Patent No. 6,021,065 Issued 2/1/00 J. Daughton, A. Pohm 14 Claims SPIN DEPENDENT TUNNELING SENSOR US Patent No. 6,072,382 Issued 6/6/00 J. Daughton, A. Pohm, M. Tondra 25 Claims SPIN DEPENDENT TUNNELING MEMORY US Patent No. 6,147,900 Issued 11/14/00 A. Pohm 24 Claims EX-99.2 5 a2032518zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 NVE CORPORATION ISSUED FOREIGN PATENTS MAGNETORESISTIVE MEMORY STRUCTURE LARGE FRACTION UTILIZATION Patent No. 663 099 Issued 6/23/99 A. Pohm 5 Claims MAGNETORESISTIVE STRUCTURE WITH ALLOY LAYER Patent No. 744,076 Issued 7/26/00 J. Daughton 10 Claims -----END PRIVACY-ENHANCED MESSAGE-----