SIMTEK
CORPORATION
4250 Buckingham Dr. #100
Colorado Springs, Colorado 80907
(719) 531-9444
PROXY STATEMENT
This proxy statement and the
accompanying proxy card are being furnished to the shareholders of Simtek
Corporation in connection with the solicitation of proxies by its board of
directors (the “Board”). The proxies are to be voted at our 2008 annual
meeting of shareholders, including any adjournment thereof (the “Annual
Meeting”). This proxy statement and the accompanying proxy card and annual
report are first being sent to Simtek’s shareholders on or about April 30,
2008.
Time and Place; Purpose
The Annual
Meeting will be held at 2:00 p.m.
, local time, on
Thursday, June 19, 2008, at The Embassy Suites Hotel, 7290 Commerce Center
Drive, Colorado Springs, Colorado 80919.
At the Annual Meeting, our
shareholders will be asked to consider and vote upon the following proposals
(the “Proposals”):
(i)
a proposal to elect
five
directors to our board of directors, each to serve until the 2009 annual meeting
of shareholders and until their successors have been duly elected and qualified;
(ii)
a proposal to ratify the selection of
Hein & Associates LLP as our independent registered public accounting firm
for the year ending December 31, 2008; and
(iii)
to transact such other business as may
properly come before the meeting.
The Board has determined that the
Proposals are in the best interests of our company and shareholders. The
Board recommends that you vote in favor of each Proposal.
Voting Rights; Record Date
The Board has fixed the close of
business on April 24, 2008 as the record date (the “Record Date”) for the
determination of holders of common stock entitled to receive notice of and to
vote at the Annual Meeting. Accordingly, only holders of record of shares
of common stock at the close of business on the Record Date are entitled to
receive notice of, and to vote at, the Annual Meeting. At the close of
business on the Record Date, we had 16,550,277 shares of common stock, par value
$0.0001 per share, outstanding (the “Common Stock”).
The holders of shares of Common Stock
are entitled to one vote per share on each matter that properly comes before the
Annual Meeting. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum.
Votes Required
In the election of directors, the five
candidates receiving the highest number of votes cast (in person or by proxy) in
favor of their election are elected to the Board. Shares which are not
voted (whether by withholding the vote, broker non-vote or otherwise) will have
no impact in the election of directors. With respect to each other
Proposal, the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy, and entitled to vote, at the Annual Meeting
will be required to approve such Proposal. Consequently, abstentions and
broker non-votes with respect to these remaining Proposals will be treated as
votes against for purposes of approving such Proposal.
1
___________________________________________________________________________________________________
Proxies
Unless otherwise specified, the shares
of Common Stock represented by the accompanying proxy card, properly voted, will
be voted FOR the Proposals as described below. As to any other matters
that may properly come before the Annual Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their best
judgment. Votes will be tabulated by Continental Stock Transfer &
Trust Company, our transfer agent.
Proxies voted “Abstain” with respect
to a particular Proposal, shares represented by “broker non-votes” (i.e., shares
held by brokers or nominees which are represented at the Annual Meeting but with
respect to which the broker or nominee is not empowered to vote on a particular
Proposal) and proxies voted “Withhold” as to nominee(s) for the Board will be
counted for purposes of determining whether there is a quorum at the Annual
Meeting, but will not be included in determining the number of votes cast with
respect to such matter.
We will bear the cost of preparing and
sending proxy materials as well as the cost of soliciting proxies. In
addition to solicitation by mail and Internet, certain of our employees or
representatives may personally solicit proxies. Such persons will receive
no additional compensation for such work.
Annual Report
Our annual report to shareholders for
the year ended December 31, 2007 is included with this proxy statement.
Common Questions and Answers
Q:
WHY AM I RECEIVING THIS PROXY
STATEMENT AND PROXY CARD?
A:
You are receiving this proxy statement
and proxy card from us because you own shares of Common Stock. This proxy
statement describes issues on which we would like you and that you are entitled,
as a shareholder, to vote. It also gives you information on these issues
so that you can make an informed decision.
When you vote according to the
procedure indicated on the proxy card, you appoint Harold A. Blomquist, Chief
Executive Officer, and Brian P. Alleman, Chief Financial Officer, as your
representatives at the annual meeting of shareholders. Harold A. Blomquist
and Brian P. Alleman will vote your shares, as you have instructed them in the
proxy card, at the meeting. This way, your shares will be voted whether or
not you attend the annual meeting. Even if you plan to attend the meeting,
it is a good idea to vote according to the procedure indicated on the proxy card
in advance of the meeting just in case your plans change. If you voted
according to the procedure indicated on the proxy card and an issue comes up for
a vote at the meeting that is not identified in this proxy statement, Harold A.
Blomquist and Brian P. Alleman will vote your shares on such issue in accordance
with their best judgment.
Q:
DOES THE BOARD RECOMMEND VOTING IN
FAVOR OF THE PROPOSALS?
A:
Yes, the Board recommends that the
shareholders vote “FOR” all the Proposals.
Election of Directors
.
The Board recommends that you vote “FOR” all nominees to the Board,
Messrs. Harold A. Blomquist, Robert Pearson, Alfred J. Stein, John Hillyard and
Philip Black, whose terms of office will expire at the Annual Meeting.
Ratification of Auditors
.
The Board recommends that you vote “FOR” the ratification of the selection
of Hein & Associates LLP as our independent registered public accounting
firm for the year ending December 31, 2008.
Q:
WHAT IS THE PROCEDURE FOR VOTING?
A:
If you are a holder of record (that
is, your shares are registered in your own name with our transfer agent), you
can vote either in person at the annual meeting or by proxy without attending
the annual meeting. You can vote by proxy by any of the following methods.
Voting Through the Internet
.
If you are a registered stockholder (that is, if you own common stock in
your own name and not through a broker, bank or other nominee that holds common
stock for your account in a “street name” capacity), you may vote by proxy by
using the Internet. Please see the proxy card provided to you for instructions
on how to access the Internet voting system.
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____________________________________________________________________________________________________
Voting by Proxy Card
.
Each stockholder electing to receive stockholder materials by mail may
vote by proxy by using the accompanying proxy card. When you return a
proxy card that is properly signed and completed, the shares of common stock
represented by your proxy will be voted as you specify on the proxy card.
If you hold your shares in “street
name,” you must either direct the bank, broker or other record holder of your
shares as to how to vote you shares, or obtain a proxy from the bank, broker or
other record holder to vote at the meeting. Please refer to the voter
instruction cards used by your bank, broker or other record holder for specific
instructions on methods of voting, including by telephone or using the Internet.
Q.
WHAT IF I DON’T SPECIFY A CHOICE FOR A
MATTER WHEN RETURNING MY PROXY?
A.
You should specify your choice for
each matter on the enclosed proxy. If you return the proxy card but do not
give specific instructions, your proxy will be voted
FOR
the election of
all director nominees, and
FOR
the proposal to ratify the appointment of
Hein & Associates LLP.
Q.
CAN I CHANGE MY VOTE AFTER SUBMITTING
MY PROXY?
A.
If you are a shareholder of record,
you may revoke a previously submitted proxy at any time before the polls close
at the Annual Meeting by:
·
submitting another proxy with a later
date;
·
giving written notice to our
Corporate Secretary that you are revoking your proxy; or
·
attending the Annual Meeting and
voting in person.
Attending the Annual Meeting will not
by itself have the effect of revoking a previously submitted proxy.
If you are a street name holder, you
must follow the instructions on revoking your proxy, if any, provided by your
bank, broker or other record holder.
Q.
WHAT DOES IT MEAN IF I RECEIVE MORE
THAN ONE NOTICE?
A.
It means that you have multiple
accounts with brokers and/or our transfer agent, Continental Stock
Transfer & Trust Company. Please vote all of these shares.
We recommend that you contact your broker and/or Continental Stock
Transfer & Trust Company to consolidate as many accounts as possible
under the same name and address. Please submit your request by mail to
Continental Stock Transfer & Trust Company, Shareholder Relations, 17
Battery Place, New York, New York 10004, or by telephone at 212.509.4000.
Continental Stock Transfer & Trust Company may also be reached
through its website at www.continentalstock.com.
Q.
WHAT IS “HOUSEHOLDING”?
A.
We may send a single set of
shareholder communications to any household at which two or more shareholders
reside. This process is called “householding.” This reduces
duplicate mailings and saves printing and postage costs as well as natural
resources. Shareholder communications to you may be householded based on
your prior express or implied consent. If you wish to receive a separate
copy of the proxy statement or annual report for each shareholder sharing your
address in the future, please contact us by mail in care of Continental Stock
Transfer & Trust Company, Shareholder Relations, 17 Battery Place, New
York, New York 10004, or by telephone at 212.509.4000, and we will promptly
deliver to you the requested material. If you are receiving multiple
copies and would like to receive a single copy, or if you would like to opt out
of this householding practice for future mailings, please submit your request by
mail to our transfer agent, Continental Stock Transfer & Trust Company,
Shareholder Relations, 17 Battery Place, New York, New York 10004, or by
telephone at 212.509.4000. Continental Stock Transfer & Trust
Company may also be reached through its website at www.continentalstock.com.
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PROPOSAL 1 - ELECTION OF
DIRECTORS
Our Certificate of Incorporation and
Bylaws provide that the Board will be elected annually. Consequently, each
of our directors is subject to re-election at the Annual Meeting, to serve until
our next annual meeting or upon a successor being elected or appointed and
qualified.
Directors are elected by a plurality
of the votes present in person or represented by proxy, and entitled to vote, at
the meeting. Shares represented by proxies will be voted, if authority to
do so is not withheld, for the election of Messrs. Blomquist, Pearson, Stein,
Hillyard and Black. In the event that any nominee should be unavailable
for election as a result of an unexpected occurrence, such shares will be voted
for the election of such substitute nominee as management may propose. Each
person nominated for election has agreed to serve if elected, and management has
no reason to believe that any nominee will be unable to serve.
Set forth below is biographical
information as of the Record Date for each director nominated for re-election.
Harold A. Blomquist
, age 56,
was originally appointed as a director in May 1998, resigned from the Board in
July 2001 to avoid a potential conflict of interest with his employer and was
re-appointed in January 2002. In October 2003, Mr. Blomquist was elected
to the position of Chairman of the Board of Directors. Mr. Blomquist has
served as our Chief Executive Officer and President since May 2005. In
February 2008 he resigned as Chairman of the Board. He served as a
Director on the Board of Microsemi, Inc. from February 2003 to February 2006,
and as a consultant to venture investors and early stage technology companies in
the semiconductor and electronic components areas. In the past, he was
employed as President and Chief Executive Officer of Morpho Technologies, Inc.,
and Chief Executive Officer of Tower Semiconductor, USA, Inc. Mr.
Blomquist served as a member of the Board of Directors of AMIS Holding Co. and
Sr. Vice President of AMI Semiconductors. Prior to joining AMI in April
1990, Mr. Blomquist held positions in engineering, sales, and marketing for
several semiconductor firms, including Texas Instruments, Inmos Corporation, and
General Semiconductor. Mr. Blomquist was granted a BSEE degree from the
University of Utah and also attended the University of Houston, where he pursued
a joint Juris Doctor/MBA course of study.
Robert C. Pearson
, age 72, has
served as a director since July 2002 and was appointed as our Chairman of the
Board in February 2008. He joined RENN Capital Group in April 1997 and is
currently its Senior Vice President-Investments. From May 1994 to May
1997, Mr. Pearson was an independent financial management consultant primarily
engaged by RENN Capital Group. From May 1990 to May 1994, he served as
Chief Financial Officer and Executive Vice President of Thomas Group, Inc., a
management consulting firm, where he was instrumental in moving a small
privately held company from a start-up to a public company with over $40 million
in revenues. Prior to 1990, Mr. Pearson spent 25 years at Texas
Instruments where he served in several positions including Vice
President-Controller and later as Vice President-Finance. Mr. Pearson
holds a BS in Business from the University of Maryland and was a W.A. Paton
Scholar with an MBA from the University of Michigan. He is currently a
Director of CaminoSoft Corporation, Riptide Worldwide, Vertical Branding and
AuraSound, Inc., all of which are publicly held. He is also a Director of
eOriginal, Inc., a privately held company.
Alfred J. Stein
, age 75, has
served as a director since March 2004. He is currently a Consultant and
Advisor to startup companies in the high technology industry. He
previously served at VLSI Technology, Inc. as Chairman of the Board and Chief
Executive Officer from 1982 until its acquisition by Philips Electronics in
1999. During his tenure, VLSI grew from a venture capital funded start-up
to a publicly traded company with revenues in excess of $600 million and over
2,200 employees in more than 25 locations around the world. For more than
45 years, Mr. Stein has played a significant role in the high tech industry,
including senior management assignments at both Texas Instruments and Motorola.
Mr. Stein was with Texas Instruments for 18 years from 1958 through 1976;
his last position was Vice President and General Manager for the Electronics
Devices Division. Mr. Stein was with Motorola for five years where he was
Vice President and Assistant General Manager of Motorola’s Semiconductor Sector.
He joined VLSI Technology from Arrow Electronics where he had been that
company’s Chief Executive Officer. In addition to Simtek, Mr. Stein is on
the Board of Directors ESS Technology, a publicly-traded company, and is also
involved with some private startup companies. He also has served on the
board of directors at Applied Materials, Radio Shack Corporation and was
Chairman of the Board for the Semiconductor Industry Association (SIA). He
was a Lieutenant for two years in the U. S. Army and was on the Board of
Trustees for St. Mary’s University of Texas.
John Hillyard
, age 51, has
served as a director since October 2006, when the Board appointed him to fill a
vacant position on the Board of Directors. Mr. Hilllyard has more than 25
years experience as a senior technology finance and operations executive, with
significant domestic and international experience at both public and private
companies. He is presently the Chief Financial Officer of LeftHand
Networks, a pioneer in the open iSCSI SAN market. Prior to joining
4
__________________________________________________________________________________________________
LeftHand Networks, Hilllyard was Executive Vice
President, Finance and Operations and Chief Financial Officer for FrontRange
Solutions; Vice President and Chief Financial Officer for daly.commerce, Inc.;
Vice President and Chief Financial Officer for InteliData Technologies Corp.;
and Senior Vice President and Chief Financial Officer for eFunds
Corporation. Mr. Hillyard has been a CFO for companies traded on domestic
and international stock exchanges. He studied Business Economics at the
University of California at Santa Barbara and earned his CPA while working at
PricewaterhouseCoopers.
Philip Black
, age 53, has
served as a director since August 2007, when the Board appointed him to fill a
vacant position on the Board of Directors. Philip Black serves as
President, Chief Executive Officer and as a director of Nexsan Corp since
September 2004. From January 2002 to July 2004, Mr. Black served as Chief
Executive Officer and as a director of LightSand Communications, a storage
networking provider. Prior to joining LightSand, Mr. Black was the Chief
Executive Officer of Box Hill/Dot Hill, a storage systems manufacturer, and was
the founder and Chief Executive Officer of Tekelec, a telecom equipment
provider.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR”
EACH OF THE NOMINATED
DIRECTORS
.
PROPOSAL 2 – RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITOR
The Audit Committee of the Board has
appointed Hein & Associates LLP (“Hein & Associates”) to serve as our
independent registered public accounting firm and to audit our consolidated
financial statements for 2008. The Audit Committee has been advised by
Hein & Associates that neither the firm, nor any member of the firm, has any
financial interest, direct or indirect, in any capacity in us or our
subsidiaries. As a matter of good corporate governance, the Audit Committee has
determined to submit its selection of Hein & Associates to our shareholders
for ratification.
Ratification of the appointment of the
independent registered public accounting firm requires the affirmative vote of a
majority of the shares of our common stock represented in person or by proxy and
entitled to vote at the Annual Meeting. Accordingly under Delaware law, our
Certificate of Incorporation and our Bylaws, abstentions have the same legal
effect as a vote against this proposal, but a broker non-vote is not counted for
purposes of determining the number of shares represented in person or by proxy
and entitled to vote at the Annual Meeting.
If the selection of the independent
registered public accounting firm is not ratified, the Audit Committee will
reconsider its selection. Even if the selection is ratified, the Audit Committee
in its discretion may direct the appointment of a different independent
registered public accounting firm at any time if the Audit Committee believes
that such a change would be in the best interest of our company and our
shareholders.
We do not expect
representatives of Hein & Associates to be present at the Annual
Meeting.
Fees Billed by Hein & Associates
The following table shows the
aggregate fees billed by Hein & Associates in each of the last two fiscal
years for the services indicated:
|
|
|
|
|
|
2007
|
2006
|
|
Audit
Fees
|
$310,570
|
$206,340
|
|
Audit-Related
Fees
|
—
|
25,206
|
|
Tax
Fees
|
—
|
14,500
|
|
All
Other Fees
|
—
|
—
|
|
Total
|
$310,570
|
$246,046
|
Audit Fees.
Fees for
audit services include fees associated with annual audits, reviews of annual
reports on Form 10-K and quarterly reports on Form 10-Q, statutory
audits required internationally, services related to comfort letters and
consents and assistance with other filings and public offering documents filed
with the SEC.
Audit-Related Fees.
Fees
for audit-related services principally include due diligence in connection with
acquisitions and related accounting consultations, compliance with financing
arrangements and attest services that were not required by statute or
regulation.
5
__________________________________________________________________________________________________
Tax Fees.
Fees for tax
services include tax compliance, tax advice and tax planning including, but not
limited to, tax compliance, federal and state tax advice, and assistance with
the preparation of tax returns.
All Other Fees.
All other
fees include fees for services not included in audit fees, audit-related fees
and tax fees.
Pre-Approval Policies and Procedures
All audit and audit-related services,
tax services and other services were pre-approved by the Audit Committee.
The Audit Committee’s pre-approval policy provides for pre-approval of all
audit, audit-related, tax and all other services provided by Hein &
Associates. The Audit Committee concluded that such services by Hein &
Associates were compatible with the maintenance of that firm’s independence in
the conduct of its auditing functions.
THE BOARD RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF HEIN & ASSOCIATES LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2008.
6
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table below sets forth information
regarding ownership of our Common Stock as of April 24, 2008 by each person who
is known by us to beneficially own more than five percent of our Common Stock,
by each director, by each current or former executive officer named in the
Summary Compensation Table, and by all directors and current executive officers
as a group. Shares issuable within sixty days after April 24, 2008 upon
the exercise of options, warrants or debentures are deemed outstanding for the
purpose of computing the percentage ownership of persons beneficially owning
such options, warrants or debentures but are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
|
|
|
|
|
|
Name
and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
Percent of
Class
|
|
Harold
A. Blomquist
18595
Lake Drive
Colorado
Springs, CO 80132
|
400,166(1)
|
2.37%
|
|
Robert
Pearson
8080
N. Central Expressway, Suite 210-LB59
Dallas,
TX 75203
|
24,501(2)
|
*
|
|
Ronald
Sartore
14445
Cypress Point
Poway,
CA 92064
|
108,771(3)
|
*
|
|
Alfred
Stein
410
Old Oak Court
Los
Altos, CA 94022
|
106,623(4)
|
*
|
|
John
Hillyard
2685 Heathrow Drive
Colorado Springs, CO
80920
|
50,000(5)
|
*
|
|
Phillip
Black
1718 Midwick Place
Santa Barbara, CA 93108
|
25,000(6)
|
*
|
|
Brian
Alleman
12861 Serenity Park
Colorado Springs, CO
80907
|
120,008(7)
|
*
|
|
Renaissance
Capital Growth & Income Fund III, Inc.
c/o RENN Capital Group
8080 N. Central Expressway,
Suite 210-LB59
Dallas, TX 75203
|
1,109,097(8)
|
6.55%
|
|
Renaissance
US Growth Investment Trust PLC
c/o RENN Capital Group
8080 N. Central Expressway,
Suite 210-LB59
Dallas, TX 75203
|
1,107,940(9)
|
6.55%
|
|
US Special
Opportunities Trust PLC
c/o RENN Capital Group
8080 N. Central Expressway,
Suite 210-LB59
Dallas, TX 75203
|
1,007,176(10)
|
5.95%
|
|
SF Capital
Partners, Ltd
3600 South Lake Drive
St. Francis, WI 53235
|
1,068,965(11)
|
6.46%
|
|
Cypress
Semiconductor Corporation
3901 N. First Street
San Jose, CA 95134
|
3,179,644(12)
|
16.69%
|
|
Crestview
Capital Master LLC
95 Revere Drive, Suite A
Northbrook, IL 60062
|
2,583,174(13)
|
15.58%
|
|
Big Bend
XXVII Investments, L.P.
3401 Armstrong Avenue
Dallas, TX 75205-4100
|
1,553,956(14)
|
9.38%
|
|
Toibb
Investment LLC
6355 Topanga Canyon Blvd.,
Suite 335
Los Angeles, CA 91367
|
1,125,000
|
6.80%
|
|
All
directors and executive officers as a group (7 persons)
|
835,069(15)
|
4.86%
|
7
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______________________
*
Less than one percent.
(1)
Includes 2,240 shares of our common
stock that Mr. Blomquist’s children personally own and includes 326,459 shares
issuable upon exercise of options.
(2)
Includes 21,125 shares issuable upon
exercise of options.
(3)
Includes 80,750 shares issuable upon
exercise of options.
(4)
Includes 44,917 shares issuable upon
exercise of options. Includes 28,793 shares of common stock and 3,798
warrants held by the A. J. Stein Family Trust and 25,317 shares of common stock
and 3,798 warrants held by the A. J. Stein Family Partnership.
(5)
Includes 50,000 shares issuable upon
exercise of options.
(6)
Includes 25,000 shares issuable upon
exercise of options.
(7)
Includes 66,193 shares issuable upon
exercise of options. Assumes exercise of warrants held by Mr. Alleman for
4,747 shares of our common stock.
(8)
Assumes conversion, at a conversion
price of $2.20 per share, of debentures issued to Renaissance Capital Growth
& Income Fund III, Inc. for 318,182 shares of our common stock.
Assumes exercise of warrants held by Renaissance Capital Growth &
Income Fund III, Inc. for 59,244 shares of our common stock.
(9)
Assumes conversion, at a conversion
price of $2.20 per share, of debentures issued to Renaissance US Growth
Investment Trust PLC for 318,182 shares of our common stock. Assumes
exercise of warrants held by Renaissance US Growth Investment Trust PLC for
59,244 shares of our common stock.
(10)
Assumes conversion, at a conversion
price of $2.20 per share, of debentures issued to US Special Opportunities Trust
PLC for 318,182 shares of our common stock. Assumes exercise of warrants
held by US Special Opportunities Trust PLC for 58,480 shares of our common
stock.
(11)
Assumes exercise of warrants held by
SF Capital for 7,595 shares of our common stock.
(12)
Assumes exercise of warrants held by
Cypress for 2,505,562 shares of our common stock.
(13)
Assumes exercise of warrants held by
Crestview Capital Master LLC for 32,279 shares of our common stock.
(14)
Assumes exercise of warrants held by
Big Bend XXVII Investments, L.P for 15,190 shares of our common stock.
(15)
Includes 614,444 shares issuable upon
exercise of options. Assumes the exercise of warrants for 12,343 shares of our
common stock. Includes 2,240 shares of our common stock that Mr.
Blomquist’s children personally own. Does not include the 2,219,282 shares
beneficially owned by Renaissance Capital Growth & Income Fund III, Inc.,
Renaissance US Growth Investment Trust PLC, US Special Opportunities Trust PLC
and Premier RENN US Emerging Growth Fund Ltd. RENN Capital Group is agent
for these four investment funds. Mr. Robert Pearson is a Senior Vice
President of RENN Capital Group. Mr. Pearson also holds the position of a
director on our board of directors.
8
__________________________________________________________________________________________________
INFORMATION
REGARDING THE BOARD AND ITS COMMITTEES
Meetings and Committees of the
Board
Members of the Board keep informed
about our business through discussions with our Chairman and our Chief Executive
Officer and other officers and employees, by reviewing materials provided to
them, by visiting our offices and by participating in meetings of the Board and
its committees. The following members of the Board are independent under
current NASDAQ Stock Market listing standards: Messrs. Pearson, Stein, Hillyard
and Black.
Our Board and its committees meet
throughout the year on a set schedule, and also hold special meetings and act by
written consent from time to time as appropriate. During the fiscal year
ended December 31, 2007, the Board held six meetings. During
that same period, the Board acted by written consent one time. During
2007, each director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board (held during the period for which he was a
director) and (ii) the total number of meetings held by all committees on which
he served (held during the periods that he served).
The Board has an
Audit Committee, a Compensation Committee and a Nominating and Corporate
Governance Committee, each of which has authority to engage legal counsel or
other experts or consultants as it deems appropriate to carry out its respective
responsibilities. The following information provides membership and
meeting information for each of the Board committees
.
Audit
Committee.
The Board has established an Audit Committee in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended. The Audit Committee consists of Mr. Hillyard, who serves as the
committee’s chairperson, and Messrs. Black and Stein. The Audit Committee
assists the Board in its oversight of the integrity of our accounting, auditing,
and reporting practices. The Board has determined that Mr. Hillyard and
Mr. Black have the requisite education, background or experience to be
considered an “audit committee financial expert” as that term is defined by
applicable SEC rules. All members of the Audit Committee are “independent”
under current NASDAQ Stock Market listing standards. The Audit Committee
held seven meetings during 2007.
Compensation
Committee.
The primary responsibilities of the Compensation
Committee are to review and recommend to the Board the compensation of our Chief
Executive Officer, determine the amounts and recipients of stock options and
perform such other functions regarding compensation as the Board may delegate.
The Compensation Committee consists of Mr. Black, who serves as the
committee’s chairperson, and Messrs. Stein and Pearson. Each member of the
Compensation Committee is independent according to standards for independence
under current NASDAQ Stock M
arket listing standards.
The Compensation Committee held ten meetings during 2007. During
2007, the Compensation Committee directly engaged a consulting firm, Pearl Meyer
& Partners, to advise the Compensation Committee on how the proposed
compensation packages for Simtek’s executive officers compared to what is
“market”. The Compensation Committee requested that Pearl Meyer &
Partners review both the cash and equity components of the compensation packages
for Simtek’s executive officers. The Compensation Committee used the
feedback from Pearl Meyer & Partners to determine the final compensation
packages for Simtek’s executive officers.
Nominating
and Corporate Governance Committee.
The primary responsibilities of the
Nominating and Corporate Governance Committee are to identify qualified
candidates for nomination to the Board and to assist us in complying with SEC
and other government regulations. The Nominating and Corporate Governance
Committee has a written charter, which is available on the Company’s website at
www.simtek.com. The Nominating and Corporate Governance Committee consists
of Mr. Stein, who serves as the committee’s chairperson, and Messrs. Blomquist
and Pearson. Messrs. Stein and Pearson are independent, and Mr. Blomquist
is not independent, in each case according to standards for independence under
current NASDAQ Stock Market listing standards. The Nominating and
Corporate Governance Committee held six meetings during 2007.
The Nominating and
Corporate Governance Committee considers all nominees for election as directors
of the Company, including all nominees recommended by stockholders. The Board
seeks a diverse group of candidates who possess the background, skills and
expertise to make a significant contribution to the Board, to the Company and
its stockholders. Desired qualities to be considered include: high-level
leadership experience in business or technology activities; breadth of knowledge
about issues affecting the Company; proven ability and willingness to contribute
special competencies to Board activities; personal integrity; willingness to
apply sound and independent business judgment; and awareness of a director’s
vital role in assuring the Company’s good corporate citizenship and corporate
image. Any
9
__________________________________________________________________________________________________
stockholder wishing to recommend a
candidate for the Board should submit the name of the candidate and a written
description of the candidate’s qualifications to the chairperson of the
Nominating and Corporate Governance Committee at Simtek’s principal business
offices.
The Nominating and
Corporate Governance Committee conducts informal self-evaluations of the
composition and size of the Board on a periodic basis. As a need is
observed, the Nominating and Corporate Governance Committee will recommend to
the Board that it consider new directors and seek input from the Board regarding
desired skills in new candidates. The Nominating and Corporate Governance
Committee has, in the past, used formal and informal networking to identify and
evaluate potential candidates, as well as a third party recruiting firm.
The third party recruiting firm, when requested, searches for and
identifies potential nominees to the Board and, if further requested by the
Nominating and Corporate Governance Committee, assists such committee in its
diligence and recruiting efforts with respect to such potential nominees.
Similar to any nominee identified by the Nominating and Corporate
Governance Committee, any potential nominee submitted for consideration by a
stockholder would first be vetted against a perceived need existing on the
Board, and would then be evaluated against other candidates for the position
based on the merits of his/her background in comparison to other candidates.
Shareholder Communications.
The Board has not
established a formal process for shareholders to follow to send communications
to the Board or its members. Our policy is to forward to the Board any
shareholder correspondence we receive that is addressed to the Board.
Shareholders who wish to communicate with the Board or any of our
directors may do so by sending their correspondence addressed to the Board at
our headquarters at 4250 Buckingham Drive, Suite 100, Colorado Springs, CO 80907
or via an email weblink “information@Simtek.com” on our website at
www.simtek.com.
Statement on Corporate Governance.
We regularly
monitor developments in the area of corporate governance by reviewing new
federal laws affecting corporate governance, such as the Sarbanes-Oxley Act of
2002, as well as rules adopted by the SEC. In response to those
developments, we review our processes and procedures and implement corporate
governance practices which we believe are in the best interest of our company
and shareholders.
The Board has approved a Code of
Business Conduct and Ethics (collectively, the “Code of Conduct”), posted on our
website at www.simtek.com. The Code of Conduct applies to our chief
executive officer, chief financial officer and all of our other employees and
directors. Our chief executive officer, chief financial officer, employees
and directors are required to report any conduct that they believe in good faith
to be an actual or apparent violation of the Code of Conduct.
Director’s Attendance at Annual Shareholder Meetings.
We believe that there are benefits to
having members of the Board attend our annual meetings of shareholders. In
2007, all of the then-current directors attended our annual meeting in person.
From time to time, however, a member of the Board might have a compelling
and legitimate reason for not attending an annual meeting. As a result,
the Board has decided that director attendance at our annual meetings should be
strongly encouraged, but is not required.
Compensation Committee Interlocks
and Insider Participation
During 2007, the Compensation
Committee consisted of Messrs. Hillyard, Stein, Pearson and Black. In
November 2007, Mr. Hillyard resigned from the Compensation Committee and Mr.
Black was nominated to join Messrs. Stein and Pearson on the Compensation
Committee. Mr. Black was appointed Chairman of the Compensation Committee
in November 2007.
On May 26, 2006, we issued to certain
affiliates managed by RENN Capital Group, for which Mr. Pearson serves as Senior
Vice President, warrants to purchase 25,000 shares of our common stock at $3.30
per share with an exercise period of 5 years. We issued 5,000 of these
warrants in consideration for a waiver letter from the RENN Capital Group
affiliates and the remaining 20,000 warrants were issued in consideration for
the affiliates managed by RENN Capital Group entering into a subordination
agreement with Wells Fargo on our behalf.
On September 21, 2006, we completed a
private placement whereby the participants were issued common stock at a per
share price of $3.95 and warrants to purchase our common stock at a per share
exercise price of $5.40 and a five year
10
__________________________________________________________________________________________________
term. The affiliates managed by the RENN Capital
Group invested a combined total of $2,000,000 and received a combined total of
506,332 shares of our common stock and 75,952 warrants. Mr. Stein invested
$200,000 and received 50,634 shares of our common stock and 7,596 warrants.
Review and Approval of Transactions with Related
Persons
We have not adopted a written
Related-Person Transactions Policy that sets forth our policies and procedures
regarding the identification, review, consideration and approval or ratification
of “related-persons transactions.” The Audit Committee approves any
transaction between our company and a related person. A related person is
any executive officer, director, or more than 5% shareholder of our stock,
including any of their immediate family members, and any entity owned or
controlled by such persons. Please review the related person transactions
described in this proxy statement under the heading “Certain Relationships and
Related Transactions.”
11
__________________________________________________________________________________________________
INFORMATION REGARDING
EXECUTIVE OFFICERS
Harold
Blomquist
Chief Executive
Officer and President
Brian
Alleman
Vice President
and Chief Financial Officer, Corporate Secretary
Ronald
Sartore
President of
AgigA Tech, Inc., a majority-owned subsidiary of Simtek
Information regarding Mr. Blomquist is
set forth above under the heading “Information Regarding the Board and its
Committees.”
Brian Alleman
, age 51, has
served as Vice President and Chief Financial Officer at the Company since June
of 2005. Since 2002, Mr. Alleman has been a partner in the Denver office
of Tatum LLC, a national firm of experienced executives serving as full-time,
part-time, interim, project, or on-staff professionals to provide executive
solutions to companies undertaking significant change. Mr. Alleman has 30
years of experience in financial management, with 10 years of experience in
leading international accounting firms. For nine years prior to joining
Tatum, Mr. Alleman served as Vice President and Chief Financial Officer with
Centuri Corporation in Penrose, Colorado. Mr. Alleman intends to remain a
partner in Tatum, which should allow Simtek access to a variety of professional
resources provided by Tatum to its clients. Mr. Alleman holds a Bachelors
Degree in Accounting from Seton Hall University and became a Certified Public
Accountant in the State of New Jersey in 1980.
Ronald Sartore
, age 58, served
as a director of Simtek from March 2004 until February 2008, resigning the post
upon taking the role of President and director of AgigA Tech, Inc., a
majority-owned subsidiary of Simtek. Mr. Sartore served as Executive Vice
President of Simtek beginning in May 2006 and ending in February 2008. Mr.
Sartore has over 30 years experience in the industry. From May of 1999
until May of 2006 he served various engineering and business roles as a Vice
President within Cypress Semiconductor Corporation’s Consumer and Computation
Division. Mr. Sartore joined Cypress Semiconductor Corporation, or “Cypress,”
after Cypress’s May 1999 accretive acquisition of Anchor Chips, where he was its
Chief Executive Officer and President. Mr. Sartore founded Anchor Chips in
1995 and secured $9.5 million in funding from its majority owner: South Korea’s
LG Semicon. Prior to that, Mr. Sartore worked as a systems architect for
San Diego based AMCC. Previous to AMCC, Mr. Sartore was a technical
consultant for Array Microsystems, and an employee of Maximum Storage, both in
Colorado Springs. In 1985, Mr. Sartore co-founded Cheetah International, a
manufacturer of personal computers and peripherals until its acquisition by
Northgate Computers in 1990. Cheetah’s products, designed by Mr. Sartore,
have received acclaim for their high performance and were the subject of
articles in numerous trade magazines. Prior to Cheetah, Mr. Sartore has
held technical design positions in the following companies: Inmos, in Colorado
Springs, Colorado; Synercom Technology, in Sugarland, Texas; Texas Instruments,
in Stafford, Texas; NCR, in Millsboro, Delaware; and Sperry Univac, in Blue
Bell, Pennsylvania. Mr. Sartore currently holds 13 US patents and obtained
a BS degree in Electrical Engineering from Purdue University.
COMPENSATION DISCUSSION AND
ANALYSIS
Compensation Philosophy and Objectives
Our executive compensation programs
are designed to attract, motivate and retain executives critical to our
long-term success and the creation of shareholder value. Our fundamental
compensation philosophy is to closely link executive officers’ total
compensation with the achievement of annual and long-term performance goals and
that performance should have a significant impact on compensation.
Management and the Compensation Committee believe that compensation
decisions are complex and best made after a careful review of individual and
company performance, semiconductor industry, and general industry compensation
levels. The Committee awards compensation to our executive officers that
is based upon overall business and individual performance and that is designed
to motivate them to achieve strategic objectives and to continue to perform at
the highest levels in the future.
Based on the objectives described
above, we strive to set a total compensation opportunity within a reasonable
range of total direct compensation paid to similarly situated executives at
comparable companies, against whom we may compete in the semiconductor industry
marketplace and in the broader market for executive, key employee, and outside
director talent. Actual compensation may be above or below the mid-range
of industry norms based on the actual performance of our company and the
individual, with the opportunity to achieve superior compensation based on
superior performance. This approach is intended to ensure that a
significant portion of executive compensation is based on our financial and
strategic performance.
12
__________________________________________________________________________________________________
Roles and Responsibilities
Each of the Compensation Committee and
management is involved in the development, review and evaluation, and approval
of our executive compensation programs. In general, the roles are
discussed below; additional details regarding the roles of each are addressed in
the discussion of the “Annual Review of Executive Compensation.”
Management.
Our
management sets our strategic direction and tactical objectives and strives to
design and develop compensation programs that motivate executives’ behaviors
consistent with these tactical and strategic objectives. In collaboration
with the Compensation Committee, management coordinates the annual review of the
compensation program for the executive officers. This includes an
evaluation of individual and overall company performance, competitive practices
and trends, and various compensation issues. Based on the outcome of this
review, management makes recommendations to the Compensation Committee regarding
the compensation of each of the executive officers, other than the Chief
Executive Officer.
Compensation Committee.
The Compensation Committee of the Board has overall responsibility for
the approval of programs that are reasonable, consistent with our compensation
philosophy, and support our business goals and objectives. The Board
established the Compensation Committee in 2004. The Committee currently
consists of three directors, all of whom are deemed independent within the
meaning of the current rules of the NASDAQ: Messrs. Philip Black
(Chairman), Alfred Stein and Robert Pearson.
The Committee has authority and
responsibility for the review, evaluation and approval of the compensation
structure and level for all of our executive officers. This includes the
articulation of our compensation philosophy, and policies and plans covering our
executive officers. The Committee also conducts an annual review and
approval of the Chief Executive Officer’s annual compensation, including an
evaluation of his performance to corporate goals and objectives relevant to his
compensation.
The Committee operates pursuant to a
charter, which is available on the Company’s website at www.simtek.com.
Under its charter, the stated purposes of the Compensation Committee are:
(1) to assist the Board in discharging its responsibilities relating to
compensation of the Corporation’s executives, (2) to administer the
Corporation’s equity incentive plans and (3) to produce a report on executive
compensation for inclusion in the Corporation’s proxy statement in accordance
with applicable rules and regulations.
The Compensation Committee typically
meets several times each year as needed to address various compensation issues.
Compensation Committee meetings may include an executive session without
members of management present. The Compensation Committee met ten times
during 2007. The Compensation Committee regularly reports to the full
Board regarding executive compensation matters.
Annual Review of Executive Compensation
Our management and the Compensation Committee strive to
maintain an executive compensation program that is structured to provide
executive officers with a total compensation package that, at expected levels of
performance, is competitive with those provided to other executives holding
comparable positions or having similar qualifications in other similarly
situated organizations in the semiconductor industry and the general market.
This is achieved by the preparation of an annual review of the
compensation of each of the Company’s executive officers.
In making its decisions on each
executive officer’s compensation, the Compensation Committee considers the
nature and scope of all elements of the executive’s total compensation package,
the executive’s responsibilities, and his or her effectiveness in supporting our
key strategic, operational and financial goals. The Compensation Committee
also considers recommendations from the Chief Executive Officer regarding total
compensation for those executive officers reporting directly to him.
The Compensation Committee believes
that input from management provides useful information and points of view to
assist the Compensation Committee to determine its own views on compensation.
Although the Compensation Committee receives information and
recommendations regarding the design and level of compensation of our executive
officers from management, the Compensation Committee makes the final decisions
as to the plan design and compensation levels for these executives.
13
__________________________________________________________________________________________________
Compensation Peer Group
In determining the appropriate amount
for each element of the total direct compensation (base salary, annual
incentives, and long-term incentives), the Compensation Committee considers the
compensation paid for similar positions at other corporations within a
reasonable peer group of companies prior to determining the executive officers’
base salary and total cash compensation potential. The peer group is
comprised of companies against which we compete in the global semiconductor
industry for executive, key employee, and outside director talent. Peer
companies fall within a range (both above and below us) of comparison factors
such as revenue, market capitalization, net income, and relevant similarities to
our fabless business model. Our peer group is comprised of (but not
limited to) the following companies:
|
|
|
|
Ramtron
|
Quicklogic
|
|
Microsemi
|
Cypress
|
|
Virage Logic
|
Sipex
|
|
Catalyst
Semiconductor
|
AMCC
|
|
ZMD
|
Tower
Semiconductor
|
This competitive market data
provides a frame of reference for the Compensation Committee when evaluating
executive compensation.
Mix of Compensation
Our executive
compensation program is composed of three key elements – base salary, an annual
cash incentive bonus, and equity-based compensation – which represent an
executive officer’s total direct compensation (excluding benefits and
perquisites). The Compensation Committee strives to align the relative
proportion of each element of total direct compensation with the competitive
market and our objectives, as well as preserve the flexibility to respond to the
continually changing global environment in which we operate. The
Compensation Committee’s goal is to strike the appropriate balance between
annual and long-term incentives, and it may adjust the allocation of pay to best
support our objectives. For 2007, the mix of these three elements for each
of the named executive officers is illustrated in the following chart:
Percent of Total Direct
Compensation
|
|
|
|
|
|
Officer
|
Base
Salary
|
Annual Cash Incentive
Compensation
|
Equity
Incentive
Awards
(1)
|
|
Harold A. Blomquist
|
29%
|
23%
|
48%
|
|
Ronald Sartore
|
71%
|
0%
|
29%
|
|
Brian P. Alleman
|
49%
|
25%
|
26%
|
(1)
Based on the FAS
123(R) grant date fair value of restricted stock and stock options granted in
2007.
The mixture of pay elements noted
above represents the belief that executive officers should have elements of
their compensation tied to both short and long term objectives. This pay
mixture is the result of our historical pay practices, management
recommendations, and Compensation Committee determinations.
Elements of Executive Compensation
The key elements of direct
compensation for the executive officers are base salary, an annual cash
incentive bonus, and equity-based compensation, typically delivered through
stock options. Executive officers also are eligible for other elements of
indirect compensation, comprised of health and welfare benefits, retirement and
savings plans, and certain perquisites. The Compensation Committee
considers each of these elements when evaluating the overall compensation
program design.
Annual Base Salary.
The
Compensation Committee, with the assistance of management, establishes base
salaries that are intended to be sufficient to attract and retain individuals
with the qualities they believe are necessary for our long-term financial
success and that are competitive in the marketplace.
An executive officer’s base salary
generally reflects the officer’s responsibilities, tenure, job performance,
special circumstances such as relocation, and direct competition for the
executive’s services. The Compensation Committee reviews the base salaries
of each executive officer, including the Chief Executive Officer, on an annual
basis. In addition to these annual reviews, the Committee may at any time
review the salary of an executive who has received a significant promotion,
whose responsibilities have been increased significantly, or who is the object
of competitive pressure. Any adjustments are based on the results of a
review of relevant market salary data, increases in the cost of living, job
performance of the executive officer over time, and the expansion of duties and
responsibilities, if any. No pre-determined weight or emphasis is placed
on any one of these factors.
14
__________________________________________________________________________________________________
In general, the Committee targets the
base salary levels of the Chief Executive Officer and other executive officers
within the mid-range of base salaries for comparable executive positions at
relevant peer companies. Adjustment of an individual executive officer’s
actual base salary above the mid-range of this reference group would generally
be based upon:
§
Achieving or exceeding key business
objectives;
§
Highly developed individual skills
critical to the Company;
§
Demonstrating an ability to
positively impact shareholder value;
§
Consistently superior levels of
performance; and
§
Experience
and level of responsibility.
During 2007, the Committee
approved no increases to the base salaries of the named executive officers.
Annual
Cash Incentive Awards.
Annual cash incentive compensation enables
executive officers and other key employees of the Company to earn annual cash
bonuses for meeting or exceeding our financial goals as well as for individual
performance.
The potential
payments available under the annual cash incentive program for the executive
officers depend on the attainment of performance goals recommended by management
and approved by the Compensation Committee early in each calendar year. In
addition to these awards, the Compensation Committee may approve additional
bonuses following a subjective evaluation of an executive officer’s performance
and success in areas deemed to be significant to us.
For executive
officers, our annual cash incentive compensation program provides for target
earning generally in the range of 50% to 150% of base salary. Individual
awards reflect both group performance and individual contributions to our
success.
The following
table summarizes, for 2007, the bonus targets, performance components, and
corresponding weightings for each of our named executive officers.
Weighting factors represent the percentage of each executive’s target cash
incentive that is attached to performance of the specific metric. For
example, Mr. Alleman has 50% of his target earnings potential that is attached
to performance to our ex-item net income goal from our annual operating plan
|
|
|
|
|
|
|
|
|
|
|
Name
|
Annual
Operating
Plan
Revenue
|
Annual
Operating
Plan Ex-
Item
Net Income
|
New Product
Research
and
Development
|
Design
Win
Points
|
Cash
Balance
|
Project
Innovation
|
Gross
Margin
|
Strategic
Initiatives
|
|
Harold
Blomquist
|
25%
|
50%
|
25%
|
|
|
|
|
50%
|
|
Brian
Alleman
|
|
50%
|
|
|
25%
|
|
25%
|
25%
|
|
Ronald
Sartore
|
|
25%
|
25%
|
25%
|
|
25%
|
|
|
We selected
these performance measures for use in the annual cash incentive because of their
importance to the value of our operations. In particular, the Compensation
Committee believes that Ex-item Net Income is an appropriate measure for the
primary financial goal to align the interests of management with the interests
of our stockholders. Because Ex-item Net Income excludes non-cash charges
for stock options and amortization of the non-compete agreement with ZMD and
other expenses related to the joint development agreement with Cypress
Semiconductor or other strategic initiatives, Ex-item Net Income provides an
indicator of general economic performance that is not affected by significant
non-cash or restricted-cash expenses. Accordingly, our management believes
this type of measurement is useful for comparing general operating performance
of our baseline nvSRAM business from period to period.
In 2007, the
Compensation Committee established threshold, target, and accelerated
performance goals for the performance measures to be achieved during 2007.
For the purposes of Ex-item Net Income (the Net Income Factor), the target
was defined as ex-item net income with certain investments in our high density
memory initiative added back in. This factor was established as $7,577,000
with a minimum threshold set at $2,325,000, below which no incentive was to be
paid, and an accelerated payout (1.25x multiplier) possible if greater than
$7,577,000.
15
__________________________________________________________________________________________________
During 2007,
achievement against our Net Income Factor was approximately 31% of target which
was below the minimum threshold. Performance to our revenue goal was $33.0
million on a plan of $53.5 million, or 62% of plan. Cash at year end was
108% of plan. The strategic initiatives were based on providing adequate
financial support for our high density memory initiative and achieving
compliance with Section 404 of the Sarbanes-Oxley Act by year end. Simtek
was able to provide adequate financing from operations to support the high
density memory initiative and Simtek was deemed compliant with Section 404 of
the Sarbanes-Oxley Act by year end. Due to falling below the minimum Net
Income Factor, no cash bonuses for the named executive officers were paid as a
result of 2007 performance.
For
additional information regarding the metrics applicable to our Chief Executive
Officer, see “Compensation of the Chief Executive Officer” below.
The 2007
bonuses for the Chief Executive Officer and other named executive officers are
disclosed in the “Bonus” column of the Summary Compensation Table.
Long-Term (Equity) Compensation.
We provide
executives with long-term compensation through the 1994 Simtek Corporation Stock
Option Plan (the “SOP”) and the 2007 Equity Incentive Plan (the “EIP”).
Through June 13, 2007, we granted options under the SOP. Beginning
June 15, 2007, we grant options under the EIP. The general objectives of
the EIP are to encourage employees and directors to acquire or increase their
equity interest in our company and to provide a means whereby they may develop a
sense of proprietorship and personal involvement in our development and
financial success. The EIP also encourages this group to remain with and
devote their best efforts to our business, thereby advancing our interests and
the interests of our stockholders. The EIP also enhances our ability to
attract and retain the services of individuals who are essential for our growth
and profitability.
The EIP
permits granting stock options which are granted according to a plan developed
by management and the Committee and approved by the Committee during the first
six months of each year. Pursuant to this schedule, grants of equity-based
awards are typically made during the second quarter. Management and the
Compensation Committee reserve the right to make other grants as determined to
be appropriate after careful review of such things as significant achievements,
the risk of losing key executives, and periodic changes in the external
environment around our company.
All options granted prior to March 24,
2006 began vesting six months after the date of grant, become fully vested after
three years and expire seven years from date of grant. On March 24, 2006,
the Board of Directors changed the vesting schedule of stock options granted
after March 24, 2006 to be as follows:
·
If an
officer or employee has been employed for 12 months or more, stock options will
vest over 48 months at 1/48th per month, and vesting will begin immediately at
1/48th per month for the four year period.
·
If an
officer or employee has been employed for less than 12 months, no vesting will
occur until the officer or employee has been employed for 12 months at which
time the officer or employee will be caught up at 1/48th per month for each
month since the option grant date and then the options will continue to vest at
1/48th per month for the remaining portion of the four year period.
·
If an
officer or employee is a new hire, no vesting will occur until the officer or
employee has been employed for 12 months at which time the officer or employee
will receive 12/48th of the vesting after which the options will continue to
vest at 1/48th per month for the remaining portion of the four year period.
·
All
options granted to outside directors of the Company will be 100% vested after
six months from the grant date.
All options
will expire seven years from date of grant.
During 2007,
the Compensation Committee approved the following equity awards to the CEO and
other named executive officers:
16
__________________________________________________________________________________________________
|
|
|
|
Officer
|
Stock
Options
|
|
Harold A. Blomquist
|
175,000
|
|
Ronald Sartore
|
30,000
|
|
Brian P. Alleman
|
40,000
|
The named
executive officers were granted a total of 245,000 stock options.
Additional details regarding the terms of these grants are provided in the
tables below.
Health and
Welfare Benefits.
We provide our executive officers with benefits that
are intended to be a part of a competitive total compensation package that
provides health and welfare programs comparable to those provided to employees
and executives at other companies in the semiconductors industry.
Executive officers participate in our health and welfare programs on the
same relative basis as our other employees.
We sponsor the Simtek Corporation 401K
Plan, a tax-qualified defined contribution retirement plan. This
contribution plan is a tax-qualified broad-based employee savings plan in which
employee contributions are calculated on gross payroll and employees are
permitted to contribute up to dollar limits and percentages established annually
by the Internal Revenue Service. In 2007, we implemented a company match
to our 401K Plan. We will make a qualified matching contribution of 100%
of salary deferral contributions up to 3% of pay, plus 50% of salary deferral
contributions from 3% to 5% of pay for the payroll period. Limits to
matching contribution are established by the Internal Revenue Service. All
company matching contributions vest immediately.
Employment Agreements/Arrangements.
We currently have an employment arrangement with our Chief Executive
Officer, Mr. Blomquist (we are currently in the process of documenting an
employment agreement with Mr. Blomquist, which may entail changes to certain of
the provisions set forth in this Proxy), and we have an employment agreement
with our Chief Financial Officer, Mr. Alleman. Generally, we do not
maintain employment agreements with executive officers. The primary
purpose of these employment agreements and arrangements is to provide certain
executive officers with a personal assurance of their treatment following a
change in control of our company or under terms of termination of their
employment.
The employment arrangement with Mr.
Blomquist provides for a base salary of $325,000 per year and he will be
eligible to receive a yearly cash bonus, based on performance, of up to 100% of
his salary. In addition, Mr. Blomquist may receive a yearly bonus of
options to purchase between 10,000 and 40,000 shares of our Common Stock; the
exact amount will be based on performance. Upon beginning employment, Mr.
Blomquist received options to purchase 250,000 shares of our Common Stock and a
$50,000 bonus. Within four months of beginning employment, Mr. Blomquist
was required to purchase 20,000 shares of common stock from us. For each
share of Common Stock Mr. Blomquist purchased from us within six months of
beginning employment, including the 20,000 shares he was required to purchase,
we granted him an additional share, up to a maximum of 50,000 matching shares.
Upon termination, Mr. Blomquist will be restricted from competing against
us for a period of 18 months. If Mr. Blomquist is terminated by us without
cause, all of Mr. Blomquist’s unvested stock options will immediately vest and
he will continue to receive his base salary, benefits, and cash and stock
bonuses for 18 months. If Mr. Blomquist terminates employment due to good
cause or as a result of constructive termination relating to a change of control
of the Company, all of Mr. Blomquist’s unvested stock options will immediately
vest and he will continue to receive his base salary, benefits and cash and
stock bonuses for 18 months.
The
employment agreement with Mr. Alleman provides for a base annual salary of
$225,000 and he will be eligible to receive a bonus, based on 100% performance
to agreed upon company and individual goals, of 50% of his base salary.
Mr. Alleman received options to purchase 75,000 shares of our common stock
upon commencement of his employment. In addition, Mr. Alleman will be
eligible to participate in our standard benefits plans. Mr. Alleman will
remain a partner of, and retain an interest in, Tatum LLC (“Tatum”), the
executive services firm through which his services were initially engaged by us,
and Tatum also will be paid a fee based on Mr. Alleman’s compensation, with the
first year’s fee to be no more than 20% of the amount paid to, or realized by,
Mr. Alleman. This fee percent will decrease in subsequent years. If
we terminate Mr. Alleman’s employment without good cause, or if Mr. Alleman
terminates his employment for good cause, Mr. Alleman will be provided with
separation pay equal to three months, from date of notice, of full base salary
and three additional months at 50% of full base salary. If Mr. Alleman
terminates his employment without good cause or we terminate Mr. Alleman for
good cause, all separation pay will be forfeited.
On April 3, 2008, AgigA Tech, Inc.,
our majority-owned subsidiary, entered into a letter agreement with Mr. Sartore
whereby Mr. Sartore is employed as the President of AgigA Tech, Inc. Mr.
Sartore's base annual salary is $225,000 and he may be eligible to participate
in a cash management bonus incentive plan if one is established.
17
__________________________________________________________________________________________________
Change of
Control Agreements.
The Company entered into a Change of Control
Agreement with Mr. Alleman on March 20, 2008 in order to better assure that Mr.
Alleman will remain with the Company and in order to diminish any distractions
or personal uncertainties that Mr. Alleman might face in light of a potential
change of control at the Company. The Change of Control Agreement, which
has a term of one year, provides generally that, if the Company undergoes a
change of control and if, within 12 months following such change of control, Mr.
Alleman is terminated by the Company (other than for cause), then the Company
shall continue to pay Mr. Alleman his base salary for whatever length of time is
remaining (starting from the date of termination) until the expiration of 12
months from the date of the change of control.
Our
majority-owned subsidiary, AgigA Tech, Inc., entered into a Change of Control
Agreement with Mr. Sartore on April 3, 2008 in order to better assure that Mr.
Sarotre will remain with AgigA Tech, Inc. and in order to diminish any
distractions or personal uncertainties that Mr. Sartore might face in light of a
potential change of control at AgigA Tech, Inc. The Change of Control
Agreement, which has a term of two years, provides generally that, if AgigA
Tech, Inc. undergoes a change of control and if, within 12 months following such
change of control, Mr. Sartore is terminated by AgigA Tech, Inc. (other than for
cause), then AgigA Tech, Inc. shall continue to pay Mr. Sartore his base salary
for whatever length of time is remaining (starting from the date of termination)
until the expiration of 12 months from the date of the change of control.
AgigA
Tech, Inc. Founders Stock Agreement
. On February 13, 2008, the
Company, AgigA Tech, Inc. and Mr. Sartore entered into a Founders Stock
Agreement, pursuant to which Mr. Sartore was granted common stock of AgigA Tech,
Inc. that vests over five years. Subject to certain exceptions, Mr.
Sartore must remain an employee of AgigA Tech, Inc. for vesting to occur.
Mr. Sartore’s common stock will become immediately vested upon an initial
public offering or change of control of AgigA Tech, Inc. If Mr. Sartore
ceases performing services for AgigA Tech, Inc., he will be required to
immediately transfer to AgigA Tech, Inc. all shares that have not become vested.
Pursuant to the terms of the Founders Stock Agreement, AgigA Tech, Inc.
has the right of first refusal to acquire Mr. Sartore’s shares upon a proposed
sale of such shares. AgigA Tech, Inc. also has the right to acquire Mr.
Sartore’s shares of common stock upon his termination from employment with AgigA
Tech, Inc. upon certain circumstances. If Simtek proposes to sell a
substantial portion of its interest in AgigA Tech, Inc., Mr. Sartore has the
right to include some of his vested shares in such sale.
Compensation of the Chief Executive Officer
In connection with the review of the
then Chief Executive Officer’s performance in April 2005, the Compensation
Committee performed a competitive analysis of the total direct compensation
program for the replacement for Simtek’s then Chief Executive Officer. The
Compensation Committee used the information in this study as it negotiated the
terms of compensation of Mr. Blomquist’s total direct compensation. Mr.
Blomquist’s total direct compensation was deemed to be reasonable when compared
to the corresponding opportunities extended to chief executive officers within
other semiconductor companies as well as the specific circumstances of our
company at the time.
For 2007, Mr. Blomquist’s base salary
was $325,000. His award under the annual incentive compensation program
related to 2006 was $261,383, which was paid in 2007. His award under the
annual incentive compensation program related to 2007 was $0. For 2007,
Mr. Blomquist’s bonus eligibility was targeted at 50% of his base salary up to a
maximum of 150% of his base salary. For 2007, Mr. Blomquist’s bonus
metrics and weightings were Company ex-item net income (50%), Company net
revenue (25%), new product research and development (25%), and an amount at the
discretion of the Committee related to strategic initiatives (50%). In
addition, we granted Mr. Blomquist 175,000 stock options.
18
__________________________________________________________________________________________________
Accounting and Tax Treatments of
the Elements of Compensation.
We account for stock-based awards,
including stock options, as provided in FAS123(R).
The Compensation Committee considers
the potential impact of IRC Section 162(m) on compensation decisions.
Section 162(m) disallows a tax deduction by us for individual executive
compensation exceeding $1 million in any taxable year for our Chief Executive
Officer and the other four highest compensated senior executive officers, other
than compensation that is performance-based under a plan that is approved by our
stockholders and that meets certain other technical requirements. The
Committee’s approach with respect to qualifying compensation paid to executive
officers for tax deductibility purposes is that executive compensation plans
will generally be designed considering a number of factors, including tax
deductibility. However, non-deductible compensation may still be paid to
executive officers when necessary for competitive reasons, to attract or retain
a key executive, to enable us to retain flexibility in maximizing our pay for
performance philosophy, or where achieving maximum tax deductibility would not
be in our best interest.
Post-Employment
Compensation
The employment arrangement with Mr. Blomquist provides
for immediate vesting of 100% of Mr. Blomquist’s currently held and non-vested
stock options in the event of a change in control of our company or termination
without cause. See Potential payments upon termination or change of
control for further information.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has
reviewed and discussed Simtek’s Compensation Discussion and Analysis for the
fiscal year ended December 31, 2007 with Simtek management. Based on this review
and discussion, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this proxy
statement.
COMPENSATION COMMITTEE
Philip Black, Chair
Robert Pearson
Alfred Stein
19
__________________________________________________________________________________________________
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents
information concerning compensation earned in the fiscal year ended
December 31, 2007, by our Chief Executive Officer, our Chief Financial
Officer and our Executive Vice President (who is now the President of AgigA
Tech, Inc.). We refer to these three persons collectively as “named executive
officers.” Our compensation policies are discussed above under the heading
“Compensation Discussion and Analysis.”
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock awards(1)
|
Option awards(2)
|
Non-equity incentive plan compensation(3)
|
Change in pension value and nonqualified deferred
compensation earnings
|
All other compensation
|
Total
|
|
Harold
A. Blomquist
President
and CEO
|
2007
2006
2005
|
$325,000
$325,000
$209,375
|
$0
$0
$50,000
|
$0
$2,500
$0
|
$403,535(9)
$324,420
$0
|
$0
$261,383
$0
|
$0
$0
$0
|
$14,731(8)
$209,516(4)
$150,490
|
$743,266
$1,122,819
$409,865
|
|
Ronald
Sartore
Former
Executive VP of Simtek / Current President of AgigA Tech, Inc.
|
2007
2006
2005
|
$225,000
$29,856
—
|
$0
$0
—
|
$0
$12,500
—
|
$153,060(9)
$6,045(5)
—
|
$0
$0
—
|
$0
$0
—
|
$15,381(8)
$152,500(6)
—
|
$393,441
$200,901
—
|
|
Brian
P. Alleman
Vice
President and CFO
|
2007
2006
2005
|
$225,000
$212,792
—
|
$0
$0
—
|
$0
$0
—
|
$69,732(9)
$41,516
—
|
$0
$150,824 (7)
—
|
$0
$0
—
|
$13,881(8)
$0
—
|
$308,613
$405,132
—
|
(1)
We issued Mr. Blomquist 371 shares of
our common stock at a value of $6.75 per share on May 26, 2006. This stock
was issued for payment of his quarterly stipend earned for serving as a director
for the period of January 1, 2005 through March 31, 2005. We issued Mr.
Sartore 3,376 shares of our common stock for a total value of $12,500 on May 26,
2006 for payment of his quarterly stipend earned for serving as a director for
the period January 1, 2005 through March 31, 2006. For purposes of
the restricted stock awards, fair value was initially calculated using the
average closing price of our stock on the last 20 days of each quarter the
stipend was earned.
(2)
Pursuant to SEC regulations, the
amounts shown exclude the impact of estimated forfeitures related to service
based vesting conditions. For information on the valuation assumptions
with respect to the 2007 grants, refer to note 6 of our financial statements in
the Form 10-K for the year ended December 31, 2007, as filed with the SEC.
For information on the valuation assumptions with respect to grants made
during 2006 and 2005, refer to the note on “Shareholders’ Equity” for our
financial statements in the Form 10-K for the years ended December 31, 2006 and
December 31, 2005, respectively. These amounts reflect our accounting
expense for these awards and do not correspond to the actual value that will be
recognized by the named executive officers.
(3)
This column represents payments made
in 2007 related to the 2006 Executive Incentive Compensation Plan. No
payments were made in relation to the 2007 Executive Incentive Compensation
Plan.
(4)
Includes the taxable portion of Mr.
Blomquist’s relocation costs for his move from California to Colorado.
(5)
These options were granted to Mr.
Sartore in his capacity as a director prior to becoming an executive
officer.
20
__________________________________________________________________________________________________
(6)
During 2006, Mr. Sartore was paid
$16,000 in his capacity as a director and $136,500 as a consultant to our
company, prior to becoming an executive officer.
(7)
Reflects $115,132 paid directly to
Mr. Alleman and $35,692 paid to Tatum, LLC.
(8)
Includes the 401K matching
contributions made on behalf of Messrs. Blomquist, Sartore and Alleman of
$12,375, $8,865 and $13,605, respectively, during 2007.
(9)
This amount represents the dollar
amount recognized for financial statement reporting purposes with respect to the
2007 fiscal year for the fair value of stock options granted to each of the
named executives in 2007 as well as prior fiscal years, that vested in 2007, in
accordance with SFAS 123R. Option expenses for each of Messrs. Blomquist,
Sartore and Alleman included $312,151, $0 and $10,363, related to options
granted in 2005, respectively, $46,964, $145,445 and $51,805, related to options
granted in 2006, respectively, and $44,420, $7,615 and $10,152 related to
options granted in 2007, respectively.
Grants of Plan-Based Awards
Our Stock Option
Plan permits the grant of non-qualified stock options to our employees and
directors and to employees of our subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
Date of the Action
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards
|
Estimated Future Payouts Under Equity Incentive Plan
Awards
|
All Other Stock Awards: Number of Shares or
Units
|
All Other Option Awards: Number of Securities Underlying
Options
(1)
|
Exercise or Base Price of Option Awards
|
Grant Date Fair Value of Stock and Option Awards
(2)
|
|
|
|
|
Threshold
|
Target
|
Max.
|
Threshold
|
Target
|
Max.
|
|
|
|
|
|
|
|
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)
|
(#)
|
(#)
|
($/sh)
|
($)
|
|
Harold A.
Blomquist
|
8/14/2007
|
7/17/2007
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
175,000
|
|
$533,050
|
|
Ronald
Sartore
|
8/14/2007
|
7/17/2007
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
30,000
|
|
$91,380
|
|
Brian P.
Alleman
|
8/14/2007
|
7/17/2007
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
40,000
|
|
$121,840
|
(1)
This column shows the number of stock
options granted to the named executive officers in 2007. These options
vest and become exercisable based on the vesting terms of the EIP.
(2)
The exercise price of each option
granted was equivalent to the closing price of a share of our common stock on
the grant date. Generally, the full grant date fair value is the amount
that we would expense in our financial statements over the award’s vesting
schedule and has been calculated using the Black-Scholes valuation model.
The valuations were based upon the following assumptions estimated holding
period of 5.00 years, expected volatility of 77.00% and a risk free interest
rate of 4.51%. It should be noted that this model is only one of the
methods available for valuing options. These amounts reflect our
accounting expense and do not correspond to the actual value that may or will be
recognized by the named executive officers.
21
__________________________________________________________________________________________________
Outstanding Equity Awards at 2007 Fiscal
Year-End
The following table provides
information on the current holdings of stock option and stock awards by the
named executive officers. This table includes unexercised and unvested option
awards and unvested grants of restricted shares of stock. Each equity grant is
shown separately for each named executive officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Name
|
Date of Award
|
Number of Securities Underlying Unexercised
Options
|
Number of Securities Underlying Unexercised
Options
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options
|
Option Exercise Price
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not
Vested
|
Market Value of Shares or Units of Stock That Have Not
Vested
|
Equity Incentive Plan Awards: Number of Unearned Shares,
Units or Other Rights That Have Not Vested
|
Equity Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested
|
|
|
|
(#)
|
(#)
|
(#)
|
($)
|
(#)
|
($)
|
(#)
|
($)
|
|
|
|
Exercisable
|
Unexercisable
(1)
|
|
|
|
|
|
|
|
Harold A.
Blomquist
|
10/31/2003
|
7,500
|
0
|
---
|
$8.30
|
10/31/2010
|
---
|
---
|
---
|
---
|
|
4/27/2004
|
2,625
|
0
|
---
|
$11.60
|
4/27/2011
|
---
|
---
|
---
|
---
|
|
|
2/15/2005
|
3,500
|
0
|
---
|
$6.20
|
2/15/2012
|
---
|
---
|
---
|
---
|
|
|
5/9/2005
|
94,389
|
15,224
|
---
|
$6.60
|
5/9/2012
|
---
|
---
|
---
|
---
|
|
|
5/17/2005
|
120,890
|
19,498
|
---
|
$5.40
|
5/17/2012
|
---
|
---
|
---
|
---
|
|
|
6/12/2006
|
9,375
|
15,625
|
---
|
$3.20
|
6/12/2013
|
---
|
---
|
---
|
---
|
|
|
10/17/2006
|
9,713
|
23,587
|
---
|
$6.00
|
10/17/2013
|
---
|
---
|
---
|
---
|
|
|
8/14/2007
|
14,583
|
160,417
|
---
|
$4.66
|
8/14/2014
|
---
|
---
|
---
|
---
|
|
Ronald
Sartore
|
3/26/2004
|
10,000
|
0
|
---
|
$13.40
|
3/26/2011
|
---
|
---
|
---
|
---
|
|
|
4/27/2004
|
2,917
|
0
|
---
|
$11.60
|
4/27/2011
|
---
|
---
|
---
|
---
|
|
|
2/15/2005
|
3,500
|
0
|
---
|
$6.20
|
2/15/2012
|
---
|
---
|
---
|
---
|
|
|
2/21/2006
|
3,500
|
0
|
---
|
$2.70
|
2/21/2013
|
---
|
---
|
---
|
---
|
|
|
9/27/2006
|
15,000
|
0
|
---
|
$5.00
|
9/27/2013
|
---
|
---
|
---
|
---
|
|
|
11/13/2006
|
27,083
|
72,917
|
---
|
$4.66
|
11/13/2013
|
---
|
---
|
---
|
---
|
|
|
8/14/2007
|
2,500
|
27,500
|
---
|
$4.66
|
8/14/2007
|
---
|
---
|
---
|
---
|
|
Brian P.
Alleman
|
08/3/2005
|
7,778
|
2,222
|
---
|
$3.65
|
8/3/2012
|
---
|
---
|
---
|
---
|
|
|
4/26/2006
|
31,250
|
43,750
|
---
|
$3.60
|
4/26/2013
|
---
|
---
|
---
|
---
|
|
|
10/17/2006
|
1,954
|
4,746
|
---
|
$6.00
|
10/17/2013
|
---
|
---
|
---
|
---
|
|
|
8/14/2007
|
3,333
|
36,667
|
---
|
$4.66
|
8/14/2007
|
---
|
---
|
---
|
---
|
(1)
The stock options issued to our named
executive officers vest over 48 months at 1/48th per month.
22
__________________________________________________________________________________________________
Option Exercises and Stock Vested
During 2007, none of the named
executive officers exercised any vested stock options.
Potential Payments upon Termination or Change of
Control
The tables
below reflect the compensation payable to or on behalf of Messrs. Blomquist and
Alleman upon an involuntary termination without cause, or a change of control.
The amounts shown assume that such termination or change of control was
effective as of December 31, 2007, and thus includes amounts earned through such
time. The actual amounts we will be required to disburse can only be
determined at the time of the applicable circumstance.
Harold A.
Blomquist
|
|
|
|
|
Executive Benefits and Payments
|
Involuntary
Termination
without Cause
|
Change in
Control
|
|
Compensation
|
|
|
|
Cash
Severance(1)
|
$487,500
|
$487,500
|
|
Options
(unvested & accelerated)
|
$543,694
|
$543,694
|
|
Relocation
from Colorado to California
|
$150,000
|
$150,000
|
|
Benefit
Plans
|
|
|
|
Health
& Welfare
|
$23,400
|
$23,400
|
(1)
Pursuant to
the employment arrangement with Mr. Blomquist, this amount is equal to 18 months
of Mr. Blomquist’s annual salary, which amount is not payable if Mr. Blomquist’s
employment is terminated for cause. The Company is currently in the
process of documenting an employment agreement with Mr. Blomquist, which may
entail changes to certain of the provisions set forth in this Proxy.
Brian P. Alleman
|
|
|
|
|
Executive
Benefits and Payments
|
Involuntary
Termination
without Cause
|
Change in
Control
|
|
Compensation
|
|
|
|
Cash
Severance
|
$84,375(1)
|
$309,375(2)
|
23
__________________________________________________________________________________________________
(1)
This amount
is equal to (a) 3 months of Mr. Alleman’s annual salary,
plus
(b) 3
months of one-half of Mr. Alleman’s annual salary, which amounts are not payable
if Mr. Alleman’s employment is terminated for cause.
(2)
This amount
is equal to (a) 3 months of Mr. Alleman’s annual salary,
plus
(b) 3
months of one-half of Mr. Alleman’s annual salary,
plus
(c) 12 months of
Mr. Alleman’s annual salary, which amounts are not payable if Mr. Alleman’s
employment is terminated for cause.
The table
below reflects the compensation payable to or on behalf of Mr. Sartore upon an
involuntary termination upon a change of control of AgigA Tech, Inc. The
amounts shown assume that such termination and change of control were effective
as of December 31, 2007, and thus includes amounts earned through such time.
The actual amounts AgigA Tech, Inc. will be required to disburse can only
be determined at the time of the applicable circumstance. Pursuant to the
terms of his offer letter, AgigA Tech, Inc. is not required to provide Mr.
Sartore any additional compensation upon an involuntary termination without
cause that does not occur incident to a change of control.
Ronald Sartore
|
|
|
|
|
Executive
Benefits and Payments
|
Involuntary
Termination
without Cause
|
Change in
Control
|
|
Compensation
|
|
|
|
Cash
Severance
|
$0
|
$225,000(1)
|
(1)
This amount
is equal to 12 months of Mr. Sartore’s annual salary, which amount is not
payable if Mr. Sartore’s employment is terminated for cause.
Director Compensation
A director who is also an employee of
our company receives no additional compensation for serving on the Board.
Annual compensation for non-employee directors is comprised of cash and
equity compensation. Cash compensation consists of an annual retainer
(paid quarterly) and meeting fees. Annual equity compensation consists of
a stock option award. Each of these components is described in more detail
below. The total 2007 compensation of our non-employee directors is shown
in the following table:
|
|
|
|
|
|
|
|
|
|
Name(1)
|
|
|
|
|
Change in Pension Value
|
|
|
|
Fees
Earned
|
|
|
|
and
Nonqualified
|
|
|
|
or
|
|
|
Non-Equity
|
Deferred
|
|
|
|
Paid in
|
Stock
|
Option
|
Incentive Plan
|
Compensation
|
All Other
|
|
|
Cash
|
Awards
|
Awards
|
Compensation
|
Earnings
|
Compensation
|
Total
|
|
($)
|
($)
|
($)(2)
|
($)
|
($)
|
($)
|
($)
|
|
Robert
Pearson,
Compensation
and
GovernanceCommittees
|
$26,000
|
--
|
$20,307
|
--
|
--
|
--
|
$46,307
|
|
Alfred
Stein,
Governance
Committee Chair,
Audit
Committee,
Compensation
Committee
|
$27,000
|
--
|
$71,037
|
--
|
--
|
--
|
$98,037
|
|
Robert
Keeley,
Former
Audit Committee Chair
|
$25,750
|
--
|
$71,037
|
--
|
--
|
--
|
$96,787
|
|
John
Hillyard,
Audit
Committee Chair
|
$26,614
|
--
|
$172,547
|
--
|
--
|
--
|
$199,161
|
|
Philip
Black,
Compensation
Committee Chair,
Audit
Committee
|
$0
|
--
|
$50,533
|
--
|
--
|
--
|
$50,533
|
(1)
As of December 31, 2007, Mr. Pearson
had 21,125 options outstanding, Mr. Stein had 44,917 options outstanding, Dr.
Keeley had 37,625 options outstanding, Mr. Hillyard had 50,000 options
outstanding and Mr. Black had 25,000 options outstanding.
(2)
This column represents the dollar
amount recognized for financial statement reporting purposes with respect to the
2007 fiscal year for the fair value of stock options granted to each independent
director. Option expense recorded in our financial statements for 2007 for
options granted in 2007 was $20,307 for each of Messrs. Pearson, Stein, Keeley,
and Hillyard. Option expense recorded in our financial statements for 2007
for options granted in 2007 was $50,533 for Mr. Black. Option expense
recorded in our financial statements for 2007 for options granted in 2006
included $50,730, $50,730 and $152,240 for Messrs. Stein, Keeley and Hillyard,
respectively. The exercise price of each option granted was equivalent to
the closing price of a share of our common stock on the grant date.
Generally, the full grant date fair value is the amount that we would
expense in our financial statements over the award’s vesting schedule and has
been calculated using the Black-Scholes valuation model. The fair value of
the options granted to Messrs. Pearson, Stein, Keeley and Hillyard in 2007 was
$30,460 per individual. The fair value of the options granted to Mr. Black
in 2007 was $75,800. The valuations used in calculating the fair value of
the options granted to Messrs. Pearson, Stein, Keeley and Hillyard in 2007 were
based upon the following assumptions: estimated holding period of 5.00 years,
expected volatility of 77.00% and a risk free interest rate of 4.51%. The
valuations used in calculating the fair value of the options granted to Mr.
Black in 2007 were based upon the following assumptions: estimated holding
period of 5.00 years, expected volatility of 77.00% and a risk free interest
rate of 4.34%. It should be noted that this model is only one of the
methods available for valuing options. These amounts reflect our
accounting expense and do not correspond to the actual value that may or will be
recognized by the named directors.
The Board believes that compensation
for independent directors should be competitive and should fairly compensate
directors for the time and skills devoted to serving us but should not be so
great as to compromise independence.
24
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With the assistance of outside compensation consultants
and information, the Compensation Committee periodically reviews our director
compensation practices and compares them against the practices of public company
boards generally.
Beginning March
2004, each director who was not an employee received $1,500 for each meeting of
the Board, attended in person and 50% of the in person fee for telephonic
participation and $500 for each meeting of a committee of the Board.
Beginning January 1, 2005, each director of the Board also received a
$10,000 annual stipend, which is paid quarterly. In November 2006, the
annual stipend was increased to $20,000 and continues to be paid quarterly.
Through March 31,
2006, the stipend was paid in equivalent shares of common stock. Upon
initial appointment or election to the Board, each newly appointed or elected
member receives options to purchase 15,000 shares of our Common Stock.
Beginning in September 2006, each committee chair received options to
purchase 15,000 shares of our Common Stock. Each member of the Board
receives, within the first month of each calendar year while serving as a member
of the Board, a grant of options to purchase 3,750 shares of our Common Stock.
In November 2006, this amount was increased to a grant of options to
purchase 10,000 shares of our Common Stock. Along with the above compensation,
the Chairman of the Board receives $4,000 per calendar quarter, as long as the
Chairman is not an employee. Directors are also reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
us.
The Board believes that our total
director compensation package is competitive with the compensation offered by
other companies and is fair and appropriate in light of the responsibilities and
obligations of our independent directors.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
There were no transactions with
related persons since the beginning of our last completed fiscal year, or any
currently proposed transaction, that involved or involves in excess of $120,000.
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD
The Audit
Committee of the Board (the “Committee”) assists the Board in fulfilling its
oversight responsibilities with respect to the external reporting process and
the adequacy of Simtek’s internal controls. Specific responsibilities of the
Committee are set forth in the Audit Committee Charter, a copy of which can be
found on the Company’s website at www.simtek.com. The members of the Committee
are Messrs. Hillyard, Stein and Black, each of whom meets the independence
requirements of Rule 10A-3 of the Exchange Act and applicable NASDAQ
independence rules.
The Committee
has reviewed and discussed Simtek’s audited financial statements for the year
ended December 31, 2007 with Simtek’s management. The Committee has discussed
with Hein & Associates LLP the matters required to be discussed by Statement
on Auditing Standards No. 61, as amended, as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. The Committee has received the written
disclosures and the letter from Hein & Associates LLP required by
Independence Standards Board Standard No. 1, as adopted by the Public Company
Accounting Oversight Board in Rule 3600T, and has discussed with Hein &
Associates LLP its independence.
Based on the
review and discussions referred to in the preceding paragraph, the Committee
recommended to the Board that Simtek’s audited financial statements for the year
ended December 31, 2007 be included in Simtek’s Annual Report on Form 10-K for
the year ended December 31, 2007.
AUDIT COMMITTEE
John Hillyard, Chair
Philip Black
Alfred Stein
EQUITY COMPENSATION PLAN
INFORMATION
The following
table sets forth information with respect to our equity compensation plans as of
December 31, 2007.
25
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|
|
|
|
|
|
Plan Category
|
Number of securities to be issued upon exercise of
outstanding options, warrants and rights
(Column (a))
|
Weighted-average exercise price of outstanding options,
warrants and rights
(Column (b))
|
Number of securities remaining available for future
issuance under equity compensation plans (excluding securities reflected
in column (a))
(Column (c))
|
|
Equity
compensation plans approved by security holders
|
617,050
|
$4.50
|
2,182,950
|
|
Equity
compensation plans not approved by security holders
|
1,291,183
|
$5.09
|
--
|
|
Total
|
1,908,233
|
$4.90
|
2,182,950
|
Material Features of the Equity Compensation Plans
.
1994 Stock Option Plan
.
Through June 13, 2007, the Company granted options under the 1994 Stock
Option Plan (the “SOP”). The SOP authorized 2,060,000 non-qualified stock
options that may be granted to directors, employees, and consultants. The
plan permitted the issuance of non-statutory options and provide for a minimum
exercise price equal to 100% of the fair market value of the Company’s common
stock on the date of grant. The maximum term of options granted under the
plan was 10 years and options granted to employees expire 90 days after the
termination of employment. In 2004, the SOP was extended for 10 more
years. No further options have been granted under the SOP since the 2007
Equity Incentive Plan (the “EIP”) became effective, and the Company does not
intend to issue any more options under the SOP in the future. All terms
and conditions of the options granted under the SOP will remain the same.
All options granted prior to March 24, 2006, began vesting after six
months after the date of grant, and will become fully vested after three years
and expire seven years from date of grant. On March 24, 2006, the Board of
Directors changed the vesting schedule of stock options granted after March 24,
2006 to be as set forth below with respect to the EIP.
2007 Equity Incentive Plan
.
At the annual meeting of stockholders on June 14, 2007, the Company’s
shareholders approved the EIP, which authorizes 2,800,000 shares that may be
granted under either incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986 (the “Code”), nonqualified stock options,
restricted stock awards or other stock grants. The EIP became effective on
June 15, 2007. The EIP provides that the maximum number of shares with
respect to which an individual can receive a grant of options in a calendar year
is 500,000 shares. Options may be granted to key employees, consultants,
and non-employee directors. The EIP provides that an individual can
receive grants of both incentive options and nonqualified options.
However, only employees may be granted incentive options. The
minimum exercise price for options is 100% of the fair market value of the
Company’s stock on the date of grant and a maximum term of 10 years.
Generally, upon termination of employment or service, options expire three
months after termination. Incentive options granted to an employee who
holds more than 10% of the Company’s stock must have an exercise price of at
least 110% of the fair market value of the Company’s stock on the date of grant
and a maximum term of no more than 5 years.
The Compensation Committee administers
the EIP with respect to grants to employees, consultants and non-employee
directors. With respect to grants to officers and directors, the Committee
is constituted in a manner that satisfies applicable laws and regulations,
including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, and Code section 162(m). The EIP also provides that the full
board of directors can perform any function of the Committee, subject to the
requirements of the NASDAQ rules and Code section 162(m). The Committee
has the authority to delegate to specified officers of the Company the grants of
stock options and other awards to specified employees of the Company, and the
Committee has delegated such grant-making authority.
Each option granted under the EIP is
evidenced by a written stock option agreement. Each option holder shall
become vested in the shares underlying the option in such installments and over
such period or periods of time, if any, or upon such events, as are determined
by the Committee in its discretion and set forth in the option agreement.
Vesting of the options is as follows:
·
If an
officer or employee has been employed for 12 months or more, stock options will
vest over 48 months at 1/48th per month, and vesting will begin immediately at
1/48th per month for the four year period.
·
If an
officer or employee has been employed for less than 12 months, no vesting will
occur until the officer or employee has been employed for 12 months at which
time the officer or employee will be caught up at 1/48th per month for each
month since the option grant date and then the options will continue to vest at
1/48th per month for the remaining portion of the four year period.
26
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·
If an
officer or employee is a new hire, no vesting will occur until the officer or
employee has been employed for 12 months at which time the officer or employee
will receive 12/48th of the vesting after which the options will continue to
vest at 1/48th per month for the remaining portion of the four year period.
·
All
options granted to outside directors of the Company will be 100% vested after
six months from the grant date.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
requires our directors, executive officers and
beneficial
owners of 10% or more of our stock, among others, to file with the SEC and the
NASDAQ an initial report of ownership of our common stock on Form 3 and
reports of changes in ownership on Form 4 or Form 5. Persons subject
to Section 16 are required by SEC regulations to furnish us with copies of
all Section 16 forms that they file related to transactions in our stock.
Under SEC rules, certain forms of indirect ownership and ownership of our common
stock by certain family members are covered by these reporting requirements. As
a matter of practice, our administrative staff assists our directors and
executive officers in preparing initial ownership reports and reporting
ownership changes and typically files these reports on their behalf.
Based on a review of the copies of
forms filed in 2007, except for one late filing on Form 4 by Mr. Blomquist with
respect to one transaction, we believe that during 2007 all of our executive
officers and directors filed the required reports on a timely basis under
Section 16(a). However, Crestview Capital Master, LLC, one of our
beneficial owners of 10% or more of our stock, was late with one Form 4 filing
with respect to five transactions.
27
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SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS FOR 2009 ANNUAL MEETING
To be considered for inclusion in the
proxy materials for our 2009 annual meeting of shareholders, shareholder
proposals must be received by our Corporate Secretary at our principal executive
offices no later than March 21, 2009. Such proposals must comply with
Rule 14a-8 under the Exchange Act. If our 2009 annual meeting is held
on a date more than 30 calendar days from June 19, 2009, proposals that
shareholders seek to have included in the proxy statement for our 2009 annual
meeting must be received by a reasonable time before the Company begins to print
and mail its proxy solicitation materials.
Shareholder proposals and director
nominations for our 2009 annual meeting of shareholders not intended for
inclusion in the proxy materials for the meeting must be delivered to our
Corporate Secretary at our principal executive offices no earlier than February
19, 2009 and no later than March 21, 2009 to be considered timely; provided,
however, that if our 2009 annual meeting is held on a date more than 30 calendar
days from June 19, 2009, notice must be received not later than the close of
business on the 10th day following the day on which the Company’s notice of the
date of the meeting is first given to the stockholders or disclosed to the
general public. The procedures for submitting a shareholder proposal or
nomination not included in the proxy statement and proxy are more fully
described in our Bylaws. Any shareholder proposals will be subject to the
requirements of the proxy rules adopted by the SEC.
ANNUAL REPORT ON FORM 10-K
We will furnish to any shareholder
upon request a copy of our Annual Report on Form 10-K or any exhibit
described in the list accompanying the Annual Report on Form 10-K. Requests
for copies of such report and/or exhibit(s) should be directed to Simtek
Investor Relations at (719) 531-9444 or investor relations@simtek.com.
OTHER INFORMATION
Shareholders should direct
communications regarding change of address, transfer of stock ownership or lost
stock certificates by mail to our Corporate Secretary at our principal executive
offices.
The cost of soliciting proxies in the
accompanying form will be borne by us. In addition to solicitations by mail, a
number of our officers, directors and employees may, for no additional
compensation, solicit proxies in person or by telephone. We will also make
arrangements with brokerage firms, banks and other nominees to forward proxy
materials to beneficial owners of shares and will reimburse such nominees for
their reasonable costs.
The persons designated to vote shares
covered by proxies intend to exercise their judgment in voting such shares on
other matters that are presented for a vote at the Annual Meeting. Management
does not expect, however, that any matters other than those referred to in this
proxy statement will be presented for action at the Annual Meeting.
28
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