Filed Pursuant to Rule 424(b)(3)
Registration No. 333-138097
Prospectus Supplement No. 3 dated May 16, 2007
(to Prospectus dated January 16, 2007)
This Prospectus Supplement No. 3 supplements and amends the Prospectus
dated January 16, 2007, as supplemented and amended by Prospectus Supplement No.
1 dated April 3, 2007 and Prospectus Supplement No. 2 dated April 30, 2007 (the
"Prospectus"), relating to the resale of 2,351,155 shares of common stock, par
value $0.0001 per share, of Simtek Corporation ("Simtek"). You should read this
Prospectus Supplement No. 3 in conjunction with the Prospectus. Prospectus
Supplement No. 3 is not complete without, and may not be delivered or utilized
except in connection with, the Prospectus, including any amendments or
supplements thereto.
Attached hereto and incorporated by reference herein is Simtek's: (a)
Schedule 14A Definitive Proxy Statement filed with the Securities and Exchange
Commission ("SEC") on May 11, 2007; and (b) Quarterly Report on Form 10-Q for
the three months ended March 31, 2007, filed with the SEC on May 15, 2007. This
Prospectus Supplement No. 3 should be read in conjunction with, and delivered
with, the Prospectus and is qualified by reference to the Prospectus except to
the extent that the information in this Prospectus Supplement No. 3 supersedes
the information contained in the Prospectus.
The Prospectus, together with this Prospectus Supplement No. 3, constitutes
the prospectus required to be delivered by Section 5(b) of the Securities Act of
1933, as amended, with respect to the offers and sales of the Simtek common
stock offered hereby.
See the section of the Prospectus titled "Risk Factors", beginning on page
4 thereof, for certain factors relating to an investment in the shares of Simtek
common stock offered hereby.
Neither the SEC nor any other state securities commission has approved or
disapproved of the Simtek common stock offered hereby or passed upon the
adequacy or accuracy of the Prospectus or this Prospectus Supplement No. 3. Any
representation to the contrary is a criminal offense.
The date of this Prospectus Supplement No. 3 is May 16, 2007.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to s. 240.14a-12
SIMTEK CORPORATION
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------
(3) Filing Party:
--------------------------------------------------------
(4) Date Filed:
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Persons who are to respond to the collection of information contained in this
form are not required to respond unless the form displays a currently valid
OMB control number
[SIMTEK LOGO]
4250 Buckingham Drive, Suite 100
Colorado Springs, CO 80907
Dear Fellow Shareholder:
You are invited to attend the annual meeting of the shareholders of Simtek
Corporation, which will be held at the Hotel Crescent Court, 400 Crescent Court,
Dallas, Texas 75201 on June 14, 2007, at 2:00 p.m., local time. We have enclosed
a notice of the annual meeting, a proxy statement, a proxy card and a copy of
our annual report for the year ended December 31, 2006.
At the annual meeting, our shareholders will:
(i) consider and vote on a proposal to elect six directors to our board of
directors, each to serve until the 2008 annual meeting of shareholders
and until their successors have been duly elected and qualified;
(ii) consider and vote on a proposal to adopt the Simtek Corporation
Employee Stock Purchase Plan;
(iii) consider and vote on a proposal to adopt the Simtek Corporation 2007
Equity Incentive Plan;
(iv) consider and vote on a proposal to ratify the selection of Hein &
Associates LLP as our independent registered public accounting firm
for the year ending December 31, 2007; and
(v) transact such other business as may properly come before the meeting.
Our board of directors has unanimously approved the proposals and
recommends that you vote in favor of the proposals. Whether or not you are
personally able to attend the annual meeting, please complete, sign and date the
enclosed proxy card and return it in the enclosed prepaid envelope as soon as
possible. This action will not limit your right to vote in person if you wish to
attend the meeting and vote personally. Please review the entire proxy statement
carefully. If you would like assistance in completing your proxy card, or if you
have any questions about the procedure for voting your shares described in the
attached proxy statement, please contact Mr. Brian Alleman, our Chief Financial
Officer, at (719) 531-9444 or Ms. Marie Daegresto, our Investor Representative,
at (323) 468-2300.
Sincerely yours,
/s/ Harold Blomquist
Harold Blomquist
Chief Executive Officer
[SIMTEK LOGO]
4250 Buckingham Drive, Suite 100
Colorado Springs, CO 80907
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 14, 2007
------------------------------------
May 10, 2007
To the Shareholders of Simtek Corporation:
The 2007 annual meeting of shareholders of Simtek Corporation, a Delaware
corporation ("Simtek"), will be held at 2:00 p.m., local time, on June 14, 2007,
at the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas 75201. Simtek is
holding the 2007 annual meeting for the following purposes:
(i) to consider and vote on a proposal to elect six directors to Simtek's
board of directors, each to serve until the 2008 annual meeting of
shareholders and until their successors have been duly elected and
qualified;
(ii) to consider and vote on a proposal to adopt the Simtek Corporation
Employee Stock Purchase Plan;
(iii) to consider and vote on a proposal to adopt the Simtek Corporation
2007 Equity Incentive Plan;
(iv) to consider and vote on a proposal to ratify the selection of Hein &
Associates LLP as Simtek's independent registered public accounting
firm for the year ending December 31, 2007; and
(v) to transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on April 25, 2007, the
record date for the meeting, will be entitled to notice of, and to vote at, the
annual meeting. A copy of Simtek's annual report for the year ended December 31,
2006, is enclosed. A list of shareholders entitled to vote at the meeting will
be kept on file at Simtek's principal office for inspection by any shareholder,
for any purpose germane to the meeting, during usual business hours for ten days
prior to the meeting.
YOU ARE INVITED TO ATTEND THE ANNUAL MEETING, BUT WHETHER OR NOT YOU PLAN
TO BE PRESENT, PLEASE COMPLETE, DATE, SIGN, AND PROMPTLY RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
Simtek's board of directors believes that the proposals are advisable to
and in the best interests of Simtek's shareholders and unanimously recommends
that you vote in favor of the proposals.
This notice and the attached proxy statement, proxy card, and annual report
are first being mailed to Simtek's shareholders on or about May 14, 2007.
By Order of the Board of Directors,
/s/ Brian P. Alleman
Brian P. Alleman
Corporate Secretary
TABLE OF CONTENTS
PROXY STATEMENT................................................................1
PROPOSAL 1 - ELECTION OF DIRECTORS.............................................5
PROPOSAL 2 - ADOPTION OF THE SIMTEK CORPORATION EMPLOYEE STOCK
PURCHASE PLAN.....................................................6
PROPOSAL 3 - ADOPTION OF SIMTEK CORPORATION 2007 EQUITY INCENTIVE PLAN.........9
PROPOSAL 4 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITOR...........12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................14
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES............................16
INFORMATION REGARDING EXECUTIVE OFFICERS......................................18
COMPENSATION DISCUSSION AND ANALYSIS..........................................18
COMPENSATION COMMITTEE REPORT.................................................24
EXECUTIVE COMPENSATION........................................................25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................30
REPORT OF THE AUDIT COMMITTEE OF THE BOARD....................................30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................30
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2008 ANNUAL MEETING........31
ANNUAL REPORT ON FORM 10-K....................................................31
OTHER INFORMATION.............................................................31
APPENDIX A - Simtek Corporation Employee Stock Purchase Plan.................A-1
APPENDIX B - Simtek Corporation 2007 Equity Incentive Plan...................B-1
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 2007 annual meeting of shareholders, including any adjournment thereof (the
"Annual Meeting").
Time and Place; Purpose
The Annual Meeting will be held at 2:00 p.m., local time, Thursday, June
14, 2007, at the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas 75201.
At the Annual Meeting, our shareholders will be asked to consider and vote upon
the following proposals (the "Proposals"):
(i) to consider and vote on a proposal to elect six directors to Simtek's
board of directors, each to serve until the 2008 annual meeting of
shareholders and until their successors have been duly elected and
qualified;
(ii) to consider and vote on a proposal to adopt the Simtek Corporation
Employee Stock Purchase Plan;
(iii) to consider and vote on a proposal to adopt the Simtek Corporation
2007 Equity Incentive Plan;
(iv) to consider and vote on a proposal to ratify the selection of Hein &
Associates LLP as Simtek's independent registered public accounting
firm for the year ending December 31, 2007; and
(v) 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 25, 2007 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 16,229,179 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 six 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 form of proxy, properly executed and returned, 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 marked "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 marked
"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.
Any person giving a proxy has the right to revoke the proxy at any time
before it is voted by giving written notice to the Secretary of our company. We
will bear the cost of preparing and mailing proxy materials as well as the cost
of soliciting proxies. In addition to solicitation by mail, certain of our
employees or representatives may personally solicit proxies. Such persons will
receive no additional compensation for such work.
This proxy statement and accompanying form of proxy and annual report are
first being mailed to shareholders on or about May 14, 2007.
Annual Report
Our annual report to shareholders for the year ended December 31, 2006 is
being mailed to you 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 sign 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 complete, sign and return your proxy card in advance of the meeting just
in case your plans change. If you have signed and returned 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 Keeley, Robert
Pearson, Ronald Sartore, Alfred J. Stein and John Hillyard, whose terms of
office will expire at the Annual Meeting.
Employee Stock Purchase Plan. The Board recommends that you vote "FOR" the
adoption of the Simtek Corporation Employee Stock Purchase Plan.
2007 Equity Incentive Plan. The Board recommends that you vote "FOR" the
adoption of the Simtek Corporation 2007 Equity Incentive Plan.
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, 2007.
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Q: WHAT IS THE PROCEDURE FOR VOTING?
A: You may vote either by mail or in person at the annual meeting. To vote by
mail, please complete, date, sign, and promptly return the accompanying proxy
card in the enclosed envelope, which requires no postage if mailed in the United
States. If you mark your proxy card to indicate how you want your shares voted
on each Proposal, your shares will be voted as you instruct. If you sign and
return your proxy card but do not mark the card to provide voting instructions,
the shares represented by your proxy card will be voted "FOR" each of the
Proposals.
If you want to vote in person, please come to the annual meeting. We will
be passing out written ballots to anyone who wants to vote at the meeting.
Please note, however, that if your shares are held in the name of your broker
(or in what is usually referred to as "street name"), you will need to arrange
to obtain a proxy from your broker in order to vote in person at the meeting.
Q. WHAT IS THE DIFFERENCE BETWEEN A SHAREHOLDER OF RECORD AND A SHAREHOLDER
WHO HOLDS SHARES IN STREET NAME?
A. Many shareholders hold their shares through a broker, bank or other nominee
rather than directly in their own name. As summarized below, there are some
distinctions between shares held of record and those owned in street name.
Shareholder of Record. If your shares are registered directly in your
name with our transfer agent, you are considered, with respect to
those shares, the shareholder of record, and these proxy materials are
being sent directly to you by us. As the shareholder of record, you
have the right to grant your voting proxy directly or to vote in
person at the Annual Meeting. We have enclosed a proxy card for you to
use.
Street Name. If your shares are held in a stock brokerage account or by
a bank or other nominee, you are considered the beneficial owner of
shares held in "street name," and these proxy materials are being
forwarded to you by your broker or nominee, which is considered, with
respect to those shares, the shareholder of record. As the beneficial
owner, you have the right to direct your broker how to vote and are
also invited to attend the Annual Meeting. However, since you are not
the shareholder of record, you may not vote these shares in person at
the Annual Meeting unless you obtained a signed proxy from the record
holder giving you the right to vote the shares. Your broker or nominee
has enclosed or provided a voting instruction card for you to use in
directing the broker or nominee how to vote your shares.
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 sign and return your proxy but do not give specific instructions, your proxy
will be voted FOR the election of all director nominees, FOR the adoption of the
Simtek Corporation Employee Stock Purchase Plan, FOR the adoption of the Simtek
Corporation 2007 Equity Incentive Plan, 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:
o submitting another proxy card with a later date;
o giving written notice to our Corporate Secretary that you are revoking
your proxy; or
o 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 or broker.
3
Q. WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
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 proxy materials and other 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. Proxy materials and
other 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.
4
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 executed proxies will be voted, if authority to do so is not withheld, for
the election of Messrs. Blomquist, Keeley, Pearson, Sartore, Stein and Hillyard.
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 55, 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. 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 H. KEELEY, age 66, has served as a director since May 1993. He is
currently Professor (Emeritus) at the University of Colorado at Colorado Springs
where he served as the El Pomar Professor of Business Finance from 1992 until
2004. From 1986 to 1992, Dr. Keeley was a professor in the Department of
Industrial Engineering and Engineering Management at Stanford University. Prior
to joining Stanford, he was a general partner of Hill and Carmen (formerly Hill,
Keeley and Kirby), a venture capital firm. Dr. Keeley holds a Bachelor's degree
in electrical engineering from Stanford University, an M.B.A. from Harvard
University, where he was a Baker Scholar, and a Ph.D. in business administration
from Stanford University. Dr. Keeley is a director and president of a private
company in the wind energy business, and a director of two other private
companies.
ROBERT C. PEARSON, age 71, has served as a director since July 2002. 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 and Laserscope, Inc., both of which are
publicly held. He is also a Director of eOriginal, Inc., a privately held
company.
RONALD SARTORE, age 57, has served as a director since March 2004. Mr.
Sartore has over 30 years experience in the industry and currently serves as
Executive Vice President of the Company. 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
5
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.
ALFRED J. STEIN, age 74, 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. Mr. Stein is on the Board of Directors of two
publicly traded companies, Advanced Power Technology and ESS Technology, as well
as several 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 served on the Board
of Trustees for St. Mary's University of Texas.
JOHN HILLYARD, age 50, 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
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.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE NOMINATED DIRECTORS.
PROPOSAL 2 - ADOPTION OF THE SIMTEK CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Introduction. You are being asked to approve our new Simtek Corporation
Employee Stock Purchase Plan ("Employee Stock Purchase Plan"), which was adopted
by the Board on March 16, 2007. In order to receive favorable tax treatment
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
shareholder approval of the Employee Stock Purchase Plan is required. If
approved by our shareholders, the Employee Stock Purchase Plan will become
effective July 1, 2007. A summary of the material features of the Employee Stock
Purchase Plan follows. The summary is qualified in its entirety by reference to
the full text of the Employee Stock Purchase Plan, which is set forth as
Appendix A hereto and incorporated by reference herein.
Purpose of the Employee Stock Purchase Plan. The Employee Stock Purchase
Plan provides a broad-based group of eligible employees of our company and
subsidiaries with an opportunity to acquire shares of our Common Stock and
thereby acquire an interest in our future.
Administration of the Employee Stock Purchase Plan. The Board or a
committee designated by the Board will administer the Employee Stock Purchase
Plan. The administrator has the exclusive right to interpret the provisions of
the Employee Stock Purchase Plan and to determine any questions arising under
the Employee Stock Purchase Plan. If the Board has designated a committee to
administer the Employee Stock Purchase Plan, the Board shall continue to have
the final power to determine questions of policy and expediency that may arise
in connection with the administration of the Employee Stock Purchase Plan.
Shares Reserved for the Employee Stock Purchase Plan.
General. The maximum number of shares of Common Stock that may be
purchased under the Employee Stock Purchase Plan, in the aggregate, is 500,000.
The shares issuable under the Employee Stock Purchase Plan are drawn from
authorized but unissued shares.
6
Changes in Capitalization. If there is a change to the Common Stock as
a result of a recapitalization, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure, or other transaction not involving the
receipt of consideration by our company, then the Board or the committee shall
appropriately adjust the outstanding rights to purchase Common Stock and the
Common Stock then subject to the Employee Stock Purchase Plan with respect to
the number of shares, kind and price of shares available for purchase under the
Employee Stock Purchase Plan and in the minimum and maximum number of shares
that an individual employee is entitled to purchase.
Offering Periods. Shares of Common Stock are offered (the "Offer") for
purchase to eligible employees through a series of successive quarterly offering
periods. A quarterly offering period begins on the first day of each calendar
quarter. A right to purchase Common Stock will be granted on the first day of
each calendar quarter during the term of the Plan, commencing with the calendar
quarter beginning July 1, 2007.
Eligibility and Participation. Employees eligible to participate in the
Employee Stock Purchase Plan include each employee of Simtek and of each
subsidiary that has been designated by the Board if the employee customarily
works for Simtek or the designated subsidiary at least 20 hours per week and 5
months in any calendar year. Nonemployee directors, leased employees,
independent contractors and employees who own stock possessing 5% or more of the
total combined voting power or value of all classes of our or any our designated
subsidiary's capital stock are not eligible to participate in the Employee Stock
Purchase Plan. In addition, the Board may provide from time to time in its
discretion that highly compensated employees are not eligible to participate.
An individual who is an eligible employee on the first day of the calendar
quarter may participate in the Offer by authorizing payroll deductions in whole
percentages from 1% up to 10% of regular salary or wages plus overtime,
commissions and bonuses per pay period. Amounts withheld will be held for the
credit of the participant as part of our general funds and will not accrue any
interest. Individuals who become eligible employees during the calendar quarter
may not enroll until the first day of the next calendar quarter.
As of April 30, 2007, there were approximately 60 eligible employees, of
whom 3 were executive officers.
Purchase Price. The purchase price is equal to the lesser of (1) 85% of the
fair market value of the Common Stock on the first trading day of the calendar
quarter or (2) 85% of the fair market value of the Common Stock on the last
trading day of the calendar quarter (the "Purchase Price"). The fair market
value of the Common Stock is the last reported sale price of the Common Stock
reported by the NASD through the NASD Automated Quotation System ("NASDAQ") or
the principal securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not admitted to trading or
listed on NASDAQ or on any national securities exchange, the average closing bid
price if available. If the Common Stock is not reported by NASDAQ or traded on
an exchange and the average closing bid price is not available, then fair market
value is determined in good faith by the Board or the committee appointed by the
Board to administer the Employee Stock Purchase Plan, using all relevant data
and information reasonably available to it.
On April 30, 2007, the last reported sale price of the Common Stock
reported on NASDAQ was $5.40.
Purchase of Common Stock. On the first day on which the NASDAQ is open for
trading after the close of the calendar quarter (the "Purchase Date"), the
entire account balance of a participating employee who has not terminated
employment or withdrawn from the Employee Stock Purchase Plan, as described
below, is applied to purchase whole shares of our Common Stock at the Purchase
Price. Any amount attributable to a fractional share will be carried forward to
the next Offer. In no event, however, is an employee permitted to purchase
Common Stock having a value of more than $25,000 during each calendar year, or
4,000 shares per Offer, whichever is less.
Termination of Employment. If a participating employee terminates
employment with our company and all participating subsidiaries during the term
of an Offer for any reason, the employee shall cease participating in the
Employee Stock Purchase Plan immediately. No deduction will be taken from the
employee's final paycheck, and all payroll deductions accumulated during the
Offer will be paid to the terminated employee without interest.
Withdrawal From the Employee Stock Purchase Plan. A participating employee
can withdraw at any time during an Offer and before the Purchase Date for the
Offer by giving written notice to us. Upon the employee's withdrawal, all
payroll deductions will stop. The payroll deductions accumulated during the
Offer are returned to the employee without interest. An employee who withdraws
from an Offer may not participate in the next Offer, but may participate in
future Offers by authorizing payroll deductions.
7
Leave of Absence; Inactive Employment. If a participating employee
continues to receive salary or wages during a leave of absence or period of
inactive employment, the employee may continue to participate for the first 90
days of the leave or period of inactive employment. If the participating
employee chooses to stop payroll deductions, the employee will be treated as
having terminated employment and withdrawn from the Employee Stock Purchase
Plan. The employee's accumulated payroll deductions will be returned to the
employee without interest on the first business day following the Purchase Date
for the Offer in which the leave of absence or period of inactive employment
commenced.
If a participating employee does not receive salary or wages, payroll
deductions will stop but will resume automatically if the employee returns to
active employment within 90 days after the leave or period of inactive
employment commenced.
In all events, a participating employee will be treated as having
terminated employment and withdrawn from the Employee Stock Purchase Plan on the
91st day of any period of leave of absence or inactive employment. We will
refund to the employee, without interest, the payroll deductions accumulated
during the Offer in which he or she is treated as having terminated employment
and withdrawn from the Employee Stock Purchase Plan.
Merger; Change in Control. Upon a "change in control event," in the sole
discretion of the Board, (1) the surviving or continuing corporation may assume
any outstanding purchase rights or substitute rights to purchase its stock, (2)
the purchase rights may continue in full force and effect, or (3) the
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the closing of the "change in control" event and the Employee Stock
Purchase Plan will be terminated.
A "change in control event" includes our liquidation or dissolution, a
merger or consolidation in which we are not the surviving corporation, a merger
in which we are the surviving corporation but our shares are converted into
other property (whether in the form of securities, cash or otherwise), or an
acquisition by an unrelated party of our stock having 50% or more of the voting
power in the election of directors.
Purchase Rights Not Transferable. Rights to purchase Common Stock under the
Employee Stock Purchase Plan are not transferable by an employee other than by
will or the laws of descent and distribution. The rights to purchase may be
exercised, during an employee's lifetime, only by the employee and may not be
sold, pledged, assigned or otherwise transferred.
Amendment and Termination. We have the right to terminate or amend the
Employee Stock Purchase Plan at any time. However, we may not, without
shareholder approval, (1) increase the number of authorized shares, (2) modify
the requirements for participation in the Employee Stock Purchase Plan, (3) make
any other change for which shareholder approval is required by Section 423 of
the Code or another law or regulation. Furthermore, we may not amend the
Employee Stock Purchase Plan in a manner that impairs outstanding rights without
the consent of the eligible employees holding the rights, unless it is necessary
to amend the rights to comply with law or regulations. The Employee Stock
Purchase Plan will terminate on the date determined by the Board.
Certain Federal Income Tax Consequences. A participant's contributions
through payroll deductions are not tax deductible but will constitute a part of
the cost basis of the Common Stock purchased under the Employee Stock Purchase
Plan.
No tax liability results on the grant of right to purchase Common Stock or
the purchase of Common Stock. The employee becomes liable for Federal income tax
on the disposition of the Common Stock. In order to receive the favorable
federal income tax treatment provided under Section 423 of the Code, a
participant must hold the Common Stock for two years from the Offer Date, or one
year from the Purchase Date, whichever is later (the "Holding Period").
If an employee disposes of shares acquired under the Employee Stock
Purchase Plan after the expiration of the Holding Period, or if an employee dies
while holding any shares acquired under the Employee Stock Purchase Plan, the
employee must include in gross income, as compensation, in the taxable year of
disposition or death, an amount with respect to each share equal to the lesser
of (i) the excess of the fair market value of the share at the time of the
disposition or death over the amount paid for the share, or (ii) the excess of
the fair market value of the share on the first day of the Offer over the
Purchase Price. We will not be allowed a corresponding deduction for the amount
treated as ordinary income.
Except in the case of death, the basis of the shares in the employee's
hands at the time of the disposition will equal the price paid for the shares
increased by the amount, if any, included in the employee's gross income as
8
compensation. Any additional gain recognized will be treated as short-term or
long-term capital gain depending on the holding period of such shares. In the
case of death of the employee, the basis of the shares to the employee's estate
or heirs will be determined under Section 1014 of the Code.
If an employee disposes of any of the shares purchased under the Employee
Stock Purchase Plan before the expiration of the Holding Period, the employee
must include in gross income, as compensation, an amount with respect to each
share equal to the excess of the fair market value of the shares on the Purchase
Date over the price paid for such shares pursuant to the Employee Stock Purchase
Plan. Such amount will be includible in the gross income of the employee for the
employee's taxable year in which the disposition occurs. We will be allowed a
corresponding deduction in the same year and in the same amount required to be
included in gross income by the employee if and to the extent such amount is an
ordinary and necessary business expense and satisfies the test of reasonable
compensation, provided that our deduction with respect to certain officers may
be limited by Section 162(m) of the Code. Any additional gain will be treated as
short- or long-term capital gain depending on the Holding Period of the shares.
The basis of the shares in the hands of the employee will be the amount
paid for the shares plus the amount, if any, included in the employee's gross
income as compensation. Any gain or loss will be short-term or long-term capital
gain or loss depending on the holding period for the shares. The holding period
for the shares will commence on the date the shares are purchased.
The foregoing is intended as a summary of certain Federal income tax
consequences associated with the Employee Stock Purchase Plan and it does not
purport to be a complete statement of such consequences. It is recommended that
employees eligible to participate in the Employee Stock Purchase Plan consult
their own tax advisors for counseling. Tax treatment under foreign, state, local
or other law, including estate tax law, is not covered in this summary.
Accounting Treatment. Under the accounting principles currently applicable
to employee stock purchase plans the fair value of each purchase right granted
under the Employee Stock Purchase Plan will be charged as a direct compensation
cost to our reported earnings over the term of the Offer to which the purchase
right pertains. The fair value of each purchase right will be determined at its
grant date.
We must have a sufficient number of shares of Common Stock approved for
issuance under the Employee Stock Purchase Plan at the beginning of each Offer
for all purchases made during the Offer. If additional shares need to be
authorized during an Offer, this may result in a delayed measurement date for
the compensation cost of the purchase rights granted at the beginning of the
Offer and may result in a greater charge to our reported earnings for the Offer.
The measurement date for the compensation cost associated with such purchase
rights will be delayed until the share increase is approved.
New Plan Benefits. Because enrollment in the Employee Stock Purchase Plan
is voluntary, we cannot determine the number of Rights that may be awarded and
shares of Common Stock that may be purchased under the Employee Stock Purchase
Plan in the future.
Shareholder Approval; Board Recommendation. The affirmative vote of the
holders of a majority of the shares of Common Stock present, in person or
represented by proxy, and entitled to vote at the Annual Meeting is required to
approve the Employee Stock Purchase Plan.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2,
APPROVING THE EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3 - ADOPTION OF SIMTEK CORPORATION 2007 EQUITY INCENTIVE PLAN
Proposal. On May 6, 2007, the Board adopted the Simtek Corporation 2007
Equity Incentive Plan, or the "2007 EIP." You are being asked to approve the
2007 EIP at the Annual Meeting. If approved by our shareholders, the 2007 EIP
will become effective on June 15, 2007 and will terminate on June 14, 2017.
The Board is also seeking the shareholders' authorization of 2,800,000
shares to be issued under the 2007 EIP pursuant to grants of non-qualified stock
options, incentive stock options, restricted stock awards and other stock
awards.
The purpose of the 2007 EIP is to provide the employees, non-employee
directors, and consultants who are selected for participation in the 2007 EIP
with added incentives to continue in the long-term service of our company and to
create in such persons a more direct interest in the future success of our
9
operations by relating increases in compensation to increases in shareholder
value, so that the income of the participants in the 2007 EIP is more closely
aligned with the income of our shareholders. The 2007 EIP is also intended to
provide a financial incentive that will enable us to attract, retain and
motivate the most qualified directors, employees, and consultants.
As of April 30, 2007, there were approximately 60 employees and 4
non-employee directors eligible to receive grants under the 2007 EIP. On April
30, 2007, the last report sale price of the Common Stock reported on NASDAQ was
$5.40.
By unanimous vote, the Board has recommended that our shareholders vote
"FOR" approval of the 2007 EIP.
The following summarizes the 2007 EIP and is qualified in its entirety by
the full text of the 2007 EIP, which is included as Appendix B to this proxy
statement and incorporated herein by this reference. The 2007 EIP, if approved
by our shareholders, will replace our 1994 Stock Option Plan. We have not made
any grants under the 1994 Stock Option Plan since February 13, 2007 and, if the
2007 EIP is approved by our shareholders, we do not expect to make any further
grants under the 1994 Stock Option Plan. However, options outstanding under the
1994 Stock Option Plan will remain outstanding until they are exercised or
expire by their terms.
Administration of the 2007 EIP. The Compensation Committee of the Board
administers the 2007 EIP with respect to grants to employees, consultants, and
non-employee directors. The Committee has sole discretion to establish rules and
procedures for the administration of the 2007 EIP, select the participants from
among the eligible employees, non-employee directors, and consultants, determine
the types of awards to be granted and the number of shares of common stock
subject to each award, and set the terms and conditions of the awards. However,
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 (the "Exchange Act") and
Code section 162(m). The 2007 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 2007 EIP provides that the Committee may delegate authority to grant
stock options and other awards to specified officers of our company, subject to
the restrictions and conditions that the Committee, in its sole discretion,
determines and subject to the requirement that, among other things, the grant or
award satisfies the requirements of Rule 16b-3 and Code section 162(m). At this
time, the Committee has not made a delegation.
Shares Subject to the Option Plan. There are 2,800,000 shares of Common
Stock reserved for the grant of awards under the 2007 EIP. The maximum number of
shares of Common Stock available for grants of incentive stock options is
2,800,000. The maximum number of shares subject to one or more options that may
be granted during any calendar year to any one participant is 500,000.
Adjustment of Shares. The number of shares available under and subject to
the 2007 EIP, the number of shares subject to each award outstanding under the
2007 EIP, the maximum number of shares that may be subject to incentive stock
options, the maximum number of shares that may be subject to options granted to
an individual in a calendar year, and the number of shares subject to a
delegation of authority by the Committee, are subject to adjustment on account
of stock splits, stock dividends, recapitalizations and other dilutive changes
in our Common Stock. Any shares of our Common Stock related to awards that
terminate by expiration, forfeiture, cancellation or otherwise and any shares
withheld for the payment of taxes will be available again for grant under the
2007 EIP.
Stock Options. The Committee may grant either non-qualified stock options
or incentive stock options; provided however that incentive stock options may be
granted only to employees. The Committee determines the exercise price for each
option, but no option may be granted at an exercise price that is less than the
fair market value of the Common Stock on the date of grant. However, the
exercise price of an incentive stock option that is granted to an employee who
owns more than 10% of the combined voting power of the common stock must be at
least 110% of the fair market value of the Common Stock on the date of grant of
the incentive stock option.
Exercise of Options. An option holder may exercise an option by written
notice and payment of the exercise price in cash, or by wire transfer or check
order payable to our order, by delivering unrestricted shares of Common Stock
having a fair market value on the date of payment equal to the amount of the
exercise price (but only to the extent the delivery of shares would not result
in an accounting compensation charge), or a combination of the foregoing. In
addition, an option may be exercised by giving notice to us to withhold from the
purchased shares a number of shares having a fair market value equal to the
exercise price. Option holders may elect to satisfy the minimum required income
tax withholding obligation through the withholding of a portion of the Common
Stock to be received upon exercise of the option.
10
Exercisability of Options. The Committee determines the period and the
conditions of exercisability, the minimum periods during which participants must
be employed by, render services as a consultant to, or serve on the Board of,
our company or must hold options before they may be exercised, the minimum
periods during which shares acquired upon exercise must be held before sale,
conditions under which the options or shares may be subject to forfeiture, the
frequency of exercise or the minimum or maximum number of shares that may be
acquired at any one time. The fair market value (determined at the time the
incentive option is granted) of shares subject to an incentive option that
become exercisable in a calendar year cannot exceed $100,000.
Option Term. Options must expire no later than 10 years from the date
of grant. However, an incentive stock option granted to an employee who owns
more than 10% of the combined voting power of the common stock must expire no
later than 5 years from the date of grant. If an option holder terminates
service after becoming disabled during the term of the option while performing
services for our company or while serving on the Board, the option holder or the
option holder's representative may exercise the option, to the extent that it
was vested on the date of termination of service on account of disability,
within one year after the option holder's termination of service on account of
disability so long as it is within the term of the option. If the option holder
dies while performing services for our company or while serving on the Board,
during the one-year period following termination of service on account of
disability, or during the 3-month period following other terminations of
service, the option holder's representative may exercise the option, to the
extent that it was vested on the date of the option holder's death, within one
year after the date of the option holder's death, so long as it is within the
term of the option. If the option holder's services to our company or service as
a member of the Board terminates for any reason other than death or disability,
the option holder may exercise the option, to the extent that it was vested on
the date of termination, for 3 months after the date of termination so long as
it is within the term of the option.
Restricted Stock. The Committee may grant a participant a number of shares
of restricted stock as determined by the Committee in its sole discretion.
Grants of restricted stock may be subject to such restrictions, including for
example, continuous employment with our company for a stated period of time or
the attainment of performance goals and objectives, as determined by the
Committee in its sole discretion. The restrictions may vary among awards and
participants. If a participant dies or terminates service on account of
disability or retires pursuant to our retirement policy, the restricted stock
will become fully vested as to a pro rata portion of each award based on the
ratio of the number of full months of employment completed at termination of
employment from the date of the award to the total number of full months of
employment required for each award to become fully vested. The remaining portion
of the restricted stock will be forfeited. If a participant terminates service
for any other reason, all unvested shares of restricted stock will be forfeited.
Other Awards. From time to time, in its sole discretion, the Committee may
grant awards under the 2007 EIP in connection with one or more incentive
compensation arrangements under which participants may acquire shares of Common
Stock by purchase, grant, or otherwise. All such awards are subject to the terms
of the 2007 EIP.
Nontransferability. Except as may otherwise be provided by the Committee at
the time of grant, options and shares of restricted Common Stock are not
transferable except by will or pursuant to the laws of descent and distribution
or pursuant to a domestic relations order issued pursuant to state domestic
relations law.
Amendment and Termination. The Board may alter, suspend or terminate the
2007 EIP at any time and may, from time to time, amend the 2007 EIP in any
manner, but may not without shareholder approval adopt any amendment for which
shareholder approval is necessary to satisfy any applicable statutory or
regulatory requirements. In addition, the Board may not modify the 2007 EIP or
any outstanding award in manner that would adversely affect the award without
the consent of the award holder. Unless terminated sooner, the 2007 EIP will
terminate on June 14, 2017.
Federal Income Tax Consequences. The following is intended as a brief
summary of the material United States federal income tax consequences of the
2007 EIP. The tax consequences to a participant will generally depend upon the
type of award issued to the participant. In general, if a participant recognizes
ordinary income compensation in connection with the grant, vesting or exercise
of an award, we will be entitled to a corresponding deduction equal to the
amount of income recognized by the participant subject to the limits of Code
section 162(m) (see the discussion below). This summary does not address the
effects of other federal taxes or taxes imposed under state, local or foreign
laws.
Non-Qualified Options. There are no income tax consequences to the
participant or to us when a non-qualified option is granted or when it vests,
subject to Code section 409A, discussed below. When a non-qualified stock option
is exercised, in general, the participant recognizes compensation, subject to
wage withholding in the case of an employee, equal to the excess of the fair
market value of the Common Stock on the date of exercise over the exercise
price. We are generally entitled to a deduction equal to the compensation
recognized by the participant, assuming that the compensation satisfies the
11
ordinary and necessary and reasonable compensation requirements for
deductibility and that the deduction is not limited by Code section 162(m)
(discussed below).
Incentive Options. There are no income tax consequences to the
participant or to us when an incentive option is granted. A participant will
generally have no taxable income on the exercise of an incentive option, except
that the alternative minimum tax may apply. Upon a disposition of shares
acquired by exercise of an incentive option before the end of the applicable
incentive option holding periods, the participant generally must recognize
compensation equal to the lesser of (1) the fair market of the shares at the
date of exercise minus the exercise price or (2) the amount realized on the
disposition of the shares minus the exercise price. Any additional amount is
treated as capital gain. We are generally entitled to a deduction equal to the
compensation recognized by the participant, assuming that the compensation
satisfies the ordinary and necessary and reasonable compensation requirements
for deductibility and that the deduction is not limited by Code section 162(m)
(discussed below). We are not entitled to a deduction for the amount treated as
capital gain. If the participant holds the shares acquired by exercise of an
incentive option for the applicable incentive option holding periods, the
participant's disposition of shares acquired upon exercise of the incentive
option will result in capital gain or loss and we would not be entitled to a
deduction of such amount.
Restricted Stock. Generally, the participant will recognize
compensation equal to the fair market value of the stock when the restrictions
lapse or the stock is transferable, whichever occurs first. However, the
participant may make an election under Code section 83(b) to recognize
compensation at the time the restricted stock is granted in an amount equal to
the fair market value of the stock on the date of grant. We are entitled to a
deduction equal to the amount of compensation recognized by the participant,
provided that the income is reasonable compensation and the deduction is not
limited by Code section 162(m) (discussed below).
Other Stock Grants. If the stock is not subject to restrictions or is
transferable, the participant will have compensation equal to the fair market
value of the stock on the date of grant. We are entitled to a deduction equal to
the amount of compensation, provided that the compensation is reasonable
compensation and the deduction is not limited by Code section 162(m) (discussed
below). If the stock is not transferable or if it is subject to restrictions,
then the tax consequences are the same as described under "Restricted Stock"
above.
Code section 409A. Section 409A provides that all amounts deferred
under a nonqualified deferred compensation plan are currently includible in
gross income to the extent they are not subject to a substantial risk of
forfeiture and have not been taxed previously unless the plan satisfies both the
plan document and operational requirements specified in Section 409A. If the
deferred compensation plan fails to satisfy the requirements of Section 409A,
all amounts deferred for the year of the failure and all preceding years (to the
extent they are not subject to a substantial risk of forfeiture) are included in
the gross income of the participant(s) affected by the failure. The amount
included in gross income is also subject to an additional tax equal to 20% of
that amount and to interest. Incentive options and restricted stock are not
subject to Section 409A. We have structured the 2007 EIP and expect to
administer the 2007 EIP with the intention that non-qualified options will
qualify for an exemption from Section 409A. Certain other awards that may be
issued under the 2007 EIP may constitute a "deferral of compensation" subject to
the requirements of Section 409A.
Code section 162(m). Under Section 162(m) of the Code, we may be
limited as to federal income tax deductions to the extent that total annual
compensation in excess of $1 million is paid to our chief executive officer or
any one of the four highest paid executive officers who we employed on the last
day of the taxable year. However, certain "performance-based compensation," the
material terms of which are disclosed to and approved by our shareholders, is
not subject to this limitation on deductibility. We have structured the 2007 EIP
with the intention that compensation resulting from options granted under the
plan would be deductible without regard to the limitations otherwise imposed by
Section 162(m) of the Code. However, compensation resulting from restricted
stock or other awards granted to officers subject to Section 162(m) will be
treated as "performance based compensation" only if we meet a number of
requirements. There are no assurances that each grant of restricted stock or
other awards will satisfy all of these requirements and, as a result, some of
the compensation resulting from grants of restricted stock or other awards may
not be fully deductible.
New Plan Benefits. Because awards under the 2007 EIP will be discretionary,
future awards are generally not determinable at this time.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3,
ADOPTION OF THE 2007 EQUITY INCENTIVE PLAN
12
PROPOSAL 4 - 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 2007. 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:
2006 2005
---- ----
Audit Fees........................................... $206,340 $101,014
Audit-Related Fees................................... 25,206 11,846
Tax Fees............................................. 14,500 12,100
All Other Fees....................................... -- --
-------- --------
Total.............................................. $246,046 $124,960
======== ========
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.
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 2007.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information regarding ownership of our Common
Stock as of April 25, 2007 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 25, 2007 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.
Amount and Nature
Name and Address of Beneficial Percent of
of Beneficial Owner Ownership Class
---------------------------------------------------------------------------------------
Robert Keeley
P. O. Box 240
Hillside, CO 81232 36,501(1) *
Harold A. Blomquist
3935 Serenity Place
Colorado Springs, CO 80908 304,228(2) 1.85%
Robert Pearson
8080 N. Central Expressway, Suite 210-LB59
Dallas, TX 75203 14,501(3) *
Ronald Sartore
14445 Cypress Point
Poway, CA 92064 44,293(4) *
Alfred Stein
410 Old Oak Court
Los Altos, CA 94022 96,623(5) *
John Hillyard
2685 Heathrow Drive
Colorado Springs, CO 80920 40,000(6) *
Brian Alleman
12861 Serenity Park
Colorado Springs, CO 80907 73,246(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) 6.64%
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) 6.64%
US Special Opportunities Trust PLC
c/o RENN Capital Group
8080 N. Central Expressway, Suite 210-LB59
Dallas, TX 75203 1,007,176(10) 6.03%
SF Capital Partners, Ltd
3600 South Lake Drive
St. Francis, WI 53235 1,068,965(11) 6.58%
Cypress Semiconductor Corporation
3901 N. First Street
San Jose, CA 95134 3,179,644(12) 16.97%
Crestview Capital Master LLC
95 Revere Drive, Suite A
Northbrook, IL 60062 2,677,113(13) 16.47%
Big Bend XXVII Investments, L.P.
3401 Armstrong Avenue
Dallas, TX 75205-4100 1,553,956(14) 9.57%
Toibb Investment LLC
6355 Topanga Canyon Blvd., Suite 335
Los Angeles, CA 91367 1,125,000 6.93%
All directors and executive officers as
a group (7 persons) 609,392(15) 3.65%
14
-----------------------
* Less than one percent.
(1) Includes 1,000 shares of our common stock held by Mr. Keeley's wife, Sandra
D. Keeley. Mr. Keeley disclaims beneficial ownership of these shares.
Includes 30,625 shares issuable upon exercise of options.
(2) Includes 2,320 shares of our common stock that Mr. Blomquist's children
personally own and includes 199.037 shares issuable upon exercise of
options.
(3) Includes 11,125 shares issuable upon exercise of options.
(4) Includes 34,917 shares issuable upon exercise of options.
(5) Includes 34,917 shares issuable upon exercise of options. Includes 25,317
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.
(6) Includes 40,000 shares issuable upon exercise of options.
(7) Includes 29,103 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 409,091
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 409,091 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 409,091 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 379,724 shares issuable upon exercise of options. Assumes the
exercise of warrants for 12,343 shares of our common stock. Includes 1,000
shares of our common stock held by Mr. Keeley's wife, Sandra D. Keeley,
with respect to which Mr. Keeley disclaims beneficial ownership. Includes
2,320 shares of our common stock that Mr. Blomquist's children personally
own. Does not include the 1,970,398 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.
15
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.
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, 2006, the Board held ten
meetings. During that same period, the Board acted by written consent four
times. During 2006, each director attended at least 75% of the total number of
meetings of the Board, and with respect to Mr. Hillyard, at least 75% of the
total number of meetings of the Board held during the period for which he has
been a director.
The Board has an Audit Committee, a Compensation Committee and a 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. In 2006, each committee member attended 100% of the meetings
of such committee held after becoming a member of that committee. 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 Dr. Keeley, who serves as the committee's
chairperson, and Messrs. Hillyard 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 Dr. Keeley and Mr. Hillyard
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 one meeting during
2006.
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 Messrs. Hillyard, Stein and Pearson. Each
member of the Compensation Committee is independent according to standards for
independence under current NASDAQ Stock Market listing standards. The
Compensation Committee held four meetings during 2006. During that same period,
the Compensation Committee acted by unanimous consent one time.
Governance Committee. The primary responsibilities of the Governance
Committee are to assist us in complying with SEC and other government
regulations. The Governance Committee does not have a written charter. The
Governance Committee consists of Messrs. Stein, Blomquist, and Keeley. Messrs.
Stein and Keeley are independent, and Mr. Blomquist is not independent, in each
case according to standards for independence under current NASDAQ Stock Market
listing standards.
The Governance Committee's responsibilities also include identifying
qualified candidates for nomination to the Board, including those recommended by
shareholders. The Governance Committee conducts informal self-evaluations of the
composition and size of the Board on a periodic basis. As a need is observed,
the 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 Governance Committee has, in the past, used formal and informal
networking to identify and evaluate potential candidates. Similar to any nominee
identified by the Governance Committee, any potential nominee submitted for
consideration by a shareholder 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. We have not, in the past, used a third party to identify or evaluate
potential nominees.
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
16
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 2006, 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 2006, the Compensation Committee consisted of Messrs. Sartore,
Pearson, and Blomquist. In October 2006, Messrs. Sartore and Blomquist resigned
from the Compensation Committee and Messrs. Hillyard and Stein were both
nominated to join Mr. Pearson on the Compensation Committee. Mr. Hillyard was
appointed Chairman of the Compensation Committee. Mr. Blomquist is our Chief
Executive Officer and President, a position he has held throughout all of 2006.
Mr. Sartore served as a consultant to Simtek from May 23, 2006 until November 3,
2006. He became an employee and executive officer of Simtek on November 13,
2006.
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 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
50,633 shares of our common stock and 7,595 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."
17
INFORMATION REGARDING EXECUTIVE OFFICERS
Harold Blomquist........................... Chairman of the Board, Chief Executive Officer and
President
Ronald Sartore............................. Director and Executive Vice President
Brian Alleman.............................. Vice President and Chief Financial Officer, Corporate
Secretary
Information regarding Messers. Blomquist and Sartore is set forth above
under the heading "Information Regarding the Board and its Committees."
Brian Alleman, age 50, has served as Vice President and Chief Financial
Officer at the Company since June of 2005. Mr. Alleman is 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
over 25 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.
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.
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 current members of the
Committee were appointed in October 2006. The Committee consists of three
directors, all of whom are deemed independent within the meaning of the current
rules of the NASDAQ: Messrs. John Hillyard (Chairman), Alfred Stein and Robert
Pearson.
18
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 more than four times during 2006 as it was developing
the incentive compensation plan currently in use, and also met several times in
executive session. 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.
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.
19
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 2006, the mix of these three elements for each of
the named executive officers is illustrated in the following chart:
Percent of Total Direct Compensation
Annual Cash
Base Incentive Equity
Officer Salary Compensation Incentive Awards(1)
------------------- ------ ------------ -------------------
Harold A. Blomquist 53% 16% 31%
Ronald Sartore 7% 0% 93%(2)
Brian P. Alleman 45% 10% 45%
(1) Based on the FAS 123(R) grant date fair value of restricted stock and stock
options granted in 2006.
(2) Includes the value of options granted to Mr. Sartore in his capacity as a
director.
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. Management, with the assistance of the Compensation
Committee, 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.
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 key competitors. Adjustment of an
individual executive officer's actual base salary above the mid-range of this
reference group would generally be based upon:
o Achieving or exceeding key business objectives;
o Highly developed individual skills critical to the Company;
o Demonstrating an ability to positively impact shareholder value;
o Consistently superior levels of performance; and
o Experience and level of responsibility.
20
During 2006, 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 100% of base
salary. Individual awards reflect both group performance and individual
contributions to our success.
The following table summarizes, for 2006, 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.
Mr. Sartore was not eligible for the incentive compensation program during 2006.
Annual Annual New Product
Operating Operating Plan Research and Strategic
Name Plan Revenue Ex-Item Income Development Cash Balance Initiatives
-------------------------- ------------------- --------------------- ------------------ ---------------- --------------------
Harold Blomquist 25% 50% 25% 50%
Brian Alleman 50% 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 2006, the Compensation Committee established threshold, target, and
accelerated performance goals for the performance measures to be achieved during
2006. For the purposes of Ex-item Net Income, the target was established as $841
thousand with a minimum threshold set at break-even and an accelerated payout
(1.2x multiplier) possible for Ex-item Net Income between $841 thousand and $1.0
million with a maximum acceleration factor at Ex-item Net Income greater than
$1.0 million (1.5x multiplier).
During 2006, achievement against our Ex-item Net Income was approximately
114% of target. Performance to our revenue goal was $30.6 million on a plan of
$28.4 million, or 108% of plan. Cash at year end was 119% of plan. The strategic
initiatives were based on successfully integrating the acquisition of the nvSRAM
assets from ZMD which was deemed to have been completed in a superior manner to
our benefit. This resulted in cash bonuses for the named executive officers in
the range of 67% to 81% of base salary.
For additional information regarding the metrics applicable to our Chief
Executive Officer, see "Compensation of the Chief Executive Officer" below.
The 2006 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").
21
The SOP has been in effect continually from 1994 through 2006 and has been
amended from time to time to allow for the replenishment of the stock option
pool in order to provide long-term equity compensation to executive officers.
The general objective of the SOP is 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 SOP 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 SOP also enhances our
ability to attract and retain the services of individuals who are essential for
our growth and profitability.
The SOP 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:
o 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.
o 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.
o 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.
o 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 2006, the Compensation Committee approved the following equity
awards to the CEO and other named executive officers:
Stock
Officer Options(1)
------------------- -----------
Harold A. Blomquist 58,300
Ronald Sartore 118,500(1)
Brian P. Alleman 81,700
(1) Includes 18,500 options granted to Mr. Sartore in his capacity as a
director.
The named executive officers were granted a total of 258,500 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 2006,
we did not provide any matching contributions.
22
Employment Agreements. We currently have employment agreements with two of
our named executive officers. Generally, we do not maintain employment
agreements with executive officers. The primary purpose of these employment
agreements 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 agreement 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.
On November 3, 2006, we entered into a letter agreement with Mr. Sartore
whereby Mr. Sartore is employed as our Executive Vice-President focusing on new
product development. Mr. Sartore's base annual salary is $225,000 and he is
eligible to receive a bonus, based on performance, in accordance with our
Executive Incentive Compensation Plan. We also issued to Mr. Sartore an option
to purchase 100,000 shares of our Common Stock, which vests monthly over a four
year period. In exchange for transferring ownership to us of certain inventions
he initiated prior to becoming an employee, Mr. Sartore will receive 1,500
shares of our Common Stock upon the filing of a patent application for each such
invention and 2,500 shares upon a patent being issued for each such invention.
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 willdecrease 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.
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 2006, Mr. Blomquist's base salary was $325,000. His award under the
annual incentive compensation program related to 2005 was $100,238, which was
paid in 2006. His award under the annual incentive compensation program related
to 2006 was $261,383, which was paid in February 2007 For 2006, Mr. Blomquist's
bonus eligibility was targeted at 50% of his base salary up to a maximum of 100%
of his base salary. For 2006, 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
58,300 stock options.
23
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 agreement 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, 2006 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
John Hillyard, Chair
Robert Pearson
Alfred Stein
24
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents information concerning compensation earned in
the fiscal year ended December 31, 2006, by our Chief Executive Officer, our
Chief Financial Officer and our Executive Vice President. We refer to these
three persons collectively as "named executive officers." Our compensation
policies are discussed above under the heading "Compensation Discussion and
Analysis."
Change in
pension
value and
nonqualified
Non-equity deferred
Name and Stock Option incentive plan compensation All other
Principal Position Year Salary Bonus awards(1) awards(2) compensation(3) earnings compensation Total
---------------------------------------------------------------------------------------------------------------------------------
Harold A. Blomquist 2006 $325,000 $0 $0 $324,420 $261,383 $0 $209,516(4) $1,120,319
President, CEO,
and Chairman
Ronald Sartore 2006 $29,856 $0 $2,500 $6,045(5) $0 $0 $152,500(6) $ 190,901
Executive VP
Brian P. Alleman 2006 $212,792 $0 $0 $41,516 $150,824(7) $0 $0 $ 405,132
Vice President and
CFO
(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) This column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair value
of stock options granted to each of the named executives in 2006 as well as
prior fiscal years, that vested in 2006, in accordance with SFAS 123R.
Pursuant to SEC regulations, the amounts shown exclude the impact of
estimated forfeitures related to service based vesting conditions. Option
expenses for each of Messrs. Blomquist, Sartore and Alleman included
$312,147, $0 and $10,363, respectively during 2005, and $12,273, $6,045 and
$31,153, respectively during 2006. For additional information on the
valuation assumptions with respect to the 2006 grants, refer to note 6 of
our financial statements in the Form 10-K for the year ended December 31,
2006, as filed with the SEC. For information on the valuation assumptions
with respect to grants made during 2005, refer to the note on
"Shareholders' Equity" for our financial statements in the Form 10-K for
the year ended December 31, 2005. 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.
(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.
(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 $35,692 paid to Tatum,
LLC.
25
Grants of Plan-Based Awards
Our Stock Option Plan permits the grant of non-qualified stock options to
our employees and directors and to employees of our subsidiaries.
All All Grant
Other Other Date
Stock Option Fair
Awards: Awards: Value of
Number Number of Stock
of Securities and
Estimated Future Payouts Estimated Future Payouts Shares Underlying Option
Date of Under Non-Equity Under Equity Incentive or Units Options Awards
Name Grant Date Action Incentive Plan Awards Plan Awards (1) (2) (3)
------------ ------------ ------- ------------------------- -------------------------
Threshold Target Max. Threshold Target Max.
($) ($) ($) ($) ($) (#) (#) ($)
----------- -------- ------ --------- ------ ----- ---------- ----------- ----------
Harold A. 5/26/06 11/22/2005 371 $2,500
Blomquist
6/12/2006 6/12/2006 25,000 $53,325
10/17/2006 10/17/2006 33,300 $134,532
Ronald 02/21/2006 2/21/2006 3,500 $6,045
Sartore
5/26/2006 11/22/2005 3,376 $12,500
9/27/2006 9/27/2006 15,000 $50,730
11/13/2006 11/13/2006 100,000 $312,200
Brian P. 04/26/2006 4/7/2006(4) 75,000 $180,150
Alleman
10/17/2006 10/17/2006 6,700 $27,068
(1) This column shows the number of shares of common stock granted to the named
executive officers in 2006. Shares issued to Mr. Blomquist and Mr. Sartore
were as granted as compensation for their service as directors prior to
becoming executive officers. Mr. Blomquist's shares covered compensation
for the period January 1, 2005 through March 31, 2005 and Mr. Sartore's
shares covered compensation for the period January 1, 2005 through March
31, 2006.
(2) This column show the number of stock options granted to the named executive
officers in 2006. These options vest and become exercisable based on the
vesting terms of the SOP. 18,500 of the options granted to Mr. Sartore were
granted to him as a director with respect to periods prior to becoming an
executive officer.
(3) 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 mode. The valuations were based upon the
following assumptions estimated holding period of 4.87 years, expected
volatility of 79.81% and a risk free interest rate of 5.11%. 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.
(4) Mr. Alleman's option grant was approved on April 7, 2006 by the
Compensation Committee and issued on April 26, 2006, the date Mr. Alleman
accepted his employment terms.
26
Outstanding Equity Awards at 2006 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
------------------------------------------------------------ -----------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Market Plan Market
Number Value Awards: or
Equity of of Number Payout
Incentive Shares Shares of Value of
Plan or or Unearned Unearned
Awards: Units Units Shares, Shares,
Number of of of Units or Units or
Date of Number of Number of Securities Stock Stock Other Other
Name Award Securities Securities Underlying That That Rights Rights
Underlying Underlying Unexercised Option Option Have Have That That
Unexercised Unexercised Unearned Exercise Expration Not Not Have Not Have Not
Options Options Options Price Date Vested Vested Vested Vested
(#) (#) (#) ($) (#) ($) (#) ($)
Exercisable Unexercisable
------------- ---------- ------------ -------------- ----------- --------- ----------- -------- --------- ---------- ----------
Harold A. 10/31/2003 7,500 0 0 $8.30 10/31/2010 --- --- --- ---
Blomquist
4/27/2004 2,625 0 0 $11.60 4/27/2011 --- --- --- ---
2/15/2005 3,500 0 0 $6.20 2/15/2012 --- --- --- ---
5/9/2005 57,851 51,762 0 $6.60 5/9/2012 --- --- --- ---
5/17/2005 74,094 66,294 0 $5.40 5/17/2012 --- --- --- ---
6/12/2006 3,125 21,875 0 $3.20 6/12/2013 --- --- --- ---
10/17/2006 1,388 31,912 0 $6.00 10/17/2013 --- --- --- ---
Ronald 3/26/2004 10,000 0 $13.40 3/26/2011
Sartore
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 --- 100,000 0 $4.66 11/13/2013 --- --- --- ---
Brian P. 08/3/2005 4,444 5,556 0 $3.65 8/3/2012
Alleman
4/26/2006 12,500 62,500 0 $3.60 4/26/2013
10/17/2006 279 6,421 0 $6.00 10/17/2013
27
Option Exercises and Stock Vested
During 2006, 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, 2006, 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. Pursuant to the terms
of his employment agreement, we are not required to provide Mr. Sartore any
additional compensation upon an involuntary termination without cause, or a
change of control.
HAROLD A. BLOMQUIST
Involuntary
Termination Change in
Executive Benefits and Payments without Cause Control
------------------------------- ------------- ---------
Compensation
Cash Severance(1) $487,500 $487,500
Options (unvested & accelerated) $799,070 $799,070
Relocation from Colorado to California $150,000 $150,000
Incentive Compensation $261,383 $261,383
Benefit Plans
Health & Welfare $23,400 $23,400
(1) 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.
BRIAN P. ALLEMAN
Involuntary
Termination Change in
Executive Benefits and Payments without Cause Control
------------------------------- ------------- ---------
Compensation
Cash Severance(1) $84,375 $84,375
(1) This amount is equal to 3 months of Mr. Alleman's annual salary, together
with 3 months of one-half of Mr. Alleman's annual salary, which amount is
not payable if Mr. Alleman's employment is terminated for cause.
28
Director Compensation
A director who is also an employee of our company receives no additional
compensation for serving on the Board. Annual compensation for non-employee
directors is comprised of cash and equity compensation. Cash compensation
consists of an annual retainer (paid quarterly) and meeting fees. Annual equity
compensation consists of a stock award. Each of these components is described in
more detail below. The total 2006 compensation of our non-employee directors is
shown in the following table:
Change in
Pension Value
Fees and
Earned Nonqualified
or Non-Equity Deferred
Paid in Stock Option Incentive Plan Compensation All Other
Cash Awards Awards Compensation Earnings Compensation Total
Name ($) ($)(1) ($)(2) ($) ($) ($) ($)
------------------------- ---------- ---------- ----------- ----------------- ----------------- ----------------- -----------
Robert Pearson, $14,750 $12,500 $6,045 $0 $0 $0 $33,295
Compensation and
Governance
Committees
Alfred Stein, $14,000 $12,500 $6,045 $0 $0 $0 $32,545
Governance
Committee Chair,
Audit Committee
Robert Keeley, $13,500 $12,500 $6,045 $0 $0 $0 $32,045
Audit Committee
Chair
John Hillyard, $0 $0 $0 $0 $0 $0 $0
Compensation
Committee Chair and
Audit Committee
(1) This column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair value
of shares of restricted stock granted to each independent director in lieu
of payment for their annual stipend from January 1, 2005 through March 31,
2006. For purposes of the restricted stock awards, fair value is calculated
using the closing price of our stock on the date of grant. For additional
information, refer to note 6 of our financial statements in the Form 10-K
for the year ended December 31, 2006, as filed with the SEC. These amounts
reflect our accounting expense for these awards, and do not correspond to
the actual value that may or will be recognized by the directors.
(2) This column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair value
of stock options granted to each independent director. For purposes of the
stock options, the fair value was estimated using the Black-Scholes
valuation model in accordance with SFAS 123R.
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.
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.
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. 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.
29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 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. One of our directors, Mr. Stein, invested
$200,000 and received 50,633 shares of our common stock and 7,595 warrants
(which securities are held by his family trust and family partnership), and two
members of his family invested an aggregate of $150,000 and received 37,976
shares of our common stock and 5,696 warrants. Our chief financial officer,
Brian Alleman, invested $125,000 and received 31,646 shares of our common stock
and 4,747 warrants.
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. Keeley, Hillyard and Stein, 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, 2006 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, 2006 be included in Simtek's Annual
Report on Form 10-K for the year ended December 31, 2006.
AUDIT COMMITTEE
Robert Keeley, Chair
John Hillyard
Alfred Stein
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, 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 2006, we believe that
during 2006, all of our executive officers and directors filed the required
reports on a timely basis under Section 16(a), except that Mr. Blomquist was
late with one Form 4 filing with respect to one transaction.
30
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2008 ANNUAL MEETING
To be considered for inclusion in the proxy materials for our 2008 annual
meeting of shareholders, shareholder proposals must be received by our Corporate
Secretary at our principal executive offices no later than December 7, 2007.
Such proposals must comply with Rule 14a-8 under the Exchange Act.
Shareholder proposals and director nominations for our 2008 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 January 3, 2008 and no later than February 4, 2008 to be
considered timely. Such proposals must comply with Section 2.8 of our Bylaws.
Our Bylaws are available on our website at www.simtek.com under the tab
"Investor Relations." We will also furnish copies of our Bylaws to any person
who requests them. Requests for copies should be directed to the Corporate
Secretary, 4250 Buckingham Drive, Suite 100, Colorado Springs, CO 80907 or to
investorrelations@simtek.com.
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.
By Order of the Board of Directors,
/s/ Brian P. Alleman
Brian P. Alleman
Secretary
Colorado Springs, Colorado
May 14, 2007
31
APPENDIX A
SIMTEK CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED MARCH 16, 2007
EFFECTIVE JULY 1, 2007
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Simtek Corporation, a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase common stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code. The Plan
shall be interpreted and administered to effect that intent.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such
rights (which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan. An Affiliate
that has been designated by the Company as eligible to participate in
the Plan shall be referred to as a "Participating Affiliate."
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct
any defect, omission or inconsistency in the Plan, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(iv) To amend the Plan as provided in paragraph 15.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the
intent and purpose of the Plan.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
A-1
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such conditions and limitations, not
inconsistent with the provisions of the Plan, as may be established from time to
time by the Board by resolutions duly adopted. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 14 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate five hundred thousand (500,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan shall in all events be unissued shares of
the Company.
4. OFFERS.
(a) The Board or the Committee shall make an offer or offers (an "Offer" or
"Offers") to Eligible Employees (as defined in paragraph 5 below) to purchase
Common Stock. Each Offer shall commence on the first day of each calendar
quarter during the term of the Plan and shall end on the last day of such
calendar quarter. The first Offer shall commence on July 1, 2007 and end on
September 30, 2007. Each subsequent Offer shall commence on the first day of
each calendar quarter thereafter. The Board or the Committee may, at any time,
determine that an Offer may be longer than one calendar quarter (but not longer
than twenty-seven (27) months beginning with the Offering Date) and shall
determine the date or dates upon which one or more subsequent Offers, if any,
may be made under the Plan. The first day of an Offer is that Offer's "Offering
Date."
(b) Prior to the commencement and first day of an Offer, the Board or the
Committee, if any, may change any or all terms of the Offer and any subsequent
Offers. The grant of rights pursuant to each Offer hereunder shall occur on each
respective Offering Date unless, prior to such date (a) the Board or the
Committee determines that such Offer shall not occur, or (b) no shares of Common
Stock remain available for issuance under the Plan in connection with the Offer.
5. ELIGIBILITY.
(a) All Employees of the Company and each Participating Affiliate shall be
eligible to be granted rights under the Plan on the first Offering Date after
such Employee has commenced employment with the Company or the Participating
Affiliate.
(b) No Employee of the Company or a Participating Affiliate shall be
eligible to be granted rights under the Plan, unless, on the Offering Date, such
Employee's customary employment with the Company or such Participating Affiliate
is for at least twenty (20) hours per week and at least five (5) months per
calendar year.
(c) No Employee shall be eligible for the grant of any rights under the
Plan if, immediately after such rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any Employee, and stock that such Employee may
purchase under all outstanding rights and stock options shall be treated as
stock owned by such Employee.
(d) An Eligible Employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified in Section 423(b)(8) of
the Code, do no permit such Employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate that exceeds twenty-five dollars ($25,000)
of the fair market value of such stock (determined at the time such rights are
granted) for each calendar year in which such rights are outstanding at any
time.
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(e) Officers of the Company and any Participating Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board or the Committee may provide in an Offering that certain Employees who are
highly compensated employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
(f) An "Employee" is any individual who performs services for the Company
or a Participating Affiliate as a common-law employee.
(g) Each Employee who satisfies the conditions of this paragraph 5 shall be
referred to as an "Eligible Employee."
6. GRANT OF RIGHTS; PURCHASE PRICE; PURCHASE DATE.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offer
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with up to ten percent (10%)
of such employee's Earnings (as defined in subparagraph 7(b)) during the period
which begins on the Offering Date and ends on the last day of the Offer, which
is the last day of the calendar quarter. Provided, however, that the maximum
number of shares that may be purchased pursuant to the Offer shall not be
greater than the lesser of 4,000 shares or the number of shares permitted under
Section 423(b)(8) of the Code.
(b) In connection with each Offer made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
Employee as well as a maximum aggregate number of shares that may be purchased
by all Eligible Employees pursuant to such Offer. If the aggregate purchase of
shares upon exercise of rights granted under the Offer would exceed any such
maximum aggregate number, the Board or the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as shall be
practicable and as it shall deem to be equitable.
(c) The purchase price of Common Stock acquired pursuant to rights granted
under the Plan shall be not less than an amount equal to eighty-five percent
(85%) of the lesser of (1) the "fair market value" of the stock on the Offering
Date or, if the exchange on which the Common Stock is traded or the NASDAQ is
not open for trading on the Offering Date, the first trading date thereafter, or
(2) the "fair market value" of the stock on the last trading day of the calendar
quarter.
(d) "Fair market value" means the closing price of the Common Stock as
reported by the principal securities exchange on which the Stock is listed or
admitted to trading or by the NASD through the NASD Automated Quotation System
("NASDAQ") or such successor quotation system, or, if the Stock is not listed or
admitted to trading on any national securities exchange or on NASDAQ, the
average closing bid price if available. If the Stock is not traded on an
exchange or reported by NASDAQ and the average closing bid price is not
available, then "Fair Market Value" shall be determined in good faith by the
Committee using all relevant data and information reasonably available to the
Committee.
(e) The Purchase Date with respect to each Offer shall be the first day on
which the NASDAQ is open for trading after the last day of the Offer.
7. PARTICIPATION; WITHDRAWAL.
(a) An Eligible Employee may become a participant in the Plan pursuant to
an Offer by delivering a participation agreement to the Company in such form as
the Company provides no later than five (5) days prior to the Offering Date.
Each such agreement shall authorize payroll deductions in whole percentages from
one percent (1%) to ten percent (10%) of such Employee's Earnings during the
Offer. Once an Eligible Employee has elected to participate in an Offer, the
Eligible Employee's election with respect to participation shall continue in
effect with respect to subsequent Offers unless and until changed in accordance
with paragraph 7(c) below. The payroll deductions made for each participant
shall be credited to an account for such participant under the Plan, shall be
deposited with the general funds of the Company, and shall not be credited with
interest.
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(b) "Earnings" means the Eligible Employee's regular salary or wages
(including salary deferrals under Code sections 125, 132(f)(4), and 401(k) and
under any nonqualified deferred compensation plan established by the Company or
an Affiliate). Earnings includes overtime, commissions, and bonuses. Earnings
does not include the cost of employee benefits paid for by the Company or an
Affiliate, education or tuition reimbursements, imputed income arising under any
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, awards and prizes, income received in connection with
equity compensation, contributions by the Company or an Affiliate to a qualified
retirement plan or to a nonqualified deferred compensation plan, and similar
items of compensation.
(c) At any time during an Offer, a participant may terminate his or her
payroll deductions and withdraw from the Offer by delivering to the Company a
notice of withdrawal in such form as the Company provides. Such withdrawal may
be elected at any time prior to the end of the Offer except as provided by the
Board or Committee in the Offer. Upon such withdrawal from the Offer by a
participant, the Company shall terminate the participant's payroll deductions
for that Offer and all future Offers until the participant again elects to
participate in the Plan as described below. Upon such withdrawal from an Offer
by a participant, the Company shall distribute to such participant all of his or
her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Common Stock for the participant) under the
Offer without interest, and such participant's participation in the Offer shall
be automatically terminated. A participant who withdraws from an Offer shall not
be eligible to participate in the next Offer, but shall be eligible to
participate in future Offers. By way of example, a participant who withdraws
from an Offer than commences April 1, 2008 shall not be eligible to participate
in the Offer that commences July 1, 2008, but shall be eligible to participate
in Offers commencing on or after October 1, 2008 and thereafter until the
participant again withdraws from an Offer. A participant who wishes to
participate in future Offers shall be required to deliver a new participation
agreement. The new participation agreement shall be delivered to the Company no
later than five (5) days prior to the Offer Date of the Offer for which the new
election is to take effect. A participant may increase or decrease the
percentage deducted from the participant's Earnings by delivering a new
participation agreement to the Company no later than five (5) days prior to the
Offer Date of the Offer for which the new election is to take effect.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 16 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. TERMINATION OF EMPLOYMENT.
Rights granted pursuant to any Offer under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, during the term of an
Offer. No deduction shall be taken from the participant's final paycheck. The
Company shall distribute to such terminated participant all of his or her
accumulated payroll deductions under the Offer, without interest.
9. LEAVES OF ABSENCE AND PERIODS OF INACTIVE EMPLOYMENT.
A participant may elect to continue to make payroll deductions under the
Plan for the first ninety (90) days of any period of inactive employment or
leave of absence if the participant continues to receive Earnings from the
Company as defined in paragraph 7(b) hereof. If a participant does not receive
Earnings from the Company during a period of inactive employment or leave of
absence, the participant's payroll deductions shall immediately cease; however,
such deductions shall resume automatically if the participant returns to active
employment from inactive status within ninety (90) days. If a participant elects
to discontinue payroll deductions, such participant shall be treated as having
terminated employment and withdrawn from the Plan and the amount accumulated in
the participant's account shall be refunded without interest on the first
business day following the Purchase Date for the Offer in which the period of
inactive employment or leave of absence commenced. In all events, a participant
shall be treated as having terminated employment and terminated participation in
the Plan on the ninety-first (91st) day of any period of inactive employment or
leave of absence. In such case, the Company shall distribute to such Employee
all of his or her accumulated payroll deductions accumulated during the Offer in
which he or she is treated as having terminated employment, without interest.
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10. EXERCISE.
(a) On the Purchase Date for the Offer, each participant's accumulated
payroll deductions (without any increase for interest) shall be applied to the
purchase of whole shares of Common Stock, up to the maximum number of shares
permitted pursuant to the terms of the Plan and the applicable Offer, at the
purchase price specified in the Offer. If the aggregate number of shares to be
purchased on the Purchase Date for an Offer would exceed the number of shares
then remaining for purchase under the Plan, the Board or the Committee shall
make a pro rata allocation of such remaining shares. No fractional shares shall
be issued upon the exercise of rights granted under the Plan. The amount, if
any, of accumulated payroll deductions remaining in each participant's account
after the purchase of shares which is less than the amount required to purchase
one share of Common Stock on the Purchase Date for the Offer shall be held in
each such participant's account for the purchase of shares under the next Offer
under the Plan, unless such participant makes a timely election not to
participate in such next Offer, as provided in subparagraph 7(b), or is no
longer eligible to be granted rights under the Plan, as provided in paragraph 5,
in which case such amount shall be distributed to the participant on the next
business day following the Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date with respect to any
Offer hereunder the Plan is not so registered or in such compliance, no rights
granted under the Plan or any Offer shall be exercised on such Purchase Date and
all payroll deductions accumulated during the Offer shall be distributed to the
participants, without interest on the first business day after the Purchase
Date.
(c) Participants shall have no right to sell, encumber, or otherwise
transfer Common Stock purchased under the Plan at any time when such
transactions are prohibited by applicable federal or state law or by the
Company's policies governing the trading of Common Stock.
11. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of Common stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of Common stock upon
exercise of the rights granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
rights unless and until such authority is obtained.
12. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
13. RIGHTS AS A SHAREHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
14. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company),
the Plan and outstanding rights shall be appropriately adjusted in the class(es)
and maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding rights. Such
adjustments shall be made by the Board or the Committee, the determination of
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which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offer terminated.
15. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 14 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires shareholder approval in
order for the Plan to receive employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to receive employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to
provide Eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to employee stock purchase plans and/or to bring the
Plan and/or rights granted under it into compliance therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations.
16. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
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the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
17. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation.
(c) Upon termination of the Plan, all payroll deductions shall cease and
all amounts credited to Participants' accounts shall be applied to the purchase
of full shares of Common Stock then available under the Plan. Any amounts
remaining in participant accounts shall be refunded.
18. NO EMPLOYMENT RIGHTS.
The Plan does not, directly or indirectly, create in any Employee or class
of Employees any right with respect to continuation of employment by the Company
or Affiliate, and it shall not be deemed to interfere in any way with the
Company's or any Affiliate's right to terminate, or otherwise modify, an
Employee's employment at any time with or without cause.
19. EXPENSES.
Expenses of administering the Plan, including any expenses incurred in
connection with the purchase by the Company of shares of Common Stock for sale
to participants, shall be paid by the Company and Participating Affiliates. Each
participant shall be responsible for all expenses associated with certificating
and selling shares purchased by the participant under the Plan.
20. GOVERNING LAW.
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws.
21. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on July 1, 2007.
SIMTEK CORPORATION
By:
-----------------------------------------------
Name:
Title:
Date:
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APPENDIX B
SIMTEK CORPORATION
2007 EQUITY INCENTIVE PLAN
Effective Date: June 15, 2007
Approved by the Board of Directors on May 6, 2007
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Table of Contents
-----------------
Article I INTRODUCTION........................................................3
1.1 Establishment.........................................................3
1.2 Purposes..............................................................3
Article II DEFINITIONS........................................................3
2.1 Definitions...........................................................3
2.2 Gender and Number.....................................................6
Article III PLAN ADMINISTRATION...............................................6
3.1 General...............................................................6
3.2 Delegation by Committee...............................................6
3.3 Contractual Limitations...............................................7
Article IV STOCK SUBJECT TO THE PLAN..........................................7
4.1 Number of Shares......................................................7
4.2 Limit on Options......................................................7
4.3 Other Shares of Stock.................................................7
4.4 Adjustments for Stock Split, Stock Dividend, Etc......................7
4.5 Other Distributions and Changes in the Stock..........................7
4.6 General Adjustment Rules..............................................8
4.7 Determination by the Committee, Etc...................................8
Article V CORPORATE REORGANIZATION; CHANGE IN CONTROL.........................8
5.1 General Provisions....................................................8
5.2 Company Actions.......................................................8
Article VI PARTICIPATION......................................................8
Article VII OPTIONS...........................................................9
7.1 Grant of Options......................................................9
7.2 Stock Option Agreements...............................................9
7.3 Restrictions on Incentive Options....................................11
7.4 Transferability......................................................11
7.5 Stockholder Privileges...............................................11
Article VIII RESTRICTED STOCK AWARDS.........................................12
8.1 Grant of Restricted Stock Awards.....................................12
8.2 Restrictions.........................................................12
8.3 Privileges of a Stockholder, Transferability.........................12
8.4 Enforcement of Restrictions..........................................12
Article IX OTHER GRANTS......................................................12
Article X RIGHTS OF PARTICIPANTS.............................................12
10.1 Service..............................................................12
10.2 Nontransferability of Awards.........................................13
10.3 No Plan Funding......................................................13
Article XI GENERAL RESTRICTIONS..............................................13
11.1 Investment Representations...........................................13
11.2 Compliance with Securities Laws......................................13
11.3 Changes in Accounting Rules..........................................13
Article XII PLAN AMENDMENT, MODIFICATION AND TERMINATION.....................14
Article XIII WITHHOLDING.....................................................14
13.1 Withholding Requirement..............................................14
13.2 Withholding With Stock...............................................14
Article XIV REQUIREMENTS OF LAW..............................................14
14.1 Requirements of Law..................................................14
14.2 Federal Securities Law Requirements..................................14
14.3 Governing Law........................................................15
Article XV DURATION OF THE PLAN..............................................15
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SIMTEK CORPORATION
2007 EQUITY INCENTIVE PLAN
ARTICLE 1.
INTRODUCTION
1.1 Establishment. Simtek Corporation adopts this 2007 Equity Incentive
Plan (the "Plan") effective as of the Effective Date. The Plan is established
for certain key employees of the Company, certain consultants and advisors to
the Company, and certain non-employee directors of the Company. The Plan permits
the grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, non-qualified stock options,
restricted stock awards, and other stock grants to certain key employees of the
Company, to certain consultants to the Company, and certain non-employee
directors of the Company.
1.2 Purposes. The purposes of the Plan are to provide those who are
selected for participation in the Plan with added incentives to continue in the
long-term service of the Company and to create in such persons a more direct
interest in the future success of the operations of the Company by relating
incentive compensation to increases in stockholder value, so that the income of
those participating in the Plan is more closely aligned with the income of the
Company's stockholders. The Plan is also designed to provide a financial
incentive that will help the Company attract, retain and motivate the most
qualified employees, consultants, advisors and non-employee directors.
ARTICLE 2.
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Affiliated Corporation" means any corporation or other entity that is
affiliated with Simtek Corporation through stock ownership or otherwise and is
designated as an "Affiliated Corporation" by the Board; provided, however, that
for purposes of Incentive Options granted pursuant to the Plan, an "Affiliated
Corporation" means any parent or subsidiary of Simtek Corporation as defined in
Section 424 of the Code.
(b) "Award" means an Option, a Restricted Stock Award, grants of Stock
pursuant to ARTICLE 9, or other issuances of Stock hereunder.
(c) "Award Agreement" shall mean an Option Agreement, Restricted Stock
Agreement or a written agreement evidencing any other Award under this Plan.
(d) "Board" means the Board of Directors of Simtek Corporation.
(e) "Change in Control" shall mean the following:
(i) Merger; Reorganization. Any consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the voting power of the surviving or successor entity
immediately after such consolidation, merger or reorganization, or any
transaction or series of related transactions to which the Company is a party in
which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding (A) any consolidation or merger effected exclusively to
change the domicile of the Company and (B) any transaction or series of
transactions principally for bona fide equity financing purposes (including, but
not limited to, the sale of securities pursuant to an effective registration
statement filed with the Securities and Exchange Commission) in which cash is
received by the Company or any successor or indebtedness of the Company is
cancelled or converted or a combination thereof; or
(ii) Other Transactions. A sale, lease or other disposition of all or
substantially all of the assets of the Company; or
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(iii) Change in Board Membership. If during any period of two
consecutive years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board (and any
new director whose election by the Board or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof.
(f) "Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
(g) "Committee" means the Compensation Committee of the Board, the
composition and governance of which is established in the Committee's charter as
approved from time to time by the Board and subject to other corporate
governance documents of Simtek. If applicable, the Committee shall be so
constituted at all times as to permit the Plan to comply with Rule 16b-3 or any
successor rule promulgated under the Exchange Act. The full Board may perform
any function of the Committee under this Plan subject to applicable requirements
of the NASDAQ rules and Code Section 162(m), in which case the term "Committee"
shall refer to the Board.
(h) "Company" means Simtek Corporation and the Affiliated Corporations.
(i) "Disabled" or "Disability" shall have the meaning given to those terms
in Section 22(e)(3) of the Code.
(j) "Domestic Relations Order" means any judgment, decree, or order
(including approval of a property settlement agreement) that is made pursuant to
a state domestic relations law and that relates to the provision of child
support, alimony payments, or marital property rights to a spouse, former
spouse, child, or other dependent of a Participant.
(k) "Effective Date" means the original effective date of the Plan, June
15, 2007.
(l) "Eligible Consultants" means those consultants and advisors to the
Company who are determined by the Committee to be individuals whose services are
important to the Company and who are eligible to receive Awards, other than
Incentive Options, under the Plan.
(m) "Eligible Employees" means those employees (including, without
limitation, officers and directors who are also employees) of the Company or any
subsidiary or division thereof, upon whose judgment, initiative and efforts the
Company is, or will become, largely dependent for the successful conduct of its
business. For purposes of the Plan, an employee is any individual who provides
services to the Company or any subsidiary or division thereof as a common law
employee. The term "Eligible Employee" shall not include any individual (A) who
provides services to the Company or any subsidiary or division thereof under an
agreement, contract, or any other arrangement pursuant to which the individual
is initially classified as an independent contractor or (B) who has not been
classified as a common law employee even if the individual is subsequently
reclassified as a common law employee as a result of a final decree of a court
of competent jurisdiction or the settlement of an administrative or judicial
proceeding.
(n) "Eligible Non-Employee Director" shall mean any person serving on the
Board who is not on the date of an Award and has not been an employee of the
Company at anytime during the twelve (12) month period immediately preceding the
date of the Award.
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as it
may be amended from time to time.
(p) "Fair Market Value" means, as of a given date, (i) the closing price of
a Share on the principal stock exchange on which the Stock is then trading, if
any (or as reported on any composite index that includes such principal
exchange) on such date, or if Shares were not traded on such date, then on the
next preceding date on which a trade occurred; or (ii) if the Stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
the closing price for the Stock on such date as reported by NASDAQ or such
successor quotation system; or (iii) if the Stock is not publicly traded on an
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exchange and not quoted on NASDAQ or a successor quotation system, the Fair
Market Value of a Share shall be determined by the Committee using a reasonable
application of a reasonable valuation method that satisfies the requirements of
Code section 409A or, in the case of an Incentive Option, Code section 422.
(q) "Forfeiture Restrictions" shall have the meaning given to that term in
Section 8.2 hereof.
(r) "Incentive Option" means an Option designated as such and granted in
accordance with Section 422 of the Code.
(s) "Non-Qualified Option" means any Option other than an Incentive Option.
(t) "Option" means a right to purchase Stock at a stated or formula price
for a specified period of time. Options granted under the Plan shall be either
Incentive Options or Non-Qualified Options.
(u) "Option Agreement" shall have the meaning given to that term in Section
7.2 hereof.
(v) "Option Holder" means a Participant who has been granted one or more
Options under the Plan.
(w) "Option Period" means the period of time, determined by the Committee,
during which an Option may be exercised by the Option Holder.
(x) "Option Price" shall have the meaning given to that term in Section
7.2(b) hereof.
(y) "Participant" means an Eligible Employee, Eligible Consultant, or
Eligible Non-Employee Director designated by the Committee from time to time
during the term of the Plan to receive one or more of the Awards provided under
the Plan.
(z) "Restricted Stock Agreement" shall have the meaning given to that term
in Section 8.1 hereof.
(aa) "Restricted Stock Award" means an award of Stock granted to a
Participant pursuant to ARTICLE 8 that is subject to certain restrictions
imposed in accordance with the provisions of such Section.
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(bb) "Section 16" shall have the meaning given to that term in Section
13.2(c) hereof.
(cc) "Securities Act" means the Securities Act of 1933, as it may be
amended from time to time.
(dd) "Service" shall mean the provision of services to the Company by a
person in the capacity of an Employee, a non-employee member of the Board, or a
consultant or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant.
(ee) "Share" means one whole share of Stock.
(ff) "Simtek" means Simtek Corporation.
(gg) "Stock" means the $0.0001 par value common stock of Simtek
Corporation.
(hh) "Tax Date" shall have the meaning given to that term in Section 13.2
hereof.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
ARTICLE 3.
PLAN ADMINISTRATION
3.1 General. The Plan shall be administered by the Committee. In accordance
with the provisions of the Plan, the Committee shall, in its sole discretion,
select the Participants from among the Eligible Employees, Eligible Consultants
and Eligible Non-Employee Directors, determine the Awards to be made pursuant to
the Plan, or shares of Stock to be issued thereunder and the time at which such
Awards are to be made, fix the Option Price, period and manner in which an
Option becomes exercisable, establish the duration and nature of Restricted
Stock Award restrictions, establish the terms and conditions applicable to, and
establish such other terms and requirements of the various compensation
incentives under the Plan as the Committee may deem necessary or desirable and
consistent with the terms of the Plan. The Committee shall determine the form or
forms of the agreements with Participants that shall evidence the particular
provisions, terms, conditions, rights and duties of the Company and the
Participants with respect to Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein; provided,
however, that Eligible Consultants and Eligible Non-Employee Directors shall not
be eligible to receive Incentive Options. The Committee may from time to time
adopt such rules and regulations for carrying out the purposes of the Plan as it
may deem proper and in the best interests of the Company. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement entered into hereunder in the manner and to the extent
it shall deem expedient and it shall be the sole and final judge of such
expediency. No member of the Committee shall be liable for any action or
determination made in good faith. The determinations, interpretations and other
actions of the Committee pursuant to the provisions of the Plan shall be binding
and conclusive for all purposes and on all persons.
3.2 Delegation by Committee. The Committee may, from time to time,
delegate, to specified officers of the Company, the power and authority to grant
Awards under the Plan to specified groups of Eligible Employees, Eligible
Consultants and Eligible Non-Employee Directors, subject to such restrictions
and conditions as the Committee, in its sole discretion, may impose. The
delegation shall be as broad or as narrow as the Committee shall determine. To
the extent that the Committee has delegated the authority to determine certain
terms and conditions of an Award, all references in the Plan to the Committee's
exercise of authority in determining such terms and conditions shall be
construed to include the officer or officers to whom the Committee has delegated
the power and authority to make such determination. However, any delegation (a)
shall not result in the loss of an exemption under Rule 16b-3(d) for Awards
granted to Participants subject to Section 16 of the Exchange Act in respect of
the Company, (b) will not cause Awards intended to qualify as
"performance-based" compensation under Code Section 162(m) to fail to so
qualify, (c) will not result in a related-person transaction with an executive
officer required to be disclosed under Item 404(a) of Regulation S-K (in
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accordance with Instruction 5.a.ii thereunder) under the Exchange Act and (d) is
permitted under Section 157 and other applicable provisions of the Delaware
General Corporation Law.
3.3 Contractual Limitations. The Committee shall in exercising its
discretion under the Plan comply with all contractual obligations of the Company
in effect from time to time, whether contained in the Company's Certificate of
Incorporation, bylaws, or other binding contract.
ARTICLE 4.
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. The maximum aggregate number of Shares that may be
issued under the Plan pursuant to Awards is 2,800,000 Shares. Upon exercise of
an option, the Shares issued upon exercise of such option shall no longer be
considered to be subject to an outstanding Award or option for purposes of the
immediately preceding sentence. Notwithstanding anything to the contrary
contained herein, no Award granted hereunder shall become void or otherwise be
adversely affected solely because of a change in the number of Shares of the
Company that are issued and outstanding from time to time, provided that changes
to the issued and outstanding Shares may result in adjustments to outstanding
Awards in accordance with the provisions of this ARTICLE 4. The maximum number
of Shares that may be issued under Incentive Options is 2,800,000 Shares. The
Shares may be either authorized and unissued Shares or previously issued Shares
acquired by the Company. The maximum numbers may be increased from time to time
by approval of the Board and by the stockholders of the Company if, in the
opinion of counsel for the Company, stockholder approval is required. The
Company shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock at least the number of
Shares from time to time required under the provisions of the Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.
4.2 Limit on Options. The maximum number of Shares with respect to which a
Participant may receive Options under the Plan during any calendar year is
500,000 Shares. The maximum number may be increased from time to time by
approval of the Board and by the stockholders of the Company if, in the opinion
of counsel for the Company, stockholder approval is required. Stockholder
approval shall not be required for increases solely pursuant to Section 4.4
below.
4.3 Other Shares of Stock. Shares that are subject to an Option that
expires or for any reason is terminated unexercised, any Shares that are subject
to an Award (other than an Option) and that are forfeited, and any Shares
withheld for the payment of taxes or received by the Company as payment of the
exercise price of an Option shall automatically become available for use under
the Plan.
4.4 Adjustments for Stock Split, Stock Dividend, Etc.. If the Company shall
at any time increase or decrease the number of its outstanding Shares or change
in any way the rights and privileges of such Shares by means of the payment of a
stock dividend or any other distribution upon such Shares payable in Stock, or
through a stock split, subdivision, consolidation, combination, reclassification
or recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, exercise price, rights
and privileges of the following shall be increased, decreased or changed in like
manner as if they had been issued and outstanding, fully paid and nonassessable
at the time of such occurrence: (i) the Shares as to which Awards may be granted
under the Plan, (ii) the Shares then included in each outstanding Award granted
hereunder, (iii) the maximum number of Shares available for grant to any one
person pursuant to Section 4.2, (iv) the maximum number of Shares available for
grant pursuant to Incentive Options, and (v) the number of Shares subject to a
delegation of authority under Section 3.2 of this Plan.
4.5 Other Distributions and Changes in the Stock. If:
(a) The Company shall at any time distribute with respect to the Stock
assets or securities of persons other than the Company (excluding (i) cash or
(ii) distributions referred to in Section 4.4), or
(b) The Company shall at any time grant to the holders of its Stock rights
to subscribe pro rata for additional shares thereof or for any other securities
of the Company, or
(c) There shall be any other change (except as described in Section 4.4) in
the number or kind of outstanding Shares or of any stock or other securities
into which the Stock shall be changed or for which it shall have been exchanged,
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and if the Committee shall in its discretion determine that the event described
in subsection (a), (b) or (c) above equitably requires an adjustment in the
number or kind of Shares subject to an Option or other Award, an adjustment in
the Option Price, or the taking of any other action by the Committee, including
without limitation, the setting aside of any property for delivery to the
Participant upon the exercise of an Option or the full vesting of an Award, then
such adjustments shall be made, or other action shall be taken, by the Committee
and shall be effective for all purposes of the Plan and on each outstanding
Option or Award that involves the particular type of stock for which a change
was effected. All adjustments to Options under this Section 4.5 shall be made in
conformity with Code Sections 409A and 424 and the regulations and other
guidance promulgated under such Code sections. Notwithstanding the foregoing
provisions of this Section 4.5, pursuant to Section 8.3 below, a Participant
holding Stock received as a Restricted Stock Award shall have the right to
receive all amounts, including cash and property of any kind, distributed with
respect to the Stock after such Restricted Stock Award was granted.
4.6 General Adjustment Rules. No adjustment or substitution provided for in
this ARTICLE 4 shall require the Company to sell a fractional Share under any
Option, or otherwise issue a fractional Share, and the total substitution or
adjustment with respect to each Option and other Award shall be limited by
deleting any fractional Share. In the case of any substitution or adjustment
with regards to an Option, the aggregate Option Price for the total number of
Shares then subject to an Option shall remain unchanged but the Option Price per
Share under each such Option shall be equitably adjusted by the Committee to
reflect the greater or lesser number of Shares or other securities into which
the Stock subject to the Option may have been changed, and appropriate
adjustments shall be made to other Awards to reflect any such substitution or
adjustment.
4.7 Determination by the Committee, Etc. Adjustments under this ARTICLE 4
shall be made by the Committee, whose determinations with regard thereto shall
be final and binding upon all parties thereto.
ARTICLE 5.
CORPORATE REORGANIZATION; CHANGE IN CONTROL
5.1 General Provisions. Unless explicitly provided otherwise in an Award
Agreement:
(a) The Shares subject to each Option outstanding under the Plan at the
time of a Change in Control shall automatically vest in full so that each such
Option shall, immediately prior to the Change in Control, become exercisable for
all of the Shares at the time subject to that Option and may be exercised for
any or all of those Shares as fully-vested Shares of Stock.
(b) All outstanding Forfeiture Restrictions with respect to Restricted
Stock Awards shall also automatically terminate, and the Shares of Stock subject
to those terminated Forfeiture Restrictions shall immediately vest in full,
immediately prior to the Change in Control.
(c) Immediately following the consummation of the Change in Control, all
outstanding Options shall terminate and cease to be outstanding.
5.2 Company Actions. The grant of Awards under the Plan shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
ARTICLE 6.
PARTICIPATION
Participants in the Plan shall be those Eligible Employees who, in the
judgment of the Committee, are performing, or during the term of their incentive
arrangement will perform, vital services in the management, operation and
development of the Company, and significantly contribute, or are expected to
significantly contribute, to the achievement of long-term corporate economic
objectives. Eligible Consultants shall be selected from those non-employee
consultants to the Company who are performing services important to the
operation and growth of the Company. All Eligible Non-Employee Directors
selected by the Board may participate in the Plan. Participants may be granted
from time to time one or more Awards; provided, however, that the grant of each
such Award shall be separately approved by the Committee and receipt of one such
Award shall not result in automatic receipt of any other Award. Upon
determination by the Committee that an Award is to be granted to a Participant,
written notice shall be given to such person, specifying the terms, conditions,
rights and duties related thereto. Each Participant shall, if required by the
Committee, enter into an agreement with the Company, in such form as the
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Committee shall determine and which is consistent with the provisions of the
Plan, specifying such terms, conditions, rights and duties. Awards shall be
deemed to be granted as of the date specified in the grant resolution of the
Committee, which date shall be the date of any related agreement with the
Participant. In the event of any inconsistency between the provisions of the
Plan and any such agreement entered into hereunder, the provisions of the Plan
shall govern.
ARTICLE 7.
OPTIONS
7.1 Grant of Options. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options. The
Committee in its sole discretion shall designate whether an Option is an
Incentive Option or a Non-Qualified Option; provided, however, that only
Non-Qualified Options may be granted to Eligible Consultants and Eligible
Non-Employee Directors. The Committee may grant both an Incentive Option and a
Non-Qualified Option to an Eligible Employee at the same time or at different
times. Incentive Options and Non-Qualified Options, whether granted at the same
time or at different times, shall be deemed to have been awarded in separate
grants and shall be clearly identified, and in no event shall the exercise of
one Option affect the right to exercise any other Option or affect the number of
Shares for which any other Option may be exercised. An Option shall be
considered as having been granted on the date specified in the grant resolution
of the Committee.
7.2 Stock Option Agreements. Each Option granted under the Plan shall be
evidenced by a written stock option agreement (an "Option Agreement"). An Option
Agreement shall be issued by the Company in the name of the Participant to whom
the Option is granted (the "Option Holder") and in such form as may be approved
by the Committee. The Option Agreement shall incorporate and conform to the
conditions set forth in this Section 7.2 as well as such other terms and
conditions that are not inconsistent as the Committee may consider appropriate
in each case.
(a) Number of Shares. Each Option Agreement shall state that it covers a
specified number of Shares, as determined by the Committee.
(b) Price. The price at which each Share covered by an Option may be
purchased (the "Option Price") shall be determined in each case by the Committee
and set forth in the Option Agreement, but in no event shall the price be less
than 100 percent of the Fair Market Value of one Share of Stock on the date the
Option is granted.
(c) Duration of Options; Vesting. Each Option Agreement shall state the
Option Period applicable to the Option, which must end, in all cases, not more
than ten years from the date the Option is granted. 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.
(d) Termination of Services, Death, Disability, Etc. The Committee may
specify the period, if any, during which an Option may be exercised following
termination of the Option Holder's Service. The effect of this subsection 7.2(d)
shall be limited to determining the consequences of a termination and nothing in
this subsection 7.2(d) shall restrict or otherwise interfere with the Company's
discretion with respect to the termination of any individual's Service. If the
Committee does not otherwise specify, the following shall apply:
(i) If the Option Holder becomes Disabled, the Option may be exercised
by the Option Holder within one year following the Option Holder's termination
of Service on account of Disability (provided that such exercise must occur
within the Option Period), but not thereafter. In any such case, the Option may
be exercised only as to the Shares that had become vested on or before the date
of the Option Holder's termination of Service because of Disability.
(ii) If the Option Holder dies during the Option Period while still in
Service of the Company or within the one-year period referred to in (i) above
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or the three-month period referred to in (iii) below, the Option may be
exercised by those entitled to do so under the Option Holder's will or by the
laws of descent and distribution within one year following the Option Holder's
death (provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the Shares
that had become vested on or before the date of the Option Holder's death.
(iii) If the Service of the Option Holder is terminated by either the
Company or the Option Holder within the Option Period for any reason other than
Disability or death, the Option may be exercised by the Option Holder within
three (3) months following the date of such termination (provided that such
exercise must occur within the Option Period), but not thereafter. In any such
case, the Option may be exercised only as to the Shares that had become vested
on or before the date of termination of Service.
(e) No Employment Right. Nothing in this paragraph shall limit or impair
the Company's right to terminate the employment of any employee or to terminate
the consulting services of any consultant.
(f) Exercise, Payments, Etc.
(i) Manner of Exercise. The method for exercising each Option granted
hereunder shall be by delivery to the Company of written notice specifying the
number of Shares with respect to which such Option is exercised. The purchase of
such Shares shall take place at the principal offices of the Company within
thirty (30) days following delivery of such notice, at which time the Option
Price of the Shares shall be paid in full by any of the methods set forth below
or a combination thereof. The Option shall be exercised when the Option Price
for the number of Shares as to which the Option is exercised is paid to the
Company in full. A properly executed certificate or certificates representing
the Shares shall be delivered to or at the direction of the Option Holder upon
payment therefor. If Options on less than all Shares evidenced by an Option
Agreement are exercised, the Company shall deliver a new Option Agreement
evidencing the Option on the remaining Shares upon delivery of the Option
Agreement for the Option being exercised.
(ii) The exercise price shall be paid by any of the following methods,
or any combination of the following methods, at the election of the Option
Holder, or by any other method approved by the Committee:
(1) in cash or by wire transfer of immediately available funds;
(2) by certified check, cashier's check, or other check acceptable
to the Company, payable to the order of the Company;
(3) if expressly permitted by a resolution of the Committee
applicable to the Option at the time of exercise (whether such resolution is
applicable solely to the Option being exercised or is generally applicable to
some or all Options outstanding under the Plan), by delivery to the Company of
certificates representing the number of Shares then owned by the Option Holder,
the Fair Market Value of which equals the purchase price of the Shares purchased
pursuant to the Option, properly endorsed for transfer to the Company; provided
however, that no Option may be exercised by delivery to the Company of
certificates representing Shares, unless such Shares have been held by the
Option Holder for more than six (6) months (or such other period of time as the
Committee determines is necessary to avoid adverse financial accounting
treatment to the Company); for purposes of this Plan, the Fair Market Value of
any Shares delivered in payment of the purchase price upon exercise of the
Option shall be the Fair Market Value as of the exercise date; the exercise date
shall be the day of delivery of the certificates for the Shares used as payment
of the Option Price; or
(4) by delivery to the Company of irrevocable instructions
directing the Company to withhold from the purchased Shares a number of Shares
having a Fair Market Value as of the exercise date equal to the aggregate Option
Price of the purchased Shares.
(g) Date of Grant. An Option shall be considered as having been granted on
the date specified in the grant resolution of the Committee.
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(h) Withholding.
(i) Non-Qualified Options. Upon exercise of an Option, the Option
Holder shall make appropriate arrangements with the Company to provide for the
amount of additional withholding required by Sections 3102 and 3402 of the Code
and applicable state income tax laws, including payment of such taxes through
delivery of Shares of Stock or by withholding Shares to be issued under the
Option, as provided in ARTICLE 13.
(ii) Incentive Options. If an Option Holder makes a disposition (as
defined in Section 424(c) of the Code) of any Shares acquired pursuant to the
exercise of an Incentive Option prior to the expiration of two years from the
date on which the Incentive Option was granted or prior to the expiration of one
year from the date on which the Option was exercised, the Option Holder shall
send written notice to the Company at the Company's principal place of business
of the date of such disposition, the number of Shares disposed of, the amount of
proceeds received from such disposition and any other information relating to
such disposition as the Company may reasonably request. The Option Holder shall,
in the event of such a disposition, make appropriate arrangements with the
Company to provide for the amount of additional withholding, if any, required by
Sections 3102 and 3402 of the Code and applicable state income tax laws.
7.3 Restrictions on Incentive Options.
(a) $100,000 Per Year Limitation. The aggregate Fair Market Value of the
Shares with respect to which Incentive Options are exercisable for the first
time by an Option Holder in any calendar year, under the Plan or otherwise,
shall not exceed $100,000. For this purpose, the Fair Market Value of the Shares
shall be determined as of the date of grant of the Option and Incentive Options
shall be taken into account in the order granted. The portion of any Incentive
Option accelerated in connection with a Change in Control shall remain
exercisable as an Incentive Option only to the extent the above limitation is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such Incentive Option shall thereafter be exercisable as a
Non-Qualified Option.
(b) Ten Percent Stockholders. Incentive Options granted to an Option Holder
who is the holder of record of 10% or more of the outstanding stock of the
Company shall have an Option Price equal to 110% of the Fair Market Value of the
Shares on the date of grant of the Option and the Option Period for any such
Option shall not exceed five years.
7.4 Transferability.
(a) General Rule: No Lifetime Transfers. An Option shall not be
transferable by the Option Holder except (i) by will or pursuant to the laws of
descent and distribution or (ii) to the Option Holder's former spouse, to the
extent such assignment is pursuant to a Domestic Relations Order (provided that
if the Option being assigned pursuant to a Domestic Relations Order is an
Incentive Option, such Incentive Option shall cease being an Incentive Option,
and shall automatically convert to a Non-Qualified Option, upon such
assignment). Except as otherwise provided by the terms of a Domestic Relations
Order, an Option shall be exercisable during the Option Holder's lifetime only
by him or her, or in the event of Disability or incapacity, by his or her
guardian or legal representative. The Option Holder's guardian or legal
representative shall have all of the rights of the Option Holder under this
Plan.
(b) No Assignment. No right or interest of any Option Holder in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Option Holder, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy, except as set forth above. In the event the Option is assigned or
transferred in any manner contrary to terms of this Plan, then all Options
transferred or assigned shall immediately terminate.
7.5 Stockholder Privileges. No Option Holder shall have any rights as a
stockholder with respect to any Shares covered by an Option until the Option
Holder becomes the holder of record of such Shares, and no adjustments shall be
made for dividends or other distributions or other rights as to which there is a
record date preceding the date such Option Holder becomes the holder of record
of such Shares, except as provided in ARTICLE 4.
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ARTICLE 8.
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock Awards. Coincident with or following
designation for participation in the Plan, the Committee may grant a Participant
one or more Restricted Stock Awards consisting of Shares of Stock. The number of
Shares granted as a Restricted Stock Award shall be determined by the Committee.
Each Restricted Stock Award granted under the Plan shall be evidenced by a
written restricted stock agreement (a "Restricted Stock Agreement"). The
Restricted Stock Agreement shall incorporate and conform to the conditions set
forth in this ARTICLE 8 as well as such other terms and conditions that are not
inconsistent as the Committee may consider appropriate in each case.
8.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him or her under Section 8.1 shall be subject to such restrictions,
including, but not limited to, his or her continuous Service for the Company for
a restriction period specified by the Committee or the attainment of specified
performance goals and objectives, as may be established by the Committee with
respect to such Award (the restrictions established by the Committee under this
Section shall be known as the "Forfeiture Restrictions"). The Committee may in
its sole discretion provide for different Forfeiture Restrictions with respect
to different Participants, to different Restricted Stock Awards, or to separate,
designated portions of the Shares constituting a Restricted Stock Award. In the
event of the death or Disability of a Participant (except as otherwise provided
in the Restricted Stock Agreement), or the retirement of a Participant in
accordance with the Company's established retirement policy, all Forfeiture
Restrictions then held by him or her shall lapse with respect to a pro rata part
of each such Award based on the ratio between the number of full months of
Service completed at the time of termination of Service from the grant of each
Award to the total number of months of Service required for such Award to be
fully nonforfeitable, and such portion of each such Award shall become fully
nonforfeitable. The remaining portion of each such Award shall be forfeited and
shall be immediately returned to the Company. If a Participant's Service
terminates for any other reason, any Shares as to which the Forfeiture
Restrictions have not been satisfied (or waived or accelerated as provided
herein) shall be forfeited, and all Shares related thereto shall be immediately
returned to the Company.
8.3 Privileges of a Stockholder, Transferability. A Participant shall have
all voting, dividend, liquidation and other rights with respect to Stock (in
accordance with its terms) received by him as a Restricted Stock Award under
this ARTICLE 8; provided, however, that the Participant's right to sell,
encumber, or otherwise transfer such Stock shall be subject to the limitations
of Sections 10.2 and 13.2 and ARTICLE 11.
8.4 Enforcement of Restrictions. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock Award
referring to the restrictions provided by Sections 8.2 and 8.3 and, in addition,
may in its sole discretion require one or more of the following methods of
enforcing the restrictions referred to in Sections 8.2 and 8.3:
(a) Requiring the Participant to keep the Stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in effect;
or
(b) Requiring that the Stock certificates, duly endorsed, be held in the
custody of a third-party while the restrictions remain in effect.
ARTICLE 9.
OTHER GRANTS
From time to time during the duration of this Plan, the Board may, in its
sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire Shares, whether by
purchase, outright grant, or otherwise. Any arrangement shall be subject to the
general provisions of this Plan and all Shares issued pursuant to such
arrangements shall be issued under this Plan.
ARTICLE 10.
RIGHTS OF PARTICIPANTS
10.1 Service. Nothing contained in the Plan or in any Option, or other
Award granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his employment by, or consulting relationship
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with, the Company, or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement or other contract to
the contrary, at any time to terminate such services or to increase or decrease
the compensation of the Participant from the rate in existence at the time of
the grant of an Award. Whether an authorized leave of absence, or absence in
military or government service, shall constitute a termination of service shall
be determined by the Committee at that time.
10.2 Nontransferability of Awards. Except as provided otherwise at the time
of grant or thereafter, or except as otherwise provided in a Domestic Relations
Order, no right or interest of any Participant in a Restricted Stock Award
(prior to the completion of the restriction period applicable thereto), or other
Award (excluding Options) granted pursuant to the Plan, shall be assignable or
transferable during the lifetime of the Participant, either voluntarily or
involuntarily, or subjected to any lien, directly or indirectly, by operation of
law, or otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Participant's death, a Participant's rights and
interests in Options, Restricted Stock Awards, and other Awards, shall, to the
extent provided in ARTICLE 7, ARTICLE 8, and ARTICLE 9 be transferable by will
or the laws of descent and distribution, and payment of any amounts due under
the Plan shall be made to, and exercise of any Options may be made by, the
Participant's legal representatives, heirs or legatees. However, a Participant's
rights and interests in Options, Restricted Stock Awards, and other Awards shall
be transferable to an Option Holder's former spouse, to the extent such
assignment is pursuant to a Domestic Relations Order (provided that if the
Option being assigned pursuant to a Domestic Relations Order is an Incentive
Option, such Incentive Option shall cease being an Incentive Option, and shall
automatically convert to a Non-Qualified Option, upon such assignment). If in
the opinion of the Committee a person entitled to payments or to exercise rights
with respect to the Plan is disabled from caring for his affairs because of
mental condition, physical condition or age, payment due such person may be made
to, and such rights shall be exercised by, such person's guardian, conservator
or other legal personal representative upon furnishing the Committee with
evidence satisfactory to the Committee of such status.
10.3 No Plan Funding. Obligations to Participants under the Plan will not
be funded, trusteed, insured or secured in any manner. The Participants under
the Plan shall have no security interest in any assets of the Company, and shall
be only general creditors of the Company.
ARTICLE 11.
GENERAL RESTRICTIONS
11.1 Investment Representations. The Company may require any person to whom
an Option, Restricted Stock Award, or other Award, is granted, as a condition of
exercising such Option, receiving such Restricted Stock Award, or such other
Award to give written assurances in substance and form satisfactory to the
Company and its counsel to the effect that such person is acquiring the Stock
for his own account for investment and not with any present intention of selling
or otherwise distributing the same, and to such other effects as the Company
deems necessary or appropriate in order to comply with Federal and applicable
state securities laws. Legends evidencing such restrictions may be placed on the
Stock certificates.
11.2 Compliance with Securities Laws. Each Option, Restricted Stock Award
grant, or other Award shall be subject to the requirement that, if at any time
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such Option, Restricted Stock Award, or
other Award grant upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or purchase of
shares thereunder, such Option, Restricted Stock Award or other Award may not be
accepted or exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
11.3 Changes in Accounting Rules. Except as provided otherwise at the time
an Award is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to Options, Restricted Stock Awards, or other Awards
shall occur which, in the sole judgment of the Committee, may have a material
adverse effect on the reported earnings, assets or liabilities of the Company,
the Committee shall have the right and power to modify as necessary, any then
outstanding and unexercised Options, outstanding Restricted Stock Awards, and
other outstanding Awards as to which the applicable services or other
restrictions have not been satisfied.
B-13
ARTICLE 12.
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the stockholders,
if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options, Restricted Stock Awards, or other Award
theretofore granted under the Plan, without the consent of the Participant
holding such Options, Restricted Stock Awards, or other Awards.
ARTICLE 13.
WITHHOLDING
13.1 Withholding Requirement. The Company's obligations to deliver shares
of Stock upon the exercise of any Option, the vesting of any Restricted Stock
Award, or the grant of Stock shall be subject to the Participant's satisfaction
of all applicable federal, state, local and foreign income and other tax
withholding requirements.
13.2 Withholding With Stock. At the time the Committee grants an Option,
Restricted Stock Award, other Award, or Stock or at any time thereafter, it may,
in its sole discretion, grant the Participant an election to pay all such
amounts of tax withholding, or any part thereof, by electing (a) to have the
Company withhold from shares otherwise issuable to the Participant, shares of
Stock having a value equal to the amount required to be withheld or such lesser
amount as may be elected by the Participant; provided however, that the amount
of Stock so withheld shall not exceed the minimum amount required to be withheld
under the method of withholding that results in the smallest amount of
withholding, or (b) to transfer to the Company a number of shares of Stock that
were acquired by the Participant more than six months prior to the transfer to
the Company (or such other period of time as the Committee determines is
necessary to avoid adverse financial accounting treatment) and that have a value
equal to the amount required to be withheld or such lesser amount as may be
elected by the Participant. All elections shall be subject to the approval or
disapproval of the Committee. The value of shares of Stock to be withheld shall
be based on the Fair Market Value of the Stock on the date that the amount of
tax to be withheld is to be determined (the "Tax Date"). Any such elections by
Participants to have shares of Stock withheld for this purpose will be subject
to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company within the
meaning of, and subject to, Section 16 of the Exchange Act ("Section 16"), the
Participant must satisfy the requirements of such Section 16 and any applicable
Rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
ARTICLE 14.
REQUIREMENTS OF LAW
14.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
14.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of, and subject to, Section 16,
Awards granted hereunder shall be subject to all conditions required under Rule
16b-3, or any successor rule promulgated under the Exchange Act, to qualify the
Award for any exception from the provisions of Section 16(b) of the Exchange Act
available under that Rule. Such conditions shall be set forth in the agreement
with the Participant which describes the Award or other document evidencing or
accompanying the Award.
B-14
14.3 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
ARTICLE 15.
DURATION OF THE PLAN
Unless sooner terminated by the Board, the Plan shall terminate at the
close of business on the day immediately preceding the tenth anniversary of the
Effective Date and no Option, Restricted Stock Award, other Award or Stock shall
be granted, or offer to purchase Stock made, after such termination. Options,
Restricted Stock Awards, and other Awards outstanding at the time of the Plan
termination may continue to be exercised, or become free of restrictions, or
paid, in accordance with their terms.
Dated as of the Effective Date:
SIMTEK CORPORATION, a Delaware corporation
By: /s/ Harold Blomquist
---------------------------------------
Harold Blomquist, President
B-15
Simtek Corporation
Proxy Card
This Proxy is solicited on behalf of the Board of Directors
of Simtek Corporation for the Annual Meeting of Shareholders
to be held on June 14, 2007.
The undersigned hereby appoints, Harold A. Blomquist, Chief Executive
Officer, and Brian Alleman, Chief Financial Officer, and each of them
individually, the proxies of the undersigned, with full power of substitution,
to vote, at the Annual Meeting of Shareholders of Simtek Corporation (the
"Company") to be held June 14, 2007 and all adjournments thereof, all shares of
Common Stock of the Company held of record by the undersigned as of April 25,
2007.
The Board of Directors recommends a vote
"FOR" all nominees in Proposal 1 and "FOR" Proposals 2, 3 and 4.
1. To elect six directors, each to serve until the 2008 Annual Meeting of
Shareholders or until his successor has been duly elected and qualified.
NOMINEES: Harold A. Blomquist Robert H. Keeley Robert C. Pearson
Ronald Sartore Alfred J. Stein John Hillyard
[ ] FOR ALL NOMINEES [ ] WITHHOLD FROM ALL NOMINEES
[ ] FOR ALL EXCEPT:
----------------------------------------------------------
List of Nominees
2. To adopt the Simtek Corporation Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt the Simtek Corporation 2007 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection of Hein & Associates LLP as our independent
registered public accounting firm for the year ending December 31, 2007.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy will
be voted FOR the nominees set forth in Proposal 1 and FOR Proposals 2, 3 and 4.
This proxy also delegates discretionary authority to vote upon such other
matters as may properly come before the meeting.
Note: Please sign exactly as name
appears hereon. If a joint
account, each joint owner must
sign. If signing for a corporation
or partnership or as an agent,
attorney or fiduciary, indicate
the capacity in which you are ------------ --------------------- -----------------------
signing. Date Shareholder sign here Co-owner sign here
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----------------------------------
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarter ended March 31, 2007
OR
[ ] Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission file number 0-19027
SIMTEK CORPORATION
(Exact name of registrant as specified in its charter)
-------------------------------------------------
Delaware 84-1057605
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4250 Buckingham Drive, Suite 100,
Colorado Springs, Colorado 80907
(Address of principal executive offices) (Zip Code)
(719) 531-9444
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [X]
The total number of shares of Common Stock issued and outstanding as of May 14,
2007, was 16,501,906.
SIMTEK CORPORATION
INDEX
For the Quarter Ended March 31, 2007
PART 1. FINANCIAL INFORMATION
ITEM 1 Page
----
Condensed Consolidated Balance Sheets as of March 31, 2007
and December 31, 2006 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2007 and 2006 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2007 and 2006 5
Notes to Condensed Consolidated Financial Statements 6-12
ITEM 2
Managements Discussion and Analysis of Financial Condition
and Results of Operations 13
ITEM 3
Quantitative and Qualitative Disclosures about Market Risk 18
ITEM 4
Controls and Procedures 19
PART 2. OTHER INFORMATION
ITEM 1 Legal Proceedings 20
ITEM 2 Unregistered Sales of Equity Securities and Use of
Proceeds 20
ITEM 3 Defaults Upon Senior Securities 20
ITEM 4 Submission of Matters to a Vote of Security Holders 20
ITEM 5 Other Information 20
ITEM 6 Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
SIMTEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value and share amounts)
ASSETS
------
March 31, 2007 December 31, 2006
-------------- -----------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,876 $ 4,522
Restricted investments 1,775 1,775
Accounts receivable - trade, net 4,979 5,537
Inventory, net 8,121 6,596
Prepaid expenses and other current assets 442 312
-------- --------
Total current assets 18,193 18,742
EQUIPMENT AND FURNITURE, net 1,394 1,239
DEFERRED FINANCING COSTS AND DEBT ISSUANCE COSTS 41 54
GOODWILL 992 992
NON-COMPETITION AGREEMENT, NET 6,680 7,126
OTHER ASSETS 114 89
-------- --------
TOTAL ASSETS $ 27,414 $ 28,242
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 3,949 $ 3,771
Accrued expenses 934 939
Accrued vacation payable 263 229
Accrued wages 45 814
Line of credit 371 681
Debentures, current 480 480
-------- --------
Total current liabilities 6,042 6,914
DEBENTURES, NET OF CURRENT 2,220 2,220
-------- --------
Total liabilities 8,262 9,134
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.0001 par value; 200,000 shares authorized,
none issued -- --
Common stock, $.0001 par value; 30,000,000 shares authorized,
16,227,929 and 16,226,929 shares issued and outstanding
at March 31, 2007 and 16,146,679 and 16,145,679 shares issued
outstanding at December 31, 2006 2 2
Additional paid-in capital 67,677 67,173
Treasury stock, at cost; 1,000 shares (1) (1)
Accumulated deficit (48,688) (48,198)
Accumulated other comprehensive income:
Cumulative translation adjustment 162 132
-------- --------
Total shareholders' equity 19,152 19,108
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 27,414 $ 28,242
======== ========
See accompanying notes to these consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
For the three months ended March 31,
----------------------------------------
2007 2006
---- ----
REVENUE
Product sales, net $ 7,867 $ 4,743
Royalty revenue -- 1,035
------------ ------------
Total Revenue 7,867 5,778
Cost of sales 4,435 3,470
------------ ------------
GROSS PROFIT 3,432 2,308
OPERATING EXPENSES:
Research and development costs 1,613 1,545
Sales and marketing 1,152 944
General and administrative 1,109 699
------------ ------------
Total operating expenses 3,874 3,188
------------ ------------
LOSS FROM OPERATIONS (442) (880)
OTHER INCOME (EXPENSE):
Interest income 49 40
Interest expense (98) (60)
Exchange rate variance 12 --
Other expense -- (1)
------------ ------------
Total other expense (37) (21)
------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (479) (901)
Provision for income taxes (11) --
------------ ------------
NET LOSS $ (490) $ (901)
============ ============
NET LOSS PER COMMON SHARE:
Basic and diluted $ (.03) $ (.06)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 16,211,671 14,692,083
============ ============
See accompanying notes to these consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Amounts in thousands)
Three Months Ended March 31,
----------------------------
2007 2006
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (490) $ (901)
Adjustments to reconcile net loss to net cash used in operating
Activities:
Depreciation 159 107
Amortization 17 8
Expense related to stock options 279 119
Amortization of non-competition agreement 446 451
Net change in allowance accounts 392 353
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 322 (1,387)
Inventory (1,635) (943)
Prepaid expenses and other (155) 567
Increase (decrease) in:
Accounts payable 170 224
Accrued expenses (1,079) (178)
------- -------
Net cash used in operating activities (1,574) (1,580)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture, net (311) (157)
Patents (14) --
Purchase of certain assets from ZMD -- (38)
------- -------
Net cash used in investing activities (325) (195)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation -- (13)
Funds receiving from December 2005 equity financing, net -- 1,874
Warrants issued for license rights -- 965
Proceeds from warrant exercises 222 --
Exercise of stock options 3 --
------- -------
Net cash provided by financing activities 225 2,826
------- -------
Effect of exchange rate changes on cash 28 (3)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,646) 1,048
CASH AND CASH EQUIVALENTS, beginning of period 4,522 1,766
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 2,876 $ 2,814
======= =======
Cash paid for interest $ 86 $ 56
======= =======
See accompanying notes to these consolidated financial statements.
5
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of Simtek and
its wholly owned subsidiaries. Intercompany accounts and transactions have been
eliminated. The financial statements included herein are presented in accordance
with the requirements of Form 10-Q and consequently do not include all of the
disclosures normally made in the registrant's annual Form 10-K filing. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Annual Report and Form
10-K, Annual Report and Form 10-K/A for Simtek Corporation ("Simtek" or the
"Company") filed on April 2, 2007 and April 30, 2007, respectively for fiscal
year 2006.
In the opinion of management, the unaudited financial statements reflect
all adjustments of a normal recurring nature necessary to present a fair
statement of the results of operations for the respective interim periods. The
year-end balance sheet data was derived from audited financial statements, but
does not include all disclosures required by accounting principles generally
accepted in the United States of America. Results of operations for the interim
periods are not necessarily indicative of the results of operations for the full
fiscal year.
Stock-Based Compensation
The Company has approved a Non-Qualified Stock Option Plan that authorizes
2,060,000 non-qualified stock options that may be granted to directors,
employees, and consultants. The plan permits 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 is 10 years and options granted to
employees expire 90 days after the termination of employment. In 2004, the
Non-Qualified Stock Option Plan was extended for 10 more years. All options
granted prior to March 24, 2006, began vesting after six months after the date
of grant, and would 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:
o 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.
o 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 and then the
options will continue to vest at 1/48th per month for the remaining
portion of the four year period.
o 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 and then
the options will continue to vest at 1/48th per month for the
remaining portion of the four year period.
o All options granted to outside directors of the Company will be 100%
vested after six months from the grant date.
o All options will expire seven years from date of grant.
Total share-based compensation recognized in the Company's consolidated
statements of operations for the quarters ended March 31, 2007 and 2006 is as
follows:
6
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Income Statement Classifications
2007 2006
---- ----
(in thousands)
Research and development $ 66 $ 39
Sales and marketing 26 16
General and administrative 187 64
--------- ---------
Total $ 279 $ 119
========= =========
As of March 31, 2007, there was approximately $2.1 million of unrecognized
compensation costs, adjusted for estimated forfeitures, related to non-vested
options granted to the Company's employees and directors, which will be
recognized through March 31, 2011. Total unrecognized compensation will be
adjusted for future changes in estimated forfeitures.
The fair value for stock options was estimated at the date of grant using
the Black-Scholes option pricing model, which requires management to make
certain assumptions. Expected volatility was based on the historical volatility
of the Company's stock over the past 5 years. The Company based the risk-free
interest rate that was used in the option valuation mode on U.S. Treasury notes.
The Company does not anticipate paying cash dividends in the foreseeable future
and therefore uses an expected dividend yield of 0%.
The fair value of each option granted in quarterly periods ending March 31,
2007 and 2006 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following:
2007 2006
---- ----
Expected volatility 79.15% 84.83%
Risk-free interest rate 4.79% 4.59%
Expected dividends - -
Expected terms (in years) 5.0 4.0
The weighted average fair value per share of options granted during the
three months ended March 31, 2007 and 2006 was $3.90 and $ 1.73, respectively.
The following table summarizes stock options outstanding and changes during
the quarterly period ended March 31, 2007.
7
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Outstanding Options
-------------------------------------------------------------
Weighted
Average
Remaining Aggregate
Weighted Contractual Intrinsic
Number of Average Term Value (In
Shares Exercise Price (in years) Thousands)
--------- -------------- ----------- ----------
Options outstanding at January 1, 2007...................... 1,302,593 $ 5.24
Granted................................................... 90,000 5.83
Exercised................................................. (2,000) (1.70) $ 9(1)
Cancelled or forfeited.................................... (13,245) (9.22)
--------- ------
Options outstanding at March 31, 2007....................... 1,377,348 $ 5.25 4.50
========= ====== ======== =====
Options exercisable at March 31, 2007....................... 677,663 $ 5.98 4.50 $ 713(2)
========= ====== ======== =====
1) Represents the difference between the exercise price and the value of
Simtek stock at the time of exercise.
2) Represents the difference between the market value as of March 31, 2007 and
the exercise price of the shares. The market value as of March 31, 2007 was
$5.69 as reported by the NASDAQ Stock Market.
Cash received from option exercises for the quarter ended March 31, 2007
was $3,000. The tax benefit will be charged to "paid-in capital" when, and if,
the tax deduction is utilized prior to expiration.
Stock options outstanding and currently exercisable at March 31, 2007 are as
follows:
Outstanding Exercisable
--------------------------------------------------------------------------- ------------------------------------
Weighted Average
------------------------------------------------------
Remaining Weighted
Number Contractual Life Average Number Weighted Average
Exercise Price Outstanding in Months Exercise Price Exercisable Exercise Price
------------------- ------------------ ------------------ ----------------- ------------------ ------------------
$1.60-$3.50 359,430 56 $ 2.95 147,854 $ 2.66
$3.60-$6.00 703,273 63 $ 4.88 257,789 $ 4.67
$6.20-$9.00 218,911 47 $ 6.58 176,286 $ 6.57
$11.25-$15.30 80,734 28 $ 12.51 80,734 $ 12.51
$19.00 15,000 47 $ 19.00 15,000 $ 19.00
--------- -------
1,377,348 677,663
========= =======
Non-competition Agreement
-------------------------
In December 2005, the Company entered into a non-competition agreement with
Zentrum Mikroelektronik Dresden AG ("ZMD") as part of the acquisition of ZMD's
nvSRAM product line. The Company assigned a value of $8,910,000 to the
non-competition agreement in December 2005. The value assigned to the
non-competition agreement is being amortized on a straight-line basis over its
8
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
five-year life. The Company recorded an expense, for the amortization, of
approximately $446,000 to sales and marketing for the three months ended March
31, 2007.
Goodwill
--------
Goodwill represents the excess of the total amount paid to ZMD for the
nvSRAM assets acquired on December 30, 2005 and the fair value assigned to
specific assets. This amount will not be amortized, but will be reviewed for
impairment on a periodic basis. As of March 31, 2007 no impairment of value has
been recorded.
Accumulated other comprehensive income (loss)
---------------------------------------------
The functional currency for Simtek GmbH is the local currency, the Euro.
Assets and liabilities for this foreign operation are translated at the exchange
rate in effect at the balance sheet date, and income and expenses are translated
at average exchange rates prevailing during the period. Translation gains or
losses are included within shareholders' equity as part of accumulated other
comprehensive income (loss). As of March 31, 2007, the Company recorded
approximately $162,000 in comprehensive income.
Incomes Taxes
-------------
The Company adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of
the implementation of Interpretation 48, the Company recognized no adjustments
to liabilities or stockholders equity.
When tax returns are filed, it is highly certain that some positions taken
would be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of
the position that would be ultimately sustained. Under FIN 48, the benefit of a
tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely
than not that the position will be sustained upon examination, including the
resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination.
The Company files consolidated income tax returns in the U.S. federal
jurisdiction and several state jurisdictions. The Company is not aware of any
jurisdictions where they would be subject to U.S. federal or state income tax
examinations by tax authorities for years before 2003.
Our policy is that we recognize interest and penalties accrued on any
unrecognized tax benefits as a component of income tax expense. As of the date
of adoption of FIN 48, we did not have any accrued interest or penalties
associated with any unrecognized tax benefits, nor was any interest expense
recognized during the quarter.
9
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Liquidity
During the three months ended March 31, 2007 and the twelve months ended
December 31, 2006, the Company incurred a net loss of approximately $490,000 and
$2,007,000, respectively and has an accumulated deficit of $48,689,000 as of
March 31, 2007.
The Company operates in a volatile industry, whereby its average selling
prices and product costs are influenced by competitive factors. Furthermore, the
Company continues to incur significant research and development costs for
product development. These factors create pressures on sales, costs, earnings
and cash flows, which will impact liquidity.
If the Company is unable to achieve profitable operations in 2007 it may
result in increased liquidity pressure on the Company, whereby it might be
required to enter into debt or equity arrangements that may not be as otherwise
favorable to the Company.
3. Revenue Recognition
Revenue Recognition - Product sales revenue is recognized when a valid
purchase order has been received with a fixed price and the products are shipped
to customers FOB origin (Colorado Springs, Colorado or Dresden, Germany),
including distributors. Based on historic business with the majority of the
Company's customers and, in the case of new customers, based on credit checks,
the Company is reasonably assured that collectibility on our shipments will
occur. Customers receive a one-year product warranty and sales to distributors
are subject to a limited product exchange program and a price protection in the
event of changes in the Company's product prices. The Company provides a reserve
for possible product returns, product price protection and warranty costs at the
time the sale is recognized. The Company has a detailed procedure to ensure that
its estimates for reserves are reasonable and reliable. The reserve for product
returns is based on the actual inventory value of the Company's semiconductor
products held by its distributors. The Company's distributors are permitted to
rotate up to 5% of their stock every six months with the stipulation that they
must submit a replacement order of equal dollar value to the stock that they are
returning. The reserve for price protection is used when the Company authorizes
special pricing to one of its distributors for a specific customer. To date, the
estimates have not been materially different from the credits the Company has
issued under these reserves.
Revenue from royalties related to non-refundable prepaid royalty payments
is recognized upon receipt. Revenue from royalties related to sales of products
by license partners is recognized upon the notification to us of shipment of
product from the Company's technology license partners to direct customers.
4. Inventories
The Company records inventory using the lower of cost (first-in, first-out)
or market. Inventory at March 31, 2007 and December 31, 2006 included:
March 31, 2007 December 31, 2006
(In thousands)
Raw Materials $ 65 $ 21
Work in progress 5,334 4,603
Finished Goods 3,601 2,737
---------- ----------
9,000 7,361
Less reserves for excess inventory (879) (765)
---------- ----------
$ 8,121 $ 6,596
========== ==========
10
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Line of Credit
On June 2, 2006, the Company secured a $3.6 million revolving line of
credit by entering into an Account Purchase Agreement (the "Agreement") with
Wells Fargo Bank, National Association ("Wells Fargo"). Pursuant to the
Agreement, the Company may sell, subject to recourse in the event of nonpayment,
up to $3.6 million of eligible accounts receivable to Wells Fargo. Advances of
the purchase price for the eligible receivables will be at an agreed upon
discount to the face value of the eligible receivable. The amount actually
collected on any receivable by Wells Fargo that is beyond the advance will be
forwarded to the Company, less certain discounts and fees retained by Wells
Fargo (including a minimum fee of $7,500 per month for the term of the
Agreement). To secure the Company's obligations under the Agreement, the Company
granted Wells Fargo a security interest in certain of the Company's property.
The Agreement has a term of two years, but may be terminated at any time by the
Company upon 60 days' written notice. As of March 31, 2007, the Company had
financed receivables with Wells Fargo for approximately $371,000.
6. Convertible Debentures
On July 1, 2002, the Company received funding of $3,000,000 in a financing
transaction with Renaissance Capital Growth and Income Fund III, Inc.,
Renaissance US Growth Investment Trust PLC and US Special Opportunities Trust
PLC. RENN Capital Group, Inc. is the agent for the RENN investment funds. One of
the Company's directors holds the position of Senior Vice President of RENN
Capital Group. The $3,000,000 funding consists of convertible debentures with a
7-year term at a 7.5% per annum interest rate. Each fund equally invested
$1,000,000. The holder of the debenture shall have the right, at any time, to
convert all, or in multiples of $100,000, any part of the Debenture into fully
paid and nonassessable shares of Simtek Corporation common stock. The debentures
were originally convertible into Simtek common stock at $3.12 per share, which
was in excess of the market price per share on July 1, 2002. The Convertible
Debentures allows for an adjustment in the conversion price, if the Company
issues Common Stock in connection with an equity financing, where the sale price
is less than the conversion price of $3.12. This occurred in December 2005 in
connection with the common stock sale of $11,000,000 at a price of $1.60 per
share. Pursuant to the terms of the 2002 convertible debentures, the Company
agreed with the RENN Capital Group that the conversion price would be reduced to
$2.20 per share. Based on the conversion rate of $2.20 per share, each RENN
investment fund is entitled to 409,091 shares upon conversion (assuming
conversion of $900,000).
On June 28, 2005, the Company received a waiver from the debenture holders
extending until July 1, 2006 the commencement date for principal payments of the
$3 million aggregate principal amount, see Note 6 Shareholders' Equity for
additional information. On July 24, 2006, each of the debenture holders
converted $100,000 of the principal amount into 45,455 shares of the Company's
common stock in lieu of the Company making the principal payments it was
required to make commencing on July 1, 2006.
At March 31, 2007, the Company was not in compliance with one of the
covenants set forth in the loan agreement. This covenant relates to the interest
coverage ratio. On May 4, 2007, the Company received a waiver from complying
with this covenant through April 1, 2008. However, significant variances in
future actual operations from the Company's current estimates could result in
the reclassification of this note to current liabilities.
7. Non-Refundable Prepaid Royalties
On March 24, 2006, the Company entered into a License and Development
Agreement with Cypress pursuant to which, among other things, Cypress agreed to
11
SIMTEK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
license certain intellectual property from the Company to develop and
manufacture standard, custom and embedded nvSRAM products and Cypress agreed to
pay to the Company $4,000,000 in non-refundable pre-paid royalties of which $2
million was paid upon signing of the agreement, $1 million was paid on June 30,
2006 and $1 million was paid on December 18, 2006. In addition, the Company
licensed rights to use certain intellectual property from Cypress for use in its
products. As part of the License and Development Agreement, the Company agreed
to issue Cypress warrants to purchase 2 million shares of the Company's common
stock for $7.50 per share. The warrants have a ten year life. The warrants were
issued upon receipt of each of the prepaid royalty amounts. The value of the
warrants issued of $1,930,000 was determined using the Black Scholes
option-pricing model and has been recorded as an increase in additional paid in
capital. The net balance of the non-refundable prepaid royalties of $2,070,000
were recognized as revenue at the time the payments were received.
8. Geographic Concentration
Sales of the Company's semiconductor products by location for the three
months ended March 31, 2007 and 2006 were as follows:
Three Months Ended
March 31,
----------------------
2007 2006
---- ----
United States 18% 19%
Europe 36% 28%
Far East 35% 44%
All Others 11% 9%
------ -------
100% 100%
====== =======
9. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) net of tax is as follows:
Foreign Currency
Translation Adjustment
Balance at January 1, 2007 $ 132
Current period change 30
--------
Balance March 31, 2007 $ 162
12
SIMTEK CORPORATION
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis in this quarterly report on Form 10-Q
is intended to provide greater details of the results of operations and
financial condition of our Company. The following discussion should be read in
conjunction with our condensed consolidated financial statements and notes
thereto and other financial data included elsewhere herein. Certain statements
under this caption constitute forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The reader should not place undue reliance on these forward looking
statements for many reasons including those risks discussed in this document. In
addition, when used in this quarterly report, the words "believes,"
"anticipates," "expects," "plans," "intends" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements and
statements of expectations, plans and intent are subject to a number of risks
and uncertainties. Actual results in the future could differ materially from
those described in the forward-looking statements, as a result, among other
things, of changes in technology, customer requirements and needs. We undertake
no obligation to release publicly the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
require us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the related disclosures. Our
accounting policies are discussed in Note 1 of the Notes to Consolidated
Financial Statements included in our 2006 Form 10-K filed with the Securities
and Exchange Commission on April 2, 2007. The estimates used by us are based
upon our historical experiences combined with our understanding of current facts
and circumstances. Certain of our accounting polices are considered critical as
they are both important to the portrayal of our financial condition and the
results of our operations and require significant or complex judgments on our
part. We believe that the following represent the critical accounting policies
of Simtek as described in Financial Reporting Release No. 60, Cautionary Advice
Regarding Disclosure About Critical Accounting Policies, which was issued by the
Securities and Exchange Commission: inventories; deferred income taxes;
allowance for doubtful accounts; and, allowance for sales returns.
The valuation of inventories involves complex judgments on our part. Excess
finished goods inventories are a natural component of market demand for
semiconductor devices. We continually evaluate and balance the levels of
inventories based on sales projections, current orders scheduled for future
delivery and historical product demand. While certain finished goods items will
sell out, quantities of other finished goods items will remain. These finished
goods are reserved as excess inventory. We believe we have adequate controls
with respect to the amount of finished goods inventories that are anticipated to
become excess. While we believe this process produces a fair valuation of
inventories, changes in general economic conditions of the semiconductor
industry could materially affect valuation of our inventories.
The allowance for doubtful accounts reflects a reserve that reduces
customer accounts receivable to the net amount estimated to be collectible.
Estimating the credit worthiness of customers and the recoverability of customer
accounts requires management to exercise considerable judgment. In estimating
uncollectible amounts, we consider factors such as industry specific economic
conditions, historical customer performance and anticipated customer
performance. While we believe our processes to be adequate to effectively
quantify our exposure to doubtful accounts, changes in industry or specific
customer conditions may require us to adjust our allowance for doubtful
accounts.
13
SIMTEK CORPORATION
We record an allowance for sales returns as a net adjustment to revenue and
customer accounts receivable. The allowance for sales returns consists of two
separate segments, distributor stock rotation and distributor price reductions.
When we record the allowance, the net method reduces customer accounts
receivables and gross sales. Generally, we calculate the stock rotation portion
of the allowance based upon actual reported distributor inventory levels. The
agreements we have with certain of our distributors generally allow them to
return to us a 5% percent of their inventory every 6 months, in exchange for
inventory that better meets their demands. At times, with our approval, our
distributors reduce the selling price of a specific device in order to meet
competition related to a specific end customer program, which we support through
a credit back to the distributor for that specific program. When this occurs, we
record an allowance for potential credit that our distributors will be
requesting. This allowance is based on approved pricing changes, inventory
affected and historical data. We believe that our processes are adequate to
reasonably predict and estimate the allowance for sales returns.
We record an allowance that directly relates to the warranty of our
products for one year. The allowance for warranty return reduces our gross
sales. This allowance is calculated by looking at annual revenues and historical
rates of our products returned due to warranty issues. While we believe this
process adequately predicts our allowance for warranty returns, changes in the
manufacturing or design of our product could materially affect valuation of our
warranties.
We assess the impairment of long-lived assets when events or changes in
circumstances indicate that the carrying value of the assets may not be
recoverable. Factors that we consider in deciding when to perform an impairment
review include significant under-performance of the business in relation to
expectations, significant negative industry or economic trends, and significant
changes or planned changes in our use of the assets. Recoverability of assets
that will continue to be used in our operations is measured by comparing the
carrying amount of the assets to our estimate of the related future net cash
flows. If the asset's carrying amount is not recoverable through the related
future cash flows, the asset is considered to be impaired. The impairment is
measured by the difference between the asset's carrying amount and its fair
value, based on the best information available, including market prices or
discounted cash flows.
Goodwill represents the excess of the purchase price over the fair value of
identifiable net tangible and intangible assets acquired in the acquisition of
the nvSRAM assets from ZMD. Goodwill is required to be tested for impairment. We
performed goodwill impairment testing as of March 31, 2007, and determined that
no impairment existed at that date. This assessment requires estimates of future
revenue, operating results and cash flows, as well as estimates of critical
valuation inputs such as discount rates, terminal values and similar data. We
will continue to perform periodic and annual impairment analyses of goodwill. As
a result of such impairment analyses, impairment charges may be recorded and may
have a material adverse impact on our financial position and operating results.
Additionally, we may make strategic business decisions in future periods which
impact the fair value of goodwill, which could result in significant impairment
charges. There can be no assurance that future goodwill impairments will not
occur.
We have recorded a valuation allowance for the full amount deferred tax
assets, which principally relate to future utilization of net operating losses.
Future operations may change our estimate in connection with potential
utilization of these assets.
Results of Operations:
Revenues
Total revenue for the three months ended March 31, 2007 was $7,867,000
compared to $5,778,000 for the same period in 2006. The 2006 amount includes
14
SIMTEK CORPORATION
$1,035,000 of royalty revenue and no revenue has been earned in the first
quarter of 2007. Product sales for the 2007 period were $7,867,000 compared to
$4,743,000 in 2006, an increase of 66%.
The following table sets forth our net product revenues for semiconductor
devices by product markets for the three months ended March 31, 2007 and 2006
(in thousands):
Three Months Ended
------------------
March 31,
---------
2007 2006 Variance
---- ---- --------
Commercial $ 7,464 $ 3,951 $ 3,513
High-end industrial and military 403 792 $ (389)
-------- --------- --------
Total Semiconductor Revenue $ 7,867 $ 4,743 $ 3,124
======== ========= ========
Commercial revenues include revenue generated from our 0.8-micron products
built from silicon wafers received from Chartered Semiconductor or purchased as
finished units from ZMD, and from our 0.25-micron products built from silicon
wafers received from Dongbu Electronics (DBE). Commercial revenues increased by
$3,513,000 for the three months ended March 31, 2007 as compared to the three
months ended March 31, 2006. This increase was due primarily to increased
product demand for our legacy products and our 1 megabit products. In addition,
revenues were also increased as a result of increased selling prices for our
highest volume 256 kilobit devices. These increases took place in the second
half of 2006 and held firm in the first quarter of 2007.
High-end industrial and military product revenues accounted for a decrease
of approximately $389,000 for the three months ended March 31, 2007 as compared
to the same period in 2006. The decrease reflects lower demand for these
products. Customer demand for these devices is generally not predictable and
tends to be volatile from period to period.
Three distributors and one direct customer together accounted for
approximately 43% of our revenue for the quarter ended March 31, 2007. Products
sold to distributors are sold without material recourse. Distributors sell our
products to various end customers. If one of these distributors was to terminate
its relationship with us, we believe that there would not be a material impact
on our product sales, as we believe that we would be able to service these
various end customers through other distributors.
Cost of Sales and Gross Profit
We recorded cost of sales of $4,435,000 and $3,470,000 for the three months
ended March 31, 2007 and 2006, respectively. These costs reflect an approximate
17 percentage point improvement in gross margin percentage for our semiconductor
products, for the three months ended March 31, 2007 as compared to the same
period in 2006. Actual product gross margin percentages for the three months
ended March 31, 2007 and March 31, 2006 were 44% and 27% respectively. This
increase reflects the higher average selling prices described above, reduced
costs of the 1 megabit devices and higher unit shipments of 1 megabit devices.
Research and Development
Continued investments in new product development are required for us to
remain competitive in the markets we serve and to grow our revenues. In 2007,
our research and development department continued its efforts on the final
development of our new product family in conjunction with Cypress Semiconductor.
This new product family will be based on Cypress' 0.13-micron "S8" process and
will include memory densities up to and beyond 4-megabits. In April 2007, we
announced the tape out for the initial 4 megabit device.
15
SIMTEK CORPORATION
Total research and development expenses were $1,613,000 for the three
months ended March 31, 2007, an increase of $68,000 as compared to $1,545,000
for the same period in 2006. The increase for the three month period was
primarily related to an increase of $355,000 in payroll related expenses and
$123,000 for additional design software and tools, principally for the
engineering staff in Dresden Germany. These increases were partially offset by a
decrease of $314,000 related to the development milestones Cypress Semiconductor
that were incurred in the 2005 period for which there was no comparable charge
in the 2007 period.
Administration
Total administration expenses were $1,109,000 for the three months ended
March 31, 2007 as compared to $699,000 for the same period in 2006. The $410,000
increase was due primarily to increases in payroll and payroll related costs of
$181,000, contract services of $37,000, expense related to employee and director
stock compensation of $123,000 and expenses related to our NASDAQ listing of
$45,000. The increase in payroll and payroll overhead costs were due to
additional headcount. The increase in contract services is due to increased
investor relations and corporate governance activities.
Sales and Marketing
Total sales and marketing expenses were $1,152,000 for the three months
ended March 31, 2007 as compared to $944,000 for the same period in 2006. The
$208,000 increase was due primarily to an increase in payroll and payroll
overhead costs of $153,000, increased expense related to employee stock
compensation of $10,000 and increased travel expenses of $20,000. The increase
in payroll and payroll overhead costs were due to changes in sales and marketing
personnel as well as higher sales incentives.
Net Loss
We recorded a net loss of $490,000 and $901,000 for the three months ended
March 31, 2007 and 2006, respectively. The decrease of $411,000 for the
three-month period reflects the higher revenue, improved gross margins and
expense items discussed above.
Liquidity and Capital Resources
As of March 31, 2007, we had a net working capital of $12,151,000 as
compared to a net working capital of $11,828,000 as of December 31, 2006.
Cash flows used in operating activities for the three months ended March
31, 2007 were $1,574,000 compared to $1,580,000 in the same period in 2006.
While the cash flows used in operating activities is similar for the two
periods, the details are significantly different. The following table shows the
components of each item in operating activities (amounts in thousands):
2007 2006
---- ----
Net loss $ (490) $ (901)
Depreciation and amortization 176 115
Expense related to stock compensation 279 119
Amortization of non-competition agreement 446 451
Net change in allowance accounts 392 353
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 322 (1,387)
Inventory (1,635) (943)
Prepaid expenses and other (155) 567
Increase (decrease) in:
Accounts payable 170 224
Accrued expenses (1,079) (178)
--------- ---------
Net cash used in operating activities $ (1,574) $ (1,580)
======== =========
16
SIMTEK CORPORATION
Excluding the effect of changes in assets and liabilities, cash generated
by operating activities was $802,000 in the 2007 period compared to $137,000 in
the 2006 period, which was used to support the increased working capital,
particularly the increase in inventory. The higher level of inventory is needed
to support our anticipated revenue growth. The decrease in accounts receivable
in the 2007 period is due to the seasonal difference in sales volume in the
first quarter of 2007 compared to the fourth quarter of 2006. The increase in
accounts receivable in the first quarter of 2006 of $1,387,000 was due to
increasing sales volume as well as the addition of sales related to the nvSRAM
business acquired from ZMD in December 2005.
Cash flows used in investing activities increased for the three months
ended March 31, 2007 by approximately $130,000 as compared to the same period in
2006, principally due to the purchase of a new ERP software system.
The decrease of $2,601,000 in cash flows provided by financing activities
was primarily due to the receipt of funds related to the sale of common stock
completed on December 30, 2005, for which some funds were received on January 3,
2006 and the value of the warrants issued to Cypress for the Development and
License Agreement in the 2006 period, for which there were no comparable items
in 2007.
Short-term liquidity.
Our unrestricted cash balance at March 31, 2007 was $2,876,000.
Our future liquidity will depend on continued revenue growth, continued
improvement in gross margins and control of operating expenses. We expect
revenues to continue to increase in 2007. In addition, gross margins are
expected to improve and we expect to be profitable for 2007. Investment in
research and development is also expected to increase in 2007. We believe that
the cash generated by operations plus the available credit under our current
credit facilities will be sufficient to fund our operations for the foreseeable
future. However, if we fail to meet our revenue targets or choose to accelerate
product development, it may be necessary for us to raise additional capital or
incur additional debt.
Long-term liquidity.
We continue to evaluate our long-term liquidity. Our growth plans may
require additional funding from outside sources. While we have no firm plans, we
are in ongoing discussions with investment banking organizations and potential
investors and lenders to ensure access to funds as required.
17
SIMTEK CORPORATION
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in
financial and commodity market prices and rates. We are exposed to market risk
in the areas of changes in United States interest rates and changes in foreign
currency exchange rates as measured against the United States dollar. These
exposures are directly related to our normal operating activities. We currently
have no derivative financial instruments.
Interest payable on our convertible debentures is fixed at 7.5% over the
term of the debentures. As such, changes in interest rates should not affect
future expenses or cash flows.
Interest payable on our revolving line of credit entered into with Wells
Fargo is a fixed amount of the face value of eligible receivables they purchase
from us. As such, changes in interest rates should not affect future expenses or
cash flows.
We manage interest income by investing our excess cash in cash equivalents
bearing variable interest rates, which are tied to various market indices. We do
not believe that near-term changes in interest rates will result in a material
effect on future earnings, fair values or cash flows.
We do not speculate in the foreign exchange market and do not manage
exposures that arise in the normal course of business related to fluctuations in
foreign currency exchange rates by entering into offsetting positions through
the use of foreign exchange forward contracts.
Average selling prices of our products have not increased significantly as
a result of inflation during the past several years, primarily due to intense
competition within the semiconductor industry. The effect of inflation on our
costs of production has been minimized through improvements in production
efficiencies. We anticipate that these factors will continue to minimize the
effects of any foreseeable inflation and other price pressures within the
industry and markets in which we participate.
18
SIMTEK CORPORATION
ITEM 4 CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Harold Blomquist, who serves as the Company's chief executive officer, and Brian
Alleman, who serves as the Company's chief financial officer, after evaluating
the effectiveness of the Company's disclosure controls and procedures as of the
end of the period covered by this quarterly report (the "Evaluation Date")
concluded that as of the Evaluation Date, the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported as specified in the SEC's rules and
forms and to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is accumulated and
communicated to our management to allow timely decisions regarding required
disclosure.
(b) Changes in internal control over financial reporting.
There were no changes in the Company's internal control over financial reporting
during the three months ended March 31, 2007, that have materially affected, or
are reasonably likely to materially affect, internal control over financial
reporting.
19
SIMTEK CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 1A. Risk Factors - None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of Principal Executive Officer
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 of Principal Financial Officer
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 of Principal Executive Officer
32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 of Principal Financial Officer
20
SIMTEK CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMTEK CORPORATION
(Registrant)
May 15, 2007 By: /s/Harold Blomquist
-------------------------------------
HAROLD BLOMQUIST
Chief Executive Officer and President
May 15, 2007 By: /s/Brian Alleman
-------------------------------------
BRIAN ALLEMAN
Chief Financial Officer
21
Exhibit 31.1
CERTIFICATIONS
I, Harold Blomquist, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Simtek Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 15, 2007
/s/Harold Blomquist
-------------------------------------
Harold Blomquist
Chief Executive Officer and President
Exhibit 31.2
CERTIFICATIONS
I, Brian Alleman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Simtek Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: May 15, 2007
/s/Brian Alleman
--------------------------------
Brian Alleman
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Harold Blomquist, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of Simtek Corporation on Form 10-Q for the quarterly period
ended March 31, 2007 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of Simtek Corporation.
/s/Harold Blomquist
-------------------------------------
Harold Blomquist
Chief Executive Officer and President
May 15, 2007
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Alleman, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Simtek Corporation on Form 10-Q for the quarterly period ended March
31, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form 10-Q
fairly presents, in all material respects, the financial condition and results
of operations of Simtek Corporation.
/s/Brian Alleman
-------------------------------------
Brian Alleman
Chief Financial Officer
May 15, 2007