Proxy Statement (definitive) (def 14a)
20 Juin 2023 - 10:19PM
Edgar (US Regulatory)
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant ☑
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)) |
| ☑ |
Definitive Proxy Statement |
| ☐ |
Definitive Additional Materials |
| ☐ |
Soliciting Material under § 240.14a-12 |
NVE 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 all boxes that apply): |
| ☑ |
No fee required. |
| |
|
| ☐ |
Fee paid previously with preliminary materials. |
| |
|
| ☐ |
Fee computed on table in exhibit required by Item
25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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11409
Valley View Road
Eden Prairie, MN 55344-3617
www.nve.com
|
June 19, 2023
Fellow Shareholders:
We cordially invite you to attend our 2023 Annual Meeting of Shareholders. The
meeting will be held at the SpringHill Suites by Marriott, 11552 Leona Road,
Eden Prairie, Minnesota, 55344, on Thursday, August 3, 2023, at 3:30 p.m.
Central Daylight Time.
The items of business are described in our Proxy Statement. The Proxy Statement
and other materials are available from www.nve.com/AnnualReports, or by using
the appropriate QR Code below.
Thank you for your support of NVE.
|
Sincerely, |
 |
Daniel A. Baker
President and CEO |
 |
 |
 |
| www.nve.com/investorEvents |
www.nve.com/AnnualReports |
www.YouTube.com/NveCorporation |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2023 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 3, 2023:
1) The Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders,
2) Shareholder Letter, and 3) Annual Report on Form
10-K for the year ended March 31, 2023 are available at www.nve.com/AnnualReports. |
PROXY
STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, AUGUST 3, 2023
TABLE OF CONTENTS
GENERAL
INFORMATION
VOTING INFORMATION
VOTING BEFORE THE MEETING
VOTING DURING THE MEETING
EQUITY COMPENSATION PLAN INFORMATION
SECURITY OWNERSHIP
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
FINANCIAL STATEMENTS
PROPOSAL 1. ELECTION OF BOARD OF DIRECTORS
CORPORATE GOVERNANCE
PROPOSAL 2. ADVISORY RESOLUTION REGARDING NAMED EXECUTIVE
OFFICER COMPENSATION
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION
PROPOSAL 3. FREQUENCY OF SHAREHOLDER VOTES ON EXECUTIVE COMPENSATION
PROPOSAL 4. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDIT COMMITTEE DISCLOSURE
Table of Contents
|
11409
Valley View Road
Eden Prairie, MN 55344-3617
www.nve.com
|
PROXY
STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, AUGUST 3, 2023
GENERAL INFORMATION
This
Proxy Statement is furnished to shareholders of NVE Corporation, a Minnesota corporation
(“NVE” or the “Company”), in connection with the solicitation
of proxies by our Board of Directors for use at our Annual Meeting of shareholders
to be held Thursday, August 3, 2023, at 3:30 p.m. Central Daylight Time at
the SpringHill Suites by Marriott, 11552 Leona Road, Eden Prairie, Minnesota,
55344, and at any adjournment or postponements of the meeting (the “2023
Annual Meeting”), for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders. This Proxy Statement and the accompanying form
of Proxy were first mailed or made accessible to our shareholders on the Internet
on or about June 20, 2023.
Admission and Voting
Proof of ownership (such as a recent brokerage statement
or letter from your broker) and a form of photo identification are required for
admission to the Annual Meeting. To vote in person, if you are a shareholder of
record, you must bring a proxy from us with a label indicating your shareholder
number and the number of shares held. If you are a shareholder through a broker
or bank, the proxy should be a form called a “Legal Proxy” that you
can request through your broker or bank.
“Householding” of Documents
We are sending only one Letter to Shareholders,
Annual Report on Form 10-K, Proxy Statement,
and Notice of Internet Availability of Proxy Materials to eligible shareholders
who share a single address unless we received instructions to the contrary from
any shareholder at that address. This practice, known as “householding,”
is designed to reduce printing and postage costs. If registered shareholders residing
at addresses with other registered shareholders wish to receive separate annual
reports, proxy statements, or Notices of Internet Availability of Proxy Materials
in the future, they may contact Investor Relations at telephone
number 952-829-9217, or by mail to the address at the top of this page. You can
also request delivery of single copies of our documents if you are receiving multiple
copies.
Other Matters and Proposals of Shareholders
Our Board is not aware that any matter other than
those described in this Proxy Statement will be presented for action at the 2023
Annual Meeting. If, however, other matters do properly come before the 2023 Annual
Meeting, the person named in our vote form intends to vote the proxied shares
in accordance with their best judgment on those matters. If any matters properly
come before the shareholders at our 2023 Annual Meeting, but we did not receive
notice of it prior to May 8, 2023, the persons named in our vote form for
the 2023 Annual Meeting will have the discretion to vote the proxied shares on
such matters in accordance with their best judgment.
Proposals of shareholders intended to be presented
at the 2023 Annual Meeting must have been received at our executive offices in
Eden Prairie, Minnesota, no later than February 20, 2023, for inclusion in
our proxy statement and proxy relating to that annual meeting. Proposals must
be in accordance with the provisions of Rule
14a-8 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934. We suggest submitting proposals by certified mail with return
receipt requested. On receiving any such proposal, we will determine whether to
include it in our proxy statement and proxy in accordance with the regulations
governing the solicitation of proxies. Shareholders who intended to present a
proposal at the 2023 Annual Meeting without including such proposal in our proxy
statement must have provided us with notice of such proposal no later than May 8,
2023. We received no such notifications, and we reserve the right to reject, rule
out of order, or take other appropriate action with respect to any proposal that
does not comply with these and other applicable requirements.
Table of Contents
Only
shareholders of record at the close of business on June 9, 2023, are entitled
to execute proxies or to vote at the 2023 Annual Meeting. As of that date, there
were outstanding 4,833,401 shares of our common stock, $0.01 par value per share
(“Common Stock”). Each holder of Common Stock is entitled to one vote
for each share of Common Stock held with respect to the matters mentioned in this
Proxy Statement and any other matters that may properly come before the 2023 Annual
Meeting. A majority of the outstanding shares of Common Stock represented by proxy
or by telephone and entitled to vote is required to approve Proposal 1. If
there is not a quorum at the 2023 Annual Meeting, our Bylaws specify that each
director shall hold office for the term for which he is elected and until his
successor shall be elected and qualified. The affirmative vote of a majority of
the voting power is required to approve Proposals 2 and 4. For Proposal 3,
the alternative with the most votes in will be considered approved. Proxies indicating
abstention from a vote and broker non-votes will be counted toward determining
whether a quorum is present. Broker non-votes will not be counted toward determining
whether a proposal has been approved.
Solicitation and Revocability of Proxies
We will pay the costs and expenses of solicitation
of proxies. In addition to the use of the mails, our directors, officers, and
regular employees may solicit proxies personally or by telephone, but these people
will not be specifically compensated for those services. Proxies are solicited
on behalf of the Board of Directors. Any shareholder giving a proxy in such form
may revoke it either by submitting a new vote form or by completing a ballot at
the meeting at any time before it is exercised. Such proxies, if received in time
for voting and not revoked, will be voted at the 2023 Annual Meeting in accordance
with the specification indicated thereon. If no specification is indicated on
a proxy, such proxy will be voted in favor of each proposal described in this
proxy statement. Persons who hold shares through a broker or other intermediary
should consult that party for the procedures to be used for revoking a vote.
VOTING
BEFORE THE MEETING
Most of our shareholders vote before the
Annual Meeting. If you are a shareholder through a broker or bank, you may vote
your shares by mail, the Internet, or telephone through August 3, 2023, the
day before the meeting. If you are a shareholder of record, you may vote your
shares by mail only. If at the close of business on June 9, 2023, your shares
were registered directly in your name with our transfer agent, Continental Stock
Transfer and Trust Company, then you are a shareholder of record.
Voting by Mail
To vote by mail, mark your selections on the vote
form, date and sign your name exactly as it appears on the form, and mail the
form in the postage-paid envelope provided. We must receive your proxy by August 2,
2023, for your vote to count.
Voting by Internet or Telephone
If you are a shareholder through a broker or bank,
you may vote or revoke your vote via the Internet or telephone by following the
instructions in the Notice Regarding the Availability of Proxy Materials. Internet
and telephone voting is available 24 hours a day until 11:59 p.m., Eastern
Daylight Time, on August 2, 2023.
Electronic Enrollment
If you are a shareholder through a broker or bank,
you can enroll via www.proxyvote.com to receive future meeting notices via e-Delivery.
VOTING
DURING THE MEETING
To
vote during the meeting, if you are a shareholder of record, you must bring a
proxy from us with a label indicating your shareholder number and number of shares
held. If you are a shareholder through a broker or bank, the proxy should be a
form called a “Legal Proxy” that you can request through your broker
or bank.
EQUITY COMPENSATION PLAN INFORMATION
We
have no securities to be issued under equity compensation plans not approved by
our shareholders. Our equity compensation plans do not allow cash buyouts of underwater
options. The following table summarizes Common Stock that may be issued as of
March 31, 2023, on the exercise of options under our 2000 Stock Option Plan,
as amended:
| |
|
(a) |
|
(b) |
|
(c) |
Number
of Securities
to be Issued Upon
Exercise of
Outstanding Options |
Weighted-Average
Exercise Price of
Outstanding
Options |
Number
of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Column (a)) |
Common Stock
that may
be issued as of March 31, 2023 |
|
34,500 |
|
$66.26 |
|
120,730 |
Table of Contents
The following table shows the number of our
shares of Common Stock beneficially owned as of June 9, 2023, by (i) each
person or group known by us to beneficially own more than five percent of our
outstanding Common Stock, (ii) each director, (iii) each named executive
officer set forth in the summary compensation table, and (iv) all of the
directors, director nominees, and executive officers as a group.
| |
Name of Beneficial Owner |
Number of Shares
Beneficially Owned(1) |
Percentage of Common
Stock Outstanding |
| |
|
Royce & Associates, LP
745 Fifth Avenue, New York, NY 10151 |
517,972
|
(2) |
10.7 |
% |
| |
| |
|
Kayne Anderson Rudnick Investment Management, LLC
1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067 |
466,555 |
(3) |
9.7 |
% |
| |
|
Daniel A. Baker |
68,686 |
(4) |
1.4 |
% |
|
Peter G. Eames |
- |
|
|
* |
| |
Daniel Nelson(5) |
- |
|
|
* |
|
Joseph R. Schmitz(6) |
- |
|
|
* |
|
Patricia M. Hollister |
9,040
|
(7) |
|
* |
|
Terrence W. Glarner |
7,200 |
(8) |
|
* |
|
Richard W. Kramp |
7,575 |
(9) |
|
* |
|
James W. Bracke |
2,500 |
(10) |
|
* |
|
All directors and named executive officers as a group (eight persons) |
95,001 |
|
2.0 |
% |
*Less than 1%
|
| (1) |
Includes shares held in trust, by broker, bank or nominee or other indirect
means and over which the individual or member of the group has sole voting or
shared voting and/or investment power. Unless otherwise noted, each individual
or member of the group has sole voting and investment power with respect to the
shares shown in the table above.
|
| (2) |
Based on information contained in Schedule 13F filed with the SEC on
May 4, 2023. According to a Schedule 13G filed with the SEC on January 24,
2023, various Accounts managed by Royce & Associates, LP, have the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of shares of the issuer, and the interest of one account, Royce
Special Equity Fund, amounted to 371,500 shares.
|
| (3) |
Based on information contained in Schedule 13F filed with the SEC on
May 16, 2023. According to that Schedule, Kayne Anderson Rudnick Investment
Management, LLC (“KAR”) had no voting authority for 24,537 shares.
According to a Schedule 13G filed with the SEC on February 14, 2023,
as of December 31, 2022, KAR beneficially owned 448,347 shares; Virtus
Investment Advisers, Inc., 332,350 shares; and Virtus Equity Trust on behalf
of Virtus KAR Small Cap Growth Fund, 273,147 shares. That filing also reported
shared voting and investment powers of KAR, 332,350 shares; Virtus Investment
Advisers, Inc., 332,350 shares; and Virtus Equity Trust on behalf of Virtus
KAR Small Cap Growth Fund, 273,147 shares.
|
| (4) |
Includes 7,500 shares issuable on the exercise of options that are currently
exercisable.
|
| (5) |
Mr. Nelson was appointed Principal Financial Officer effective May 8, 2023.
|
| (6) |
Mr. Schmitz was Chief Financial Officer until May 5, 2023.
|
| (7) |
Includes 8,000 shares issuable on the exercise of options that are currently
exercisable.
|
| (8) |
Includes 6,000 shares issuable on the exercise of options that are currently
exercisable.
|
| (9) |
Includes 7,000 shares issuable on the exercise of options that are currently
exercisable.
|
| (10) |
Includes 2,000 shares issuable on the exercise of options that are currently
exercisable. |
Table
of Contents
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Our Audit Committee reviews and approves
our proxy statement and the information it contains.
In our past two fiscal years (fiscal years referred
to in this document end March 31), there has not been any transaction, or
is there any currently proposed transaction, in which we were or are to be a participant
and in which any related person had or will have a direct or indirect material
interest. There have never been any related-party transactions involving our CEO.
Review and Approval of Related Party Transactions
The audit committee is responsible for reviewing
and approving (with the concurrence of a majority of the disinterested members
of the Board of Directors) any related party and affiliated party transactions
as provided in the Amended and Restated Audit Committee Charter adopted by the
Board of Directors of NVE Corporation on May 15, 2008. In addition, NASDAQ
Listing Rule 5630(a) provides that the
audit committee must review all related party transactions for conflicts of interest.
In accordance with policies adopted by the audit committee, the following transactions
must be presented to the audit committee for its review and approval:
| 1. |
Any transaction in which the Company was or is to be a participant
(within the meaning of Securities and Exchange Commission (SEC) Regulation
S-K, Item 404(a)), and a related
person (as defined in Regulation S-K
Item 404(a)) has or will have a direct or indirect material interest (within the
meaning of Regulation S-K Item
404(a)).
|
| 2. |
Any contract or other transaction between the Company and one or more directors
of the Company, or between the Company and an organization in or of which one
or more directors of the Company are directors, officers, or legal representatives
or have a material financial interest within the meaning of Minnesota Statutes
Section 302A.255. |
In addition to the Company’s Board of Directors
complying with the requirements of Minnesota Statutes, Section
302A.255 with respect to any proposed transaction with a potential director’s
conflict of interest, all proposed transactions covered by the policy must be
approved in advance by a majority of the members of the audit committee. If a
proposed transaction covered by the policy involves a member of the audit committee,
such member may not participate in the audit committee’s deliberations concerning,
or vote on, such proposed transaction. Prior to approving any proposed transaction
covered by the policy, the following information concerning the proposed transaction
will be fully disclosed to the audit committee:
| 1. |
The names of all parties and participants involved in the proposed transaction,
including the relationship of all such parties and participants to the Company.
|
| 2. |
The basis on which the related person is deemed a related person within the
meaning of Regulation S-K Item
404(a), if applicable.
|
| 3. |
The material facts and terms of the proposed transaction.
|
| 4. |
The material facts as to the interest of the related person in the proposed
transaction.
|
| 5. |
Any other information the audit committee requests concerning the proposed
transaction. |
The audit committee may require that all or any
part of such information be provided in writing. The audit committee may approve
only those transactions covered by the policy that a majority of the members of
the audit committee in good faith determine to be (i) fair and reasonable
to the Company, (ii) on terms no less favorable than could be obtained by
the Company if the proposed transaction did not involve a director or the related
person, and (iii) in the best interests of the Company.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of
1934, as amended, requires our directors and executive officers, and persons who
own more than 10% of our Common Stock, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock. Executive officers,
directors, and greater than 10% shareholders are required by SEC regulations to
furnish us with copies of all Section 16(a)
reports they file. To our knowledge, based solely on a review of the copies of
such reports furnished to us during, or with respect to, the fiscal year ended
March 31, 2023, all reports were filed with the SEC on a timely basis.
Our
financial statements for the fiscal year ended March 31, 2023, are included in
our Annual Report on Form 10-K for the
fiscal year ended March 31, 2023, which was filed with the SEC on May 3,
2023, and accompanies this Notice of Annual Meeting and Proxy Statement. No portion
of the Annual Report is incorporated into this proxy statement or is to be considered
proxy-soliciting material. Our Annual Report on Form
10-K, this Proxy Statement, and our Shareholder Letter are available at
www.nve.com/AnnualReports. On written request, we will provide a copy of our
Annual Report on Form 10-K without charge
to anyone receiving a copy of this proxy statement. Such written requests should
be addressed to Investor Relations at the address on the cover page of this Proxy
Statement.
Table
of Contents
PROPOSAL 1. ELECTION OF BOARD OF DIRECTORS
There are five director nominees, all of
whom have been nominated by the Board. All directors are to be elected at the
Annual Meeting to serve until the 2024 Annual Meeting of Shareholders. The Board
has no reason to believe that any of the nominees will be unable to serve as a
director. The individuals named as proxies intend to vote for the nominees listed
in this proxy statement. If any nominee should be unable to serve as a director,
the individuals named as proxies intend to vote for the election of such person
or persons as the Board may recommend. Our director nominees’ skills, experience,
and demographics are summarized below:
|
|
Board Skills, Experience, and Demographics (as of June 9,
2023)
|
| |
|
Terrence W.
Glarner
|
Daniel A.
Baker
|
Patricia M.
Hollister
|
Richard W.
Kramp
|
James W.
Bracke
|
| Skills
and Experience |
| 1. |
Experience
as a director at other publicly-traded companies |
•
|
•
|
|
•
|
•
|
| 2. |
Senior executive experience (e.g., CEO or CFO)
at a publicly traded company |
|
•
|
•
|
•
|
•
|
| 3. |
Experience
in electronics or semiconductor
industries |
•
|
•
|
•
|
•
|
•
|
| 4. |
Experience in the medical device industry |
•
|
•
|
|
•
|
•
|
| 5. |
Experience
with corporate development, mergers,
and acquisitions |
•
|
•
|
•
|
•
|
•
|
| 6. |
Business-to-business
sales management
experience |
|
•
|
|
•
|
•
|
| 7. |
Financial
expert |
•
|
•
|
•
|
•
|
•
|
| 8. |
Cybersecurity experience |
•
|
•
|
•
|
•
|
•
|
| 9. |
Experience
managing the effects and risks of
climate change |
•
|
•
|
•
|
•
|
•
|
| 10. |
Experience
managing human capital
and enhancing diversity, equity, and inclusion |
•
|
•
|
•
|
•
|
•
|
| 11. |
Experience managing employee health and safety |
•
|
•
|
•
|
•
|
•
|
| 12. |
Experience
aligning compensation with strategy
and performance |
•
|
•
|
•
|
•
|
•
|
| 13. |
Experience
with succession planning and
execution |
•
|
•
|
•
|
•
|
•
|
| 14. |
Independent
of Management |
•
|
|
•
|
•
|
•
|
Background |
| |
NVE
Board tenure |
24 years
|
22 years
|
19 years
|
9 years
|
2 years
|
| |
Age |
80
|
65
|
63
|
77
|
76
|
| |
Educational
background |
English;
Law
|
Engineering;
Business
|
Accounting
|
Engineering
|
Microbiology
|
| |
Demographic
background |
White
|
White
|
White
|
White
|
White
|
| |
Gender
identity |
Male
|
Male
|
Female
|
Male
|
Male
|
We believe items 1, 2, 7, 8, 9, 10, 11, 13,
and 14 are important for good corporate governance and our Board’s role in
risk oversight. Items 8, 9, 10, and 11 relate to emerging risks for public
companies. Item 3, experience in the electronics or semiconductor industries,
is desirable because we market and sell to electronics industries and our sales
strategy relies heavily on semiconductor-industry distribution channels. Item 4,
experience in the medical device industry, is desirable because medical device
sensors are an important market for us. Item 5, experience with corporate
development, mergers, and acquisitions is desirable since such transactions could
be part of our growth strategy. Item 6, business-to-business sales management
experience, helps our Board review strategies to overcome inherent challenges
small semiconductor companies face.
Table
of Contents
In accordance with Nasdaq Rule 5606(a), each director’s
voluntary self-identified characteristics are as follows:
|
Board Diversity Matrix (as of June 9, 2023)
|
| Total Number of Directors |
5
|
|
Female
|
Male
|
Non-
Binary
|
Did Not
Disclose Gender
|
| Part
I: Gender Identity |
| Directors |
1
|
4
|
-
|
-
|
| Part
II: Demographic Background |
|
| African American or Black |
-
|
-
|
-
|
-
|
| Alaskan
Native or Native American |
-
|
-
|
-
|
-
|
| Asian |
-
|
-
|
-
|
-
|
| Hispanic
or Latinx |
-
|
-
|
-
|
-
|
| Native
Hawaiian or Pacific Islander |
-
|
-
|
-
|
-
|
White
|
1
|
4
|
-
|
-
|
Two
or More Races or Ethnicities
|
-
|
-
|
-
|
-
|
| LGBTQ+ |
-
|
| Did not Disclose Demographic Background
|
-
|
Table
of Contents
Directors’ biographical information is as follows:
Terrence W. Glarner, age 80,
has been a director since 1999 and Chairman of the Board since January 2001.
Since 1993, Mr. Glarner has been President of West Concord Ventures, Inc.,
a venture capital company. He has served as a director of several other publicly
traded companies in the past. He was also a director of Bremer Financial Corp.,
a privately held company, until retiring in 2018. Mr. Glarner has a B.A.
in English from the University of St. Thomas, a J.D. from the University
of Minnesota School of Law, and is a Chartered Financial Analyst. Mr. Glarner’s
extensive experience as a director of publicly traded companies, his experience
as a director of semiconductor industry companies, his financial expertise, and
his legal training qualify him to serve as Chairman of the Board.
Daniel A. Baker, age 65, has been
a director and NVE’s President and CEO since 2001. Dr. Baker has more
than 45 years of executive and engineering experience. From 1993 until joining
NVE, he was President and CEO of Printware, Inc., which manufactures and
markets high-speed imaging systems. Prior to being named President and CEO, he
was Printware’s Vice President of Sales, Marketing, and Product Development.
He was a Printware director from 1993 to 2000. Printware was publicly traded beginning
with its initial public stock offering in 1996 through Dr. Baker’s tenure.
He also served as Director of Electronic Development for Minntech Corporation
(now Cantel Medical Corp., a STERIS company) and Director of Engineering for Percom
Data Corporation. Dr. Baker holds Ph.D. in biomedical engineering and MBA
degrees from the University of Minnesota, and a B.S. in biomedical engineering
from Case Western Reserve University. Dr. Baker’s more than 35 years
of experience as an executive in publicly-traded technology companies, his experience
managing product development and sales organizations, his understanding of our
business gained through his role as our President and CEO, and his educational
background in engineering and business qualify him to serve as a director.
Patricia M. Hollister, age 63, has
been a director since 2004. She was Director of Finance for TEL FSI, Inc.
(now TEL Manufacturing and Engineering of America, Inc., or “TMEA”)
until retiring in 2016. TMEA designs, manufactures, markets, and supports equipment
used in the fabrication of microelectronics. Ms. Hollister served as chief
financial officer of FSI International Inc. (“FSI”) from 1998 until
it was acquired by TEL in 2012. FSI was publicly traded until it was acquired.
Prior to joining FSI in 1995, Ms. Hollister was employed by KPMG LLP,
where she served for more than 12 years on various audit and consulting engagements,
most recently as a Senior Manager. Ms. Hollister holds a BS in Accounting
from St. Cloud State University. Her experience in the semiconductor industry,
her experience as an executive officer of a publicly traded company, her experience
with audits of publicly traded companies, and her educational background in accounting
qualify her to serve as a director and Audit Committee chair.
Richard W. Kramp, age 77, has been
a director since 2014. Mr. Kramp was the CEO and a director of Synovis Life
Technologies, Inc., a diversified medical device company, from January 2007 to
February 2012. Synovis was publicly traded until it was purchased by Baxter International,
Inc. in February 2012. Mr. Kramp served as President of Synovis from June
2006 to January 2007, and from August 2004 to May 2006, he served as President
and Chief Operating Officer of the former interventional business unit of Synovis.
Prior to joining Synovis, Mr. Kramp served as the President and Chief Operating
Officer of Medical CV, Inc., a medical device company, and before that, as
its Vice President of New Product Development. From 1988 to 2003, Mr. Kramp
served as President and Chief Operating Officer, and then President and CEO, as
well as a director of ATS Medical, Inc. (now part of Medtronic, Inc.).
Mr. Kramp served as National Sales Manager, then as Director of Sales and Marketing,
and then as Vice President of Sales and Marketing for St. Jude Medical, Inc.
(now part of Abbott Laboratories) from 1978 to 1988. Prior to that, Mr. Kramp
held engineering positions with Cardiac Pacemakers, Inc. (now part of Boston
Scientific, Inc.). He was also a director of Vascular Solutions, Inc., a
publicly traded medical device company, from May 2013 until its acquisition by
Teleflex Corporation in February 2017. He previously served on the board of Rochester
Medical Corporation when it was a publicly held medical device company. Mr. Kramp
holds a Bachelor’s Degree in Electrical Engineering from Marquette University.
Mr. Kramp’s extensive experience in the medical device industry, his director,
executive, sales, marketing, and engineering experience, and his engineering education
qualify him to serve as a director.
James W. Bracke, age 76, has been
a director since August 2021. Dr. Bracke has been President of Boulder Creek
Consulting, LLC, a business and technology consulting firm, since 2004. He
was Vice President of Oral Health at EPIEN Medical Inc., a privately-held
medical device company, from April 2014 to September 2018. Dr. Bracke was
President and CEO of Lifecore Biomedical, Inc., a publicly-held medical device
manufacturer, from 1983 to 2004. He has been a director of Autoscope Technologies
Corporation (formerly Image Sensing Systems, Inc.) since 2009. Autoscope
is a publically-held corporation dedicated to helping improve safety and efficiency
for cities and highways by developing and delivering above-ground detection technology,
applications, and solutions. Dr. Bracke is a member of Autoscope’s Audit
Committee, Nominating and Corporate Governance Committee, and Compensation Committee.
He was Chairman of the Image Sensing Systems Board from September 2011 until June
2016. Dr. Bracke received a Ph.D. in microbiology from the University of
Iowa College of Medicine. Dr. Bracke’s management, technical, medical
device, and public company experience and his medical education qualify him to
serve as a director.
The Board unanimously recommends a vote FOR each
of the director-nominees.
Table
of Contents
Corporate Governance Guidelines
We operate under written Corporate Governance Guidelines,
which are available through the “Investors” section of our Website (www.nve.com).
Code of Ethics
We have adopted a Code of Business Conduct and Ethics
that applies to all of our employees and directors, including our principal executive
officer and principal financial officer. A copy of our Code of Business Conduct
and Ethics is available from the “Investors” section of our Website
(www.nve.com).
We intend to post on our Website any amendment to,
or waiver from, a provision of our Code of Business Conduct and Ethics that applies
to our principal executive officer, principal financial officer, and other employees
performing similar functions within four business days following the date of such
amendment or waiver.
Whistleblower Protection
In accordance with Section 806 of the Sarbanes-Oxley
Act of 2002, we provide a means for the confidential, anonymous submission of
concerns about accounting or auditing matters to the Audit Committee, and our
policies protect “whistleblowers.”
Insider Trading Policies
We have had formal insider trading policies and
procedures since 2001. These policies and procedures govern the purchase, sale,
and other dispositions of our securities by directors, officers, and employees,
and are designed to promote compliance with insider trading laws, rules, and regulations,
and NASDAQ listing standards.
Prohibition of Lobbying Activities
Our Code of Ethics prohibits legislative or regulatory
lobbying on the Company’s behalf as such lobbying is defined by jurisdictional
governments. Our Code of Ethics requires compliance with all applicable rules
and laws relating to Procurement Lobbying. Our Whistleblower System provides a
mechanism for anonymously reporting lobbying concerns, and our policy protects
whistleblowers.
Board Leadership Structure
Our Board currently consists of five directors,
including our independent Chairman of the Board, Mr. Glarner, and our CEO,
Dr. Baker. We have had separate Chairman and CEO roles since 2001. We currently
believe that separating these roles enhances the accountability of the CEO to
the board and strengthens the board’s independence from management. According
to our bylaws, the CEO’s responsibilities include general active management
and presiding at meetings of the Board and of the shareholders. Our bylaws do
not specify the Chairman’s duties, but our practice has been for the Chairman
to provide Board oversight, approve board meeting schedules and agendas, preside
over independent director meetings, independently assess risks, provide input
on board structure, serve as a liaison between the CEO and independent directors,
and situationally represent the Board in communications with shareholders or other
stakeholders. The Audit Committee meets with our independent registered public
accounting firm without the CEO, CFO, or other company management present at least
quarterly. We currently believe that our relatively small Board with primarily
independent directors and an independent Chairman supports our Board’s oversight
of risk management and that such a smaller board can communicate better, be more
involved, and act more quickly than a large board.
Board Role in Risk Oversight
Our Board oversees management in identifying, prioritizing,
and assessing a range of financial, operational, cybersecurity, climate policy,
and business risks, and formulating plans to mitigate risks. Our Board considers
risks when considering plans and discussing management reports, and our Audit
Committee considers risks including those related to our internal controls over
financial reporting and risks related to our investments. Our practice has been
to retain outside advisors to assist Management with assessing our internal controls
over financial reporting and related risks. We evaluate short-, intermediate-,
and long-term risks. Immediate risks are addressed as required between regular
Board meetings. Intermediate-term risks are addressed at regular quarterly Board
meetings. Long-term risks are addressed at least annually. We reassess our risk
environment at least annually, and we identify significant emerging risks.
Board Independence
The Board has determined that each of our directors
and director candidates, except Dr. Baker, are independent as defined under
Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and NASDAQ Listing
Rule 5605(a)(2). In making this determination,
the Board has concluded that none of these members has a relationship that, in
the opinion of the Board, would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. Furthermore, each of our director
candidates has disclosed that they have no agreements or arrangements with any
person or entity other than the Company relating to compensation or other payment
in connection with their candidacy or service as a director (so-called “golden
leashes” as defined under NASDAQ Rule 5250(b)(3)).
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Overboarding
Our policy is that any director who is a Named Executive
Officer should not serve on more than one other board of a public company, and
Directors other than our NEOs should not serve on more than three boards of other
public companies in addition to our Board. All of our Directors comply with this
policy.
Board Refreshment
We value healthy board refreshment and a diversity
of experience on our Board, however, we have not imposed age or term limits for
directors because we believe it might interfere with retaining directions with
valuable skills. We have three mechanisms to encourage director refreshment:
1. Board compensation policies to encourage refreshment
by encouraging directors with a desire to serve rather than a desire to earn fees.
2. The preparation required for our Board meetings
discourages directors from continuing to serve if they cannot devote sufficient
time or energy to board duties.
3. Our Chairman and our CEO evaluate directors and
provide candid feedback to our directors, which we believe encourages director
refreshment.
CEO Succession Planning
At least annually, the Board reviews a formal succession
plan addressing the policies and principles for selecting a successor to the CEO
and other key employees, either in an emergency or in the ordinary course of business.
The succession plan includes an assessment of the experience, performance, skills,
and planned career paths for possible successors.
Meeting Attendance and Executive Sessions of Independent Directors
The Board met six times in fiscal 2023, and each
director attended at least 75% of the meetings of the Board and of the committees
on which they serve. As a matter of policy, the independent directors meet without
the CEO or other company management present at every regular board meeting.
Environmental, Social, and Governance (ESG)
NVE is committed to ensuring the safety, health,
and protection of people and the environment, and to high standards of corporate
governance and ethics. Visit www.nve.com/ESG for more information.
Climate Policies
Our Board oversees our climate-related policies
and Management reviews such policies with the Board at least annually. We have
disclosed a climate policy report aligned with the Task Force on Climate-Related
Financial Disclosures (TCFD) framework. Visit www.nve.com/ESG for more information.
Commitment to Diversity and Inclusion
Our goal is to promote diversity and inclusion in
our recruitment of directors, management, and other employees. Our Whistleblower
System provides a mechanism for anonymously reporting concerns about discrimination,
diversity, or inclusion. Our policies protect whistleblowers.
Cybersecurity
The Audit Committee oversees cybersecurity, and
Management briefs the Committee on cybersecurity and information security at least
annually. We operate under written cybersecurity policies and procedures, and
we use a risk-based approach to information security and periodically assess our
cybersecurity risks. We internally audit to information security standards. We
have information security training and compliance programs, develop and implement
actions to correct deficiencies and reduce or eliminate vulnerabilities, and have
formal cybersecurity contingency plans. New employees are required to complete
information security training, and all employees must complete information security
training annually. We have not experienced any information security breaches in
the last three years.
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Board Committees
The Board has three standing committees: the Audit,
Compensation, and Nominating/Corporate Governance Committees, each of which is
comprised solely of independent directors. The committees are governed by written
charters, which are available through the “Investors” section of our
Website (www.nve.com). The committees review and assess the adequacy of their
charters annually. This table summarizes committee memberships:
| |
Terrence W.
Glarner
|
Daniel A.
Baker
|
Patricia M.
Hollister
|
Richard W.
Kramp
|
James W.
Bracke
|
| Audit
Committee |
•
|
|
•
|
|
•
|
| Compensation
Committee |
•
|
|
•
|
•
|
|
| Nominating/Corporate Governance |
•
|
|
•
|
•
|
•
|
Audit Committee
The Audit Committee currently consists of three
independent directors: Ms. Hollister (Committee Chair), Mr. Glarner,
and Dr. Bracke. Our Board has determined that each member meets the criteria
of “audit committee financial experts” as that term is defined under
Regulation S-K Item 407 and that
they are financially sophisticated under NASDAQ Listing Rule
5605(c)(2)(A). All have cybersecurity experience. The Audit Committee met
five times in fiscal 2023. The primary responsibilities of the Audit Committee
are to appoint, compensate, and oversee our auditors. The Committee is also responsible
for cybersecurity. The Audit Committee was also involved in the selection of Boulay’s
lead engagement partner. The Report of the Audit Committee, including a description
of the functions of the Committee, is included in this Proxy Statement. The Audit
Committee charter is available on our website at http://www.nve.com/GovernanceLinks/auditcharter.
Compensation Committee
The Compensation Committee currently consists of
Mr. Glarner (Committee Chair), Ms. Hollister, and Mr. Kramp, and
met twice in fiscal 2023. Our Board has determined that each member or proposed
member of the Compensation Committee is “independent” as defined under
NASDAQ Listing Rule 5605(d)(2)(A). The
Compensation Committee charter prohibits members from accepting directly or indirectly
any consulting, advisory, or other compensatory fee from the Company. Compensatory
fees do not include fees received as a member of the Board or any board committee.
The Compensation Committee reviews and sets compensation guidelines for executive
officers and other senior management, and the composition and levels of participation
in incentive compensation and fringe benefits for all employees. The Compensation
Committee also oversees the administration of our 2000 Stock Option Plan, as amended.
The Compensation Committee charter is available on our website at http://www.nve.com/GovernanceLinks/compcharter.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee currently
consists of all our independent directors: Mr. Glarner (Committee Chair),
Ms. Hollister, Mr. Kramp, and Dr. Bracke. The Nominating/Corporate
Governance Committee met five times in fiscal 2023. The Committee’s functions
include the selection of candidates for our Board, selecting members of various
committees, and addressing corporate governance matters. The Nominating/Corporate
Governance Committee charter is available on our website at http://www.nve.com/GovernanceLinks/ngccharter.
Our process for identifying and evaluating candidates for nomination to the Board
starts with an evaluation of a candidate by the Nominating / Corporate Governance
Committee and CEO. Members of our Board or our CEO can forward candidates to the
Committee. The Nominating / Corporate Governance Committee recommends to the Board
the slate of directors to serve as management’s nominees for election by
the shareholders at the Annual Meeting. The Committee will also consider candidates
recommended by shareholders. We have also engaged third parties to assist in identifying
potential nominees, although none of our directors have been recruited through
fee-based agencies.
Audit Committee Report
In connection with the financial statements for
the fiscal year ended March 31, 2023, the Audit Committee has reviewed and
discussed the audited financial statements and the effectiveness of internal control
over financial reporting with management and Boulay. Boulay represented that its
presentations to the Audit Committee included the matters required to be discussed
with the independent registered public accounting firm by applicable Public Company
Accounting Oversight Board (PCAOB) rules regarding “Communication with Audit
Committees.” Boulay also provided the Audit Committee with the letter and
written disclosures required by Auditing Standard No. 16, Communications
with Audit Committees, and the Audit Committee discussed with Boulay the firm’s
independence. Based on these reviews and discussions, the Audit Committee recommended
to the Board that the Company’s audited financial statements be included
in our Annual Report on Form 10-K for
the year ended March 31, 2023 filed with the SEC. The Board approved this
inclusion.
AUDIT
COMMITTEE MEMBERS
| Patricia M. Hollister |
Terrence W. Glarner |
James W. Bracke |
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Director Qualifications
In evaluating candidates, the Board will require
that candidates possess, at a minimum, a desire to serve on the Company’s
Board, an ability to contribute to the effectiveness of the Board, and an understanding
of the function of the board of a public company. We will require that candidates
meet our Corporate Governance Guidelines, including overboarding limitations.
We will consider whether the candidate would contribute to the diversity of the
Board. While not required of any one candidate, the Board would consider favorably
semiconductor or medical device industry experience, commercial experience, and
prior experience serving on the management or boards of publicly traded companies.
In evaluating any candidate for director nominee, the Board will also evaluate
the contribution of the proposed nominee toward compliance with NASDAQ Stock Market
corporate governance requirements concerning board composition.
The Role of Diversity in Choosing Board Candidates
We consider the diversity of our Board and believe
that directors that contribute to gender, race, ethnicity, or cultural diversification
help make an effective Board. The director slate in this Proxy Statement includes
one Diverse nominee, Ms. Hollister, where “Diverse” is defined
under NASDAQ Listing Rule 5605(f)(1) to mean an individual who self-identifies
in one or more of the following categories: (i) Female, (ii) Underrepresented
Minority, or (iii) LGBTQ+. Ms. Hollister self-identifies as female.
Rule 5605(f)(7)(C) requires the Company to have, or explain why it does not have,
at least one Diverse director by August 7, 2023. Ms. Hollister, if reelected,
will meet this requirement. Ms. Hollister also serves in a board leadership
position as chair of our Audit Committee. Rule 5605(f)(7)(C) will require two
Diverse directors by August 6, 2026.
Shareholder Nominees
Shareholder proposals for nominations to the Board
should be submitted to the Nominating/Corporate Governance Committee at our offices,
11409 Valley View Road, Eden Prairie, Minnesota, 55344. To be considered
by the Board for nomination at the next succeeding annual meeting, nominations
must be delivered not less than 90 days nor more than 120 days prior
to the first anniversary of the mailing of the notice of the preceding year’s
annual meeting. Shareholders’ proposals must provide the following information
for each nominee: (i) the name, age, business address, and residence address
of the person; (ii) the principal occupation or employment of the person;
(iii) the number of shares of our stock owned by the person; (iv) the
written and acknowledged statement of the person that such person is willing to
serve as a director; and (v) any other information relating to the person
that would be required to be disclosed in a solicitation of proxies for election
of directors pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended, if the candidate had been nominated by or on behalf of the
Board.
Candidates recommended by shareholders will be considered
under the same standards as candidates that are identified by the Nominating/Corporate
Governance Committee. No shareholders submitted director nomination proposals
in connection with this year’s Annual Meeting.
Shareholder Communications With the Board
Shareholders and others who wish to communicate
with our Board as a whole or any individual director may write to them at our
offices, 11409 Valley View Road, Eden Prairie, Minnesota, 55344. We will
forward any such written communication to the Board, or if indicated, to a specified
individual member of the Board, unless the written communication is (i) a
personal or similar grievance, a shareholder proposal or related communication,
an abusive or inappropriate communication or a communication not related to the
responsibilities or duties of the Board, in which case we have the authority to
discard the communication or to take appropriate legal action regarding the communication;
or (ii) a request for information about the company, a stock-related matter
or any other matter that does not appear to require direct attention by the Board
or any individual director, in which case we will attempt to handle the inquiry
or request directly. All such communications will be kept confidential to the
extent possible.
Director Attendance at Annual Meetings
We do not have a formal policy regarding attendance
by members of the Board at our annual meetings of shareholders, but we encourage
our directors to attend. All of our directors attended our 2022 Annual Meeting.
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Director Compensation
Our non-employee directors receive cash compensation
of $2,500 per quarter, plus an additional $250 per quarter for the Chairman of
the Board of Directors and an additional $125 per quarter for the Audit Committee
Chair. Directors forfeit unpaid portions of cash compensation on termination,
retirement, disability, or death. In addition to the cash compensation, on each
reelection to the Board, each non-employee director is automatically granted an
immediately vested nonqualified option to purchase 1,000 shares. The
following table summarizes non-employee director compensation in the fiscal year
ended March 31, 2023:
| |
Name |
|
Fees Earned or
Paid in Cash ($) |
|
Stock
Awards ($) |
|
Option
Awards ($)(1) |
|
All Other
Compensation ($) |
|
Total ($) |
|
Terrence W. Glarner |
|
11,000 |
|
- |
|
8,204
|
|
- |
|
19,204 |
|
Patricia M. Hollister |
|
10,500 |
|
- |
|
8,204
|
|
- |
|
18,704 |
|
Richard W. Kramp |
|
10,000 |
|
- |
|
8,204
|
|
- |
|
18,204 |
| |
James W. Bracke |
|
10,000 |
|
- |
|
8,204
|
|
- |
|
18,204 |
| (1) |
Grant date fair values of option awards are determined using the Black-Scholes-Merton
option-pricing model with the assumptions discussed in Note 5 to the Financial
Statements in our Annual Report on Form 10-K
for the year ended March 31, 2023. As of March 31, 2023, the named directors
held options, all of which were exercisable, to purchase the following numbers
of shares: Mr. Glarner, 6,000; Ms. Hollister, 8,000; Mr. Kramp,
7,000; and Dr. Bracke, 2,000. |
Fees
earned or paid in cash for the fiscal year ended March 31, 2023, consisted
solely of quarterly retainers, the Chairman’s fee, and the Audit Committee
Chair’s fee. We do not provide perquisites to our Directors.
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PROPOSAL 2. ADVISORY RESOLUTION REGARDING
NAMED EXECUTIVE OFFICER COMPENSATION
At
the 2017 and 2011 Annual Meetings of Shareholders, our shareholders voted in favor
of an advisory vote regarding the compensation of our Named Executive Officers
(“NEOs”) every year. Following those advisory votes, our Board resolved
to hold annual say-on-pay votes, and shareholders have had the opportunity to
approve or not approve the compensation of our NEOs every year beginning in 2012.
Shareholders may vote for or against the following resolution (or by abstaining
with respect to the resolution):
| |
“RESOLVED, that the compensation paid to the company’s named executive
officers, as disclosed pursuant to Item 402 of Regulation
S-K, including the compensation tables, and narrative discussion is hereby
APPROVED.” |
|
The Board unanimously recommends a vote FOR approval
of named executive officer compensation as disclosed in this Proxy Statement.
Because the vote is advisory, it will not be binding
on the Board and will not overrule any decision by the Board or require the Board
to take any action. However, the Compensation Committee will take the vote into
account in future NEO compensation decisions.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
We
have three executive officers. Daniel A. Baker is our Chief Executive Officer,
Peter G. Eames is Vice President of Advanced Technology, and Daniel Nelson
is our Accounting Manager and Principal Financial Officer. Dr. Baker’s
biographical information is included under “Proposal 1. Election of
Board of Directors.” Biographical information for our other two executive
officers is as follows:
Peter G. Eames, age 47, was promoted
to Vice President of Advanced Technology from Director of Advanced Technology
in 2016. He has been an NVE employee in various capacities since joining the Company
in 2003 after completing his Ph.D. in experimental condensed matter physics from
the University of Minnesota.
Daniel Nelson, age 37, was appointed
Accounting Manager and Principal Financial Officer on May 8, 2023. He joined
NVE in September 2022 as Senior Accountant. From August 2021 until joining NVE,
he worked at RMH Tax & Business Advisors in Plymouth, Minn., and from May
2015 to July 2021 he was a senior accountant at Intelligere in Plymouth, Minn.
He earned bachelor’s and master’s degrees in accounting from the University
of Liberia and started his career at Baker Tilly in Liberia.
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COMPENSATION DISCUSSION AND ANALYSIS
Fiscal
2023 Performance
We were pleased with our fiscal 2023 performance.
Highlights included:
• Product
sales increased 44%.
• Income
from operations increased 57%.
• Net income
increased 56%.
Most of our CEO’s compensation for the past
fiscal year was tied to this performance. For details on our fiscal 2023 results,
please refer to our Annual Report on Form 10-K for the year ended March 31,
2023.
Executive Compensation Governance
The following table summarizes some of our current
compensation “best practices”:
| What
We Do |
|
What
We Don’t Do |
|
|
CEO compensation is aligned with performance.
Our CEO compensation
is linked to growth and profitability, which we expect to drive shareholder value.
Our CEO has significant exposure to our stock price.
Although he is not required to do so, our CEO has significant holdings of company
stock. As of March 31, 2023, Mr. Baker held company stock with a market value
of 17 times his fiscal 2023 salary. |
We don’t overpay.
Our Compensation Committee believes our NEO pay is similar or less than most comparable
public companies.
We don’t unduly dilute our shareholders.
We have a low stock option burn rate and overhang. Option awards to our CEO have
been modest and we have not awarded options to our other NEOs.
We don’t have executive perks.
Our NEOs have not received any significant benefits or perquisites other than
those offered to all employees. Our NEOs receive no pension benefits, nonqualified
deferred compensation, or other post-employment potential payments.
We don’t provide “golden parachutes.”
Like all our employees, our NEOs are employees at will and don’t have change
of control or severance agreements. |
Compensation Philosophy and Objectives
Our executive compensation is designed to maximize
shareholder value by rewarding growth and profitability. Our NEOs’ compensation
consists of:
| |
• |
Salary to provide a base of compensation.
|
| • |
Bonuses under
extraordinary circumstances.
|
| • |
Stock options
to provide a longer-term performance incentive and further align the interest
of our CEO with those of shareholders.
|
| • |
Performance-based
compensation, which is at-risk compensation to reward growth and profitability.
|
| • |
Fringe benefits (designated “other compensation”), which are
not excessive, and our NEOs participate in these benefits under the same terms
as all other employees. |
The size and mix of compensation components are
set to attract, motivate, and retain top talent. Our objective is to reward exceptional
performance without overpaying. At our 2022 Annual Meeting, 99% of the shares
voted to approve named executive officer compensation. We believe this is evidence
that our compensation programs are consistent with our shareholders’ interests.
Incentive plan compensation is based on income from
operations, which captures revenue, as well as costs and expenses. Income from
operations excludes interest income and taxes, which are less controllable by
management. Performance-based incentives are based on income from operations to
reward our NEOs for strategies that result in revenue and revenue growth, as well
as for controlling costs and expenses. We have no specific targets for NEO compensation
relative to peer companies, and no pre-established policy or target for the allocation
between salary and performance-based compensation. Performance-based compensation
plans are based on fiscal-year performance and approved by our Compensation Committee
at the beginning of fiscal years.
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Outstanding Equity Awards at Fiscal Year End
Dr. Baker had 7,500 shares of vested equity-based
awards as of June 9, 2023. None of our NEOs has ever had any form of equity
award other than options.
Post-Employment Compensation
Our NEOs receive no pension benefits, nonqualified
deferred compensation, or other post-employment potential payments. Our NEOs are
eligible to participate in our 401(k)
retirement plan under the same terms as other employees.
Compensation Clawbacks
Under Section 304 of the Sarbanes-Oxley Act, in
the event of misconduct that results in a financial restatement that would have
reduced a previously paid incentive amount, those improper payments to a CEO or
CFO can be recouped by the company. We also plan to adopt a “clawback”
policy in compliance with mandated NASDAQ listing standards. We expect the policy
to allow us to recoup improper performance-based compensation payments that were
based on financial metrics that required restatement. The SEC has mandated that
the NASDAQ have clawback rules in effect no later than November 28, 2023.
Companies such as NVE will be required to implement clawback policies no later
than 60 days after the NASDAQ rules go into effect. Therefore, we plan to
adopt a clawback policy by January 27, 2024.
Employment Agreements
We have no obligations for payments in connection
with termination or change-in-control other than unused accrued Paid Time Off.
We have an employment agreement with Dr. Baker that set his initial salary
and contains non-competition, confidentiality, and assignment of invention provisions
benefiting the Company. Either Dr. Baker or we may terminate the agreement
on 30 days’ written notice. In addition, we may terminate Dr. Baker’s
employment for cause or on his death or incapacity. We have agreements with Dr. Eames
and Mr. Nelson relating to non-competition, confidentiality, and assignment
of invention provisions benefiting the Company.
The Impact of Accounting and Tax Treatment
We consider the accounting and tax treatment of
stock options in determining their mix in executive compensation.
Prohibitions of Pledging, Hedging, and Other Derivative Transactions
No director or named executive officer (or such
person’s designees) is permitted to (i) pledge or margin our securities as
collateral for a loan obligation, (ii) engage in “short sales” or “sales
against the box” or trade in puts, calls or other options on our securities
or (iii) purchase any financial instrument or contract that is designed to hedge
or offset any risk of decrease in the market value of our securities. This prohibition
includes securities granted as compensation or otherwise held.
Compensation Advisers and Benchmarks
The Compensation Committee charter provides that
the Committee may, in its sole discretion, retain or obtain the advice of a compensation
consultant, legal counsel, or other adviser. The Committee has not employed such
advisers because it does not believe it is a necessary use of company resources,
and we believe members of our Compensation Committee, by virtue of experience
in compensation management and service on other boards, have the required knowledge
of compensation practices. We have not engaged in peer-based compensation benchmarking.
We use U.S. Bureau of Labor Statistics and Federal Reserve compensation data to
inform compensation decisions.
Role of NEOs in Setting Compensation
Our CEO and Principal Financial Officer provide
input on goals and metrics. Our Principal Financial Officer prepares financial
results used to determine the payouts for our performance-based compensation.
The Committee considers, discusses, modifies as appropriate, and takes action
on the CEO’s recommendations. Our NEOs do not set their own compensation.
Our CEO makes recommendations for compensation for direct reports and provides
input on their performance.
Table
of Contents
Summary Compensation Table
The following table summarizes the compensation
earned by our NEOs in the past two fiscal years:
Name
and
Principal Position |
|
Fiscal Year
Ended
March 31 |
|
Salary
($) |
|
Bonus
($) |
|
Option
Awards
($)(1)(2) |
|
Non-equity
Incentive Plan
Compensation($)(3)
|
|
All Other
Compensation
($)(4) |
|
Total
($) |
| Daniel A. Baker |
2023 |
|
400,000 |
|
- |
|
26,082 |
|
616,108 |
|
13,290 |
|
1,055,480 |
| President and CEO |
2022 |
|
380,651 |
|
- |
|
32,067 |
|
271,562 |
|
13,307 |
|
697,587 |
|
| Peter G. Eames |
|
2023 |
|
215,000 |
|
20,000 |
|
- |
|
43,000 |
|
11,743 |
|
269,743 |
| Vice President, Advanced Technology |
|
2022 |
|
201,755 |
|
- |
|
- |
|
- |
|
10,883 |
|
212,859 |
|
| Daniel Nelson(5) |
|
2023 |
|
36,308 |
|
- |
|
- |
|
- |
|
(7) |
|
36,308 |
| Principal Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Joseph R. Schmitz(6) |
|
2023 |
|
196,344 |
|
- |
|
- |
|
- |
|
10,416 |
|
206,760 |
| Former Chief Financial Officer |
|
2022 |
|
33,750 |
|
- |
|
- |
|
- |
|
(7) |
|
33,750 |
| (1) |
Option awards are based on the fair value on the grant date determined
from the Black-Scholes-Merton option-pricing model with the assumptions discussed
in Note 5 to the Financial Statements in our Annual Report on Form
10-K for the year ended March 31, 2023.
|
| (2) |
Option awards have a one-year vesting period.
|
| (3) |
Paid based on performance achieved during the fiscal year under
plans approved by our Compensation Committee at the beginning of the fiscal years.
|
| (4) |
Includes Company contributions made to 401(k) savings plans and
Health Savings Accounts on behalf of NEOs, and life and long-term disability insurance
premiums paid on behalf of NEOs. NEOs participate in these benefit programs under
the same terms as all other employees.
|
| (5) |
Mr. Nelson joined the Company in September 2022 and was promoted
to Principal Financial Officer effective May 8, 2023.
|
| (6) |
Mr. Schmitz was Chief Financial Officer from January 20, 2022
through May 5, 2023.
|
| (7) |
Less than $10,000. |
Table
of Contents
Fiscal 2023 Named Executive Officer Compensation
For the fiscal year ended March 31, 2023, the principal
components of compensation for NEOs were salary and performance-based compensation.
Dr. Baker also received an option award. Performance-based compensation criteria
were set at the beginning of fiscal years by the Compensation Committee. Performance-based
compensation for Dr. Baker and Dr. Eames had thresholds of positive operating
income so that no incentives would be paid without income from operations.
The following graph shows compensation from the
summary compensation table for Dr. Baker and Dr. Eames compared to financial
metrics of net income and income from operations. We use income from operations
as an important financial metric to link compensation to financial performance:
Dr. Baker’s compensation for the most recent
fiscal year consisted primarily of a salary of $400,000, performance-based incentive
plan compensation of $616,108, and option awards of $28,952. The increase in Dr. Baker’s
total compensation in fiscal 2023 compared to fiscal 2022 was primarily due to
an increase in performance-based compensation due to exceptional company growth,
which may be difficult to replicate in the future.
Dr. Eames’ compensation for the most recent
fiscal year consisted primarily of a salary of $215,000, performance-based incentive
plan compensation of $43,000, and a $20,000 discretionary bonus for exceptional
dedication. Dr. Eames’ total compensation in fiscal 2023 increased 27%
from the prior year primarily due to the addition of performance-based compensation,
the payment of a bonus, and a 7% salary increase.
Mr. Nelson’s compensation consisted of
salary.
Table
of Contents
Pay Versus Financial Performance
The following table summarizes “actually paid”
compensation versus performance in the past two fiscal years:
Year
Ended
March 31 |
|
Summary
Compensation
Table
Total for
CEO($) |
|
“Actually
Paid”
CEO
Compensation
($)(1) |
|
Average
Summary
Comp. Table
Total for
Non-CEO
NEOs($)(2) |
|
Average
Comp.
Actually Paid to
Non-CEO
NEOs($)(1)(2) |
|
Value of
Initial Fixed
$100 Investment
Based on Total
Shareholder
Return($)(3)
|
|
Company
Net
Income($) |
|
Company
Income from
Operations
($)(4) |
| 2023 |
|
1,055,480
|
|
1,081,798 |
|
238,252 |
|
238,252 |
|
157.18 |
|
22,694,458 |
|
25,644,182 |
| 2022 |
|
697,587 |
|
675,995 |
|
212,859
|
|
212,859
|
|
85.05 |
|
14,507,501 |
|
16,328,685 |
| (1) |
“Actually paid” compensation is defined as “total compensation”
as reported in the Summary Compensation Table except the value of Option Awards
calculated as follows: (i) for new option awards granted during the fiscal year,
the fair value as of the earlier of the vesting date or the last day of the fiscal
year; plus (ii) for awards granted in prior fiscal years (and not vested as of
the first day of the covered fiscal year), the change in fair value (positive
or negative) from the end of the last fiscal year to the earlier of the vesting
date or the end of the covered fiscal year. Fair value is determined from the
Black-Scholes-Merton option-pricing model with the assumptions discussed in Note 5
to the Financial Statements in our Annual Report on Form
10-K for the year ended March 31, 2023.
|
| (2) |
Fiscal 2023 averages exclude Mr. Nelson, and fiscal 2022 averages exclude
Mr. Schmitz because they were not employees for the entire year.
|
| (3) |
Based on an initial fixed $100 investment at the beginning of the fiscal year.
|
| (4) |
We use income from operations as an important financial metric to link compensation
to financial performance. |
The following graph shows “Actually Paid”
compensation for the CEO and the average of the other NEOs compared to our Total
Shareholder Return:
Pay for Financial Performance Descriptive Disclosure
We believe income from operations is an important
metric because it captures revenue as well as costs and expenses. We have based
performance-based incentives on income from operations to reward our NEOs for
strategies that result in revenue and revenue growth, as well as for controlling
costs and expenses. Dr. Baker’s performance-based compensation was based
on 0.5% of adjusted income from operations in fiscal 2023 plus 5% of the increase
in income from operations in fiscal 2023 compared to fiscal 2022. Fifty-seven
percent of Dr. Baker’s “actually paid” compensation in fiscal
2023 was performance-based compensation based on income from operations. Dr. Eames’
performance-based compensation was based on 20% of his salary for meeting a target
of at least 20% growth in income from operations in fiscal 2023 compared to fiscal
2022.
Table
of Contents
PROPOSAL
3. FREQUENCY OF SHAREHOLDER VOTES ON EXECUTIVE COMPENSATION
SEC
rules require shareholders to have the opportunity to vote every six calendar
years on the frequency of advisory votes on the compensation of our NEOs, similar
to Proposal 2 this year. Since the last such vote was in 2017, shareholders
have the opportunity this year to vote on the frequency of advisory votes. Shareholders
may indicate whether they would prefer that the advisory vote occur every one,
two, or three years. Shareholders may also abstain from voting. Although the vote
is non-binding, the Board will consider the outcome in deciding the frequency
of executive compensation advisory votes.
The Board unanimously recommends a say-on-pay
vote every year. In formulating this recommendation, the Board considered
accountability to shareholders and the recommendations of corporate governance
service providers. The frequency with the most votes will be considered approved
by shareholders.
Table
of Contents
PROPOSAL 4. RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our
Audit Committee has selected Boulay PLLP as our independent registered public
accounting firm to audit our financial statements for fiscal 2024 and recommends
that shareholders ratify the selection.
Boulay has audited our financial statements beginning
with fiscal 2020. Our Articles of Incorporation do not require shareholder ratification
of our independent registered public accounting firm, but our Board is submitting
the selection for ratification as a matter of good corporate practice. We expect
representatives of Boulay to be at our 2023 Annual Meeting and they will have
the opportunity to make a statement if they wish. We also expect them to be available
to respond to appropriate questions. If our shareholders fail to ratify the selection
of Boulay, our Audit Committee will reconsider its engagement. Even if the selection
is ratified, the Committee in its discretion may direct the selection of different
independent auditors at any time during the year if it determines that such a
change would be in our company’s and shareholders’ best interests.
The Board unanimously recommends a vote FOR the ratification of the selection
of Boulay PLLP.
Table
of Contents
AUDIT COMMITTEE DISCLOSURE
Fees Billed to Us by Our Independent Registered
Public Accounting Firm During Fiscal 2023 and 2022
Audit Fees
We incurred fees from Boulay of $97,500 relating
to the audit of our March 31, 2023 financial statements, review of the financial
statements included in fiscal 2023 quarterly reports on Form
10-Q, and other matters directly relating to the fiscal 2023 audit. Fees
relating to the audit of the prior-year financial statements, review of the financial
statements included in fiscal 2022 quarterly reports on Form
10-Q, and other matters directly relating to the fiscal 2022 audit were
$86,934.
Tax, Audit-Related, and All Other Fees
Boulay billed fees to us of $6,620 in fiscal 2023
and $8,430 in fiscal 2022 relating to tax return preparation and other tax compliance matters.
Boulay billed us $7,785 for audit-related services for our March 31, 2023 financial statements
and $14,800 for audit-related services for our March 31, 2022 financial statements.
Boulay billed no other fees for services to us during the past two fiscal years.
Audit Committee Independence and Preapproval Policy
To ensure that our independent registered public
accounting firm is engaged only to provide audit and non-audit services that are
compatible with maintaining its independence, the Audit Committee has a policy
that requires the Committee to review and approve all services to be provided
by accounting firms before the firm is engaged to provide those services. The
Committee considers non-audit services and fees when assessing auditor independence,
and determined that tax return preparation and other tax compliance services are
compatible with maintaining our accounting firm’s independence. To date,
Boulay has not performed any other audit-related or non-audit services. If it
becomes necessary to engage the independent auditor for additional services not
contemplated in the original preapproval, the Company will obtain the specific
preapproval of the Committee before engaging the auditor. The preapproval policy
requires informing the Audit Committee of each service performed by the auditor,
and the policy does not include any delegation of the Committee’s responsibilities
to management. The Audit Committee may delegate preapproval authority to one or
more of its members. The member with such delegated authority will report any
preapprovals to the entire Committee at its next scheduled meeting. The Audit
Committee approved all fees paid to our accounting firm described in the sections
above.
|
By Order of the Board of Directors |
|
Daniel A. Baker
President and CEO
June 19, 2023 |
The Board of Directors recommends a vote FOR each of the Director nominees,
FOR Proposals 2 and 4, and ONE YEAR for Proposal 3:
| 1. |
Elect five directors. |
| 01 |
Terrence W. Glarner |
03 |
Patricia M. Hollister |
05 |
James W. Bracke |
| 02 |
Daniel A. Baker |
04 |
Richard W. Kramp |
|
| [ ] |
Vote FOR all nominees
(except as marked) |
[ ] |
Vote WITHHELD
from all nominees |
|
| Instructions:
To withhold authority to vote for any nominee, strike a line through the name(s). |
| 2. |
Advisory approval of named executive officer compensation. |
| |
[ ] FOR |
[ ] AGAINST |
[ ] ABSTAIN |
|
|
| 3. |
Advisory vote on the frequency of votes on executive compensation. |
| |
[ ] 1 YEAR |
[ ] 2 YEARS |
[ ] 3 YEARS |
[ ] ABSTAIN |
|
| 4. |
Ratify the selection of Boulay PLLP as our independent registered
public accounting firm for the fiscal year ending March 31, 2024. |
| |
[ ] FOR |
[ ] AGAINST |
[ ] ABSTAIN |
|
| (please sign on the other side) |
THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS. The undersigned, a holder of common stock of NVE
Corporation (the “Company”), hereby appoints Daniel A. Baker the
proxy of the undersigned, with full power of substitution, to attend, represent
and vote for the undersigned, all of the shares of the Company which the undersigned
would be entitled to vote, at the Annual Meeting of Shareholders of the Company
to be held on August 3, 2023, and any adjournments thereof.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2023
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 3, 2023: 1) The
Company’s Proxy Statement for the 2023 Annual Meeting of Shareholders, 2) Shareholder
Letter, and 3) Annual Report on Form 10-K
for the year ended March 31, 2023, are available at www.nve.com/AnnualReports.
Date _________________________________
Signature _________________________________
Signature _________________________________
Please sign exactly as name appears on the label. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE MARK (ON THE OTHER SIDE), SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE DIRECTOR NOMINEES, FOR PROPOSALS 2 AND 4, AND ONE YEAR FOR
PROPOSAL 3. THE PROXIES ARE AUTHORIZED TO VOTE THIS PROXY IN THEIR DISCRETION
WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
NVE (NASDAQ:NVEC)
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