def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
|
o |
|
Preliminary Proxy Statement |
|
|
o |
|
Confidential, For Use of the Commission Only (as permitted by 14a-6(e)(2)) |
|
|
þ |
|
Definitive Proxy Statement |
|
|
o |
|
Definitive Additional materials |
|
|
o |
|
Soliciting Material Pursuant To § 240.14a-12 |
SUPERCONDUCTOR TECHNOLOGIES INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
|
þ |
|
No fee required. |
|
|
o |
|
Fee computed on 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): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials: |
|
|
o |
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON OCTOBER 23,
2007
To Our Stockholders:
The Annual Meeting of Stockholders of Superconductor
Technologies Inc. will be held on Tuesday, October 23,
2007, at 11:00 a.m., Pacific Time, at our offices at 460
Ward Drive, Santa Barbara, California for the following
purposes:
1. To elect two Class 3 Directors to hold office
until the year 2010 Annual Meeting or until their successors are
elected and qualified;
2. To amend our 2003 Equity Incentive Plan to increase the
number of shares authorized to be issued thereunder to 2,500,000;
3. To ratify the selection of Stonefield Josephson, Inc. as
independent auditors for the year ending December 31,
2007; and
4. To transact such other business as may properly come
before the meeting or any adjournment(s) thereof
Only stockholders of record at the close of business on
August 31, 2007 are entitled to notice of and to vote at
the Annual Meeting. A list of shareholders as of this date will
be available during normal business hours for examination at our
offices by any stockholder for any purpose germane to the Annual
Meeting for a period of ten days prior to meeting.
All stockholders are urged to attend the Annual Meeting in
person or by proxy. YOUR VOTE IS IMPORTANT. WHETHER OR NOT
YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE SIGN
AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES
CAN BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH YOUR
INSTRUCTIONS. The proxy is revocable and will not affect
your right to vote in person in the event you attend the Annual
Meeting.
By Order of the Board of Directors
Jeffrey A. Quiram
President and Chief Executive Officer
Santa Barbara, California
September 26, 2007
TABLE OF CONTENTS
PROXY STATEMENT
ANNUAL MEETING TO BE HELD ON
OCTOBER 23, 2007
460 Ward Drive
Santa Barbara, California
93111-2310
(805) 690-4500
This Proxy Statement contains information related to the
solicitation of proxies by and on behalf of the Board of
Directors of Superconductor Technologies Inc. for use in
connection with our Annual Meeting of Stockholders to be held on
Tuesday, October 23, 2007, beginning at 11:00 a.m.,
Pacific Time, at the offices of Superconductor located at 460
Ward Drive, Santa Barbara, California 93111, and at any and
all adjournments or postponements thereof. This Proxy Statement
and the accompanying proxy are being mailed to stockholders on
or about September 26, 2007.
INFORMATION
CONCERNING SOLICITATION AND VOTING
Record
Date
Only holders of record of our voting stock at the close of
business on August 31, 2007 (the Record
Date) are entitled to notice of the Annual Meeting and
to vote at the Annual Meeting. On that date, we had
12,483,367 shares of voting common stock outstanding.
Revocability
of Proxies
Any proxy given pursuant to this solicitation may be revoked by
the person giving it at any time before its use by delivering to
our Secretary, at or before the taking of the vote at the Annual
Meeting, a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and
voting in person.
Voting
and Solicitation
Each share of common stock is entitled to one vote on all
matters presented at the Annual Meeting. Stockholders do not
have the right to cumulate their votes in the election of
directors.
Shares of common stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted
in accordance with the instructions indicated thereon. In the
absence of specific instructions to the contrary, properly
executed proxies will be voted: (i) FOR the election of
each of our two nominees for the Class 3 directors,
(ii) FOR the amendments to the 2003 Equity Incentive Plan
and (iii) FOR the ratification of the selection of
Stonefield Josephson, Inc. as our independent auditors for the
year ending December 31, 2007. No business other than that
set forth in the accompanying Notice of Annual Meeting of
Stockholders is expected to come before the Annual Meeting.
Should any other matter requiring a vote of stockholders
properly arise, the persons named in the enclosed form of proxy
will vote such proxy in accordance with the recommendation of
our Board.
If you will not be able to attend the Annual Meeting to vote in
person, you may vote your shares by completing and returning the
accompanying proxy card or by voting electronically via the
Internet or by telephone. To vote by mail, please mark, sign and
date the accompanying proxy card and return it promptly in the
enclosed postage paid envelope.
Proxies may be solicited by certain of our directors, officers
and employees, without additional compensation, personally or by
telephone, telegram, letter or facsimile. We may reimburse
brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation
materials to such beneficial owners.
Quorum;
Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the
Annual Meeting is a majority of the votes eligible to be cast by
holders of shares of common stock issued and outstanding on the
Record Date. Shares that are voted FOR or
AGAINST a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting with
respect to such matter.
We believe that abstentions should be counted for purposes of
determining both the presence and absence of a quorum for the
transaction of business and the total number of votes cast with
respect to a proposal (other than the election of directors). In
the absence of controlling precedent to the contrary, we intend
to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against a proposal (other
than the election of directors).
Broker non-votes are shares held in street name for which a
broker returns a proxy card but indicates that instructions have
not been received from the beneficial owners or other persons
entitled to vote and for which the broker does not have
discretionary voting authority. In a 1988 Delaware case,
Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for
the purposes of determining the presence or absence of a quorum
for the transaction of business, broker non-votes should not be
counted for purposes of determining the number of votes cast
with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, we intend to treat broker
non-votes in this manner. Thus, a broker non-vote will not
affect the outcome of the voting on a proposal requiring solely
a majority of shares voted.
Deadline
for Receipt of Stockholder Proposals
Any stockholder who intends to present a proposal at the 2008
Annual Meeting of Stockholders must ensure that the proposal is
received by the Corporate Secretary at Superconductor
Technologies Inc., 460 Ward Avenue, Santa Barbara,
California 93111 not later than January 1, 2007 in order to
be considered for inclusion in our proxy materials for that
meeting.
PROPOSAL ONE
ELECTION OF
CLASS 3 DIRECTORS
Our Board currently consists of six directors divided into three
classes Class 1 (Mr. Quiram), Class 2
(Mr. Horowitz, Mr. Kaplan and Mr. Davis) and
Class 3 (Mr. Vellequette and
Mr. Lockton) with the directors in each class
holding office for staggered terms of three years each or until
their successors have been duly elected and qualified.
Mr. John F. Carlson, formerly a director, passed away in
November 2006. On January 18, 2007, Mr. David
Vellequette was elected to our Board and appointed to the Audit
Committee and the Governance and Nominating Committee.
The Class 3 Directors will be elected at this
years Annual Meeting or any adjournments or postponements
thereof. The nominees for election as the
Class 3 Directors are Mr. Vellequette and
Mr. Lockton. The Class 3 Directors will serve
until the year 2010 Annual Meeting or until their successors are
elected and qualified. Assuming the nominees are elected, we
will have six directors serving as follows:
Class 1: Jeffrey A. Quiram
Class 2: Lynn J. Davis, Dennis J.
Horowitz, Martin A. Kaplan
Class 3: John D. Lockton, David W.
Vellequette
The accompanying proxy grants to the holder the power to vote
the proxy for substitute nominees in the event that any nominee
becomes unavailable to serve as a Class 3 Director.
Management presently has no knowledge that any nominee will
refuse or be unable to serve as a Class 3 Director for
the prescribed term.
Required
Vote
Directors are elected by a plurality of the shares
voted. Plurality means that the nominee with the largest number
of votes is elected, up to the maximum number of directors to be
chosen (in this case, two directors).
2
Stockholders can either vote for the nominee or
withhold authority to vote for the nominee. However, shares that
are withheld will have no effect on the outcome of the election
for directors. Broker non-votes also will not have any effect on
the outcome of the election of the directors.
Board
Recommendation
OUR BOARD RECOMMENDS A VOTE FOR
MR. LOCKTON AND MR. VELLEQUETTE.
Corporate
Governance Policies and Practices
The following is a summary of our corporate governance policies
and practices:
|
|
|
|
|
A majority of the members of our Board are independent
directors, as defined by NASDAQ. Our Board has determined that
all of our directors are independent, other than
Messrs. Quiram and Shalvoy. Independent directors do not
receive consulting, legal or other fees from Superconductor
other than Board and Committee compensation.
|
|
|
|
All of our employees, officers and directors are subject to our
Code of Business Conduct and Ethics Policy, which is available
on our website at www.suptech.com. The ethics policy
meets the requirements of NASDAQ, as well as the code of ethics
requirements of the Securities and Exchange Commission
(SEC). If any material provisions of our Code of
Business Conduct and Ethics Policy are waived for our Chief
Executive Officer or senior financial officers, or if any
substantive changes are made to our policy, as they relate to
any director or executive officer, we will disclose that fact on
our website within five (5) business days. In addition, any
other material amendment to our code will be disclosed in the
same manner.
|
|
|
|
Our Boards current policy is to separate the roles of
Chairman of our Board and Chief Executive Officer.
|
|
|
|
The Audit, Compensation and Governance & Nominating
Committees consist entirely of independent directors.
|
|
|
|
Our Board reviews at least annually our business initiatives,
capital projects and budget matters.
|
|
|
|
The Audit Committee reviews and approves all related-party
transactions.
|
|
|
|
As part of our Code of Business Conduct and Ethics Policy, we
have made a whistleblower hotline available to all
employees for anonymous reporting of financial or other
concerns. The Audit Committee receives directly, without
management participation, all hotline activity reports
concerning accounting, internal controls or auditing matters.
|
Stockholder
Communications with Directors
Stockholders who want to communicate with our Board or with a
particular director may send a letter to the our Secretary at
Superconductor Technologies Inc., 460 Ward Avenue,
Santa Barbara, California 93111. The mailing envelope
should contain a clear notation indicating that the enclosed
letter is a Board Communication or Director
Communication. All such letters should state whether the
intended recipients are all members of our Board or just certain
specified individual directors. The Secretary will circulate the
communications (with the exception of commercial solicitations)
to the appropriate director or directors. Communications marked
Confidential will be forwarded unopened.
Board
Meetings and Committees
During 2006, all of our directors attended at least seventy-five
percent (75%) of (i) the total number of Board meetings and
(ii) the total number of committee meetings on which the
director served.
Board
of Directors
Our Board held a total of two meetings during the year ended
December 31, 2006. Our Board has four standing
committees an Audit Committee, a Compensation
Committee, a Governance & Nominating Committee and
until April 20, 2007, an Executive Committee. Current
committee members are listed below. New committee
3
members will be appointed at the Board meeting immediately
following the Annual Meeting of Stockholders. The Audit
Committee, the Compensation and Governance &
Nominating Committees each have a charter which is available on
our website at www.suptech.com.
Audit
Committee
The functions of the Audit Committee are to recommend selection
of independent public accountants to our Board, to review the
scope and results of the year-end audit with management and the
independent auditors, to review our accounting principles and
its system of internal accounting controls and to review our
annual and quarterly reports before filing with the SEC. The
Audit Committee met 11 times during 2006. The current members of
the Audit Committee are Dennis J. Horowitz (Chairman), John D.
Lockton, Lynn J. Davis, and David Vellequette. Our Board has
determined that all members of the Audit Committee are
independent directors under the rules of the SEC and the listing
standards of NASDAQ. Our Board has determined that David
Vellequette is a financial expert who is independent
of management in accordance with the applicable regulations.
Compensation
Committee
The Compensation Committee reviews and approves salaries,
bonuses and other benefits payable to the executive officers and
administers the Management Incentive Plan. The Compensation
Committee is specifically responsible for determining the
compensation of the Chief Executive Officer. The Compensation
Committee met five times during 2006. The current members of the
Compensation Committee are Lynn J. Davis (Chairman), Dennis J.
Horowitz and Martin A. Kaplan. Our Board has determined that all
members of the Compensation Committee are independent directors
under the rules of the SEC and the listing standards of NASDAQ.
The Compensation Committee created the Stock Option Committee
consisting of two members the Compensation Committee
Chairman and the Chief Executive Officer. The purpose of the
Stock Option Committee is to facilitate the timely granting of
stock options in connection with hiring, promotions and other
special situations. The Stock Option Committee was empowered
through 2006 to grant options to non-executive employees up to a
preset annual aggregate limit (200,000 shares for 2006).
The Compensation Committee supervises these grants and retains
exclusive authority for all executive officer grants and the
annual employee grants. The current members of the Stock Option
Committee are Lynn J. Davis (Chairman) and Jeffrey Quiram. The
Stock Option Committee did not meet during 2006.
Governance &
Nominating Committee
The Governance & Nominating Committee is responsible
for overseeing and, as appropriate, making recommendations to
our Board regarding, membership and constitution of our Board
and its role in overseeing our affairs. The
Governance & Nominating Committee is responsible for
proposing a slate of directors for election by the stockholders
at each annual meeting and for proposing candidates to fill any
vacancies. This committee is also responsible for the corporate
governance practices and policies of our Board and its
committees. The current members of the Nominating &
Governance Committee are Martin A. Kaplan (Chairman), John D.
Lockton, and David W. Vellequette. The Governance &
Nominating Committee met five times in 2006.
The Governance & Nominating Committee manages the
process for evaluating current Board members at the time they
are considered for re-nomination. After considering the
appropriate skills and characteristics required on our Board,
the current makeup of our Board, the results of the evaluations,
and the wishes of our Board members to be re-nominated, the
Nominating Committee recommends to our Board whether those
individuals should be re-nominated.
The Governance & Nominating Committee periodically
reviews with our Board whether it believes our Board would
benefit from adding a new member(s), and if so, the appropriate
skills and characteristics required for the new member(s). If
our Board determines that a new member would be beneficial, the
Governance & Nominating Committee solicits and
receives recommendations for candidates and manages the process
for evaluating candidates. All potential candidates, regardless
of their source, are reviewed under the same process. The
Governance & Nominating Committee (or its chairman)
screens the available information about the potential
candidates. Based on the results of the initial screening,
interviews with viable candidates are scheduled with
Governance & Nominating
4
Committee members, other members of our Board and senior members
of management. Upon completion of these interviews and other due
diligence, the Governance & Nominating Committee may
recommend to our Board the election or nomination of a candidate.
Candidates for independent Board members have typically been
found through recommendations from directors or others
associated with us. Stockholders may also recommend candidates
by sending the candidates name and resume to the
Governance & Nominating Committee under the provisions
set forth above for communication with our Board.
The Governance & Nominating Committee has no
predefined minimum criteria for selecting Board nominees,
although it believes that all independent directors should share
qualities such as, independence; experience at the corporate,
rather than divisional level, in multi-national organizations
larger than us; relevant, non-competitive experience; and strong
communication and analytical skills. In any given search, the
Committee may also define particular characteristics for
candidates to balance the overall skills and characteristics of
our Board and our perceived needs. However, during any search
the Governance and Nominating Committee reserves the right to
modify its stated search criteria for exceptional candidates.
Non-Employee
Director Compensation
Our Board maintains a written compensation policy for its
non-employee directors. The following table summarizes the
compensation policy for board service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Retainer(1)
|
|
|
Meeting Fees(2)
|
|
|
|
Cash
|
|
|
Options(3)
|
|
|
Cash
|
|
|
Options
|
|
|
Chairman of the Board
|
|
$
|
20,000
|
|
|
|
2,000
|
|
|
$
|
4,000
|
|
|
|
0
|
|
Other Non-Employee Directors
|
|
$
|
10,000
|
|
|
|
1,500
|
|
|
$
|
2,000
|
|
|
|
0
|
|
New Director (First Year)(4)
|
|
|
NA
|
|
|
|
2,500
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
|
(1) |
|
The annual retainer is paid quarterly and requires the director
attend at least 75% of our Board meetings. |
|
(2) |
|
Meeting fees are paid per meeting attended. The rate for
telephonic meetings is fifty percent of the regular meeting fees. |
|
(3) |
|
Directors receive annual stock option grants on the date of each
annual meeting. These options vest in two equal annual
installments on each anniversary of the grant date. |
|
(4) |
|
New directors receive an initial stock option grant for
2,500 shares of common stock on the date they join our
Board. The option vests in four equal annual installments on
each anniversary of the grant date. |
Our Board provides additional compensation for service on its
standing committees Audit Committee, Compensation
Committee, Stock Option Committee, Governance &
Nominating Committee and Executive Committee. Except for the
Executive Committee and the Stock Option Committee, the
committees consist entirely of independent, non-employee
directors. The following summarizes the compensation policy for
committee service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Retainer(1)
|
|
|
Meeting Fees(2)
|
|
|
|
Cash
|
|
|
Options
|
|
|
Cash(3)
|
|
|
Options(4)
|
|
|
Audit Committee Chairman
|
|
$
|
5,000
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
400
|
|
Compensation Committee Chairman
|
|
$
|
3,000
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
400
|
|
Governance & Nominating
Committee Chairman
|
|
$
|
3,000
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
400
|
|
Executive Committee Chairman(5)
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
4,000
|
|
|
|
0
|
|
Other Executive Committee
Non-Employee Members(5)
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
2,000
|
|
|
|
0
|
|
Other Committee Non-Employee
Members
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
200
|
|
|
|
|
(1) |
|
The annual retainer is paid quarterly. |
|
(2) |
|
Meeting fees are paid per committee meeting attended. |
5
|
|
|
(3) |
|
The same fees apply to both telephonic and in person meetings,
except for Executive Committee meetings which are compensated at
fifty percent of the regular meeting fees. The Executive
Committee fees are waived if our Board and the Executive
Committee meet on the same day. |
|
(4) |
|
Options are granted on the date of each committee meeting. These
options vest in two equal annual installments on each
anniversary of the grant date. |
|
(5) |
|
Executive Committee was dissolved April 20, 2007 |
Non-employee directors do not receive compensation from us other
than as a director or as committee member. There are no family
relationships among our directors and executive officers.
DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding
those individuals currently serving as our directors (or
nominated to serve as a director) and executive officers:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Principal Occupation
|
|
John D. Lockton(1)(3)(5)
|
|
|
70
|
|
|
Chairman of the Board, Managing
Director of IPWireless, Inc.
|
David W. Vellequette(1)(3)(5)
|
|
|
51
|
|
|
Chief Financial Officer, JDS
Uniphase, Inc.
|
Dennis J. Horowitz(1)(2)(5)
|
|
|
61
|
|
|
Chairman, President, Chief
Executive Officer and Director of Wolverine Tube, Inc.
|
Martin A. Kaplan(2)(3)(5)
|
|
|
70
|
|
|
Chairman of the Board of JDS
Uniphase, Inc., retired Executive Vice President Pacific Telesis
Group
|
Lynn J. Davis(1)(2)(4)(5)
|
|
|
60
|
|
|
President, Chief Operating Officer
of August Technology
|
Adam Shelton
|
|
|
41
|
|
|
Vice President Product Management
and Marketing
|
Jeffrey A. Quiram(4)(5)
|
|
|
47
|
|
|
President, Chief Executive Officer
and Director
|
William J. Buchanan
|
|
|
59
|
|
|
Controller, Chief Accounting
Officer
|
Robert B. Hammond, Ph.D.
|
|
|
59
|
|
|
Senior Vice President, Chief
Technical Officer
|
Robert L. Johnson
|
|
|
57
|
|
|
Senior Vice President, Operations
|
Terry A. White
|
|
|
55
|
|
|
Vice President, Worldwide Sales
|
|
|
|
(1) |
|
Member of the Audit Committee. |
|
(2) |
|
Member of the Compensation Committee. |
|
(3) |
|
Member of Governance & Nominating Committee. |
|
(4) |
|
Member of Stock Option Committee. |
|
(5) |
|
Member of Executive Committee. |
John Lockton joined our Board in December 1997 and was
named Chairman of our Board effective January 1, 2001.
Mr. Lockton is a founder, initial chairman and is now
managing director of IPWireless, Inc., a wireless internet
access and IP telephony service provider of 3G technology. From
August 1991 to March 1998, he was President, Chief Executive
Officer and a director of International Wireless Communications,
Inc. (IWC), an operator of cellular systems and from
March 1998 until June 1998 he served IWC as Vice-Chairman and a
director. From May 1990 to August 1991 he was Managing Partner
of Corporate Technology Partners, a joint-venture with Bell
Canada Enterprises. In 1988, Mr. Lockton founded Cellular
Data, Inc., a cellular wireless data technology company, and
Star Associates, Inc., a cellular radio RSA company. He founded
and was a director of Interactive Network, Inc., a
wireless-based television company, and was Chairman of that
companys Board of Directors until December 1994. From 1983
to 1987 Mr. Lockton was Executive Vice President of Pacific
Bell (now part of SBC Communications). From 1980 to 1983 he was
President of Warner Amex (now Time Warner) Cable Television,
Inc. From 1968 to 1980 Mr. Lockton held various senior
positions at Dun & Bradstreet. Mr. Lockton is the
primary inventor of a patented wireless technology for Personal
Communication Services (PCS). Mr. Lockton is a graduate
6
of Yale University (Phi Beta Kappa), Harvard Law School, and
holds an Executive M.B.A. from Columbia University.
David W. Vellequette was appointed to our Board on
January 18, 2007. Mr. Vellequette currently serves as
Chief Financial Officer of JDS Uniphase, Inc., a world leader in
optical communications, broadband and test and measurement, and
optical commercial and consumer applications, a position he has
held since June 2005. He joined JDSU as Vice President and
Operations Controller in July 2004, having previously served as
Vice President of Worldwide Sales and Service Operations at
Openwave Systems, Inc., an independent provider of software
solutions for the mobile communications and media industries.
From 1992 to 2002, Mr. Vellequette served as Corporate
Controller of StrataCom Corporation which was acquired by Cisco
Systems, Inc. in 1996, and subsequently, as Vice President of
Finance of Cisco Systems, the worldwide leader in networking for
the Internet. From 1984 to 1992, Mr. Vellequette was
Corporate Controller at Altera Corporation, a supplier of
programmable silicon solutions to the electronics industry.
Mr. Vellequette began his finance career as an auditor with
Ernst and Young. He holds a B.S. in Accounting from the
University of California, Berkeley, and is a CPA.
Dennis J. Horowitz has served on our Board since June
1990. Mr. Horowitz is currently Chairman of the Board of
Wolverine Tube, Inc., a manufacturer and distributor of copper
and copper alloy tube, of which he had been the Chairman and CEO
through December 2005. From September 1994 to April 1997, he
served as Corporate Vice President and President of the Americas
of AMP Incorporated, an interconnection device company. From
October 1993 to August 1994, Mr. Horowitz served as
President and Chief Executive Officer of Philips Technologies, a
Philips Electronics North America company. From April 1990 to
September 1993, he served as President and Chief Executive
Officer of Philips Components, Discrete Products Division. From
1988 to 1990, he served as President and Chief Executive Officer
of Magnavox CATV, and from 1980 to 1988 was involved in the
general administration of North American Philips Corporation.
Mr. Horowitz holds an M.B.A and a B.A. in economics from
St. Johns University.
Martin A. Kaplan was appointed to our Board in December
2002 concurrent with the Conductus merger. Mr. Kaplan
served as a director of Conductus from 1996 to the closing of
the merger transaction. Since May 2000, Mr. Kaplan has
served as Chairman of the Board of JDS Uniphase, Inc., a
telecommunications equipment company. Mr. Kaplan also
serves as a director of Tekelec and Redback Networks Inc. In a
career spanning forty years, Mr. Kaplan served as Executive
Vice-President of Pacific Telesis Group, which became a
subsidiary of SBC Communications in 1997, from 1986 until May
2000, as President, Network Services Group of Pacific Bell, and
its successor, Pacific Telesis, and in various other senior
management positions. Mr. Kaplan earned a B.S. in
engineering from California Institute of Technology.
Lynn J. Davis was appointed to our Board on July 29,
2005. He recently retired as President, Chief Operating Officer
and Board Member of August Technology, a manufacturer of
inspection equipment for the semiconductor fabrication industry.
From 2002 to 2004, he was a partner at Tate Capital Partners
Fund, LLC, a private investment firm he co-founded. Prior to
Tate, Mr. Davis was an employee of ADC Telecommunications
for 28 years, serving in 14 management positions, including
corporate president, group president and chief operating
officer. He is also a member of the Board of Directors of
Flexsteel Industries Inc., a furniture manufacturer.
Mr. Davis holds a B.S. in electrical engineering from Iowa
State University and an M.B.A. from the University of Minnesota.
Adam Shelton joined in April 2006 as Vice President,
Product Management and Marketing. Prior to STI, Mr. Shelton
was the Senior Director of Marketing for Motorola where he was
responsible for the marketing of Motorola Networks products.
Before joining Motorola, he was the Senior Director of Marketing
for Advanced Fibre Communications (AFC), now Tellabs.
Mr. Shelton also held various management and executive
management positions with Mahi Networks, ATU Communications and
Bell Canada. Mr. Shelton graduated with deans honors
as a Civil Engineering Technologist from Seneca College in
Toronto, Canada.
Jeffrey A. Quiram was appointed as director, President
and Chief Executive Officer effective March 15, 2005.
Mr. Quiram joined us for a transition period which began
February 17, 2005. Mr. Quiram was most recently Vice
President of the business wireless unit of ADC
Telecommunications. Mr. Quiram was at ADC from
1991-2004 in
a variety of management roles. Mr. Quiram has a BS in
Quantitative Methods and Computer Science from College of St.
Thomas, and an MBA from University of Minnesota.
7
William J. Buchanan has served as Controller since June
2000. Mr. Buchanan joined us in January 1998 and has served
in various accounting positions prior to becoming the
Controller. For 16 years prior to joining us, he was a
self-employed private investor and investment advisor. For the
nine years prior to that, he served in various executive and
accounting positions with Applied Magnetics Corp and Raytheon
Co. Mr. Buchanan holds a B.A. in Economics from California
State University, Fresno.
Robert B. Hammond, Ph.D., has served as Senior Vice
President and Chief Technical Officer since December 1992.
Dr. Hammond served as Vice President of Technology, and
Chief Technical Officer, until August 1990. He has also served
as Secretary from October 1999 to 2002. From May 1991 to
December 1991, and July 1992 to December 1992, he served as
Acting Chief Operating Officer. From December 1987 to August
1990, he served as Program Manager. Dr. Hammond also serves
on our Technical Advisory Board. For over eleven years prior to
joining us, he was at Los Alamos National Laboratory, most
recently as Deputy Group Leader of Electronics Research and
Development a group that performs research,
development, and pilot production of solid-state electronics and
optics. Dr. Hammond received his Ph.D. and M.S. in applied
physics and his B.S. in physics from the California Institute of
Technology.
Robert L. Johnson is Senior Vice President, Operations.
Mr. Johnson joined us in April 2000 as Vice President of
Wireless Manufacturing. From 1996 to early 2000,
Mr. Johnson was the Director and General Manager of
Schlumberger ATE. From 1990 to 1996, he served as Vice President
and General Manager of Harman International Industries.
Mr. Johnson majored in industrial engineering at Arizona
State University.
Terry A. White was appointed Vice President Worldwide
Sales in April 2005. From August 2003 to March 2005,
Mr. White was Vice President of Worldwide Sales for Mahi
Networks, a telecom company. From March 2002 to June 2003,
Mr. White was Vice President of Global Sales at Turnstone
Systems. Prior to that position and from February 1992 to
December 2001, he held various positions at ADC
Telecommunications. His most recent position at ADC was Senior
Vice President of BIA Sales. Mr. White has been employed in
sales management for more than 20 years. Mr. White
holds a Bachelor of Arts degree from Kennesaw College.
VOTING
SECURITIES OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
common stock as of September 7, 2007 by (i) each
person known by us to be the beneficial owner of more than five
percent (5%) of our common stock, (ii) by each director,
(iii) by each of the executive officers named in the table
under Executive Compensation Summary
Compensation Table, and (iv) all directors and
executive officers as a group. Except as otherwise indicated in
the footnotes to the table, the persons and entities named in
the table have sole voting and investment power with respect to
all shares beneficially owned, subject to community property
laws, where applicable.
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares(2)
|
|
|
Percentage Ownership
|
|
|
Kopp Investment Advisors, LLC
|
|
|
1,245,600
|
(1)
|
|
|
10
|
%
|
7701 France Avenue South, #500
Edina, MN 55435
|
|
|
|
|
|
|
|
|
Jeffrey A. Quiram
|
|
|
120,000
|
|
|
|
1
|
%
|
Adam Shelton
|
|
|
26,625
|
|
|
|
|
*
|
Robert L. Johnson
|
|
|
7,500
|
|
|
|
|
*
|
Robert B. Hammond
|
|
|
50,000
|
|
|
|
|
*
|
Dennis J. Horowitz
|
|
|
12,850
|
|
|
|
|
*
|
John D. Lockton
|
|
|
9,500
|
|
|
|
|
*
|
Martin A. Kaplan
|
|
|
9,980
|
|
|
|
|
*
|
Dave W. Vellequette
|
|
|
|
|
|
|
|
*
|
Lynn J. Davis
|
|
|
3,800
|
|
|
|
|
*
|
William Buchanan
|
|
|
|
|
|
|
|
*
|
All executive officers and
directors as a group (11 persons)
|
|
|
340,255
|
|
|
|
3
|
%
|
8
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Based on information reported in a Schedule 13G filed by
Kopp Investment Advisors, LLC, on behalf of Kopp Investment
Advisors, LLC, Kopp Holding Company, LLC, Kopp Holding Company
and Leroy C. Kopp. Kopp Investment Advisers is an investment
adviser registered under the Investment Advisers Act of 1940. It
is wholly-owned by Kopp Holding Company, LLC which is controlled
by Mr. Kopp through Kopp Holding Company. Of the
1,245,600 shares, 264,100 shares are held in a
fiduciary or representative capacity. Accordingly, persons other
than the listed persons have the right to receive, or the power
to direct the receipt of, dividends from, or the proceeds from
the sale of, such sales. No person individually has an interest
that relates to more than five percent of our common stock. |
|
(2) |
|
Includes shares issuable upon the exercise of stock options that
are exercisable within 60 days of September 7, 2007 as
follows: Mr. Quiram, 120,000 shares; Mr. Johnson,
none; Mr. Hammond, none; Mr. Horowitz,
12,850 shares; Mr. Lockton, 9,500 shares;
Mr. Kaplan, 7,060 shares; Mr. Davis,
3,800 shares; Mr. Shelton, 20,625 shares; and all
executive officers and directors as a group, 273,835 shares. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934,
our directors and officers and its significant stockholders
(defined by statute as stockholders beneficially owning more
than ten percent (10%) of the common stock) are required to file
with the Securities and Exchange Commission and us reports of
ownership, and changes in ownership, of common stock. Based
solely on a review of the reports received by it, we believe
that, during the year ended December 31, 2006, all of its
officers, directors and significant stockholders complied with
all applicable filing requirements under Section 16(a)
except as follows: Messrs. Lockton, Davis, Kaplan, Horowitz
filed late Form 4 reports for stock option grants totaling
4,000, 4,100, 3,900, 4,900 shares respectively.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Compensation Program
The Compensation Committee is responsible for oversight of our
compensation and employee benefit plans and practices, including
our executive compensation, incentive-compensation and
equity-based plans. The Compensation Committee also establishes
our policies with respect to compensation of executive officers,
including our named executive officers (as defined below) and
reviews and presents to our Board for its approval our executive
compensation disclosures as required by the SEC to be included
in our annual proxy statement or annual report on
Form 10-K
filed with the SEC. The Compensation Committee members consist
of directors who are independent from our executive officers or
management. Our executive compensation programs are designed to
attract, motivate and retain the executive talent needed to
optimize shareholder value. The programs are designed to enhance
shareholder value by aligning the financial interests of our
executive officers with those of our shareholders.
Throughout this Report, the individuals who served as our Chief
Executive Officer and Chief Financial Officer during 2006, as
well as the other individuals included in the Summary
Compensation Table below, are referred to as our named
executive officers.
Compensation
Philosophy and Objectives
We seek to maintain a competitive total compensation package
that aligns the economic interest of our named executive
officers with that of our shareholders and rewards individual
and corporate performance, while also considering multiple
factors including competitive compensation, our budget, the
accounting and tax treatment and any impact on share dilution.
Our executive compensation programs are based on the belief that
the interests of the executives should be closely aligned with
our shareholders. In support of this philosophy, a meaningful
portion of each executives compensation is placed at-risk
and is linked to the accomplishment of specific results that are
expected to lead to the creation of value for shareholders from
both a short-term and long-term perspective.
9
There are three primary components of compensation for our named
executive officers: base salary, bonus and long-term equity
incentive compensation, retirement benefits and perquisites and
other personal benefits. While the elements of compensation are
considered separately, the Compensation Committee takes into
account the total compensation package afforded by us to the
individual executive.
The Compensation Committee uses data from published sources, as
well as from anecdotal data, regarding the compensation
practices of other employers, including selected
telecommunications and other technology companies for comparable
measures. The selected companies target similar markets, engage
in similar manufacturing techniques and face similar sales
challenges. The Compensation Committee also uses the Radford
Total Compensation Surveys for companies with less than
$200 million in annual revenue. The Compensation Committee
does not generally hire an outside consulting firm to assist
with compensation, as we believe that the value of doing so is
exceeded by the costs.
2006
Executive Compensation Components
For the year ended December 31, 2006, the principal
components of compensation for our named executive officers were:
|
|
|
|
|
base salary;
|
|
|
|
annual bonuses;
|
|
|
|
long-term equity incentive compensation;
|
|
|
|
retirement benefits; and
|
|
|
|
perquisites and other personal benefits.
|
Base Salary. We pay our named executive
officers a base salary to provide a minimum compensation level
and to reflect the perceived current value of each executive
relative to his or her peers. We establish base salary levels
for executive officers based on factors such as (i) the
responsibilities of the position, (ii) the
individuals performance and perceived ability to influence
our financial performance in the short and long-term,
(iii) the compensation of our other employees and
(iv) our evaluation of salaries for similar positions at
other employers. The base salaries for some of our named
executive officers is set in their employment agreements with us.
Subject to any applicable employment agreements, the
Compensation Committee reviews the salaries of the executive
officers (including the Chief Executive Officer) annually as
well as upon any promotion or other significant change in job
responsibility. Changes in base salary may reflect changes in
the cost of living, changes in compensation paid by our peer
group and other employers, or the Compensation Committees
assessment, in consultation with our management, of the
individuals performance. The Compensation Committee used
3.5% as the baseline for increases in base salaries for 2006.
Annual Bonuses. We maintain a bonus plan for
executive officers and selected other members of senior
management. The bonus plan is intended to provide incentives to
senior management for achieving certain objective performance
goals. At the beginning of 2006, the Compensation Committee
established the performance targets and assigned each executive
officer an annual target bonus amount based on a percentage of
his or her base salary, which ranged from 20% to 100%.
For 2006, the performance goals were based solely on
improvements in our total revenues and net income, which were
intended by the compensation committee to be challenging goals.
There were no individual performance goals, and there was no
provision for partial payouts based on achieving less than the
performance targets. While we made progress in net income, we
made no improvement in revenue in 2006, therefore, we did not
achieve the performance goals for the bonuses. Consequently, we
did not pay any bonuses for 2006 to any of the named executive
officers.
Long-term equity incentive compensation. We
grant stock options and stock awards to our named executive
officers to attempt to align the interests of executives with
those of our shareholders, to encourage long term retention of
executives and to reward share price appreciation and the
attainment of other corporate goals over a multi-year period. In
addition to any periodic grants, stock option grants and awards
may be made to executive
10
officers for example: upon initial employment, upon promotion to
a new, higher level position that entails increased
responsibilities and accountability, for the recognition of
superior performance, or as an incentive for continued service
with us as well as continued superior performance. For executive
officers, the Chief Executive Officer generally recommends the
number of options to be granted within a range associated with
the individual executives salary level, and presents this
to the Compensation Committee for its review and approval. The
Compensation Committee takes into account the total compensation
offered to its executives when considering the number of options
awarded.
In 2006, the Compensation Committee awarded stock options to
Mr. Shelton upon joining us in accordance with the terms of
his negotiated employment agreement. The Committee also awarded
the named executive officers and other key members of management
stock awards with a single two year vesting to encourage long
term retention.
Retirement and Other Benefits. We sponsor a
retirement savings plan under Section 401(k) of the
Internal Revenue Code that covers all of our eligible employees
which allows eligible employees to defer, within prescribed
limits, up to 15% of their compensation on a pre-tax basis
through contributions to the plan. We do not have any special
retirement plans for our named executive officers.
Perquisites and Other Personal Benefits. We
provide our named executive officers with perquisites and other
personal benefits that we and the Compensation Committee believe
are reasonable and consistent with our overall compensation
program to better enable us to attract and retain superior
employees for key positions. In 2006, we paid living and
commuting expenses for Messrs. Quiram and Shelton, as well
as life insurance premiums for all named executive officers. We
expect these benefits to be considered by the Compensation
Committee in its review of compensation for our named executive
officers. We believe these perquisites, while not representing a
significant portion of our named executive officers total
compensation, reflect our intent to create overall market
comparable compensation packages.
Tax and
Accounting Implications
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction to public corporations for
compensation paid to executive officers in excess of $1,000,000
during any fiscal year. It is the current policy of the
Compensation Committee to preserve, to the extent reasonably
possible, our ability to obtain a corporate tax deduction for
compensation paid to executive officers to the extent consistent
with our best interests. However, the Compensation Committee
believes that its primary responsibility is to provide a
compensation program that will attract, retain and reward the
executive talent necessary for our success. Consequently, the
Compensation Committee recognizes that the loss of a tax
deduction may be necessary in some circumstances.
We account for stock-based payments, including awards under our
Management Incentive Plan, in accordance with the requirements
of FASB Statement 123(R).
Change of
Control Payments
As described below under Principal Compensation Agreements
and Plans Change of Control Agreements, we are
obligated under the employment contracts with
Messrs. Quiram and White and change of control agreements
with Messrs. Hammond, Johnson and Shelton to make severance
payments to such officers in the event they terminate their
employment within 24 months after a change of control as
defined in those agreements. We believe that these payments were
necessary to attract and retain these officers.
Role of
Executive Officers in Compensation Decisions
Under its charter, the Compensation Committee makes all
compensation decisions with respect to the Chief Executive
Officer and makes recommendations to our Board regarding
non-equity compensation and equity awards to our other named
executive officers and all other elected officers. In doing so,
with respect to named executive officers other than the Chief
Executive Officer, the Compensation Committee generally receives
a recommendation from our Chief Executive Officer and other
officers as appropriate.
11
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee is composed of three non-employee
directors Lynn J. Davis (Chairman), Dennis J.
Horowitz and Martin A. Kaplan. No interlocking relationship
exists between our Board and the compensation committee of any
other company, and no such interlocking relationship has existed
in the past.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to our Board that the
Compensation Discussion and Analysis be included in this Report.
THE COMPENSATION COMMITTEE
Lynn J. Davis, Chairman
Dennis J. Horowitz
Martin A. Kaplan
PRINCIPAL
COMPENSATION AGREEMENTS AND PLANS
Employment
Agreements
Jeffrey A. Quiram. Jeffrey A. Quiram became
President, Chief Executive Officer and a director effective upon
the retirement of Mr. Thomas in March 2005. We entered into
an employment agreement with Mr. Quiram. On
February 5, 2007, we amended Mr. Quirams
employment agreement to comply with the deferred compensation
rules contained in Section 409A of the Internal Revenue
Code and related treasury regulations and to provide for
immediate vesting of all of his outstanding equity grants in the
event of his termination. The employment agreement provides for
the following:
|
|
|
|
|
Appointment as President, Chief Executive Officer and a member
of our Board;
|
|
|
|
A base salary of $315,000 per year (based on performance, in
2005, the Compensation Committee increased his base salary by
5.0% from $300,000 to $315,000 for 2006);
|
|
|
|
A bonus of up to 100% of his base salary based upon achievement
of annual performance goals to be developed by the Compensation
Committee and Mr. Quiram;
|
|
|
|
A stock option for 120,000 shares of stock granted in
connection with the signing of the employment agreement;
|
|
|
|
A stock option for an additional 120,000 shares of stock
which was granted after shareholder approval at the 2005 annual
meeting of an increase in the shares authorized for grants under
the 2003 Equity Incentive Plan;
|
|
|
|
Accelerated vesting of all his outstanding equity grants in the
event of an Involuntary Termination or Change in Control (as
defined in the employment agreement);
|
|
|
|
A severance payment equal to one years salary and
continued benefits for one year in the event of involuntary
termination;
|
|
|
|
Payment or reimbursement of travel expenses from his present
home in Minnesota and the lease of an apartment for
Mr. Quiram near our Santa Barbara headquarters. We are
also obligated to make a special indemnity payment for any taxes
resulting from the payment or reimbursement of such expenses;
|
|
|
|
Lease of an automobile; and
|
|
|
|
(a) if Mr. Quiram is a specified employee
as defined in IRC Section 409A at the time of termination
in the event of a change in control, all severance payments due
under the agreement will be paid, and all insurance coverage due
will commence, on the 183rd day after the date of
Mr. Quirams termination; and (b) the
|
12
|
|
|
|
|
employment agreement will be otherwise interpreted in accordance
with Section 409A of the Internal Revenue Code and related
treasury regulations.
|
Terry A. White. Terry A. White was appointed
Vice President Worldwide Sales in April 2005. We entered into an
employment agreement with Mr. White. On February 5,
2007, we amended Mr. Whites employment agreement to
comply with the deferred compensation rules contained in
Section 409A of the Internal Revenue Code and related
treasury regulations. The employment agreement, as amended,
provides for the following:
|
|
|
|
|
Appointment as Vice President Worldwide Sales;
|
|
|
|
A base salary of $220,000 per year;
|
|
|
|
An annual sales bonus;
|
|
|
|
A stock option for 100,000 shares of stock which was
granted after shareholder approval at the 2005 annual meeting of
an increase in the shares authorized for grants under the 2003
Equity Incentive Plan;
|
|
|
|
A severance payment equal to six months salary and continued
benefits for six months in the event of involuntary
termination; and
|
|
|
|
Accelerated vesting of his stock options in the event of an
Involuntary Termination or a Change of Control (both as defined
in the Employment Agreement).(a) if Mr. White is a
specified employee as defined in IRC
Section 409A at the time of termination in the event of a
change in control, all severance payments due under the
agreement will be paid, and all insurance coverage due will
commence, on the 183rd day after the date of
Mr. Whites termination; and (b) the agreement
will be otherwise interpreted in accordance with Section 409A of
the Internal Revenue Code and related treasury regulations.
|
Mr. Whites sales incentive bonus for 2006 was based
on improvements in net commercial product sales over our 2005
results, which were intended by the compensation committee to be
challenging goals. Payments began at 70% of target sales and
continued as follows:
|
|
|
Net Commercial
|
|
Bonus Formula
|
Product Sales (% of Plan)
|
|
(Percentage of Base Salary)
|
|
Less than 70%
|
|
0%
|
70% to 100%
|
|
10% to 30% (linear scale)
|
Over 100%
|
|
2.0% of the amount by which net
commercial product sales exceed plan
|
The sales targets and bonus payments are for the full year 2006.
The bonus structure for future years is to be mutually agreed
upon.
Change of
Control Agreements
Mr. Quiram, our President and Chief Executive Officer, has
a change of control provision in his employment agreement. The
employment agreement provides that in the event of a change of
control (as defined in his employment agreement), whether or not
he is terminated, Mr. Quiram is entitled to
(i) payment of two times his annual base salary,
(ii) 24 months of benefits coverage, and
(iii) accelerated vesting of all of his outstanding equity
grants. Mr. White, our Vice President of Worldwide Sales,
has a similar change of control provision in his employment
agreement which provides that in the event of a change of
control, whether or not he is terminated, he shall receive
(i) accelerated vesting of 50% of his options and
(ii) accelerated vesting of his remaining options if he
does not resign from us for six months after the change in
control. In addition, if his employment is terminated following
a change in control, then he is entitled to a lump sum payment
equal to one year of his base salary.
We also have change in control agreements with all
of our remaining vice presidents (Messrs. Hammond, Johnson
and Shelton). The change in control agreements provide severance
benefits if there is a qualifying termination of employment. The
agreements generally provide that, if the employees
employment is terminated within twenty-four months of a change
in control (as defined in the change in control agreements) by
us for any reason other than death, Cause or
Disability (as both terms are defined in the change
in control agreements) or by the employee for Good
Reason, then the terminated employee will be entitled to a
severance benefits. Good
13
Reason generally means that the employee has sustained a
material reduction in authority or responsibility, or incurred a
reduction greater than 10% in total compensation (other than
reductions which apply equally to all executive officers), or
been notified that his principal place of work will be relocated
by 50 miles or more. The change in control agreements with
Messrs. Hammond and Johnson and with Mr. Shelton were
amended on February 5 and March 1, 2007, respectively, to
comply with the deferred compensation rules contained in
Section 409A of the Internal Revenue Code and related
treasury regulations
The severance benefits include salary continuation payments,
full accelerated vesting for all outstanding unvested stock
options and similar equity securities held by the employee and
continuation of health/life insurance benefits. The salary
continuation payments shall be made on a monthly basis to the
former employee for 18 months. Subject to earlier cessation
under certain circumstances, the post-termination of employment
health/life insurance coverage shall be provided for
18 months for Messrs. Hammond and Johnson. Any
payments or distributions made to or for the benefit of the
named employees under these change in control agreements will be
reduced, if necessary, to an amount that would result in no
excise taxes being imposed under Internal Revenue Code
Section 4999.
Stock
Option Plans
We presently have a single plan for granting equity
incentives the 2003 Equity Incentive Plan (as
amended, the Plan). The following summarizes the
essential features of the Plan.
Eligibility
The Plan provides for the granting of stock options, stock
appreciation rights (SARs), restricted stock awards,
performance unit awards and performance share awards
(collectively, Awards) to our key employees,
directors and consultants. As of September 14, 2007, there
were approximately 130 employees and directors eligible to
receive awards under the Plan.
Purpose
The purpose of the Plan is to promote our success, and enhance
our value, by linking the personal interests of participating
employees and directors to those of our stockholders and by
providing such employees and directors with an incentive for
outstanding performance. The 2003 Plan is further intended to
provide us flexibility in our ability to motivate, attract and
retain the services of participating employees upon whose
judgment, interest and special efforts we are is largely
dependent for the successful conduct of our operations.
Administration
The Plan is administered by the Compensation Committee of the
Board (the Committee).
Available
Shares; Limitations on Awards
Subject to adjustments described below, if this Proposal 2
is approved no more than two million five hundred thousand
(2,500,000) shares of our common stock may be issued in the
aggregate under the Plan. No further awards can be made under
any old option plans. If awards are granted under the Plan and
subsequently expire or are forfeited, the shares of our common
stock underlying those awards will be available for reissuance.
No plan participant may be awarded more than one hundred twenty
thousand (120,000) options and appreciation rights, in the
aggregate, under the Plan during any calendar year, except that
during a participants initial year of service, such
maximum shall be two hundred forty thousand (240,000). No
participant may receive non-option awards of more than one
hundred twenty thousand (120,000) shares during any calendar
year, except that during a participants initial year of
service, such maximum shall be two hundred forty thousand
(240,000).
Options
Plan participants may receive options to purchase shares of our
common stock for an exercise price fixed on the date of the
grant. The exercise price may not be less than the fair market
value of our common stock on the date of the grant. Grants of
option rights under the Plan may be incentive stock options or
non-qualified stock options. An
14
incentive stock option is an option that is intended to qualify
as an incentive stock option under Section 422
of the Internal Revenue Code. A plan participant may pay the
exercise price of an option in cash, by check, or by the
transfer of unrestricted shares of our common stock owned for a
period of time acceptable to the Committee and having a value at
the time of exercise equal to the exercise price, by any other
consideration the plan committee may deem appropriate, or by a
combination thereof. The Committee shall determine the vesting
schedule and requirements for continuous service associated with
each grant of options and may provide for earlier vesting under
specified circumstances. The vesting or exercise of option
rights may be subject to the optionee or the achievement of
management objectives. No incentive options shall be exercisable
more than 10 years after the date of grant.
Stock
Appreciation Rights
The Plan permits the grant of three types of SARs: Affiliated
SARs, Freestanding SARs, Tandem SARs, or any combination
thereof. An Affiliated SAR is an SAR that is granted in
connection with a related option and which will be deemed to
automatically be exercised simultaneously with the exercise of
the related option. A Freestanding SAR is an SAR that is granted
independently of any options. A Tandem SAR is an SAR that is
granted in connection with a related option, the exercise of
which requires a forfeiture of the right to purchase a share
under the related option (and when a share is purchased under
the option, the SAR is similarly cancelled).
The Committee has complete discretion to determine the number of
SARs granted to any optionee or recipient and the terms and
conditions pertaining to such SARs. However, the grant price
must be at least equal to the fair market value of a share of
our common stock on the date of grant in the case of a
Freestanding SAR and equal to the option price of the related
option in the case of an Affiliated or Tandem SAR.
Restricted
Stock Awards
The Plan permits the grant of restricted stock awards which are
restricted shares of our common stock bonuses that vest in
accordance with terms established by the Committee. The
Committee may impose restrictions and conditions on the shares,
including, without limitation, restrictions based upon the
achievement of specific performance goals (Company-wide,
divisional
and/or
individual),
and/or
restrictions under applicable federal or state securities laws.
The Committee may accelerate the time at which any restrictions
lapse,
and/or
remove any restrictions.
Performance
Unit/ Share Awards
The Plan permits the grant of performance unit and performance
share awards which are bonuses credited to an account
established for the recipient and payable in cash, our common
stock, or a combination thereof. Each performance unit has an
initial value that is established by the Committee at the time
of its grant. Each performance share has an initial value equal
to the fair market value of a share of our common stock on the
date of its grant. The number
and/or value
of performance unit/shares that will be paid out to recipients
will depend upon the extent to which performance goals
established by the Committee are satisfied. After a performance
unit/share award has vested, the recipient will be entitled to
receive a payout of the number of performance unit/shares earned
by the recipient, to be determined as a function of the extent
to which the corresponding performance goals have been achieved.
The Committee also may waive the achievement of any performance
goals for such performance units/shares. Subject to the
applicable award agreement, performance units/shares awarded to
recipients will be forfeited upon the earlier of the
recipients termination of employment or the date set forth
in the award agreement.
Term
No grants of incentive stock options may be made under the Plan
after March 20, 2013. All awards made under the Plan that
remain outstanding subsequent to that date shall continue to be
governed by the terms of the Plan.
Nontransferability
of Awards
Awards granted under the Plan may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the applicable laws of descent and
distribution. However, an optionee or
15
recipient may designate one or more beneficiaries to receive any
exercisable or vested awards following his or her death.
Plan
Benefits
As the grant of awards under the Plan is discretionary, it is
impossible to determine the amount and terms of such future
grants under the Plan.
Prohibition
on Repricings
The Committee may not lower the exercise price of outstanding
option rights without the approval of our stockholders.
Adjustments
The maximum number of shares of common stock which may be
awarded under the Plan, and the number of shares and price per
share applicable to any outstanding award, are subject to
adjustment in the event of stock dividends, stock splits,
combinations of shares, recapitalizations, mergers,
consolidations or other reorganizations.
Market
Value of Underlying Securities
Our common stock underlies all of the options and rights to be
awarded under the Plan. The market value of the common stock at
the close of trading on September 7, 2007 was $6.17 per
share.
Federal
Tax Aspects
The following is a summary of certain federal income tax
consequences relating to awards under the Plan, based on federal
income tax laws currently in effect. This summary is not
intended to and does not describe all of the possible tax
consequences that could result from the acquisition, holding,
exercise or disposition of an option right or shares of common
stock purchased or granted pursuant to, or any other award
granted under, the Plan and does not describe any state, local
or foreign tax consequences.
Tax
Consequences to Participants
Incentive Stock Options. A plan participant
will not recognize income upon the grant of an option intended
to be an incentive stock option. Furthermore, a plan participant
will not recognize ordinary income upon the exercise of an
incentive stock option if he or she satisfies certain employment
and holding period requirements although the exercise may be
subject to alternative minimum tax. To satisfy the employment
requirement, a Plan participant must exercise the option not
later than three (3) months after he or she ceases to be
our employee (one (1) year if he or she is disabled). To
satisfy the holding period requirement, a Plan participant must
hold the shares acquired upon exercise of the incentive stock
option for more than two (2) years from the grant of the
option and more than one (1) year after the shares are
transferred to him or her. If these requirements are satisfied,
the Plan participant will be taxed on the difference between his
or her basis in the shares and the net proceeds of the sale at
capital gain rates on the sale of the shares.
If a Plan participant disposes of shares of our common stock
acquired upon the exercise of an incentive stock option without
satisfying the holding period requirement, the Plan participant
will usually recognize ordinary income at the time of
disposition equal to the amount of the difference between the
fair market value of that stock on the date the option is
exercised and the exercise price of the option.
Non-Qualified Stock Options. In general, a
Plan participant will not recognize income at the time an option
is granted. At the time of exercise of the option, he or she
will recognize ordinary income if the shares are not subject to
a substantial risk of forfeiture (as defined in Section 83
of the Internal Revenue Code). The amount of such income will be
equal to the difference between the option exercise price and
the fair market value of the shares of our common stock on the
date of exercise. At the time of the sale of the shares of our
common stock acquired pursuant to the exercise of an option,
appreciation in value of the shares after the date of exercise
will be treated as either short-term or long-term capital gain,
and depreciation in value will be treated as short-term or
long-term
16
capital loss, depending on how long the shares have been held.
Long-term capital gains may be eligible for reduced rates if the
participant has satisfied applicable holding period requirements.
Stock Appreciation Rights. A Plan participant
will not recognize income upon the grant of a stock appreciation
right. In general, a participant will recognize ordinary income
at the time he or she receives payment on a stock appreciation
right in the amount of the payment.
Restricted Shares. In general, a Plan
participant will not recognize ordinary income upon receipt of
restricted shares. The Plan participant will recognize ordinary
income when the shares are transferable by the Plan participant
or are no longer subject to a substantial risk of forfeiture,
whichever occurs first. At such time, the Plan participant will
recognize ordinary income in an amount equal to the current fair
market value of the shares. A Plan participant may, however,
elect to recognize ordinary income when the restricted shares
are granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the
restrictions. Any appreciation in the value of the shares after
the date the shares become transferable or are no longer subject
to substantial risk of forfeiture, or after the participant has
made the election referred to in the preceding sentence, if
applicable, will be treated as either short-term or long-term
capital gain, and any depreciation in value will be treated as
either short-term or long-term capital loss, depending upon how
long the shares have been held.
Performance Units. A Plan participant will not
recognize income upon the grant of performance units. In
general, a Plan participant will recognize ordinary income at
the time he or she receives payment with respect to performance
units in the amount of the payment.
Tax
Consequences to the Company
To the extent that a Plan participant recognizes ordinary income
as described above, we will be entitled to a corresponding
deduction provided that, among other things, the income meets
the test of reasonableness, is an ordinary and necessary
business expense, is not an excess parachute payment
within the meaning of Section 280G of the Internal Revenue
Code and is not disallowed by the $1,000,000 limitation on
certain executive compensation under Section 162(m) of the
Internal Revenue Code.
Predecessor Plans. In addition to stock
options outstanding under our current equity compensation plan
(the 2003 Equity Incentive Plan), we have stock options
outstanding under the following prior equity compensation plans:
the 1999 Stock Option Plan, the 1998 Stock Option Plan, the 1992
Stock Option Plan, the Non-statutory 1992 Directors Option
Plan and the 1988 Stock Option Plan, as well as, the Conductus
1987 Stock Option Plan, 1989 Stock Option Plan and 2001 Stock
Option Plan. All of these plans are administrated by our
Compensation Committee, and no new grants may be made under any
of them.
SUMMARY
COMPENSATION TABLE
The following table sets forth the base salary and other
compensation that was paid or earned in 2006 by our named
executive officers. The discussion of executive compensation
below and information disclosed in the
17
Summary Compensation Table and Grants of Plan Based Awards table
reflect executive compensation paid and grants awarded during
the year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(i)
|
|
(j)
|
(a)
|
|
(b)
|
|
Salary
|
|
Bonus
|
|
Stock Awards
|
|
Option Awards
|
|
All Other Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
Jeffrey A. Quiram
|
|
|
2006
|
|
|
|
310,961
|
|
|
|
|
|
|
|
31,313
|
|
|
|
|
|
|
|
135,326
|
|
|
|
477,600
|
|
Director, President, Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin S. McDermut
|
|
|
2006
|
|
|
|
75,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
496
|
|
|
|
75,672
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Principal Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until March 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William J. Buchanan
|
|
|
2006
|
|
|
|
188,026
|
|
|
|
|
|
|
|
6,263
|
|
|
|
|
|
|
|
9,945
|
|
|
|
204,234
|
|
Controller and Acting Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer (Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer effective
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 13, 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L Johnson
|
|
|
2006
|
|
|
|
227,244
|
|
|
|
|
|
|
|
12,525
|
|
|
|
|
|
|
|
1,290
|
|
|
|
241,059
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B. Hammond
|
|
|
2006
|
|
|
|
244,087
|
|
|
|
|
|
|
|
12,525
|
|
|
|
|
|
|
|
1,290
|
|
|
|
257,902
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Technical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Shelton
|
|
|
2006
|
|
|
|
170,440
|
|
|
|
75,000
|
|
|
|
4,697
|
|
|
|
28,687
|
|
|
|
39,745
|
|
|
|
318,569
|
|
Vice President Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts in column (f) reflect the dollar amount
recognized for financial statement reporting purposes for the
year ended December 31, 2006, in accordance with
FAS 123(R) of awards of options to purchase the following
numbers of shares of our Common Stock, as follows: for
Mr. Shelton, 55,000 shares. Assumptions used in the
calculation of these amounts are included in footnote 7 to our
audited financial statements for the year ended
December 31, 2006 included in our Annual Report on
Form 10-K
filed with the SEC on April 2, 2007.
|
|
(2)
|
The amount shown in column (i) reflects the value
attributable to term life insurance premiums for each named
executive officer as well as other perquisites described below.
Each named executive officer is responsible for paying income
tax on such amounts. The aggregate dollar amount of perquisites
or other personal benefits for our named executive officers is
less than $10,000 for each named executive officer, except with
respect to Messrs. Quiram and Shelton. Pursuant to the
terms of their employment agreements, Mr. Quiram received
$134,876 for travel expenses from his home in Minnesota, the
lease of an apartment near our Santa Barbara headquarters,
the lease of an automobile, and special indemnity payments to
cover the taxes resulting from the payment or reimbursement of
such travel and housing expenses and Mr. Shelton received
$39,416 for travel expenses for travel from his home in
California to our headquarters.
|
|
(3)
|
The amounts in column (e) reflect the following restricted
stock awards: Mr. Quiram, 100,000 shares;
Mr. Buchanan, 20,000 shares; Mr. Johnson
40,000 shares; Mr. Hammond, 40,000 shares;
Mr. Shelton 15,000 shares. We used the value
recognized for financial statement reporting purposes in
accordance with FAS 123(R), under the assumptions included in
footnote 14 to our audited financial statements for the year
ended December 31, 2006 included in our Annual Report to
Stockholders.
|
|
(4)
|
Mr. Buchanan became our Principal Financial Officer on
March 13, 2006, but his compensation for the full year is
included. The numbers also reflect partial years in the case of
Messrs. Quiram (2005), McDermut (2006) and Shelton
(2006).
|
18
Based on the fair value of equity awards granted to our named
executive officers in 2006 and the base salary of our named
executive officers, Salary accounted for
approximately 78% of the total compensation of our named
executive officers while incentive compensation accounted for
approximately 6% of the total compensation of our named
executive officers. Because the value of certain equity awards
included in the table below is based on the FAS 123(R)value
rather than the fair value, these percentages may not be able to
be derived using the amounts reflected in the table below.
GRANTS OF
PLAN BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number of
|
|
|
Exercise or
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Securities
|
|
|
Base Price of
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Grant Date Fair Value of Stock
|
|
Name
|
|
Grant Date
|
|
|
or Units (#)
|
|
|
Options (#)
|
|
|
Awards ($/Sh)
|
|
|
and Option Awards ($)
|
|
(a)
|
|
(b)
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
Jeffrey A Quiram
|
|
|
7/28/2006
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
William J Buchanan
|
|
|
7/28/2006
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
Robert L Johnson
|
|
|
7/28/2006
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
Robert B Hammond
|
|
|
7/28/2006
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
Adam L Shelton
|
|
|
4/24/2006
|
|
|
|
|
|
|
|
55,000
|
|
|
|
4.03
|
|
|
|
152,998
|
|
|
|
|
7/28/2006
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
The Stock Awards vest in a single installment on the second
anniversary of the grant date in July 2008. The Stock Options
vest over four years: 25% after one year and ratably, monthly,
for the remaining three years.
19
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Options (#)
|
|
Options (#)
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
|
Exercisable
|
|
Unexercisable
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
Name
|
|
(1)
|
|
(2)
|
|
Price ($)
|
|
Date
|
|
Vested (2)
|
|
Vested ($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Jeffrey A Quiram
|
|
|
120,000
|
|
|
|
|
|
|
|
10.40
|
|
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
6.90
|
|
|
|
5/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
177,000
|
|
William J Buchanan
|
|
|
42
|
|
|
|
|
|
|
|
30.00
|
|
|
|
2/4/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
40.00
|
|
|
|
2/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
28.75
|
|
|
|
6/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
89.06
|
|
|
|
1/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
356.25
|
|
|
|
6/14/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
79.37
|
|
|
|
2/8/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
528
|
|
|
|
|
|
|
|
52.25
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
528
|
|
|
|
|
|
|
|
10.40
|
|
|
|
2/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
30.50
|
|
|
|
5/22/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
810
|
|
|
|
|
|
|
|
66.40
|
|
|
|
1/27/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
|
|
|
|
|
10.00
|
|
|
|
9/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
35,400
|
|
Robert L Johnson
|
|
|
5,999
|
|
|
|
|
|
|
|
280.00
|
|
|
|
4/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
211.80
|
|
|
|
8/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
1,999
|
|
|
|
|
|
|
|
113.75
|
|
|
|
11/7/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
835
|
|
|
|
|
|
|
|
79.37
|
|
|
|
2/8/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
52.00
|
|
|
|
5/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600
|
|
|
|
|
|
|
|
52.25
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
6,600
|
|
|
|
|
|
|
|
10.40
|
|
|
|
2/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
30.50
|
|
|
|
5/22/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
66.40
|
|
|
|
1/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
14,999
|
|
|
|
|
|
|
|
10.00
|
|
|
|
9/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
70,800
|
|
Robert B Hammond
|
|
|
125
|
|
|
|
|
|
|
|
40.00
|
|
|
|
1/28/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
32.50
|
|
|
|
5/20/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
542
|
|
|
|
|
|
|
|
23.13
|
|
|
|
12/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
992
|
|
|
|
|
|
|
|
38.75
|
|
|
|
12/10/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
89.06
|
|
|
|
1/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
1,999
|
|
|
|
|
|
|
|
113.75
|
|
|
|
11/7/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
365
|
|
|
|
|
|
|
|
79.37
|
|
|
|
2/8/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
5,775
|
|
|
|
|
|
|
|
52.25
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
4,375
|
|
|
|
|
|
|
|
10.40
|
|
|
|
2/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
30.50
|
|
|
|
5/22/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
|
|
|
|
|
|
66.40
|
|
|
|
1/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
9,750
|
|
|
|
|
|
|
|
10.00
|
|
|
|
9/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
70,800
|
|
Adam L Shelton
|
|
|
|
|
|
|
55,000
|
|
|
|
4.03
|
|
|
|
4/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
26,600
|
|
20
|
|
|
(1) |
|
These options are fully vested. |
|
(2) |
|
We granted a total of 55,000 shares subject to options to
one employee in 2006. This number includes options granted to
employee directors, but excludes options granted to non-employee
directors and consultants. These options will fully vest in four
years; 25% after one year and ratably, monthly, for the
remaining three years. |
Option
Exercises and Stock Vested
There were no stock options exercised or vested by named
executive officers during fiscal 2006.
Potential
Payments Upon Termination or Change of Control
The information below sets forth the amount of compensation we
will pay to each of our named executive officers in the event of
termination of such executives employment, including
certain estimates of the amount which would have been paid on
certain dates under what we believe to be reasonable
assumptions. However, the actual amounts to be paid out can only
be determined at the time of such executives termination.
Payments
Made Upon Termination
Regardless of the manner in which any of our employees
(including any of our named executive officers) is terminated,
the employee is entitled to receive certain amounts due during
such employees term of employment. Such amounts include:
|
|
|
|
|
Any unpaid base salary from the date of the last payroll to the
date of termination;
|
|
|
|
Any unpaid annual bonus for a previously completed year, unless
specified otherwise;
|
|
|
|
Reimbursement for any properly incurred unreimbursed business
expenses; and
|
|
|
|
unpaid, accrued and unused personal time off through the date of
termination;
|
In addition, the officer will retain certain rights:
|
|
|
|
|
any existing rights to indemnification for prior acts through
the date of termination; and
|
|
|
|
Any stock options awarded pursuant to our 2006 Plan to the
extent provided in that Plan and the grant or award.
|
Payments Made Upon Termination by Us Without Cause or by the
Officer for Good Reason. Under his employment
agreement, Mr. Quiram is entitled to receive a severance
payment equal to one years salary and continued benefits
for one year in the event of his involuntary termination, and
all of Mr. Quirams equity grants then outstanding
will vest immediately. Under his employment agreement,
Mr. White is entitled to receive a severance payment equal
to six months salary and continued benefits for six months
in the event of his involuntary termination, and all of
Mr. Whites equity grants then outstanding will vest
immediately. Based on compensation paid in 2006, then unvested
options, and using medical insurance premiums and the price of
our Common Stock as of December 31, 2006, we estimate that
the approximate value of these severance payments on
December 31, 2006 would have been $495,000 for
Mr. Quiram and $183,000 for Mr. White.
Payments on Termination following a Change of
Control. Under his employment agreement, in the
event of a change of control, whether or not he is terminated,
Mr. Quiram is entitled to (i) payment of two times his
annual base salary, (ii) 24 months of benefits
coverage, and (iii) vesting of all of his outstanding
equity grants. Under his employment agreement, in the event of a
change of control, whether or not he is terminated,
Mr. White is entitled to (i) vesting of 50% of his
equity grants and (ii) vesting of his remaining equity
grants if he does not resign from us for six months after the
change in control. In addition, if Mr. Whites
employment is terminated involuntarily following a change in
control, then he is entitled to a lump sum payment equal to one
year of his base salary. Based on compensation paid in 2006,
then unvested equity grants, and using medical insurance
premiums and the price of our Common Stock as of
December 31, 2006, we estimate that the approximate value
of these benefits on December 31, 2006 would have been
$813,000 for Mr. Quiram, and $35,000 for Mr. White. If
Mr. White does not resign for six months after the change
in control, he would have received an estimated additional
$35,000 in benefits under such
21
assumptions. If Mr. White is terminated involuntarily
following a change in control, he would have received an
estimated additional $220,000 in benefits under such assumptions.
If within twenty-four months of a change in control any of
Messrs. Hammond, Johnson or Shelton (i) is terminated
by us for any reason other than death, cause or
disability or (ii) terminates his employment
for good reason, then the terminated executive will
be entitled to a severance payment equal to 1.5 times the
executives annual base salary, continuation of certain
benefits and immediate vesting of all his equity grants then
outstanding. Based on compensation paid in 2006, then unvested
equity grants, and using medical insurance premiums and the
price of our Common Stock as of December 31, 2006, we
estimate that the approximate value of these benefits on
December 31, 2006 would have been $480,000 for
Mr. Hammond, $470,000 for Mr. Johnson and $391,000 for
Mr. Shelton.
Payments Made Upon Death or Disability. Except
as noted above, none of our named executive officers have any
contractual severance arrangements on termination or change in
control.
TRANSACTIONS
WITH RELATED PERSONS
The Audit Committee has the authority to review and approve all
related-party transactions. See Corporate Governance
and Audit Committee.
Transactions
with Mr. Shalvoy
Settlement
of Litigation
Mr. Shalvoy, a director and stockholder, executed two notes
aggregating $820,244 in principal in connection with the
exercise in December 2000 of two options to purchase Conductus,
Inc. common stock prior our acquisition of Conductus, Inc. in
December 2002. We filed a lawsuit against Mr. Shalvoy to
collect both notes. On March 2, 2007, we entered into a
Settlement Agreement and Mutual Release of All Claims with
Mr. Shalvoy to settle the lawsuit, received $610,000 in
April 2007 and rescinded Mr. Shalvoys second
purported option exercise including cancellation of the related
note.
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO THE 2003 EQUITY INCENTIVE
PLAN
We believe that our officers and other key employees should have
a significant stake in our stock price performance under
programs which link compensation to shareholder return. As a
result, stock option grants and other equity incentives are an
integral part of our compensation program. We presently grant
equity incentives only under the Plan. The Plan has an aggregate
limit of 1,200,000 shares of our common stock for all
awards and related sublimits on awards to a single person and on
certain types of equity awards.
As of September 7, 2007, we had less than
282,000 shares of our common stock remaining under the Plan
for future equity grants. Therefore, on September 21, 2007,
our Board approved, and under this proposal you are being
requested to approve, an increase in the total shares available
for grants under the Plan from 1,200,000 shares of our
common stock to 2,500,000 shares of our common stock.
(Proposal 2 does not affect the sublimits in the Plan for
aggregate restricted stock, performance units and performance
shares, the maximum number of shares available for options and
SARs or all types of awards to a single participant in one year.)
We will have in excess of 21,000,000 shares of our common
stock outstanding after including the 9,216,590 shares sold
in a private placement in August 2007 an increase of
approximately 100% over approximately 10,700,000 shares
outstanding when the shareholders last amended the Plan in May
of 2005. This increase has dramatically reduced the effective
limit of the Plan as a percentage of the outstanding shares.
For a summary description of the 2003 Equity Incentive Plan, see
Executive Compensation Stock Option
Plans. That summary is qualified in its entirety by
reference to the full text of the amended plan which is attached
to this Proxy Statement as Annex A.
22
Vote
Required
Proposal Two requires the affirmative vote of a majority of
the votes cast on the proposal. Stockholders may vote
for or against the proposal, or
they may abstain from voting on the proposal. Abstentions will
have effect of voting against the proposal, but
broker non-votes will not have any effect on the outcome of this
proposal.
Board
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENTS TO THE 2003
EQUITY INCENTIVE PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of our Board has selected Stonefield
Josephson, Inc., an independent registered public accounting
firm, to audit our financial statements for the year ending
December 31, 2007. The Audit Committee is submitting its
selection to the shareholders for ratification. Stonefield
Josephson, Inc. has served as our auditor since 2006 and has no
financial interest of any kind in us except the professional
relationship between auditor and client. A representative of
Stonefield Josephson is expected to attend the meeting, will be
afforded an opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate
questions by stockholders.
Required
Vote
Proposal 2 requires the affirmative vote of a majority of
the votes cast on the proposal. Stockholders may vote
for or against the proposal, or they may
abstain from voting on the proposal. Abstentions will have
effect of voting against the proposal, but broker
non-votes will not have any effect on the outcome of this
proposal. In the event the stockholders do not approve this
proposal, the Audit Committee will reconsider the appointment of
Stonefield Josephson, Inc. as the independent auditors.
Board
Recommendation
OUR BOARD RECOMMENDS A VOTE FOR
THIS PROPOSAL.
AUDIT
COMMITTEE REPORT
The Audit Committee reviews our financial reporting process on
behalf of our Board. Management has the primary responsibility
for the financial statements and the reporting process,
including the system of internal controls. The Audit Committee
has reviewed and discussed the audited financial statements with
management. In addition, the Audit Committee has discussed with
the independent auditors the matters required to be discussed by
Statements on Auditing Standards No. 90.
The Audit Committee has also received the written disclosures
and the letter from the independent accountants required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and
has discussed with PricewaterhouseCoopers its independence,
including whether their provision of other non-audit services to
us is compatible with maintaining its independence.
The Committee discussed with our independent auditors the
overall scope and plans for the respective audits. The Committee
meets with the independent auditors, with and without management
present to discuss the results of their examinations, the
evaluation of our internal controls and the overall quality of
our reporting.
Based upon the review and discussions referred to in the
foregoing paragraph, the Audit Committee recommended to our
Board that the audited financial statements be included in our
Annual Report on
Form 10-K
for the last year for filing with the Commission. The Audit
Committee and our Board also have recommended, subject to
shareholder approval, the selection of our independent auditors.
23
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities
Act of 1933, as amended (the Securities Act), or the
Exchange Act, through any general statement incorporating by
reference in its entirety the Proxy Statement in which this
report appears, except to the extent that we specifically
incorporates this report or a portion of it by reference. In
addition, this report shall not be deemed to be filed under
either the Securities Act or the Exchange Act.
Dennis J. Horowitz (Chairman)
David Vellequette
John D. Lockton
Lynn J. Davis
FEES PAID
TO INDEPENDENT AUDITORS
The Audit Committee regularly reviews and determines whether
specific non-audit projects or expenditures with our independent
auditors, Stonefield Josephson, Inc., potentially affect their
independence. The Audit Committees policy is to
pre-approve all audit and permissible non-audit services
provided by PricewaterhouseCoopers. Pre-approval is generally
provided by the Audit Committee for up to one year, as detailed
as to the particular service or category of services to be
rendered, as is generally subject to a specific budget. The
Audit Committee may also pre-approve additional services of
specific engagements on a
case-by-case
basis.
The following table sets forth the aggregate fees billed to us
by PricewaterhouseCoopers for the year ended December 31,
2005 and PricewaterhouseCoopers and Stonefield Josephson, Inc.
for the year ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit Fees(1)
|
|
$
|
300,293
|
|
|
$
|
521,450
|
|
Audit-related fees(2)
|
|
|
|
|
|
|
|
|
Tax fees
|
|
|
|
|
|
|
|
|
All other fees
|
|
|
12,630
|
|
|
|
4,685
|
|
Total
|
|
$
|
312,923
|
|
|
$
|
526,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes fees for professional services rendered for the audit
of our annual financial statements and review of our annual
report on
Form 10-K
and for reviews of the financial statements included in our
quarterly reports on Form
10-Q for the
first three quarters of the years ended December 31, 2006
and 2005. Includes $60,000 of fees in the year ended
December 31, 2005 in connection with SEC registration
statements. |
|
(2) |
|
Includes fees for professional services rendered in connection
with our evaluation of internal controls. |
FORM 10-K
Investor
Information
All reports filed by us with the SEC are available free of
charge via EDGAR through the SEC website at www.sec.gov. In
addition, the public may read and copy materials filed by us
with the SEC at the SECs public reference room located at
450 Fifth St., N.W., Washington, D.C., 20549. You can
obtain information about the operation of the SECs Public
Reference Room by calling the SEC at
1-800-SEC-0330.
We also provide copies of its
Forms 8-K,
10-K,
10-Q, Proxy,
Annual Report and press releases at no charge to investors upon
request and makes electronic copies of such reports and press
releases available through its website at www.suptech.com
as soon as reasonable practicable after filing such material
with the SEC. Requests should be sent to we, attention: William
J. Buchanan, Controller.
24
We know of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting,
it is the intention of the persons named in the enclosed proxy
card to vote the shares they represent as our Board may
recommend.
By Order of the Board of Directors
Jeffrey A. Quiram
President and Chief Executive Officer
Santa Barbara, California
September 26, 2007
25
Annex A
SUPERCONDUCTOR
TECHNOLOGIES INC.
2003
Equity Incentive Plan
Superconductor Technologies Inc. hereby adopts the 2003 Equity
Incentive Plan, effective as of March 20, 2003 and amends
it as of September 21, 2007, as follows:
SECTION 1
BACKGROUND,
PURPOSE AND DURATION
1.1 Background and Effective Date. The
Plan provides for the granting of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights (or SARs),
Restricted Stock, Performance Units, and Performance Shares. The
Plan is adopted effective as of March 20, 2003 and amended
effective as of September 21, 2007, subject to approval by
the stockholders of the Company within twelve (12) months.
The Company will seek stockholder approval in the manner and to
the degree required under Applicable Laws. Awards may be granted
prior to the receipt of stockholder approval, but such grants
shall be null and void if such approval is not in fact received
within twelve (12) months.
1.2 Purpose of the Plan. The purpose of
the Plan is to promote the success, and enhance the value, of
the Company by aligning the interests of Participants with those
of the Companys shareholders, and by providing
Participants with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of
outstanding individuals, upon whose judgment, interest, and
special effort the success of the Company largely is dependent.
1.3 Duration of the Plan. The Plan shall
commence on the date specified in Section 1.1 and subject
to SECTION 12 (concerning the Boards right to amend
or terminate the Plan), shall remain in effect thereafter.
However, without further stockholder approval, no Incentive
Stock Option may be granted under the Plan on or after
March 20, 2013.
1.4 Termination of Old Plans. The
Companys four existing stock option plans (the 1992 Stock
Option Plan, the Nonstatutory 1992 Directors Stock Option
Plan, the 1998 Stock Option Plan and the 1999 Stock Option Plan)
shall terminate effective upon stockholder approval of this
Plan, and no further grants of awards shall be made under those
plans after the date of such approval. The termination of those
plans will not affect the rights of holders of options
previously granted and outstanding under those plans.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following
meanings unless a different meaning is plainly required by the
context:
2.1 1934 Act means the Securities
Exchange Act of 1934, as amended. Reference to a specific
section of the Exchange Act or regulation thereunder shall
include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of
any future legislation or regulation amending, supplementing or
superseding such section or regulation.
2.2 Affiliate means any corporation or
any other entity (including, but not limited to, partnerships
and joint ventures) controlling, controlled by, or under common
control with the Company.
2.3 Affiliated SAR means an SAR that is
granted in connection with a related Option, and which
automatically will be deemed to be exercised at the same time
that the related Option is exercised.
2.4 Applicable Laws means the
requirements relating to the administration of equity plans
under U.S. state corporate laws, U.S. federal and
state securities laws, the Code, any stock exchange or quotation
system on which
A-1
the Shares are is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Awards are, or will
be, granted under the Plan.
2.5 Award means, individually or
collectively, a grant under the Plan of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, or Performance Shares.
2.6 Award Agreement means the written
agreement setting forth the terms and provisions applicable to
each Award granted under the Plan.
2.7 Board or Board of
Directors means the Board of Directors of the Company.
2.8 Change in Control is defined in
Section 15.4.
2.9 Code means the Internal Revenue Code
of 1986, as amended. Reference to a specific section of the Code
or regulation thereunder shall include such section or
regulation, any valid regulation promulgated under such section,
and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section
or regulation.
2.10 Committee means the committee
appointed by the Board to administer the Plan pursuant to
Section 3.1.
2.11 Company means Superconductor
Technologies Inc., a Delaware corporation, or any successor
thereto.
2.12 Consultant means an individual who
provides significant services to the Company
and/or an
Affiliate, including a Director who is not an Employee.
2.13 Director means any individual who
is a member of the Board of Directors of the Company.
2.14 Disability means a permanent and
total disability within the meaning of Code
Section 22(e)(3).
2.15 Employee means an employee of the
Company or of an Affiliate, whether such employee is so employed
at the time the Plan is adopted or becomes so employed
subsequent to the adoption of the Plan.
2.16 ERISA means the Employee Retirement
Income Security Act of 1974, as amended. Reference to a specific
section of ERISA shall include such section, any valid
regulation promulgated thereunder, and any comparable provision
of any future legislation amending, supplementing or superseding
such section.
2.17 Fair Market Value means as of any
date, the value of a Share determined as follows:
(a) If the Shares are listed on any established stock
exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap
Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such Share (or the closing bid,
if no sales were reported) as quoted on such exchange or system
on the day of, or the last market trading day prior to, the day
of determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable;
(b) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair
Market Value of the Share shall be the mean between the high bid
and low asked prices for the Shares on the day of, or the last
market trading day prior to, the day of determination, as
reported in The Wall Street Journal or such other source as the
Committee deems reliable; or
(c) In the absence of an established market for the Shares,
the Fair Market Value shall be determined in good faith by the
Committee.
2.18 Freestanding SAR means a SAR that
is granted independently of any Option.
2.19 Incentive Stock Option or
ISO means an option to purchase Shares, which
is designated as an Incentive Stock Option and is intended to
meet the requirements of Section 422 of the Code.
2.20 Nonqualified Stock Option means an
option to purchase Shares which is not intended to be an
Incentive Stock Option.
2.21 Option means an Incentive Stock
Option or a Nonqualified Stock Option.
A-2
2.22 Option Price means the price at
which a Share may be purchased pursuant to an Option.
2.23 Participant means an Employee,
Consultant or Director who has an outstanding Award.
2.24 Performance Share means an Award
granted to an Employee pursuant to SECTION 8 having an
initial value equal to the Fair Market Value of a Share on the
date of grant.
2.25 Performance Unit means an Award
granted to an Employee pursuant to SECTION 8 having an
initial value (other than the Fair Market Value of a Share) that
is established by the Committee at the time of grant.
2.26 Period of Restriction means the
period during which the transfer of Shares of Restricted Stock
are subject to restrictions.
2.27 Plan means the Superconductor
Technologies Inc. 2003 Equity Incentive Plan, as set forth in
this instrument and as hereafter amended from time to time.
2.28 Restricted Stock means an Award
granted to a Participant pursuant to SECTION 7.
2.29 Retirement means, in the case of an
Employee, a Termination of Employment by reason of the
Employees retirement at or after age 62.
2.30 Rule 16b-3
means
Rule 16b-3
promulgated under the 1934 Act, and any future regulation
amending, supplementing or superseding such regulation.
2.31 Section 16 Person means a
person who, with respect to the Shares, is subject to
Section 16 of the 1934 Act.
2.32 Shares means the shares of common
stock, $0.001 par value, of the Company.
2.33 Stock Appreciation Right or
SAR means an Award, granted alone or in
connection with a related Option, that pursuant to the terms of
SECTION 7 is designated as an SAR.
2.34 Subsidiary means any
subsidiary corporation (other than the Company) as
defined in Code Section 424(f).
2.35 Tandem SAR means an SAR that is
granted in connection with a related Option, the exercise of
which shall require forfeiture of the right to purchase an equal
number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the
same extent).
2.36 Termination of Employment means a
cessation of the employee-employer or director or other service
arrangement relationship between an Employee, Consultant or
Director and the Company or an Affiliate for any reason,
including, but not by way of limitation, a termination by
resignation, discharge, death, Disability, Retirement, or the
disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment or
re-engagement by the Company or an Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. The Plan shall be
administered by a committee of the Board that meets the
requirements of this Section 3.1 (hereinafter referred to
as the Committee). The Committee shall consist of
not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall
serve at the pleasure of, the Board of Directors. The Committee
shall be comprised solely of Directors who are both
outside directors under
Rule 16b-3
and independent directors under the requirements of
any national securities exchange or system upon which the Shares
are then listed
and/or
traded.
3.2 Authority of the Committee. The
Committee shall have all powers and discretion necessary or
appropriate to administer the Plan and to control its operation,
including, but not limited to, the power (a) to determine
which Employees, Consultants and Directors shall be granted
Awards, (b) to prescribe the terms and conditions of such
Awards, (c) to interpret the Plan and the Awards,
(d) to adopt rules for the administration, interpretation
and application of the Plan as are consistent therewith, and
(e) to interpret, amend or revoke any such rules.
A-3
The Committee, in its sole discretion and on such terms and
conditions as it may provide, may delegate all or any part of
its authority and powers under the Plan to one or more directors
and/or
officers of the Company; provided, however, that the Committee
may not delegate its authority and powers with respect to
Section 16 Persons.
3.3 Decisions Binding. All determinations
and decisions made by the Committee shall be final, conclusive,
and binding on all persons, and shall be given the maximum
deference permitted by law.
SECTION 4
SHARES
SUBJECT TO THE PLAN
4.1 Shares Available.
4.1.1 Maximum Shares Available under
Plan. The aggregate number of Shares available
for issuance under the Plan as of September 21,
2007 may not exceed two million five hundred thousand
(2,500,000) Shares. Such shares may be authorized but unissued
shares or treasury shares.
4.1.2 Limitation on Restricted Stock, Performance Units
and Performance Shares. The aggregate number of
Shares available for issuance pursuant to Awards of Restricted
Stock, Performance Units and Performance Shares may not exceed
three hundred sixty thousand (360,000) Shares.
4.1.3 Limitation on Incentive Stock Options and Stock
Appreciation Rights. No Participant may receive
Options and SARs for more than one hundred twenty thousand
(120,000) Shares in the aggregate in any single calendar year;
provided, however, that a Participant may receive Options and
SARs for up two hundred forty thousand (240,000) Shares in the
Participants initial year of service to the Company.
4.1.4 General Award Limitation. No
Participant may receive Awards under the Plan, the value of
which Awards is based solely on an increase in the value of
Shares after the date of grant of such Awards, for more than one
hundred twenty thousand (120,000) Shares in the aggregate in any
single calendar year; provided, however, that a Participant may
receive Options and SARs for up two hundred forty thousand
(240,000) Shares in the Participants initial year of
service to the Company. The foregoing annual limitation
specifically includes the grant of any Awards representing
qualified performance-based compensation within the
meaning of Section 162(m) of the Code.
4.1.5 Adjustments. All Share numbers in
this Section 4.1 are subject to adjustment as provided in
SECTION 15.
4.2 Number of Shares. The following rules
will apply for purposes of the determination of the number of
Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted
against the authorized pool of Shares, regardless of its vested
status.
(b) The grant of an Option or Restricted Stock shall reduce
the Shares available for grant under the Plan by the number of
Shares subject to such Award.
(c) The grant of a Tandem SAR shall reduce the number of
Shares available for grant by the number of Shares subject to
the related Option (i.e., there is no double counting of Options
and their related Tandem SARs); provided, however, that, upon
the exercise of such Tandem SAR, the authorized Share pool shall
be credited with the appropriate number of Shares representing
the number of shares reserved for such Tandem SAR less the
number of Shares actually delivered upon exercise thereof or the
number of Shares having a Fair Market Value equal to the cash
payment made upon such exercise.
(d) The grant of an Affiliated SAR shall reduce the number
of Shares available for grant by the number of Shares subject to
the SAR, in addition to the number of Shares subject to the
related Option; provided, however, that, upon the exercise of
such Affiliated SAR, the authorized Share pool shall be credited
with the appropriate number of Shares representing the number of
shares reserved for such Affiliated SAR less the number of
Shares actually delivered upon exercise thereof or the number of
Shares having a Fair Market Value equal to the cash payment made
upon such exercise.
A-4
(e) The grant of a Freestanding SAR shall reduce the number
of Shares available for grant by the number of Freestanding SARs
granted; provided, however, that, upon the exercise of such
Freestanding SAR, the authorized Share pool shall be credited
with the appropriate number of Shares representing the number of
shares reserved for such Freestanding SAR less the number of
Shares actually delivered upon exercise thereof or the number of
Shares having a Fair Market Value equal to the cash payment made
upon such exercise.
(f) The Committee shall in each case determine the
appropriate number of Shares to deduct from the authorized pool
in connection with the grant of Performance Units
and/or
Performance Shares.
(g) To the extent that an Award is settled in cash rather
than in Shares, the authorized Share pool shall be credited with
the appropriate number of Shares having a Fair Market Value
equal to the cash settlement of the Award.
4.3 Lapsed Awards. If an Award is
cancelled, terminates, expires, or lapses for any reason (with
the exception of the termination of a Tandem SAR upon exercise
of the related Option, or the termination of a related Option
upon exercise of the corresponding Tandem SAR), any Shares
subject to such Award again shall be available to be the subject
of an Award.
SECTION 5
STOCK
OPTIONS
5.1 Grant of Options. Options may be
granted to Employees, Consultants and Directors at any time and
from time to time, as determined by the Committee in its sole
discretion. The Committee, in its sole discretion, shall
determine the number of Shares subject to Options granted to
each Participant. The Committee may grant ISOs, NQSOs, or a
combination thereof.
5.2 Award Agreement. Each Option shall be
evidenced by an Award Agreement that shall specify the Option
Price, the expiration date of the Option, the number of Shares
to which the Option pertains, any conditions to exercise of the
Option, and such other terms and conditions as the Committee, in
its discretion, shall determine. The Award Agreement also shall
specify whether the Option is intended to be an ISO or a NQSO.
5.3 Option Price. Subject to the
provisions of this Section 5.3, the Option Price for each
Option shall be determined by the Committee in its sole
discretion.
5.3.1 Nonqualified Stock Options. In the
case of a Nonqualified Stock Option, the Option Price shall be
not less than one hundred percent (100%) of the Fair Market
Value of a Share on the date that the Option is granted.
5.3.2 Incentive Stock Options. In the
case of an Incentive Stock Option, the Option Price shall be not
less than one hundred percent (100%) of the Fair Market Value of
a Share on the date that the Option is granted; provided,
however, that if at the time that the Option is granted, the
Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of
the Code) owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or
any of its Subsidiaries, the Option Price shall be not less than
one hundred and ten percent (110%) of the Fair Market Value of a
Share on the date that the Option is granted.
5.3.3 Substitute Options. Notwithstanding
the provisions of Sections 5.3.1 and 5.3.2, in the event
that the Company or an Affiliate consummates a transaction
described in Section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation),
persons who become Employees, Consultants or Directors on
account of such transaction may be granted Options in
substitution for options granted by their former employer. If
such substitute Options are granted, the Committee, in its sole
discretion, may determine that such substitute Options shall
have an exercise price less than 100% of the Fair Market Value
of the Shares on the date the Option is granted.
5.4 Expiration of Options. Unless the
applicable stock option agreement provides otherwise, each
Option shall terminate upon the first to occur of the events
listed in Section 5.4.1, subject to Section 5.4.2.
A-5
5.4.1 Expiration Dates.
(a) The date for termination of the Option set forth in the
Award Agreement;
(b) The expiration of ten years from the date the Option
was granted, or
(c) The expiration of three months from the date of the
Participants Termination of Employment for a reason other
than the Participants death, Disability or
Retirement, or
(d) The expiration of twelve months from the date of the
Participants Termination of Employment by reason of
Disability, or
(e) The expiration of twelve months from the date of the
Participants death, if such death occurs while the
Participant is in the employ or service of the Company or an
Affiliate.
5.4.2 Committee Discretion. The Committee
shall provide, in the terms of each individual Option, when such
Option expires and becomes unexercisable. After the Option is
granted, the Committee, in its sole discretion may extend the
maximum term of such Option. The foregoing discretionary
authority is subject to the limitations and restrictions on
Incentive Stock Options set forth in Section 5.8.
5.5 Exercise of Options. Options granted
under the Plan shall be exercisable at such times, and subject
to such restrictions and conditions, as the Committee shall
determine in its sole discretion. After an Option is granted,
the Committee, in its sole discretion, may accelerate the
exercisability of the Option.
5.6 Payment. The Committee shall
determine the acceptable form of consideration for exercising an
Option, including the method of payment. In the case of an
Incentive Stock Option, the Committee shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(a) cash;
(b) check;
(c) promissory note;
(d) other Shares which (i) in the case of Shares
acquired upon exercise of an Option, have been owned by the
Participant for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(e) consideration received by the Company from a licensed
broker under a cashless exercise program implemented by the
Company to facilitate same day exercises and sales
of Options;
(f) a reduction in the amount of any Company liability to
the Participant, including any liability attributable to the
Participants participation in any Company-sponsored
deferred compensation program or arrangement;
(g) any combination of the foregoing methods of
payment; or
(h) such other consideration and method of payment for the
issuance of Shares to the extent permitted by applicable laws.
5.7 Restrictions on Share
Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of
an Option, as it may deem advisable, including, but not limited
to, restrictions related to Federal securities laws, the
requirements of any national securities exchange or system upon
which such Shares are then listed
and/or
traded,
and/or any
blue sky or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock
Options.
5.8.1 Exercisability. The aggregate Fair
Market Value (determined at the time the Option is granted) of
the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its
Subsidiaries) shall not exceed $100,000.
5.8.2 Termination of Employment. No
Incentive Stock Option may be exercised more than three months
after the Participants termination of employment for any
reason other than Disability or death, unless (a) the
A-6
Participant dies during such three-month period, and
(b) the Award Agreement
and/or the
Committee permits later exercise. No Incentive Stock Option may
be exercised more than one year after the Participants
termination of employment on account of Disability, unless
(a) the Participant dies during such one-year period, and
(b) the Award Agreement
and/or the
Committee permit later exercise.
5.8.3 Company and Subsidiaries
Only. Incentive Stock Options may be granted only
to persons who are Employees of the Company
and/or a
Subsidiary at the time of grant.
5.8.4 Expiration. No Incentive Stock
Option may be exercised after the expiration of 10 years
from the date such Option was granted; provided, however, that
if the Option is granted to an Employee who, together with
persons whose stock ownership is attributed to the Employee
pursuant to Section 424(d) of the Code, owns stock
possessing more than 10% of the total combined voting power of
all classes of the stock of the Company or any of its
Subsidiaries, the Option may not be exercised after the
expiration of 5 years from the date that it was granted.
5.9 Nontransferability of Options. No
Option granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by
will, the laws of descent and distribution, or as provided under
SECTION 9. All Options granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by
such Participant.
SECTION 6
STOCK
APPRECIATION RIGHTS
6.1 Grant of SARs. An SAR may be granted
to an Employee, Consultant or Director at any time and from time
to time as determined by the Committee, in its sole discretion.
The Committee may grant Affiliated SARs, Freestanding SARs,
Tandem SARs, or any combination thereof. The Committee shall
have complete discretion to determine the number of SARs granted
to any Participant, and consistent with the provisions of the
Plan, the terms and conditions pertaining to such SARs. However,
the grant price of a Freestanding SAR shall be at least equal to
the Fair Market Value of a Share on the date of grant. The grant
price of Tandem or Affiliated SARs shall equal the Option Price
of the related Option.
6.2 Exercise of Tandem SARs. Tandem SARs
may be exercised for all or part of the Shares subject to the
related Option upon the surrender of the right to exercise the
equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related
Option is then exercisable.
6.2.1 ISOs. Notwithstanding any contrary
provision of the Plan, with respect to a Tandem SAR granted in
connection with an ISO: (i) the Tandem SAR shall expire no
later than the expiration of the underlying ISO; (ii) the
value of the payout with respect to the Tandem SAR shall be for
no more than one hundred percent (100%) of the difference
between the Option Price of the underlying ISO and the Fair
Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR
shall be exercisable only when the Fair Market Value of the
Shares subject to the ISO exceeds the Option Price of the ISO.
6.3 Exercise of Affiliated SARs. An
Affiliated SAR shall be deemed to be exercised upon the exercise
of the related Option. The deemed exercise of an Affiliated SAR
shall not necessitate a reduction in the number of Shares
subject to the related Option.
6.4 Exercise of Freestanding
SARs. Freestanding SARs shall be exercisable on
such terms and conditions as the Committee, in its sole
discretion, shall determine.
6.5 SAR Agreement. Each SAR shall be
evidenced by an Award Agreement that shall specify the grant
price, the term of the SAR, the conditions of exercise, and such
other terms and conditions as the Committee, in its sole
discretion, shall determine.
6.6 Expiration of SARs. An SAR granted
under the Plan shall expire upon the date determined by the
Committee, in its sole discretion, and set forth in the Award
Agreement. Notwithstanding the foregoing, the rules of
Section 5.4 (pertaining to Options) also shall apply to
SARs.
A-7
6.7 Payment of SAR Amount. Upon exercise
of an SAR, a Participant shall be entitled to receive payment
from the Company in an amount determined by multiplying: of an
SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share
on the date of exercise over the grant price; times
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment upon SAR
exercise may be in cash, in Shares of equivalent value, or in
some combination thereof.
6.8 Nontransferability of SARs. No SAR granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will, the laws of
descent and distribution, or as permitted under SECTION 9.
An SAR granted to a Participant shall be exercisable during the
Participants lifetime only by such Participant.
SECTION 7
RESTRICTED
STOCK
7.1 Grant of Restricted Stock. Subject to
the terms and provisions of the Plan, the Committee, at any time
and from time to time, may grant Shares of Restricted Stock to
Employees, Consultants or Directors in such amounts as the
Committee, in its sole discretion, shall determine.
7.2 Restricted Stock Agreement. Each
Award of Restricted Stock shall be evidenced by an Award
Agreement that shall specify the Period of Restriction, the
number of Shares granted, and such other terms and conditions as
the Committee, in its sole discretion, shall determine. Unless
the Committee determines otherwise, shares of Restricted Stock
shall be held by the Company as escrow agent until the
restrictions on such Shares have lapsed.
7.3 Transferability. Except as provided
in this SECTION 7, Shares of Restricted Stock may not be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of
Restriction. All rights with respect to the Restricted Stock
granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
7.4 Other Restrictions. The Committee, in
its sole discretion, may impose such other restrictions on any
Shares of Restricted Stock as it may deem advisable including,
without limitation, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional,
and/or
individual),
and/or
restrictions under applicable Federal or state securities laws;
and may legend the certificates representing Restricted Stock to
give appropriate notice of such restrictions. For example, the
Committee may determine that some or all certificates
representing Shares of Restricted Stock shall bear the following
legend:
The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary, involuntary,
or by operation of law, is subject to certain restrictions on
transfer as set forth in the Superconductor Technologies Inc.
2003 Equity Incentive Plan, and in a Restricted Stock Agreement.
A copy of the Plan and such Restricted Stock Agreement may be
obtained from the Secretary of Superconductor Technologies
Inc.
7.5 Removal of Restrictions. Except as
otherwise provided in this SECTION 7, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan
shall be released from escrow as soon as practicable after the
last day of the Period of Restriction. The Committee, in its
discretion, may accelerate the time at which any restrictions
shall lapse,
and/or
remove any restrictions. After the restrictions have lapsed, the
Participant shall be entitled to have any legend or legends
under Section 7.4 removed from his or her Share
certificate, and the Shares shall be freely transferable by the
Participant.
7.6 Voting Rights. During the Period of
Restriction, Participants holding Shares of Restricted Stock
granted hereunder may exercise full voting rights with respect
to those Shares, unless the Committee determines otherwise.
7.7 Dividends and Other
Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be
entitled to receive all dividends and other distributions paid
with respect to such Shares,
A-8
unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares shall
be subject to the same restrictions on transferability and
forfeitability as the Shares of Restricted Stock with respect to
which they were paid.
7.8 Return of Restricted Stock to
Company. Subject to the applicable Award
Agreement and Section 7.5, upon the earlier of (a) the
Participants Termination of Employment, or (b) the
date set forth in the Award Agreement, the Restricted Stock for
which restrictions have not lapsed shall revert to the Company
and, subject to Section 4.3, again shall become available
for grant under the Plan.
7.9 Repurchase Option. Unless the
Committee determines otherwise, the Restricted Stock Purchase
Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the
Participants service with the Company for any reason
(including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement
shall be the original price paid by the Participant and may be
paid by cancellation of any indebtedness of the Participant to
the Company. The repurchase option shall lapse at a rate
determined by the Committee.
SECTION 8
PERFORMANCE
UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance
Units/Shares. Performance Units and Performance
Shares may be granted to Employees, Consultants or Directors at
any time and from time to time, as shall be determined by the
Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance
Units and Performance Shares granted to each Participant.
8.2 Value of Performance
Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time
of grant. Each Performance Share shall have an initial value
equal to the Fair Market Value of a Share on the date of grant.
The Committee shall set performance goals in its discretion
which, depending on the extent to which they are met, will
determine the number
and/or value
of Performance Units/Shares that will be paid out to the
Participants. The time period during which the performance goals
must be met shall be called the Performance Period.
8.3 Earning of Performance
Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units/Shares shall
be entitled to receive a payout of the number of Performance
Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved. After
the grant of a Performance Unit/Share, the Committee, in its
sole discretion, may adjust
and/or waive
the achievement of any performance goals for such Performance
Unit/Share.
8.4 Form and Timing of Payment of Performance
Units/Shares. Payment of earned Performance
Units/Shares shall be made as soon as practicable after the
expiration of the applicable Performance Period. The Committee,
in its sole discretion, may pay earned Performance Units/Shares
in the form of cash, in Shares (which have an aggregate Fair
Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period)
or in a combination thereof.
8.5 Cancellation of Performance
Units/Shares. Subject to the applicable Award
Agreement, upon the earlier of (a) the Participants
Termination of Employment, or (b) the date set forth in the
Award Agreement, all remaining Performance Units/Shares shall be
forfeited by the Participant to the Company, and subject to
Section 4.3, the Shares subject thereto shall again be
available for grant under the Plan.
8.6 Nontransferability. Performance
Units/Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will, the
laws of descent and distribution, or as permitted under
SECTION 9. A Participants rights under the Plan shall
be exercisable during the Participants lifetime only by
the Participant or the Participants legal representative.
A-9
SECTION 9
BENEFICIARY
DESIGNATION
If permitted by the Committee, a Participant may name a
beneficiary or beneficiaries to whom any unpaid vested Award
shall be paid in event of the Participants death. Each
such designation shall revoke all prior designations by the same
Participant and shall be effective only if given in a form and
manner acceptable to the Committee. In the absence of any such
designation, benefits remaining unpaid at the Participants
death shall be paid to the Participants estate and,
subject to the terms of the Plan, any unexercised vested Award
may be exercised by the Committee or executor of the
Participants estate.
SECTION 10
DEFERRALS
The Committee, in its sole discretion, may permit a Participant
to defer receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an
Award. Any such deferral elections shall be subject to such
rules and procedures as shall be determined by the Committee in
its sole discretion.
SECTION 11
RIGHTS OF
EMPLOYEES AND CONSULTANTS
11.1 No Effect on Employment or
Service. Nothing in the Plan shall interfere with
or limit in any way the right of the Company to terminate any
Participants employment or service at any time, with or
without cause.
11.2 Participation. No Employee,
Consultant or Director shall have the right to be selected to
receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.
SECTION 12
AMENDMENT,
SUSPENSION, OR TERMINATION
The Board, in its sole discretion, may alter, amend or terminate
the Plan, or any part thereof, at any time and for any reason.
However, as required by Applicable Laws, no alteration or
amendment shall be effective without further stockholder
approval. Neither the amendment, suspension, nor termination of
the Plan shall, without the consent of the Participant, alter or
impair any rights or obligations under any Award theretofore
granted. No Award may be granted during any period of suspension
nor after termination of the Plan.
SECTION 13
TAX
WITHHOLDING
13.1 Withholding Requirements. Prior to
the delivery of any Shares or cash pursuant to an Award, the
Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes
required to be withheld with respect to such Award.
13.2 Shares Withholding. The Committee,
in its sole discretion and pursuant to such procedures as it may
specify from time to time, may permit a Participant to satisfy
the minimum statutory tax withholding obligation, in whole or in
part, by delivering to the Company Shares already owned for more
than six (6) months having a value equal to the amount
required to be withheld. The value of the Shares to be delivered
will be based on their Fair Market Value on the date of delivery.
A-10
SECTION 14
INDEMNIFICATION
Each person who is or shall have been a member of the Committee,
or of the Board, shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, notion, suit, or
proceeding to which he or she may be a party or in which he or
she may be involved by reason of any action taken or failure to
act under the Plan or any Award Agreement and against and from
any and all amounts paid by him or her in settlement thereof,
with the Companys approval, or paid by him or her in
settlement thereof, with the Companys approval, or paid by
him or her in satisfaction of any judgment in any such action,
suit, or proceeding against him or her, provided he or she shall
give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the
Companys Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
SECTION 15
ADJUSTMENTS
UPON CHANGES IN CAPITALIZATION,
DISSOLUTION, MERGER OR ASSET SALE
15.1 Changes in Capitalization; No Award
Repricing. Subject to any required action by the
shareholders of the Company, the number of Shares covered by
each outstanding Award, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Awards
have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Award, as well as the
price per Share covered by each such outstanding Award, shall be
proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of
the Shares, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been
effected without receipt of consideration. Such
adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
Shares subject to an Award. Further, except for the adjustments
provided herein, no Award may be amended to reduce its initial
exercise price, and no Award may be cancelled and replaced with
an Award with a lower price.
15.2 Dissolution or Liquidation. In the
event of the proposed dissolution or liquidation of the Company,
the Committee shall notify each Participant as soon as
practicable prior to the effective date of such proposed
transaction. The Committee in its discretion may provide for a
Participant to have the right to exercise his or her Award until
ten (10) days prior to such transaction as to all of the
Shares covered thereby, including Shares as to which the Award
would not otherwise be exercisable. In addition, the Committee
may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Award shall lapse as to all
such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed
action.
15.3 Merger or Asset Sale. In the event
of a merger of the Company with or into another corporation, or
the sale of substantially all of the assets of the Company, each
outstanding Award shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the
Award, the Participant shall fully vest in and have the right to
exercise the Award as to all of the Shares as to which it would
not otherwise be vested or exercisable. If an Award becomes
fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the
Committee shall notify the Participant in writing or
electronically that the Award shall be fully vested and
exercisable for a period of fifteen (15) days from the date
of such notice, and the Award shall
A-11
terminate upon the expiration of such period. For the purposes
of this paragraph, the Award shall be considered assumed if,
following the merger or sale of assets, the option or right
confers the right to purchase or receive, for each Share subject
to the Award immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of
Shares for each Share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation
or its Parent, the Committee may, with the consent of the
successor corporation, provide for the consideration to be
received upon the exercise of the Award, for each Share subject
to the Award, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per
share consideration received by holders of Shares in the merger
or sale of assets.
15.4 Change in Control. In the event of a
Change of Control (as defined below), except as otherwise
determined by the Board, the Participant shall fully vest in and
have the right to exercise the Awards as to all of the Shares,
including Shares as to which it would not otherwise be vested or
exercisable. If an Award becomes fully vested and exercisable as
the result of a Change of Control, the Committee shall notify
the Participant in writing or electronically prior to the Change
of Control that the Award shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such
notice, and the Award shall terminate upon the expiration of
such period. For purposes of this Agreement, a Change of
Control means the happening of any of the following events:
(a) When any person, as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than
the Company, a Subsidiary or a Company employee benefit plan,
including any trustee of such plan acting as trustee) is or
becomes the beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
combined voting power of the Companys then outstanding
securities entitled to vote generally in the election of
directors; or
(b) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all the Companys assets; or
(c) A change in the composition of the Board of Directors
of the Company, as a result of which fewer than a majority of
the directors are Incumbent Directors. Incumbent
Directors shall mean directors who either (A) are
directors of the Company as of the date the Plan is approved by
the stockholders, or (B) are elected, or nominated for
election, to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating
to the election of directors to the Company).
SECTION 16
CONDITIONS
UPON ISSUANCE OF SHARES
16.1 Legal Compliance. Shares shall not
be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of Shares
shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such
compliance.
16.2 Investment Representations. As a
condition to the exercise of an Award, the Company may require
the person exercising such Award to represent and warrant at the
time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
A-12
SECTION 17
INABILITY
TO OBTAIN AUTHORITY
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed
by the Companys counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not
have been obtained.
SECTION 18
RESERVATION
OF SHARES
The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
SECTION 19
LEGAL
CONSTRUCTION
19.1 Gender and Number. Except where
otherwise indicated by the context, any masculine term used
herein also shall include the feminine; the plural shall include
the singular and the singular shall include the plural.
19.2 Severability. In the event any
provision of the Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been
included.
19.3 Requirements of Law. The granting of
Awards and the issuance of Shares under the Plan shall be
subject to all Applicable Laws.
19.4 Securities Law Compliance. With
respect to Section 16 Persons, transactions under this
Plan are intended to comply with all applicable conditions of
Rule 16b-3.
To the extent any provision of the Plan, Award Agreement or
action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed
advisable by the Committee.
19.5 Governing Law. The Plan and all
Award Agreements shall be construed in accordance with and
governed by the laws of the State of Delaware.
19.6 Captions. Captions are provided
herein for convenience only, and shall not serve as a basis for
interpretation or construction of the Plan.
A-13
DETACH HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SUPERCONDUCTOR TECHNOLOGIES INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 23, 2007
The undersigned stockholder of SUPERCONDUCTOR TECHNOLOGIES INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement,
each dated September 26, 2007, and hereby appoints Jeffrey A. Quiram as proxy and attorney-in-fact
with full power of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Stockholders of Superconductor Technologies Inc. to be held on
Tuesday, October 23, 2007 at 11:00 a.m., local time, at the offices of Superconductor Technologies
Inc, located at 460 Ward Drive, Santa Barbara, California and at any adjournment or adjournments
thereof, and to vote all shares of capital stock that the undersigned would be entitled to vote if
then and there personally present, on the matters set forth on the reverse side.
[SEE REVERSE SIDE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
[BACK OF PROXY]
DETACH HERE
[X] |
|
Please mark votes as in this example |
|
1. |
|
TO ELECT TWO CLASS 3 DIRECTORS. |
Nominees: John D. Lockton and David Vellequette
|
|
|
|
|
o FOR ALL NOMINEES
(except listed to the contrary below)
|
|
o WITHHELD FROM ALL NOMINEES
|
|
o EXCEPTIONS |
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the Exceptions
box and write that nominees name in the space provided above.)
|
|
|
|
|
|
|
|
|
|
|
2. |
|
PROPOSAL TO INCREASE THE SHARES
AUTHORIZED UNDER THE 2003 EQUITY
INCENTIVE PLAN TO 2,500,000.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o |
|
|
|
|
|
|
|
|
|
|
|
3. |
|
PROPOSAL TO RATIFY THE
SELECTION OF STONEFIELD JOSEPHSON, INC.
AS INDEPENDENT AUDITORS OF THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 2007.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o |
As to any other matters that may properly come before the meeting or any adjournments thereof, the
proxy holders are authorized to vote in accordance with their best judgment.
|
|
|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
|
|
o |
|
|
|
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING
|
|
o |
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants or as community property, both
should sign.)
|
|
|
|
|
|
|
Signature:
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE
VOTED FOR THE ELECTION OF DIRECTORS, AND FOR THE RATIFICATION OF THE APPOINTMENT OF
STONEFIELD JOSEPHSON, INC. AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2007, AND AS THE PROXY
HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.