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 ☒ Filed by a Party other than the
Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional materials
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Soliciting Material Pursuant to § 240.14a-12
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SUPERCONDUCTOR TECHNOLOGIES INC.
(Name of Registrant as Specified in Its Charter)
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No fee required.
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filing fee is calculated and state how it was determined):
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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
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 27, 2017
To Our Stockholders:
The Annual Meeting of Stockholders (our
Annual
Meeting
) of Superconductor Technologies Inc. will be held on Wednesday, September 27, 2017, at 9:00 a.m., local time, at our offices at 9101 Wall Street, Austin, Texas 78754 for the following purposes, as more fully described in
the accompanying Proxy Statement:
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1.
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To elect two (2) Class 1 directors to hold office until our 2020 Annual Meeting of Stockholders or until his or her successor is elected and qualified;
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2.
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To amend our 2013 Equity Incentive Plan to increase the number of shares authorized to be issued thereunder from 293,333 to 2,293,333 and the related sublimit of awards
to any one participant from 20,000 to 300,000 shares;
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3.
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To ratify the appointment of Marcum LLP as our independent registered public accounting firm for 2017; and
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4.
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To transact such other business as may properly come before our Annual Meeting or any adjournment(s) or postponement(s) thereof.
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Only stockholders of record at the close of business on August 8, 2017 are entitled to notice of and to vote at our Annual Meeting.
A list of stockholders as of this date will be available during normal business hours for examination at our offices by any stockholder for any purpose relevant to our Annual Meeting for a period of ten days prior to the Annual Meeting.
All stockholders are urged to attend our Annual Meeting in person or vote by proxy.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT
TO ATTEND OUR ANNUAL MEETING IN PERSON, PLEASE SIGN AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT OUR ANNUAL MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS.
The proxy is revocable at any time prior to its exercise
and will not affect your right to vote in person in the event you attend our Annual Meeting.
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By Order of the Board of Directors,
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J
EFFREY
A. Q
UIRAM
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President and Chief Executive Officer
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Austin, Texas
August 17, 2017
Important Notice Regarding Availability of Proxy
Materials for the 2017 Annual Meeting of
Stockholders to be Held on September 27, 2017
Our Proxy Statement, Annual Report on Form 10-K, as amended, and proxy card are available on the Internet at http://www.proxyvote.com and
at the SEC Filings section under the Investors tab on our corporate website at http://
www.suptech.com.
9101 Wall Street
Austin, Texas 78754
(512) 334-8900
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 27, 2017
INTRODUCTION
This Proxy Statement contains information related to the solicitation of proxies by and on behalf of the Board of
Directors of Superconductor Technologies Inc. (our
Board
) for use in connection with our Annual Meeting of Stockholders to be held on Wednesday, September 27, 2017, beginning at 9:00 a.m., local time, at our offices
located at 9101 Wall Street, Austin, Texas 78754, and at any and all adjournments or postponements thereof (our
Annual Meeting
). At our Annual Meeting, stockholders will be asked to consider and vote upon the following proposals:
(i) the election of two (2) Class1 directors to hold office until our 2020 Annual Meeting of Stockholders or until his or her successors are elected and qualified; (ii) amend our 2013 Equity Incentive Plan to increase the number
of shares authorized to be issued thereunder from 293,333 to 2,293,333 and the related sublimit of awards to any one participant from 20,000 to 300,000 shares, (iii) the ratification of the appointment of Marcum LLP as our independent
registered public accounting firm for 2017; and (iv) the transaction of such other business as may properly come before our Annual Meeting. This Proxy Statement and the accompanying proxy card are being mailed to stockholders of record on or
about August 23, 2017.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date
Only holders of record of our common stock at the close of
business on August 8, 2017 (the
Record Date
) are entitled to notice of our Annual Meeting and to vote at our Annual Meeting. As of the Record Date, we had 10,724,261 shares of our common stock issued and 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 our Annual Meeting, a
written notice of revocation or a duly executed proxy bearing a later date or by attending our Annual Meeting and voting in person.
Voting
and Solicitation
Each share of our common stock is entitled to one vote on all matters presented at our 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 unrevoked proxies will be
voted: (i) FOR the election of the nominees in this Proxy Statement for Class 1 director (ii) FOR the amendment of our 2013 Equity Incentive Plan to increase the number of shares authorized to be issued thereunder from 293,333 to
2,293,333 and the related
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sublimit of awards to any one participant from 20,000 to 300,000 shares, and (iii) FOR the ratification of the selection of Marcum LLP as our independent registered public accounting firm
for 2017. No other business is expected to come before our Annual Meeting. Should any other matter requiring a vote of stockholders properly arise, the persons named in the enclosed proxy card will vote such proxy in accordance with the
recommendation of our Board.
If you will not be able to attend our Annual Meeting to vote in person, please 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. To vote by Internet, go to
www.proxyvote.com.
To vote by telephone, call
1-800-690-6903,
and follow the instructions to cast your vote. For voting by Internet or telephone, you will need
to have your 12-digit control number located on your proxy card. Please do not return the enclosed paper ballot if you are voting by Internet or telephone.
We intend to solicit proxies primarily by mail. However, directors, officers, agents and employees may communicate with stockholders, banks, brokerage houses and others by telephone, e-mail, in person or
otherwise to solicit proxies. We have no present plans to hire specially engaged employees or paid solicitors to assist in obtaining proxies, but reserve the option to do so. All expenses incurred in connection with this solicitation will be borne
by us. We request that brokerage houses, nominees, custodians, fiduciaries and other like parties forward the soliciting materials to the underlying beneficial owners of our common stock. We will reimburse reasonable charges and expenses in doing
so.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at our Annual Meeting is the holders of a majority of the stock issued and outstanding on the Record Date and entitled to vote at our Annual Meeting,
present in person or by proxy.
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 our Annual Meeting with respect to such matter.
An abstention is the voluntary act of not voting by a stockholder who is present at a meeting and entitled to vote.
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.
Abstentions and broker non-votes will count toward the
presence of a quorum. Refer to each proposal for a discussion of the effect of abstentions and broker non-votes on the results of each proposal.
If your shares of common stock are held by a bank, broker or other nominee, please follow the instructions you receive from your bank, broker or other nominee to have your shares of common stock voted. If
your shares are held by a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, then your shares will be voted as you direct. If you do not give instructions, then for the ratification of the
independent registered public accounting firm, the broker may vote your shares in its discretion, but for the election of directors the broker may not be entitled to vote your shares at all.
Deadline for Receipt of Stockholder Proposals for 2018 Annual Meeting of Stockholders
Pursuant to Rule 14a-8 of the Securities and Exchange Commission (
SEC
), proposals by eligible stockholders that are intended to be presented at our 2018 Annual Meeting of Stockholders
must be received by
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our Corporate Secretary at Superconductor Technologies Inc., 9101 Wall Street, Austin, Texas 78754 not later than April 25, 2018 in order to be considered for inclusion in our proxy
materials.
Stockholders intending to present a proposal at our 2018 Annual Meeting of Stockholders must comply with the
requirements and provide the information set forth in our amended and restated bylaws. Under our amended and restated bylaws, a stockholders proposal must be timely received, which means that a proposal must be delivered to or mailed to our
Secretary not less than 90 days prior to the meeting; provided that if less than 100 days notice or prior public disclosure of the meeting is given to stockholders, then notice by a stockholder, to be timely received, must be received by our
Secretary not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made.
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PROPOSAL ONE
ELECTION OF CLASS 1 DIRECTORS
Our Board currently consists of four directors divided into three classes Class 1 (Mr. Quiram and Mr. Kaplan), Class 2 (Mr. Davis) and Class 3
(Mr. Halvorson) 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. Quirams and Mr. Kaplans terms expire
at the Annual Meeting. Accordingly, two Class 1 directors will be elected at our Annual Meeting. The nominees for election as the Class 1 directors are Mr. Quiram and Mr. Kaplan. The Class 1 directors will serve until our 2020 Annual
Meeting of Stockholders and until their successors are elected and qualified. Assuming the nominees are elected, we will have four directors serving as follows:
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Class 1 directors
: Jeffrey A. Quiram and Martin A. Kaplan
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Terms expire at our 2020 annual meeting of stockholders.
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Class 2 director
: Lynn J. Davis
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Term expires at our 2018 annual meeting of stockholders.
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Class 3 director
: Dan L. Halvorson
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Term expires at our 2019 annual meeting of stockholders.
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The accompanying proxy card grants the proxy holder the power to vote the proxy for a substitute nominee
in the event that any nominee becomes unavailable to serve as a Class 1 director. Management presently has no knowledge that any nominee will refuse or be unable to serve as a Class 1 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). 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 of directors. Abstentions and 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. Quiram and For Mr. Kaplan.
CORPORATE GOVERNANCE AND BOARD MEETINGS AND COMMITTEES
Corporate Governance Policies and Practices
The following is a summary of
our corporate governance policies and practices:
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Our Board has determined that all of our directors, other than Mr. Quiram, are independent as defined by the rules of the SEC and The NASDAQ Stock
Market (
NASDAQ
). Our Audit Committee, Compensation Committee and Governance and Nominating Committee each consists entirely of independent directors under the rules of the SEC and NASDAQ.
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We have a Code of Business Conduct and Ethics for all of our employees, including our Chief Executive Officer and Chief Financial Officer. If we amend
any provision of our Code of Business Conduct and Ethics that applies to our Chief Executive Officer or Chief Financial Officer (or any persons performing similar functions), or if we grant any waiver (including an
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implicit waiver) from any provision of our Code of Business Conduct and Ethics to our Chief Executive Officer or Chief Financial Officer (or any persons performing similar functions), we will
disclose those amendments or waivers on our website at
www.suptech.com/Investors/Corporate Governance/Amendments and Waivers to the Code of Conduct
within four business days following the date of the amendment or waiver.
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Our Audit Committee reviews and approves all related-party transactions.
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As part of our Code of Business Conduct and Ethics, we have made a whistleblower hotline available to all employees for anonymous reporting
of financial or other concerns. Our Audit Committee receives directly, without management participation, all hotline activity reports concerning accounting, internal controls or auditing matters.
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Board Leadership Structure and Role in Risk Oversight
Our Boards current policy is to separate the role of Chairman of our Board and Chief Executive Officer. Our Board believes that this structure combines accountability with effective oversight. This
structure also allows us to benefit from the experience and knowledge of our Chairman, who has been on our Board since 2002, while reflecting the responsibilities and contributions of our Chief Executive Officer. In addition, we believe that the
independence of our Chairman provides additional oversight over the decisions of our management and places additional control in the hands of our independent directors.
Our Board is actively involved in overseeing our risk management through our Audit Committee. Under its charter, our Audit Committee is responsible for inquiring of management and our independent auditors
about significant areas of risk or exposure and assessing the steps management has taken to minimize such risks. Our Boards role in risk oversight has not affected our Boards determination that the separation of roles of Chairman and
Chief Executive Officer is most appropriate for our company
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Stockholder Communications with Directors
Stockholders who want to communicate with our Board or with a particular director or committee may send a letter to our Secretary at
Superconductor Technologies Inc., 9101 Wall Street, Austin, Texas 78754. 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 or a specified committee. 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.
Attendance at Annual Meetings of Stockholders
We expect that all of our Board members attend our annual meetings of stockholders in the absence of a showing of good cause for failure to do so. All of the members of our Board attended our 2016 annual
meeting of stockholders in person or by telephone.
Board Meetings and Committees
During 2016, each of our directors attended at least 75% of the aggregate of (i) the total number of Board meetings and (ii) the
total number of meetings of the committees on which the director served.
Board of Directors
Our Board held a total of six meetings during 2016. Our Board has three standing committees an Audit Committee established in
accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934 (our
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Audit Committee
), a Compensation Committee (our
Compensation Committee
) and a Governance and Nominating Committee (our
Nominating
Committee
). Our Audit Committee, Compensation Committee and Nominating Committee each have a charter, which is available at the Corporate Governance section under the Investors tab on our website at
www.suptech.com
.
Audit Committee
The principal functions of our Audit Committee are to hire our independent public auditors, to review the scope and results of the
year-end audit with management and the independent auditors, to review our accounting principles and our system of internal accounting controls and to review our annual and quarterly reports before filing them with the SEC. Our Audit Committee met
seven times during 2016. The current members of our Audit Committee are Messrs. Halvorson (Chairman), Kaplan and Davis.
Our
Board has determined that all members of our Audit Committee are independent as defined under the rules of the SEC and the listing standards of NASDAQ. Our Board has determined that Mr. Halvorson is an audit committee
financial expert.
Compensation Committee
Our Compensation Committee reviews and approves salaries, bonuses and other benefits payable to our executive officers and administers our
management incentive plan. Our Compensation Committee makes all compensation decisions with respect to our Chief Executive Officer and makes recommendations to our Board regarding non-equity compensation and equity awards to our other named
executive officers (set forth below under Executive Compensation Summary Compensation Table) and all other elected officers. In doing so, with respect to named executive officers other than the Chief Executive Officer, our
Compensation Committee generally receives a recommendation from our Chief Executive Officer and other officers as appropriate. Our Chief Executive Officer also generally recommends the number of options or other equity awards to be granted to
executive officers, within a range associated with the individual executives salary level, and presents this to our Compensation Committee for its review and approval.
Our Compensation Committee uses available data to review and compare our compensation levels to market compensation levels, taking into consideration the other companies size, the industry, and the
individual executives level of responsibility, as well as anecdotal data regarding the compensation practices of other employers. We do not annually benchmark our executive compensation against a defined peer group, since we believe that
defining such a group is difficult and would not materially affect our decisions. Our 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. No compensation consultant was engaged to provide advice or recommendations on our executive or director compensation for 2016.
Our Compensation Committee also reviews the compensation of directors and recommends to our Board the amounts and types of cash to be paid and equity awards to be granted to our directors.
Our Compensation Committee met three times during 2016. The current members of our Compensation Committee are Messrs. Davis (Chairman),
Kaplan and Halvorson. Our Board has determined that all members of our Compensation Committee are independent as defined under the rules of the SEC and the listing standards of NASDAQ. Our Compensation Committee will only delegate its
authority to the extent consistent with our certificate of incorporation and bylaws and applicable laws, regulations and listing standards.
Our Compensation Committee created the Stock Option Committee (our
Stock Option Committee
) consisting of two members our Compensation Committee Chairman and the Chief Executive
Officer. The purpose of our Stock Option Committee is to facilitate the timely granting of stock options in connection with hiring, promotions and other special situations, and therefore our Stock Option Committee meets only
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periodically as certain events occur. Our Stock Option Committee is empowered to grant options to non-executive employees up to a preset annual aggregate limit (120,000 shares for 2016). The
Stock Option Committee did not meet during 2016. Our Compensation Committee supervises these grants and retains exclusive authority for all executive officer grants and the annual employee grants. The current members of our Stock Option Committee
are Messrs. Davis (Chairman) and Quiram.
Governance and Nominating Committee
Our 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. Our 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.
Our Nominating Committee is also responsible for the corporate governance practices and policies of our Board and its committees. The current members of our Nominating Committee are Messrs. Kaplan (Chairman), Davis, and Halvorson. Our
Nominating Committee met three times in 2016. Our Board has determined that all members of our Nominating Committee are independent as defined under the rules of the SEC and the listing standards of NASDAQ.
Our 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, our Nominating Committee recommends to our
Board whether those individuals should be
re-nominated.
Our 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, our Nominating Committee solicits and receives recommendations for candidates and manages the process for evaluating candidates. All potential candidates, regardless of their source (including candidates recommended by security holders),
are reviewed under the same process. Our Nominating Committee (or its chair) screens the available information about the potential candidates. Based on the results of the initial screening, interviews with viable candidates are scheduled with
Nominating Committee members, other members of our Board and senior members of management. Upon completion of these interviews and other due diligence, our 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. Our stockholders may also recommend candidates by sending the candidates name and resume to our Nominating Committee under the provisions set forth above for communication with our Board. No such suggestions from our
stockholders were received in time for our Annual Meeting.
Our Nominating Committee has no predefined minimum criteria for
selecting Board nominees, although it believes that (i) all directors should share qualities such as: an ability to make meaningful contributions to our board; independence; strong communication and analytical skills; and a reputation for
honesty and ethical conduct; and (ii) independent directors should share qualities such as: experience at the corporate, rather than divisional level, in multi-national organizations as large as or larger than us; and relevant, non-competitive
experience. Our Nominating Committee does not have a formal policy with respect to diversity. However, our Nominating Committee and our Board believe that it is important that we have Board members whose diversity of skills, experience and
background are complementary to those of our other Board members. In considering candidates for our Board, our Nominating Committee considers the entirety of each candidates credentials. In any given search, our Nominating Committee may also
define particular characteristics for candidates to balance the overall skills and characteristics of our Board and our perceived needs. However,
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during any search, our Nominating Committee reserves the right to modify its stated search criteria for exceptional candidates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and significant stockholders
(defined by statute as stockholders beneficially owning more than 10% of our common stock) to file with the SEC initial reports of beneficial ownership, and reports of changes in beneficial ownership, of our common stock. Directors, executive
officers and significant stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of Forms 3, 4 and 5 (and amendments thereto) filed with the SEC and
submitted to us, and on written representations by certain directors and executive officers received by us, we believe that all of our executive officers, directors and significant stockholders complied with all applicable filing requirements under
Section 16(a) during 2016.
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NON-EMPLOYEE DIRECTOR COMPENSATION
Summary of Compensation
Our directors who are also employees do not receive additional compensation for their service on our Board. Our Board maintains a written compensation policy for our non-employee directors. Each director
other than our Chairman of the Board receives an annual cash retainer of $20,000, and our Chairman of the Board receives an annual cash retainer of $40,000. The annual cash retainer is paid bi-annually and requires that the director attend at least
75% of our Board meetings. Each director receives a $5,000 annual retainer for service as a member of our three standing committees. In addition, new directors receive an initial grant of 25,000 shares of our common stock on the date that they join
our Board and, on the date of each annual meeting of stockholders, each director (other than our Chairman of the Board) receives an annual equity grant of 10,000 shares of our common stock and our Chairman of the Board receives an annual equity
grant of 15,000 shares. Initial equity grants vest in three equal installments, on each anniversary of the grant date, and annual grants vest in two equal installments, on each anniversary of the grant date. Our Board provides an additional $15,000
annual retainer (which is paid bi-annually) as compensation for service as chairman of our Audit Committee and an additional $10,000 annual retainer for service as chairman of each of our Compensation Committee and Nominating Committee.
Non-employee directors do not receive compensation from us other than as a director or as committee member. There are no family
relationships among our directors and executive officers.
Non-employee Director Compensation Table
The following table summarizes the compensation paid to our non-employee directors for 2016:
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Name
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Fees earned or
paid
in cash
($)
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Stock
Awards
($) (1)
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Option
Awards
($) (1)
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Total
($)
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Martin A. Kaplan
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60,000
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60,000
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Lynn J. Davis
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40,000
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40,000
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Dan L. Halvorson
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45,000
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45,000
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(1)
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The amounts in this column represent the aggregate grant date fair value of the shares of restricted common stock calculated in accordance with Accounting Standards
Codification (
ASC
) 718, under the assumptions included in Note 5 to our audited financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K. As of December 31, 2016
(i) Mr. Kaplan had 5,745 options to purchase common stock and no unvested shares of restricted common stock; (ii) Mr. Davis had 4,412 options to purchase common stock and no unvested shares of restricted common stock and;
(iii) Mr. Halvorson had 2,667 options to purchase common stock and 555 unvested shares of restricted common stock.
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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 as of August 8, 2017:
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Name
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Age
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Position
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Martin A. Kaplan(1)(2)(3)
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79
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Chairman of the Board
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Lynn J. Davis(1)(2)(3)(4)
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70
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Director
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Dan L. Halvorson(1)(2)(3)
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51
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Director
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Jeffrey A. Quiram(4)
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56
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President, Chief Executive Officer and Director
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William J. Buchanan
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69
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Chief Financial Officer (Principal Financial and Accounting Officer)
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Kenneth E. Pfeiffer
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50
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Vice President, Engineering
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Robert L. Johnson
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66
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Senior Vice President, Operations
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Adam L. Shelton
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50
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Vice President, Product Management and Marketing
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(1)
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Member of our Audit Committee.
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(2)
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Member of our Compensation Committee.
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(3)
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Member of our Governance and Nominating Committee.
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(4)
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Member of our Stock Option Committee.
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Each of our directors, including our current nominee, was nominated based on the assessment of our Nominating Committee and our Board that he has demonstrated: an ability to make meaningful contributions
to our Board; independence; strong communication and analytical skills; and a reputation for honesty and ethical conduct. Our Board consists of, and seeks to continue to include, persons whose diversity of skills, experience and background are
complementary to those of our other directors.
Martin A. Kaplan
has served on our board since 2002 and was
named Chairman of the Board in October 2010. From 2000 through 2012, Mr. Kaplan was Chairman of the Board of JDS Uniphase, Inc. (JDSU), a telecommunications equipment company, where he remained a director until August
2015. In August 2015, JDSU spun off its communications and commercial optical products business into the publicly-traded company Lumentum Holdings Inc., at which time Mr. Kaplan resigned from the JDSU Board and became Chairman of the Board
of Lumentum Holdings Inc. In a career spanning 40 years, Mr. Kaplan last served as Executive Vice-President of the Pacific Telesis Group, which became a subsidiary of SBC Communications in 1997. Mr. Kaplan has served as a director of a
number of other public and private companies. Mr. Kaplan earned a B.S. in engineering from California Institute of Technology. Our Board has determined that Mr. Kaplan is qualified to serve as a director because he has extensive
business leadership and board experience.
Lynn J. Davis
has served on our Board since 2005. He served as
President, Chief Operating Officer and director of August Technology, a manufacturer of inspection equipment for the semiconductor fabrication industry from 2005 to 2006. 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. In
December 2016, he retired as Chairman 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.
Our Board has determined that Mr. Davis is qualified to serve as a director because he has extensive knowledge in various management roles in the telecommunications industry, including manufacturing, sales and marketing. In addition, as a
venture capitalist, Mr. Davis has worked with smaller companies and brings a valuable entrepreneurial approach to management and compensation issues.
Dan L. Halvorson
has served on our Board since 2014 and currently serves as Executive Vice President and Chief Financial Officer for Ingenu, Inc., a pioneer in delivering
connectivity exclusively to machines, in the Internet of Things space. Mr. Halvorson was Executive Vice President and Chief Financial
10
Officer for OneRoof Energy, Inc. from 2013 through April 2016, and from 2007 to 2010 he served as the Executive Vice President-Operations and Chief Financial Officer for DivX,
Inc. until its acquisition by Sonic Solutions. From 2000 to 2007, Mr. Halvorson held various executive positions with Novatel Wireless, Inc. including Chief Financial Officer. In addition, he was Director of Finance for Dura
Pharmaceuticals, Inc. from 1998 to 2000, when the company was acquired by Elan Corporation, and Director of Finance for Alliance Pharmaceutical Corp. from 1996 to 1998. From 1988 to 1994, Mr. Halvorson was with Deloitte & Touche
LLC, and subsequently with PriceWaterhouseCoopers LLP from 1994 to 1996 until he joined Alliance Pharmaceutical Corp. Mr. Halvorson is a certified public accountant (inactive) and holds a B.S. in Business Administration, Accounting, from
San Diego State University. Our Board has determined that Mr. Halvorson is qualified to serve as a Board director because he has extensive knowledge about public and financial accounting matters.
Jeffrey A. Quiram
has served on our Board, and has been our President and Chief Executive Officer, since 2005. From 1991 to
2004, Mr. Quiram served ADC Telecommunications in a variety of management roles, including Vice President of its wireless business unit. Mr. Quiram has a B.S. in Quantitative Methods and Computer Science from College of St. Thomas, and an
M.B.A. from University of Minnesota. Our Board has determined that Mr. Quiram is qualified to serve as a director because he has extensive knowledge about product development, business planning, and complex manufacturing. In addition, he has
extensive knowledge about our corporate operations and market activities from serving as our Chief Executive Officer.
William J. Buchanan
has been our Chief Financial Officer since May 2010. Mr. Buchanan joined us in 1998 and served as
our Controller from 2000 to May 2010. 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 L. Johnson
has been our Senior Vice President, Operations since 2004. Mr. Johnson joined us in 2000 as Vice
President of Wireless Manufacturing. From 1996 to 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 studied industrial engineering at Arizona State University.
Adam L. Shelton
has been our Vice
President, Product Management and Marketing since 2006. From 2005 to 2006, Mr. Shelton was the Senior Director of Marketing for Motorola. From 2003 to 2005, 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.
Kenneth E. Pfeiffer
has been our Vice President, Engineering since 2012. From 2009
to 2011, Mr. Pfeiffer was Vice President, Engineering at Veeco Instruments Inc. From 2006 to 2009, Mr. Pfeiffer was the Director of Equipment Engineering for HelioVolt Corporation. Prior to that, Mr. Pfeiffer held various engineering
and management positions at Active Power, Inc. and Applied Materials, Inc. Mr. Pfeiffer obtained a B.S. Mechanical Engineering degree from Texas A&M University in 1990 and a M.S. Mechanical Engineering from the University of Texas in 1994.
He also holds a Masters in Business Administration degree from the University of Texas at Austin.
11
VOTING SECURITIES OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as of August 8, 2017 by (i) each person known by us
to be the beneficial owner of more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our executive officers named in the table under Executive Compensation Summary Compensation
Table, and (iv) all of our directors and executive officers as a group. Except as otherwise indicated in the footnotes to the table, (i) 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, and (ii) the address of each person is c/o Superconductor Technologies Inc., 9101 Wall Street, Austin, Texas 78754.
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares (1)
|
|
|
Percentage Ownership
|
|
Kopp Family Office, LLC (2)
8400 Normandale Lake Boulevard,
Suite 1450
Bloomington, Minnesota 55437
|
|
|
1,571,072
|
|
|
|
14.6
|
|
Jeffrey A. Quiram
|
|
|
43,984
|
|
|
|
*
|
|
William J. Buchanan
|
|
|
21,042
|
|
|
|
*
|
|
Robert L. Johnson
|
|
|
24,592
|
|
|
|
*
|
|
Adam L. Shelton
|
|
|
24,670
|
|
|
|
*
|
|
Kenneth E. Pfeiffer
|
|
|
22,474
|
|
|
|
*
|
|
Lynn J. Davis
|
|
|
4,690
|
|
|
|
*
|
|
Martin A. Kaplan
|
|
|
6,233
|
|
|
|
*
|
|
Dan L. Halvorson
|
|
|
3,667
|
|
|
|
*
|
|
All executive officers and directors as a group (8 persons)
|
|
|
151,352
|
|
|
|
1.4
|
%
|
(1)
|
Includes shares issuable upon the exercise of stock options that are exercisable within 60 days of August 8, 2017 as follows: Mr. Quiram, 26,790 shares;
Mr. Buchanan, 13,059 shares; Mr. Johnson, 14,802 shares; Mr. Shelton, 14,849 shares; Mr. Pfeiffer, 14,092 shares; Mr. Davis, 3,079 shares; Mr. Kaplan, 3,745 shares; Mr. Halvorson, 1,334 shares; and all executive
officers and directors as a group, 91,750 shares.
|
(2)
|
Based solely on information reported in a Schedule 13G filed with the SEC on June 2, 2017 by Kopp Family Office, LLC (KFO), Kopp Holding Company, LLC
(KHCLLC), and LeRoy C. Kopp (Mr. Kopp). KFO, a wholly-owned subsidiary of KHCLLC, may be deemed to beneficial own 1,561,599 shares. KHCLLC, which is controlled by Mr. Kopp, may be deemed to beneficial owner 1,571,072
shares. Mr. Kopp may be deemed to beneficially own an aggregate of 1,571,072 shares, consisting of the shares referenced above with respect to KFO and KHCLLC and additional shares held by the Kopp Family Foundation and other shares held
directly or indirectly by Mr. Kopp and his spouse.
|
12
Summary Compensation Table
The following table sets forth for 2016, 2015 and 2014 the base salary and other compensation of our (i) President and Chief
Executive Officer and (ii) our other two most highly compensated officers for 2016 (our named executive officers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Stock
Awards
($) (1)
|
|
|
Option
Awards
($) (1)
|
|
|
Non-equity
Incentive Plan
Compensation
($)
|
|
|
All Other
Compensation
($) (2)
|
|
|
Total
($)
|
|
Jeffrey A. Quiram
|
|
|
2016
|
|
|
|
324,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,092
|
|
|
|
354,542
|
|
President, Chief
|
|
|
2015
|
|
|
|
324,450
|
|
|
|
|
|
|
|
30,177
|
|
|
|
|
|
|
|
35,754
|
|
|
|
390,391
|
|
Executive Officer, Director
|
|
|
2014
|
|
|
|
324,450
|
|
|
|
743,211
|
|
|
|
|
|
|
|
|
|
|
|
42,814
|
|
|
|
1,110,475
|
|
|
|
|
|
|
|
|
|
Robert L. Johnson
|
|
|
2016
|
|
|
|
242,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,508
|
|
|
|
260,970
|
|
Senior Vice President,
|
|
|
2015
|
|
|
|
242,462
|
|
|
|
|
|
|
|
16,597
|
|
|
|
|
|
|
|
15,799
|
|
|
|
274,858
|
|
Operations
|
|
|
2014
|
|
|
|
242,462
|
|
|
|
416,554
|
|
|
|
|
|
|
|
|
|
|
|
15,274
|
|
|
|
674,290
|
|
|
|
|
|
|
|
|
|
Adam L. Shelton
|
|
|
2016
|
|
|
|
247,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,977
|
|
|
|
254,177
|
|
Vice President Product
|
|
|
2015
|
|
|
|
247,200
|
|
|
|
|
|
|
|
16,597
|
|
|
|
|
|
|
|
4,850
|
|
|
|
268,647
|
|
Management and Marketing
|
|
|
2014
|
|
|
|
247,200
|
|
|
|
424,692
|
|
|
|
|
|
|
|
|
|
|
|
4,850
|
|
|
|
676,742
|
|
(1)
|
The Option Awards and Stock Awards amounts represent the aggregate grant date fair value of the options to purchase common stock or shares of restricted common stock
(as applicable) calculated in accordance with ASC 718, under the assumptions included in Note 5 to our audited financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K, as amended.
|
(2)
|
The All Other Compensation amounts shown reflect the value attributable to term life insurance premiums and company 401(k) matching 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 Mr. Johnson is less than $10,000. Pursuant
to the terms of his employment agreement, Mr. Quiram received $24,704, $30,213 and $37,724 in 2016, 2015 and 2014, respectively, for travel expenses from his home in Minnesota, temporary housing near our Santa Barbara and Austin facilities, the
use of an automobile, and special indemnity payments to cover the taxes resulting from the payment or reimbursement of such travel and housing expenses.
|
Narrative Disclosure To Summary Compensation Table
Employment Agreement
We entered into an employment agreement with Mr. Quiram in 2005, which was amended in 2007. The employment agreement provides for the
following:
|
|
|
Appointment as our President, Chief Executive Officer and a member of our Board;
|
|
|
|
A base salary, which was $315,000 per year for 2008-2009 and increased to $324,450 during 2010;
|
|
|
|
A bonus of up to 100% of his base salary based upon achievement of annual performance goals to be developed by our Compensation Committee and
Mr. Quiram;
|
|
|
|
Accelerated vesting of all his equity grants in the event of an Involuntary Termination or Change of Control (both as defined
in his employment agreement);
|
|
|
|
A severance payment equal to one years salary and continued benefits for one year in the event of Involuntary Termination;
|
|
|
|
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) accelerated vesting of all of his outstanding equity grants;
|
13
|
|
|
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; and a special indemnity payment for any taxes resulting from the payment or reimbursement of such expenses; and
|
|
|
|
Lease of an automobile.
|
Change of Control Agreements
We also have change of control agreements with Mr. Shelton. The change of control agreement generally provides that, if the employees employment is terminated within twenty-four
months of a Change of Control (as defined in the change of control agreements) either (i) by us for any reason other than death, Cause or Disability (as both terms are defined in the change of control
agreements) or (ii) by the employee for Good Reason (as defined in the change of control agreements), then the terminated employee will be entitled to severance benefits salary continuation payments and continuation of health/life
insurance benefits for 18 months and accelerated vesting for all outstanding unvested stock options and other equity securities held by the employee. Any payments or distributions made to or for the benefit of the named employees under these change
of 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.
Non-Equity Incentive Compensation
We maintain a bonus plan for executive
officers and selected other members of senior management. Under the plan, our Compensation Committee establishes financial and other pertinent objectives for the period and assigns each executive officer an annual target bonus amount based on a
percentage of his or her base salary, which ranges from 20% to 100%. Our Compensation Committee also retains the authority to award discretionary bonuses for performance in other aspects of the business not covered by the established goals. In
December 2015, our Compensation Committee decided, based on then-current economic conditions, to not establish financial performance targets under this plan for 2016 and to not award cash bonuses based on financial objectives in 2016. Our
Compensation Committee did reserve its right to award discretionary bonuses if appropriate; however no bonuses were awarded for 2016.
Equity Grants
For 2016,
we made no grants of restricted stock awards and options to our named executive officers.
14
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to outstanding options and unvested shares of restricted stock on
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options(#)
Exerciseable (1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options(#)
Unexerciseable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of Stock
That Have
Not Vested
|
|
|
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)
|
|
Jeffrey A Quiram
|
|
|
278
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
471.60
|
|
|
|
5/6/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
587
|
|
|
|
|
|
|
|
284.40
|
|
|
|
1/25/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
253
|
|
|
|
|
|
|
|
262.80
|
|
|
|
2/9/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
619
|
|
|
|
|
|
|
|
37.80
|
|
|
|
3/7/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
|
|
|
|
31.80
|
|
|
|
12/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
6,666
|
(2)
|
|
|
3.30
|
|
|
|
11/9/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L Johnson
|
|
|
100
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
114
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
102
|
|
|
|
|
|
|
|
471.60
|
|
|
|
5/6/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
284.40
|
|
|
|
1/25/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
262.80
|
|
|
|
2/9/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
347
|
|
|
|
|
|
|
|
37.80
|
|
|
|
3/7/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
31.80
|
|
|
|
12/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
3,667
|
|
|
|
3,666
|
(2)
|
|
|
3.30
|
|
|
|
11/9/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam L Shelton
|
|
|
133
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
116
|
|
|
|
|
|
|
|
921.60
|
|
|
|
2/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
|
471.60
|
|
|
|
5/6/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
284.40
|
|
|
|
1/25/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
262.80
|
|
|
|
2/9/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
|
|
|
|
|
37.80
|
|
|
|
3/7/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
31.80
|
|
|
|
12/5/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
3,667
|
|
|
|
3,666
|
(2)
|
|
|
3.30
|
|
|
|
11/9/2025
|
|
|
|
|
|
|
|
|
|
(1)
|
These options are fully vested.
|
(2)
|
These shares will vest on November 9, 2017.
|
15
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO THE 2013 EQUITY INCENTIVE PLAN
We believe that our officers and other key employees should have a significant stake in our stock price performance under programs that link compensation to stockholder 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 our 2013 Equity Incentive Plan, (the Plan). The Plan has an aggregate limit of 293,333 shares of our
common stock for all awards and related sublimits on awards to a single person and on certain types of equity awards. In addition to stock options outstanding under the Plan, we have stock options outstanding under our prior 2003 Equity Incentive
Plan, but no new grants can be made under the 2003 Equity Incentive Plan.
As of August 8, 2017, we had fewer than
90,000 shares of our common stock available for issuance under the Plan for future equity grants. Therefore, on August 10, 2017, 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 293,333 shares of our common stock to 2,293,333 shares of our common stock and to restore the related sublimit of awards to any one participant from 20,000 shares to 300,000 shares (which was
the sublimit in effect prior to the July 2016 reverse stock split).
Below is a summary description of the Plan, which
summarizes its essential features. This summary is qualified in its entirety by reference to the full text of the Plan, as proposed to be amended, which is attached to this Proxy Statement as Annex A.
Summary of the Plan
General
The Plan provides for grants of stock options, stock appreciation rights (SARs), stock awards and restricted stock units, all of which are
sometimes referred to individually or collectively as Awards, to employees, consultants, non-employee directors of our company and its subsidiaries. Stock options may be either incentive stock options (ISOs), as defined in Section 422 of the
Internal Revenue Code, as amended, or the Code, or non-qualified stock options (NQSOs).
Plan Administration; Amendment and
Termination
The Board and/or one or more of its committees shall administer the Plan in accordance with applicable law,
referred to as the Administrator. The Administrator may, amend, suspend or terminate any portion of the Plan for any reason, but must obtain stockholder consent for any material amendments to the Plan, or the consent of affected plan participants if
any such action alters or impairs any obligations regarding Awards that have been granted. The Plan terminates in 2023. However, such termination will not affect Awards granted under the Plan prior to termination.
Reversion of Shares to the Plan
Any shares underlying an expired, forfeited or cancelled Award shall become available for future Awards under the Plan. Shares awarded and delivered under the Plan may be authorized but unissued, or
reacquired shares.
Eligibility for Awards
Employees, consultants and non-employee directors of our company or its subsidiaries may be granted Awards under the Plan. The Administrator determines which individuals will receive Awards, as well as
the
16
number and composition of each Award. Awards under the Plan may consist of a single type or any combination of the types of Awards permissible under the Plan as determined by the Administrator,
or by the full Board in the case of Awards to non-employee directors. These decisions may be based on various factors, including a participants duties and responsibilities, the value of the participants past services, his/her potential
contributions to our success, and other factors.
Exercise Price Limitations
The Administrator will determine the exercise price for the shares underlying each Award on the date the Award is granted. The exercise
price for shares under an ISO may not be less than 100% of fair market value on the date the Award is granted under Section 422 of the Code. Similarly, under the terms of the Plan, the exercise price for SARs and NQSOs may not be less than 100%
of fair market value on the date of grant. There is no minimum exercise price prescribed for stock awards and restricted stock units awarded under the Plan.
No Material Amendments or Re-Pricing Without Stockholder Approval
Except
for adjustments upon changes in capitalization, dissolution, merger or asset sale, the Plan prohibits our company from making any material amendments to the Plan or decreasing the exercise price or purchase price of any outstanding Award, including
by means of cancellation or re-grant, without stockholder approval.
Individual Grant Limits
No participant may be granted Awards in any one year to purchase more than an aggregate of 20,000 shares. This amendment would restore
such grant limit to 300,000 shares (which was the sublimit in effect prior to the July 2016 reverse stock split). Such limitation is subject to proportional adjustment in connection with any change in our capitalization as described in the Plan.
Award Exercise; Payment of Exercise Price
The Administrator will determine when Awards become exercisable. However, no Award may have a term longer than ten years from the date of grant unless otherwise approved by our stockholders, and no Award
may be exercised after expiration of its term. Payment for any shares issued upon exercise of an Award shall be specified in each participants Award agreement, and may be made by cash, check or other means specified in the Plan.
Tax Withholding
We shall have the right to deduct or withhold or require a participant to remit to us an amount sufficient to satisfy federal, state, local and any applicable foreign taxes (including FICA obligations, if
applicable) required to be withheld with respect to the grant, exercise or vesting of any Award.
Effect of Termination,
Death, or Disability
If a participants employment, consulting arrangement, or service as a non-employee director
terminates for any reason, the vesting of an Award generally will stop as of the effective termination date. Participants generally have three months from their termination date to exercise vested unexercised options and SARs before they expire.
Longer post-termination exercise periods apply in the event the termination of employment or cessation of service results from death or disability. If a participant is dismissed for cause, the right to exercise shall terminate five business days
following the participants receipt of written notice from us of the participants termination.
17
Non-Transferability of Awards
Unless otherwise determined by the Administrator, Awards granted under the Plan are not transferable other than by will or the laws of
descent and distribution, and may be exercised by the participant only during the participants lifetime.
Stock
Appreciation Rights
Under the Plan, SARs may be settled in shares or cash and must be granted with an exercise price not
less than 100% of fair market value on the date of grant. Upon exercise of a SAR, a participant is entitled to receive cash or a number of shares equivalent in value to the difference between the fair market value on the exercise date and the
exercise price of the SAR. For example, assume a participant is granted 100 SARs with an exercise price of $10 and assume the SARs are later exercised when the fair market value of the underlying shares is $20 per share. At exercise, the participant
is entitled to receive 50 shares [(($20 $10) x 100) / $20], or $1,000 in cash (50 shares x $20).
Stock Awards
The Plan also permits the Company to grant stock awards. The Administrator has discretion to establish periods of
restriction during which shares awarded remain subject to forfeiture or the Companys right to repurchase if the participants employment terminates for any reason (including death or disability). Restrictions may be based on the passage
of time, the achievement of specific performance objectives, or other measures as determined by the Administrator in its discretion. Stock Awards may be granted for past services with no restrictions. During periods of restriction, a participant has
the right to vote his/her restricted stock and to receive distributions and dividends, if any, but may not sell or transfer any such shares.
Restricted Stock Units
The Plan also permits the Company to grant
restricted stock units that are payable in Company shares or in cash. Each restricted stock unit is equivalent in value to one share of the Companys common stock. Depending on the number of restricted stock units that become vested at the end
of the performance period, the equivalent number of shares are payable to the participant, or the equivalent value in cash. The restricted stock units may be vested upon the attainment of performance goals or based on continued service.
Changes in Capitalization; Change of Control
The Plan provides for exercise price and quantity adjustments if we declare a stock dividend or stock split. Also, vesting or restriction periods may be accelerated if we merge with another entity that
does not either assume the outstanding Awards or substitute equivalent Awards. In such case, vesting will be accelerated ten days prior to the consummation of the Change in Control and the Award will terminate and no longer be exercisable upon
consummation. We have change of control agreements with certain executive officers that provide for accelerated vesting of stock options and other equity compensation awards.
Participation in the Plan
Except as otherwise provided in the Plan, the grant of Awards is subject to the discretion of the Administrator. No determinations have been made with respect to future awards under the Plan.
U.S. Federal Income Tax Consequences
Option Grants
Options granted under the Plan may be either ISOs, which are
intended to satisfy the requirements of Section 422 of the Code, or NQSOs, which are not intended to meet those requirements. The Federal income tax treatment for NQSOs and ISOs is summarized below.
18
Non-Qualified Stock Options
No taxable income is recognized by an optionee upon the grant of an NQSO. Generally, the optionee will recognize ordinary income in the
year in which the option is exercised. The amount of ordinary income will equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares. Our company and the optionee are
required to satisfy the tax withholding requirements applicable to that income, unless the optionee is a non-employee director or consultant, where in such case tax withholding is not required. We will be entitled to an income tax deduction equal to
the amount of ordinary income recognized by the optionee with respect to exercised NQSOs.
Incentive Stock Options
No taxable income is recognized by an optionee upon the grant of an ISO. Generally, the optionee will not recognize
ordinary income in the year in which the option is exercised, although the optionees gain from exercise may be subject to alternative minimum tax. If the optionee sells the underlying shares acquired from the option within two years after the
option grant date or within one year of the option exercise date, then the sale is treated as a disqualifying disposition and the optionee will be taxed in the year of disposition on the gain at exercise, but not exceeding the gain from disposition
as ordinary income and the balance of the gain from disposition, if any, as short-term or long-term capital gain. We will be entitled to an income tax deduction that equals the amount of the optionees compensatory ordinary income. If the
optionee does not make a disqualifying disposition, then the optionee will not recognize ordinary income and the entire gain will be taxes as long-term capital gain and we will not be entitled to a tax deduction.
Stock Appreciation Rights
No taxable income is recognized by an optionee upon the grant of a SAR. The participant will recognize ordinary income in the year in which the SAR is exercised. The amount of ordinary income will be fair
market value of the shares received or the cash payment received. Our company and the participant are required to satisfy the applicable tax withholding requirements, unless the participant is a non-employee director, where in such case tax
withholding is not required. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant with respect to exercised SARs.
Stock Awards
The tax principles applicable to the issuance of shares under the Plan will be substantially the same as those summarized above for the exercise of non-qualified stock options in that they are both
governed by Section 83 of the Code. When shares are granted with no restrictions, the participant will have ordinary income equal to the difference between the fair market value of the shares on the grant date and the amount paid for the
shares, if any. If shares are granted with restrictions, such income tax treatment applies on the date the restrictions lapse (the vesting date) based on the fair market value of the shares on the vesting date, unless the participant
made an 83(b) election within 30 days of the date of grant to include as ordinary income in the year of the grant, an amount equal to the difference between the fair market value of the granted shares on the grant date and any
amount paid for the shares. If the Section 83(b) election is made, the participant will not recognize any additional compensation income when the restriction lapses, but may have capital gain income or loss upon sale of the shares. The Company
will be entitled to an income tax deduction equal to the ordinary income recognized by the participant in the year in which the participant recognizes such income.
Restricted Stock Units
Generally, a plan participant who is granted
restricted stock units will recognize ordinary income in the year payment occurs. The income recognized will generally be equal to the fair market value of the shares received or to the cash payment received. The Company will generally be entitled
to an income tax deduction equal to the income recognized by the participant on the payment date for the taxable year in which the ordinary income is recognized by the participant.
19
Deductibility of Executive Compensation
We anticipate that any compensation deemed paid by us in connection with the exercise of both ISOs and NQSOs granted with exercise prices
equal to the fair market value of the shares on the grant date will not be subject to the Section 162(m) $1 million limitation per covered individual on the deductibility of the compensation paid to our executive officers.
Required Vote
The affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the meeting and entitled to vote is required to approve this proposal. If you are present
in person or represented by proxy at the meeting and abstain from voting on this proposal, it has the same effect as if you voted against the proposal. Broker non-votes are not counted for any purpose in determining whether this proposal has been
approved.
Board Recommendation
Our Board Recommends a Vote
For
Approval of the Amendments to the 2013 Equity Incentive Plan.
20
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has
selected Marcum LLP, an independent registered public accounting firm, to audit our financial statements for 2017. Our Audit Committee is submitting its selection to our stockholders for ratification. Marcum LLP has served as our auditor since
October 2010 and has no financial interest of any kind in us except the professional relationship between auditor and client. A representative of Marcum LLP is expected to attend our Annual Meeting, and 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
This proposal 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 count as a vote against and broker non-votes will not have any effect on the outcome of this proposal. In the event the
stockholders do not approve this proposal, our Audit Committee will reconsider the appointment of Marcum LLP as our independent registered public accounting firm.
Board Recommendation
Our Board Recommends a Vote
For
the Ratification of the Appointment of our Independent Registered Public Accounting Firm.
21
AUDIT COMMITTEE REPORT
The information contained in this Audit Committee Report shall not be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this
information by reference) and shall not otherwise be deemed soliciting material or filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934
(except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).
Our 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. Our Audit Committee has reviewed and discussed the audited financial statements with management. In addition, our Audit Committee has discussed with our independent registered public accounting firm the matters required to be
discussed by Statements on Public Company Accounting Oversight Board Auditing Standard No. 16
Communications with Audit Committees
.
Our Audit Committee has also received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the Public Company Accounting
Oversight Board regarding their communications with the audit committee concerning independence, and has discussed with them their independence, including whether their provision of other non-audit services to us is compatible with maintaining their
independence.
Our Audit Committee discussed with our independent registered public accounting firm the overall scope and
plans for the audit. Our Audit Committee meets with them, 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 paragraphs, our Audit Committee recommended to our Board that the
audited financial statements be included in our Annual Report on Form 10-K for 2016 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Dan L. Halvorson
(Chairman)
Martin A. Kaplan
Lynn J. Davis
22
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee regularly reviews and determines whether specific non-audit projects or expenditures with our independent registered
public accounting firm, Marcum LLP, potentially affects its independence. Our Audit Committees policy is to pre-approve all audit and permissible non-audit services provided by Marcum LLP. Pre-approval is generally provided by our Audit
Committee for up to one year, as detailed as to the particular service or category of services to be rendered, and is generally subject to a specific budget. Our 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 Marcum LLP for 2016 and 2015, all of
which were pre-approved by our Audit Committee:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Audit fees(1)
|
|
$
|
190,000
|
|
|
$
|
204,000
|
|
All other fees(2)
|
|
$
|
60,000
|
|
|
$
|
32,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
250,000
|
|
|
$
|
236,000
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes fees for professional services rendered for the audit of our annual consolidated financial statements and review of our annual report on Form 10-K and for
reviews of the condensed consolidated financial statements included in our quarterly reports on Form 10-Q for the first three quarters of 2016 and 2015.
|
(2)
|
These fees related to services rendered for our S-3 and S-1 registration statements.
|
TRANSACTIONS WITH RELATED PERSONS
None.
ANNUAL REPORT TO STOCKHOLDERS
Our Annual Report on Form 10-K for the year ended December 31, 2016, as amended by an Amendment No.1, is being mailed to our
stockholders along with this Proxy Statement.
OTHER MATTERS
We know of no other matters to be submitted at our 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,
|
|
|
J
EFFREY
A. Q
UIRAM
President and Chief Executive Officer
|
Austin, Texas
August 17, 2017
23
ANNEX A
2013 Equity Incentive Plan as proposed to be amended
Superconductor
Technologies Inc. hereby adopts the 2013 Equity Incentive Plan (the Plan), effective as of October 25, 2013 (the Plan adoption date) and previously amended on November 5, 2017, to be as amended September 27,
2017 as follows:
SECTION 1
BACKGROUND AND PURPOSE
1.1
Background
The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights (SARs), Stock Awards, and Restricted Stock Units.
1.2
Purpose of the Plan
The Plan is intended to attract, motivate and retain the following individuals: (a) employees of the Company or its Affiliates; (b) consultants who provide significant services to the Company or its Affiliates and (c) directors of the
Company or any of its Affiliates who are employees of neither the Company nor any Affiliate. The Plan is also designed to encourage stock ownership by such individuals, thereby aligning their interests with those of the Companys shareholders.
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 Act shall include such section, any valid rules or regulations promulgated under such section, and any comparable provisions of any future legislation, rules or regulations amending, supplementing or
superseding any such section, rule or regulation.
2.2
Administrator
means, collectively the Board, and/or one or more
Committees, and/or one or more executive officers of the Company designated by the Board to administer the Plan or specific portions thereof; provided, however, that Awards to Section 16 Persons may only be administered by a committee of
Independent Directors (as defined in Section 2.23) or the Board as a whole. The Plan permits coextensive administrative authority; provided, however, that the scope of any such authority is specifically approved by the Board in accordance with
the Plan.
2.3
Affiliate
means any corporation or any other entity (including, but not limited to, Subsidiaries,
partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
2.4
Applicable Law
means the legal requirements relating to the administration of Options, SARs, Stock Awards, Restricted Stock Units and similar incentive plans under any applicable laws, including but not limited to the laws of the United States and any applicable
foreign country, including employment, labor, privacy, securities, and tax laws, the Code, and applicable rules and regulations promulgated by the Nasdaq, New York Stock Exchange, American Stock Exchange or the requirements of any other stock
exchange or quotation system upon which the Shares may then be listed or quoted.
2.5
Award
means, individually or
collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Stock Awards, and Restricted Stock Units.
A-1
2.6
Award Agreement
means the written agreement setting forth the terms and provisions
applicable to each Award granted under the Plan, including the Grant Date.
2.7
Board
or
Board of
Directors
means the Board of Directors of the Company.
2.8
Change in Control
means the occurrence of any of the
following:
2.8.1 Any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Companys then
outstanding voting capital stock, other than a group of two or more persons not (A) acting in concert for the purpose of acquiring, holding or disposing of such stock or (B) otherwise required to file any form or report with any
governmental agency or regulatory authority having jurisdiction over the Company which requires the reporting of any change in control;
2.8.2 The consummation of the sale or disposition by the Company of all or substantially all of the Companys assets (whether by stock sale, merger, consolidation or otherwise);
2.8.3 The consummation of a liquidation or dissolution of the Company; or
2.8.4 The consummation of a merger or consolidation of the Company with any other corporation, other than (i) a merger or
consolidation for the sole purpose of changing the Companys jurisdiction of incorporation or (ii) a consolidation or merger of the Company in which the holders of the voting capital stock of the Company immediately prior to the
consolidation or merger (other than Persons who are parties to such consolidation or merger and their respective Affiliates) hold at least fifty percent (50%) of the voting power represented by the Companys then outstanding voting capital
stock of the Company or the surviving entity (or its parent entity) immediately after the consolidation or merger.
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 any committee appointed by the Board of Directors to administer the Plan.
2.11
Company
means Superconductor Technologies Inc., or any successor thereto.
2.12
Consultant
means any consultant, independent
contractor or other person who provides significant services to the Company or its Affiliates or any employee or Affiliate of any of the foregoing, but who is neither an Employee nor a Director.
2.13
Continuous Status
as an Employee, Consultant or Director means that a Participants employment or service relationship with
the Company or any Affiliate is not interrupted or terminated.
Continuous Status
shall not be considered interrupted in the following cases: (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company and any Subsidiary or successor. A leave of absence approved by the Company shall include sick leave, military leave or any other personal leave approved by an authorized representative of the Company.
For purposes of Incentive Stock Options, no leave of absence may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If such reemployment is approved by the Company but not guaranteed
by statute or contract, then such employment will be considered terminated on the ninety-first (91st) day of such leave and on such date any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonqualified Stock Option. In the event a Participants status changes among the positions of Employee, Director and Consultant, the Participants Continuous Status as an Employee, Director or
Consultant shall be deemed to be continuous and uninterrupted.
A-2
2.14
Director
means any individual who is a member of the Board of Directors of the
Company or an Affiliate of the Company.
2.15
Disability
means a permanent and total disability within the meaning of
Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.
2.16
Employee
means any individual who is a
common-law employee of the Company or of an Affiliate.
2.17
Exercise Price
means the price at which a Share may be
purchased by a Participant pursuant to the exercise of an Option, and the price used to determine the amount of cash or number of Shares payable to a Participant upon the exercise of a SAR.
2.18
Fair Market Value
means, as of any date, provided the Common Stock is listed on an established stock exchange or a national market system, including without limitation the NASDAQ,
the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock on the Grant Date of the Award. If no sales were reported on such Grant Date of the Award, the Fair Market Value of a share of Common Stock shall be the
closing price for such stock as quoted on the NASDAQ (or the exchange with the greatest volume of trading in the Common Stock) on the last market trading day with reported sales prior to the date of determination. In the case where the Company is
not listed on an established stock exchange or national market system, Fair Market Value shall be determined by the Board in good faith in accordance with Code Section 409A and the applicable Treasury regulations.
2.19
Fiscal Year
means a fiscal year of the Company.
2.20 Intentionally omitted.
2.21
Grant Date
means the date the Administrator
approves the Award.
2.22
Incentive Stock Option
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.
2.23
Independent Director
means a
Nonemployee Director who is (i) a nonemployee director within the meaning of Section 16b-3 of the 1934 Act and (ii) independent as determined under the applicable rules of the NASDAQ, as either of these
definitions may be modified or supplemented from time to time.
2.24
Misconduct
shall include commission of any act in
competition with any activity of the Company (or any Affiliate) or any act contrary or harmful to the interests of the Company (or any Affiliate) as determined in good faith by the Administrator and shall include, without limitation:
(a) conviction of a felony or crime involving moral turpitude or dishonesty, (b) violation of Company (or any Affiliate) policies, with or acting against the interests of the Company (or any Affiliate), including employing or recruiting
any present, former or future employee of the Company (or any Affiliate), (c) misuse of any confidential, secret, privileged or non-public information relating to the Companys (or any Affiliates) business, or (d) participating
in a hostile takeover attempt of the Company or an Affiliate. The foregoing definition shall not be deemed to be inclusive of all acts or omissions that the Company (or any Affiliate) may consider as Misconduct for purposes of the Plan.
2.25
NASDAQ
means The NASDAQ Stock Market, LLC.
2.26
Nonemployee Director
means a Director who is not employed by the Company or an Affiliate.
2.27
Nonqualified Stock Option
means an option to purchase Shares that is not intended to be an Incentive Stock Option.
A-3
2.28
Option
means an Incentive Stock Option or a Nonqualified Stock Option.
2.29
Participant
means an Employee, Consultant or Nonemployee Director who has an outstanding Award.
2.30
Performance Goals
means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to
a Participant with respect to an Award. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement, including without limitation goals tied to individual objectives
and/or the Companys (or a business units) return on assets, return on shareholders equity, efficiency ratio, earnings per share, net income, or other financial measures determined in accordance with U.S. generally accepted
accounting principles (GAAP), with or without adjustments determined by the Administrator. The foregoing definition shall not be deemed to be inclusive of all Performance Goals for purposes of this Plan. The Performance Goals may differ
from Participant to Participant and from Award to Award.
2.31
Restricted Stock Units
means an Award granted to a
Participant pursuant to Section 8 of the Plan that entitles the Participant to receive a prescribed number of Shares, or the equivalent value in cash, upon achievement of Performance Goals associated with such Award. The Participants
Award Agreement shall specify whether the Restricted Stock Units will be settled in Shares or cash.
2.32
Period of
Restriction
means the period during which Stock Awards are subject to restrictions that subject the Shares to a substantial risk of forfeiture. As provided in Section 7, such restrictions may be based on the passage of time in which
case the restrictions may lapse over the Period of Restriction, the achievement of Performance Goals, or the occurrence of other events as determined by the Administrator, in its discretion.
2.33
Plan
means this Superconductor Technologies Inc. 2013 Equity Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.
2.34
Rule 16b-3
means the rule so designated promulgated under Section 16 of the 1934 Act, and any future rule or regulation
amending, supplementing or superseding such rule.
2.35
SEC
means the U.S. Securities Exchange Commission.
2.36
Section 16 Person
means a person who, with respect to the Shares, is subject to Section 16 of the 1934 Act.
2.37
Shares
means shares of common stock of the Company.
2.38
Stock Appreciation Right
or
SAR
means an Award granted to a Participant pursuant to Section 6. Upon exercise, a SAR gives a Participant a right to receive a
payment in cash, or the equivalent value in Shares, equal to the difference between the Fair Market Value of the Shares on the exercise date and the Exercise Price. Both the number of SARs and the Exercise Price are determined on the Grant Date. For
example, assume a Participant is granted 100 SARs at an Exercise Price of $10 and the award agreement specifies that the SARs will be settled in Shares. Also assume that the SARs are exercised when the underlying Shares have a Fair Market Value of
$20 per Share. Upon exercise of the SAR, the Participant is entitled to receive 50 Shares [(($20-$10)*100)/$20].
2.39
Stock
Awards
means an Award granted to a Participant pursuant to Section 7. A Stock Award constitutes a transfer of ownership of Shares to a Participant from the Company. Such transfer may be subject to restrictions against transferability,
assignment, and hypothecation. Under the terms of the Award, the restrictions against transferability are removed when the Participant has met the specified vesting requirement. Shares granted pursuant to a Stock Award shall vest immediately upon
the lapsing of the applicable Period of Restriction (if any). Stock Awards may also be granted without any restrictions or vesting requirements. Vesting may be based on continued employment or service over a stated service period, or on the
attainment of specified Performance Goals. If employment or service is terminated prior to vesting, the unvested Shares revert back to the Company.
A-4
2.40
Subsidiary
means any corporation, LLC or partnership (collectively referred to as
Entities) in an unbroken chain of Entities beginning with the Company if each of the Entities other than the last Entity in the unbroken chain then owns fifty percent (50%) or more of the total combined voting power in one of the
other Entities in such chain.
SECTION 3
ADMINISTRATION
3.1
The Administrator
. The Administrator, if not the Board of Directors,
shall be appointed by the Board of Directors from time to time. Grants of authority in a committee charter shall be deemed appointment.
3.2
Authority of the Administrator
. It shall be the duty of the Administrator to administer the Plan in accordance with the Plans provisions and in accordance with Applicable Law. The Administrator, if the Board of Directors or a 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 following: (a) which Employees, Consultants and Directors shall be granted Awards;
(b) the terms and conditions of the Awards at initial grant and any subsequent revisions or changes to the terms and conditions of Awards, including, but not limited to, changes to, or removal of restrictions on, outstanding Awards relating to
vesting, Period of Restriction or exercisability periods, (c) interpretation of the Plan, (d) adoption of rules for the administration, interpretation and application of the Plan as are consistent therewith and (e) interpretation,
amendment or revocation of any such rules.
3.3
Decisions Binding
. All determinations and decisions made by the Administrator shall be
final, conclusive and binding on all persons, and shall be given the maximum deference permitted by Applicable Law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1
Number of Shares
. Subject to adjustment, as provided in Section 4.3, the total number of Shares initially available for grant under the Plan shall be two million two hundred ninety three
thousand three hundred thirty three (2,293,333). Shares granted under the Plan may be authorized but unissued Shares or reacquired Shares bought on the market or otherwise. Awards settled in cash shall not count against the limitation set forth in
this Section 4.1.
4.2
Reversion of Shares to the Plan
. If any Award made under the Plan expires, or is forfeited or cancelled,
the Shares underlying such Awards shall become available for future Awards under the Plan.
4.3
Adjustments in Awards and Authorized
Shares
. The number of Shares covered by the Plan, each outstanding Award, and the per Share exercise price of each such Award, shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock
resulting from a stock split, reverse stock split, recapitalization, spin-off, combination, reclassification, the payment of a stock dividend on the common stock or any other increase or decrease in the number of such Shares of common stock 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 Administrator whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue 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 of common stock subject to an Option.
4.4
Legal Compliance
. Shares shall not be issued pursuant to the making or exercise of an Award unless the exercise of Options and rights and the issuance and delivery of Shares shall comply with
the Securities Act of 1933, as amended, the 1934 Act and other Applicable Law, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Any Award made in violation hereof shall be null and void.
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4.5
Investment Representations
. As a condition to the exercise of an Option or other right, the
Company may require the person exercising such Option or right to represent and warrant at the time of exercise that the Shares are being acquired 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.
SECTION 5
STOCK OPTIONS
The provisions of this Section 5 are applicable to Options granted to Employees, Consultants and Nonemployee Directors. Such
Participants shall also be eligible to receive other types of Awards as set forth in the Plan.
5.1
Grant of Options
. Subject to the
terms and provisions of the Plan, Options may be granted at any time and from time to time as determined by the Administrator in its discretion. The Administrator may grant Incentive Stock Options, Nonqualified Stock Options, or a combination
thereof, and the Administrator, in its discretion and subject to Sections 4.1, shall determine the number of Shares subject to each Option.
5.2
Award Agreement
. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the
Option, the number of Shares to which the Option pertains, any conditions to exercise the Option, and such other terms and conditions as the Administrator, in its discretion, shall determine. The Award Agreement shall also specify whether the Option
is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3
Exercise Price
. The Administrator shall determine the
Exercise Price for each Option subject to the provisions of this Section 5.3.
5.3.1
Nonqualified Stock Options
.
In the case of a Nonqualified Stock Option, the per Share exercise price shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date, as determined by the Administrator.
5.3.2
Incentive Stock Options
. The grant of Incentive Stock Options shall be subject to the following limitations:
(a) The Exercise Price of an Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of a
Share on the Grant Date; provided, however, that if on the Grant Date, 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 Exercise Price shall be not less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the Grant Date;
(b) Incentive Stock Options may be granted only to persons who are, as of the Grant Date, Employees of the Company or a Subsidiary, and
may not be granted to Consultants or Nonemployee Directors.
(c) To the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any parent or Subsidiary) exceeds $100,000, the Options to acquire Shares in
excess of such amount shall be treated as Nonqualified Stock Options. For purposes of this Section 5.3.2(c), Incentive Stock Options shall be taken into account in the order in which they were granted. For purposes of this limitation, the Fair
Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted; and
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(d) In the event of a Participants change of status from Employee to Consultant or
Nonemployee Director, an Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonqualified Stock Option three (3) months and one (1) day following
such change of status.
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, Directors or Consultants on
account of such transaction may be granted Options in substitution for options granted by their former employer, and such Options may be granted with an Exercise Price less than the Fair Market Value of a Share on the Grant Date; provided, however,
the grant of such substitute Option shall not constitute a modification as defined in Code Section 424(h)(3) and the applicable Treasury regulations.
5.4
Exercise of Options
. Options granted under the Plan shall be exercisable only with respect to the underlying shares that have become vested and shall be subject to restrictions as set forth in
the Award Agreement as the Administrator shall determine in its discretion. Except as set forth in Section 9.1, in all cases involving termination of Continuous Status as an Employee, Director or Consultant (including, but not limited to, the
reasons described in subsections (c), (d), (e) and (f) of Section 5.5.1), such Option shall be exercisable only to the extent the Participant was entitled to exercise it at the date of such termination.
5.5
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Expiration of Options
|
5.5.1
Expiration Dates
. Unless otherwise specified in the Award Agreement, but in any event no later than ten (10) years from
the Grant Date, each Option shall terminate no later than the first to occur of the following events:
(a)
Date in Award
Agreement
. The date for termination of the Option set forth in the written Award Agreement;
(b)
Termination of
Continuous Status as Employee, Director or Consultant
. The last day of the three (3)-month period following the date the Participant ceases his/her/its Continuous Status as an Employee, Director or Consultant (other than termination for a reason
described in subsections (c), (d), (e), or (f) below).
(c)
Misconduct
. In the event a Participants
Continuous Status as an Employee, Director or Consultant terminates because the Participant has performed an act of Misconduct as determined by the Administrator, all unexercised Options held by such Participant shall expire five (5) business
days following Participants receipt of written notice from the Company of Participants termination due to Misconduct; provided, however, that the Administrator may, in its sole discretion, prior to the expiration of the five (5) day
period, reinstate the Options by giving written notice of such reinstatement to Participant. In the event of such reinstatement, the Participant may exercise the Option only to such extent, for such time, and upon such terms and conditions as if the
Participant had ceased to be employed by or affiliated with the Company or a Subsidiary upon the date of such termination for a reason other than Misconduct, disability or death;
(d)
Disability
. In the event that a Participants Continuous Status as an Employee, Director or Consultant terminates as a
result of the Participants Disability, the Participant may exercise his or her Option at any time within twelve (12) months from the date of such termination (but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). If, at the date of termination, the Participant is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the
Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan;
(e)
Death
. In the event of the death of a Participant, the Participants Option may be exercised at any time within twelve (12) months following the date of death (but in no event later
than the expiration of the term
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of such Option as set forth in the Award Agreement), by the Participants estate or by a person who acquired the right to exercise the Option by bequest or inheritance. If, at the time of
death, the Participant was not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after death, the Participants estate or a person who acquired
the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan; or
(f)
10 Years from Grant
. An Option shall expire no more than ten (10) years from the Grant Date; provided, however, that if
an Incentive Stock 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, such Incentive Stock Option may not be exercised after the expiration of five (5) years from the Grant Date.
5.5.2
Administrator Discretion
. Notwithstanding the foregoing the Administrator may, after an Option is granted, extend the
exercise period that an Option is exercisable following a Participants termination of Continuous Service (recognizing in some such circumstances the Options would cease to be Incentive Stock Options); provided, however, in no event may any
such extension extend beyond the stated expiration date of the Option.
5.6
No Re-Pricing Without Shareholder Approval
.
Except as provided in Section 4.3, in no event may the Administrator directly or indirectly reduce the exercise price of an Option after it has been granted without the approval of a majority of the shareholders eligible to vote.
5.7
Exercise and Payment
. Options shall be exercised by the Participants delivery of a written notice of exercise to the Secretary of the
Company (or its designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares and payment of any additional amount that the Administrator specifies is necessary for the
Company to pay any required withholding taxes in accordance with Section 11.
5.7.1
Form of Consideration
. Upon
the exercise of any Option, the Exercise Price shall be payable to the Company in full in cash or its equivalent. The Administrator, in its discretion, also may permit the exercise of Options and same-day sale of related Shares, or exercise by
tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price, or by any other means which the Administrator, in its discretion, determines to provide legal consideration for the
Shares, and to be consistent with the purposes of the Plan. The Administrator, in its discretion, may also permit a net issuance of any Option, where the term net issuance means the issuance of a number of Shares (rounded
down to the nearest whole number of Shares) that is equivalent in value to the difference between the fair market value of the underlying stock on the exercise date, less the exercise price and minimum tax withholding. Such discretion may be
exercised by the Administrator either in the Award Agreement or at any other time.
5.7.2
Delivery of Shares
. As soon
as practicable after receipt of a written notification of exercise and full payment for the Shares purchased and taxes required to be withheld, the Company shall deliver to the Participant (or the Participants designated broker), Share
certificates (which may be in book entry form) representing such Shares.
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SECTION 6
STOCK APPRECIATION RIGHTS
6.1
Grant of SARs
. Subject to the terms of the Plan, a SAR may
be granted to Employees, Consultants and Nonemployee Directors at any time and from time to time as shall be determined by the Administrator.
6.1.1
Number of Shares
. The Administrator shall have complete discretion to determine the number of SARs granted to any Participant.
6.1.2
Exercise Price and Other Terms
. The Administrator, subject to the provisions of the Plan, shall have discretion to determine
the terms and conditions of SARs granted under the Plan, including whether upon exercise the SARs will be settled in Shares or cash, which must be determined at the time of grant and set forth in the Award Agreement. However, the Exercise Price of a
SAR shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.
6.2
Exercise of
SARs
. SARs granted under the Plan shall be exercisable at such times and be subject to such restrictions as set forth in the Award Agreement and conditions as the Administrator shall determine in its discretion.
6.3
SAR Agreement
. Each SAR grant shall be evidenced by an Award Agreement that shall specify the Exercise Price, the term of the SAR, the
conditions of exercise and such other terms and conditions as the Administrator shall determine.
6.4
Expiration of SARs
. A SAR granted
under the Plan shall expire upon the date determined by the Administrator in its discretion as set forth in the Award Agreement, or otherwise pursuant to the provisions relating to the expiration of Options as set forth in Section 5.5.
6.5
No Re-Pricing Without Shareholder Approval
. Except as provided in Section 4.3, in no event may the Administrator
directly or indirectly reduce the exercise price of a SAR after it has been granted without the approval of a majority of the shareholders eligible to vote.
6.6
Payment of SAR Amount
. Upon exercise of a SAR, a Participant shall be entitled to receive (whichever is specified in the Award Agreement) from the Company either (a) a cash payment in an
amount equal to (x) the difference between the Fair Market Value of a Share on the date of exercise and the SAR Exercise Price, multiplied by (y) the number of Shares with respect to which the SAR is exercised, or (b) a number of
Shares by dividing such cash amount by the Fair Market Value of a Share on the exercise date. If the Administrator designates in the Award Agreement that the SAR will be settled in cash, upon Participants exercise of the SAR the Company shall
make a cash payment to Participant as soon as reasonably practicable.
SECTION 7
STOCK AWARDS
7.1
Grant of
Stock Awards
. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Stock Awards to Employees, Nonemployee Directors and Consultants in such amounts as the Administrator, in its
discretion, shall determine. The Administrator shall determine the number of Shares to be granted to each Participant and the purchase price (if any) to be paid by the Participant for such Shares.
7.2
Stock Agreement
. Each Stock Award shall be evidenced by an Award Agreement that shall specify the terms of the grant, including the Period of
Restriction that applies to such grant (if any), the conditions that must be satisfied for the Period of Restriction to lapse, and such other terms and conditions as the Administrator, in its discretion, shall determine. Unless the Administrator
determines otherwise, Shares granted pursuant to Stock Awards shall be held by the Company as escrow agent until the Period of Restriction has lapsed.
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7.3
Transferability
. Shares granted pursuant to a Stock Award may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until expiration of the applicable Period of Restriction (if any).
7.4
Restrictions
.
In its sole and absolute discretion, the Administrator may set restrictions based on a Participants Continuous Status as Employee, Nonemployee Director or Consultant or the achievement of specific Performance Goals (Company-wide, business
unit, or individual), or any other basis determined by the Administrator in its discretion.
7.5
Legend on Certificates
. The
Administrator, in its discretion, may place a legend or legends on the Share certificates to give appropriate notice of such restrictions in the case the Shares are not held by the Company in escrow.
7.6
Release of Shares
. Shares granted pursuant to Stock Awards shall be released from escrow as soon as practicable after expiration of the Period
of Restriction. At such time, the Participant shall be entitled to have any legend or legends under Section 7.5 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to Applicable
Law.
7.7
Voting Rights
. During any Period of Restriction, Participants holding Shares granted pursuant this Section 7 may
exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement.
7.8
Dividends and Other
Distributions
. During any Period of Restriction, Participants holding Shares granted pursuant to this Section 7 shall be entitled to receive all dividends and other distributions paid with respect to such Shares 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 with respect to which they were paid.
7.9
Return of Stock to Company
. On the date that any forfeiture event set forth in the Award Agreement occurs, the Stock for which restrictions
have not lapsed shall revert to the Company and again shall become available for grant under the Plan.
SECTION 8
RESTRICTED STOCK UNITS
8.1
Grant of Restricted Stock Units
. Subject to the terms and conditions of the Plan, Restricted Stock Units may be granted to Employees, Consultants and Nonemployee Directors at any time and from time to time, as shall be determined by the
Administrator in its discretion.
8.1.1
Number of Units
. The Administrator will have complete discretion in determining
the number of Restricted Stock Units granted to any Participant, subject to the limitations in Sections 4.1.
8.1.2
Value
of Restricted Stock Units
. Each Performance Unit shall have a value equal to the Fair Market Value of one Share.
8.2
Performance Goals
and Other Terms
. The Administrator will set Performance Goals or other vesting provisions, including, without limitation, time-based vesting provisions, in its discretion which, depending on the extent to which they are met, will determine the
number Restricted Stock Units that are converted into Shares or into the equivalent value of cash that shall be paid to Participants. The time period during which the Performance Goals or other vesting provisions must be met will be called the
Performance Period. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its discretion, will determine. The
Administrator may set Performance Goals based upon the achievement of Company-wide or Individual Objectives or any other basis determined by the Administrator in its discretion.
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8.3
Earning of Restricted Stock Units
. After the applicable Performance Period has ended, the holder
of Restricted Stock Units will be entitled to receive a payment based on the number of Restricted Stock Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance
Goals or other vesting provisions have been achieved.
8.4
Form and Timing of Payment of Restricted Stock Units
. Each Award Agreement
of Restricted Stock Units shall specify the form of payment, which may be in the form of Shares or in cash. Payment with respect to earned Restricted Stock Units shall be made as soon as reasonably practical (an in no event more than two and
one-half months) after the expiration of the Performance Period.
8.5
Cancellation of Restricted Stock Units
. On the date that any
forfeiture event set forth in the Award Agreement occurs, all unearned or unvested Restricted Stock Units will revert to the Company, and again will be available for grant under the Plan.
SECTION 9
MISCELLANEOUS
9.1
Change In
Control
. Unless otherwise provided in the Award Agreement, in the event of a Change in Control, unless an Award is assumed or substituted by the successor corporation, then (i) such Awards shall become fully exercisable during the ten
(10) day period immediately prior to the Change in Control, whether or not otherwise then exercisable and (ii) all restrictions and conditions on any Award then outstanding shall lapse as of the date of the Change in Control. Unless an
Award is assumed or substituted by the successor corporation, such Award shall terminate and shall no longer be exercisable immediately upon the Change in Control, Participant shall be provided written notification of whether Options granted under
the Plan will be assumed, substituted or shall become fully exercisable no later than ten (10) days prior to the Change in Control date.
9.2
Dissolution or Liquidation
. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each
Participant as soon as practicable prior to the effective date of such proposed transaction. Notwithstanding anything to the contrary contained in this Plan or in any Award Agreement, the Participant shall have the right to exercise his or her Award
for a period of not less than ten (10) days immediately prior to such dissolution or transaction as to all of the Shares covered thereby, including Shares as to which the Award would not otherwise be exercisable.
9.3
No Effect on Employment or Service
. Nothing in the Plan shall interfere with or limit in any way the right of the Company or an Affiliate to
terminate any Participants employment or service at any time, with or without cause. Unless otherwise provided by written contract, employment or service with the Company or any of its Affiliates is on an at-will basis only. Additionally, the
Plan shall not confer upon any Director any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which such Director or the Company may have to terminate
his or her directorship at any time.
9.4
Participation
. No Employee, Consultant or Nonemployee 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.
9.5
Limitations on
Awards
. No Participant shall be granted an Award or Awards in any Fiscal Year in which the combined number of Shares underlying such Award(s) exceeds three hundred thousand (300,000) Shares; provided, however, that such limitation shall be
adjusted proportionately in connection with any change in the Companys capitalization as described in Section 4.3.
9.6
Successors
. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or, otherwise, sale or disposition of all or substantially all of the business or assets of the Company.
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9.7
Beneficiary Designations
. If permitted by the Administrator, a Participant under the Plan may
name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participants death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in
a form and manner acceptable to the Administrator. In the absence of any such designation, any vested benefits remaining unpaid at the Participants death shall be paid to the Participants estate and, subject to the terms of the Plan and
of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participants estate.
9.8
Limited Transferability of Awards
. No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. All rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to the Participant. Notwithstanding the foregoing, the Participant may, in a manner specified by the
Administrator, (a) transfer a Nonqualified Stock Option to a Participants spouse, former spouse or dependent pursuant to a court-approved domestic relations order which relates to the provision of child support, alimony payments or
marital property rights and (b) transfer a Nonqualified Stock Option or Stock Awards by bona fide gift and not for any consideration to (i) a member or members of the Participants immediate family, (ii) a trust established for
the exclusive benefit of the Participant and/or member(s) of the Participants immediate family, (iii) a partnership, limited liability company of other entity whose only partners or members are the Participant and/or member(s) of the
Participants immediate family or (iv) a foundation in which the Participant and/or member(s) of the Participants immediate family control the management of the foundations assets.
9.9
Restrictions on Share Transferability
. The Administrator may impose such restrictions on any Shares acquired pursuant to the exercise of an
Award as it may deem advisable, including, but not limited to, restrictions related to applicable federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded or any blue sky or
state securities laws.
9.10
Transfers Upon a Change in Control
. In the sole and absolute discretion of the Administrator, an Award
Agreement may provide that in the event of certain Change in Control events, which may include any or all of the Change in Control events described in Section 2.8, Shares obtained pursuant to this Plan shall be subject to certain rights and
obligations, which include but are not limited to the following: (i) the obligation to vote all such Shares in favor of such Change in Control transaction, whether by vote at a meeting of the Companys shareholders or by written consent of
such shareholders; (ii) the obligation to sell or exchange all such Shares and all rights to acquire Shares, under this Plan pursuant to the terms and conditions of such Change in Control transaction; (iii) the right to transfer less than
all but not all of such Shares pursuant to the terms and conditions of such Change in Control transaction, and (iv) the obligation to execute all documents and take any other action reasonably requested by the Company to facilitate the
consummation of such Change in Control transaction.
9.11
Performance-Based Awards
. Each agreement for the grant of Restricted Stock
Units or other performance-based awards shall specify the number of Shares or Units underlying the Award, the Performance Period and the Performance Goals (each as defined below), and each agreement for the grant of any other award that the
Administrator determines to make subject to a Performance Goal similarly shall specify the applicable number of shares of Common Stock, the period for measuring performance and the Performance Goal. As used herein, Performance Goals
means performance goals specified in the agreement for a Performance Unit Award, or for any other Award which the Administrator determines to make subject to Performance Goals, upon which the vesting or settlement of such award is conditioned and
Performance Period means the period of time specified in an agreement over which Restricted Stock Units, or another Award which the Administrator determines to make subject to a Performance Goal, are to be earned. Each agreement for a
performance-based Award shall specify in respect of a Performance Goal the minimum level of performance below which no payment will be made, shall describe the method of determining the amount of any payment to be made if performance is at or above
the minimum acceptable level, but falls short of full achievement of the Performance Goal, and shall specify the maximum percentage payout under the agreement.
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9.11.1
Performance Goals for Covered Employees
. The Performance Goals for Restricted
Stock Units and any other performance-based award granted to a Covered Employee, if deemed appropriate by the Administrator, shall be objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of the Code, and shall be based
upon one or more of the following performance-based business criteria, either on a business unit or Company-specific basis or in comparison with peer group performance: revenue, operating income, operating cash flows, return on net assets, return on
assets, return on equity, return on capital, asset turnover, total stockholder return, net income, pre-tax income, gross margin, profit margin, net income margin, cash flow, book value, earnings per share, earnings growth, EBIT, EBITDA. Achievement
of any such Performance Goal shall be measured over a period of years not to exceed ten (10) as specified by the Administrator in the agreement for the performance-based Award. No business criterion other than those named above in this
Section 9.11.1 may be used in establishing the Performance Goal for an award to a Covered Employee under this Section 9.11. For each such award relating to a Covered Employee, the Administrator shall establish the targeted level or levels
of performance for each such business criterion. The Administrator may, in its discretion, reduce the amount of a payout otherwise to be made in connection with an award under this Section 9.11, but may not exercise discretion to increase such
amount, and the Administrator may consider other performance criteria in exercising such discretion. All determinations by the Administrator as to the achievement of Performance Goals under this Section 9.11 shall be made in writing. The
Administrator may not delegate any responsibility under this Section 9.11. As used herein, Covered Employee shall mean, with respect to any grant of an award, an executive of the Company or any Subsidiary who is a member of the
executive compensation group under the Companys compensation practices (not necessarily an executive officer) whom the Administrator deems may be or become a covered employee as defined in Section 162(m)(3) of the Code for any year that
such award may result in remuneration over $1 million which would not be deductible under Section 162(m) of the Code but for the provisions of the Program and any other qualified performance-based compensation plan (as defined under
Section 162(m) of the Code) of the Company; provided, however, that the Administrator may determine that a Plan Participant has ceased to be a Covered Employee prior to the settlement of any award.
9.11.2
Mandatory Deferral of Income
. The Administrator, in its sole discretion, may require that one or more award agreements
contain provisions which provide that, in the event Section 162(m) of the Code, or any successor provision relating to excessive employee remuneration, would operate to disallow a deduction by the Company with respect to all or part of any
award under the Program, a Plan Participants receipt of the benefit relating to such award that would not be deductible by the Company shall be deferred until the next succeeding year or years in which the Plan Participants remuneration
does not exceed the limit set forth in such provisions of the Code; provided, however, that such deferral does not violate Code Section 409A.
SECTION 10
AMENDMENT, SUSPENSION, AND TERMINATION
10.1
Amendment, Suspension, or Termination
. Except as provided in Section 10.2, the Board, in its sole discretion, may amend, suspend or
terminate the Plan, or any part thereof, at any time and for any reason. The amendment, suspension or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Award theretofore
granted to such Participant. No Award may be granted during any period of suspension or after termination of the Plan.
10.2
No Amendment
without Shareholder Approval
. The Company shall obtain shareholder approval of any material Plan amendment (including but not limited to any provision to reduce the exercise or purchase price of any outstanding Options or other Awards after the
Grant Date (other than for adjustments made pursuant Section 4.3), or to cancel and re-grant Options or other rights at a lower exercise price), to the extent required to comply with the rules of the NASDAQ, the Exchange Act, Section 422
of the Code, or other Applicable Law.
10.3
Plan Effective Date and Duration of Awards
. The Plan shall be effective as of the Plan
Adoption Date subject to the shareholders of the Company approving the Plan by the required vote), subject to Sections 10.1 and
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10.2 (regarding the Boards right to amend or terminate the Plan), and shall remain in effect thereafter. If the shareholders of the Company do not approve the Plan by the required vote
within twelve months of the Plan Adoption Date, all Awards granted under this Plan, and this Plan in its entirety, shall immediately terminate. However, without further shareholder approval, no Award may be granted under the Plan more than ten
(10) years after the Plan Adoption Date.
SECTION 11
TAX WITHHOLDING
11.1
Withholding Requirements
. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof) or the release of Shares from escrow arrangements or removal of legends, 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 (including the Participants FICA obligation) required to be withheld with respect to such Award (or exercise
thereof).
11.2
Withholding Arrangements
. The Administrator, in its discretion and pursuant to such procedures as it may specify from
time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) electing to have the Company withhold otherwise deliverable Shares or (b) delivering to the Company already-owned Shares having a
Fair Market Value equal to the minimum amount required to be withheld. The amount of the withholding requirement shall be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made; provided,
however, in the case Shares are withheld by the Company to satisfy the tax withholding that would otherwise be issued to the Participant, the amount of such tax withholding shall be determined by applying the statutory minimum federal, state or
local income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date
taxes are required to be withheld.
SECTION 12
LEGAL CONSTRUCTION
12.1
Liability of Company
. 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 grant or any Award or the issuance and sale of any Shares hereunder, shall relieve the Company, its
officers, Directors and Employees of any liability in respect of the failure to grant such Award or to issue or sell such Shares as to which such requisite authority shall not have been obtained.
12.2
Grants Exceeding Allotted Shares
. If the Shares covered by an Award exceed, as of the date of grant, the number of Shares, which may be
issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess Shares, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely
obtained.
12.3
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.
12.4
Severability
. In the event any
provision of the Plan shall be held illegal or invalid for any reason, the 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.
12.5
Requirements of Law
. The granting of Awards and the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
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12.6
Governing Law
. The Plan and all Award Agreements shall be construed in accordance with and
governed by the laws of the State of California.
12.7
Captions
. Captions are provided herein for convenience only, and shall not serve
as a basis for interpretation or construction of the Plan.
A-15
DETACH HERE
PROXY
THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SUPERCONDUCTOR TECHNOLOGIES INC.
ANNUAL MEETING OF STOCKHOLDERS
September 27, 2017
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 August 17, 2017, and hereby appoints each of Jeffrey A. Quiram and William J. Buchanan, or either of them, 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 Wednesday, September 27, 2017 at 9:00 a.m., local time, at the offices of Superconductor
Technologies Inc., located at 9101 Wall Street, Austin, Texas 78754 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
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
☐
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Please mark votes as in this example
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1. TO ELECT TWO CLASS 1 DIRECTORS
Nominees:
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(1) Jeffrey A. Quiram
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☐ FOR ALL NOMINEES
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☐ WITHHOLD ALL NOMINEES
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☐ FOR ALL NOMINEES EXCEPT
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Instructions: To withhold authority to vote for any individual nominee, mark the For All Nominees Except box and
write that nominees name in the space provided above.
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2. TO AMEND THE 2013 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED THEREUNDER FROM 293,333 TO 2,293,333 AND THE RELATED SUBLIMIT OF AWARDS TO ANY ONE PARTICIPANT FROM 20,000 TO 300,000 SHARES.
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FOR
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AGAINST
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ABSTAIN
☐
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3. RATIFICATION OF THE SELECTION OF MARCUM LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF SUPERCONDUCTOR TECHNOLOGIES INC. FOR 2017.
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FOR
☐
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AGAINST
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ABSTAIN
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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.
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MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT.
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☐
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PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING.
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☐
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(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 must sign.)
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Signature:
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Date:
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Signature:
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Date:
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
THE ELECTION OF THE CLASS 1 DIRECTOR NOMINEES, FOR THE AMENDMENTS TO OUR 2013 EQUITY INCENTIVE PLAN AND FOR THE RATIFICATION OF THE APPOINTMENT OF MARCUM LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF SUPERCONDUCTOR TECHNOLOGIES INC.
FOR 2017. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO VOTE AS TO ANY OTHER MATTERS THAT MAY BE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
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