<PAGE>
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 registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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CONDUCTUS INC.
- ----------------------
(Name of Registrant as Specified in Its Charter)
- ----------------------
(Name of Person(s) Filing Proxy Statement)
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Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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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 number, or the form or schedule and the date
of its filing.
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(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
[CONDUCTUS LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1998
TO THE STOCKHOLDERS OF CONDUCTUS, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
CONDUCTUS, INC. (the "Company"), will be held on Friday, May 29, 1998, at
3:00 p.m. local time (the "Annual Meeting"), at the Company's administrative
offices located at 965 West Maude Avenue, Sunnyvale, California 94086 for the
following purposes, as more fully described in the Proxy Statement
accompanying this Notice:
(1) To elect directors of the Company;
(2) To approve an amendment to and restatement of the Company's Restated
Certificate of Incorporation (i) to increase the number of shares of
Common Stock that the Company is authorized to issue from 11,000,000 to
20,000,000, and (ii) to increase the number of shares of Preferred Stock
that the Company is authorized to issue from 1,000,000 to 5,000,000;
(3) To approve amendments to the Company's 1992 Stock Option/Stock Issuance
Plan to change the maximum number of options for shares of Common Stock
which may be granted to a single individual to 750,000 in any one
calendar year from 240,000 over the life of the Plan and to permit
discretionary option grants to non-employee directors;
(4) To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
(5) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 16, 1998, are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed between the record date and the date of the Annual
Meeting. A list of stockholders entitled to vote at the Annual Meeting will
be available for inspection at the executive offices of the Company for a
period of ten days before the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend, please sign and return the
enclosed Proxy as promptly as possible in the envelope enclosed for your
convenience. Should you receive more than one proxy because your shares are
registered in different names and addresses, each proxy should be signed and
returned to assure that all your shares will be voted. You may revoke your
proxy at any time prior to the Annual Meeting. If you attend the Annual
Meeting and vote by ballot, your proxy will be revoked automatically and only
your vote at the Annual Meeting will be counted.
BY ORDER OF THE BOARD OF DIRECTORS
Charles E. Shalvoy
President and Chief Executive Officer
, 1998
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
PROXY STATEMENT
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
MATTERS TO BE CONSIDERED AT ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . .2
PROPOSAL ONE -- ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . .2
PROPOSAL TWO -- AMENDMENT TO AND RESTATEMENT OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . .3
PROPOSAL THREE -- APPROVAL OF AMENDMENTS TO 1992 STOCK OPTION/STOCK ISSUANCE
PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
PROPOSAL FOUR -- RATIFICATION OF INDEPENDENT AUDITORS . . . . . . . . . . . . 11
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
OWNERSHIP OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXECUTIVE COMPENSATION AND RELATED INFORMATION . . . . . . . . . . . . . . . . . . 14
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Summary Compensation Table. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Option Grants in Last Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 14
Employment Contracts, Termination of Employment Arrangements and Change in
Control Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Ten-Year Option/SAR Repricings. . . . . . . . . . . . . . . . . . . . . . . . 16
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
COMPENSATION COMMITTEE REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
COMPARISON OF STOCKHOLDER RETURN . . . . . . . . . . . . . . . . . . . . . . . . . 20
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 . . . . . . . 21
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . 21
ANNUAL REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FORM 10-K/A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
<PAGE>
CONDUCTUS, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1998
The enclosed proxy ("Proxy") is solicited on behalf of the Board of Directors
of CONDUCTUS, INC., a Delaware corporation (the "Company"), for use at the
1998 Annual Meeting of Stockholders to be held on May 29, 1998 (the "Annual
Meeting"). The Annual Meeting will be held at 3:00 p.m. PST at the Company's
administrative offices located at 965 West Maude Avenue, Sunnyvale,
California 94086. These proxy solicitation materials were mailed on or about
, 1998, to all stockholders entitled to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders
and are described in more detail in this Proxy Statement. On April 16, 1998,
the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting, 7,046,421 shares of the Company's common
stock, $.0001 par value ("Common Stock"), were issued and outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held by
such stockholder on April 16, 1998. Stockholders may not cumulate votes in
the election of directors.
Directors are elected by a plurality vote of the affirmative votes cast by
those shares present in person, or represented by proxy, and entitled to vote
at the Annual Meeting. The five nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker
non-votes will not be counted toward a nominee's total. Stockholders may not
cumulate votes in the election of directors. Approval of the amendment to and
restatement of the Company's Restated Certificate of Incorporation requires
the affirmative vote of a majority of the Company's Common Stock issued and
outstanding, and entitled to vote at the Annual Meeting. Abstentions and
broker non-votes will be treated as votes against the proposal. Approval of
amendments to the Company's 1992 Stock Option/Stock Issuance Plan requires
the affirmative vote of a majority of those shares present in person or
represented by proxy, and entitled to vote at the Annual Meeting.
Abstentions will be treated as votes against the proposal. Broker non-votes
will be treated as not entitled to vote on this matter and thus will have no
effect on the outcome of the vote. Ratification of the appointment of
Coopers & Lybrand L.L.P. as the Company's independent public accountants for
the fiscal year ending December 31, 1998, requires the affirmative vote of a
majority of those shares present in person, or represented by proxy, and cast
either affirmatively or negatively at the Annual Meeting. Abstentions and
broker non-votes will not be counted as having been voted on the proposal.
REVOCABILITY OF PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your
proxy when properly completed. In the event no directions are specified, such
proxies will be voted FOR the Nominees of the Board of Directors (as set
forth in Proposal No. 1), FOR Proposals Nos. 2, 3 and 4 and in the discretion
of the proxy holders as to other matters that may properly come before the
Annual Meeting. You may revoke or change your Proxy at any time before the
Annual Meeting by filing with the Secretary of the Company, at the Company's
principal executive offices, a notice of revocation or another signed Proxy
with a later date. You may also revoke your Proxy by attending the Annual
Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the
Proxy and any additional soliciting materials furnished to stockholders.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names that are
beneficially owned by others so that they may forward these solicitation
materials to such beneficial owners. In addition, the Company may reimburse
such persons for their costs in forwarding these solicitation materials to
such beneficial owners. The original solicitation of proxies by mail may be
supplemented by a solicitation by telephone, telegram, or other means by the
Company's directors, officers or employees. No additional compensation will
be paid to these individuals for any such services. Except as described
above, the Company does not presently intend to solicit proxies other than by
mail.
<PAGE>
CONDUCTUS, INC.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
GENERAL
The Company currently has five directors. All directors hold office until the
next annual meeting of stockholders or until their successors are duly
elected and qualified. The officers serve at the discretion of the Board of
Directors (the "Board").
The Board has selected five nominees, all of whom are currently serving as
directors of the Company. The names of the persons who are nominees for
director and their positions with the Company as of April 16, 1998 are set
forth in the table below. Each person nominated for election has agreed to
serve, if elected, and management has no reason to believe that any nominee
will be unavailable to serve. In the event any nominee is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who may be designated by the present Board to fill the
vacancy. Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the nominees named below. The five candidates receiving
the highest number of affirmative votes of the shares represented and voting
on this particular matter at the Annual Meeting will be elected directors of
the Company, to serve their respective terms and until their successors have
been elected and qualified.
NOMINEES FOR TERM ENDING UPON THE 1999 ANNUAL STOCKHOLDERS' MEETING
<TABLE>
<CAPTION>
Nominee Age Positions and Offices Held with the Company
------- --- -------------------------------------------
<S> <C> <C>
John F. Shoch, Ph.D(1)(2) 49 Chairman of the Board
Charles E. Shalvoy 50 President, Chief Executive Officer and Director
Martin Cooper (1) 69 Director
Robert M. Janowiak 61 Director
Martin J. Kaplan (2) 60 Director
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
BUSINESS EXPERIENCE OF DIRECTORS
DR. SHOCH has served as Chairman of the Board of the Company since its
inception in 1987. As a founder of Conductus, Dr. Shoch served as President
from 1987 to 1988. Since 1985, he has been a general partner of AMC Partners
84, which is the general partner of Asset Management Associates 1984, a
venture capital investment fund and a principal stockholder of the Company.
Dr. Shoch holds a B.S. in political science and an M.S. and Ph.D. in computer
science from Stanford University.
MR. SHALVOY joined the Company in June 1994 as President, Chief Executive
Officer and Director. From 1988 to 1994, he was President and Chief Operating
Officer of Therma-Wave, Inc., a manufacturer of semiconductor production
equipment. Prior to that he was employed by Aehr Test Systems and Raychem
Corporation in a variety of senior management positions. Mr. Shalvoy holds a
B.S. in Mechanical Engineering from the University of Notre Dame and a M.B.A.
from Stanford University.
MR. COOPER has served as director of the Company since January 1995. Since
1992, Mr. Cooper has served as Chairman and Chief Executive Officer of
ArrayComm, Inc., a company he co-founded that manufactures intelligent
antennas for wireless applications. Previously he was co-founder, Chairman,
Chief Executive Officer and President of Cellular Business Systems, Inc., a
provider of management information software to the cellular industry that was
purchased by Cincinnati Bell in 1983. Mr. Cooper worked for 29 years at
Motorola Inc., where he started out as a Senior Development Engineer in 1954
and advanced to Corporate Director of Research and Development in 1983. Mr.
Cooper earned a B.S. and M.S. in Electrical Engineering from the Illinois
Institute of Technology.
-2-
<PAGE>
CONDUCTUS, INC.
MR. JANOWIAK has served as Director of the Company since December 1996. Since
1982, he has served as the Executive Director of the International
Engineering Consortium. Prior to that, he was President of Federal Signal
Corporation's Signal Group, a provider of public safety products and systems.
Mr. Janowiak also held positions with ITT Research and Rockwell, where he
advanced to Vice-President, General Manager of the Information Products
Division. Mr. Janowiak earned a B.S.E.E. from the University of Illinois, an
M.S.E.E. from Illinois Institute of Technology and an M.B.A. from the
University of Chicago.
MR. KAPLAN has served as Director of the Company since July 1996. Since 1997,
Mr. Kaplan has served as an Executive Vice-President of Pacific Telesis
Group. Prior to that he was President - Network Services Group of Pacific
Bell, a Regional Bell Operating Company. Mr. Kaplan has worked for Pacific
Bell and its successor, Pacific Telesis, for 38 years in various senior
management positions. Mr. Kaplan earned a B.S. in engineering from California
Institute of Technology.
There are no family relationships among executive officers or directors of
the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board held five meetings.
The Board has an Audit Committee and a Compensation Committee but does not
have a nominating committee. Each of the directors attended or participated
in 75% or more of the total meetings of the Board and of the committee(s) on
which he served during the past fiscal year.
The Audit Committee currently consists of two directors, Dr. Shoch and Mr.
Cooper, and is primarily responsible for approving the services performed by
the Company's independent auditors and reviewing their reports regarding the
Company's accounting practices and systems of internal accounting controls.
The Audit Committee held two meetings during the last fiscal year.
The Compensation Committee currently consists of two directors, Dr. Shoch and
Mr. Kaplan, and is primarily responsible for reviewing and approving the
Company's general compensation policies and setting compensation levels for
the Company's executive officers. The Compensation Committee also has the
authority to administer the Company's 1992 Stock Option/Stock Issuance Plan,
as amended, and make option grants thereunder. The Compensation Committee
held two meetings during the last fiscal year.
DIRECTOR COMPENSATION
Directors receive no cash compensation for serving on the Board. In January
1995, several non-employee directors were granted options, under the
Automatic Option Grant Program of the Company's 1992 Stock Option/Stock
Issuance Plan, as follows: Mr. Cooper - 15,000 shares and Dr. Shoch - 15,000
shares. Each new Option was granted at an exercise price of $4.93 per share.
In July 1996, Mr. Kaplan was granted a non-qualified stock option to purchase
15,000 shares of Common Stock at an exercise price of $11.25 per share under
the Automatic Grant Program. This option was canceled in November 1997 in
exchange for a new option to purchase 15,000 shares of Common Stock at a
purchase price of $6.50. In November 1996, Mr. Janowiak was granted a
non-qualified stock option to purchase 15,000 shares of Common Stock at an
exercise price of $ 6.56 per share under the Automatic Grant Program. In
October 1996 each non-employee director was granted options to purchase 3,000
shares of Common stock at an exercise price of $8.00 under the Automatic
Option Grant Program. In May 1997, Mr. Cooper, Mr. Janowiak, Mr. Kaplan and
Dr. Shoch were each granted options to purchase 3,000 shares of Common Stock
at an exercise price of $7.125 under the Automatic Option Grant Program. If
Proposal Two is approved by the stockholders, directors (including
non-employee directors) will also be eligible for discretionary option grants
under the Company's 1992 Stock Option/Stock Issuance Plan. Except for the
foregoing option grants and for reimbursement of certain expenses in
connection with attendance at Board and committee meetings, directors receive
no compensation for attending meetings of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE ABOVE NOMINEES.
PROPOSAL TWO -- AMENDMENT TO AND RESTATEMENT OF THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has determined that it is in the best interests of the
Company and its stockholders to amend and restate the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock
-3-
<PAGE>
of the Company from 11,000,000 to 20,000,000 shares and to increase the
number of authorized shares of Preferred Stock of the Company from 1,000,000
to 5,000,000 shares. Accordingly, the Board of Directors has unanimously
approved the proposed Amended and Restated Certificate of Incorporation, in
substantially the form attached hereto as Exhibit A (the "Restated
Certificate"), and hereby solicits the approval of the Company's stockholders
of the Restated Certificate. If the stockholders approve the Restated
Certificate, the Board of Directors currently intends to file the Restated
Certificate with the Secretary of State of the State of Delaware as soon as
practicable following such stockholder approval. If the Restated Certificate
is not approved by the stockholders, the existing Certificate of
Incorporation will continue in effect.
The objectives of the increases in the authorized number of shares of Common
Stock and Preferred Stock are to ensure that the Company has sufficient
shares available for future equity issuances. The Board of Directors believes
that it is prudent to increase the authorized number of shares of Common
Stock and Preferred Stock to the proposed levels in order to provide a
reserve of shares available for issuance to meet business needs as they
arise. Such future activities may include, without limitation, financings,
establishing strategic relationships with corporate partners, providing
equity incentives to employees, officers or directors, or effecting stock
splits or dividends. The Company has retained a financial advisor to seek to
raise up to $8 million in gross proceeds (before offering commissions and
expenses) to fund its working capital and other requirements. Although the
terms of the proposed offering have not been finalized, the Company
currently plans to issue shares of its Preferred Stock in the offering. The
proposed terms of the Preferred Stock have not been determined. There can be
no assurance that the offering can be completed or, if it is, as to the
amount of gross proceeds that the Company will raise or the type or terms of
the securities that will be issued by the Company. Failure to amend and
restate the Company's Restated Certificate of Incorporation will have a
material adverse effect on the ability of the Company to complete the
offering which, in turn, will have a material adverse effect on the Company.
The additional shares of Common Stock or Preferred Stock authorized may also
be used to acquire or invest in complementary businesses or products or to
obtain the right to use complementary technologies. Although the Company has
no present obligation to issue additional shares of Common Stock or Preferred
Stock (except pursuant to stock option/stock issuance plans, the Employee
Stock Purchase Plan and existing warrants), the Company may continue to
evaluate potential acquisitions of or investments with third parties.
However, the Company currently has no specific plans to enter into any such
transaction.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT TO AND RESTATEMENT OF THE
CERTIFICATE OF INCORPORATION
If the stockholders approve the proposed Restated Certificate, the Board of
Directors may cause the issuance of additional shares of Common Stock or
Preferred Stock without further vote of the stockholders of the Company,
except as provided under Delaware corporate law or under the rules of any
securities exchange on which shares of Common Stock and Preferred Stock of
the Company are then listed. Current holders of Common Stock have no
preemptive or similar rights, which means that current stockholders do not
have a prior right to purchase any new issue of capital stock of the Company
in order to maintain their appropriate ownership thereof. The issuance of
additional shares of Common Stock or Preferred Stock would decrease the
proportionate equity interest of the Company's current stockholders and,
depending upon the price paid for such additional shares, could result in
dilution to the Company's current stockholders.
In addition, as is presently the case, the Board of Directors could use
authorized but unissued shares to create impediments to a takeover or a
transfer of control of the Company. For example, the Board of Directors has
created 50,000 shares of Series A Preferred shares which are available for
issuance pursuant to the Company's Shareholders' Rights Plan dated January
29, 1998. In addition, the Board of Directors has the authority to issue the
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock pursuant to the Shareholder
Rights Plan and the [ILLEGIBLE COPY] other Preferred Stock authorized by the
Board of Directors may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders
and may adversely affect the voting and other rights of the holders of Common
Stock. The issuance of preferred Stock with voting and conversion rights may
adversely affect the voting power of the holders of Common Stock, including
the loss of voting control to others. At present, the Company has no plans to
issue any of the Preferred Stock.
-4-
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO AND RESTATEMENT OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION.
PROPOSAL THREE -- APPROVAL OF AMENDMENTS TO 1992 STOCK
OPTION/STOCK ISSUANCE PLAN
Stockholders are being asked to vote on a proposal to approve amendments to
the Company's 1992 Stock Option/Stock Issuance Plan (the "Plan") to (a)
modify the maximum number of stock options and direct stock issuances that
may be granted to a single employee from 240,000 shares over the life of the
Plan to 750,000 shares in a single calendar year and (b) permit discretionary
option grants to your non-employee directors. The Board deems it advisable to
modify the limitation on the maximum number of shares of Common Stock which
may be awarded to a single individual under the Plan in order to allow the
Company to use its equity incentives to attract and retain the services of
key individuals essential to the Company's long term success. The original
limitation was adopted in anticipation of the adoption of regulations
defining the requirements for satisfying the requirements of section 162(m)
of the Internal Revenue Code of 1986. The amended limitation satisfies the
requirements of the regulations, as adopted, and thus of section 162(m) of
the Internal Revenue Code of 1986. The Board also deems it advisable to
eliminate the Plan's prohibition against discretionary option grants to
non-employee directors. The prohibition originally was required by Rule 16b-3
of the Securities and Exchange Commission, but Rule 16b-3 has been amended to
permit discretionary grants. Since directors receive no cash compensation
from the Company, this amendment will facilitate the attraction and retention
of qualified directors.
The following is a summary of the principal features of the Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the Plan. Any stockholder of the Company who wishes to obtain a
copy of the actual plan document may do so by written request to the
Corporate Secretary at the Company's principal executive offices.
EQUITY INCENTIVE PROGRAMS
The Plan includes three separate equity incentive programs: (i) a
Discretionary Option Grant Program, under which eligible individuals may be
granted options to purchase shares of Common Stock, (ii) an Automatic Option
Grant Program under which non-employee Board members are automatically
granted options to purchase shares of Common Stock, and (iii) a Stock
Issuance Program, under which eligible individuals may be issued shares of
Common Stock directly, through the immediate purchase of the shares or as a
bonus tied to the performance of services or the Company's attainment of
financial objectives.
Options granted under the Discretionary Option Grant Program may be either
incentive stock options designed to meet the requirements of Section 422 of
the Internal Revenue Code or non-statutory options not intended to satisfy
such requirements.
SHARE RESERVE
2,080,000 shares of Common Stock have been reserved for issuance over the ten
(10) year term of the Plan.
The issuable shares may be made available from either the Company's
authorized but unissued shares of Common Stock or from re-acquired shares of
Common Stock, including shares repurchased by the Company on the open market.
Should an option (including outstanding options incorporated into the Plan
from predecessor plans) expire or terminate for any reason prior to exercise
in full (including options canceled in accordance with the
cancellation/regrant provisions of the Plan), the shares subject to the
portion of the option not so exercised will be available for subsequent
issuance under the Plan. Shares subject to any option surrendered in
accordance with the stock appreciation right provisions of the Plan and all
share issuances under the Plan, whether or not the shares are subsequently
re-acquired by the Company pursuant to its repurchase rights under the Plan,
will reduce on a share-for-share basis the number of shares of Common Stock
available for subsequent issuance.
No individual participating in the Plan may be granted stock options and
direct stock issuances for more than 240,000 shares of Common Stock in the
aggregate over the remaining term of the Plan. Options granted prior to
January 1, 1994, will not be taken into account for purposes of determining
the 240,000 share limit. Subject to approval of Proposal Three, this
limitation will be increased to 750,000 shares in any single calendar year.
-5-
<PAGE>
CONDUCTUS, INC.
As of April 16, 1998, options covering 1,006,237 shares were outstanding
under the Plan and 509,939 shares remained available for future option
grants. The expiration dates for all such options range from October 26, 2000
to March 2, 2008.
PLAN ADMINISTRATION
The Plan is administered by a committee (the "Committee") comprised of two or
more non-employee Board members appointed by the Board. The Committee has
discretion (subject to the provisions of the Plan) to authorize stock option
grants and direct stock issuances.
ELIGIBILITY
Officers, directors, other employees and independent consultants and advisors
to the Company (or any parent or subsidiary company) will be eligible to
participate in the Plan.
As of April 16, 1998, it was estimated that five executive officers, four
outside directors and 68 other employees were eligible to participate in the
Plan.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the Plan will be the closing selling price per share on that date on the
Nasdaq Stock Market. If there is no reported selling price for such date,
then the closing selling price for the last previous date for which such
quotation exists will be determinative of fair market value. The fair market
value of Common Stock on April 16, 1998, as reported on the Nasdaq Stock
Market, was $3.8125 per share.
DISCRETIONARY OPTION GRANT PROGRAM
Under the Discretionary Option Grant Program, the exercise price per share of
Common Stock subject to an incentive stock option will not be less than 100%
of the fair market value per share on the grant date. The exercise price per
share of the Common Stock subject to a non-statutory option may not be less
than 85% of such fair market value on the grant date. No option will have a
maximum term in excess of ten years measured from the grant date. The
Committee has discretion to grant options (i) which are immediately
exercisable for vested shares, (ii) which are immediately exercisable for
unvested shares subject to the Company's repurchase rights or (iii) which
become exercisable in installments for vested shares over the optionee's
period of service.
The exercise price may be paid in cash or in shares of Common Stock valued at
fair market value on the exercise date. The option may also be exercised for
vested shares through a same-day sale program pursuant to which the purchased
shares are to be sold immediately and a portion of the sale proceeds is to be
applied to the payment of the exercise price for those shares on the
settlement date.
Any option held by the optionee at the time of cessation of service will
normally not remain exercisable beyond the limited period designated by the
Committee at the time of the option grant. During that period, the option
will generally be exercisable only for the number of shares in which the
optionee is vested at the time of cessation of service. For purposes of the
Plan, an individual will (except to the extent otherwise specifically
provided in the Option or Issuance Agreement) be deemed to continue in
service for so long as that person performs services on a periodic basis for
the Company or any parent or subsidiary corporations, whether as an employee,
a non-employee member of the Board or an independent consultant or advisor.
The Committee may extend the period following the optionee's cessation of
service during which his or her outstanding options may be exercised and/or
accelerate the exercisability of such options in whole or in part. Such
discretion may be exercised at any time while the options remain outstanding.
Any unvested shares of Common Stock will be subject to repurchase by the
Company, at the original exercise price paid per share, upon the optionee's
cessation of service prior to vesting in these shares. The Committee will
have complete discretion in establishing the vesting schedule for any such
unvested shares and will have full authority to cancel the Company's
outstanding repurchase rights with respect to these shares in whole or in
part at any time.
The optionee is not to have any stockholder rights with respect to the option
shares until the option is exercised and the exercise price is paid for the
purchased shares. Options are not assignable or transferable other than by
will or by the laws of inheritance following the optionee's death, and the
option may, during the optionee's lifetime, be exercised only by the optionee.
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CONDUCTUS, INC.
One or more officers of the Company may be granted limited stock appreciation
rights in connection with their option grants. Any option with such a limited
stock appreciation right in effect for at least six months will automatically
be canceled, to the extent such option is at the time exercisable for fully
vested shares, upon the successful completion of a hostile tender offer for
securities possessing 50% or more of the combined voting power of the
Company's outstanding securities. In return for the canceled option, the
officer will be entitled to a cash distribution from the Company in an amount
per vested share of Common Stock subject to the canceled option equal to the
excess of (i) the price per share of Common Stock paid in such hostile tender
offer over (ii) the option exercise price.
The Committee will have the authority to effect, on one or more separate
occasions, the cancellation of outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
predecessor plans) which have exercise prices in excess of the then current
market price of Common Stock and to issue replacement options with an
exercise price based on the market price of Common Stock at the time of the
new grant.
AUTOMATIC OPTION GRANT PROGRAM
The Automatic Option Grant Program under the Option Plan provides for the
grant of non-statutory options to purchase shares of Common Stock to
non-employee Board members. Each non-employee Board member who first becomes
a non-employee Board member at any time on or after January 23, 1995, will
automatically be granted at the time of such initial election or appointment
an option to purchase 15,000 shares of Common Stock. In addition, four
non-employee Board members received an option to purchase 15,000 shares of
Common Stock on January 23, 1995. Two non-employee Board members received
options for 15,000 shares of Common Stock upon joining the Board in 1996.
Additionally, each individual who served as a non-employee Board member on
October 24, 1996, and had served in that capacity for the immediately
preceding ninety (90) days automatically received an option to purchase three
thousand (3,000) shares of Common Stock ("Annual Automatic Option Grant") on
that date. Thereafter, each Outside Director who has served in that capacity
for the immediately preceding ninety (90) days and continues to so serve,
will receive as an Annual Automatic Option Grant an option to purchase three
thousand (3,000) shares of Common Stock at the Annual Shareholder Meeting.
The option price per share for each automatic grant will be the fair market
value per share of Common Stock on the date of grant. The option prices for
purchased shares will be payable in cash or shares of Common Stock held for
at least six months, or through a same-day sale program.
Automatic option grants have a term of ten (10) years from the date of grant
and will be immediately exercisable. However, the Company will have
repurchase rights with respect to the nonvested shares purchased under the
options. In the case of a director's initial grant, 20% of the shares vest
one year after the date of grant, and the remaining shares vest in 48 equal
monthly installments over the following four years. In the case of the
annual grants, 33.3% of the shares vest one year after the date of grant, and
the remaining shares vest in 24 equal monthly installments over the following
two years.
If the optionee ceases to serve as a Board member, the option may be
exercised to the extent then exercisable and within its term for a period of
three months after the date of cessation (12 months if due to disability, and
three years if due to death). In the case of death, the option may be
exercised within such period by the estate or heirs of the optionee.
In the event of any Corporate Transaction, as defined below, each outstanding
option shall automatically vest in full so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, be exercisable for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation
of the Corporate Transaction, each Automatic Option Grant under the Plan
shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation or its parent company.
In connection with any Change in Control of the Company, as defined below,
each outstanding option shall automatically vest in full so that each such
option shall immediately prior to the specified effective date for the Change
in Control be exercisable for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain fully
exercisable until the expiration or sooner termination of the option term or
the cash-out of the option pursuant to a Hostile Take-Over.
Upon the occurrence of a Hostile Take-Over, the optionee shall have a thirty
(30)-day period in which to surrender
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CONDUCTUS, INC.
to the Company each Automatic Option Grant held by him or her under this Plan
for a period of at least six months. The optionee shall in return be entitled
to a cash distribution from the Company in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to
the surrendered option (whether or not the optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five days following
the surrender of the option to the Company. No approval or consent of the
Board shall be required in connection with such option surrender and cash
distribution.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share not
less than 85% of fair market value, payable in cash or through a promissory
note payable to the Company, or as a bonus for past services. Shares issued
under the Stock Issuance Program may either be vested upon issuance or
subject to a vesting schedule tied to the participant's period of service or
the attainment of designated performance goals. Unvested shares will be
subject to certain transfer restrictions and to repurchase or cancellation by
the Company upon either the participant's cessation of service prior to
vesting in those shares or the non-attainment of the applicable performance
goals. The Committee has discretion to accelerate the vesting of any issued
shares in whole or in part at any time. Individuals holding shares under the
Stock Issuance Program will have full stockholder rights with respect to
those shares, whether the shares are vested or unvested.
GENERAL PROVISIONS
OPTION/VESTING ACCELERATION
Outstanding options under the Plan may become immediately exercisable in
full, and unvested shares issued under the Plan may become fully vested, in
the event of certain changes in the ownership or control of the Company. The
transactions which may trigger such option/vesting acceleration are as
follows:
CORPORATE TRANSACTION: any one of the following stockholder approved
transactions (a "Corporate Transaction"):
1. a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is
to change the State of the Company's incorporation;
2. the sale, transfer or other disposition of all or substantially all
of the assets of the Company in liquidation or dissolution of the
Company; or
3. any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such
securities immediately prior to the merger.
CHANGE IN CONTROL: a change in ownership or control of the Company effected
through either of the following transactions (a "Change in Control"):
1. any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly
acquires beneficial ownership within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Act") of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept; or
2. a change in the composition of the Board over a period of twenty-
four (24) consecutive months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one
or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause
(i) who were still in office at the time such election or nomination
was approved by the Board.
Following a Corporate Transaction, all outstanding options become exercisable
in full, except that options generally do not accelerate if they are assumed
by the successor corporation, if the successor corporation substitutes
comparable options to purchase its own stock, or if the successor corporation
substitutes a comparable cash incentive program based on the option spread at
the time of the Corporate Transaction. Upon the consummation of the
Corporate Transaction, all outstanding options will terminate if they are not
assumed by the successor corporation. In addition, in the event of a
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CONDUCTUS, INC.
Corporate Transaction, all shares that remain subject to the Company's right
of repurchase will vest in full, except that vesting generally does not
accelerate if the repurchase right is assigned to the successor corporation.
In the event of a Change in Control, the Committee, at its discretion, may
accelerate any outstanding options and vest any shares that remain subject to
the Company's right of repurchase. The Committee may also determine that the
acceleration will occur only if the optionee's service terminates within a
specified period after the Change in Control.
The acceleration of options or vesting of shares in the event of a Corporate
Transaction or Change in Control may be seen as an anti-takeover provision
and may have the effect of discouraging a merger proposal, a takeover attempt
or other efforts to gain control of the Company.
HOSTILE TAKE-OVERS
One or more officers of the Company may, in the Plan Administrator's sole
discretion, be granted limited stock appreciation rights in connection with
their outstanding options under the Plan. Upon the occurrence of a Hostile
Take-Over, each outstanding option with such a limited stock appreciation
right in effect for at least six months shall automatically be canceled, to
the extent such option is at the time exercisable for fully-vested shares of
Common Stock. The Optionee shall in return be entitled to a cash distribution
from the Company in an amount equal to the excess of (i) the Take-Over Price
of the vested shares of Common Stock at the time subject to the canceled
option (or canceled portion of such option) over (ii) the aggregate exercise
price payable for such shares. Neither the approval of the Committee nor the
consent of the Board shall be required in connection with such option
cancellation and cash distribution.
A Hostile Take-Over shall be deemed to occur in the event (i) any person or
related group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with the
Company) directly or indirectly acquires beneficial ownership, within the
meaning of Rule 13d-3 of the 1934 Act, of securities possessing more than 50%
of the total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to accept
and (ii) more than 50% of the securities so acquired in such tender or
exchange offer are accepted from holders other than officers and directors of
the Company subject to the short-swing profit restrictions of Section 16 of
the 1934 Act.
The Take-Over Price per share shall be deemed to be equal to the greater of
(a) the fair market value per share on the date of cancellation, as
determined pursuant to the regular valuation provisions of the Plan, or
(b) the highest reported price per share paid in effecting such Hostile
Take-Over. However, if the canceled option is an Incentive Option, the
Take-Over Price shall not exceed the clause (a) price per share.
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the Plan
by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding
Common Stock as a class without the Company's receipt of consideration, then
appropriate adjustments shall be made to (i) the number and/or class of
shares issuable under the Plan, (ii) the number and/or class of shares and
price per share in effect under each outstanding option under the Plan,
(iii) the number and/or class of shares for which any one individual may be
granted stock options and direct share issuances in the aggregate, (iv) the
number and/or class of shares and price per share in effect under each
outstanding option incorporated into this Plan from the predecessor plans and
(v) the number and/or class of shares for which non-employee members of the
Board receive options under the Automatic Option Grant Program.
FINANCIAL ASSISTANCE
The Committee may institute a loan program in order to assist one or more
optionees in financing their exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program. The form in which such assistance is to be made available
(including loans or installment payments) and the terms upon which such
assistance is to be provided will be determined by the Committee. However,
the maximum amount of financing provided any participant may not exceed the
amount of cash consideration payable for the issued shares plus all
applicable Federal, State and local income and employment taxes
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CONDUCTUS, INC.
incurred in connection with the acquisition of the shares. Any such financing
may be subject to forgiveness in whole or in part, at the discretion of the
Committee, over the participant's period of service.
PREDECESSOR PLANS
Each stock option issued and outstanding under the predecessor plans
immediately prior to the effective date of this Plan was incorporated into
the Plan and treated as an outstanding stock option under the Plan, but each
such option continues to be governed solely by the terms and conditions of
the instrument evidencing such grant, and nothing in the Plan will be deemed
to affect or otherwise modify the rights or obligations of the holders of
such options with respect to their acquisition of shares thereunder. However,
the Committee has discretion to extend one or more features of the Plan,
including the various acceleration provisions, to any or all of the options
incorporated from the predecessor plans.
AMENDMENT AND TERMINATION
The Board may amend or modify the Plan in any or all respects whatsoever.
However, no such amendment may adversely affect the rights of existing
optionees or holders of unvested shares without their consent. In addition,
the Board may not without the approval of the Company's stockholders (i)
materially increase the maximum number of shares issuable under the Plan or
the maximum number of shares for which any one individual may be granted
options or direct stock issuances, except to reflect certain changes in the
Company's capital structure, or (ii) materially modify the eligibility
requirements for option grants or share issuances.
The Board may terminate the Plan at any time, and the Plan will in all events
terminate on January 10, 2002. Each stock option or unvested share issuance
outstanding at the time of such termination will remain in force in
accordance with the provisions of the instruments evidencing such grant or
issuance.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as
described below:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. However, the difference between the fair
market value of the purchased shares and the exercise price is generally
included as alternative minimum taxable income for purposes of the
alternative minimum tax. The optionee will recognize taxable income in the
year in which the purchased shares are sold or otherwise made the subject of
disposition. For Federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. The optionee will make a
qualifying disposition of the purchased shares if the sale or other
disposition of such shares is made after the optionee has held the shares for
more than two years after the grant date of the option and more than one year
after the exercise date. If the optionee fails to satisfy either of these two
minimum holding periods prior to the sale or other disposition of the
purchased shares, then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for such shares. If there is a disqualifying disposition of the
shares, then generally the excess of (i) the fair market value of those
shares on the exercise date over (ii) the exercise price paid for the shares
will be taxable as ordinary income. Any additional gain recognized upon the
disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will generally be entitled to an income tax deduction, for
the taxable year in which such disposition occurs, equal to the amount of
ordinary income recognized by the optionee. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition of
the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, 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, and the optionee (if an employee
or former employee) will be required to satisfy the tax withholding
requirements applicable to such income.
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CONDUCTUS, INC.
Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of Common Stock under a non-statutory option. These special
provisions may be summarized as follows:
- - If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of service prior to vesting in
those shares, then the optionee will not recognize any taxable income at
the time of exercise but will have to report as ordinary income, as and
when the Company's repurchase right lapses, an amount equal to the
excess of (i) the fair market value of the shares on the date the
repurchase right lapses with respect to those shares over (ii) the
exercise price paid for the shares.
- - The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of
the non-statutory option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date over (ii) the
exercise price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when
the repurchase right lapses.
The Company will generally be entitled to a business expense deduction equal
to the amount of ordinary income recognized by the optionee with respect to
the exercised non-statutory option. The deduction will be allowed for the
taxable year of the Company in which such ordinary income is recognized by
the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize ordinary
income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to a business expense deduction
equal to the appreciation distribution for the taxable year in which the
ordinary income is recognized by the optionee.
DIRECT STOCK ISSUANCES
The tax principles applicable to direct stock issuances under the Plan will
be substantially the same as those summarized above for the exercise of
non-statutory option grants.
PARACHUTE PAYMENTS.
If the exercisability of an option or stock appreciation right is accelerated
as a result of a Change of Control, all or a portion of the value of the
option or stock appreciation right at that time may be a parachute payment
for purposes of the excess parachute provisions of the Internal Revenue Code.
Those provisions generally provide that if parachute payments equal or exceed
three times an employee's average annual compensation for the five tax years
preceding the change of control, the Company loses its deduction and the
recipient is subject to a 20% excise tax for the amount of the parachute
payments in excess of one times such average compensation.
NEW PLAN BENEFITS
Awards under the Plan are discretionary, except for the Automatic Option
Grant Program described above. Therefore, it is not possible to determine
the benefits that will be received in the future by participants in the Plan
or the benefits that would have been received by such participants if the
Plan, as amended, had been in effect in 1997. New options for 60,000 shares
and an additional 240,000 shares granted on April 13, 1998 in exchange for
cancellation of prior grants to Charles E. Shalvoy under the Plan are subject
to the approval of Proposal Three by the stockholders at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL
OF THE AMENDMENTS TO THE PLAN.
PROPOSAL FOUR - RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Coopers & Lybrand, L.L.P.,
independent public auditors for the Company during fiscal year 1997, to serve
in the same capacity for the fiscal year ending December 31, 1998, and is
asking the stockholders to ratify this appointment.
In the event the stockholders fail to ratify the appointment, the Board will
reconsider its selection. Even if
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CONDUCTUS, INC.
the selection is ratified, the Board in its discretion may direct the
appointment of a different independent auditing firm at any time during the
year if the Board believes that such a change would be in the best interests
of the Company and its stockholders.
A representative of Coopers & Lybrand L.L.P. is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
so desires. Such representative will be available to respond to appropriate
questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF COOPERS & LYBRAND L.L.P. TO SERVE AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
OTHER MATTERS
No other matters will be presented for consideration at the Annual Meeting.
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of April
16, 1998 by (i) all persons who are beneficial owners of 5% or more of the
outstanding shares of the Company's Common Stock, (ii) each director and
nominee, (iii) the Company's Chief Executive Officer and each of the three
other most highly paid current executive officers and (iv) all current
directors and executive officers as a group.
<TABLE>
<CAPTION>
5% STOCKHOLDERS, DIRECTORS, EXECUTIVE OFFICERS & SHARES BENEFICIALLY PERCENT BENEFICIALLY
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP OWNED (1) OWNED (2)
------------------------------------------- --------- ---------
<S> <C> <C>
Charles L. Grimes 620,000 8.9%
P.O. Box 136
Mendenhall, PA 19357-0136
Hewlett-Packard Company ("H-P") 558,212 8.0%
3000 Hanover Street
Palo Alto, CA 94304
Portola Group 455,445 6.5%
3000 Sand Hill Road
Bldg. 2-145
Menlo Park, CA 94025
Asset Management 1984 (3) 351,581 5.1%
2275 East Bayshore Road
Suite 150
Palo Alto, CA 94303
John F. Shoch (4) 386,393 5.5%
Martin Cooper (5) 21,000 *
Robert Janowiak (6) 18,000 *
Martin Kaplan (7) 22,500 *
Charles E. Shalvoy (8) 257,486 3.6%
William J. Fowler (9) 15,384 *
Graham Y. Mostyn (10) 15,384 *
Randy W. Simon (11) 70,135 *
All directors and executive officers
as a group (9 persons) (12) 843,484 11.3%
- --------------------------------------------------------------------------------------------------
</TABLE>
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CONDUCTUS, INC.
Notes
*Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes sole or shared
voting or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of April 16, 1998, are deemed
outstanding for purposes of computing the percentage ownership of the person
holding such option or warrant but are not outstanding for purposes of
computing the percentage of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) Percentage of beneficial ownership is calculated assuming 7,046,421
shares of Common Stock were outstanding on April 16, 1998. This percentage
also includes Common Stock of which such individual or entity has the right
to acquire beneficial ownership within sixty days of April 16, 1998,
including, but not limited to, the exercise of an option; however, such
Common Stock shall not be deemed outstanding for the purpose of computing the
percentage owned by any other shareholder.
(3) Includes 351,581 shares held by Asset Management Associates 1984. Dr.
Shoch, a director of the Company, is a general partner of AMC Partners 84,
which is the general partner of Asset Management Associates 1984. Dr. Shoch
disclaims beneficial ownership of the shares held by Asset Management
Associates 1984 except to the extent of his pecuniary interest therein.
Messrs. Franklin P. Johnson, Jr. and Craig C. Taylor are the other general
partners of Asset Management Company and may be deemed beneficial owners of
shares owned by Asset Management Associates 1984.
(4) Includes 6,000 shares held and 28,812 shares in the form of immediately
exercisable options held by Dr. Shoch of which 9,000 are subject to a
repurchase right in favor of the Company that will lapse in a series of
installments so long as Dr. Shoch remains in the service of the Company and
351,581 shares held by Asset Management Associates 1984, as to which Dr.
Shoch disclaims beneficial ownership except to the extent of his pecuniary
interest therein.
(5) Includes 21,000 shares in the form of immediately exercisable options
held by Mr. Cooper of which 9,000 are subject to a repurchase right in favor
of the Company that will lapse in a series of installments so long as Mr.
Cooper remains in the service of the Company.
(6) Includes 18,000 shares in the form of immediately exercisable options
held by Mr. Janowiak of which 12,750 are subject to a repurchase right in
favor of the Company that will lapse in a series of installments so long as
Mr. Janowiak remains in the service of the Company.
(7) Includes 1,500 shares held and 21,000 shares in the form of immediately
exercisable options held by Mr. Kaplan of which 13,500 are subject to a
repurchase right in favor of the Company that will lapse in a series of
installments so long as Mr. Kaplan remains in the service of the Company.
(8) Includes 35,307 shares held in the Shalvoy Family Trust, 6,600 shares
held in trust for minor children and 215,579 shares in the form of
immediately exercisable options, of which 55,148 are subject to a repurchase
right in favor of the Company that will lapse in a series of installments so
long as Mr. Shalvoy remains in the service of the Company.
(9) Includes 15,384 shares in the form of immediately exercisable options,
of which 2,718 are subject to a repurchase right in favor of the Company that
will lapse in a series of installments so long as Mr. Fowler remains in the
service of the Company.
(10) Includes 15,384 shares in the form of immediately exercisable options.
(11) Includes 5,205 shares held and 64,930 shares in the form of immediately
exercisable options, of which 8,884 shares are subject to a repurchase right
in favor of the Company that will lapse in a series of installments so long
as Dr. Simon remains in the service of the Company.
(12) Includes 383,889 shares in the form of options exercisable at April 16,
1998. See Notes (4), (5), (6), (7), (9), (10) and (11).
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CONDUCTUS, INC.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of its
other four most highly compensated executive officers whose compensation was
in excess of $100,000 (determined as of the end of the last fiscal year) for
services rendered in all capacities to the Company for the fiscal year ended
December 31, 1997 (collectively, "Named Officers"). No executive officers who
would have otherwise been includable in such table on the basis of salary and
bonus earned for the 1997 fiscal year have resigned or terminated employment
during that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
- --------------------------------------------------------------------------------------------------------------------------
AWARDS
- --------------------------------------------------------------------------------------------------------------------------
NAME AND YEAR SALARY BONUS SECURITIES UNDERLYING OPTIONS (#)
PRINCIPAL POSITION ($) (1) ($) (2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles E. Shalvoy, 1997 $197,088 $11,000 --
President and CEO 1996 185,682 64,600 --
1995 175,011 31,669 --
- --------------------------------------------------------------------------------------------------------------------------
William J. Fowler 1997 114,128 8,000 40,000(6)
Vice President 1996(3) 31,879 7,500 40,000
1995 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Graham Y. Mostyn 1997 140,004 18,000 60,000(7)
Vice President 1996(4) 15,616 10,000 60,000
1995 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Dennis Nau 1997(5) 130,915 -- 50,000(8)
Vice President and 1996(5) 74,428 10,000 50,000
General Manager 1995 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Randy W. Simon, 1997 125,908 5,000 60,000(9)
Vice President 1996 113,698 23,664 20,000
1995 105,704 21,612 8,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Salary includes amounts deferred pursuant to the Company's 401(k) Plan.
(2) Includes bonuses earned but not paid.
(3) Includes salary from September 3, 1996, upon commencement of employment.
(4) Includes salary from November 5, 1996, upon commencement of employment.
(5) Includes salary from June 18, 1996, upon commencement of employment. Mr.
Nau's employment terminated on October 31, 1997. His stock options were
canceled on January 30, 1998.
(6) Includes options for 40,000 shares granted under a repricing program in
exchange for cancellation of options for an equal number of shares.
(7) Includes options for 60,000 shares granted under a repricing program in
exchange for cancellation of options for an equal number of shares.
(8) Includes options for 50,000 shares granted under a repricing program in
exchange for cancellation of options for an equal number of shares.
(9) Includes options for 40,000 shares granted in exchange for cancellation
of options for an equal number of shares under a repricing program.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Officers for the fiscal year ended December 31,
1997.
-14-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM (1)
- ------------------------------------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF EXERCISE EXPIRATION 5% ($) 10% ($)
SECURITIES TOTAL OPTIONS PRICE DATE
UNDERLYING GRANTED TO ($/SHARE)
OPTIONS EMPLOYEES IN
GRANTED (#) FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Fowler 40,000(2) 7.1 6.50 10/24/2006 153,057 382,234
Graham Mostyn 60,000(3) 10.6 6.50 11/5/2006 230,580 576,375
Dennis Nau 50,000(4) 8.8 6.50 10/24/2006 183,445 454,044
Randy Simon 20,000(5) 3.5 6.50 3/14/2006 70,436 172,873
20,000(6) 3.5 8.375 1/23/2007 105,340 266,952
20,000(7) 3.5 6.50 1/23/2007 79,056 198,839
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) There is no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% and
10% levels or at any other defined level.
(2) Granted April 29, 1997, in exchange for cancellation of an option
granted October 24, 1996, to purchase the same number of shares at an
exercise price of $9.25 per share. The options are immediately
exercisable. The shares are subject to a repurchase right which lapses
as follows: as to 20% of the shares plus an additional 1.67% for each
month of service between October 24, 1997 and April 29, 1998, on April
29, 1998, and an additional 1.67% upon the completion of each month of
service thereafter until the repurchase right shall fully lapse upon the
completion of the fifth year of service from October 24, 1996.
(3) Granted April 29, 1997, in exchange for cancellation of an option
granted November 5, 1996 to purchase the same number of shares at an
exercise price of $8.00 per share. The options are immediately
exercisable. The shares are subject to a repurchase right which lapses
as follows: as to 20% of the shares plus an additional 1.67% for each
month of service between November 5, 1997 and April 29, 1998, on April
29, 1998, and an additional 1.67% upon the completion of each month of
service thereafter until the repurchase right shall fully lapse upon the
completion of the fifth year of service from November 5, 1996.
(4) Granted April 29, 1997, in exchange for cancellation of an option
granted October 24, 1996, to purchase the same number of shares at an
exercise price of $9.25 per share.
(5) Granted April 29, 1997, in exchange for cancellation of an option
granted March 14, 1996 to purchase the same number of shares at an
exercise price of $11.50. The options are immediately exercisable. The
shares are subject to a repurchase right which lapses as follows: as to
20% of the shares plus an additional 1.67% for each month of service
between March 14, 1997, and April 29, 1998, on April 29, 1998, and an
additional 1.67% upon the completion of each month of service thereafter
until the repurchase right shall fully lapse upon the completion of the
fifth year of service from March 14, 1996.
(6) Granted January 23, 1997. Canceled April 29, 1997.
(7) Granted April 29, 1997, in exchange for cancellation of an option
granted January 23, 1997, to purchase the same number of shares at an
exercise prices of $8.375. The options are immediately exercisable. The
shares are subject to a repurchase right which lapses as follows: as to
20% of the shares plus an additional 1.67% for each month of service
between January 23, 1998, and April 29, 1998, on April 29, 1998, and an
additional 1.67% upon the completion of each month of service thereafter
until the repurchase right shall fully lapse upon the completion of the
fifth year of service from January 23, 1997.
-15-
<PAGE>
CONDUCTUS, INC.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises and
option holdings at the end of the 1997 fiscal year with respect to the Named
Officers. No options or SARs were exercised during the 1997 fiscal year, nor
were any SARs outstanding at the end of such fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR END YEAR END (1) ($)
(#)
- ------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) ($) (2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Shalvoy 25,000 $37,500 114,998 110,002 $ - $ -
William J. Fowler - - - 40,000 - -
Graham Y. Mostyn - - - 60,000 - -
Dennis Nau - - 12,994 - - -
Randy Simon - - 46,212 43,334 174,882 10,617
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated on the basis of the fair market value of the Common Stock
on December 31, 1997 of $5.063 per share, as reported on the NASDAQ
National Market, minus the exercise price.
(2) Any unvested shares purchased under the option will be subject to
repurchase by the Company at the original exercise price per share
upon the optionee's cessation of service prior to vesting in such
shares. As of December 31, 1997, the Company's repurchase right had
lapsed with respect to the following number of option shares: Mr.
Shalvoy - 99,998; Mr. Fowler - 0; Mr. Mostyn - 0; Mr. Nau - 12,994;
Dr. Simon - 40,523
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND
CHANGE IN CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements with the
Company, and their employment may be terminated at any time at the discretion
of the Board. The 1992 Stock Option/Stock Issuance Plan provides for the
accelerated vesting of the shares of Common Stock subject to outstanding
options under certain circumstances. See "Proposal Three" above.
TEN-YEAR OPTION/SAR REPRICINGS
On April 29, 1997, the Compensation Committee and the Board of Directors
approved a program under which employees who had elected to surrender those
of their options which were above the closing price of the Company's common
stock on April 29, 1997, would receive in exchange new options at the closing
price on that date. The new options would cover the same number of shares as
the surrendered options, would have the same status under the tax laws as the
surrendered options and would be non-vested until April 29, 1998, after which
they would vest as provided in the original vesting schedule. The repricing
was undertaken to attract and retain employees while maintaining relatively
low cash compensation. Pursuant to the repricing program, the following
table sets forth information concerning repricing of options held by any
executive officer during the last ten completed fiscal years:
-16-
<PAGE>
CONDUCTUS, INC.
<TABLE>
<CAPTION>
NAME DATE SECURITIES MARKET PRICE EXERCISE PRICE NEW EXERCISE LENGTH OF
UNDERLYING OF STOCK AT AT TIME OF PRICE ($) ORIGINAL
NUMBER OF TIME OF REPRICING OR OPTION TERM
OPTIONS REPRICING OR AMENDMENT REMAINING AT
REPRICED OR AMENDMENT ($) DATE OF
AMENDED (#) ($) REPRICING OR
AMENDMENT
<S> <C> <C> <C> <C> <C> <C>
William Fowler 4/29/97 40,000 $6.50 $9.25 $6.50 9.5 years
Graham Mostyn 4/29/97 50,000 6.50 8.00 6.50 9.5 years
Dennis Nau 4/29/97 60,000 6.50 8.00 6.50 9.5 years
Randy Simon 4/29/97 20,000 6.50 11.50 6.50 8.9 years
4/29/97 20,000 6.50 8.375 6.50 9.8 years
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John F. Shoch, who became a member of the Compensation Committee of the Board
of Directors in May 1993, is a general partner of AMC Partners 84, which is
the general partner of Asset Management Associates 1984, the beneficial owner
of more than five percent of the Company's Common Stock. Dr. Shoch served as
Chief Executive Officer of the Company from September 1987 until October
1988.
CERTAIN TRANSACTIONS
In October 1988, Conductus entered into a five-year Coordinated Research
Program Agreement with H-P. In June 1993, Conductus and H-P modified this
agreement by entering into a new five-year agreement (the "Current H-P
Agreement"). In addition, H-P has made a total equity investment of
$6,230,000 in Conductus and beneficially owns more than 5% of the Company's
Stock. See "Ownership of Securities."
The Current H-P Agreement requires Conductus and H-P to exchange reviews and
assessments of Conductus' technical and applications developments,
particularly with respect to their potential application to H-P's product
lines. H-P has the right to appoint an H-P employee (the "H-P Member") as a
member of the Company's Scientific Advisory Board. H-P will jointly own with
Conductus any invention by the H-P Member acting pursuant to the Current H-P
Agreement or using the Company's confidential information.
The Company has entered into separate indemnification agreements with its
directors and officers. These agreements require the Company, among other
things, to indemnify them against certain liabilities that may arise by
reason of their status or service as directors or officers (other than
liabilities arising from actions not taken in good faith or in a manner the
indemnitee believed to be opposed to the best interest of the Company), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified and to obtain directors' and officers'
insurance if available on reasonable terms.
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the 1934 Act that might
incorporate future filings, including this Proxy, in whole or in part, the
following report and the Performance Graph which follows shall not be deemed
to be incorporated by reference into any such filings.
Decisions on compensation of the Company's Chief Executive Officer, Charles
E. Shalvoy, and its other executive officers are generally made by the
Compensation Committee of the Company's Board of Directors. At the time of
this report, the Compensation Committee consists of Dr. Shoch and Mr. Kaplan,
two of the Company's outside directors. All decisions by the Compensation
Committee are reviewed by the full Board of Directors, except for decisions
about awards under the Company's 1992 Stock Option/Stock Issuance Plan. The
Compensation Committee has furnished the following report on the 1997
compensation of Charles E. Shalvoy and the Company's other executive officers.
-17-
<PAGE>
CONDUCTUS, INC.
In setting the compensation levels, the Compensation Committee considers the
standard practices in the superconductor industry, including data from
surveys, as well as the practices of companies with whom the Company competes
for executive talent. The Company believes that its total executive
compensation package is near the median among its peers making the transition
from the development stage, although it is low when compared to companies at
a more advanced stage with whom the Company competes for talent.
It is the current philosophy of the Company to keep the base salary of
executives between the 25th and 50th percentiles based on the RADFORD
ASSOCIATES MANAGEMENT TOTAL COMPENSATION PLAN 1994 - OVERALL COMPANIES LESS
THAN $40M (Radford), so that more of their compensation depends on bonuses,
which are contingent upon Company and individual performance. The Radford
surveys include some but not all companies included in the indices used in
the Performance Graph. See "Comparison of Stockholder Return." The executives
are thus motivated to enhance stockholder value.
As the Company is just beginning to commercialize products, the Compensation
Committee believes that corporate performance is not appropriately measured
by traditional financial performance criteria such as profitability and
earnings per share. Rather, the Compensation Committee believes that
corporate performance is appropriately measured by analyzing the degree to
which the Company has achieved certain goals established by the Compensation
Committee and approved by the Board.
Under the Executive Compensation Bonus Plan (ECBP), an executive's annual
incentive award depends on improved revenues, profit/loss results, milestone
accomplishments and the executive's specific contribution. The current
philosophy of the Company is to keep total compensation, including bonuses,
for executives between the 50th and 75th percentiles of the companies in the
Radford survey. The performance goals for the Company are derived from the
Company's business plans that include critical individual performance targets
relating to strategic product positioning, revenue growth, and profit/loss
for the fiscal year and key milestones. The ECBP is based on a formula
comprised of a Company Performance Ratio (CPR) multiple times an Individual
Performance Ratio (IPR) multiple. The CPR is based on the ratio of actual
versus plan performance for revenues and profit/loss and can range from 50%
to 150%. The IPR is tied to achievement of goals during the year that are
established in advance and may have a range from 0% to 100%. Multiplying the
two, CPR x IPR then quantifies the executives' bonuses based on a
predetermined target of 30% to 50% of base salary. The incentive target is
set at a higher percentage for more senior officers, with the result that the
more senior executive officers have a higher percentage of their potential
cash compensation at risk. If the CPR is 150% and IPR equals 130%, executives
can earn up to a maximum of 45% to 75% of their base salaries. The Committee
annually reviews and approves specific bonus targets, maximums, and
performance criteria for all executives.
For 1997, the bonuses were reduced below the ECBP values due to the Company's
performance and cash position during the first quarter of 1998. The bonuses
awarded ranged from 57% to 82% of the ECBP value.
STOCK OPTIONS
The Committee grants stock options under the Plan to foster executive
ownership and to provide direct linkage with stockholder interests. The
Committee considers the current level of equity holdings in the Company,
stock options previously granted, industry practices, the executive's
accountability level, and assumed potential stock value when determining
stock option grants. The Committee relies upon competitive guideline ranges
of retention-effective, target-gain objectives to be derived from option
gains based upon relatively aggressive assumptions relating to planned growth
and earnings. In this manner, potential executive gains parallel those of
other stockholders over the long term. Therefore, the stock option program
serves as the Company's primary long-term incentive and retention tool for
executives and other key employees. The exercise prices of stock options
granted to the executive officers are equal to the market value of the stock
on the date of grant.
REPRICING OF STOCK OPTIONS
On April 29, 1997, the Compensation Committee and the Board of Directors
approved a program under which employees, including executive officers, who
had elected to surrender those of their options which were above the closing
price of the Company's common stock on April 29, 1997, would receive in
exchange new options at the closing price on that date. The new options
would cover the same number of shares as the surrendered options, would have
the same status under the tax laws as the surrendered options and would be
non-vested until April 29, 1998, after which they would vest as provided in
the original vesting schedule. The repricing was undertaken to attract and
retain employees while maintaining relatively low cash compensation.
-18-
<PAGE>
CONDUCTUS, INC.
CEO COMPENSATION
Mr. Shalvoy commenced employment with the Company effective June 6, 1994. In
general, the factors utilized in determining Mr. Shalvoy's compensation are
the same as those applied to the other executive officers in the manner
described in the preceding paragraphs, although achievement of Company
financial performance goals has a greater impact on his total compensation.
In establishing Mr. Shalvoy's base salary, it was the Committee's intent to
provide him with a level of stability and certainty each year. His base
salary for the 1997 fiscal year approximates the 40th percentile of reported
base salaries for Chief Executive Officers based on Radford.
The annual bonus component of Mr. Shalvoy's compensation package was based on
Company financial performance and individual goal achievement, as described
under "Annual Bonus" above. Based upon Mr. Shalvoy's IPR and CPR multiples,
his resultant bonus for 1997 would have been $41,000. As with the other
officers, Mr. Shalvoy's 1997 bonus was reduced below the ECBP value, and
totaled $11,000, or 27% of the ECPB amount.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation
exceeding $1 million per year paid to certain of the corporation's executive
officers. It is not expected that the compensation to be paid to the
Company's executive officers for fiscal 1998 will exceed the $1 million limit
per officer. The Compensation Committee will defer any decision on whether or
not to limit the dollar amount of all compensation payable to the Company's
executive officers to $1 million per year, should the individual compensation
of any executive officer ever approach that level.
In summary, it is the opinion of the Committee that the adopted executive
compensation policies and plans provide the necessary total remuneration
program to properly align the Company's performance and the interest of the
Company's stockholders with competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long term.
JOHN F. SHOCH, Ph.D.
Chairman, Compensation Committee
MARTIN KAPLAN
Member, Compensation Committee
-19-
<PAGE>
CONDUCTUS, INC.
COMPARISON OF STOCKHOLDER RETURN
The graph depicted below reflects a comparison of the cumulative total return
(change in stock price plus reinvested dividends) of the Company's Common
Stock together with the cumulative total returns of the Nasdaq Stock Market,
U.S. Index and the Hambrecht & Quist Technology Index.
[GRAPH]
(1) The graph covers the period from August 6, 1993, the date the Company's
initial public offering commenced, through the fiscal year ended
December 31, 1997.
(2) The graph assumes that $100 was invested on August 6, 1993 in the
Company's Common Stock and in each index and that all dividends were
reinvested. No cash dividends have been declared on the Company's Common
Stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Company's executive officers and
directors and persons who own more than 10% of the Company's Common Stock to
file certain reports of ownership with the Securities and Exchange Commission
("SEC") and with the National Association of Securities Dealers. Such
officers, directors and stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms that they file.
Based upon (i) the copies of Section 16(a) reports which the Company received
from such persons for their 1997 fiscal year transactions and (ii) the
written representations received from one or more of such persons that no
annual Form 5 reports were required to be filed for them for the 1997 fiscal
year, the Company believes that all Section 16(a) filing requirements
applicable to such officers, directors and 10% beneficial owners were
complied with.
-20-
<PAGE>
CONDUCTUS, INC.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1999 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than February 26, 1999, in order to be included. Such stockholder proposals
should be addressed to Conductus, Inc., 969 West Maude Avenue, Sunnyvale,
California 94086, Attention: Corporate Secretary.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1997, has been mailed concurrently with this Proxy Statement to
all stockholders entitled to notice of and to vote at the Annual Meeting.
FORM 10-K/A
THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-K/A WITH THE SEC. STOCKHOLDERS
MAY OBTAIN A COPY OF THIS REPORT, WITHOUT CHARGE, BY WRITING TO DONALD
DEPASCAL, CHIEF ACCOUNTING OFFICER, AT THE COMPANY'S EXECUTIVE OFFICES AT 969
WEST MAUDE AVENUE, SUNNYVALE, CALIFORNIA 94086.
THE BOARD OF DIRECTORS
OF CONDUCTUS, INC.
-21-
<PAGE>
CONDUCTUS, INC.
DIRECTIONS TO:
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1998
FROM SAN FRANCISCO AIRPORT
Follow signs to 101 South - Take 101 South approximately 35 miles to Mathilda
Avenue South Exit - Take Mathilda South to Maude Avenue - Turn right onto
Maude Avenue - Go down two traffic lights - Conductus' administrative offices
are located at 965 West Maude Avenue on the right just before the third
stoplight (Macara Avenue).
FROM SAN JOSE AIRPORT
Follow signs to 101 North - Take 101 North approximately 8 miles to Mathilda
Avenue South Exit - Take Mathilda South to Maude Avenue - Turn right onto
Maude Avenue - Go down two traffic lights - Conductus' administrative offices
are located at 965 West Maude Avenue on the right just before the third
stoplight (Macara Avenue).
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CONDUCTUS, INC.
a Delaware Corporation
(Pursuant to sections 242 and 245 of the
Delaware General Corporation Law)
Conductus, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law") does hereby certify that:
FIRST: The name of the Corporation is Conductus, Inc. and that the
Corporation was originally incorporated on September 1, 1987 pursuant to the
General Corporation Law; and
SECOND: The following resolutions amending and restating the
Corporation's Restated Certificate of Incorporation, as amended, were
approved by the Board of Directors of the Corporation by unanimous written
consent effective as of April 28, 1998 and were duly adopted by the
stockholders of the Corporation in accordance with the provisions of Sections
242 and 245 of the General Corporation Law at a meeting of the stockholders
held in accordance with Section 228 of the General Corporation Law:
"Now, therefore, be it resolved that the Restated
Certificate of Incorporation of the Corporation, as amended, be
amended and restated in its entirety as follows:
ARTICLE I
The name of the Corporation (herein called the "Corporation") is
CONDUCTUS, INC.
ARTICLE II
The address of the registered office of the Corporation in the State
of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County
of Kent. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
<PAGE>
ARTICLE IV
A. CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that the Corporation is authorized to issue
is Twenty-Five Million (25,000,000) shares. Twenty Million (20,000,000) shares,
par value of one hundredths of a cent ($.0001) per share, shall be Common Stock,
and Five Million (5,000,000) shares, par value of one hundredth of a cent
($.0001) per share, shall be Preferred Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The Board of Directors is
hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any series of Preferred Stock, and the
number of shares constituting any such series and the designation thereof, or of
any of them. Subject to compliance with applicable protective voting rights
that have been or may be granted to the Preferred Stock or series thereof in
Certificates of Determination or the Corporation's Certificate of Incorporation
("Protective Provisions"), but notwithstanding any other rights of the Preferred
Stock or any series thereof, the rights, privileges, preferences and
restrictions of any such additional series may be subordinated to, PARI PASSU
with (including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series, prior or subsequent to
the issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to any preferential dividend rights
applicable to the shares of the Preferred Stock, the holders of shares of the
Common Stock shall be entitled to receive such dividends as may be declared from
time to time by the Board of Directors.
2. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after distribution in
full of the preferential amounts to be distributed to the holders of shares of
the Preferred Stock, the holders of shares of the Common Stock shall be entitled
to receive all of the remaining assets of the Corporation available for
distribution to its stockholders, ratably in proportion to the number of shares
of the Common Stock held by them.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holders of shares of Common Stock shall be
entitled to vote on all matters at all meetings of the stockholders of the
Corporation and shall be entitled to one vote for each share of Common Stock
entitled to vote at such meeting.
2
<PAGE>
ARTICLE V
Except as otherwise provided in this Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders of the Corporation.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
No action may be taken by the stockholders of the Corporation without
a meeting, and no consents in lieu of a meeting may be taken pursuant to Section
228 of the Delaware General Corporation Law.
ARTICLE X
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is hereafter amended
to authorize, with the approval of a corporation's stockholders, further
reductions in the liability of the Corporation's directors for breach of
fiduciary duty, then a director of the Corporation shall not be liable for any
such breach to the fullest extent permitted by the Delaware General Corporation
Law as so amended. Any repeal or modification of the foregoing provisions of
this Article X by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
3
<PAGE>
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
4
<PAGE>
IN WITNESS WHEREOF, CONDUCTUS, INC. has caused this Amended and
Restated Certificate of Incorporation to be signed by its President and attested
to by its Secretary this __ day of _____, 1998.
----------------------------------------
CHARLES E. SHALVOY, President
and Chief Executive Officer
ATTEST:
- -------------------------------
JUDITH A. DEFRANCO
Secretary
<PAGE>
CONDUCTUS, INC.
PROXY
Annual Meeting of Stockholders, May 29, 1998
This Proxy is Solicited on Behalf of the Board of Directors of
Conductus, Inc.
The Undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held May 29, 1998 and
the Proxy Statement and appoints Charles E. Shalvoy and Judith A. DeFranco
and each of them, the Proxy of the undersigned, with full power of
substitution, to vote all shares of Common Stock of Conductus, Inc. (the
"Company") which the undersigned is entitled to vote, either on his or her
own behalf or on behalf of any entity or entities, at the Annual Meeting of
Stockholders of the Company to be held at the Company's offices located at
969 W. Maude Avenue, Sunnyvale, California on Friday, May 29 at 3:00 p.m.
(the "Annual Meeting"), and at any adjournment or postponement thereof, with
the same force and effect as the undersigned might or could do if personally
present thereat. The shares represented by this Proxy shall be voted in the
manner set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- -------------------------------------------------------------------------------
<PAGE>
1. To elect the following directors to serve for a term ending upon the
1999 Annual Meeting of stockholders indicated beside their respective names
and until their successors are elected and qualified:
/ / FOR ALL NOMINEES
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
/ / FOR ALL NOMINEES, EXCEPT AS NOTED ABOVE
2. FOR AGAINST ABSTAIN To approve the amendment and
restatement of the Company's
Restated Certificate of
Incorporation to (i) increase the
number of shares of Common Stock
authorized to be issued from
11,000,000 to 20,000,000, and (ii)
increase the number of shares of
Preferred Stock authorized to be
issued from 1,000,000 to 5,000,000.
3. FOR AGAINST ABSTAIN To approve the Company's Amended and
Restated 1992 Stock Option/Stock
Issuance Plan to change the maximum
number of shares which may be granted
to a single individual to 750,000 in
any one calendar year from 240,000
over the life of the Plan and to
permit discretionary option grants
to non-employee directors.
4. FOR AGAINST ABSTAIN To ratify the Board of Director's
selection of Coopers & Lybrand to
serve as the Company's independent
auditors for the fiscal year
ending December 31, 1998 and
5. FOR AGAINST ABSTAIN To transact such other business as
may properly come before the
Annual Meeting or any adjournment
or postponement thereof.
The Board of Directors recommends a vote FOR each of the nominees listed
above and a vote FOR the other proposals. This Proxy, when properly executed,
will be voted as specified above. THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES LISTED ABOVE AND FOR THE OTHER PROPOSALS IF NO SPECIFICATION
IS MADE.
Please print the name(s) appearing on each
share certificate(s) over which you have
voting authority: ________________________________
(Print name(s) on certificate)
Please sign your name: _______________________________ Date: _______________
(Authorized Signature(s))
