<PAGE> 1
SCHEDULE 14A
(Rule 14a101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SUPERCONDUCTOR TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SUPERCONDUCTOR TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
TO THE STOCKHOLDERS OF SUPERCONDUCTOR TECHNOLOGIES INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Superconductor Technologies Inc., a Delaware corporation (the "Company"), will
be held on MAY 20, 1998, at 11:00 a.m., local time, at the Pacifica Suites, 5490
Hollister Avenue, Santa Barbara, California, for the following purposes:
1. To elect seven (7) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of shares of authorized
Common Stock from 15,000,000 shares to 30,000,000 shares.
3. To ratify the appointment of Price Waterhouse LLP as independent
auditors of the Company for the year ending December 31, 1998.
4. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on MARCH 23, 1998
are entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. Any stockholder
attending the Annual Meeting may vote in person even if such stockholder has
previously returned a proxy.
James G. Evans, Jr.
Vice President and
Chief Financial Officer
Santa Barbara, California
April __, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED.
<PAGE> 3
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(805) 683-7646
MEETING TO BE HELD AT:
PACIFICA SUITES
5490 HOLLISTER AVENUE
SANTA BARBARA, CA 93111
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
----------------
The enclosed Proxy is solicited on behalf of Superconductor
Technologies Inc. (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Wednesday, May 20, 1998, at 11:00 a.m.,
local time, and at any adjournment(s) thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the Pacifica Suites, 5490 Hollister Avenue, Santa
Barbara, California 93111.
These proxy solicitation materials were first mailed on or about April
__, 1998, to all stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE
Stockholders of record at the close of business on MARCH 23, 1998 (the
"Record Date"), are entitled to notice of the Annual Meeting and to vote at the
Annual Meeting. At the Record Date, 7,707,081 shares of the Company's Common
Stock, $0.001 par value, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at or before the taking of the vote at the Annual Meeting a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock
on all matters presented at the Annual Meeting. Stockholders do not have the
right to cumulate their votes in the election of directors.
Shares of Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated thereon. In the absence of specific instructions to
the contrary, properly executed proxies will be voted: (i) FOR the election of
each of the Company's nominees for director, (ii) FOR approval of an amendment
to the Company's Amended and Restated Certificate of Incorporation increasing
the number of shares of Common Stock authorized thereunder by 15,000,000 shares,
and (iii) FOR ratification of the appointment of Price Waterhouse LLP as
independent auditors for the Company for the period ending December 31, 1998. No
business other than that set forth in the accompanying Notice of Annual Meeting
of Stockholders is expected to come before the Annual Meeting. Should any other
matter requiring a vote of stockholders properly arise, the persons named in the
enclosed form of proxy will vote such proxy in accordance with the
recommendation of the Board of Directors.
1
<PAGE> 4
Proxies may be solicited by certain of the directors, officers and
employees of the Company, without additional compensation, personally or by
telephone, telegram, letter or facsimile. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to such beneficial owners.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. Shares that are voted
"FOR" or "AGAINST" a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as shares entitled to
vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for the
purpose of determining the presence or absence of a quorum for the transaction
of business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat broker
non-votes in this manner. Thus, a broker non-vote will not affect the outcome of
the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1999 Annual Meeting of
Stockholders must be received by the Company no later than December 19, 1998 in
order to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
2
<PAGE> 5
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide for a Board of seven (7) directors.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for management's seven (7) nominees named below, all of whom are presently
directors of the Company. In the event that any management 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 is designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next annual meeting of
stockholders or until a successor has been duly elected and qualified.
The names of the nominees and certain information about them as of
March 23, 1998 are set forth below:
<TABLE>
<CAPTION>
Director
Name Age Since Principal Occupation
- ---------------------------------- ------ -------- --------------------------------------------------------
<S> <C> <C> <C>
Glenn E. Penisten 66 1987 Chairman of the Board of the Company
E. Ray Cotten 66 1996 Vice Chairman of the Board of the Company
M. Peter Thomas 56 1997 President, Chief Executive Officer and Director
Robert P. Caren, Ph.D.(l)(2) 65 1988 Retired Corporate Vice President, Science and
Engineering, Lockheed Corporation
Dennis Horowitz(l)(2) 51 1990 President and Chief Executive Officer of Wolverine Tube,
Inc.
John D. Lockton(1)(2) 60 1997 President and Chief Executive Officer of International
Wireless Communications, Inc.
J. Robert Schrieffer, Ph.D.(l)(2) 66 1988 Chairman of the Technical Advisory Board of the
Company; University Professor, Florida State University;
Chief Scientist of the National High Magnetic Field
Laboratory
</TABLE>
- ---------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Glenn E. Penisten has served as Chairman of the Board since May 1994.
Mr. Penisten is a founder of the Company and has served on its Board of
Directors since May 1987. He served as the Company's Chief Executive Officer
from August 1987 to June 1988. Mr. Penisten has been a General Partner of Alpha
Partners, a venture capital firm, since 1985. Mr. Penisten was Chairman of the
American Electronics Association in 1982, while he was Chairman of the Board of
Directors and Chief Executive Officer of American Microsystems Inc., a
semiconductor company. Mr. Penisten is a director of Bell Microproducts Inc.,
IKOS Systems, Inc., Network Peripherals, Inc. and Pinnacle Systems. Mr. Penisten
holds a B.S. in electrical engineering from Oklahoma State University.
E. Ray Cotten joined the Board of Directors in July 1996 and since
August 1996 has served as Vice Chairman of the Board. Since August 1994, he has
served as Chairman of the Board of Impulse Telecommunications Corporation, a
wireless communications consulting and engineering firm ("Impulse"). Prior to
joining Impulse, from December 1992 to August 1994, Mr. Cotten was President,
Chief Executive Officer and Chief Operating Officer of Scott Instruments
Corporation, a pioneer in voice recognition systems, and from December 1990 to
November 1992, he was President and Chief Executive Officer of ACS Software
Products Group, a software company for the apparel industry. Prior to December
1990, he also served as Vice Chairman and co-founder of NetAmerica, a digital
networking company, held vice-president
3
<PAGE> 6
positions at Microdynamics, Inc., a CAD/CAM company for the apparel industry,
Northern Telecom, Inc., a telecommunications company, Data Transmission
Corporation, a digital networking company, and Danray, a communications switch
manufacturing company, and he spent nearly 10 years with Texas Instruments,
where he held various management positions. Mr. Cotten received his B.A. in
business from Oklahoma State University.
M. Peter Thomas joined the Company as President and Chief Executive
Officer and member of the Board of Directors in April 1997. Prior to joining the
Company, Mr. Thomas was President and Chief Executive Officer of First Pacific
Networks, Inc., a telecommunications company, from June, 1995 to January 1997,
which company filed for bankruptcy in February 1997 under Chapter 11 of the U.S.
Bankruptcy Code. From August 1991 to May 1995, Mr. Thomas engaged in general
business consulting in conjunction with The Stanbridge Group, a consulting firm
which he co-founded in 1989. From January 1990 to July 1991, he was President
and Chief Executive Officer of Data-Design Laboratories, Inc., an electronics
company, and from 1989 to 1990, he consulted for The Stanbridge Group. Prior to
1989, Mr. Thomas also served as President and Chief Executive Officer of
Ericsson North America, Inc., the North American operating subsidiary of
Sweden's L.M. Ericsson, a telecommunications company, as President and Chief
Operating Officer of Telenova, Inc. a telecommunications company, and as
President of the Telecom Network Systems Division of ITT, Inc., a
telecommunications company. Mr. Thomas received his B.S.E. in Aerospace
Engineering from Princeton University and his M.B.A. from the Harvard Business
School.
Robert P. Caren, Ph.D., has served on both the Board of Directors and
the Technical Advisory Board of the Company since January 1988. From 1988 to
1995, when he retired, Dr. Caren served as Corporate Vice President, Sciences
and Engineering, for Lockheed Martin Corporation. Dr. Caren is a fellow of the
American Institute of Aeronautics and Astronautics, American Astronautics
Society and the American Association for the Advancement of Science. He is a
member of the National Academy of Engineering and past Chairman of the Research
Division of the Defense Preparedness Association. Dr. Caren received his Ph.D.,
M.S. and B.S. in physics from Ohio State University.
Dennis Horowitz has served on the Board of Directors of the Company
since June 1990. Mr. Horowitz is currently President and Chief Executive Officer
of Wolverine Tube Inc., a manufacturer and distributor of copper and copper
alloy tube. From September 1994 to April 1997, he served as Corporate Vice
President and President of the Americas, AMP Incorporated, an interconnection
device company. From October 1993 to August 1994, Mr. Horowitz served as
President and Chief Executive Officer of Philips Technologies, a Philips
Electronics North America company. From April 1990 to September 1993, Mr.
Horowitz served as President of Philips Components, Discrete Products Division.
From 1988 to 1990, he served as President and Chief Executive Officer of
Magnavox CATV, and from 1980 to 1988 he was involved in the general
administration of North American Philips Corporation. Philips Components and
Magnavox CATV are divisions of North American Philips Corporation. Mr. Horowitz
is a director of Aerovox Corporation. Mr. Horowitz holds an M.B.A.
and a B.A. in economics from St. John's University.
John Lockton joined the Board of Directors of the Company in December
1997. Mr. Lockton is currently President, Chief Executive Officer and a Director
of International Wireless Communications, Inc., an operator of cellular systems,
of which he was a co-founder in 1992. From May 1990 to August 1991, he was
Managing Partner of Corporate Technology Partners, a joint venture with Bell
Canada Enterprises. In 1988 Mr. Lockton founded Cellular Data, Inc., a cellular
wireless data technology company, and Star Associates, Inc., a cellular radio
RSA company. He founded and was a director of Interactive Network, Inc., a
wireless-based television company, and was Chairman of the Board of Directors
until December 1994. From 1983 to 1987 Mr. Lockton was Executive Vice President
of Pacific Bell (now Pacific Telesis). From 1980 to 1983 he was President of
Warner Amex (now Time Warner) Cable Television, Inc. From 1968 to 1980, Mr.
Lockton served in various capacities at Dun & Bradstreet. Mr. Lockton is the
primary inventor of a patented wireless technology for Personal Communication
Services (PCS). Mr. Lockton is a graduate of Yale University (Phi Beta Kappa),
and Harvard Law School and received an Executive M.B.A. from Columbia
University.
J. Robert Schrieffer, Ph.D., founded the Technical Advisory Board of
the Company in August 1987 and has served as its Chairman since that time. He
has also served on the Board of Directors of the Company since October 1988. He
received the Nobel Prize in Physics in 1972 for work in superconductivity
theory, and he has received many other professional honors including the
National Medal of Science. Dr. Schrieffer is currently the President of the
American Physical Society. He is also the University Eminent Scholar of the
State of Florida University System and has been the Chief Scientist of the
National High Magnetic Field Laboratory since January 1992. Dr. Schrieffer was
Chancellor's Professor of Physics and Director of the Institute for Theoretical
Physics at the University of California, Santa Barbara, from 1980 to
4
<PAGE> 7
1991. Dr. Schrieffer serves on a number of government and industrial committees
and is a Fellow of the Los Alamos National Laboratory, heading its Advanced
Study Program in High Temperature Superconductivity Theory from 1988 to 1993.
Dr. Schrieffer received his Ph.D. and M.S. in physics from the University of
Illinois and his B.S. in physics from the Massachusetts Institute of Technology.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The seven (7) nominees receiving the highest number of affirmative
votes shall be elected as directors. Votes withheld from any director are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business but have no other legal effect under Delaware law.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
SET FORTH ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) meetings
during the fiscal year ended December 31, 1997, including two telephonic
meetings. The Board of Directors has two standing committees, an Audit Committee
and a Compensation Committee. The Board does not have a nominating committee or
any committee performing similar functions.
The functions of the Audit Committee are to recommend selection of
independent public accountants to the Board of Directors, to review the scope
and results of the year-end audit with management and the independent auditors
and to review the Company's accounting principles and its system of internal
accounting controls. The Audit Committee met one (1) time during fiscal 1997.
The current members of the Audit Committee are Robert P. Caren, Ph.D., Dennis
Horowitz, John Lockton and J. Robert Schrieffer, Ph.D.
The functions of the Compensation Committee are to review and approve
salaries, bonuses and other benefits payable to the Company's executive officers
and to administer the Company's Amended and Restated 1988 Stock Option Plan, the
1992 Director Option Plan and the 1992 Stock Option Plan. The Compensation
Committee met five (5) times during fiscal 1997. The current members of the
Compensation Committee are Robert P. Caren, Ph.D., Dennis Horowitz, John Lockton
and J. Robert Schrieffer, Ph.D.
No incumbent director attended fewer than 75% of the aggregate of (i)
the total number of meetings of the Board of Directors held during fiscal 1997;
and (ii) the total number of meetings held by all committees of the Board of
Directors during fiscal 1997 on which such person served, except John Lockton,
who was appointed to the Board of Directors at the final Board of Directors
meeting held December 15, 1997, and therefore attended no meetings.
DIRECTOR COMPENSATION
Each nonemployee director of the Company, consisting in fiscal 1997 of
Robert P. Caren, Ph.D., Dennis Horowitz, Glenn E. Penisten, J. Robert
Schrieffer, Ph.D., Charles Crocker, who resigned from the Board in July 1997,
and John Lockton, who was appointed to the Board in December but attended no
meetings during fiscal 1997, is paid $1,000 for each non-telephonic Board
meeting in which the Board member participates.
Nonemployee directors also participate in the 1992 Director Option
Plan, as amended (the "Director Plan"), and the 1992 Stock Option Plan, as
amended (the "1992 Option Plan"). The Director Plan provides for the automatic
grant of a nonstatutory stock option to purchase 15,000 shares of Common Stock
of the Company to each of the Company's nonemployee directors on the date on
which such person (i) first becomes a director or (ii) ceases to serve as a
representative of a stockholder of the Company (a "First Option"), and an
additional automatic grant of a nonstatutory stock option to purchase 3,000
shares of Common Stock of the Company on June 1 of each year provided such
person has served on the Board for at least six (6) months (a "Subsequent
Option"). First Options vest at the rate of twenty-five percent (25%) of the
shares granted on each anniversary of the date of grant, and Subsequent Options
vest at the rate of fifty percent (50%) of the shares on each anniversary of the
date of grant. During the fiscal year ended December 31, 1997, directors Caren,
Crocker, Horowitz and Schrieffer were each automatically granted an option to
purchase 3,000 shares at a per share exercise
5
<PAGE> 8
price of $3.56 pursuant to the Director Plan, and upon joining the Board in
December, director Lockton was automatically granted an option to purchase
15,000 shares at an exercise price of $2.31 pursuant to the Director Plan.
In October 1997 the Directors were given the opportunity to reprice
options, on or before December 5, 1997, which had been granted under the
Director Plan (the "Old Options") with new options to be granted under the 1992
Option Plan (the "New Options"). The New Options were offered at $3.125, the
closing price of the Company's stock on October 29, 1997 as quoted on the Nasdaq
National Market, and if a director elected to reprice Old Options, he received
one-third less New Options, vesting at the same rate as the Old Options. Three
directors, namely Glenn Penisten, Dennis Horowitz and J. Robert Schrieffer,
elected to participate in the repricing. A total of 232,500 shares were canceled
under the Director Plan, and 155,002 shares were issued at $3.125 under the 1992
Option Plan to the participating directors: 17,334 New Options were issued to
Dennis Horowitz replacing 26,000 Old Options (2,500 at $6.00, 2,500 at $6.75,
3,000 at $6.25, 15,000 at $7.625 and 3,000 at $7.50); 49,334 New Options were
issued to J. Robert Schrieffer replacing 74,000 Old Options (62,500 at $6.00,
2,500 at $6.75, 3,000 at $6.25, 3,000 at $7.50 and 3,000 at $3.56); and 88,334
New Options were issued to Glenn Penisten replacing 132,500 Old Options (130,000
at $6.50 and 2,500 at $6.00).
Except as described above, directors do not receive additional
compensation for their services as directors of the Company or as members of
committees of the Board of Directors. There are no family relationships between
directors and executive officers of the Company.
PROPOSAL TWO:
APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Amended and Restated Certificate of Incorporation as currently in
effect (the "Certificate"), provides that the Company is authorized to issue two
classes of stock consisting of 15,000,000 shares of Common Stock, $.001 par
value per share, and 2,000,000 shares of Preferred Stock, $.001 par value per
share. In February 1998, the Board of Directors authorized an amendment to the
Certificate to increase the authorized number of shares of Common Stock to
30,000,000 shares. The stockholders are being asked to approve such amendment to
the Certificate at the Annual Meeting.
The Company currently has 15,000,000 authorized shares of Common Stock,
of which, as of March 26, 1998, 7,707,081 shares of Common Stock were issued and
outstanding, and 2,000,000 shares of Preferred Stock, of which 833,333 shares
have been designated Series A Preferred and 500,000 of which are issued and
outstanding as of March 26, 1998. The Company has reserved 1,666,666 shares of
Common Stock for issuance upon conversion of the Series A Preferred, 1,828,909
shares for future grant or for issuance upon the exercise of outstanding options
under the Director Plan, the Option Plan and the Amended and Restated 1988 Stock
Option Plan, 250,000 shares for issuance upon exercise of certain outstanding
warrants and 66,667 shares for issuance upon exercise of certain warrants
issuable by the Company.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed amendment to the Certificate is
to authorize additional shares of Common Stock which will be available in the
event the Board of Directors determines that it is necessary or appropriate to
permit a future stock dividend or stock split, to raise additional capital
through the sale of securities, to acquire another company or its business or
assets, or to establish a strategic relationship with a corporate partner. The
Board of Directors has no present agreement or arrangement to issue any of the
shares for which approval is sought. If the amendment is approved by the
stockholders, the Board of Directors does not intend to solicit further
stockholder approval prior to the issuance of any additional shares of Common
Stock, except as may be required by applicable law. The increase in authorized
Common Stock will not have any immediate effect on the rights of existing
stockholders. To the extent that the additional authorized shares are issued in
the future, except in the case of a stock split or stock dividend, such
issuances will decrease existing stockholders' percentage equity ownership. The
holders of Common Stock have no preemptive rights.
POTENTIAL ANTI-TAKEOVER EFFECT
6
<PAGE> 9
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of Common
Stock, and such additional shares could be used to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the shares
outstanding as of the Record Date will be required to approve the amendment to
the Certificate of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected Price Waterhouse LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1998.
A representative of Price Waterhouse LLP is expected to be present at
the Annual Meeting and will have the opportunity to make a statement if such
person desires to do so. Such representative is expected to be available to
respond to appropriate questions.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Ratification of the Board's appointment of Price Waterhouse LLP
requires the affirmative vote of a majority of the Votes Cast. In the event the
stockholders do not approve the selection of Price Waterhouse LLP, the
appointment of the independent auditors will be reconsidered by the Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
7
<PAGE> 10
VOTING SECURITIES OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock as of March 23, 1998, by (i) each person known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock, (ii) by each director, (iii) by each of the executive officers named in
the table under "Executive Compensation--Summary Compensation Table," and (iv)
all directors and executive officers as a group. Except as otherwise indicated
in the footnotes to the table, the persons and entities named in the table have
sole voting and investment power with respect to all shares beneficially owned,
subject to community property laws, where applicable.
<TABLE>
<CAPTION>
Number Percentage
Name of Shares Ownership
- --------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Lockheed Martin Corporation.......................................... 494,047 6.41%
6801 Rockledge Drive
Bethesda, Maryland 20817
Glenn E. Penisten(1)................................................. 185,591 2.38
Robert B. Hammond(2)................................................. 104,585 1.34
M. Peter Thomas(3)................................................... 76,267 *
James P. Simmons, Jr.(4)............................................. 54,417 *
E. Ray Cotten(5) .................................................... 50,717 *
James G. Evans, Jr.(5)............................................... 44,897 *
J. Robert Schrieffer(6).............................................. 41,918 *
Neal Fenzi(5)........................................................ 27,730 *
Michael Eddy(7)...................................................... 25,638 *
Robert P. Caren(8)................................................... 20,992 *
Dennis Horowitz(9)................................................... 16,418 *
John D. Lockton...................................................... -0- *
Daniel C. Hu......................................................... 15,484 *
All executive officers and directors as a group (12 persons)(10)..... 649,170 7.9%
</TABLE>
- --------------------
* Less than one percent.
(1) Includes 96,997 shares held by a trust for the benefit of Glenn and
Mary Louise Penisten. Also includes 88,334 shares issuable upon the
exercise of stock options that are exercisable within 60 days of March
23, 1998.
(2) Includes 72,085 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(3) Includes 75,834 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(4) Includes 54,167 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(5) All shares are issuable upon the exercise of stock options that are
exercisable within 60 days of March 23, 1998. (6) Includes 38,918
shares issuable upon the exercise of stock options that are exercisable
within 60 days of March 23, 1998.
(7) Includes 24,438 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(8) Includes 18,292 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(9) Includes 13,418 shares issuable upon the exercise of stock options that
are exercisable within 60 days of March 23, 1998.
(10) See footnotes (1)-(9). Includes 508,830 shares issuable upon exercise
of stock options held by executive officers and directors that are
exercisable within 60 days of March 23, 1998. Does not include shares
owned by Mr. Hu, who ceased service with the Company in April 1997.
8
<PAGE> 11
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation received for services
rendered to the Company in all capacities during the fiscal years ended December
31, 1997, 1996 and 1995 by the Company's Chief Executive Officer and former
Chief Executive Officer, and the four executive officers other than the Chief
Executive Officer and former Chief Executive Officer whose total salary and
bonus for fiscal year 1997 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- ------------- --------------
SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) ($)
- ------------------------------- -------- ------------- ---------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
M. Peter Thomas 1997 162,798(3) -- 15,000(4) 280,000 1,644
President and Chief Executive 1996 N/A N/A N/A N/A N/A
Officer 1995 N/A N/A N/A N/A N/A
Daniel C. Hu 1997 208,535 78,000 -- 20,000(5) 1,329
Former President and Chief 1996 236,248 -- -- 160,000 1,529
Executive Officer 1995 180,857 -- 12,546(6) -- 1,558
E. Ray Cotten 1997 166,076 -- -- -- 6,542
Vice Chairman of the Board of 1996 51,003 -- -- 108,934 1,249
Directors 1995 N/A N/A N/A N/A N/A
Robert B. Hammond 1997 165,080 -- -- 60,000(7) 932
Senior Vice President and 1996 148,265 -- -- 25,000(8) 839
Chief 1995 141,921 -- -- -- 851
Technical Officer
James G. Evans, Jr. 1997 146,908 -- -- 30,000(9) 847
Vice President and Chief 1996 130,260 -- -- 35,000(10) 463
Financial Officer 1995 91,281 -- -- 45,000 358
James P. Simmons, Jr. 1997 144,277 -- -- 20,000(11) 819
Vice President Marketing and 1996 130,155 -- -- 20,000(12) 750
Sales 1995 121,233 -- -- 15,000 419
</TABLE>
- ---------------------------
(1) Excludes certain perquisites and other amounts that, for any executive
officer, in the aggregate did not exceed the lesser of $50,000 or 10%
of the total annual salary and bonus for such executive officer.
(2) Term life insurance premiums.
(3) Mr. Thomas commenced employment with the Company in April 1997; amount
shown reflects pro rated annual salary of $200,000.
(4) Relocation expenses.
(5) Mr. Hu resigned from his positions with the Company in April 1997;
amounts shown include options to purchase 20,000 shares which
terminated prior to the vesting of any shares under such options.
(6) Hotel and transportation expenses.
(7) Includes 15,000 shares which replaced a 1996 grant of an option to
purchase 15,000 shares which was canceled.
(8) Includes 15,000 shares which were canceled and replaced by a 1997 grant
of an option to purchase 15,000 shares.
(9) Includes 20,000 shares which replaced a 1996 grant of an option to
purchase 20,000 shares which was canceled.
(10) Includes 20,000 shares which were canceled and replaced by a 1997 grant
of an option to purchase 20,000 shares.
(11) Includes 10,000 shares which replaced a 1996 grant of an option to
purchase 10,000 shares which was canceled.
9
<PAGE> 12
12 Includes 10,000 shares which were canceled and replaced by a 1997 grant
of an option to purchase 10,000 shares.
EMPLOYMENT AGREEMENTS
In addition to the executive compensation set forth in the table above,
pursuant to a letter agreement between M. Peter Thomas and the Company dated
April 3, 1997, Mr. Thomas is entitled to six months' salary as severance in the
event of a change in position not for cause, and 70,000 of the 280,000 options
to purchase Common Stock of the Company will be accelerated to vest immediately
upon a change of control involving a change in Mr. Thomas' position. E. Ray
Cotten is entitled to twelve months severance, including a continuation of base
salary and employee and dependent health and insurance benefits, in the event of
involuntary termination as set forth in an Employment Agreement between the
Company and Mr. Cotten dated July 1, 1997. Upon his resignation as President and
Chief Executive Officer of the Company in April 1997, Daniel Hu received 6
months of base salary and health, dental and life insurance for himself and his
dependents as severance. In addition, 240,293 of Mr. Hu's options to purchase
Common Stock of the Company were accelerated to vest as of April 7, 1997, and
the period in which to exercise such options was extended through October 31,
1997. Mr. Hu elected not to exercise such options, and they were returned to the
option plans from which they were issued effective November 1, 1997. There are
no other employment agreements between the Company and any of its executive
officers.
10
<PAGE> 13
OPTION GRANTS IN FISCAL 1997
The following table sets forth certain information regarding stock
options granted during the fiscal year ended December 31, 1997 to each of the
executive officers named in the table under "Executive Officer
Compensation--Summary Compensation Table."
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
VALUE
% OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED (#) YEAR(1) ($/SH) DATE 5%($) 10%($)
- ----------------------- ----------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
M. Peter Thomas(3) 280,000 37.40 3.75 04/07/07 660,339 1,673,430
Daniel C. Hu(4) 20,000 2.67 7.88 01/06/07 -- --
E. Ray Cotten(5) -- -- -- -- -- --
Robert B. Hammond(6) 15,000 2.00 4.00 01/28/07 37,734 95,625
15,000(7) 2.00 4.00 01/28/07 37,734 95,625
10,000 1.34 3.25 05/20/07 20,439 51,797
20,000 2.67 2.31 12/15/07 29,093 73,727
James G. Evans, Jr.(6) 20,000(7) 2.67 4.00 01/28/07 50,312 127,499
10,000 1.34 3.25 05/20/07 20,439 51,797
James P. Simmons, Jr.(6) 10,000(7) 1.34 4.00 01/28/07 25,156 63,750
10,000 1.34 3.50 05/23/07 22,011 55,781
</TABLE>
- -------------
(1) Total number of shares subject to options granted to employees in
fiscal 1997 was 748,634, which number includes options granted to
employee directors, but excludes options granted to nonemployee
directors and consultants
(2) The Potential Realizable Value is calculated based on the fair market
value on the date of grant, which is equal to the exercise price of
options granted in fiscal 1997, assuming that the stock appreciates in
value from the date of grant until the end of the option term at the
annual rate specified (5% and 10%). Potential Realizable Value is net
of the option exercise price. The assumed rates of appreciation are
specified in rules of the SEC and do not represent the Company's
estimate or projection of future stock price. Actual gains, if any,
resulting from stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall
stock market conditions, as well as the option holders' continued
employment through the exercise/vesting period. There can be no
assurance that the amounts reflected in this table will be achieved.
(3) Option vests over a four-year period at the rate of 1/8th of the shares
subject to the Option vesting on the date of grant and 1/48 of the
shares subject to the Option vesting monthly thereafter beginning
10/07/97, subject to optionee's continued employment with the Company;
70,000 of the 280,000 options will be accelerated to vest immediately
upon a change of control involving a change in Mr. Thomas' position.
(4) Mr. Hu ceased service with the Company in April 1997; options to
purchase 20,000 shares terminated prior to the vesting of any shares
under such options.
(5) No options were granted to Mr. Cotten in fiscal 1997. See "Aggregated
Option Exercises In Fiscal 1997 and 1997 Fiscal Year-End Option
Values," page 12, for information regarding Mr. Cotten's prior option
grants.
(6) Each option vests over a four-year period at the rate of 1/4th of the
shares subject to the option at the end of the first twelve months and
1/36th of the remaining shares subject to the option at the end of each
monthly period thereafter so long as such optionee's employment with
the Company has not terminated.
(7) Option grant replaces a 1996 option grant which was canceled.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the value
of unexercised options as of December 31, 1997 for each of the executive
officers named in the table under "Executive Compensation--Summary Compensation
Table."
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
UNDERLYING UNEXERCISED THE MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END: FISCAL YEAR END:
SHARES VALUE ----------------------------- -------------------------------
ACQUIRED ON REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME EXERCISE ($) (#) (#) ($) ($)
- --------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Peter Thomas -- -- 46,667 233,333 N/A(1) N/A(1)
Daniel C. Hu (2) -- -- -- -- -- --
E. Ray Cotten(3) -- -- 37,670 71,264 N/A(1) N/A(1)
Robert B. Hammond -- -- 61,667 63,333 N/A(1) $16,240(4)
James G. Evans, Jr. -- -- 30,001 59,999 N/A(1) N/A(1)
James P. Simmons, Jr. -- -- 43,021 46,979 N/A(1) N/A(1)
</TABLE>
- ----------
(1) The fair market value of the Company's Common Stock as of December 31,
1997 was $3.125, which did not exceed the exercise price of such
exercisable or unexercisable options held by such person.
(2) Mr. Hu ceased service with the Company in April 1997 and had no
outstanding options on December 31, 1997.
(3) Of a total of 108,934 options to purchase Common Stock of the Company
granted to Mr. Cotten during fiscal 1996, 93,934 options will be
accelerated to vest immediately upon "acquisition of the Company"
defined as "the acquisition or merger of the Company into another
entity or the acquisition or merger of another entity into the Company
which is valued at or in excess of $2.5 Million or is significant to
the Company as determined by the Board of Directors of the Company in
its sole discretion."
(4) Market value of underlying securities based on the $3.125 closing price
of the Company's Common Stock on December 31, 1997 (the last market
trading day in 1997), minus the exercise price.
12
<PAGE> 15
TEN YEAR OPTION REPRICINGS
The following table identifies stock options to purchase shares of the
Company's Common Stock held by all officers of the Company, including the Named
Officers, which were granted at a lower exercise price during the last ten
fiscal years, including the repricing on January 28, 1997 (the "January
Repricing") by replacement of certain options previously granted to such
officers during fiscal 1996. The Compensation Committee Report on Repricing of
Options on page 15 sets forth the basis for these exchanges.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SECURITIES MARKET PRICE TERM
UNDERLYING OF STOCK AT EXERCISE NEW REMAINING
OPTIONS TIME OF PRICE AT TIME EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING ($) OF REPRICING PRICE ($) REPRICING
- --------------------------- -------- -------- ------------- ------------- --------- -----------
(#) ($)
<S> <C> <C> <C> <C> <C> <C>
Robert B. Hammond 01/28/97 15,000 4.00 7.38 4.00 9 yrs 5 mos
Senior Vice President and 01/11/96 25,000 4.63 7.00 4.88 7 yrs
Chief Technical Officer 01/11/96 15,000 4.63 6.25 4.88 7 yrs 9 mos
01/11/96 15,000 4.63 7.25 4.88 8 yrs 9 mos
James G. Evans, Jr. 01/28/97 20,000 4.00 7.38 4.00 9 yrs 5 mos
Vice President and Chief 01/12/96 45,000 4.69 6.25 4.88 9 yrs 4 mos
Financial Officer
James P. Simmons, Jr. 01/28/97 10,000 4.00 7.38 4.00 9 yrs 5 mos
Vice President, Marketing 01/15/96 45,000 4.75 6.50 4.88 8 yrs 7 mos
and Sales 01/15/96 15,000 4.75 6.25 4.88 9 yrs 7 mos
Daniel C. Hu(1) 01/12/96 96,117 4.68 7.00 4.88 7 yrs
President and Chief 01/12/96 144,176 4.68 7.00 4.88 7 yrs 2 mos
Executive Officer
Gregory L. Hey-Shipton(2) 01/09/96 10,000 4.75 7.00 4.88 7 yrs
Director of RF 01/09/96 7,500 4.75 7.50 4.88 7 yrs 8 mos
Engineering 01/09/96 10,000 4.75 6.38 4.88 8 yrs 8 mos
01/09/96 10,000 4.75 5.88 4.88 9 yrs 8 mos
Neal Fenzi 01/15/96 3,500 4.75 10.00 4.88 7 yrs 4 mos
Vice President, 01/15/96 3,000 4.75 7.13 4.88 9 yrs 3 mos
Engineering
Michael M. Eddy 01/28/97 7,000 4.00 7.38 4.00 9 yrs 5 mos
Vice President, 01/09/96 7,500 4.75 7.50 4.88 7 yrs 9 mos
Operations 01/09/96 3,000 4.75 6.38 4.88 8 yrs 9 mos
01/09/96 3,000 4.75 5.88 4.88 9 yrs 9 mos
</TABLE>
- ---------------
1 Mr. Hu ceased service with the Company in April 1997. As of December
31, 1997, all of Mr. Hu's shares included in the 1996 repricing were
canceled and returned to the option pool for future grant pursuant to
the option plan from which they were granted.
2 Mr. Hey-Shipton, formerly Vice President and General Manager,
Government Products Business Unit, left service with the Company for a
period of approximately six months during 1997. As of December 31,
1997, all of Mr. Hey-Shipton's shares included in the 1996 repricing
had been canceled and returned to the option pool for future grant
pursuant to the option plan from which they were granted.
13
<PAGE> 16
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and the holders of more than 10%
of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
equity securities of the Company. Based solely upon a review of such forms, or
on written representations from certain reporting persons that no other reports
were required for such persons, the Company believes that all reports required
pursuant to Section 16(a) with respect to its executive officers, directors and
10% stockholders for the 1997 fiscal year and prior years were complied with.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors is composed
of four nonemployee directors, namely, Robert P. Caren, Ph.D., Dennis Horowitz,
John Lockton and J. Robert Schrieffer, Ph.D. No interlocking relationship exists
between the Company's Board of Directors and the compensation committee of any
other company, and no such interlocking relationship has existed in the past.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors of
the Company is comprised of four independent, non-employee directors who have no
interlocking relationships with the Company or any of its affiliates. As part of
their duties, the Compensation Committee reviews compensation levels of the
executive officers to insure compensation is in line with performance and
industry practices. The goal of the Committee is to insure the compensation
practices of the Company are sufficient to attract the necessary technical and
manufacturing talent to enable the growth from a development stage company into
one with commercialized products.
The Committee meets with the Chief Executive Officer to gather input on
the performance of the other executive officers. In determining individual
salaries for officers, consideration is given to individual factors, such as
experience, performance and responsibilities within the Company, as well as
industry-specific comparables. Because the superconductivity industry is small,
the Committee uses other industries for comparable measures which have similar
manufacturing techniques and challenges, in particular the wireless and
semiconductor industries. As the Company is still in the development stages,
bonus plans are based upon goal attainment rather than upon profitability.
Historically, the Company has not given bonuses on an annual or recurring basis.
The Compensation Committee also administers the Company's Stock Option
Program, which is made available to all employees. In addition to the executive
officers, the Committee also reviews stock option grants to all employees. The
size of the stock option awards is based primarily on an individual's
performance, responsibilities and position with the Company, as well as such
individual's present equity ownership and unvested and vested stock options. The
Committee believes the stock option program is crucial to the retention and
motivation of all employees. The Committee also believes it is essential to
insure all employees have a stake in the Company. With all employees as
stakeholders, the Committee believes this enhances the overall stockholder value
and creates an environment in which creativity and technical achievement will
excel.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
When setting the Chief Executive Officer's compensation, the Committee
does so without such person's attendance. The Chief Executive Officer's
compensation is determined based on comparable salaries of chief executive
officers in comparable technology companies. As stated previously, the
superconductivity industry is small; the Committee uses other industries for
comparable measures which have some of the same manufacturing techniques and
challenges.
Daniel C. Hu, who served as the Company's Chief Executive Officer during
part of fiscal 1997, ceased service with the Company in April 1997. He was paid
a salary of $208,535 and a bonus of $78,000 during 1997. The options he was
granted upon joining the Company, which were in part based upon performance,
were accelerated to vest on April 7, 1997, but were unexercised and returned to
the option plan November 1, 1997. In addition, during 1996 and 1997 Mr. Hu
received additional grants of options to purchase 180,000 shares, which options
terminated prior to the vesting of any shares under such options.
14
<PAGE> 17
M. Peter Thomas, who served as the Company's Chief Executive Officer
during most of fiscal 1997, began his employment with the Company in April 1997
upon the departure of Mr. Hu. Mr. Thomas' annual salary was set at $200,000 by
the Board at the time of hire, and he earned $162,798 from his date of hire in
April through December 31, 1997. In addition to his salary, at the time of hire
Mr. Thomas was granted an option to purchase 280,000 shares of the Company's
Common Stock, vesting over a period of 4 years. No adjustment has been made to
Mr. Thomas' compensation since his date of hire.
$1,000,000 LIMIT ON TAX DEDUCTIBLE COMPENSATION
Section 162(m), enacted as part of the Omnibus Budget Reconciliation Act
of 1993, limits to $1,000,000 the deductibility, for any year beginning after
December 31, 1993, of compensation paid by a public corporation to the chief
executive officer and the next four most highly compensated executive officers
unless such compensation is performance-based within the meaning of Section
162(m) and the regulations thereunder.
The Committee intends to continue to utilize performance-based
compensation in order to minimize the effect of the limits imposed by Section
162(m) and seeks to assure the maximum tax deductibility of all compensation it
authorizes. However, the Committee believes that its primary responsibility is
to provide a compensation program that will attract, retain and reward the
executive talent necessary to the Company's success. Consequently, the Committee
recognizes that the loss of a tax deduction may be necessary in some
circumstances.
Robert P. Caren, Ph.D.
Dennis Horowitz
John Lockton
J. Robert Schrieffer, Ph.D.
REPORT ON REPRICING OF OPTIONS
On January 28, 1997, the Compensation Committee of the Board of Directors
of the Company voted to cancel the special option grants made to employees of
the Company, including the Named Officers, granted on August 20, 1996 in
connection with the Company's follow-on public offering and to regrant to those
employees still in service with the Company new options with an exercise price
of $4.00 per share, which price was equal to the closing price of the Company's
Common Stock on that date. The actions of the Compensation Committee were
ratified by the Board of Directors at its meeting immediately following the
meeting of the Compensation Committee. A total of 73,000 shares granted August
20, 1996 were canceled, and 63,000 of those options were regranted to employees,
including the Named Officers. The Ten Year Option Repricings Table on page 13
lists all officers of the Company whose options were canceled and regranted in
the January Repricing.
The Company believes that given the disparity in January of 1997 between
the trading price of its Common Stock and the exercise price of those options
awarded employees as incentive compensation following the public offering
process in August 1996, the January Repricing was desirable in order to
incentivize the Company's employees to continue to work towards the future
growth of the Company and to retain key personnel. In exchange for the reduction
in the exercise price, the vesting commencement date of each replaced option
commenced with the date of the grant of the replacement option vs.
the earlier August 20, 1996 date.
Robert P. Caren, Ph.D.
Dennis Horowitz
John Lockton
J. Robert Schrieffer, Ph.D.
15
<PAGE> 18
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total stockholders' return on the
Company's Common Stock since the Company's initial public offering in March 1993
with the NASDAQ-U.S. Index and the Hambrecht & Quist Technology Index over the
same period (assuming the investment of $100 in the Company's Common Stock and
in the two other indices, and reinvestment of all dividends).
SUPERCONDUCTOR TECHNOLOGIES
H&Q TECHNOLOGY INDEX
NASDAQ STOCK MARKET - U.S. INDEX
<TABLE>
<CAPTION>
Superconductor Nasdaq Stock
DATES Technologies H&O Technology Market-U.S.
- ------- -------------- -------------- ------------
<S> <C> <C> <C>
3/9/93 100 100 100
Dec-93 63.75 108.68 112.88
Dec-94 65.00 130.55 110.34
Dec-95 45.00 195.20 156.05
Dec-96 39.37 242.61 191.93
Dec-97 31.25 284.43 235.52
</TABLE>
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Santa Barbara, California
April __, 1998
16
<PAGE> 19
DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SUPERCONDUCTOR TECHNOLOGIES INC.
P ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
R
The undersigned stockholder of SUPERCONDUCTOR TECHNOLOGIES INC., a Delaware
O corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April __, 1998 and hereby
X appoints M. Peter Thomas and James G. Evans, Jr., or either of them,
proxies and attorneys-in-fact, with full power to each of substitution,
Y on behalf and in the name of the undersigned, to represent the undersigned
at the Annual Meeting of Stockholders of Superconductor Technologies Inc.
to be held on May 20, 1998 at 11:00 a.m., local time, at the Pacifica
Suites, located at 5490 Hollister Avenue, Santa Barbara, California, and
at any adjournment or adjournments thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth on the reverse side.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 20
DETACH HERE
[X] Please mark votes as
in this sample.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND FOR THE RATIFICATION OF
THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
1. Election of Directors
Nominees: Glenn E. Penisten; E. Ray Cotten; M. Peter Thomas; Robert P. Caren,
Ph.D.; Dennis Horowitz; John Lockton; J. Robert Schrieffer, Ph.D.
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________________
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
their name in the space provided above.)
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK THEREUNDER
BY 15,000,000 SHARES.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
and, in their discretion, upon such other matter or matters, which may properly
come before the meeting or any adjournment or adjournments thereof.
MARK HERE FOR ADDRESS CHANGE [ ]
AND NOTE AT LEFT
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
Signature:___________________________________________ Date:_____________________
Signature:___________________________________________ Date:_____________________
