def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only (as permitted by 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional materials |
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Soliciting Material Pursuant To § 240.14a-12 |
SUPERCONDUCTOR TECHNOLOGIES INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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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 (set forth
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the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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o Fee paid previously with preliminary materials:
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o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2006
To Our Stockholders:
The Annual Meeting of Stockholders of Superconductor
Technologies Inc. will be held on Wednesday, May 24, 2006,
at 11:00 a.m., Pacific Time, at 460 Ward Drive,
Santa Barbara, California, the offices of the Company, for
the following purposes:
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1. To elect three Class 2 Directors to hold office
until the year 2009 Annual Meeting or until their successors are
elected and qualified; |
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2. To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors for the year ending December 31,
2006; and |
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3. To transact such other business as may properly come
before the meeting or any adjournment(s) thereof. |
Only stockholders of record at the close of business on
March 27, 2006 are entitled to notice of and to vote at the
Annual Meeting. A list of shareholders as of this date will be
available during normal business hours for examination by any
stockholder for any purpose germane to the Annual Meeting for a
period of ten days prior to meeting at the offices of the
Company.
All stockholders are urged to attend the Annual Meeting in
person or by proxy. YOUR VOTE IS IMPORTANT. WHETHER OR NOT
YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE SIGN
AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES
CAN BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH YOUR
INSTRUCTIONS. The proxy is revocable and will not affect
your right to vote in person in the event you attend the Annual
Meeting.
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By Order of the Board of Directors |
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Jeffrey A. Quiram
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President and Chief Executive Officer |
Santa Barbara, California
April 5, 2006
TABLE OF CONTENTS
PROXY STATEMENT
ANNUAL MEETING TO BE HELD ON MAY 24, 2006
460 Ward Drive
Santa Barbara, California 93111-2310
(805) 690-4500
This Proxy Statement contains information related to the
solicitation of proxies by and on behalf of the Board of
Directors of Superconductor Technologies Inc. (the
Company) for use in connection with the
Annual Meeting of Stockholders to be held on Wednesday,
May 24, 2006, beginning at 11:00 a.m., Pacific Time,
at the offices of Superconductor located at 460 Ward Drive,
Santa Barbara, California 93111, and at any and all
adjournments or postponements thereof. This Proxy Statement and
the accompanying proxy are being mailed to stockholders on or
about April 5, 2006.
RECENT DEVELOPMENTS REVERSE STOCK SPLIT
We implemented a one-for-ten (1:10) reverse split of the common
stock effective as of the open of business on March 13,
2006. The reverse stock split was approved by our stockholders
last May at the 2005 Annual Meeting.
In the reverse split, each ten shares of issued and outstanding
common stock were converted automatically into one share of
common stock. No fractional shares were issued in connection
with the reverse stock split, and holders of fractional shares
received cash in lieu of their fractional shares. We now have
approximately 12.5 million shares outstanding after the
reverse split. The reverse split also had a proportionate affect
on all stock options and warrants outstanding immediately prior
to the effective date of the reverse split.
Our common stock began trading on a split-adjusted basis on
March 13, 2006, with the interim ticker symbol
SCOND. We expect that the D designation
will be removed on April 10, 2006, and our ticker symbol
will revert back to SCON. Our transfer agent,
Registrar and Transfer Company, has mailed instructions to all
stockholders of record as of March 10, 2006 explaining the
process for obtaining new post-split stock certificates.
We have adjusted all of the relevant information in this
proxy statement to reflect the reverse stock split.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date
Only holders of record of voting stock at the close of business
on March 27, 2006 (the Record Date) are
entitled to notice of the Annual Meeting and to vote at the
Annual Meeting. On that date, the Company had outstanding
12,483,367 shares of voting common stock.
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 share of common stock is entitled to one vote on all
matters presented at the Annual Meeting. Stockholders do not
have the right to cumulate their votes in the election of
directors.
Shares of common stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted
in accordance with the instructions indicated thereon. In the
absence of specific instructions to the contrary, properly
executed proxies will be voted: (i) FOR the election of
each of the Companys three nominees for the Class 2
directors, and (ii) FOR the ratification of the selection
of PricewaterhouseCoopers LLP as independent auditors of the
Company for the year ending December 31, 2006. 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.
If you will not be able to attend the Annual Meeting to vote in
person, you may vote your shares by completing and returning the
accompanying proxy card or by voting electronically via the
Internet or by telephone. To vote by mail, please mark, sign and
date the accompanying proxy card and return it promptly in the
enclosed postage paid envelope.
Proxies may be solicited by certain of the directors, officers
and employees of the Company, without additional compensation,
personally or by telephone, telegram, letter or facsimile. 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 with
respect to such matter.
The Company believes that abstentions should be counted for
purposes of determining both the presence and absence of a
quorum for the transaction of business and the total number of
votes cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this
manner. Accordingly, abstentions will have the same effect as a
vote against a proposal (other than the election of directors).
Broker non-votes are shares held in street name for which a
broker returns a proxy card but indicates that instructions have
not been received from the beneficial owners or other persons
entitled to vote and for which the broker does not have
discretionary voting authority. In a 1988 Delaware case,
Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for
the purposes of determining the presence or absence of a quorum
for the transaction of business, broker non-votes should not be
counted for purposes of determining the number of
votes cast with respect to the particular proposal on which
the broker has expressly not voted. Accordingly, 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
requiring solely a majority of shares voted.
Deadline for Receipt of Stockholder Proposals
Any stockholder who intends to present a proposal at the 2007
Annual Meeting of Stockholders must ensure that the proposal is
received by the Corporate Secretary at Superconductor
Technologies Inc., 460 Ward Avenue, Santa Barbara,
California 93111 not later than December 1, 2006 in order
to be considered for inclusion in our proxy materials for that
meeting.
2
PROPOSAL ONE
ELECTION OF CLASS 2 DIRECTORS
The Board of Directors currently consists of seven directors
divided into three classes Class 1
(Mr. Quiram and Mr. Shalvoy), Class 2
(Mr. Horowitz, Mr. Kaplan and Mr. Davis) and
Class 3 (Mr. Carlson and Mr. Lockton)
with the directors in each class holding office for staggered
terms of three years each or until their successors have been
duly elected and qualified.
The Class 2 Directors will be elected at this years
Annual Meeting or any adjournments or postponements thereof. The
nominees for election as the Class 2 Directors are
Mr. Horowitz, Mr. Kaplan and Mr. Davis. The
Class 2 Directors will serve until the year 2009 Annual
Meeting or until their successors are elected and qualified.
Assuming the nominees are elected, the Company will have seven
directors serving as follows:
Class 1: Jeffrey A. Quiram,
Charles E. Shalvoy
Class 2: Lynn J. Davis, Dennis
J. Horowitz, Martin A. Kaplan
Class 3: John F. Carlson, John
D. Lockton
The accompanying proxy grants to the holder the power to vote
the proxy for substitute nominees in the event that any nominee
becomes unavailable to serve as a Class 2 Director.
Management presently has no knowledge that any nominee will
refuse or be unable to serve as a Class 2 Director for the
prescribed term.
Required Vote
Directors are elected by a plurality of the shares
voted. Plurality means that the nominee with the largest number
of votes is elected, up to the maximum number of directors to be
chosen (in this case, three directors). Stockholders can either
vote for the nominee or withhold authority to vote
for the nominee. However, shares that are withheld will have no
effect on the outcome of the election for directors. Broker
non-votes also will not have any effect on the outcome of the
election of the directors.
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR MR. HOROWITZ, MR. KAPLAN AND
MR. DAVIS.
Corporate Governance Policies and Practices
The following is a summary of our corporate governance policies
and practices:
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A majority of the members of the Board are independent
directors, as defined by NASDAQ. The Board has determined that
all of our directors are independent, other than
Messrs. Quiram and Shalvoy. Independent directors do not
receive consulting, legal or other fees from Superconductor
other than Board and Committee compensation. |
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All of our employees, officers and directors are subject to our
Code of Business Conduct and Ethics Policy, which is available
on the Companys website at www.suptech.com. The
ethics policy meets the requirements of NASDAQ, as well as the
code of ethics requirements of the SEC. If any material
provisions of our Code of Business Conduct and Ethics Policy are
waived for our Chief Executive Officer or senior financial
officers, or if any substantive changes are made to our policy,
as they relate to any director or executive officer, we will
disclose that fact on our website within five (5) business
days. In addition, any other material amendment to our code will
be disclosed in the same manner. |
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The Boards current policy is to separate the roles of
Chairman of the Board and Chief Executive Officer. |
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The Audit, Compensation and Governance & Nominating
Committees consist entirely of independent directors. |
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The Board reviews at least annually the Companys business
initiatives, capital projects and budget matters. |
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The Audit Committee reviews and approves all related-party
transactions. |
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As part of our Code of Business Conduct and Ethics Policy, we
have made a whistleblower hotline available to all
employees for anonymous reporting of financial or other
concerns. The Audit Committee receives directly, without
management participation, all hotline activity reports
concerning accounting, internal controls or auditing matters. |
Stockholder Communications with Directors
Stockholders who want to communicate with the board or with a
particular director may send a letter to the Secretary of the
Company at Superconductor Technologies Inc., 460 Ward Avenue,
Santa Barbara, California 93111. The mailing envelope
should contain a clear notation indicating that the enclosed
letter is a Board Communication or Director
Communication. All such letters should state whether the
intended recipients are all members of the board or just certain
specified individual directors. The Secretary will circulate the
communications (with the exception of commercial solicitations)
to the appropriate director or directors. Communications marked
Confidential will be forwarded unopened.
Board Meetings and Committees
During 2005, all of our directors attended at least seventy-five
percent (75%) of (i) the total number of board meetings and
(ii) the total number of committee meetings on which the
director served.
The Board of Directors held a total of 14 meetings during the
year ended December 31, 2005. The Board of Directors has
four standing committees an Audit Committee, a
Compensation Committee, a Governance & Nominating
Committee and an Executive Committee. Current committee members
are listed below. New committee members will be appointed at the
Board of Directors meeting immediately following the Annual
Meeting of Stockholders. The Audit, Compensation and
Governance & Nominating Committees each have a charter
which is available on the Companys website at
www.suptech.com.
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, to review the
Companys accounting principles and its system of internal
accounting controls and to review the Companys annual and
quarterly reports before filing with the Securities and Exchange
Commission. The Audit Committee met 9 times during 2005. The
current members of the Audit Committee are John F. Carlson,
Dennis J. Horowitz (Chairman), John D. Lockton and Lynn J.
Davis. The Board of Directors has determined that all members of
the Audit Committee are independent directors under the rules of
the SEC and the listing standards of NASDAQ. The Board of
Directors has determined that John F. Carlson is a
financial expert who is independent of management in
accordance with the applicable regulations.
The Compensation Committee reviews and approves salaries,
bonuses and other benefits payable to the executive officers and
administers the 2003 Equity Incentive Plan. The Compensation
Committee is specifically responsible for determining the
compensation of the Chief Executive Officer. The Compensation
Committee met 6 times during 2005. The current members of the
Compensation Committee are John F. Carlson (Chairman), Dennis J.
Horowitz and Martin A. Kaplan. The Board of Directors has
determined that all members of the Compensation Committee are
independent directors under the rules of the SEC and the listing
standards of NASDAQ.
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Governance & Nominating Committee |
The Governance & Nominating Committee is responsible
for overseeing and, as appropriate, making recommendations to
the Board regarding, membership and constitution of the Board
and its role in overseeing the affairs of the Company. The
Governance & Nominating Committee is responsible for
proposing a slate of directors for election by the stockholders
at each annual meeting and for proposing candidates to fill any
vacancies. This committee is also responsible for the corporate
governance practices and policies of the board and its
committees. The current members of the Nominating &
Governance Committee are Martin A. Kaplan (Chairman), John D.
Lockton, and Lynn J. Davis. The Governance & Nominating
Committee met 3 times in 2005.
The Governance & Nominating Committee manages the
process for evaluating current Board members at the time they
are considered for re-nomination. After considering the
appropriate skills and characteristics required on the Board,
the current makeup of the Board, the results of the evaluations,
and the wishes of the Board members to be re-nominated, the
Nominating Committee recommends to the Board whether those
individuals should be re-nominated.
The Governance & Nominating Committee periodically
reviews with the Board whether it believes the Board would
benefit from adding a new member(s), and if so, the appropriate
skills and characteristics required for the new member(s). If
the Board determines that a new member would be beneficial, the
Governance & Nominating Committee solicits and receives
recommendations for candidates and manages the process for
evaluating candidates. All potential candidates, regardless of
their source, are reviewed under the same process. The
Governance & Nominating Committee (or its chairman)
screens the available information about the potential
candidates. Based on the results of the initial screening,
interviews with viable candidates are scheduled with
Governance & Nominating Committee members, other
members of the Board and senior members of management. Upon
completion of these interviews and other due diligence, the
Governance & Nominating Committee may recommend to the
Board the election or nomination of a candidate.
Candidates for independent Board members have typically been
found through recommendations from directors or others
associated with the Company. Stockholders may also recommend
candidates by sending the candidates name and resume to
the Governance & Nominating Committee under the
provisions set forth above for communication with the Board. The
deadline to submit recommendations for nominees for election to
the Board at the Companys 2007 Annual Meeting of
Stockholders is December 1, 2006.
The Governance & Nominating Committee has no predefined
minimum criteria for selecting Board nominees, although it
believes that all independent directors should share qualities
such as, independence; experience at the corporate, rather than
divisional level, in multi-national organizations larger than
the Company; relevant, non-competitive experience; and strong
communication and analytical skills. In any given search, the
Committee may also define particular characteristics for
candidates to balance the overall skills and characteristics of
the Board and the perceived needs of the Company. In recent
years, for example, the Company has sought a nominee with
significant financial expertise and a nominee with significant
relevant operating experience. The Governance and Nominating
Committee believes that it is necessary for at least one
independent Board member to possess each of these skills.
However, during any search the Governance and Nominating
Committee reserves the right to modify its stated search
criteria for exceptional candidates.
The Executive Committee may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Company; provided, however, that the
Executive Committee does not have any power or authority with
respect to the following matters:
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(1) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders
for approval; or |
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(2) adopting, amending or repealing any bylaw of the
Company. |
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The current members are John D. Lockton (Chairman), John F.
Carlson, Lynn J. Davis, Dennis J. Horowitz, Martin A. Kaplan,
and Jeffrey A. Quiram. The Executive Committee was formed in
January of 2006 and did not meet in 2005.
Non-Employee Director Compensation
The Board of Directors maintains a written compensation policy
for its non-employee directors. The following table summarizes
the compensation policy for board service:
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Annual Retainer(1) | |
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Meeting Fees(2) | |
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Cash | |
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Options(3) | |
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Options | |
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Chairman of the Board
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$ |
20,000 |
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2,000 |
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$ |
4,000 |
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0 |
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Other Non-Employee Directors
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$ |
10,000 |
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1,500 |
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$ |
2,000 |
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0 |
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New Director (First Year)(4)
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NA |
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2,500 |
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NA |
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NA |
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1. |
The annual retainer is paid quarterly and requires the director
attend at least 75% of the board meetings. |
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Meeting fees are paid per meeting attended. The rate for
telephonic meetings is fifty percent of the regular meeting fees. |
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Directors receive annual stock option grants on the date of each
annual meeting. These options vest in two equal annual
installments on each anniversary of the grant date. |
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New directors receive an initial stock option grant for
2,500 shares of common stock on the date they join the
Board. The option vests in four equal annual installments on
each anniversary of the grant date. |
The Board of Directors provides additional compensation for
service on its standing committees Audit Committee,
Compensation Committee, Governance & Nominating
Committee and Executive Committee. Except for the Executive
Committee, the committees consist entirely of independent,
non-employee directors. The following summarizes the
compensation policy for committee service:
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Annual Retainer(1) | |
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Meeting Fees(2) | |
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Cash | |
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Options | |
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Options(4) | |
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Audit Committee Chairman
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$ |
5,000 |
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0 |
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$ |
0 |
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400 |
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Compensation Committee Chairman
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$ |
3,000 |
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0 |
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$ |
0 |
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400 |
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Governance & Nominating Committee Chairman
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$ |
3,000 |
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0 |
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$ |
0 |
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400 |
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Executive Committee Chairman
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$ |
0 |
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0 |
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$ |
4,000 |
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0 |
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Other Executive Committee Non-Employee Members
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$ |
0 |
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0 |
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$ |
2,000 |
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0 |
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Other Committee Non-Employee Members
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$ |
0 |
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0 |
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$ |
0 |
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200 |
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The annual retainer is paid quarterly. |
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Meeting fees are paid per committee meeting attended. |
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The same fees apply to both telephonic and in person meetings,
except for Executive Committee meetings which are compensated at
fifty percent of the regular meeting fees. The Executive
Committee fees are waived if the Board and the Executive
Committee meet on the same day. |
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Options are granted on the date of each committee meeting. These
options vest in two equal annual installments on each
anniversary of the grant date. |
Non-employee directors do not receive compensation from the
Company other than as a director or as committee member. There
are no family relationships between directors and executive
officers of the Company.
6
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, to audit the financial statements of the
Company for the year ending December 31, 2006. The Audit
Committee is submitting its selection to the shareholders for
ratification. PricewaterhouseCoopers has served as the
Companys auditor since 1997 and has no financial interest
of any kind in the Company except the professional relationship
between auditor and client. A representative of
PricewaterhouseCoopers LLP is expected to attend the meeting,
will be afforded an opportunity to make a statement if he or she
desires to do so, and will be available to respond to
appropriate questions by stockholders.
Required Vote
Proposal 2 requires the affirmative vote of a majority of
the votes cast on the proposal. Stockholders may vote
for or against the proposal, or they may
abstain from voting on the proposal. Abstentions will have
effect of voting against the proposal, but broker
non-votes will not have any effect on the outcome of this
proposal. In the event the stockholders do not approve this
proposal, the Audit Committee will reconsider the appointment of
PricewaterhouseCoopers LLP as the independent auditors.
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THIS PROPOSAL.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding
those individuals currently serving as the directors (or
nominated to serve as a director) and executive officers of the
Company:
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Principal Occupation |
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John D. Lockton(1)(3)(4)
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68 |
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Chairman of the Board of the Company, Managing Director of
IPWireless, Inc. |
John F. Carlson(1)(2)(4)
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67 |
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Retired Chairman and Chief Executive Officer, Cray Research, Inc. |
Dennis J. Horowitz(1)(2)(4)
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59 |
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Chairman, President, Chief Executive Officer and Director of
Wolverine Tube, Inc. |
Martin A. Kaplan(2)(3)(4)
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68 |
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Chairman of the Board of JDS Uniphase, Inc., retired Executive
Vice President Pacific Telesis Group |
Lynn J. Davis(1)(3)(4)
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59 |
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President, Chief Operating Officer of August Technology |
Charles E. Shalvoy
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57 |
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Chairman, Chief Executive Officer of
Canesta, Inc. |
Jeffrey A. Quiram(4)
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45 |
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President, Chief Executive Officer and Director |
William J. Buchanan
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57 |
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Controller, Chief Accounting Officer |
Robert B. Hammond, Ph.D.
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57 |
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Senior Vice President, Chief Technology Officer |
Robert L. Johnson
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55 |
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Senior Vice President, Operations |
Terry A. White
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54 |
|
|
Vice President, Worldwide Sales |
|
|
(1) |
Member of the Audit Committee. |
|
(2) |
Member of the Compensation Committee. |
|
(3) |
Member of Governance & Nominating Committee. |
|
(4) |
Member of Executive Committee. |
7
John Lockton joined our Board of Directors in December
1997 and was named Chairman of the Board effective
January 1, 2001. Mr. Lockton is a founder, initial
chairman and is now managing director of IPWireless, Inc., a
wireless internet access and IP telephony service provider of 3G
technology. From August 1991 to March 1998, he was President,
Chief Executive Officer and a director of International Wireless
Communications, Inc. (IWC), an operator of cellular
systems and from March 1998 until June 1998 he served IWC as
Vice-Chairman and a director. From May 1990 to August 1991 he
was Managing Partner of Corporate Technology Partners, a
joint-venture with Bell Canada Enterprises. In 1988,
Mr. Lockton founded Cellular Data, Inc., a cellular
wireless data technology company, and Star Associates, Inc., a
cellular radio RSA company. He founded and was a director of
Interactive Network, Inc., a wireless-based television company,
and was Chairman of that companys Board of Directors until
December 1994. From 1983 to 1987 Mr. Lockton was Executive
Vice President of Pacific Bell (now part of SBC Communications).
From 1980 to 1983 he was President of Warner Amex (now Time
Warner) Cable Television, Inc. From 1968 to 1980
Mr. Lockton held various senior positions at Dun &
Bradstreet. Mr. Lockton is the primary inventor of a
patented wireless technology for Personal Communication Services
(PCS). Mr. Lockton is a graduate of Yale University (Phi
Beta Kappa), Harvard Law School, and holds an Executive M.B.A.
from Columbia University.
John F. Carlson joined the Companys Board in
January 2004. Mr. Carlson served as Chairman and Chief
Executive Office of Cray Research, Inc. from 1993 to 1995. From
1991 to 1993 he served as Crays President and Chief
Operating Officer and from 1982 to 1991 he served as Executive
Vice President and Chief Financial Officer. Mr. Carlson
joined Cray in 1976. From 1964 to 1976, he was with the
accounting and consulting firm of KPMG Peat Marwick LLP.
Mr. Carlson serves as a director of World Heart
Corporation. Mr. Carlson is a Certified Public Accountant,
and holds a B.S. in Business Administration from
St. Marys College.
Dennis J. Horowitz has served on our Board of Directors
since June 1990. Mr. Horowitz is currently Chairman of the
Board of Wolverine Tube, Inc., a manufacturer and distributor of
copper and copper alloy tube, of which he had been the Chairman
and CEO through December 2005. From September 1994 to April
1997, he served as Corporate Vice President and President of the
Americas of AMP Incorporated, an interconnection device company.
From October 1993 to August 1994, Mr. Horowitz served as
President and Chief Executive Officer of Philips Technologies, a
Philips Electronics North America company. From April 1990 to
September 1993, he served as President and Chief Executive
Officer of Philips Components, Discrete Products Division. From
1988 to 1990, he served as President and Chief Executive Officer
of Magnavox CATV, and from 1980 to 1988 was involved in the
general administration of North American Philips Corporation.
Mr. Horowitz holds an M.B.A and a B.A. in economics from
St. Johns University.
Martin A. Kaplan was appointed to the Companys
Board in December 2002 concurrent with the Conductus merger.
Mr. Kaplan served as a director of Conductus from 1996 to
the closing of the merger transaction. Since May 2000,
Mr. Kaplan has served as Chairman of the Board of JDS
Uniphase, Inc., a telecommunications equipment company.
Mr. Kaplan also serves as a director of Tekelec and Redback
Networks Inc. In a career spanning forty years, Mr. Kaplan
served as Executive Vice-President of Pacific Telesis Group,
which became a subsidiary of SBC Communications in 1997, from
1986 until May 2000, as President, Network Services Group of
Pacific Bell, and its successor, Pacific Telesis, and in various
other senior management positions. Mr. Kaplan earned a B.S.
in engineering from California Institute of Technology.
Lynn J. Davis was appointed to the Board of Directors on
July 29, 2005. He recently retired as President, Chief
Operating Officer and Board Member of August Technology, a
manufacturer of inspection equipment for the semiconductor
fabrication industry. From 2002 to 2004, he was a partner at
Tate Capital Partners Fund, LLC, a private investment firm he
co-founded. Prior to Tate, Mr. Davis was an employee of ADC
Telecommunications for 28 years, serving in 14 management
positions, including corporate president, group president and
chief operating officer. He is also a member of the Board of
Directors of Flexsteel Industries Inc., a furniture
manufacturer. Mr. Davis holds a B.S. in electrical
engineering from Iowa State University and an M.B.A. from the
University of Minnesota.
8
Charles E. Shalvoy has served as a member of the Board of
Directors since the closing of the Conductus transaction in
December 2002. He is now Chairman and Chief Executive Officer of
Canesta, Inc. He has served as a consultant to the Company since
May 2003. He was President, Chief Executive Officer and Director
of Conductus from June 1994 to May 2003. 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, Emerson Electric
Corp. 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 an M.B.A. from
Stanford University.
Jeffrey A. Quiram was appointed as director, President
and Chief Executive Officer effective March 15, 2005.
Mr. Quiram joined us for a transition period which began
February 17, 2005. Mr. Quiram was most recently Vice
President of the business wireless unit of ADC
Telecommunications. Mr. Quiram was at ADC from 1991-2004 in
a variety of management roles. Mr. Quiram has a BS in
Quantitative Methods and Computer Science from College of St.
Thomas, and an MBA from University of Minnesota.
William J. Buchanan has served as Controller since June
2000. Mr. Buchanan joined the company in January 1998 and
has served in various accounting positions prior to becoming the
Controller. For 16 years prior to joining the company, he
was a self-employed private investor and investment advisor. For
the nine years prior to that, he served in various executive and
accounting positions with Applied Magnetics Corp and Raytheon
Co. Mr. Buchanan holds a B.A. in Economics from California
State University, Fresno.
Robert B. Hammond, Ph.D., has served as Senior Vice
President and Chief Technical Officer since December 1992.
Dr. Hammond served as Vice President of Technology, and
Chief Technical Officer, until August 1990. He has also served
as Secretary from October 1999 to 2002. From May 1991 to
December 1991, and July 1992 to December 1992, he served as
Acting Chief Operating Officer. From December 1987 to August
1990, he served as Program Manager. Dr. Hammond also serves
on our Technical Advisory Board. For over eleven years prior to
joining us, he was at Los Alamos National Laboratory, most
recently as Deputy Group Leader of Electronics Research and
Development a group that performs research,
development, and pilot production of solid-state electronics and
optics. Dr. Hammond received his Ph.D. and M.S. in applied
physics and his B.S. in physics from the California Institute of
Technology.
Robert L. Johnson is Senior Vice President, Operations.
Mr. Johnson joined the Company in April 2000 as Vice
President of Wireless Manufacturing. From 1996 to early 2000,
Mr. Johnson was the Director and General Manager of
Schlumberger ATE. From 1990 to 1996, he served as Vice President
and General Manager of Harman International Industries.
Mr. Johnson majored in industrial engineering at Arizona
State University.
Terry A. White was appointed Vice President Worldwide
Sales in April 2005. From August 2003 to March 2005,
Mr. White was Vice President of Worldwide Sales for Mahi
Networks, a telecom company. From March 2002 to June 2003,
Mr. White was Vice President of Global Sales at Turnstone
Systems. Prior to that position and from February 1992 to
December 2001, he held various positions at ADC
Telecommunications. His most recent position at ADC was Senior
Vice President of BIA Sales. Mr. White has been employed in
sales management for more than 20 years. Mr. White
holds a Bachelor of Arts degree from Kennesaw College.
VOTING SECURITIES OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Companys common stock as of March 30, 2006 by
(i) each person known by the Company to be the beneficial
owner of more than five percent (5%) of the Companys
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
9
in the table have sole voting and investment power with respect
to all shares beneficially owned, subject to community property
laws, where applicable.
|
|
|
|
|
|
|
|
|
|
Name |
|
Number of Shares | |
|
Percentage Ownership | |
|
|
| |
|
| |
Kopp Investment Advisors, LLC
|
|
|
1,638,822 |
(1) |
|
|
13 |
% |
|
7701 France Avenue South, #500 |
|
|
|
|
|
|
|
|
|
Edina, MN 55435 |
|
|
|
|
|
|
|
|
Jeffrey A. Quiram
|
|
|
240,000 |
(7) |
|
|
2 |
% |
Charles E. Shalvoy
|
|
|
73,976 |
(2) |
|
|
* |
|
Robert L. Johnson
|
|
|
81,534 |
(3) |
|
|
* |
|
Robert B. Hammond
|
|
|
58,819 |
(4) |
|
|
* |
|
Dennis J. Horowitz
|
|
|
18,697 |
(5) |
|
|
* |
|
John D. Lockton
|
|
|
18,897 |
(7) |
|
|
* |
|
Martin A. Kaplan
|
|
|
13,040 |
(6) |
|
|
* |
|
John F. Carlson
|
|
|
4,400 |
(7) |
|
|
* |
|
Lynn D. Davis
|
|
|
|
|
|
|
* |
|
Terry A. White
|
|
|
100,000 |
(7) |
|
|
* |
|
All executive officers and directors as a group
(11 persons)(8)
|
|
|
617,528 |
|
|
|
5 |
% |
|
|
(1) |
Based on information reported in a Schedule 13G filed by
Kopp Investment Advisors, LLC, on behalf of Kopp Investment
Advisors, LLC, Kopp Holding Company, LLC, Kopp Holding Company
and Leroy C. Kopp. Kopp Investment Advisers is an investment
adviser registered under the Investment Advisers Act of 1940. It
is wholly-owned by Kopp Holding Company, LLC which is controlled
by Mr. Kopp through Kopp Holding Company. Of the
1,638,822 shares, 1,272,322 shares are held in a
fiduciary or representative capacity. Accordingly, persons other
than the listed persons have the right to receive, or the power
to direct the receipt of, dividends from, or the proceeds from
the sale of, such sales. No person individually has an interest
that relates to more than five percent of the Companys
common stock. |
|
(2) |
Includes 57,755 shares issuable upon the exercise of stock
options that are exercisable within 60 days of
March 30, 2006. |
|
(3) |
Includes 74,034 shares issuable upon the exercise of stock
options that are exercisable within 60 days of
March 30, 2006. |
|
(4) |
Includes 49,444 shares issuable upon the exercise of stock
options that are exercisable within 60 days of
March 30, 2006. |
|
(5) |
Consists solely of 18,697 shares issuable upon the exercise
of stock options that are exercisable within 60 days of
March 30, 2006. |
|
(6) |
Consists of 2,920 shares held jointly with his spouse and
10,120 shares issuable upon the exercise of stock options
that are exercisable within 60 days of March 30, 2006. |
|
(7) |
All shares are issuable upon exercise of stock options. |
|
(8) |
See footnotes (2)-(7). Includes 581,513 shares issuable
upon exercise of stock options held by executive officers and
directors that are exercisable within 60 days of
March 30, 2006. |
10
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth summary information concerning
compensation paid by or accrued for services rendered to the
Company in all capacities during the past three fiscal years to
the Companys Chief Executive Officer and to the four other
most highly compensated executive officers who were serving as
executive officers at December 31, 2005 and whose total
annual salary and bonus exceeded $100,000 (the Named
Executive Officers).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term | |
|
|
|
|
|
|
Annual Compensation | |
|
Compensation | |
|
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
Other Annual | |
|
Securities | |
|
All Other | |
|
|
|
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Underlying Options | |
|
Compensation | |
Name and Principal Position |
|
Year | |
|
($) | |
|
($) | |
|
($)(1) | |
|
(#) | |
|
($)(2) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jeffrey A. Quiram
|
|
|
2005 |
|
|
|
251,538 |
|
|
|
|
|
|
|
99,985 |
|
|
|
240,000 |
|
|
|
281 |
|
|
Director, President, Chief |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer(3) |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry A. White
|
|
|
2005 |
|
|
|
152,308 |
|
|
|
43,966 |
|
|
|
|
|
|
|
100,000 |
|
|
|
478 |
|
|
Vice President, |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide Sales(4) |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B. Hammond
|
|
|
2005 |
|
|
|
238,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,290 |
|
|
Senior Vice President, |
|
|
2004 |
|
|
|
229,706 |
|
|
|
|
|
|
|
|
|
|
|
18,250 |
|
|
|
1,290 |
|
|
Chief Technical Officer |
|
|
2003 |
|
|
|
223,565 |
|
|
|
50,548 |
|
|
|
|
|
|
|
19,375 |
|
|
|
1290 |
|
Robert L. Johnson
|
|
|
2005 |
|
|
|
214,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,290 |
|
|
President, STI Wireless |
|
|
2004 |
|
|
|
206,611 |
|
|
|
|
|
|
|
|
|
|
|
27,000 |
|
|
|
690 |
|
|
Systems, North America |
|
|
2003 |
|
|
|
202,598 |
|
|
|
40,760 |
|
|
|
|
|
|
|
26,600 |
|
|
|
690 |
|
Martin S. McDermut
|
|
|
2005 |
|
|
|
222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690 |
|
|
Senior Vice President, |
|
|
2004 |
|
|
|
214,363 |
|
|
|
|
|
|
|
|
|
|
|
16,250 |
|
|
|
690 |
|
|
Chief Financial Officer |
|
|
2003 |
|
|
|
210,962 |
|
|
|
42,428 |
|
|
|
|
|
|
|
20,775 |
|
|
|
690 |
|
|
and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Peter Thomas(3)(5)
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
515,026 |
|
|
|
|
|
|
|
1,980 |
|
|
Former Director, |
|
|
2004 |
|
|
|
337,827 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
1,980 |
|
|
President and CEO |
|
|
2003 |
|
|
|
325,681 |
|
|
|
92,038 |
|
|
|
|
|
|
|
12,500 |
|
|
|
1,980 |
|
|
|
(1) |
Pursuant to the terms of his employment agreement,
Mr. Quiram received $99,885 for travel expenses from his
home in Minnesota, the lease of an apartment near the
Companys Santa Barbara headquarters and special
indemnity payments to cover the taxes resulting from the payment
or reimbursement of such travel and housing expenses. Excludes
all other perquisites and other amounts that, for any Named
Executive Officer, in the aggregate did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus for such
Named Executive Officer. |
|
(2) |
Term life insurance premiums for all Named Executive Officers. |
|
(3) |
Mr. Quiram succeeded Mr. Thomas as Chief Executive
Officer after his retirement in March 2005. |
|
(4) |
Mr. White was hired in April 2005. |
|
(5) |
Other annual compensation for Mr. Thomas
consists of (a) $365,026 in post-employment consulting
payments (one years base salary) and (b) $150,000 in
the form of loan forgiveness pursuant the terms of a Promissory
Note which were in effect prior to the adoption of the
Sarbanes-Oxley Act of 2002. |
11
Option Grants in 2005
The following table sets forth certain information regarding
stock options granted during the year ended December 31,
2005 to each of the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
|
|
|
| |
|
Potential Realizable | |
|
|
|
|
% of Total | |
|
|
|
Value at Assumed | |
|
|
Number of | |
|
Options | |
|
|
|
Annual Rates of Stock | |
|
|
Securities | |
|
Granted to | |
|
|
|
Price Appreciation for | |
|
|
Underlying | |
|
Employees | |
|
Exercise | |
|
|
|
Option Term(3) | |
|
|
Options | |
|
in Fiscal | |
|
Price | |
|
Expiration | |
|
| |
Name |
|
Granted(1) | |
|
Year(2) | |
|
($/Sh) | |
|
Date | |
|
5% ($) | |
|
10% ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Jeffrey A. Quiram
|
|
|
120,000 |
|
|
|
28.6 |
% |
|
$ |
10.40 |
|
|
|
2015 |
|
|
$ |
784,860 |
|
|
$ |
1,988,991 |
|
Jeffrey A. Quiram
|
|
|
120,000 |
|
|
|
28.6 |
% |
|
|
6.90 |
|
|
|
2015 |
|
|
|
520,725 |
|
|
|
1,319,619 |
|
Jeffrey A Quiram(4)
|
|
|
9,375 |
|
|
|
2.2 |
% |
|
|
8.00 |
|
|
|
2015 |
|
|
|
47,167 |
|
|
|
119,531 |
|
Robert B. Hammond(4)
|
|
|
5,950 |
|
|
|
1.4 |
% |
|
|
8.00 |
|
|
|
2015 |
|
|
|
29,935 |
|
|
|
75,862 |
|
Robert L. Johnson(4)
|
|
|
5,450 |
|
|
|
1.3 |
% |
|
|
8.00 |
|
|
|
2015 |
|
|
|
27,420 |
|
|
|
69,487 |
|
Martin S. McDermut(4)
|
|
|
5,550 |
|
|
|
1.3 |
% |
|
|
8.00 |
|
|
|
2015 |
|
|
|
27,671 |
|
|
|
70,125 |
|
Terry A. White
|
|
|
100,000 |
|
|
|
23.9 |
% |
|
|
6.90 |
|
|
|
2015 |
|
|
|
433,937 |
|
|
|
1,099,682 |
|
M. Peter Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Except as discussed below in Note 4, these options vested
on December 1, 2005. See Executive Officer
Compensation Accelerated Vesting of Underwater
Options in 2005. |
|
(2) |
Total number of shares subject to options granted to employees
in 2005 was 419,005. This number includes options granted to
employee directors, but excludes options granted to non-employee
directors and consultants. It also includes grant of 40,815
performance based options subsequently cancelled. See
note 4 below. |
|
(3) |
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 2005, assuming that the
stock appreciates in value from the date of grant until the end
of the option term at the compounded 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 Companys
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. |
|
(4) |
These were performance-based options with vesting tied to
achieving specific financial targets for 2005. The Company did
not meet the targets, and the options did not vest. |
12
Aggregated Option Exercises In 2005 and 2005 Year-End
Option Values
The following table sets forth certain information concerning
the exercise of stock options during 2005 and the value of
unexercised options as of December 31, 2005 for each of the
Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
|
|
|
|
Underlying | |
|
Value of | |
|
|
|
|
|
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable | |
|
|
|
|
|
|
Options at December 31, | |
|
Options at December 31, | |
|
|
Shares | |
|
|
|
2005 | |
|
2005 | |
|
|
Acquired | |
|
Value | |
|
| |
|
| |
|
|
on | |
|
Realized | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
Name |
|
Exercise | |
|
($) | |
|
(#) | |
|
(#) | |
|
(1)($) | |
|
(1)($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert B. Hammond
|
|
|
0 |
|
|
|
0 |
|
|
|
49,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L. Johnson
|
|
|
0 |
|
|
|
0 |
|
|
|
74,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin S. McDermut
|
|
|
0 |
|
|
|
0 |
|
|
|
55,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Quiram
|
|
|
0 |
|
|
|
0 |
|
|
|
240,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry A. White
|
|
|
0 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Market value of underlying securities based on the $4.30 closing
price of the common stock on December 30, 2005 (the last
market trading day in 2005), minus the exercise price. |
Accelerated Vesting of Underwater Options in 2005
On December 1, 2005, the Compensation Committee approved
the accelerated vesting of all time-vested outstanding
out-of-the-money stock
options held by then current employees or consultants. For this
purpose,
out-of-the-money was
defined as options having an exercise price equal to or greater
than the current market price on the date of the Compensation
Committee meeting which was $5.80 per share. Options to
purchase approximately 480,000 shares of the common stock
became immediately exercisable on that date as a result of the
acceleration. These options have exercise prices varying from
$6.10 to $493.80 per share and a weighted average exercise
price of $13.40. No changes were made to the exercise price of
any accelerated option.
The Company accelerated the vesting of the Options in
anticipation of the impact of Statement of Financial Accounting
Standard No. 123R (SFAS 123R) Share-Based
Payment. SFAS 123R will require the recognition of
compensation expense related to unvested stock options for
fiscal years beginning after December 15, 2005. The primary
purpose of the accelerated vesting was to minimize the amount of
compensation expense recognized in relation to the underwater
options in future periods following the adoption by the Company
of SFAS 123R. In addition, because these options had
exercise prices in excess of the then current market values and
were not fully achieving their original objectives of incentive
compensation and employee retention, the Company believes that
the acceleration has had a positive effect on employee morale
and retention.
Without the acceleration, the Company estimates that future
pre-tax charges under SFAS 123R relating to the accelerated
options would have been $3.1 million, of which
$1.3 million and $1.1 million would have been
recognized in 2006 and 2007 respectively. These amounts have
been reflected in pro forma footnote disclosure in the
financial statements of the Companys 2005 Annual Report.
Employment Agreements
Jeffrey A. Quiram
Jeffrey A. Quiram became President, Chief Executive Officer and
a director effective upon the retirement of Mr. Thomas in
March 2005. The Company entered into an employment agreement
with Mr. Quiram. The Employment Agreement provides for the
following:
|
|
|
|
|
Appointment as President, Chief Executive Officer and a member
of the Board of Directors upon the retirement of Mr. Thomas; |
|
|
|
A base salary of $300,000 per year; |
13
|
|
|
|
|
A bonus of up to 100% of his base salary based upon achievement
of annual performance goals to be developed by the Compensation
Committee and Mr. Quiram; |
|
|
|
A stock option for 120,000 shares of stock granted in
connection with the signing of the Employment Agreement; |
|
|
|
A stock option for an additional 120,000 shares of stock
which was granted after shareholder approval at last years
annual meeting of an increase in the shares authorized for
grants under the 2003 Equity Incentive Plan; |
|
|
|
Accelerated vesting of his stock options in the event of an
Involuntary Termination or a Change of Control (both as defined
in the Employment Agreement); |
|
|
|
A severance payment equal to one years salary and
continued benefits for one year in the event of involuntary
termination; |
|
|
|
Payment or reimbursement of travel expenses from his present
home in Minnesota and the lease of an apartment for
Mr. Quiram near the Companys Santa Barbara
headquarters. The Company is also obligated to make a special
indemnity payment for any taxes resulting from the payment or
reimbursement of such expenses; and |
|
|
|
Lease of an automobile. |
Terry A. White
Terry A. White was appointed Vice President Worldwide Sales in
April 2005. The Company entered into an employment agreement
with Mr. White. The Employment Agreement provides for the
following:
|
|
|
|
|
Appointment as Vice President Worldwide Sales; |
|
|
|
A base salary of $220,000 per year; |
|
|
|
An annual sales bonus; |
|
|
|
The sales incentive bonus for 2005 shall be based on a mutually
acceptable revenue plan for net commercial product sales as
follows: |
|
|
|
Net Commercial |
|
Bonus Formula |
Product Sales (% of Plan) |
|
(Percentage of Base Salary) |
|
|
|
Less than 70%
|
|
0% |
70% to 100%
|
|
10% to 30% (linear scale) |
Over 100%
|
|
2.0% of the amount by which net commercial product sales exceed
plan |
|
|
|
The sales targets and bonus payments are for the full year 2005
and were pro rated based on Mr. Whites April 2005
start date. The bonus structure for future years is to be
mutually agreed upon. |
|
|
|
|
|
A stock option for 100,000 shares of stock which was
granted after shareholder approval at last years annual
meeting of an increase in the shares authorized for grants under
the 2003 Equity Incentive Plan; |
|
|
|
A severance payment equal to six months salary and continued
benefits for six months in the event of involuntary
termination; and |
|
|
|
Accelerated vesting of his stock options in the event of an
Involuntary Termination or a Change of Control (both as defined
in the Employment Agreement). |
14
M. Peter Thomas
M. Peter Thomas, the Companys former President, Chief
Executive Officer and a director, retired in March 2005. The
Company had an existing employment agreement with
Mr. Thomas which was supplemented with a retirement
agreement in March 2005. The Retirement Agreement with
Mr. Thomas provides for the following:
|
|
|
|
|
Mr. Thomas will retire upon completion and filing of the
Companys 2004 Annual Report on
Form 10-K; |
|
|
|
He will receive his cash bonus for services rendered during 2004
in an amount to be determined by the Compensation Committee in
the normal course of its work in the awarding of bonuses to the
executive officers; |
|
|
|
His stock options (a) will immediately vest and become
fully exercisable and (b) remain exercisable until the
earlier of the fifth (5th) anniversary of the retirement date or
the normal expiration date of the relevant option; |
|
|
|
The Company will forgive a $150,000 loan in accordance with the
existing terms of the Promissory Note which were in effect prior
to the adoption of the Sarbanes-Oxley Act of 2002; |
|
|
|
He will provide consulting services to the Company for one year
following retirement; |
|
|
|
The Company will pay Mr. Thomas at a rate equal to his
current base salary ($350,155 per year) during the one-year
consulting term; |
|
|
|
The Company will also continue health and other benefits for
Mr. Thomas and his family during the consulting term; |
|
|
|
The Company will continue to provide Mr. Thomas with an
automobile during the consulting term; and |
|
|
|
The parties gave mutual releases of any claims. |
Change of Control Agreements
Mr. Quiram, the Companys President and Chief
Executive Officer, has a change of control provision in his
employment agreement. The employment agreement provides that in
the event of a change of control (as defined in his employment
agreement), whether or not he is terminated, Mr. Quiram is
entitled to (i) payment of two times his annual base
salary, (ii) 24 months of benefits coverage,
(iii) accelerated vesting of 50% of his options upon the
change in control and (iv) accelerated vesting of his
remaining options if he does not resign from the Company for six
months after the change in control. Mr. White, the Vice
President of Worldwide Sales, has a similar change of control
provision in his employment agreement which provides that in the
event of a change of control, whether or not he is terminated,
he shall receive (i) accelerated vesting of 50% of his
options and (ii) accelerated vesting of his remaining
options if he does not resign from the Company for six months
after the change in control. In addition, if his employment is
terminated following a change in control, then he is entitled to
a lump sum payment equal to one year of his base salary.
The Company also has change in control agreements
with all of its remaining vice presidents (Messrs. Hammond
and Johnson). The change in control agreements provide severance
benefits if there is a qualifying termination of employment. The
agreements generally provide that, if the employees
employment is terminated within twenty-four months of a change
in control (as defined in the change in control agreements) by
the Company for any reason other than death, Cause
or Disability (as both terms are defined in the
change in control agreements) or by the employee for Good
Reason, then the terminated employee will be entitled to a
severance benefits. Good Reason generally means that
the employee has sustained a material reduction in authority or
responsibility, or incurred a reduction greater than 10% in
total compensation (other than reductions which apply equally to
all executive officers), or been notified that his principal
place of work will be relocated by 50 miles or more.
15
The severance benefits include salary continuation payments,
full accelerated vesting for all outstanding unvested stock
options and similar equity securities held by the employee and
continuation of health/life insurance benefits. The salary
continuation payments shall be made on a monthly basis to the
former employee for 18 months. Subject to earlier cessation
under certain circumstances, the post-termination of employment
health/life insurance coverage shall be provided for
18 months for Messrs. Hammond and Johnson. Any
payments or distributions made to or for the benefit of the
named employees under these change in control agreements will be
reduced, if necessary, to an amount that would result in no
excise taxes being imposed under Internal Revenue Code
section 4999.
Stock Option Plans
The Company presently has a single plan for the granting of
equity incentives to directors, employees and
consultants the 2003 Equity Incentive Plan. The
Compensation Committee administers the 2003 Equity Plan,
including the granting of awards under the plan. The plan was
adopted by the board and approved by the stockholders in 2003.
The purpose of the plan is to promote the success, and enhance
the value, of the Company by aligning the interests of
participants with those of the Companys shareholders. It
also provides participants with an incentive for outstanding
performance. The plan authorizes the granting of stock options,
restricted stock, stock appreciation rights, performance units
and performance shares. Historically, the Company has granted
stock options, typically with a
10-year term and a
4-year vesting
provision.
During the year ended December 31, 2005, the Company
granted options to purchase a total of 453,205 shares of
common stock. After deducting 197,554 shares for options
forfeited, the result was net option grants of 255,655. Net
option grants during the year represented 2.0% of our total
outstanding common shares of 12,483,431 as of December 31,
2005. The following table summarizes the net stock option grants
to our employees, directors and executive officers during the
last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended | |
|
|
| |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net grants (forfeitures) during the period as a % of total
outstanding common shares
|
|
|
2.0 |
% |
|
|
1.9 |
% |
|
|
4 |
% |
Grants to executive officers during the period as a % of total
options granted during the period(1)
|
|
|
82.4 |
% |
|
|
45 |
% |
|
|
56 |
% |
Grants to executive officers during the period as a % of total
outstanding common shares
|
|
|
2.7 |
% |
|
|
1.3 |
% |
|
|
2 |
% |
Cumulative options held by executive officers as a % of total
options outstanding
|
|
|
43.9 |
% |
|
|
50.6 |
% |
|
|
45 |
% |
Options outstanding and issuable as a % of total outstanding
common shares
|
|
|
9.6 |
% |
|
|
8.8 |
% |
|
|
16 |
% |
|
|
(1) |
Net of 40,815 performance based options cancelled in the same
period as awarded. |
At December 31, 2005, a total of 387,602 options were
available for grant under all of our option plans.
16
The following table summarizes outstanding stock options that
are
in-the-money
and out-of the-money as of December 31, 2005.
For purposes of this table,
in-the-money stock
options are those options with an exercise price less than
$4.30 per share (the closing price of the common stock on
December 30, 2005) and
out-of-the-money stock
options are stock options with an exercise price greater than or
equal to $4.30 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
|
Average | |
|
|
|
|
Exercise | |
|
|
|
Exercise | |
|
|
Options | |
|
Price | |
|
Options | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
In the money
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Out of the money
|
|
|
1,162,330 |
|
|
$ |
41.32 |
|
|
|
40,045 |
|
|
$ |
13.72 |
|
|
Total options
|
|
|
1,162,330 |
|
|
$ |
41.32 |
|
|
|
40,045 |
|
|
$ |
13.72 |
|
Equity Compensation Plan Information
The following table gives information about common stock that
may be issued upon the exercise of stock options outstanding as
of December 31, 2005 under our current equity compensation
plan (the 2003 Equity Incentive Plan) and our old equity
compensation plans (the 1992 Stock Option Plan, the Nonstatutory
1992 Directors Option Plan, the 1998 Stock Option Plan and
the 1999 Stock Option Plan).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plan Information(1) | |
|
|
| |
|
|
|
|
Number of Securities | |
|
|
|
|
Remaining Available | |
|
|
Number of | |
|
|
|
for Future Issuance | |
|
|
Securities to be | |
|
|
|
Under Equity | |
|
|
Issued Upon | |
|
Weighted Average | |
|
Compensation Plans | |
|
|
Exercise of | |
|
Exercise Price of | |
|
(Excluding | |
|
|
Outstanding Options | |
|
Outstanding Options | |
|
Securities Reflected | |
|
|
and Rights | |
|
and Rights | |
|
in Column(a)) | |
Plan Category |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders
|
|
|
1,195,642 |
|
|
$ |
40.32 |
|
|
|
387,602 |
|
Equity compensation plans not approved by security holders(2)
|
|
|
6,733 |
|
|
|
52.81 |
|
|
|
|
|
|
Total
|
|
|
1,202,375 |
|
|
$ |
40.39 |
|
|
|
387,602 |
|
|
|
(1) |
The information presented in this table excludes options assumed
by the Company in connection with the acquisition of Conductus.
As of December 31, 2005, 124,543 shares of our common
stock were issuable upon the exercise of these assumed options
at a weighted average exercise price of $71.05 per share. |
|
(2) |
Consists of options that are outstanding under our 1998 Stock
Option Plan. Stockholder approval was not required for the 1998
Stock Option Plan pursuant to an exemption under NASDAQ rules in
effect at the time of adoption. No further options can be issued
under this plan. |
Material Features of the 1998 Stock Option Plan
The Superconductor Technologies 1998 Nonstatutory Stock Option
Plan was adopted by the Board of the Company on July 22,
l998. The 1998 Plan authorized issuance of options to issue up
to 25,000 shares of the Companys common stock. The
1998 Plan has terminated except for the 6,733 of outstanding
options already issued thereunder. The 1998 Plan is administered
by the Compensation Committee.
Section 16(a) Beneficial Ownership Reporting
Compliance
Under Section 16(a) of the Securities Exchange Act of 1934,
the Companys directors and officers and its significant
stockholders (defined by statute as stockholders beneficially
owning more than ten percent (10%) of the common stock) are
required to file with the Securities and Exchange Commission and
the Company reports of ownership, and changes in ownership, of
common stock. Based solely on a review of the
17
reports received by it, the Company believes that, during the
year ended December 31, 2005, all of its officers,
directors and significant stockholders complied with all
applicable filing requirements under Section 16(a) except
as follows: Mr. Lockton filed late two Form 4 reports
for two stock option grants totaling 8,000 shares, and
Mr. Carlson filed late two Form 4 reports for two
stock option grants totaling 4,000 shares.
Compensation Committee Interlocks and Insider
Participation
The Compensation Committee of the Board of Directors is composed
of three non-employee directors John D. Carlson,
Dennis J. Horowitz and Martin A. Kaplan. No interlocking
relationship exists between the Companys 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 administers the compensation policies
applicable to the executive officers. The Compensation Committee
members consist of directors who are independent from the
executive officers or management of the Company. The
Companys executive compensation programs are designed to
attract, motivate and retain the executive talent needed to
optimize shareholder value. The programs are designed to enhance
shareholder value by aligning the financial interests of the
executive officers of the Company with those of our shareholders.
Compensation Policy
The Companys executive compensation programs are based on
the belief that the interests of the executives should be
closely aligned with the Companys shareholders. In support
of this philosophy, a meaningful portion of each
executives compensation is placed at-risk and is linked to
the accomplishment of specific results that are expected to lead
to the creation of value for shareholders from both a short-term
and long-term perspective.
There are three primary components of executive compensation:
base salary, bonus and stock option grants. While the elements
of compensation are considered separately, the Compensation
Committee takes into account the total compensation package
afforded by the Company to the individual executive.
The Compensation Committee uses the compensation practices of
selected telecommunications and other technology companies for
comparable measures. The selected companies target similar
markets, engage in similar manufacturing techniques and face
similar sales challenges. The Compensation Committee also uses
the Radford Total Compensation Surveys for companies with less
than $200 million in annual revenue.
Base Salary
The Compensation Committee reviews annually the salaries of the
executive officers (including the Chief Executive Officer) and
makes adjustments based upon an assessment of the nature of the
position, the individuals contribution to corporate goals,
experience and tenure of the executive officer, comparable
market salary data, and changes in the executives
responsibilities. The Compensation Committee approves all
changes to executive officer salaries and used 3.5% as the
baseline for increases in base salaries for 2006.
Bonus Plan
The Company maintains a bonus plan for executive officers and
selected other members of senior management. The bonus plan is
intended to provide incentives to senior management for
achieving certain objective performance goals. The performance
targets are established at the beginning of the year on the
basis of an annual budget and are approved by the Compensation
Committee. Each executive officer has an annual target bonus
amount that is based on a percentage of his or her base salary.
The annual target bonus for executives ranges from 20% to 100%
of annual base salary. These target percentages are approved by
the Compensation Committee.
18
For 2005, the performance goals were based solely on specific
improvements in the Companys total revenues and cash flow.
There were no individual performance goals, and there was no
provision for partial payouts based on achieving less than the
performance targets. While the Company did make progress in both
revenues and cash flow, it did not achieve the performance
goals. Consequently, the Company did not pay any bonuses for
2005 to any of the executive officers.
Bonuses have been paid historically in cash, but the
Compensation Committee decided to use performance-based stock
options for 2005 to conserve cash. Since, as discussed, the
Company did not meet the performance targets and no bonuses were
earned, the bonus plan options did not vest and the shares were
returned to the stock option plan.
Stock Options
Stock options are designed to align the interests of executives
with those of the shareholders. Stock option grants may be made
to executive officers when one of the following events occurs:
upon initial employment, upon promotion to a new, higher level
position that entails increased responsibilities and
accountability, for the recognition of superior performance, or
as an incentive for continued service with the Company as well
as continued superior performance. For executive officers, the
Chief Executive Officer recommends the number of options to be
granted within a range associated with the individual
executives salary level, and presents this to the
Compensation Committee for their review and approval. The
Compensation Committee takes into account the total compensation
offered to its executives when considering the number of options
awarded.
The Compensation Committee awarded stock options to
Messrs. Quiram and White upon joining the Company in
accordance with the terms of their negotiated employment
agreements. The Compensation Committee did not grant any other
time-vested stock options to the Named Executive Officers in
2005 because of the use of performance-based stock options for
the bonus plan in 2005. See Compensation Committee
Report Bonus Plan and Executive
Compensation Option Grants in 2005.
Stock Option Committee
The Compensation Committee supervises a subcommittee called the
Stock Option Committee. The Stock Option Committee has two
members the Compensation Committee Chairman and the
Chief Executive Officer. The purpose of the Stock Option
Committee is to facilitate the timely granting of stock options
in connection with hiring, promotions and other special
situations. The Stock Option Committee is empowered to grant
options to non-executive employees up to a preset annual
aggregate limit (20,000 shares for 2005). The Compensation
Committee supervises these grants and retains exclusive
authority for all executive officer grants and the annual
employee grants.
CEO Compensation
Jeffrey A. Quiram joined the Company in February 2005 as Chief
Executive Officer. The Board of Directors, in consultation with
the Compensation Committee, negotiated an employment agreement
with Mr. Quiram after a careful search for a successor to
the retiring Chief Executive Officer (M. Peter Thomas).
Mr. Quirams compensation package is the result of
arms-length negotiations and reflects the desire of the Board to
recruit a highly qualified successor. The Compensation Committee
considers his compensation package appropriate based on
comparable companies in similar situations.
The principal components of his annual compensation are base
salary and bonus. Mr. Quirams employment agreement
provides for a 2005 base salary of $300,000 and a bonus of up to
100% of his base salary based upon achievement of annual
performance goals. The Compensation Committee and
Mr. Quiram mutually agreed upon the 2005 performance goals.
The goals were based on specific improvements in total revenues
and cash flow. While the Company did make progress in both
areas, it did not achieve the performance goals. Consequently,
Mr. Quiram did not receive a bonus for 2005.
Despite the Companys failure to meet the performance
goals, the Compensation Committee concluded that Mr. Quiram
had met expectations for his overall 2005 performance. The
Committee based its decision in
19
large part on Mr. Quirams successful efforts at
reducing operating costs, recruiting a new Vice President of
Worldwide Sales and completing a public offering. The
Compensation Committee believes these improvements have well
positioned the Company for 2006. As a result, the Compensation
Committee increased his base salary by 5.0% to $315,000 for 2006.
Mr. Quiram received options for 240,000 shares in 2005
under the terms of his employment agreement 120,000
upon acceptance of employment and 120,000 upon shareholder
approval at last years annual meeting of an increase in
the stock option plan. These are intended to provide incentive
for superior performance.
Accelerated Vesting of Underwater Stock Options
In December 2005, the Compensation Committee approved the
accelerated vesting of all time-vested stock options having an
exercise price equal to or greater than $5.80 per share
(the then current stock price). The primary purpose of the
accelerated vesting was to minimize the amount of compensation
expense recognized in relation to the underwater options in
future periods following the adoption by the Company of
SFAS 123R. However, the Compensation Committee also
believed that the acceleration would have a positive effect on
employee morale and retention. See Executive Officer
Compensation Accelerated Vesting of Underwater
Options in 2005.
Policy Regarding Section 162(m) of the Internal Revenue
Code
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction to public corporations for
compensation paid to executive officers in excess of $1,000,000
during any fiscal year. It is the current policy of the
Compensation Committee to preserve, to the extent reasonably
possible, the Companys ability to obtain a corporate tax
deduction for compensation paid to executive officers to the
extent consistent with the best interests of the Company and its
shareholders. However, the Compensation Committee believes that
its primary responsibility is to provide a compensation program
that will attract, retain and reward the executive talent
necessary for the Companys success. Consequently, the
Compensation Committee recognizes that the loss of a tax
deduction may be necessary in some circumstances.
|
|
|
Members of the Compensation Committee |
|
John F. Carlson (Chairman) |
|
Dennis J. Horowitz |
|
Martin A. Kaplan |
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the system of
internal controls. The Audit Committee has reviewed and
discussed the audited financial statements with management. In
addition, the Audit Committee has discussed with the independent
auditors the matters required to be discussed by Statements on
Auditing Standards No. 90.
The Audit Committee has also received the written disclosures
and the letter from the independent accountants required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and
has discussed with PricewaterhouseCoopers its independence,
including whether their provision of other non-audit services to
the Company is compatible with maintaining its independence.
The Committee discussed with the Companys independent
auditors the overall scope and plans for the respective audits.
The Committee meets with the independent auditors, with and
without management present to discuss the results of their
examinations, the evaluation of the Companys internal
controls and the overall quality of the Companys reporting.
Based upon the review and discussions referred to in the
foregoing paragraph, the Audit Committee recommended to the
Board of Directors that the audited financial statements be
included in the Companys
20
Annual Report on
Form 10-K for the
last year for filing with the Commission. The Audit Committee
and the Board also have recommended, subject to shareholder
approval, the selection of the Companys independent
auditors.
No portion of this Audit Committee Report shall be deemed to be
incorporated by reference into any filing under the Securities
Act of 1933, as amended (the Securities Act), or the
Exchange Act, through any general statement incorporating by
reference in its entirety the Proxy Statement in which this
report appears, except to the extent that the Company
specifically incorporates this report or a portion of it by
reference. In addition, this report shall not be deemed to be
filed under either the Securities Act or the Exchange Act.
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Dennis J. Horowitz (Chairman) |
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John F. Carlson |
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John D. Lockton |
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Lynn J. Davis |
FEES PAID TO INDEPENDENT AUDITORS
The Audit Committee regularly reviews and determines whether
specific non-audit projects or expenditures with our independent
auditors, PricewaterhouseCoopers, LLP, potentially affect their
independence. The Audit Committees policy is to
pre-approve all audit and permissible non-audit services
provided by PricewaterhouseCoopers. Pre-approval is generally
provided by the Audit Committee for up to one year, as detailed
as to the particular service or category of services to be
rendered, as is generally subject to a specific budget. The
Audit Committee may also pre-approve additional services of
specific engagements on a case-by-case basis.
The following table sets forth the aggregate fees billed to us
by PricewaterhouseCoopers for the years ended December 31,
2004 and 2005:
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Year Ended December 31, | |
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2005 | |
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2004 | |
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Audit Fees(1)
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$ |
521,450 |
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$ |
629,091 |
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Audit-related fees(2)
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216,193 |
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Tax fees
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All other fees
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4,685 |
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3,879 |
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Total
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$ |
526,135 |
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$ |
849,163 |
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(1) |
Included fees for professional services rendered for the audit
of the Companys annual financial statements and review of
our annual report on
Form 10-K and for
reviews of the financial statements included in our quarterly
reports on
Form 10-Q for the
first three quarters of the years ended December 31, 2005
and 2004. Includes $97,715 of fees in the year ended
December 31, 2004, and $60,000 of fees in the year ended
December 31, 2005 in connection with SEC registration
statements. |
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(2) |
Includes fees for professional services rendered in connection
with our evaluation of internal controls. |
CERTAIN TRANSACTIONS
Transactions with Mr. Thomas
The Company had an outstanding
5-year, interest-free
loan of $150,000 to Mr. Thomas, its former Chief Executive
Officer, in connection with Mr. Thomas compensation
during 2001. The loan was secured by shares of the
Companys common stock and options to purchase shares of
the Companys common stock. Mr. Thomas retired
effective March 15, 2005 and executed a retirement
agreement which provided for continuing payment of salary and
benefits. In accordance with the terms of the note (which was in
existence
21
prior to the adoption of the Sarbanes-Oxley Act of 2002), the
loan was forgiven by the Company when Mr. Thomas retired in
March 2005.
Transactions with Mr. Shalvoy
Mr. Shalvoy, a director and stockholder, owes the Company a
total of $820,244 of principal, plus accrued interest of more
than $214,000, under two, full recourse promissory notes. The
notes are secured by 15,176 shares of the Companys
common stock with a market value at December 31, 2005 of
approximately $70,000.
The Company acquired the notes in connection with the
acquisition of Conductus, Inc. in December 2002. Conductus made
these two loans to Mr. Shalvoy, its then President and
Chief Executive Officer, prior to the acquisition.
Mr. Shalvoy issued the notes to Conductus as payment for
the purchase price on the exercise of stock options in December
2000. The first note was due on December 28, 2005 ($460,244
principal amount), and the second note is due on August 21,
2006 ($360,000 principal amount).
Mr. Shalvoy notified the Company in 2005 of his intention
not to repay either of the loans. Mr. Shalvoy alleges,
among other things, that the Conductus board committed to
forgive the loans should the stock purchase turn out to have
negative financial consequences to him. Mr. Shalvoy had not
previously disclosed this alleged agreement to the Company, and
the Company has not found any and is not aware of any
documentation to support his allegation. The Company does not
believe that any agreement to forgive the notes ever existed,
and it believes that the notes are valid and binding debt
obligations of Mr. Shalvoy. Consequently, the Company filed
a lawsuit against Mr. Shalvoy on December 21, 2005 in
the California Superior Court (Case No. 1186812) to collect
payment in full of all principal and interest due under both
notes.
The Company carried the principal and accrued interest for both
notes as assets on its most recent balance sheet dated
October 1, 2005. As of that date, the balance sheet
included principal of $820,000 under the heading
Notes Receivable from Stockholder and accrued
interest of $203,000 in the line item Prepaid Expenses and
Other Current Assets. Notwithstanding its firm belief that
the notes are valid and binding debt obligations, the Company
concluded on January 23, 2006 that generally accepted
accounting principles require the recording of a material,
non-cash reserve against these assets in the fourth quarter of
2005 due to Mr. Shalvoys refusal to pay the notes
voluntarily. The reserve of $969,000 represents the total value
of the notes (principal plus accrued interest) less the market
value of the collateral securing the notes.
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Change in Control Payment |
Mr. Shalvoy had a change in control agreement with our
Conductus subsidiary that provides that following a change of
control (our purchase of Conductus), he would receive a
retention payment equal to 1.5 times his annual salary, if
he remained a full-time employee of Conductus through May 2003.
In May 2003, Mr. Shalvoy was an employee of Conductus and
became entitled to a retention payment of $442,500. The
retention payment was paid out ratably until December 2003 when
at the election of Mr. Shalvoy the remainder was paid in a
lump sum. Pursuant to his change in control agreement,
Mr. Shalvoy continues as a part-time employee with annual
compensation ranging from $5,000 to $20,000. The Company paid
Mr. Shalvoy $5,000 for services as a part-time employee in
2004 and 2005.
During 2004, the Company entered into a consulting agreement
with Mr. Shalvoy. Under the agreement, the Company has
retained his services from time to time as a consultant on
strategic planning matters at the rate of $3,000 per day
plus reasonable
out-of-pocket and
travel expenses. As additional consideration, the Company agreed
to continue his health benefits and granted him an option to
purchase 10,000 shares of common stock. The Company
has paid Mr. Shalvoy nothing in 2004 and in 2005 for
consulting services under this agreement.
22
STOCK PRICE PERFORMANCE GRAPH
The graph and table below compare the cumulative total
stockholders return on the Companys common stock
since December 31, 2000 with the Nasdaq-U.S. Composite
Index, and the Nasdaq Telecommunications Index over the same
period (assuming the investment of $100 in the Companys
common stock and in the two other indices, and reinvestment of
all dividends).
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12/31/00 |
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12/31/01 |
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12/31/02 |
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12/31/03 |
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12/31/04 |
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12/31/05 |
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Superconductor Technologies
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$ |
100.00 |
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$ |
179.31 |
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$ |
25.93 |
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$ |
153.38 |
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$ |
38.34 |
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$ |
11.86 |
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Nasdaq-U.S. Composite
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100.00 |
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79.33 |
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54.85 |
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82.18 |
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89.37 |
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91.26 |
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Nasdaq-Telecommunications
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100.00 |
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66.93 |
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30.84 |
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51.22 |
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54.18 |
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51.47 |
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23
FORM 10-K
Investor Information
All reports filed by the Company with the SEC are available free
of charge via EDGAR through the SEC website at www.sec.gov. In
addition, the public may read and copy materials filed by the
Company with the SEC at the SECs public reference room
located at 450 Fifth St., N.W., Washington, D.C.,
20549. You can obtain information about the operation of the
SECs Public Reference Room by calling the SEC at
1-800-SEC-0330. The
Company also provides copies of its
Forms 8-K, 10-K, 10-Q,
Proxy, Annual Report and press releases at no charge to
investors upon request and makes electronic copies of such
reports and press releases available through its website at
www.suptech.com as soon as reasonable practicable after
filing such material with the SEC. Requests should be sent to
the Company, attention: William J. Buchanan, Controller.
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.
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By Order of the Board of Directors |
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Jeffrey A. Quiram
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President and Chief Executive Officer |
Santa Barbara, California
April 5, 2006
24
DETACH HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SUPERCONDUCTOR TECHNOLOGIES INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2006
The undersigned stockholder of SUPERCONDUCTOR TECHNOLOGIES INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement,
each dated April 5, 2006, and hereby appoints Jeffrey A. Quiram as proxy and attorney-in-fact with
full power of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Stockholders of Superconductor Technologies Inc. to be held on
May 24, 2006 at 11:00 a.m., local time, at the offices of Superconductor Technologies Inc, located
at 460 Ward Drive, Santa Barbara, California and at any adjournment or adjournments thereof, and to
vote all shares of capital stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
[SEE REVERSE SIDE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
[BACK OF PROXY]
DETACH HERE
[X] Please mark votes as in this example
1. TO ELECT THREE CLASS 2 DIRECTORS.
Nominees: Dennis J. Horowitz, Martin A Kaplan and Lynn J. Davis
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o FOR ALL NOMINEES
(except listed to the contrary below)
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o WITHHELD FROM ALL NOMINEES
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o EXCEPTIONS |
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the Exceptions box and write that nominees name in the space provided above.)
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2. PROPOSAL TO RATIFY THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 2006.
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FOR
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AGAINST
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ABSTAIN
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As to any other matters that may properly come before the meeting or any adjournments thereof, the
proxy holders are authorized to vote in accordance with their best judgment.
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MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
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o |
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PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING
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o |
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants or as community property, both
should sign.)
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Signature:
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Date:
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Signature:
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Date:
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THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED
FOR THE ELECTION OF DIRECTORS, AND FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31,
2006, AND AS THE PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.