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THE SECURITIES EXCHANGE ACT OF 1934
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AMERICAN SUPERCONDUCTOR CORPORATION
(Name of Registrant as Specified In Its Charter)
AMERICAN SUPERCONDUCTOR CORPORATION
(Name of Person(s) Filing Proxy Statement)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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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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AMERICAN SUPERCONDUCTOR CORPORATION
TWO TECHNOLOGY DRIVE
WESTBOROUGH TECHNOLOGY PARK
WESTBOROUGH, MASSACHUSETTS 01581
Notice of Annual Meeting of Stockholders to
be Held on Friday, September 5, 1997
The Annual Meeting of Stockholders of American Superconductor Corporation
(the "Company") will be held at the offices of the Company, Two Technology
Drive, Westborough Technology Park, Westborough, Massachusetts 01581 on Friday,
September 5, 1997 at 9:00 a.m., local time, to consider and act upon the
1. To elect directors for the ensuing year.
2. To approve the 1997 Director Stock Option Plan, as described in the
3. To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the Company's independent auditors for the current fiscal
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on July 24, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock transfer books of the Company will remain open.
By Order of the Board of Directors,
Roland Lefebvre, Secretary
July 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
AMERICAN SUPERCONDUCTOR CORPORATION
TWO TECHNOLOGY DRIVE
WESTBOROUGH TECHNOLOGY PARK
WESTBOROUGH, MASSACHUSETTS 01581
Proxy Statement for the Annual Meeting of Stockholders
to be Held on September 5, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of American Superconductor Corporation (the
"Company") for use at the Annual Meeting of Stockholders to be held on September
5, 1997 and at any adjournment of that meeting. All executed proxies will be
voted in accordance with the stockholders' instructions, and if no choice is
specified, executed proxies will be voted in favor of the matters set forth in
the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a subsequently
dated proxy to the Secretary of the Company or by voting in person at the Annual
On July 24, 1997, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, there were outstanding and entitled to
vote an aggregate of 11,594,484 shares of Common Stock of the Company
(constituting all of the voting stock of the Company). Holders of Common Stock
are entitled to one vote per share.
The Company's Annual Report for the fiscal year ended March 31, 1997
("fiscal 1997") will be mailed to stockholders, along with these proxy
materials, on or about August 7, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH
31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT FOR
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY, TWO TECHNOLOGY DRIVE,
WESTBOROUGH TECHNOLOGY PARK, WESTBOROUGH, MASSACHUSETTS 01581.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum is present at the
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors, and the
affirmative vote of a majority of the shares of Common Stock voting on the
matter is required for the approval of the 1997 Director Stock Option Plan and
the ratification of the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the Company's independent auditors for the current year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as shares voting on such matter. Accordingly, abstentions and "broker
non-votes" will have no effect on the voting on matters (such as the matters
being presented for stockholder approval at this meeting) that require the
affirmative vote of a plurality or a majority of the shares voting on the
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 30, 1997 by (i) each person who is known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
by each director or nominee for director, (iii) by each of the executive
officers named in the Summary Compensation Table set forth under the caption
"Executive Compensation" below (the "Senior Executives"), and (iv) by all
current directors and executive officers as a group:
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
- -------------------------------------------------------------- ---------------- --------------
* Less than 1%.
(1) The inclusion of any shares of Common Stock deemed beneficially owned does
not constitute an admission of beneficial ownership of those shares. In
accordance with the rules of the Securities and Exchange Commission, each
stockholder is deemed to beneficially own any shares subject to stock
options that are currently exercisable or exercisable within 60 days after
April 30, 1997, and any reference below to shares subject to outstanding
stock options held by the person in question refers only to such stock
(2) Number of shares deemed outstanding includes 11,571,727 shares outstanding
as of April 30, 1997, plus any shares subject to outstanding stock options
held by the person in question.
(3) Mr. Druckenmiller, as the Lead Portfolio Manager of Soros Fund Management
LLC, the principal investment advisor to Quantum Partners LDC ("Quantum"),
and as the sole managing member of Duquesne Capital Management L.L.C., a
discretionary investment advisor to a limited number of institutional
clients (the "Duquesne Clients"), may be deemed to be the beneficial owner
of the shares of Common Stock of the Company held for the accounts of
Quantum and the Duquesne Clients.
(4) Includes 6,562 shares held by Dr. Yurek's wife and minor children and
303,500 shares subject to outstanding stock options.
(5) Includes 33,000 shares subject to outstanding stock options.
(6) Includes (i) 3,000 shares held by Mr. Crisp's wife and (ii) 33,000 shares
subject to outstanding stock options. Mr. Crisp disclaims beneficial
ownership of the shares held by his wife.
(7) Includes 25,500 shares subject to outstanding stock options.
(8) Comprised of 22,000 shares subject to outstanding stock options.
(9) Comprised of 11,000 shares subject to outstanding stock options.
(10) Comprised of 35,000 shares owned by a limited partnership of which Mr. Sage
is the general partner.
(11) Includes (i) 3,000 shares held by a trust of which Dr. Malozemoff is the
co-trustee and (ii) 150,750 shares subject to outstanding stock options.
(12) Comprised of 89,000 shares subject to outstanding stock options.
(13) Includes 55,000 shares subject to outstanding stock options.
(14) Comprised of 20,000 shares subject to outstanding stock options.
(15) Includes 805,839 shares subject to outstanding stock options.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
eight nominees named below, all of whom are presently directors of the Company,
unless authority to vote for the election of any or all of the nominees is
withheld by marking the proxy to that effect. All of the nominees have indicated
their willingness to serve, if elected, but if any should be unable or unwilling
to serve, proxies may be voted for a substitute nominee designated by the Board
of Directors. Each director will be elected to hold office until the next annual
meeting of stockholders (subject to the election and qualification of his
successor and to his earlier death, resignation or removal).
Set forth below, for each nominee, are his name and age, his positions with
the Company, his principal occupation and business experience during the past
five years and the year of the commencement of his term as a director of the
GREGORY J. YUREK, age 50, co-founded the Company in 1987 and has been
President since March 1989, Chief Executive Officer since December 1989 and
Chairman of the Board since October 1991. Prior to joining the Company, Dr.
Yurek was a Professor of Materials Science and Engineering at MIT for 13 years.
Dr. Yurek has been a director of the Company since 1987.
ALBERT BACIOCCO, age 66, has been the President of The Baciocco Group,
Inc., a technical and management consulting practice, since 1987 when he retired
as Vice Admiral from the U.S. Navy after 34 years of distinguished service. Mr.
Baciocco is a director of Honeywell, Inc. Mr. Baciocco is also a consultant to
the Company. Mr. Baciocco has been a director of the Company since April 1997.
FRANK BORMAN, age 69, has been Chairman of the Board of DBT Online Inc., an
online provider of integrated database servers and related reports, Chairman of
the Board of AutoFinance Group, Inc., an automotive finance company, since
December 1993 and Chief Executive Officer and President of Patlex
Corporation, a company engaged in enforcing and exploiting laser-related
patents, since 1989. From 1976 to 1986, Mr. Borman was Chairman and Chief
Executive Officer of Eastern Airlines, Inc. Mr. Borman was the Commander of the
Apollo 8 Mission in 1968 and retired from the Air Force in 1970. Mr. Borman is a
director of Outboard Marine Corporation, The Home Depot, Inc. and Thermo
Instrument Systems. Mr. Borman is also a consultant to the Company. Mr. Borman
has been a director of the Company since 1992.
PETER O. CRISP, age 64, has been a General Partner of Venrock Associates, a
venture capital firm based in New York, since 1969. Mr. Crisp is also a director
of Evans & Sutherland Computer Corporation, Long Island Lighting Co.,
Thermedics, Inc., Thermo Electron Corporation, Thermo Power Corporation,
ThermoTrex Corporation and United States Trust Corporation. Mr. Crisp has been a
director of the Company since 1987.
RICHARD DROUIN, age 66, has been a partner at McCarthy Tetrault, a law firm
based in Montreal, Canada, since December 1995. Mr. Drouin is also Vice Chairman
of Morgan Stanley Canada. Mr. Drouin was the Chairman and Chief Executive
Officer of HydroQuebec, a power company based in Canada, from April 1988 to
September 1995. Mr. Drouin is a director of Abitibi Price Inc., CT Financial
Services Inc., Provigo Inc., Stelco Inc., Coca-Cola Beverages Inc.,
Tele-Metropole Inc. and Memotec Communications Inc. Mr. Drouin has been a
director of the Company since February 1996.
GERARD MENJON, age 48, has been Executive Vice President, Head of the
Research and Development Division, of Electricite de France, the French public
electric utility ("EDF"), since December 1994 and was the Senior Vice President,
Business Development, of EDF from February 1992 to November 1994. Mr. Menjon has
been a director of the Company since April 1997.
ANDREW G.C. SAGE, II age 71, has been President of Sage Capital Corporation
since December 1993 and was the President and Chief Executive Officer of
Robertson Ceco Corporation, a metal buildings manufacturing company, from
November 1992 to December 1993. From late 1991 to the present, Mr. Sage has been
a member of the Board of Directors and a consultant to Computervision
Corporation. In addition, Mr. Sage serves as Chairman of the Board of Robertson
Ceco Corporation. Mr. Sage has been a director of the Company since April 1997.
JOHN B. VANDER SANDE, age 53, co-founded the Company. He has been a
professor at MIT specializing in the microstructure of materials since 1971 and
became Associate Dean of Engineering at MIT in 1992. Dr. Vander Sande is also a
consultant to the Company. Dr. Vander Sande has been a director of the Company
In addition, George McKinney is currently a director but is not being
nominated for reelection. Dr. McKinney has been President and Chief Executive
Officer of GelSciences, Inc., a venture-backed chemicals company, since
September 1992 and a Managing Director of Beacon Venture Management since
January 1990. Dr. McKinney served as President of the Company from its founding
until March 1989 and as Chairman of the Board from its founding until December
1989. Dr. McKinney is also a director of Integra Life Sciences Corporation. Dr.
McKinney has been a director of the Company since 1987.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
auditors and the Board. The Audit Committee did not meet during fiscal 1997; it
held a meeting on June 3, 1997. The current Audit Committee members are Dr.
Vander Sande (Chairman) and Dr. McKinney.
The Company has a standing Compensation Committee of the Board of
Directors, which makes compensation decisions regarding the officers of the
Company, provides recommendations to the Board regarding compensation programs
of the Company and administers and authorizes stock option grants under the 1987
Stock Plan, the 1993 Stock Option Plan, the 1994 Director Stock Option Plan, the
1996 Stock Incentive Plan, and, if it is approved, will administer and authorize
stock options under the 1997 Director Stock Option Plan. The Compensation
Committee met four times during fiscal 1997. The current members of the
Compensation Committee are Mr. Crisp (Chairman), Dr. Vander Sande and Mr.
The Board of Directors met eight times during fiscal 1997. Each director
attended at least 75% of the aggregate of the number of Board meetings and the
number of meetings held by all committees on which he then served.
Directors of the Company currently receive no compensation for their
services as directors, other than through the grant of options under previous
director stock option plans and, if it is approved, the 1997 Director Stock
Option Plan (the "1997 Director Plan").
Pursuant to the 1997 Director Plan, upon the approval of the 1997 Director
Plan by the stockholders, each director of the Company who is not an employee of
the Company or any subsidiary (an "Outside Director") shall be granted an option
to purchase 40,000 shares of Common Stock of the Company, provided that any
options granted to such Outside Director pursuant to another director stock
option plan of the Company are vested completely or that the Outside Director
has not yet been granted such other options. If such other options are not
completely vested, the grant shall be made automatically on the first business
day after such other options are completely vested. In addition, each Outside
Director of the Company who is initially elected to the Board of Directors after
the date of the 1997 Annual Meeting shall be granted an option to purchase
40,000 shares of Common Stock upon his or her initial election to the Board of
Directors. Each option granted under the 1997 Director Plan has an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Options granted under the 1997 Director Plan become exercisable in equal annual
installments over a four-year period. Notwithstanding these vesting schedules,
all outstanding options under the 1997 Director Plan become exercisable in full
in the event of an "Acquisition Event" (as defined in the 1997 Director Plan).
The term of each option granted under the 1997 Director Plan is ten years,
provided that, in general, an option may be exercised only while the director
continues to serve as a director of the Company or within 60 days thereafter.
Mr. Borman was paid $6,000 during fiscal 1997 as consideration for
consulting services provided to the Company pursuant to a consulting agreement
with the Company under which the Company will pay Mr. Borman $500 per month
until the agreement is terminated by either party upon notice. Dr. Vander Sande
was paid $12,300 during fiscal 1997 for consulting services provided to the
Company pursuant to a consulting agreement with the Company under which the
Company will pay Dr. Vander Sande $1,100 per month until the agreement is
terminated by either party upon notice. Mr. Drouin was paid $18,000 during
fiscal 1997 for consulting services provided to the Company pursuant to a
consulting agreement with the Company. Under this agreement, the Company pays
Mr. Drouin $1,500 per month until the agreement is terminated by either party
upon notice. The Baciocco Group, Inc., a consulting practice owned by Mr.
Baciocco, was paid $7,500 during fiscal 1997 as consideration for consulting
services provided to the Company pursuant to a consulting agreement with the
Company under which the Company will pay The Baciocco Group, Inc. $2,500 per
quarter until the agreement is terminated by either party upon notice.
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of the Company's Chief
Executive Officer and the Company's four other most highly compensated executive
officers for fiscal 1997 (the Senior Executives).
SUMMARY COMPENSATION TABLE
Five Percent Shareholders
Stanley Druckenmiller......................................... 742,000(3) 6.4 %
Directors or Nominees
Gregory J. Yurek.............................................. 450,062(4) 3.9 %
John B. Vander Sande.......................................... 129,562(5) 1.2 %
Peter O. Crisp................................................ 64,603(6) *
Frank Borman.................................................. 28,500(7) *
George W. McKinney, III....................................... 22,000(8) *
Richard Drouin................................................ 11,000(9) *
Albert J. Baciocco, Jr........................................ 0 *
Gerard Menjon................................................. 0 *
Andrew G.C. Sage, II.......................................... 35,000(10) *
Other Senior Executives
Alexis P. Malozemoff.......................................... 164,250(11) 1.4 %
Gero Papst.................................................... 89,000(12) *
Ramesh L. Ratan............................................... 57,000(13) *
Roland E. Lefebvre............................................ 20,000(14) *
All current directors and executive officers as a group (17
persons).................................................... 1,132,714(15) 9.8 %
COMPENSATION (1) NUMBER OF
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTION COMPENSATION
- ---------------------------------------- ------ -------- ------ ------------ ------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary of the Senior Executive.
(2) Represents the forgiveness of $206,744 (consisting of principal and
associated interest) loaned by the Company to Dr. Yurek and $1,695 of
insurance premiums paid by the Company for a term life insurance policy on
Dr. Yurek. Dr. Yurek's wife is the beneficiary of this insurance policy.
(3) Represents the forgiveness of $104,779 (consisting of principal and
associated interest) loaned by the Company to Dr. Yurek and $1,555 of
insurance premiums paid by the Company for a term life insurance policy on
Dr. Yurek. Dr. Yurek's wife is the beneficiary of this insurance policy.
(4) Represents insurance premiums paid by the Company for a term life insurance
policy on Dr. Yurek. Dr. Yurek's wife is the beneficiary of this insurance
(5) The Company pays the salary of Dr. Papst in Deutschemarks. The salaries
presented in U.S. dollars are calculated based on the average exchange rate
of the Deutschemark for the relevant fiscal year.
(6) Represents amounts contributed by the Company to Dr. Papst's pension plan
as required by German law and insurance premiums paid by the Company for a
life insurance policy on Dr. Papst. Dr. Papst's wife is the beneficiary of
this insurance policy.
(7) Mr. Ratan joined the Company in January 1995 and consequently received
compensation only for a portion of the fiscal year ended March 31, 1995.
(8) Constitutes a signing bonus paid to Mr. Ratan.
(9) Mr. Lefebvre joined the Company in May 1996 and consequently received
compensation only for a portion of the fiscal year ended March 31, 1997.
(10) Represents amount paid by the Company to Mr. Lefebvre for costs related to
relocating to the Westborough, Massachusetts area.
The following table sets forth certain information concerning the stock
options granted by the Company during fiscal 1997 to each of the Senior
OPTIONS GRANTED IN LAST FISCAL YEAR
Gregory J. Yurek........................ 1997 $295,000 -- 60,000 $208,439(2)
President and Chief 1996 295,000 -- 80,000 106,334(3)
Executive Officer 1995 291,250 -- 150,000 1,420(4)
Gero Papst.............................. 1997 193,920(5) 12,550 10,000 12,928(6)
Managing Director, 1996 210,070(5) 8,125 25,000 14,058(6)
American Superconductor 1995 189,277(5) -- 15,000 12,050(6)
Ramesh L. Ratan......................... 1997 190,000 12,535 5,000 --
Chief Financial 1996 190,000 7,600 25,000 --
Officer, Treasurer and 1995 45,429(7) -- 125,000 20,000(8)
Alexis P. Malozemoff.................... 1997 183,000 16,713 10,000 --
Chief Technical 1996 183,000 7,320 20,000 --
Officer 1995 175,500 -- 117,500 --
Roland E. Lefebvre...................... 1997 161,282(9) 30,000 110,000 50,000(10)
Vice President, 1996 -- -- -- --
Marketing and Sales 1995 -- -- -- --
PERCENT POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
EXECUTIVE OFFICER GRANTED FISCAL YEAR PER SHARE(1) DATE 5% 10%
- ------------------------ ---------- ------------ ------------ ---------- -------- ----------
(1) The exercise price per share of each option was equal to the fair market
value per share of Common Stock on the date of grant. Options become
exercisable over a five-year period and generally terminate 60 days
following termination of the Senior Executive's employment with the Company
or the expiration date, whichever occurs earlier.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercises of the option or the sale of the underlying shares. The actual
gains, if any, on the exercises of stock options will depend on the future
performance of the Common Stock, the optionholder's continued employment
through the option period, and the date on which the options are exercised.
Option Exercises and Holdings
The following table sets forth certain information concerning each exercise
of a stock option during fiscal 1997 by each of the Senior Executives and the
number and value of unexercised options held by each of the Senior Executives on
March 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
Gregory J. Yurek........ 60,000 7.8% $ 9.75 3/07/2007 $367,903 $ 932,339
Gero Papst.............. 10,000 1.3% $ 9.75 3/07/2007 $ 61,317 $ 155,390
Ramesh L. Ratan......... 5,000 .7% $ 9.75 3/07/2007 $ 30,659 $ 77,695
Alexis P. Malozemoff.... 10,000 1.3% $ 9.75 3/07/2007 $ 61,317 $ 155,390
Roland E. Lefebvre...... 100,000 13.0% $12.69 4/10/2006 $798,867 $2,022,459
10,000 1.3% $ 9.75 3/07/2007 $ 61,317 $ 155,390
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------- ----------- ----------- ------------------------- -------------------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Based on the fair market value of the Common Stock on March 31, 1997 ($8.375
per share), less the option exercise price.
EMPLOYMENT AGREEMENTS WITH SENIOR EXECUTIVES
Dr. Yurek and Dr. Malozemoff are each party to an employment agreement with
the Company. The term of each agreement commenced on December 4, 1991 and
continues until terminated as follows: by the employee, at any time on or after
December 4, 1992, upon at least 90 days prior notice; by the Company for cause
(as defined in the employment agreement); by the Company without cause (in which
case, for a 12-month period following the date of termination, the employee
shall continue to receive his salary and other benefits and his stock options
shall continue to vest); or as a result of the death or disability of the
employee (in which case his stock options shall become immediately exercisable
for the number of additional shares as to which it would have become exercisable
if his employment had continued for an additional 12 months). Under the terms of
each employment agreement, the employee agreed that, among other things, he will
not engage in a business competitive with that of the Company until one year
after the later of the termination of the employee's employment with the Company
or the expiration of the one-year period during which the employee's
compensation and benefits continue in the event of an employment termination
without cause. The Company has the right to extend the period for which these
restrictions remain in effect for an additional one-year period by continuing
the employee's salary and benefits for this additional period.
Dr. Papst is a party to an employment agreement with American
Superconductor Europe GmbH, a wholly owned subsidiary of the Company ("ASC
Europe"). The term of the agreement commenced on January 1, 1993 and continues
until terminated as follows: by either party upon at least 12 months' notice; by
ASC Europe if Dr. Papst is dismissed from his position as Managing Director of
ASC Europe as a result of German corporate law; or by either party for cause (as
defined in the employment agreement). Under the
terms of the employment agreement, Dr. Papst agreed that he will not engage in a
business competitive with that of the Company or ASC Europe until two years
after the termination of the employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Vander Sande and Mr. Crisp, non-employee directors of the Company, each
served on the Compensation Committee for all of fiscal 1997. Dr. McKinney, a
non-employee director of the Company, served on the Compensation Committee until
February 1997 and Mr. Drouin, a non-employee director of the Company, has served
on the Compensation Committee since then. Dr. McKinney served as President of
the Company from its founding until March 1989 and as Chairman of the Board from
its founding until December 1989.
CERTAIN BUSINESS RELATIONSHIPS
Between April 18, 1994 and November 1, 1994, the Company made a series of
loans to Dr. Yurek in the aggregate amount of $650,000. These loans bear
interest at rates ranging from 4.51% to 6.34% per annum, which in each case is
based on the then Applicable Federal Rate as announced by the Internal Revenue
Service for a loan of the applicable duration. These loans are secured by a
pledge by Dr. Yurek's wife of her beneficiary interest in an insurance policy on
the life of Dr. Yurek. By vote of the Compensation Committee at a meeting on May
12, 1995, the Company forgave $100,000 of the principal of the loans made on
April 18, 1994, May 23, 1994 and August 19, 1994, and the associated interest
and the remainder of the loans were consolidated. By vote of the Compensation
Committee at a meeting on April 17, 1996, the Company forgave an additional
$106,744 of the principal of the outstanding loan. $100,000 of principal was
repaid on November 1, 1996. By vote of the Compensation Committee at a meeting
held on May 2, 1997, the Company forgave an additional $100,000 of the principal
of the outstanding loan. The principal and interest on the remaining loan are
repayable on November 1, 1998.
The Company has adopted a Code of Business Conduct which, among other
things, prohibits its officers and employees from having any significant
interest in an enterprise with whom the Company has material business dealings,
or engaging in any business or financial activity that may conflict with that of
REPORT ON EXECUTIVE COMPENSATION
This report addresses the compensation policies of the Company applicable
to its officers during fiscal 1997. The Company's executive compensation program
is administered by the Compensation Committee of the Board of Directors (the
"Committee"), which is comprised of three non-employee directors. The Committee
is responsible for determining the compensation package of each executive
officer, including the Chief Executive Officer. In fiscal 1997, the Board of
Directors did not modify in any material way or reject any action or
recommendation of the Committee with respect to executive officer compensation.
The objectives of the Committee in determining executive compensation are
(i) to recognize and reward exceptional performance by the Company's executives,
(ii) to provide incentive for high levels of current and future performance, and
(iii) to align the objectives and rewards of Company executives with those of
the stockholders of the Company. The Committee believes that an executive
compensation program that achieves these objectives will not only properly
motivate and compensate the Company's current officers, including the Chief
Executive Officer, but will enable the Company to attract other officers that
may be needed by the Company in the future.
The executive compensation program is implemented through three principal
elements -- base salary, an annual incentive plan based on individual
contributions to corporate success and stock option grants.
In establishing the salary of officers, including the Chief Executive
Officer, the Committee considers the individual performance of the officer, the
performance of the Company as a whole, the nature of the individual's
responsibilities, historic salary levels of the individual, and the median level
of cash compensation paid to officers in comparable positions at other companies
whose business and/or financial position is similar to that of the Company. For
purposes of this comparison, the Committee considers the executive compensation
of a range of public technology-oriented companies whose business, stage of
development, financial position and/or recent financial performance are similar
to that of the Company, as well as the companies included in the Peer Index in
the Stock Performance Graph. The Committee has determined that the salaries paid
to the Company's officers, including the Chief Executive Officer, are
appropriately positioned relative to the median cash compensation levels for
executives with comparable responsibilities in similar firms and the
contributions of the individuals to the success of the firm.
In 1996, the Committee implemented an annual incentive compensation plan
for all officers, including the Chief Executive Officer. Awards under the plan
reflect individual contributions to the achievement of predetermined Company
objectives, including financial objectives, product development objectives, and
marketing and business development objectives. At this stage of the Company's
development, the Committee believes it is appropriate for officers to have a
portion of their annual cash compensation dependent upon performance in that
year, and the Committee may consider increasing the "at risk" portion of
executive compensation over time. Bonuses were awarded for 1997 performance
because the Company achieved key corporate objectives for the year including
both technical progress as exemplified by demonstrations of prototype power
cables, motors and transformers, the successful negotiation of a key strategic
relationship with a subsidiary of Electricite de France and the successful
acquisition of Superconductivity, Inc.
The Committee uses stock options as a significant element of the
compensation package of the officers, including the Chief Executive Officer,
because they provide an incentive to executives to maximize stockholder value,
because they reward the officers only to the extent that stockholders also
benefit, and because the vesting of the options (the options generally become
exercisable in installments over a five-year period) serves as a means of
retaining these officers. In making stock option grants to officers, the
Committee considers the performance of the officer, the responsibilities of the
officer, the executive's current stock or option holdings, and the median levels
of long term incentives paid to officers with comparable responsibilities in
similar companies, including the companies included in the Company's Peer Index
in the Stock Performance Graph. It has been the practice of the Compensation
Committee to fix the exercise price of options granted at 100% of the fair
market value of the Common Stock on the date of grant.
The Board of Directors recognizes that it is essential for officers of the
Company to establish and maintain an ownership position in the Company. In order
to ensure that this expectation is met, the Board of Directors has established
guidelines relating to stock ownership and disposition for all officers under
which an officer is strongly encouraged to establish and maintain ownership of
shares in an amount directly proportional to the number of shares exercised. The
Committee considers each officer's compliance with these guidelines in the
establishment of ongoing option grants. All officers, including the Chief
Executive Officer, are in compliance with this policy.
In evaluating corporate and individual performance for the purposes of
determining salary levels, awarding bonuses and granting stock options, the
Committee considers the progress and success of the
Company with respect to matters such as product development, strategic
alliances, and enhancement of the Company's patent and licensing position, as
well as changes in scope of responsibility for specific individuals.
The Committee also takes into account, to the extent it believes
appropriate, the limitations on the deductibility of executive compensation
imposed by Section 162(m) of the Internal Revenue Code in determining
compensation levels and practices.
Peter O. Crisp
John B. Vander Sande
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from March 31, 1992 to March 31, 1997 (the end of
fiscal 1997) with the cumulative total return of (i) the CRSP Total Return Index
for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Index") and (ii) an
index of five companies in a line of business similar to the Company's (the
"Peer Index"). The Peer Index is comprised of Biomagnetic Technologies, Inc.,
Intermagnetic General Corporation, Superconductor Technologies, Inc., Conductus,
Inc. and Illinois Superconductor Corporation. The Company believes these five
companies are the only companies whose business is similar to that of the
Company and whose stock has been publicly traded for at least one year. This
graph assumes the investment of $100.00 on March 31, 1992 in the Company's
Common Stock, the Nasdaq Index and the Peer Index, and assumes any dividends are
reinvested. Measurement points are March 31, 1993, March 31, 1994 and March 31,
1995 and March 31, 1996 and March 31, 1997 (the Company's last five fiscal year
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AMERICAN SUPERCONDUCTOR CONRPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
Gregory J. Yurek............... 60,000 $ 714,333 288,500/259,000 $850,125/0
Gero Papst..................... 0 0 86,000/61,500 0/0
Ramesh L. Ratan................ 0 0 5,000/100,000 0/0
Alexis P. Malozemoff........... 0 0 118,050/109,700 327,769/0
Roland E. Lefebvre............. 0 0 0/110,000 0/0
* $100 invested on 3/31/92 in stock or index - including reinvestment of
Fiscal year ending March 31.
APPROVAL OF THE 1997 DIRECTOR STOCK OPTION PLAN
On May 2, 1997, the Compensation Committee of the Board of Directors of the
Company adopted, subject to stockholder approval, the 1997 Director Plan
covering 240,000 shares of the Company's Common Stock.
The purpose of the 1997 Director Plan is to encourage stock ownership in
the Company by outside directors of the Company whose continued services are
considered essential to the Company's future success and to provide them with a
further incentive to remain as directors of the Company. THE BOARD OF DIRECTORS
OF THE COMPANY BELIEVES THE 1997 DIRECTOR PLAN IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
The 1997 Director Plan is summarized below. This summary is qualified in
all respects by reference to the full text of the 1997 Director Plan, copies of
which are available upon request to the Chief Financial Officer of the Company.
SUMMARY OF THE 1997 DIRECTOR PLAN
A total of up to 240,000 shares of Common Stock may be issued upon the
exercise of options granted under the 1997 Director Plan. Only Outside Directors
of the Company shall be eligible to receive options under the 1997 Director
Plan. The Company currently has eight Outside Directors (which number may change
in the future). All options granted under the 1997 Director Plan will be
non-statutory stock options not entitled to special tax treatment under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code.")
The 1997 Director Plan provides for the automatic grant of stock options
under the following circumstances: (i) an option to purchase 40,000 shares of
Common Stock shall be granted automatically to each Outside Director upon the
approval of the Plan by the stockholders of the Company, provided that any stock
options previously granted to such Outside Director under another director stock
option plan of the Company are vested completely or the Outside Director has not
yet been granted an option, (ii) for Outside Directors whose stock options
previously granted under a director stock option plan of the Company are not
completely vested, an option to purchase 40,000 shares of Common Stock shall be
granted automatically on the first business day following the date that such
stock options are vested completely, and (iii) an option to purchase 40,000
shares of Common Stock shall be granted automatically to each Outside Director
first elected to the Board after the approval of the 1997 Director Plan by the
stockholders, upon the date of his or her initial election to the Board. The
exercise price of each option granted under the 1997 Director Plan will be equal
to the fair market value of the Common Stock on the date of grant. Each option
will become exercisable (or "vest") in equal annual installments over the four
year period following the date of grant, provided the optionee continues to
serve as a director on such dates. In the case an Acquisition Event (as defined
in the 1997 Director Plan) occurs, all outstanding options will become vested in
full. In general, an optionee may exercise his or her option, to the extent
vested, only while he or she is a director of the Company and for up to 60 days
thereafter. Unexercised options expire ten years after the date of grant.
The Board of Directors may suspend, discontinue or amend the 1997 Director
Plan, provided, however, that without approval of the stockholders of the
Company, no amendment may (i) increase the number of shares subject to the 1997
Director Plan, or (ii) effect any action which requires approval of the
stockholders pursuant to the rules or requirements of the Nasdaq National Market
or any other exchange on which the Common Stock of the Company is listed.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the grant and exercise of
stock options under the Plan and with respect to the sale of Common Stock
acquired under the Plan. It does not address the tax consequences that may arise
with respect to any gift or disposition other than by sale of Common Stock
acquired under the Plan.
Tax Consequences to Participants. A participant will not recognize taxable
income upon the grant of an option under the Plan. However, a participant will
recognize ordinary compensation income upon the exercise of the option in an
amount equal to the excess of the fair market value of the Common Stock acquired
through the exercise of the option (the "Option Stock") on the exercise date
over the exercise price.
A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the Option
Stock and the participant's tax basis in the Option Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
Option Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Option Stock for
a shorter period.
Tax Consequences to the Company. The grant of a stock option under the
Plan will have no tax consequences to the Company except that the Company
generally will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by a participant under the Plan.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the current fiscal year. Coopers &
Lybrand L.L.P. has served as the Company's independent auditors since the
Company's inception. Although stockholder approval of the Board of Directors'
selection of Coopers & Lybrand L.L.P. is not required by law, the Board of
Directors believes that it is advisable to give stockholders an opportunity to
ratify this selection. If this proposal is not approved at the Annual Meeting,
the Board of Directors may reconsider its selection of Coopers & Lybrand L.L.P.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Westborough, Massachusetts not later than February 27, 1998 for inclusion in
the proxy statement for that meeting.
Section 16 Beneficial Ownership Reporting Compliance
Robert Schwall, Vice President of Engineered Products, filed a Form 4
reporting the February 1996 grant of an option in April 1997, eleven months
after the required filing date. Gerard Menjon, a director of the Company, filed
a Form 3 on April 18, 1997, one day after the required filing date. The Company
believes that during the fiscal year ended March 31, 1997, all other officers,
directors and holders of 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements.
By Order of the Board of Directors,
Roland Lefebvre, Secretary
July 29, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR
PROXY AMERICAN SUPERCONDUCTOR PROXY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 5, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Gregory
J. Yurek, Roland Lefebvre and Patrick J. Rondeau, and each of them, with full
power of substitution, as proxies to represent and vote, as designated herein,
all shares of stock of American Superconductor Corporation (the "Company") which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the offices of the Company,
Two Technology Drive, Westborough Technology Park, Westborough, Massachusetts
01581 on Friday, September 5, 1997, at 9:00 a.m., local time, and at any
adjournment thereof (the "Meeting").
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is given, this
proxy will be voted FOR all proposals. Attendance of the undersigned at the
meeting or at any adjournment thereof will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing or shall deliver a
subsequently dated proxy to the Secretary of the Company or shall vote in person
at the Meeting.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE.
1. To elect the following eight (8) directors (except as marked below) for the
NOMINEES: Gregory J. Yurek, Albert Baciocco, Frank Borman, Peter O. Crisp,
Richard Drouin, Gerard Menjon, Andrew G.C. Sage, II and John B. Vander
/ / FOR all nominees / / WITHHOLD authority to vote
(except as marked below) for all nominees
For all nominees except the following nominee(s):
(Continued, and to be signed, on reverse side)
2. To approve the 1997 Director Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
Signature if held jointly
Please sign exactly as name appears hereon.
If the stock is registered in the names of
two or more persons, each should sign.
Executors, administrators, trustees,
guardians, attorneys and corporate officers
should add their titles.
3/92 3/93 3/94 3/95 3/96 3/97
American Superconductor Corporation ........... $100 $111 $193 $165 $117 $ 70
Peer Group .................................... 100 110 147 131 233 124
NASDAQ Stock Market (U.S.) .................... 100 115 124 138 187 208