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Exhibit 10.1



Superconductor Technologies Inc.


Management Incentive Plan


(July 24, 2006)




			
	I	 	Plan Objective






     The Management Incentive Plan (the “MIP”) is an annual bonus program designed to
reward eligible participants for achievement of the financial, operational and strategic objectives
of Superconductor Technologies Inc. (the “Company”).




			
	II	 	Plan Administrator





     (a) The MIP shall be administered by the Compensation Committee (the “Committee”) of
the Board of Directors of the Company. The Committee may delegate responsibility regarding the
grant and administration of awards with respect to participants other than the executive officers
(as such term is defined in Rule 3b-7 of the SEC’s Regulations promulgated under the Securities
Exchange Act of 1934, as amended). The term “Plan Administrator” as used herein shall mean
the Committee or its designee.



     (b) The Plan Administrator shall have full authority to establish the rules and regulations
relating to the MIP, to interpret the MIP and those rules and regulations, to approve participants
in the MIP, to determine each participant’s target award, to approve all of the awards, to decide
the facts in any case arising under the MIP and to make all other determinations, including factual
determinations, and to take all other actions necessary or appropriate for the proper
administration of the MIP, including the delegation of such authority or power, where appropriate;
provided, however, that only the Committee shall have authority to amend or terminate the MIP and
the Plan Administrator shall not be authorized to increase the amount of the award payable to a
participant that would otherwise be payable pursuant to the terms of the MIP. The Plan
Administrator’s administration of the MIP, including all such rules and regulations,
interpretations, selections, determinations, approvals, decisions, delegations, amendments,
terminations and other actions, shall be final and binding on the Company and all employees of the
Company, including the participants in the MIP and their respective beneficiaries.




			
	III	 	Eligibility





     Subject to such limitations or restrictions as the Plan Administrator may impose, the
individuals eligible to participate in the MIP shall be regular employees in senior management
roles for the Company and its subsidiaries in all locations.



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     The Plan Administrator shall approve the individuals who shall participate in the MIP for each
Plan Year. A person who joins the Company after September 30 will not be eligible to participate
in the Plan until the following year.




			
	IV	 	Performance Goals





     (a) For each Plan Year for which awards are to be made under the MIP, the Committee will
pre-establish the performance goals to be achieved in order for any awards to be payable for that
Plan Year and the threshold, target and maximum amounts that may be paid if the performance goals
are met.



     (b) The performance goals for MIP participants will be based on one or more financial,
operational and strategic criteria determined annually by the Committee. The following is a
non-exclusive list of possible criteria:




	 	•	 	Net income (before or after taxes) or operating income;
	 
	 	•	 	EBITDA (earnings before interest, taxes, depreciation and amortization);
	 
	 	•	 	Sales or revenue targets;
	 
	 	•	 	Cash flow or free cash flow (cash flow from operations less capital
expenditures);
	 
	 	•	 	Implementation, completion or progress of projects, processes, products or
product-lines strategic or critical to the Company’s business operations;
	 
	 	•	 	Growth in sales of products or product lines;
	 
	 	•	 	Any combination of, or a specified increase in, any of the foregoing.





     Each of these measures will be defined by the Plan Administrator on a corporation, subsidiary,
group or division basis and may include or exclude specified extraordinary items, as determined by
the Plan Administrator.




			
	V	 	Target Bonus Levels





     (a) The Plan Administrator shall approve the performance goals for each participant which may
be based on the Company’s achievement of specified targets. The Plan Administrator will also
approve individual performance goals for each participant. The Plan Administrator will approve the
threshold, target and maximum bonus levels for each participant in the MIP that will be paid upon
the attainment of specified performance goals.



     (b) Each participant will earn an award for a Plan Year based on the achievement of the
performance goals established under the Plan. The Plan Administrator may adjust, upward or
downward, the award for each participant, based on the Plan Administrator’s determination of the
participant’s achievement of personal and other performance goals approved by the Plan
Administrator and other factors as the Plan Administrator determines.



     (c) Unless determined otherwise by the Plan Administrator, the target bonus amounts will be
expressed as a dollar amount. In no event may the bonus paid to a



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participant for a Plan Year exceed 200% of the participant’s target bonus for the Plan Year.




			
	VI	 	Payment of Bonuses





     (a) The Plan Administrator shall certify and announce to the participants the awards that will
be paid by the Company as soon as practicable following the final determination of the Company’s
financial results for the Plan Year. Payment of the awards certified by the Plan Administrator
shall be made as soon as practicable following such certification. Payments shall be made either
(a) in a single lump sum cash payment or (b) through the granting or vesting of equity awards under
the Company’s 2003 Equity Incentive Plan or any successor plan. Solely for the purpose of testing
compliance with any provision or limitation set forth in the MIP, the value of an equity award
shall be determined in accordance with Statement of Financial Accounting Standard No. 123R, Share
Based Payment, as in effect at the time of such testing.



     (b) Participants must be employed on the last day of the Plan Year to be eligible for an award
from the MIP, except as described in subsections (c) and (d) below.



     (c) Participants who terminate employment prior to the last day of the Plan Year will not be
eligible for any award payment for the Plan Year. However, the Plan Administrator shall have the
discretion to authorize a full or partial payment of the bonus to which the participant would have
actually become entitled had such individual continued in employee status through the payment date,
should such participant’s employment terminate prior to such date by reason of his or her death,
disability, retirement, or involuntary termination due to a reduction in force, departmental
reduction or job reduction that occurs after at least six months of service during the Plan Year.
The bonus amounts in these cases will be based on the achievement of the performance goals for the
Plan Year and the participant’s actual level of individual performance. The awards may be prorated
based on the period calculated from the date when the individual became eligible for the MIP to the
date of termination. Payment will be made in a single payment at the same time as all other awards
for the Plan Year are distributed.



     (d) In the case of the death of a participant, any award payable to the participant shall be
paid to his or her beneficiary. For this purpose, the Company will use the beneficiary named under
the Company-sponsored life insurance plan. If no life insurance beneficiary is designed, the
beneficiary will be the decedent’s estate.



     (e) The Plan Administrator may establish appropriate terms and conditions to accommodate newly
hired and transferred employees.




			
	VII	 	Changes to Performance Goals and Target Awards





     At any time prior to the final determination of awards the Plan Administrator may adjust the
performance goals and target awards to reflect a change in corporate capitalization (such as a
stock split or stock dividend), or a corporate transaction (such



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as a merger, consolidation, separation, reorganization, or partial or complete liquidation),
or to reflect equitably the occurrence of any extraordinary event, any change in applicable
accounting rules or principles, any change in the Company’s method of accounting, any change in
applicable law, any change due to any merger, consolidation, acquisitions, reorganization, stock
split, stock dividend, combination of shares or other changes in the Company’s corporate structure
or share, or any other change of a similar nature. The Plan Administrator may make the foregoing
adjustments with respect to participants’ awards to the extent the Plan Administrator deems
appropriate.




			
	VIII	 	Timing of Distributions; Additional Conditions Applicable To Nonqualified Deferred
Compensation Under Section 409A





     Bonus awards under the MIP are not intended to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”). Thus, in order to avoid such
classification, the Company shall pay all bonuses under the MIP within 2-1/2 months after the end
of the fiscal year.



     However, if payment is not made by such date or for any other reason any bonus award under the
MIP is determined to constitute a 409A Award, the following additional conditions shall apply and
shall supersede any contrary provisions of the MIP or the terms of any agreement relating to such
award.



     (a) Distributions. Except as provided in Section VIII(b) hereof, no 409A Award shall
be distributable earlier than upon one of the following:



          (i) Specified Time. A specified time or a fixed schedule established in a written
instrument evidencing the 409A Award.




          (ii) Separation from Service. Separation from service (within the meaning of Section
409A) by the 409A Award recipient; provided, however, that if the 409A Award recipient is a
“key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof)
and any of the Company’s stock is publicly traded on an established securities market or otherwise,
payment of the 409A Award may not be made before the date that is six months after the date of
separation from service.




          (iii) Death. The date of death of the 409A Award recipient.




          (iv) Disability. The date the 409A Award recipient becomes disabled (within the
meaning of Section VIII(c)(iii) hereof).




          (v) Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the
meaning of Section VIII(c)(iv) hereof), but only if the payment does not exceed the amounts
necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a
result of the payment, after taking into account the extent to which the emergency is or may be
relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the


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recipient’s other assets (to the extent such liquidation would not itself cause severe
financial hardship).




          (vi) Change in Control Event. The occurrence of a Change in Control Event (within the
meaning of Section VIII(c)(i) hereof), including the Company’s discretionary exercise of the right
to accelerate vesting of such grant upon a Change in Control Event or to terminate the Plan or any
409A Award granted hereunder within 12 months of the Change in Control Event.




     (b) No Acceleration. The payment of a 409A Award may not be accelerated prior to the
time specified in Section VIII(a) hereof, except in the case of one of the following events:



          (i) Domestic Relations Order. The 409A Award may permit the acceleration of the
distribution time or schedule to an individual other than the recipient as may be necessary to
comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the
Code).




          (ii) Conflicts of Interest. The 409A Award may permit the acceleration of the
distribution time or schedule as may be necessary to comply with the terms of a certificate of
divestiture (as defined in Section 1043(b)(2) of the Code).




          (iii) Change in Control Event. The Committee may exercise the discretionary right to
accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the Plan
or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the
409A Award for other compensation.




     (c) Definitions. Solely for purposes of this Section VIII and not for other purposes
of the Plan, the following terms shall be defined as set forth below:



          (i) “Change in Control Event” means the occurrence of a change in the ownership of the
Company, a change in effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (as defined in Section 1.409A-3(g) of the proposed
regulations promulgated under Section 409A by the Department of the Treasury on September 29, 2005
or any subsequent guidance).




          (ii) “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.




          (iii) “Disabled” means a participant who (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than 12 months,
or (ii) is, by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company or its subsidiaries.




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          (iv) “Unforeseeable Emergency” means a severe financial hardship to the recipient resulting
from an illness or accident of the participant, the recipient’s spouse, or a dependent (as defined
in Section 152(a) of the Code) of the recipient, loss of the recipient’s property due to casualty,
or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the recipient.





			
	IX	 	Amendment and Termination





     Notwithstanding the above, the Committee, at its sole discretion, may amend, modify or change
the MIP or its implementation at any time, including, but not limited to, revising performance
targets, form of consideration for bonus payment, bonus multipliers, strategic goals and objectives
and actual bonus payments; provided that no such action shall adversely affect any
incentive payments previously awarded under the MIP. The Committee may terminate the MIP at any
time.




			
	X	 	Miscellaneous





     (a) The “Plan Year” means the calendar year beginning January 1 and ending December
31.



     (b) Neither the establishment of the MIP, nor any action taken hereunder, shall be construed
as giving any participant any right to be retained in the employ of the Company or any of its
subsidiaries. Nothing in the MIP, and no action taken pursuant to the MIP, shall affect the right
of the Company to terminate a participant’s employment at any time and for any or no reason. The
Company is under no obligation to continue the MIP.



     (c) The MIP is not the exclusive means of awarding annual bonuses to participants, and the
Committee retains discretionary authority to grant other cash and non-cash bonuses to MIP
participants as and when it deems appropriate. The Committee may grant such discretionary bonuses
in addition to any bonus earned under the MIP and regardless of whether annual performance goals
for a bonus under the MIP have been achieved.



     (d) A participant’s right and interest under the MIP may not be assigned or transferred,
except upon death, and any attempted assignment or transfer shall be null and void and shall
extinguish, in the Company’s sole discretion, the Company’s obligation under the MIP to pay awards
with respect to the participant. The Company’s obligations under the MIP may be assigned to any
corporation which acquires all of substantially all of the Company’s assets or any corporation into
which the Company may be merged or consolidated.



     (e) The MIP shall be unfunded. The Company shall not be required to establish any special or
separate fund, or to make any other segregation of assets, to assure payment of awards. The
Company’s obligations hereunder shall constitute a general, unsecured obligation; awards shall be
paid solely out of the Company’s general assets, and no participant shall have any right to any
specific assets of the Company.



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     (f) The Company shall have the right to deduct from awards, or require the prior payment of,
any and all federal, state and local taxes or other amounts required by law to be withheld.



     (g) The validity, construction, interpretation and effect of the MIP shall exclusively be
governed by and determined in accordance with the laws of the State of California.



*** [END OF DOCUMENT] ***





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