<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
COMMISSION FILE NUMBER 0-11915
CONDUCTUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0162388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
969 W. MAUDE AVE.
SUNNYVALE, CA 94086
(Address of principal executive offices)
(408) 523-9950
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
--- ---
As of April 30, 2000 there were 11,500,056 shares of the Registrants Common
stock outstanding.
<PAGE>
CONDUCTUS, INC.
FORM 10-Q
March 31, 2000
INDEX
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ---------------------------------------
<S> <C> <C>
Item 1: Financial Statements.....................................................................................1
--------------------
Condensed Balance Sheets at March 31, 2000 and December 31, 1999................................1
Condensed Statements of Operations for the Three Months Ended March 31, 2000 and 1999...........2
Condensed Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999...........3
Notes to Condensed Financial Statements.........................................................4
Item 2 : Management's Discussion and Analysis of Financial Condition and Results of Operations...................7
-------------------------------------------------------------------------------------
Item 3: Quantitative and Qualitative Disclosures About Market Risk..............................................10
----------------------------------------------------------
PART II: OTHER INFORMATION
- ---------------------------
Item 1: Legal Proceedings.......................................................................................11
-----------------
Item 2: Changes in Securities...................................................................................11
---------------------
Item 3: Default Upon Senior Securities..........................................................................11
------------------------------
Item 4: Submission of Matters to a Vote of Security Holders.....................................................11
---------------------------------------------------
Item 5: Other Information.......................................................................................11
-----------------
Item 6: Exhibits and Reports on Form 8-K........................................................................12
--------------------------------
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
--------------------
CONDUCTUS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------------ ------------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents............................................. $ 26,718,090 $ 11,956,508
Short-term investments................................................ -- 2,121,274
Accounts receivable .................................................. 846,404 1,381,724
Inventories........................................................... 1,580,701 1,266,200
Prepaid expenses and other current assets............................. 96,053 306,339
------------------ ------------------
Total current assets................................................ 29,241,248 17,032,045
Property and equipment, net........................................... 1,395,066 1,374,354
Other assets.......................................................... 182,132 190,383
------------------ ------------------
Total assets........................................................ $ 30,818,446 $ 18,596,782
================== ==================
LIABILITIES
Current liabilities:
Current portion of long-term debt..................................... $ 780,554 $ 752,419
Accounts payable...................................................... 1,257,581 1,022,993
Other accrued liabilities............................................. 1,310,780 1,572,897
------------------ ------------------
Total current liabilities........................................... 3,348,915 3,348,309
Long-term debt, net of current portion................................ 390,675 595,665
------------------ ------------------
Total liabilities................................................... 3,739,590 3,943,974
------------------ ------------------
REDEEMABLE PREFERRED STOCK
Preferred stock.......................................................... 7,831,440 10,777,675
STOCKHOLDERS' EQUITY
Common stock............................................................. 1,150 726
Additional paid-in capital............................................... 73,288,016 52,543,129
Accumulated deficit...................................................... (54,041,750) (48,668,722)
------------------ ------------------
Total stockholders' equity.......................................... 19,247,416 3,875,133
------------------ ------------------
Total liabilities, redeemable equity, and stockholders' equity...... $ 30,818,446 $ 18,596,782
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
CONDUCTUS, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
---------------- -----------------
<S> <C> <C>
(Unaudited) (Unaudited)
Revenues:
Contract................................................................ $ 251,154 $ 917,607
Product sales........................................................... 87,900 396,770
---------------- -----------------
Total revenues....................................................... 339,054 1,314,377
---------------- -----------------
Costs and expenses:
Cost of product sales.................................................. 701,219 569,667
Research and development............................................... 1,081,217 1,121,295
Selling, general and administrative.................................... 1,209,677 834,470
---------------- -----------------
Total costs and expenses............................................. 2,992,113 2,525,432
---------------- -----------------
Loss from operations...................................................... (2,653,059) (1,211,055)
Interest income........................................................... 358,496 25,744
Other income.............................................................. -- 2,505
Interest expense.......................................................... (63,575) (96,880)
---------------- -----------------
Net loss............................................................... (2,358,138) (1,279,686)
Dividend accretion and deemed dividend on preferred stock................. (3,014,889) (211,680)
---------------- -----------------
Net loss attributable to common stockholders.............................. $ (5,373,027) $ (1,491,366)
================ =================
Basic and diluted net loss per share...................................... $ (0.56) $ (0.21)
================ =================
Shares used in per share calculations..................................... 9,535,312 7,144,162
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONDUCTUS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
2000 1999
--------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................. $ (2,358,138) $ (1,279,686)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................................ 187,468 212,783
Amortization of discount on long term debt............................... 10,098 11,348
(Increase) decrease in:
Accounts receivable...................................................... 535,320 30,169
Inventories.............................................................. (314,501) 135,926
Prepaid expenses and other current assets................................ 210,287 28,309
Other assets............................................................. -- (3,331)
Increase (decrease) in:
Accounts payable and other accrued liabilities........................... 263,943 (184,708)
--------------- ----------------
Net cash used in operating activities................................ (1,465,523) (1,049,190)
--------------- ----------------
Cash flows from investing activities:
Maturities of short-term investments..................................... 2,142,219 783,287
Purchases of short-term investments...................................... (20,945) --
Acquisition of property and equipment.................................... (199,930) (8,338)
--------------- ----------------
Net cash provided by investing activities............................ 1,921,344 774,949
--------------- ----------------
Cash flows from financing activities:
Net proceeds from issuance of common stock............................... 14,492,709 (58,263)
Principal repayments on long-term debt................................... (186,948) (225,040)
--------------- ----------------
Net cash provided by (used in) financing activities.................. 14,305,761 (283,303)
--------------- ----------------
Net increase (decrease) in cash and cash equivalents..................... 14,761,582 (557,544)
Cash and cash equivalents at beginning of period............................ 11,956,508 1,547,169
--------------- ----------------
Cash and cash equivalents at end of period.................................. $ 26,718,090 $ 989,625
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONDUCTUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL INFORMATION:
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These condensed financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's Report on Form 10-K for the year ended December 31, 1999 dated March
30, 2000 and filed with the Securities and Exchange Commission. The unaudited
financial statements as of March 31, 2000 and for the three months ended March
31, 2000 and 1999 include, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial information set forth herein. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
an entire year. The December 31, 1999 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
RECENT PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new standards of
accounting and reporting for derivative instruments and hedging activities. This
statement requires that all derivatives be recognized at fair value in the
statement of financial position, and that the corresponding gains or losses be
reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
Statement No. 133 will be effective for fiscal years beginning after June 15,
2000. Conductus does not currently hold derivative instruments or engage in
hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
the Financial Statements," which provides guidance on the recognition,
presentation and disclosure of revenue in the financial statements filed with
the SEC. SAB 101 outlines the basic criteria that must be met to recognize
revenue and provide guidance for disclosures related to the revenue recognition
policies.
Conductus is currently studying the implications of these statements
and has not yet determined the impact of their adoption.
2. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
Conversion of preferred shares to common stock.......................... $ 5,736,124 $ --
Conversion of preferred dividend to common stock 516,472 --
---------------- ----------------
Total............................................................ $ 6,252,596 --
================ ================
---------------- ----------------
Dividend accretion and deemed dividend on preferred stock............... $ 3,014,889 $ 211,680
================ ================
</TABLE>
4
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
3. BASIC AND DILUTED NET LOSS PER SHARE:
A reconciliation of the numerator and denominator of the basic and
diluted loss per share is provided as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
Numerator - basic and diluted net loss per share:
Net loss attributable to common shareholders....................... $ (5,373,027) $ (1,491,366)
Denominator - basic and diluted net loss per share:
Weighted average common shares outstanding......................... 9,535,312 7,144,162
Basic and diluted net loss per share............................... $ (0.56) $ (0.21)
</TABLE>
In the above computations, common equivalent shares are excluded from
the diluted loss per share as their effect is anti-dilutive. Common equivalent
shares including common stock options, warrants and convertible preferred stock
that could potentially dilute basic earnings per share in the future and that
were not included in the computations of diluted loss per share because of
anti-dilution were approximately 7,741,000 and 1,822,000 for the three months
ended March 31, 2000 and 1999, respectively.
4. ACCOUNTS RECEIVABLE:
Accounts receivable, net, consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------------- -------------------
<S> <C> <C>
U.S. government contracts:
Unbilled
Recoverable costs and accrued profit on
progress completed - not billed.................................. $ 146,083 $ 148,088
Billed............................................................... 269,240 192,254
Commercial.............................................................. 9,000 94,300
License Fee Receivable.................................................. 525,000 1,050,000
Allowance for doubtful accounts......................................... (102,918) (102,918)
------------------- -------------------
$ 846,404 $ 1,381,724
=================== ===================
</TABLE>
5
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------------- -------------------
<S> <C> <C>
Raw materials........................................................... $ 837,443 $ 573,526
Work in process......................................................... 326,920 401,335
Finished goods.......................................................... 416,338 291,339
------------------- -------------------
$ 1,580,701 $ 1,266,200
=================== ===================
</TABLE>
6. STOCKHOLDERS EQUITY:
On January 18, 2000 the Company entered into an agreement with the
Nevis Fund and Snowdon LP. Under the terms of the agreement, the Company issued
1,000,000 shares of common stock at $13.66875 per share.
6
<PAGE>
Item 2 : Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
THIS REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. CONDUCTUS, INC.'S (THE "COMPANY" OR
"CONDUCTUS") ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" IN PART 1 OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS REPORT ON FORM 10-Q.
OVERVIEW
We develop, manufacture and market electronic components and systems
based on superconductors for applications in the worldwide telecommunications
markets. As of March 31, 2000, we had accumulated losses of approximately
$54,042,000 and we expect to incur significant additional losses during the
remainder of 2000. We, alone or with collaborative partners, must successfully
develop, manufacture, introduce and market our potential products in order to
achieve profitability. We do not expect to recognize meaningful product sales
until we successfully develop and commercialize superconductive components,
systems and subsystems that address significant market needs.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Total revenues consist primarily of contract revenue and, to a lesser
extent, product sales. Our total revenues decreased by 74% to $339,000 for the
quarter ended March 31, 2000 from $1,314,000 in the comparable period of 1999.
The decrease in total revenues from the prior year is primarily due to decreases
in revenues from government contracts and government product sales, which
resulted from the completion of several contracts and delays in the anticipated
start date of new contracts in 2000.
Revenue under U.S. government research and development contracts
represented approximately 74% of total revenue for the quarter ended March 31,
2000 compared to 70% in the comparable period of 1999. Contract revenues
decreased by 73% to $251,000 for the quarter ended March 31, 2000 from $917,000
in the comparable period of 1999. This decrease in revenue is primarily
attributable to the completion of contracts related to our core wireless
business in 1999. We have submitted several proposals related to prospective
contracts associated with this core business and we expect to continue to submit
proposals as additional and appropriate programs become available. We believe we
will be able to participate in several of the contracts for which proposals have
been submitted and anticipate that government contract revenues will increase;
however, we cannot assure you that we will receive the level of awards we
anticipate or any awards at all. Additionally, the recognition of revenue and
receipt of payment pursuant to these contracts and awards are subject to
numerous risks.
Product revenues decreased by 78% to $88,000 from $397,000 in the
comparable period of 1999. The decrease in product revenues was primarily the
result of a reduction in sales of the Company's commercial and government
wireless telecommunications products. We have several field trials in process
for our products that may result in sales; however, there can be no assurance
that the customers will purchase the products.
Cost of product sales was primarily composed of costs of products
related to our wireless telecommunications products. Cost of product sales
was $701,000 for the period ended March 31, 2000 compared to $570,000 for the
comparable period of 1999. This increase in cost and corresponding decrease
in gross margin is primarily attributable to an increase in expenses relating
to continued development of the Company's manufacturing infrastructure to
meet future demand.
Research and development includes both externally and internally funded
projects. Research and development expenses were $1,081,000 in the quarter ended
March 31, 2000 compared to $1,121,000 in the comparable period of the prior
year. Research and development, as a percentage of revenue, represented 319% and
85% in the quarters ended March 31, 2000 and 1999, respectively. The decrease in
research and development expense was primarily attributable to a increase in
spending on internally funded projects related to new product development
partially offset by a decrease in spending on externally funded research and
development contracts.
7
<PAGE>
We expect to continue to incur significant research and development expenses on
internally funded programs as we seek to develop additional commercial products,
particularly in the wireless communications area and, as a result, anticipate
moderate increases in research and development expenses compared to the prior
year.
Selling, general and administrative expenses include costs associated
with marketing, sales, and various administrative activities. Selling, general
and administrative expenses were $1,210,000 and $834,000 in the quarters ended
March 31, 2000 and 1999, respectively. The increase in spending was primarily
due to increases in sales, marketing and administrative headcount compared to
the prior year. We expect sales and marketing expenses to continue to increase
during 2000 to the extent we increase sales of commercial products.
Interest expense was $64,000 and $97,000 for the periods ended March
31, 2000 and 1999, respectively. Interest charges related primarily to our loan
from a leasing company as well as our bank term loan. The decrease in interest
expense was primarily the result of lower average debt levels during the
comparison periods.
Interest and other income was $358,000 and $28,000 for the periods
ended March 31, 2000 and 1999, respectively. The increase in interest income was
primarily the result of higher average cash balances in 2000 compared to 1999.
The net loss recorded for the first quarter of 2000 includes $225,000
in dividends recorded for Series C Preferred Stock as well as a charge of
$2,790,000 for the beneficial conversion feature on the Series C Preferred
Stock, which is being recognized as a deemed dividend to preferred shareholders
over a six month period ending in June 2000.
As a result of incurring losses, we have not incurred any income tax
liability. We have established a valuation allowance against our deferred tax
assets (principally the tax benefit of our net operating losses) and review this
allowance on a periodic basis. At such time that we believe that it is more
likely than not that the deferred tax asset will be realized, the valuation
allowance will be reduced.
We do not believe that inflation has had a material effect on our
financial condition or results of operations during the past two fiscal years.
However, we cannot assure you that our business will not be affected by
inflation in the future.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through:
- $13,251,000 in net proceeds from our initial public offering of
common stock in August 1993.
- $9,892,000 in net proceeds from our follow-on public offering of
common stock in June 1996,
- $49,565,000 raised in private placement financings, including net
proceeds of $14,906,000 raised in December 1999 and $13,670,000 in
January 2000.
- $46,136,000 from U.S. government contracts,
- $1,171,000 in outstanding borrowings under various lease and bank
loan arrangements, and
- $4,231,000 in interest income.
As of March 31, 2000 our aggregate cash and cash equivalents totaled
$26,718,000. Additionally, we have a bank line of credit under which we may
borrow up to a maximum of $2,000,000 based on a limitation of 80% of certain
eligible receivables. As of March 31, 2000, there are no amounts outstanding
under the bank line of credit facility.
8
<PAGE>
Net cash used in operations was $1,466,000 during the quarter ended
March 31, 2000. Net cash used in operations was primarily the result of the
net loss of $2,358,000 partially offset by the effect of non-cash
depreciation and amortization charges of $198,000 during the quarter and the
reduction of accounts receivable. We anticipate that we will incur
significant additional net losses during 2000 and anticipate that our
accounts receivable and inventories may increase during 2000. As a result, we
anticipate the use of additional cash in operating activities during the
remainder of 2000.
Net cash provided by investing activities was $1,921,000 during the
quarter ended March 31, 2000. The balance was primarily related to the proceeds
from sales of short-term investments during the quarter partially offset by
investments in additional property and equipment of $200,000. We anticipate
spending approximately $1,550,000 on capital expenditures during the remainder
of 2000.
Net cash provided by financing activities was $14,306,000 during
the quarter ended March 31, 2000 and was primarily the result of the
financing transaction completed in January 2000.
All of our credit arrangements contain reporting and financial
covenants, which we are required to satisfy. We cannot assure you that we will
satisfy all such covenants in the future. We cannot assure you that if we
default on any of the covenants, we could obtain a waiver of the default from
the lender. In the event of default on any of these covenants, no further
amounts would be advanced to us under any facility, the entire amounts
outstanding could become due and payable immediately upon default, and those
assets that are collateral could be seized, unless such default is waived by the
lender.
To date we have received limited revenues from product sales. The
continued development of our products will require a commitment of substantial
funds to conduct further research and development and testing, to establish
commercial-scale manufacturing and to market these products. We expect to use
significant amounts of cash for capital equipment and to support operations
until product revenues increase. Our future capital requirements will depend on
many factors, including:
- continued progress in our research and development programs,
- the magnitude of these programs,
- the time and cost involved in obtaining any required regulatory
approvals,
- the costs involved in preparing, filing, prosecuting, maintaining
and enforcing patents,
- successful completion of technological, manufacturing and market
requirements,
- changes in existing research relationships,
- the availability of funding under government contracts,
- our ability to establish collaborative arrangements, and
- the cost of manufacturing scale-up and the amount and timing of
future revenues.
We anticipate that existing sources of liquidity and anticipated
revenue, primarily from government contracts will satisfy our projected working
capital and other cash requirements through fiscal 2000. However, there can be
no assurance that changes in our plans or other events affecting Conductus will
not result in the expenditure of our resources before then.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new
9
<PAGE>
standards of accounting and reporting for derivative instruments and hedging
activities. This statement requires that all derivatives be recognized at fair
value in the statement of financial position, and that the corresponding gains
or losses be reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
Statement No. 133 will be effective for fiscal years beginning after June 15,
2000. Conductus does not currently hold derivative instruments or engage in
hedging activities.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
the Financial Statements," which provides guidance on the recognition,
presentation and disclosure of revenue in the financial statements filed with
the SEC. SAB 101 outlines the basic criteria that must be met to recognize
revenue and provide guidance for disclosures related to the revenue recognition
policies.
Conductus is currently studying the implications of these statements
and has not yet determined the impact of their adoption.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Conductus' general policy is to limit the risk of principal loss and
ensure the safety of invested funds by limiting market and credit risk. Our
exposure to financial market risks relates primarily to our exposure to the
impact of changes in interest rates on our fixed income investment portfolio and
long-term debt obligations.
DEBT OBLIGATIONS
Conductus' outstanding debt consists of term loan obligations that are
primarily based on fixed rates. Therefore, our exposure to changes in interest
rates is limited because any increase or decrease in interest rates would not
significantly increase or decrease interest expense on our debt obligations.
10
<PAGE>
PART II: OTHER INFORMATION
Item 1: Legal Proceedings - Not Applicable
----------------------------------
Item 2: Changes in Securities
---------------------
On January 18, 2000, we sold and issued an aggregate of 1,000,000
shares of our Common Stock at a price of $13.66875 per share in a private
placement of our equity. The offering was not underwritten and raised
$13,668,750. Certain institutional and accredited investors purchased shares of
Common Stock in such offering, which sales were exempt from the requirements of
the Securities Act of 1933, as amended (the "Act") pursuant to Rule 506 of
Regulation D under the Act.
Item 3: Default Upon Senior Securities - Not Applicable
-----------------------------------------------
Item 4: Submission of Matters to a Vote of Security Holders - Not Applicable
--------------------------------------------------------------------
Item 5: Other Information - Not Applicable.
-----------------------------------
11
<PAGE>
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(A) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
10.37 Common Stock Purchase Agreement dated January 18, 2000 between the Company and the Investors named
therein.
10.38 Building Leases Amendment Letter dated January 31, 2000 between the Company and the Mozart
Development Company.
27.1 Financial Data Schedule.
- ---------------------
</TABLE>
(B) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter for which this
report is filed.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONDUCTUS, INC.
Dated: May 12, 2000 /S/ Ron Wilderink
-----------------------------------------
Ron Wilderink, Vice President of Finance
and Chief Financial Officer
13
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") dated
January 18, 2000 is entered into by and between Conductus, Inc., a Delaware
corporation (together with its successors, the "Company"), and the investor set
forth on the signature page attached hereto ("Investor").
Unless otherwise defined herein, capitalized terms used herein
and not defined herein shall have the meanings given to them under the
Securities Act of 1933, as amended (the "Securities Act").
The parties hereto agree as follows:
1. PURCHASE AND SALE. In consideration of and upon the basis
of the representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement, Investor agrees to purchase from the
Company, and the Company agrees to sell to Investor, on the Closing Date
specified in Section 2 hereof, the number of shares of the Company's Common
Stock (the "Common Shares") set forth on the signature page attached hereto for
a price per share equal to $13.66875 (the "Purchase Price"). On or before the
Closing Date (as defined below), the Company will have authorized the sale and
issuance of the Common Shares to Investor.
2. CLOSING.
The closing of the sale of the Common Shares (the "Closing")
shall take place on January 18, 2000 upon satisfaction or, if applicable, waiver
of the conditions set forth in Sections 7 and 8 hereof, or at such other date
and time as the Investor and the Company shall mutually agree (such date and
time and any subsequent closing pursuant to Section being referred to herein as
the "Closing Date"). At the Closing, the Company shall deliver to Investor a
certificate representing the Common Shares, against payment by Investor of the
Purchase Price by check or wire transfer of immediately available funds.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Investor as follows:
a. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.
b. All corporate action on the part of the Company, its
officers and directors necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Common Shares has been taken or
<PAGE>
will be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of the Company, enforceable in accordance with
their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies.
c. The Company is not in violation or default of any
provision of its Amended and Restated Certificate of Incorporation or bylaws,
or of any judgment, order, writ, or decree by which it is bound. The Company
is not in violation or default in any material respect of any instrument or
contract to which it is a party or by which it is bound, or, to its
knowledge, of any provision of any federal or state statute, rule or
regulation applicable to the Company, which violation or default would have a
material adverse effect on its business or properties. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event that results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
d. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated
by this Agreement, except the filing pursuant to Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act, which filing
will be effected within 15 days of the sale of the Common Shares hereunder,
or such other post-closing filings as may be required.
e. Except as disclosed in the SEC Filings (as defined
below) (i) there is no action, suit, proceeding or investigation pending or,
to the Company's knowledge, currently threatened against the Company that
questions the validity of this Agreement or the right of the Company to enter
into such agreements, or to consummate the transactions contemplated hereby,
and (ii) there is no action, suit, proceeding or investigation pending or, to
the knowledge of the Company, currently threatened in writing against the
Company, or against any executive officer or director of the Company which
might result, either individually or in the aggregate, in any material
adverse change in the business, properties, financial condition or operating
results of the Company, as such business is presently conducted.
f. The Company has filed all filings with the United
States Securities and Exchange Commission (the "SEC") under the Securities
Act or under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or under the rules and regulations
promulgated by the SEC (any such filing, an "SEC Filing") required to be
filed by the Company pursuant to such acts and no SEC Filing contained, on
the date on which such document was filed with the SEC, any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements, in the
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light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in SEC Filings (including any
similar documents filed after the date of this Agreement) comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto), and fairly present the consolidated
financial position of Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
g. Since the date of the Company's most recent quarterly
report on Form 10-Q or most recent periodic report on Form 8-K filed with the
SEC, there has not been any development that has not otherwise been publicly
disclosed that is reasonably likely to result in any material adverse change
in the financial condition or results of operations of the Company.
h. Except as disclosed in the SEC Filings and as
contemplated hereby, and except for registration rights granted to the
holders of Series C Preferred Stock upon substantially the same terms as the
registration rights granted to the Investor hereunder as set forth in Section
6 hereof, the Company has not granted or agreed to grant any registration
rights, including piggy-back rights, to any person or entity.
i. As of December 10, 1999, the authorized capital stock
of the Company consisted of 5,000,000 shares of Preferred Stock, 50,000 of
which have been designated Series A Junior Participating Preferred Stock
("Series A Preferred Stock"), none of which are issued and outstanding,
4,500,000 of which have been designated Series B Preferred Stock ("Series B
Preferred Stock"), 2,461,227 shares of which are issued and outstanding, and
20,000,000 shares of Common Stock, 7,156,716 shares of which are issued and
outstanding. As of December 22, 1999, 400,000 shares of Preferred Stock have
been designated Series C Preferred Stock, ("Series C Preferred Stock"),
375,000 of which are issued and outstanding. Series C Preferred Stock is
convertible into Common Stock at the rate of 10 shares of Common Stock for
each share of Series C Preferred Stock. The Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and the Common Stock are
collectively referred to herein as the "Capital Stock". All of the issued and
outstanding shares of Capital Stock have been duly authorized, validly issued
and are fully paid and nonassessable.
j. The Common Shares, when issued, sold or delivered in
accordance with the terms hereof, for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable and will be
free of any liens and encumbrances created by the Company and, subject to the
accuracy of the representations of the Investor in this Agreement, will be
issued in compliance with all applicable federal and state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby
represents and warrants to the Company on the date hereof, and agrees with the
Company (unless otherwise specified as provided in the paragraphs below), as
follows:
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a. Investor understands that no United States federal or
state agency has passed on, reviewed or made any recommendation or
endorsement of the Common Shares.
b. Investor has full power and authority to enter into
this Agreement and such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
c. This Agreement is made with Investor in reliance upon
Investor's representation to the Company, which by Investor's execution of
this Agreement Investor hereby confirms, that the Common Shares (below
referred to as the "Securities") will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a present
view to the resale or distribution of any part thereof, and that Investor has
no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Investor further
represents that Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Securities.
d. Investor is an investor in securities of companies in
the development stage and acknowledges that it can bear the economic risk of
its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Securities. Investor also represents it has not been
organized for the purpose of acquiring the Securities.
e. Investor is an "accredited investor" within the
meaning of SEC Rule 501(a) of Regulation D, as presently in effect and all
representations made by Investor in that certain Investor Questionnaire
completed by Investor and delivered to the Company are true and correct in
all respects as if made on the date hereof.
f. Investor understands that the Securities are being
offered and sold in reliance on a transactional exemption from the
registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Investor
set forth herein in order to determine the applicability of such exemptions
and the suitability of the Investor to acquire the Securities.
g. Investor understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration
under the Securities Act, only in certain limited circumstances. In this
connection, Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby
and by the Securities Act.
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<PAGE>
h. Without in any way limiting the representations set
forth above, Investor further agrees not to make any disposition of all or
any portion of the Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by the terms of this
Agreement provided and to the extent such terms are then applicable, and:
(1) There is then in effect a Registration Statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or
(2) (i) Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by the Company, Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in circumstances
that require a designation of an entity's status as an "affiliate".
i. It is understood that the certificates evidencing the
Securities will bear the following legends:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
j. The execution, delivery and performance of this
Agreement and the consummation by Investor of the transactions contemplated
hereby do not and will not (i) result in a violation of Investor's charter
documents or bylaws or (ii) conflict with any material agreement, indenture
or instrument to which Investor is a party, or (iii) result in a violation of
any order, judgment or decree of any court or governmental agency applicable
to Investor or, to the Investor's knowledge, of any law, rule, or regulation.
Investor is not required to obtain any consent or authorization of any
governmental agency in order for it to perform its obligations under this
Agreement.
5. COVENANTS.
a. The Investor covenants and agrees with the Company
that (i) neither Investor nor any of Investor's affiliates nor any person
acting on its or their behalf will at any time offer or sell any Common
Shares, other than pursuant to registration under the Securities Act or
pursuant to an available exemption therefrom, and (ii) that the Investor
shall report to the Company Sales made pursuant to a registration statement
under Section 6 below.
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b. With a view to making available the benefits of
certain rules and regulations of the SEC that may at any time permit the sale
of the restricted securities to the public without registration, the Company
agrees to:
(1) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(2) Use its best efforts to then file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(3) So long as Investor owns any of the Common
Shares, to furnish to the Investor upon request, a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and of the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents of the Company as the Investor may reasonably request in availing
itself of any rule or regulation of the SEC allowing the Investor to sell any
such securities without registration.
6. REGISTRATION RIGHTS.
a. REGISTRATION OF SHARES. The Company shall file with
the SEC, as promptly as practicable following the Closing and in any event
within 120 days after the Closing, a registration statement under the
Securities Act covering the resale to the public by the Investor of the
Common Shares (the "Registration Statement"). The Company shall use its best
efforts to cause the Registration Statement to be declared effective by the
SEC as soon as practicable and in any event within 180 days after the
Closing. The Company shall cause the Registration Statement to remain
effective until the later of 2 years from the Closing Date or such time as
all Common Shares may be sold under Rule 144 within a ninety (90) day period
or such earlier time as all of the Common Shares covered by the Registration
Statement have been sold pursuant thereto.
b. LIMITATIONS ON REGISTRATION RIGHTS.
(1) The Company may, by written notice to the
Investor, (x) delay the filing or effectiveness of the Registration Statement
(for up to a total of sixty (60) days) or (y) suspend (for up to a total of
seventy-five (75) days within any twelve-month period) the Registration
Statement after effectiveness and require that the Investor immediately cease
sales of shares pursuant to the Registration Statement, in the event and
during such period as the Company determines that the existence of any fact
or the happening of any event (including without limitation pending
negotiations relating to, or the consummation of, a transaction or the
occurrence of any other event) would require additional disclosure of
material information by the Company in the Registration Statement the
confidentiality of which the Company has a business purpose to preserve or
which fact or event would render the Company unable to comply with
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<PAGE>
SEC requirements (in either case, a "Suspension Event"). In the case of any
Suspension Event occurring prior to and delaying the filing of the
Registration Statement, the Company shall file the Registration Statement,
the Company shall be required to keep the Registration Statement effective
until the earlier of (x) such time as all of the shares offered thereby have
been disposed of in accordance with the intended methods of distribution set
forth in the Registration Statement or (y) the period required by Section 6.a
above plus an extended period equal to the number of days during which any
such suspension was in effect.
(2) If the Company delays or suspends the
Registration Statement or requires the Investor to cease sales of shares
pursuant to paragraph (1) above, the Company shall, as promptly as
practicable following the termination of the circumstance which entitled the
Company to do so, take such actions as may be necessary to file or reinstate
the effectiveness of the Registration Statement and/or give written notice to
all Investors authorizing them to resume sales pursuant to the Registration
Statement. If as a result thereof the prospectus included in the Registration
Statement has been amended to comply with the requirements of the Securities
Act, the Company shall enclose such revised prospectus with the notice to
Investor given pursuant to this paragraph 2, and the Investor shall make no
offers or sales of shares pursuant to the Registration Statement other than
by means of such revised prospectus.
c. REGISTRATION PROCEDURES.
(1) In connection with the filing by the Company of
the Registration Statement, the Company shall furnish to each Investor a copy
of the prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act and such additional copies as are
reasonably requested by the Investor.
(2) The Company shall use its best efforts to
register or qualify the Common Shares covered by the Registration Statement
under the securities laws of such states as the Investor shall reasonably
request; PROVIDED, HOWEVER, that the Company shall not be required in
connection with this paragraph (ii) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
(3) If the Company has delivered final prospectuses
to the Investor and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly
notify the Investor and, if requested by the Company, the Investor shall
immediately cease making offers or sales of shares under the Registration
Statement and return all prospectuses to the Company. The Company shall
promptly provide the Investor with revised prospectuses and, following
receipt of the revised prospectuses, the Investor shall be free to resume
making offers and sales under the Registration Statement.
(4) The Company shall pay the expenses incurred by it
in complying with its obligations under this Section 6, including all
registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Company, and fees and expenses of accountants for the
Company, but excluding (x) any brokerage fees, selling commissions or
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<PAGE>
underwriting discounts incurred by the Investor in connection with sales
under the Registration Statement and (y) the fees and expenses of any counsel
retained by Investor.
d. REQUIREMENTS OF INVESTOR. The Company shall not be
required to include any Common Shares in the Registration Statement unless
the Investor furnishes to the Company in writing such information regarding
the Investor and the proposed sale of Common Shares by such Investor as the
Company may reasonably request in writing in connection with the Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities.
e. ASSIGNMENT OF RIGHTS. The Investor may not assign any
of its rights under this Section 6 except in connection with the transfer of
some or all of its Common Shares to an affiliated entity or to the limited or
general partner(s) or members of the Investor, PROVIDED each such transferee
agrees in a written instrument delivered to the Company to be bound by the
provisions of this Section 6.
f. INDEMNIFICATION.
(1) To the extent permitted by law, the Company shall
indemnify and hold the Investor, the partners or officers, directors and
stockholders of the Investor, legal counsel and accountants for the Investor,
any underwriter (as defined in the Securities Act) for the Investor and each
person, if any, who controls the Investor or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or any state securities laws,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations in connection with the Registration
Statement (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities laws; and the
Company will reimburse the Investor, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
6.f(1) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based
upon a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by the Investor, underwriter or controlling person; provided further,
however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of the Investor or
underwriter, or any person
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<PAGE>
controlling the Investor or underwriter, from whom the person asserting any
such losses, claims, damages or liabilities purchased shares in the offering,
if the Company shall have furnished to the Investor a revised prospectus (by
amendment or supplement) which cures the defect giving rise to such loss,
claim, damage or liability and if a copy of such revised prospectus (as then
amended or supplemented) was not sent or given by or on behalf of the
Investor or underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the shares
to such person.
(2) To the extent permitted by law, the Investor
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, legal
counsel and accountants for the Company, any underwriter, any other party
selling securities in such registration statement and any controlling person
of any such underwriter or other party, against any losses, claims, damages
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Securities Act, the Exchange Act or any state
securities laws, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by the
Investor expressly for use in connection with such registration; and the
Investor will reimburse any person intended to be indemnified pursuant to
this subsection 6.f(2), for any legal or other expenses reasonably incurred
by such person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 6.f(2) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent
shall not be unreasonably withheld), provided that in no event shall any
indemnity under this subsection 6.f(2) exceed the gross proceeds from the
offering received by such Investor.
(3) Promptly after receipt by an indemnified party
under this Section 6.f of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 6.f,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties that may be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 6.f, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 6.f.
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(4) If the indemnification provided for in this
Section 6.f is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage or
expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relevant intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(5) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.
7. CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATIONS. The
obligations of Investor under subsection 1.a of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions,
unless expressly waived in writing by the Investor:
a. The representations and warranties of the Company
contained in Section 3 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as
of the date of such Closing, except for representations and warranties made
as of a particular date, which shall be true and correct as of such date.
b. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
c. The President of the Company shall deliver to
Investor at the Closing a certificate stating that the conditions specified
in Sections 7.a and 7.b have been fulfilled and stating that there shall have
been no material adverse change in the business, affairs, operations,
properties, assets or financial condition of the Company since the date of
this Agreement.
d. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
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e. The Company shall have delivered to Investor a
certificate representing the Common Shares, duly registered on the books of
the Company in the name of the Investor.
f. Investor shall have received from Orrick, Herrington
& Sutcliffe, LLP, counsel for the Company, an opinion, dated as of the
Closing Date, in substantially the form attached hereto as EXHIBIT A.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The
obligations of the Company to Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor, unless expressly waived in writing by the Company:
a. The representations and warranties of the Investor
contained in Section 4 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as
of the date of such Closing, except for representations and warranties made
as of a particular date, which shall be true and correct as of such date.
b. The Investor shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
c. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
d. The Investor shall have delivered the Purchase Price
for the Common Shares.
9. FEES AND EXPENSES. Each of Investor and the Company agrees
to pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to the fees, expenses and disbursements of
such party's counsel, except as is otherwise expressly provided in this
Agreement.
10. SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC. The
respective representations, warranties, and agreements made herein by or on
behalf of the parties hereto shall remain in full force and effect for a period
of two years from the Closing Date, regardless of any investigation made by or
on behalf of the other party to this Agreement or any officer, director or
employee of, or person controlling or under common control with, such party and
will survive delivery of and payment for the Common Shares.
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11. TERMINATION.
a. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing as follows:
(i) by mutual written consent of the Company and the
Investor; or
(ii) by either the Company or the Investor if the
Closing shall not have occurred on or before January 31, 2000 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 11 shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or before the
Termination Date.
b. In the event of termination of this Agreement by
either the Company or Investor as provided in this Section 11, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of the Company or Investor, other than the provisions
of this Section 11 and Section 13, and except to the extent that such
termination results from the willful and material breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
12. NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon delivery by confirmed facsimile or reliable international
courier service or upon personal delivery to the party to be notified.
13. MISCELLANEOUS.
a. This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
b. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and assigns.
c. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California without regard
to principles of conflict of laws.
d. The provisions of this Agreement are severable, and
if any clause or provision hereof shall be held invalid, illegal or
unenforceable in whole or in part, such invalidity or unenforceability shall
not in any manner affect any other clause or provision of this Agreement.
e. The headings of the sections of this document have
been inserted for convenience of reference only and shall not be deemed to be
a part of this Agreement.
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f. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter of this
Agreement and is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder or under the terms of the
term sheets between such parties.
g. The term "affiliate" is used herein as defined in
Rule 144(a)(1) under the Securities Act.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
CONDUCTUS, INC.
By: /s/ Ron Wilderink
----------------------------------
Name: Ron Wilderink
Title: Chief Financial Officer
No. of Common Shares 500,000 INVESTOR
--------
By: /s/ Jon C. Baker
----------------------------------
Name: Jon C. Baker
Title: Snowdon L.P.
1119 St. Paul St.
Baltimore, MD 21202
(410) 385-2645
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
CONDUCTUS, INC.
By: /s/ Ron Wilderink
----------------------------------
Name: Ron Wilderink
Title: Chief Financial Officer
No. of Common Shares 500,000 INVESTOR
--------
By: /s/ Jon C. Baker
----------------------------------
Name: Jon C. Baker
Title: The Nevis Fund
1119 St. Paul St.
Baltimore, MD 21202
(410) 385-2645
<PAGE>
[THE MOZART DEVELOPMENT COMPANY LETTERHEAD]
January 31, 2000
Mr. Ron Wilderink
Vice President of Finance & Chief Financial Officer
Conductus, Inc.
969 West Maude Avenue
Sunnyvale, California 94086 VIA FAX #408-523-999
RE: The Two (2) December 8, 1994 Lease Agreements, one for the property
at 965 West Maude Avenue and the other on the adjacent property at
969 West Maude Avenue, both by and between Mozart-McKee Limited
Partnership and Conductus, Inc.
Dear Ron:
Pursuant to Paragraph 40 of the Leases listed above, we have received your
Opinion Notice to exercise the extension options. In addition to the lease
extensions, you have requested that the terms of the two building leases be
made coterminous. The purpose of this letter is to propose terms for the
cotermination of leases and to establish the Market Rent for the two
properties.
The initial terms for the 965 and the 969 Maude leases expire August 31, 2000
and August 31, 2001, respectively. To create the cotermination of leases, we
propose a 5.5-year extension as of September 1, 2000 for both buildings. The
extension would commence on September 1, 2000 and expire on February 28, 2006.
To establish a market rent for the two buildings, we reviewed the current
leasing activity on comparable space in the local market. We also consulted
Jim Beeger, a Vice President of Cornish & Carey Commercial and Steve Horton,
a Senior Vice President of CPS Corfac International. We have concluded that
the market rents for the 965 and the 969 Maude buildings are $2.25/SF NNN and
$1.90/SF NNN, respectively, with 3% annual escalations.
In recognition of the 965 Maude building tenant improvements that were paid
for by the Tenant, we propose a $0.15/SF discount in that building's rent.
This would reduce the rent for that building to $2.10/SF. To convert the two
building rents into one, the $2.10/SF and $1.90/SF are averaged. In
conclusion, the rent for the two buildings will be $2.00/SF with 3% annual
bumps.
<PAGE>
January 31, 2000
Page 2
To recognize that the 969 Maude building has one additional year left on the
initial lease term, the rent in first year of the 5.5-year extension period
will be $1.37/SF. This is an average of the new rent of $2.00/SF and the
existing rent of $0.75/SF in the 969 Maude building. A schedule of monthly
base NNN rent is listed below:
STARTING SEPTEMBER 1
- --------------------
OF THE YEAR
- -----------
2000 $1.37/SF
2001 $2.06/SF
2002 $2.12/SF
2003 $2.19/SF
2004 $2.25/SF
2005 $2.32/SF
If you agree with and accept these terms and conditions, please execute the
letter and return it to me. If you have any questions, please do not hesitate
to call me or email; [email protected].
Sincerely,
THE MOZART DEVELOPMENT COMPANY
/s/ JAMES FREITAS
- ----------------------
James Freitas
AGREED AND ACCEPTED,
CONDUCTUS, INC.
/s/ RON WILDERINK
- ----------------------
Ron Wilderink
Vice President of Finance & Chief Financial Officer
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