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As filed with the Securities and Exchange Commission on September 30, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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SUPERCONDUCTOR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0158076
(State of incorporation) (I.R.S. Employer Identification No.)
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(805) 683-7646
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
M. PETER THOMAS
CHIEF EXECUTIVE OFFICER
SUPERCONDUCTOR TECHNOLOGIES INC.
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(805) 683-7646
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
JOHN V. ROOS, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: FROM
TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
share .............................. 2,978,333 $4.719 $14,054,753 $4,147
================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this Registration Statement
also relates to a presumably indeterminate number of shares of Common Stock
which are issuable upon the conversion of Convertible Preferred Stock of the
Company or the payment of dividends thereon, pursuant to the provisions
thereof regarding determination of the applicable conversion price.
(2) Estimated solely for the purpose of computing the registration fee required
by Section 6(b) of the Securities Act and computed pursuant to Rule 457(c)
under the Securities Act based upon the average of the high and low prices
of the Common Stock on September 28, 1998, as reported on the Nasdaq
National Market.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION
8(a), MAY DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
State.
PROSPECTUS
(Subject to completion, dated September 30, 1998)
2,978,333 SHARES
SUPERCONDUCTOR TECHNOLOGIES INC.
COMMON STOCK
The shares (the "Shares") of Common Stock, $.001 par value (the "Common
Stock"), of Superconductor Technologies Inc. (the "Company") covered by this
Prospectus may be sold from time to time by the stockholders specified in this
Prospectus or their pledgees, donees, transferees or other successors in
interest (the "Selling Stockholders"). See "Selling Stockholders." This
Prospectus relates to (a) 2,978,333 Shares, of which (i) 1,291,666 are Shares
which may in the future be issued to certain Selling Stockholders upon the
conversion of outstanding shares of the Company's Series A Preferred Stock (the
"Series A Stock"), (ii) 250,000 are Shares which may in the future be issued to
certain Selling Stockholders upon the conversion of outstanding shares of the
Company's Series A-1 Preferred Stock (the "Series A-1 Stock"), (iii) 1,000,000
are Shares which may in the future be issued to certain Selling Stockholders
upon the conversion of outstanding shares of the Company's Series B Preferred
Stock (the "Series B Stock") and (iv) 436,667 are Shares which may in the future
be issued to the Selling Stockholders upon the exercise of outstanding warrants
held by the Selling Stockholders (the "Warrants"), and (b) such presently
indeterminate number of additional Shares as may be issuable upon conversion of
the Series A Stock, the Series A-1 Stock and the Series B Stock or the payment
of dividends thereon, based upon fluctuations in the conversion price of the
Series A Stock, the Series A-1 Stock and the Series B Stock, in accordance with
Rule 416 under the Securities Act of 1933, as amended (the "Securities Act").
The Shares issuable upon conversion of the Series A Stock , Series A-1 Stock and
Series B Stock are subject to adjustment and could be more or less than the
estimated amount listed herein depending on factors which cannot be predicted at
this time. The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders, but the Company may receive the proceeds
from the exercise of the Warrants by the Selling Stockholders. See "Use of
Proceeds." None of the Shares offered pursuant to this Prospectus have been
registered prior to the filing of the Registration Statement of which this
Prospectus is a part.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus. It is
anticipated, however, that the Shares may be offered by the Selling Stockholders
from time to time in one or more transactions on the Nasdaq National Market, in
privately negotiated transactions at such prices as may be agreed upon, or in a
combination of such methods of sale. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Plan of Distribution." The price at which any of
the Shares may be sold, and the commissions, if any, paid in connection with any
such sale, are unknown and may vary from transaction to transaction. The Company
will pay all expenses incident to the offering and sale of the Shares to the
public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Stockholders" and "Plan of
Distribution."
The Common Stock is listed on the Nasdaq National Market under the symbol
"SCON." On September 29, 1998, the last sale price of the Common Stock was
$4.56 per share.
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AN INVESTMENT IN THE SHARES OFFERED HEREBY ENTAILS A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
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The Securities and Exchange Commission (the "Commission") may take the view
that, under certain circumstances, the Selling Stockholders and any
broker-dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act. The Company and the Selling Stockholders have agreed to
certain indemnification arrangements. See "Plan of Distribution."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS SEPTEMBER 30, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048 and Chicago Regional Office, Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained by mail at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. The Common Stock of the Company is listed on the Nasdaq
National Market, and such reports, proxy and information statements and other
information concerning the Company may be inspected at the offices of Nasdaq
Operations, 1735 K Street, NW, Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement. The Registration
Statement may be inspected at the public reference facilities maintained by the
Commission at the addresses set forth in the preceding paragraph. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 28, 1998 and June 27, 1998;
(3) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission on January
4, 1993; and
(4) All other reports filed by the Company pursuant to Sections 13(a) or
15(d) of the Exchange Act since December 31, 1997.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference into this Prospectus, to the extent required, and to
be a part of this Prospectus from the date of filing of such reports and
documents.
Any statement contained in a document incorporated by reference into this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated by reference into this Prospectus (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be submitted in writing
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to Investor Relations, Superconductor Technologies Inc., 460 Ward Drive, Suite
F, Santa Barbara, 93111-2310, or by telephone at (805) 683-7646.
THE COMPANY
Superconductor Technologies Inc. (the "Company") develops, manufactures
and markets superconductor materials and related cryogenics. High-temperature
superconductors ("HTS") are materials that have the ability to conduct
electrical energy with little or no resistance when cooled to "critical"
temperatures. The Company believes that the growing worldwide wireless
communications market offers the most viable commercialization opportunities for
its superconducting products. To capitalize on these opportunities the Company
has developed its SuperFilter (TM) products, which combine specialized
superconducting filters with a proprietary cryogenic cooler and, in many cases,
a low noise amplifier ("LNA") in a highly compact system. The SuperFilter (TM)
products, when incorporated into wireless base stations, offer significant
advantages over conventional filter products for wireless applications,
including reduced size, increased range and reduced interference.
During the past 18 months, the Company has transitioned from focusing
on research and development to introducing its first commercial product line and
establishing the manufacturing infrastructure to support the product. The
Company introduced the SuperFilter (TM) system for application in the AMPS/B
segment of the cellular market in March 1997 and completed the cellular
offerings by introducing the AMPS/A product in February 1998.
As a result of the product introductions, the Company has significantly
expanded its sales and marketing efforts. The Company has added four Regional
Sales Executives to cover the United States and Latin America. The Company's
sales and marketing effort has been directed primarily at rural and suburban
cellular providers as the Company believes they will be the early deployers of
product. The Company's product addresses the two most critical needs of these
service providers: range coverage and call quality. In addition, the Company
continues to pursue and develop urban applications and its relationship with the
base station original equipment manufacturers ("OEMs").
In order to support the SuperFilter (TM) product introductions, the
Company began the establishment of a manufacturing infrastructure in 1997 which
includes operating units to support the production of all critical components
including the superconducting filters, cryogenic coolers, cryogenic packaging
and final enclosures, and quality and material control functions. In addition,
the Company has expanded its manufacturing space and has procured the necessary
equipment and tooling to produce its product in greater volume.
A critical component of any superconducting application is cryogenic
cooling. The Company has developed a proprietary cryogenic cooler which, in
addition to being integrated into its SuperFilter (TM) systems, has the
potential to be used in other applications. These other applications include
home medical products, cold computing to increase the processing speeds of
computers, and components of various kinds of instrumentation. The Company
believes that the successful commercialization of its cryogenic coolers as stand
alone products will assist in its ability to achieve economies of scale
associated with volume production.
Since its formation in 1987 and through June 27, 1998, the Company has
received over $ 48.7 million in revenue from government research and development
contracts, through which it has developed much of the technology used in its
commercial products. The Company continues to secure government contracts,
primarily to fund its research and development efforts, and also to address
potential wireless product opportunities in the government section.
The principal executive officers of the Company are located at 460 Ward
Drive, Suite F, Santa Barbara, California 93111-2310, 805-683-7646.
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RISK FACTORS
THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE STATEMENTS
CONTAINED IN THIS PROSPECTUS THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S EXPECTATIONS, BELIEFS, ESTIMATES, INTENTIONS AND STRATEGIES ABOUT THE
FUTURE. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES,"
"SEEKS," "ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE
FOLLOWING RISK FACTORS, ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE. POTENTIAL INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING FACTORS, AS WELL AS THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY REFERENCE, BEFORE MAKING
A DECISION TO INVEST IN THE SHARES OFFERED HEREBY.
EARLY STAGE OF THE COMMERCIAL SUPERCONDUCTOR PRODUCTS MARKET: MARKET ACCEPTANCE
AND RELIABILITY
The commercial superconductor products market has experienced limited
product commercialization to date. Moreover, since inception, the Company has
been principally engaged in research and development activities and has only
limited experience in the commercialization of its products. The Company's
ability to grow will depend on its ability to successfully transition its
expertise in superconducting filter and cryogenics technologies and applications
to commercial markets, including the wireless communications market. The
Company's success in this regard will depend upon a number of factors, including
successful product testing by its potential customers, the success of the
Company's sales and marketing efforts into the wireless communications market,
the ability of the Company's products to achieve its anticipated benefits, its
ability to attract and retain qualified personnel, successful and rapid scale-up
of the Company's manufacturing capacity, the establishment of satisfactory
vendor relationships to ensure continual supply of key components which are
sourced outside the company, reduction of manufacturing expenses in order to
price products competitively and continued product development to meet customer
demands. While the Company's product has been field tested by its customers and
has passed performance and reliability testing, there can be no assurances that
the product will continue to pass these tests or meet the customers' performance
expectations in the future. If such problems occur, the Company could experience
increased costs, delays, reductions or cancellations of orders and shipments,
and product returns and discounts. There can be no assurance that the Company
will be able to produce its products in sufficient volume to meet market demand
or that any of the Company's products will achieve full market acceptance. If
the Company is unable to manufacture and market its products for its target
markets successfully, its business, results of operations and financial
condition will be materially and adversely affected.
DEPENDENCE ON SALES TO SERVICE PROVIDERS AND OEMS
Most of the Company's products, including those developed for wireless
communications base stations and government applications, are intended for use
as components or subsystems in base station systems or other complex systems.
Therefore, to gain market acceptance, particularly in the wireless market, the
Company must demonstrate that its products will provide advantages to the
service providers who utilize base station systems and the OEMs that manufacture
base station systems. These benefits include a decrease in system size, an
increase in base station range and a reduction in interference. There can be no
assurance that upon acceptance, the Company's products will be able to achieve
any of these advantages. Moreover, even if the Company is able to demonstrate
such advantages, there can be no assurance that service providers and OEMs will
elect to incorporate the Company's products into their systems or, if they
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do, that related system and manufacturing requirements can or will be met.
Failure of service providers or OEMs to incorporate the Company's products into
their systems or failure of such systems including the SuperFilter(TM) product
to achieve market acceptance would have a material adverse effect on the
Company's business, results of operations and financial condition.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has sold products only in limited quantities,
primarily for use in field-testing as well as development and prototypes. During
the first half of 1998, the Company significantly increased its manufacturing
capacity in order to meet the increased demand for its products as well as
expected future requirements. While the company has increased its manufacturing
capacity, there can be no assurances that the Company will be successful in
overcoming the technological, engineering and management challenges associated
with the production of commercial quantities of superconducting or cryogenic
products at acceptable costs and on a timely basis. For example, the Company
could incur significant ramp-up costs and unforeseen expenses and delays in
connection with attempts to manufacture commercial quantities of superconducting
and cryogenic products, which could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
a portion of the components of the SuperFilter (TM) system will be manufactured
outside the Company. There can be no assurances that the Company will, if at
all, be able to identify manufacturers of these components that will meet the
Company's requirements as to reliability, timeliness and cost-effectiveness.
Any such failure will limit the Company's ability to satisfy customer
orders and would have a material adverse effect on the Company's business,
results of operations and financial condition.
HIGH DEGREE OF DEPENDENCE ON GOVERNMENT CONTRACTS
Since inception and through June 27, 1998, 94% of the Company's net
revenues have been from research and development contract sales directly to the
government or to resellers to the government. Nearly all of such revenues were
earned under contracts between the Company and the United States Department of
Defense (the "DOD"). The Company uses these contracts to help fund its research
and development programs. Although the Company recently has been devoting
substantial resources to the development of commercial markets for its products,
the Company is, and expects to continue to be in the near term, dependent on
government funding for its research and development projects. The DoD has been
reducing total expenditures over the past few years, and while to date DoD
research and development funding for electronics has been relatively stable
despite overall cutbacks, there can be no assurance that such funding will not
be reduced in the future. Absent significant future revenues from commercial
sales, a significant loss of government funding would have a material adverse
effect on the Company's business, results of operations and financial condition.
Virtually all of the Company's government contracts are terminable at
any time at the option of the government. Although the Company historically has
complied with applicable government regulations and contract provisions, there
can be no assurance as to such compliance in the future. Noncompliance with
government procurement regulations or contract provisions could result in
termination of government contracts, substantial monetary fines or damages,
suspension or debarment from doing business with the government and possible
civil or criminal liability. During the term of any suspension or debarment by a
government agency, the Company could be prohibited from competing for or being
awarded any contract by any government agency. The termination of the Company's
significant government contracts, the imposition of fines, damages, suspension
or debarment, or the adoption of new or modified procurement regulations or
practices could have a material adverse effect on the Company's business,
results of operations and financial condition.
Inventions conceived or actually reduced to practice under a government
contract generally result in the government obtaining a royalty-free, paid-up,
non-exclusive license to practice the invention. Similarly, technologies
developed in whole or in part at government expense generally result in the
government obtaining unlimited rights to use, duplicate or disclose technical
data produced under the contract. There can be no assurance that such licenses
and rights will not result in a loss by the Company of potential revenues or the
disclosure of any of the Company's proprietary information, either of which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
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INTENSE COMPETITION
The markets for the Company's products are intensely competitive. The
Company faces competition in various aspects of its technology and product
development and in each of the markets targeted by the Company. The Company's
current and potential competitors include conventional RF filter manufacturers
and both established and newly emerging companies developing similar or
competing superconducting technologies. The Company competes primarily with
Conductus, Inc. and Illinois Superconductor Corporation, with respect to its
superconducting filter systems. The Company also competes with alternative means
of enhancing base stations range and selectivity other than by superconducting
filter. The primary competition comes from tower mount and ground mount
amplifiers and "smart" antennas. Tower mount and ground mount amplifiers pass
the signal received by the antenna through a broad low level filter which then
amplifies the signal. These units are produced by a number of companies, which
include most of the OEMs of base stations such as Motorola, Lucent, Nortel and
Nokia. These units are also produced by filter manufacturers including Allen
Telecom and Cellwave. The "smart" antennas allow the antennas to focus on the
signal they are trying to receive to enhance the ability to receive the signal.
Among the companies that produce these systems are Metawave and Arraycom.
In addition, the Company currently supplies components and licenses
technology to large companies and industry leaders that may decide to
manufacture or design their own superconducting components instead of purchasing
them, or licensing the technology, from the Company. The Company competes with
IBM, DuPont, Matsushita and Amtel, a Japanese consortium, among others, with
respect to its HTS materials. In the government sector, the Company competes
with universities, national laboratories and both large and small companies for
research and development contracts. The Company expects increased competition
both from existing competitors and a number of companies that may enter the
wireless communications market.
The Company also competes in cryogenic coolers with companies such as
CTI Cryogenics, Leybold and Ricor. CTI Cryogenics uses another cooling method
than is employed by the Company, which is not as efficient and thus requires
additional power. Leybold and Ricor have produced similar units to one produced
by the Company in limited or prototype quantities.
The Company believes that it competes on the basis of technological
sophistication, product performance, reliability, quality, cost-effectiveness
and product availability. Many of the Company's current and potential
competitors have significantly greater financial, technical, manufacturing and
marketing resources than the Company. The Company's ability to effectively
compete will require it to successfully manufacture and market its current
products at a sufficiently low cost to achieve commercial acceptance, develop
and maintain technologically advanced products, attract and retain highly
qualified personnel and obtain patent or other protection for its technology and
products. There can be no assurance that the Company will be able to compete
successfully in the future.
ACCUMULATED DEFICIT AND ANTICIPATED FUTURE LOSSES
The Company has incurred net losses each year since its inception and,
as of June 27, 1998, had an accumulated deficit of $31,072,000. The Company
expects to continue to incur significant operating losses over the next several
quarters as it continues to devote significant financial resources to the
commercialization of wireless and cold computing products, the expansion of
Company operations and product development activities. The success of the
Company in this regard is dependent upon the Company's successful
commercialization of its HTS filter systems for the worldwide wireless
communications market, and there can be no assurance that the Company will be
able to successfully commercialize such products. As a result, the timing of
when the Company will be profitable and the amount of net losses until that time
are uncertain.
DEPENDENCE OF KEY PERSONNEL
The Company is highly dependent upon the efforts of its technical
workforce and senior management. Due to the specialized technical nature of the
Company's business, the Company is also highly dependent upon its ability to
attract and retain qualified technical personnel, primarily in the areas of
wireless communications and cold computing. The loss of the services of one or
more members of the senior management or technical teams could impede STI's
ability to achieve its product development and commercialization objectives.
There is intense competition for qualified
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personnel in the areas of the Company's activities and there can be no assurance
that the Company will be able to continue to attract and retain qualified
personnel necessary for the development of its business.
LIMITED MARKETING AND SALES CAPABILITIES
In order for the Company to successfully reach full market acceptance
in its targeted markets, it must continue to develop appropriate marketing,
sales, technical, customer service and distribution capabilities, or it must
enter into agreements with third parties to provide such services. There can be
no assurance that the Company's continuing efforts in developing its marketing
and sales capabilities, including customer service and distribution, will be
successful. Furthermore, there can be no assurance that such third party
agreements can be obtained upon acceptable terms. Failure to develop such
capabilities or obtain such third party agreements could have a material adverse
effect on the acceptance of the Company's products in the commercial markets
and, as a result, on the Company's business, results of operations and financial
condition.
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of patent, trademark, trade secret
and copyright law and internal procedures and nondisclosure agreements to
protect its intellectual property. There can be no assurance that the Company's
intellectual property rights can be successfully asserted in the future or will
not be invalidated, circumvented or challenged. In addition, the laws of certain
foreign countries in which the Company's products may be produced or sold do not
protect the Company's intellectual property rights to the same extent as the
laws of the United States. The failure of the Company to protect its proprietary
information could have a material adverse effect on the Company's business,
results of operations and financial condition.
The Company has an exclusive, worldwide license, in all fields of use,
to formulations covered by patents held by the University of Arkansas covering
thallium barium calcium copper oxide ("TBCCO"), the material upon which the
Company primarily relies for its HTS, products and product development. There
can be no assurance that the validity of these patents will not be subject to
challenge. In addition, other parties may have developed similar materials
utilizing TBCCO formulations and may design around the patented aspects of this
material. Under the terms of its exclusive license, the Company has agreed to
assume litigation expenses for infringement actions, subject to a right of set
off against future royalty obligations. If the Company is required to incur
significant expenses under this agreement, the Company's results of operations
and financial condition could be materially and adversely affected. In addition,
the Company has granted each of DuPont and Superconducting Core Technologies,
Inc. and its affiliates a non-exclusive worldwide sublicense under its license
with the University of Arkansas to develop and market TBCCO materials and
superconducting technologies. There can be no assurance that these sublicenses
will not adversely affect the Company's business, results of operations and
financial condition.
The Company believes that a number of patent applications are pending
that cover the composition yttrium barium copper oxide ("YBCO") including
applications filed by IBM, AT&T and other large potential competitors of the
Company. YBCO is an HTS material upon which the Company also relies, although to
a lesser extent than TBCCO. The Company understands that such applications are
the subject of interference proceedings currently pending in the U.S. Patent and
Trademark Office. The Company is not involved in these proceedings. In addition,
the Company has been issued patents for specific compounds that it uses. The
Company believes that a number of international patents may be pending regarding
other specific YBCO compounds. There is a substantial risk that one or more
third parties will be granted patents covering YBCO and that the Company's use
of these materials may require a license. As with other patents, there can be no
assurance that the Company will be able to obtain licenses to any such patents
for YBCO or other materials or that such licenses would be available on
commercially reasonable terms. The Company's efforts to develop products based
on YBCO would be substantially impaired by its failure to obtain any such
license for YBCO, and such failure could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company owns or has rights under a number of patents and pending
patent applications related to the processing of TBCCO and YBCO. There can be no
assurance that the patent applications filed by the Company will result in
patents being issued, that any patents issued will afford meaningful protection
against competitors with similar technology, or that any patents issued will not
be challenged by third parties. Since U.S. patent applications are maintained in
secrecy until patents are issued, and since publications of discoveries in the
scientific or patent literature
-7-
<PAGE> 9
tend to lag behind actual discoveries by several months, the Company cannot be
certain that it was the first creator of inventions covered by issued patents or
pending patent applications or that it was the first to file patent applications
for such inventions. Moreover, there can be no assurance that other parties will
not independently develop similar technologies, duplicate the Company's
technologies or, if patents are issued to the Company or rights licensed by the
Company, design around the patented aspects of any technologies developed or
licensed by the Company. The Company may have to participate in interference
proceedings declared by the U.S. Patent and Trademark Office to determine the
priority of inventions, which could result in substantial costs to the Company.
Litigation may also be necessary to enforce any patents held by or issued to the
Company or to determine the scope and validity of others' proprietary rights,
which could result in substantial costs to the Company.
The rapid rate of inventions and discoveries in the superconductivity
field has raised many patent issues which are not resolved at this time. The
claims in the granted patents often overlap and there are disputes involving
rights to inventions claimed in pending patent applications. As a result, the
patent situation in the HTS field is unusually complex. It is likely that there
will be patents held by third parties relating to the Company's products or
technology. Therefore, the Company may need to acquire licenses to design around
or successfully contest the validity or enforceability of such patents. The
extent to which the Company may be able to acquire necessary licenses is not
known. It is also possible that because of the number and scope of patents
pending or issued, the Company may be required to obtain multiple licenses in
order to use a single material. If the Company is required to obtain multiple
licenses, the cost to the Company of HTS materials will increase. Furthermore,
there can be no assurance that such licenses would be available on commercially
reasonable terms or at all. The likelihood of successfully contesting the
validity or enforceability of such patents is also uncertain, and, in any event,
the Company could incur substantial costs in defending the validity or scope of
its patents or challenging the patents of others.
RAPID TECHNOLOGICAL CHANGE
The field of superconductivity is characterized by rapidly advancing
technology. The future success of the Company will depend in large part upon its
ability to keep pace with advancing superconductor technology, including
superconducting materials and processes and industry standards. The Company has
focused its development efforts on TBCCO and, to a lesser extent, YBCO. There
can be no assurance that either TBCCO or YBCO will ultimately prove commercially
competitive against other currently known materials or materials that may be
discovered in the future. The Company intends to continue to develop and
integrate advances in wireless filter and cryogenic cooling technologies in the
manufacture of commercial quantities of products. The Company will also need to
continue to develop and integrate advances in complementary technologies,
particularly in the wireless communication industry. There can be no assurance
that the Company's development efforts will not be rendered obsolete by research
efforts and technological advances made by others or that materials other than
those currently used by the Company will not prove more advantageous for the
commercialization of HTS products.
MATERIALS RISKS
To date, the Company has principally focused its development efforts on
TBCCO. Although TBCCO has one of the highest critical temperatures of any HTS
material verified by the scientific community to date, other HTS materials are
currently known to have advantages over TBCCO with respect to certain
applications. There can be no assurance that TBCCO will ultimately prove
commercially competitive against YBCO or against other currently known
materials. Moreover, there is no assurance that other materials will not be
discovered with higher critical temperatures or other superior qualities or that
the Company will be able to obtain the rights to any such superior material.
The Company currently purchases substrates for growth of HTS thin films
from two primary suppliers because of the quality of the substrate provided by
such suppliers. There are additional components which the Company sources from a
single vendor due to the present volume. While the Company is aware of
alternative sources for its components, the establishment of relationships with
additional or replacement suppliers could be time consuming and result in a
supply interruption which would have a material adverse effect on the Company's
ability to manufacture its products in commercial quantities and,
correspondingly, upon its business, results of operations and financial
condition.
-8-
<PAGE> 10
BUSINESS INTERRUPTIONS AND DEPENDENCE ON A SINGLE U.S. FACILITY
The Company's primary operations, including engineering, manufacturing,
customer service, distribution and general administration, are housed in a
single facility in Santa Barbara, California. Any material disruption in the
Company's operations, whether due to fire, natural disaster or otherwise, could
have a material adverse effect on the Company's business, results of operations
and financial condition.
HAZARDOUS MATERIALS; ENVIRONMENTAL REGULATIONS
The Company uses certain hazardous materials in its research,
development and manufacturing operations. As a result, the Company is subject to
stringent federal, state and local regulations governing the storage, use and
disposal of such materials. It is possible that current or future laws and
regulations could require the Company to make substantial expenditures for
preventive or remedial action, reduction of chemical exposure, or waste
treatment or disposal. There can be no assurance that the operations, business
or assets of the Company will not be materially and adversely affected by the
interpretation and enforcement of current or future environmental laws and
regulations. In addition, although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, nevertheless there is the
risk of accidental contamination or injury from these materials. To date, the
Company has not incurred substantial expenditures for preventive action with
respect to hazardous materials or for remedial action with respect to any
hazardous materials accident. If such an accident occurred, the Company could be
held liable for any resulting damages. Furthermore, the use and disposal of
hazardous materials involves the risk that the Company could be required to
incur substantial expenditures for such preventive or remedial actions. The
liability in the event of an accident or the costs of such actions could exceed
the Company's resources or otherwise have a material adverse effect on the
Company's business, results of operations and financial condition.
FUTURE CAPITAL NEEDS
To date, the Company has financed its operations primarily through equity,
debt, equipment and lease financings. To date, the Company has raised $44
million in equity, net of related expenses. In addition, the Company currently
has outstanding indebtedness and lease financings of $820,000 and an additional
$350,000 available under debt and lease financings. Although the Company
believes that its current funds, including the aggregate $8.875 million of
proceeds from its sale of the Series A Stock, Series A-1 Stock and Series B
Stock to certain Selling Stockholders on March 26, 1998, August 11, 1998 and
September 2, 1998, respectively, are sufficient to finance the Company's
operations as planned for the next 12 months, the Company will require
additional funds to finance its operations thereafter. There can be no assurance
that additional financing will be available on terms acceptable to the Company,
if at all. Also, depending upon the timing of market acceptance of the Company's
products and the additional manufacturing ramp-up necessary to support the
market acceptance, additional working capital financing may be required within
the next 12 months to fully implement the Company's business plan. Under such
circumstances, the Company's inability to fully implement its business plan,
including the procurement of additional financing, would have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, certain Selling Stockholders have been granted certain rights of first
refusal to participate in certain future issuances of equity securities. These
rights of first refusal could impair the Company's ability to obtain additional
equity financings. If additional funds are raised by issuing other equity
securities, further dilution to existing or future stockholders is likely to
result.
VOLATILITY OF COMMON STOCK PRICE
The market price of the Common Stock, like that of many other
high-technology companies, has fluctuated significantly and is likely to
continue to fluctuate in the future. Announcements by the Company or others
regarding the receipt of customer orders, quarterly variations in operating
results, additional equity financings, changes in recommendations of securities
analysts, results of customer field trials, scientific discoveries,
technological innovations, litigation, product developments, patent or
proprietary rights, government regulation and general market conditions may have
a significant impact on the market price of the Common Stock. In addition, the
securities markets have experienced volatility which is often unrelated to the
operating performance of particular companies. In the past, following a period
of volatility in the market price of a company's securities, securities class
action lawsuits have been instituted against some
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<PAGE> 11
companies. If brought, the costs of defending such litigation could have a
material adverse effect on the Company's business, results of operation and
financial condition.
SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE
On March 26, 1998, August 11, 1998 and September 2, 1998, the Company sold
645,833 shares of Series A Stock, 125,000 shares of Series A-1 Stock and 500,000
shares of Series B Stock, respectively, to certain Selling Stockholders in
private placements pursuant to three convertible preferred stock purchase
agreements. Each share of Series A Stock, Series A-1 Stock and Series B Stock is
initially convertible into two shares of Common Stock. No shares of Series A
Stock, Series A-1 Stock or Series B Stock have been converted into shares of
Common Stock as of the date hereof. In connection with the issuances of the
Series A Stock, Series A-1 Stock and Series B Stock, Warrants exercisable for an
aggregate of 286,667 shares of Common Stock were also issued to certain Selling
Stockholders. Also, in connection with a public offering of the Common Stock in
November 1996, Warrants exercisable for an aggregate of 150,000 shares of Common
Stock were issued to a certain Selling Stockholder. The Warrants have not been
exercised for shares of Common Stock as of the date hereof.
Pursuant to the securities purchase agreement in connection with the Series
B Stock financing, the Company may be obligated to grant additional warrants
exercisable for up to 454,545 shares of Common Stock under certain conditions.
The Company may also issue additional capital stock, warrants and/or other
securities to raise capital in the future. In order to attract and retain key
personnel, the Company may also issue additional securities, including stock
options, in connection with its employee benefit plans. During the terms of such
options, warrants, Series A Stock, Series A-1 Stock and Series B Stock, if any,
the holders thereof are given the opportunity to benefit from a rise in the
market price of the Common Stock.
The sale of a substantial number of shares of Common Stock by the Company
or any of its significant stockholders, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock.
In connection with the Registration Statement of which this Prospectus is a
part, 2,978,333 Shares are being registered by the Company for public resale, of
which (i) 1,291,666 are Shares which may in the future be issued to certain
Selling Stockholders upon the conversion of outstanding shares of Series A
Stock, (ii) 250,000 are Shares which may in the future be issued to certain
Selling Stockholders upon the conversion of outstanding shares of Series A-1
Stock, (iii) 1,000,000 are Shares which may be issued to certain Selling
Stockholders upon the conversion of outstanding shares of Series B Stock and
(iv) 436,667 are Shares which may in the future be issued to the Selling
Stockholders upon the exercise of Warrants. In addition, in connection with the
Registration Statement of which this Prospectus is a part, a presently
indeterminate number of additional Shares as may be issuable upon conversion of
the Series A Stock, the Series A-1 Stock and the Series B Stock or the payment
of dividends thereon are being registered by the Company for public resale in
accordance with Rule 416 under the Securities Act. There can be no assurance
that the Company will not be obligated to register additional shares of Common
Stock for public resale prior to or upon conversion of the Series A Stock, the
Series A-1 Stock and the Series B Stock depending on, among other factors, the
future market price of the Common Stock. The increase in the number of
outstanding shares of Common Stock that are available for sale without
restriction due to the registration of the Shares and the perception that a
substantial number of the Shares may be sold by the Selling Stockholders, or the
actual sale of a substantial number of the Shares by the Selling Stockholders,
could adversely affect the market price of the Common Stock. The Company is
unable to make any prediction as to the effect, if any, that future sales of
Common Stock or the availability of Common Stock for sale may have on the market
price of the Common Stock prevailing from time to time. In addition, any such
sale or such perception could make it more difficult for the Company to sell
equity securities in the future at a time and price that the Company deems
appropriate.
The Company currently has outstanding warrants to purchase 436,667 shares
of Common Stock at a weighted average exercise price of $4.64 per share and
options to purchase 1,800,726 shares of Common Stock at a weighted average
exercise price of $4.40 per share (952,721 of which have not yet vested) issued
to employees, directors and consultants pursuant to the Company's various stock
option plans and individual agreements with management and directors of the
Company.
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<PAGE> 12
DILUTION AND DIVIDEND POLICY
The conversion of Series A Stock, Series A-1 Stock or Series B Stock, or
the exercise of options and warrants, including the Warrants, as well as the
sale by the Company of additional securities and/or rights to purchase such
securities, would likely have an adverse or dilutive effect on the market value
of the Common Stock, including the shares of Common Stock being offered hereby.
The Series A Stock, Series A-1 Stock and Series B Stock may be converted into
shares of Common Stock at a discount to the market price of the Common Stock on
the particular date of conversion. The Company also may in the future offer
equity participation in connection with the obtaining of non-equity financing,
such as debt or leasing arrangements accompanied by warrants to purchase equity
securities of the Company. This could also have a dilutive effect upon the
holders of Common Stock.
The Company has never paid a cash dividend on its Common Stock and does not
expect to do so in the foreseeable future. Cumulative dividends on the Series A
Stock, Series A-1 Stock and Series B Stock are payable at the rates of 6%, 6%
and 7% per annum, respectively. While the Series A Stock, Series A-1 Stock and
Series B Stock are outstanding, the Company is limited in its ability to pay
dividends on the Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws, each as amended to
date, contain provisions that could delay, deter or prevent a merger, tender
offer or other business combination or change in control involving the Company
that some or a majority of the stockholders might consider to be in their best
interests, including offers or attempted takeovers that might otherwise result
in such stockholders receiving a premium over the market price of the Common
Stock.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code filed. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century date from 20th century dates. As a result, in
approximately two years, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists concerning the potential effects associated with
compliance. The Company currently uses a limited number of software products
which are not Year 2000 compliant. However, the Company has acquired
manufacturing software, which has replaced substantially all non-Year 2000
compliant software, in order to support its expansion efforts. The software
developer has represented that the new software is Year 2000 compliant.
Nonetheless, there can be no assurance that coding errors or other defects will
not be discovered in the future. Any Year 2000 compliance problem of the Company
could result in a material adverse effect on the Company's business, operating
results and financial conditions. However, the Company currently does not expect
the amounts required to be expensed to become Year 2000 compliant to have a
material effect on its financial position or results of operations.
-11-
<PAGE> 13
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders. If and when all or a portion of the Warrants are
exercised and up to 436,667 Shares are issued to the Selling Stockholders, the
Company will receive the proceeds from the sale of such Shares to the Selling
Stockholders to the extent that such warrants are exercised with cash
consideration and not through warrant conversion. If the warrants are exercised
in full and with cash consideration, the Company will receive $2,025,668. Such
amount is intended to be used by the Company for working capital and other
general corporate purposes. See "Selling Stockholders" and "Plan of
Distribution" described below.
-12-
<PAGE> 14
SELLING STOCKHOLDERS
The following table sets forth, as of September 30, 1998, certain
information regarding the beneficial ownership of the outstanding Common Stock
by the Selling Stockholders, consisting of the Shares which the Selling
Stockholders may be issued upon conversion of the Series A Stock, the Series A-1
Stock and the Series B Stock and the Shares which the Selling Stockholders may
acquire upon exercise of the Warrants, both before the offering of the Shares
and as adjusted to reflect the sale of the Shares.
The Company has agreed to initially register 2,978,333 Shares for resale by
the Selling Stockholders. The Shares being offered by the Selling Stockholders
were acquired from the Company (i) in private placement transactions pursuant to
the Series A Preferred Stock Purchase Agreement dated March 26, 1998 (the
"Series A Agreement"), Series A-1 Preferred Stock Purchase Agreement dated
August 11, 1998 (the "Series A-1 Agreement") and Securities Purchase Agreement
dated September 2, 1998 (the "Series B Agreement", and collectively, with the
Series A Agreement and Series A-1 Agreement, the "Purchase Agreements") and (ii)
upon exercise of the Warrants. Each Selling Stockholder that purchased the
Shares pursuant to the Purchase Agreements represented to the Company that it
would acquire the Shares for investment and with no present intention of
distributing any such Shares except pursuant to this Prospectus or sales exempt
from the registration requirements of the Securities Act. Pursuant to its
obligation under the Registration Rights Agreement dated September 2, 1998 (the
"Registration Rights Agreement"), the Company filed with the Commission, under
the Securities Act, a Registration Statement on Form S-3, of which this
Prospectus forms a part, with respect to the resale of the Shares from time to
time on the Nasdaq National Market or in privately-negotiated transactions and
has agreed to use its best efforts to keep such Registration Statement effective
until the earlier of (i) the date on which all the Shares may be immediately
sold without restriction (including without limitation as to volume by each
holder thereof) and without registration under the Securities Act, or (ii) the
date all of the Shares have been sold.
None of the Selling Stockholders has held any position or office or had a
material relationship with the Company or any of its affiliates within the past
three years other than as a result of the ownership of the Common Stock. The
Company may amend or supplement this Prospectus from time to time to update the
disclosure set forth herein.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
SHARES BENEFICIALLY SHARES AFTER OFFERING(3)
OWNED PRIOR TO BEING -----------------------
SELLING STOCKHOLDER OFFERING(1) OFFERED(2) NUMBER PERCENT
------------------- ------------------ ---------- ------- -------
<S> <C> <C> <C> <C>
Wilmington Securities, Inc.(4) 2,819,333 2,044,333 775,000 7.95
Henry L. Hillman, Elsie Hilliard Hillman
and C.G. Grefenstette, Trustees of the
Henry L. Hillman Trust under
Agreement dated November 18, 1985
(the "Henry L. Hillman Trust")(5) 441,000 336,000 105,000 1.31
Thomas G. Bigley and C.G.
Grefenstette, Trustees under Agreement
of Trust dated December 30, 1976 for
Children of Juliet Lea Hillman Simonds
(the "Juliet Lea Hillman Simonds
Trust")(6) 117,000 112,000 5,000 *
Thomas G. Bigley and C.G.
Grefenstette, Trustees under Agreement
of Trust dated December 30, 1976 for
Children of Audrey Hillman Fischer (the
"Audrey Hillman Fischer Trust")(7) 117,000 112,000 5,000 *
</TABLE>
-13-
<PAGE> 15
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
SHARES BENEFICIALLY SHARES AFTER OFFERING(3)
OWNED PRIOR TO BEING -----------------------
SELLING STOCKHOLDER OFFERING(1) OFFERED(2) NUMBER PERCENT
------------------- ------------------ ---------- ------- -------
<S> <C> <C> <C> <C>
Thomas G. Bigley and C.G.
Grefenstette, Trustees under Agreement
of Trust dated December 30, 1976 for the
Children of Henry Lea Hillman, Jr. (the
"Henry Lea Hillman, Jr. Trust")(8) 117,000 112,000 5,000 *
Thomas G. Bigley and C.G.
Grefenstette, Trustees under Agreement
of Trust dated December 30, 1976 for
Children of William Talbott Hillman
(the "William Talbott Hillman Trust")(9) 117,000 112,000 5,000 *
Van Kasper & Company(10) 150,000 150,000 -- --
Total....................... 3,878,333 2,978,333 900,000 8.42
</TABLE>
- ----------------------
* Less than one percent.
(1) Henry L. Hillman, as settlor and trustee of the Henry L. Hillman Trust, and
Elsie Hilliard Hillman and C.G. Grefenstette, as trustees of the Henry L.
Hillman Trust, may be deemed to share voting and disposition power
regarding 2,819,333 shares of Common Stock held beneficially by Wilmington
Securities, Inc. and 436,000 shares (exclusive of 5,000 shares of Common
Stock owned of record and beneficially by C.G. Grefenstette) of Common
Stock held beneficially by the Henry L. Hillman Trust. As trustees of the
Juliet Lea Hillman Simonds Trust, the Audrey Hillman Fischer Trust, the
Henry Lea Hillman, Jr. Trust and the William Talbott Hillman Trust, Thomas
G. Bigley and C.G. Grefenstette may be deemed to share voting and
disposition power regarding 448,000 shares (exclusive of 5,000 shares of
Common Stock owned of record and beneficially by C.G. Grefenstette) of
Common Stock held beneficially by each of such trusts.
(2) Represents the specified number of Shares that may be sold by the Selling
Stockholders pursuant to this Prospectus; provided, however, that, pursuant
to Rule 416 under the Securities Act, the Registration Statement of which
this Prospectus is a part shall also cover any additional shares of Common
Stock which become issuable in connection with the Shares registered for
sale hereby (i) by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the Company's number of
outstanding shares of Common Stock or (ii) upon conversion of the Series A
Stock, the Series A-1 Stock and the Series B Stock or the payment of
dividends thereon, pursuant to fluctuations in the applicable conversion
price thereof.
(3) Assumes the Selling Stockholders sell all of their Shares offered hereby to
unaffiliated third parties pursuant to this Prospectus. The Selling
Stockholders may sell all or part of their Shares.
(4) 775,000 shares of Common Stock are owned of record and beneficially by
Wilmington Securities, Inc. Wilmington Securities, Inc. also holds 645,833
shares of Series A Stock, 125,000 shares of Series A-1 Stock and 150,000
shares of Series B Stock, each with a stated value of $6, $8 and $8 per
share, respectively, which may be initially converted into two shares of
Common Stock. The number of shares of Common Stock shown in the table
includes 1,841,666 shares of Common Stock, which represents two times the
number of shares of Series A Stock, Series A-1 Stock and Series B Stock
held by such Selling Stockholder. Because the number of shares of Common
Stock that will ultimately be issued to Wilmington Securities, Inc. is
dependent upon the applicable conversion ratio at the time of conversion,
that number of shares of Common Stock, and therefore, the number of shares
of Common Stock offered hereby, cannot be determined exactly at this time.
The number of shares of Common Stock shown in the table also includes
202,667 shares of Common Stock issuable upon exercise of presently
exercisable Warrants held by Wilmington Securities, Inc.
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<PAGE> 16
(5) 5,000 shares of Common Stock are owned of record and beneficially by C.G.
Grefenstette. 100,000 shares of Common Stock are owned of record and
beneficially by the Henry L. Hillman Trust. The Henry L. Hillman Trust also
holds 150,000 shares of Series B Stock, with a stated value of $8 per
share, which may be initially converted into two shares of Common Stock.
The number of shares of Common Stock shown in the table includes 300,000
shares of Common Stock, which represents two times the number of shares of
Series B Stock held by such Selling Stockholder. Because the number of
shares of Common Stock that will ultimately be issued to the Henry L.
Hillman Trust is dependent upon the applicable conversion ratio at the time
of conversion, that number of shares of Common Stock, and therefore, the
number of shares of Common Stock offered hereby, cannot be determined
exactly at this time. The number of shares of Common Stock shown in the
table also includes 36,000 shares of Common Stock issuable upon exercise of
presently exercisable Warrants held by the Henry L. Hillman Trust.
(6) 5,000 shares of Common Stock are owned of record and beneficially by C.G.
Grefenstette. The Juliet Lea Hillman Simonds Trust also holds 50,000 shares
of Series B Stock, with a stated value of $8 per share, which may be
initially converted into two shares of Common Stock. The number of shares
of Common Stock shown in the table includes 100,000 shares of Common Stock,
which represents two times the number of shares of Series B Stock held by
such Selling Stockholder. Because the number of shares of Common Stock that
will ultimately be issued to the Juliet Lea Hillman Simonds Trust is
dependent upon the applicable conversion ratio at the time of conversion,
that number of shares of Common Stock, and therefore, the number of shares
of Common Stock offered hereby, cannot be determined exactly at this time.
The number of shares of Common Stock shown in the table also includes
12,000 shares of Common Stock issuable upon exercise of presently
exercisable Warrants held by the Juliet Lea Hillman Simonds Trust.
(7) 5,000 shares of Common Stock are owned of record and beneficially by C.G.
Grefenstette. The Audrey Hillman Fischer Trust also holds 50,000 shares of
Series B Stock, with a stated value of $8 per share, which may be initially
converted into two shares of Common Stock. The number of shares of Common
Stock shown in the table includes 100,000 shares of Common Stock, which
represents two times the number of shares of Series B Stock held by such
Selling Stockholder. Because the number of shares of Common Stock that will
ultimately be issued to the Audrey Hillman Fischer Trust is dependent upon
the applicable conversion ratio at the time of conversion, that number of
shares of Common Stock, and therefore, the number of shares of Common Stock
offered hereby, cannot be determined exactly at this time. The number of
shares of Common Stock shown in the table also includes 12,000 shares of
Common Stock issuable upon exercise of presently exercisable Warrants held
by the Audrey Hillman Fischer Trust.
(8) 5,000 shares of Common Stock are owned of record and beneficially by C.G.
Grefenstette. The Henry Lea Hillman, Jr. Trust also holds 50,000 shares of
Series B Stock, with a stated value of $8 per share, which may be initially
converted into two shares of Common Stock. The number of shares of Common
Stock shown in the table includes 100,000 shares of Common Stock, which
represents two times the number of shares of Series B Stock held by such
Selling Stockholder. Because the number of shares of Common Stock that will
ultimately be issued to the Henry Lea Hillman, Jr. Trust is dependent upon
the applicable conversion ratio at the time of conversion, that number of
shares of Common Stock, and therefore, the number of shares of Common Stock
offered hereby, cannot be determined exactly at this time. The number of
shares of Common Stock shown in the table also includes 12,000 shares of
Common Stock issuable upon exercise of presently exercisable Warrants held
by the Henry Lea Hillman, Jr. Trust.
(9) 5,000 shares of Common Stock are owned of record and beneficially by C.G.
Grefenstette. The William Talbott Hillman Trust also holds 50,000 shares of
Series B Stock, with a stated value of $8 per share, which may be initially
converted into two shares of Common Stock. The number of shares of Common
Stock shown in the table includes 100,000 shares of Common Stock, which
represents two times the number of shares of Series B Stock held by such
Selling Stockholder. Because the number of shares of Common Stock that will
ultimately be issued to the William Talbott Hillman Trust is dependent upon
the applicable conversion ratio at the time of conversion, that number of
shares of Common Stock, and therefore, the number of shares of Common Stock
offered hereby, cannot be determined exactly at this time. The number of
shares of Common Stock shown in the table also includes 12,000 shares of
Common Stock issuable upon exercise of presently exercisable Warrants held
by the William Talbott Hillman Trust.
(10) The number of shares of Common Stock shown in the table includes 150,000
shares of Common Stock issuable upon exercise of presently exercisable
Warrants held by Van Kasper & Company.
-15-
<PAGE> 17
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Stockholders may sell the Shares being
offered hereby on the Nasdaq National Market, or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
at negotiated prices. The Shares may be sold by one or more of the following
means of distribution: (a) block trades in which the broker-dealer so engaged
will attempt to sell Shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a
broker-dealer as principal and resale by such broker-dealer for its own account
pursuant to this Prospectus; (c) over-the-counter distributions in accordance
with the rules of the Nasdaq National Market; (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (e)
privately negotiated transactions. To the extent required, this Prospectus may
be amended and supplemented from time to time to describe a specific plan of
distribution. In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Common Stock in the course of hedging the positions they assume with Selling
Stockholders. The Selling Stockholders may also sell the Common Stock short and
redeliver the shares to close out such short positions. The Selling Stockholders
may also enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to such broker-dealer or other
financial institution of Shares offered hereby, which Shares such broker-dealer
or other financial institution may resell pursuant to this Prospectus (as
supplemented or amended to reflect such transaction). The Selling Stockholders
may also pledge Shares to a broker-dealer or other financial institution, and,
upon a default, such broker-dealer or other financial institution, may effect
sales of the pledged Shares pursuant to this Prospectus (as supplemented or
amended to reflect such transaction). In addition, any Shares that qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all reasonable expenses incident to the registration of the Shares other
than any commissions and discounts of underwriters, dealers or agents.
In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and there has been compliance thereof.
The Company has advised the Selling Stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Shares in the
market and to the activities of the Selling Stockholders and their affiliates.
In addition, the Company will make copies of this Prospectus available to the
Selling Stockholders and has informed them of the need for delivery of copies of
this Prospectus to purchasers at or prior to the time of any sale of the Shares
offered hereby. The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of Shares is made, if required, a Prospectus
Supplement will be distributed that will set forth the number of Shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
The sale of Shares by the Selling Stockholders is subject to compliance by
the Selling Stockholders with certain contractual restrictions with the Company.
There can be no assurance that the Selling Stockholders will sell all or any of
the Shares.
-16-
<PAGE> 18
The Company has agreed to indemnify the Selling Stockholders and any person
controlling a Selling Stockholder against certain liabilities, including
liabilities under the Securities Act. The Selling Stockholders have agreed to
indemnify the Company and certain related persons against certain liabilities,
including liabilities under the Securities Act.
The Company has agreed with certain of the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective
until all the Shares are sold by the Selling Stockholders or all unsold Shares
are immediately saleable without restriction (including without volume
limitations) and without registration under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Shares offered
hereby will be passed upon by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California, counsel to the Company.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-K for the years ended December 31,
1997 and 1996, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
-17-
<PAGE> 19
================================================================================
No person is authorized in connection with any offering made by this
Prospectus to give any information or to make any representations not contained
in this Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company, any Selling
Stockholder or by any other person. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any security other than the Shares
offered hereby, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the Shares offered hereby to any person in any jurisdiction
in which it is unlawful to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale of or offer to sell the Shares made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain
Documents By Reference........... 2
Risk Factors.......................... 4
Use of Proceeds....................... 12
Selling Stockholders.................. 13
Plan of Distribution.................. 16
Legal Matters......................... 17
Experts............................... 17
</TABLE>
================================================================================
SUPERCONDUCTOR TECHNOLOGIES INC.
2,978,333 Shares
of
Common Stock
PROSPECTUS
September 30, 1998
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will pay all reasonable expenses incident to the registration
of the shares other than any commissions and discounts of underwriters, dealers
or agents. Such expenses are set forth in the following table. All of the
amounts shown are estimates except the Securities and Exchange Commission
("SEC") registration fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 4,147
Legal fees and expenses.......................................... 20,000
Accounting fees and expenses .................................... 15,000
Miscellaneous expenses........................................... 3,503
--------
Total........................................................ $42,650
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Article 10 of the Registrant's Certificate of Incorporation, Article 10
of the Registrant's Restated Certificate of Incorporation and Article VI of the
Registrant's Bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements with its officers and directors.
Under the Registration Rights Agreement, the Company has agreed to
indemnify the Selling Stockholders and persons controlling a Selling Stockholder
against certain liabilities, including liabilities under the Securities Act, and
the Selling Stockholders have agreed to indemnify the Company, its directors,
its officers signing the Registration Statement and certain control and related
persons against certain liabilities, including liabilities under the Securities
Act.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company.
4.1 Certificate of Designation, Preferences and Rights relating to the
Company's Series B Preferred Stock.
4.2 Series A Preferred Stock Purchase Agreement dated March 26, 1998 between
the Company and Wilmington Securities, Inc.
4.3 Series A-1 Preferred Stock Purchase Agreement dated August 11, 1998 between
the Company and Wilmington Securities, Inc.
4.4 Amended and Restated Stockholders Rights Agreement dated August 11, 1998
between the Company and Wilmington Securities, Inc.
4.5 Securities Purchase Agreement dated September 2, 1998 between the Company
and Wilmington Securities, Inc.
4.6 Registration Rights Agreement dated September 2, 1998 between the Company
and Wilmington Securities, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4).
</TABLE>
II-1
<PAGE> 21
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs A(l)(i) and A(l)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of this offering.
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT
DOCUMENTS BY REFERENCE.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
II-2
<PAGE> 22
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Santa Barbara on this 30th day of September,
1998.
SUPERCONDUCTOR TECHNOLOGIES INC.
By: /s/ M. PETER THOMAS
-------------------------------------
M. Peter Thomas
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints M.
Peter Thomas and James G. Evans, Jr., jointly and severally, as
attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any amendment to this Registration Statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
II-4
<PAGE> 24
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on the
30th day of September, 1998 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ M. Peter Thomas President, Chief Executive Officer September 30, 1998
- ------------------------- (Principal Executive Officer)
M. Peter Thomas and Director
/s/ James G. Evans, Jr. Vice President, Chief Financial Officer September 30, 1998
- ------------------------- and Secretary, (Principal Financial
James G. Evans, Jr. and Accounting Officer)
/s/ Glenn E. Penisten Director September 30, 1998
- -------------------------
Glenn E. Penisten
/s/ E. Ray Cotten Director September 30, 1998
- -------------------------
E. Ray Cotten
/s/ Robert P. Caren Director September 30, 1998
- -------------------------
Robert P. Caren
/s/ Dennis Horowitz Director September 30, 1998
- -------------------------
Dennis Horowitz
/s/ John D. Lockton Director September 30, 1998
- -------------------------
John D. Lockton
/s/ J. Robert Schrieffer Director September 30, 1998
- -------------------------
J. Robert Schrieffer
</TABLE>
II-5
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the Company.
4.1 Certificate of Designation, Preferences and Rights relating to the
Company's Series B Preferred Stock.
4.2 Series A Preferred Stock Purchase Agreement dated March 26, 1998 between
the Company and Wilmington Securities, Inc.
4.3 Series A-1 Preferred Stock Purchase Agreement dated August 11, 1998 between
the Company and Wilmington Securities, Inc.
4.4 Amended and Restated Stockholders Rights Agreement dated August 11, 1998
between the Company and Wilmington Securities, Inc.
4.5 Securities Purchase Agreement dated September 2, 1998 between the Company
and Wilmington Securities, Inc.
4.6 Registration Rights Agreement dated September 2, 1998 between the Company
and Wilmington Securities, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4).
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SUPERCONDUCTOR TECHNOLOGIES INC.
Superconductor Technologies Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby certify
that:
1. The name of the Corporation is Superconductor Technologies Inc. The
Corporation was originally incorporated under that name, and the original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on May 11, 1987.
2. Pursuant to Sections 242 and 222 of the General Corporation Law of
Delaware, the amendments and restatement herein set forth have been duly
approved by the Board of Directors and the stockholders of the Corporation.
3. Pursuant to Section 245 of the General Corporation Law of the State
of Delaware, this Restated Certificate of Incorporation restates and integrates
and further amends the provisions of the Certificate of Incorporation of the
Corporation.
4. The text of the Amended and Restated Certificate of Incorporation as
previously amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
"ARTICLE I
The name of this corporation is "SUPERCONDUCTOR TECHNOLOGIES INC."
ARTICLE II
The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
<PAGE> 2
ARTICLE IV
Section 1. Designation and Amount. The Corporation is authorized to
issue two classes of shares to be designated respectively Common Stock and
Preferred Stock. The total number of shares of Common Stock which the
Corporation shall have authority to issue is 30,000,000, with par value of
$0.001 per share, and the total number of shares of Preferred Stock this
Corporation shall have authority to issue is 2,000,000, with par value of $0.001
per share. Of the Preferred Stock, 500,000 shares shall be designated Series A
Preferred Stock ("Series A Preferred") and 125,000 shares shall be designated
Series A-1 Preferred Stock ("Series A-1 Preferred").
The undesignated 1,375,000 shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors of the Corporation is
authorized to determine or alter the powers, designations, preferences and
rights and the qualifications, limitations or restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock, and within the limitations
or restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, to
increase or decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issuance
of shares of that series, to determine the designation of any series, and to fix
the number of shares of any series. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The rights, preferences, privileges and restrictions granted to or
imposed on the Common Stock and Preferred Stock are as follows:
Section 2. Dividends. The holders of shares of Series A Preferred
and Series A-1 Preferred shall be entitled to receive dividends, out of funds
legally available therefor, payable in preference and priority to any payment of
any dividend on Common Stock of the Corporation, at the rates of $0.36 per share
and $0.48 per share (adjusted for any recapitalization, stock combinations,
stock dividends, stock splits and the like) per annum for the Series A Preferred
and the Series A-1 Preferred, respectively. Such dividends shall be payable
when, as and if declared by the Board of Directors, provided that the right to
such dividends shall be cumulative and be due and payable annually in arrears.
No dividend shall be paid on the Common Stock in any year, other than dividends
payable solely in Common Stock, until all dividends due and payable on the
Preferred Stock have been declared and paid, and then such dividends on the
Common Stock shall not be in excess of the dividends paid on the Preferred Stock
unless the amount of such excess is also paid on the Preferred Stock on an
as-converted per share basis.
-2-
<PAGE> 3
Section 3. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary (a "Liquidation Event"), distributions to the stockholders of the
Corporation shall be made in the following manner:
(a) The holders of Series A Preferred and Series A-1
Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership of such stock, an
amount per share equal to the sum (the "Liquidation Preference") of (i) $6.00
and $8.00 for each share of Series A Preferred and Series A-1 Preferred,
respectively, then held by them, adjusted for any recapitalizations, stock
combinations, stock dividends, stock splits and the like with respect to such
shares and, (ii) an amount equal to all unpaid dividends on the Series A
Preferred and Series A-1 Preferred held by them; provided however, in the event
of a Liquidation Event pursuant to Section 3(b) below that is consummated on or
before March 26, 2001, the Liquidation Preference shall be $7.20 and $9.60 for
each share of Series A Preferred and Series A-1 Preferred, respectively,
adjusted for any recapitalizations, stock combinations, stock dividends, stock
splits and the like. If the assets and funds thus distributed among the holders
of the Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Preferred Stock in proportion to the aggregate
preferential amount of shares of Preferred Stock outstanding as of the date of
the distribution upon the occurrence of such event. After payment has been made
to the holders of the Preferred Stock of the full amounts to which they shall be
entitled as aforesaid, the holders of the Common Stock shall be entitled to
share ratably in the remaining assets, based on the number of shares of Common
Stock held.
(b) For purposes of this Section 3, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, or the sale of all or substantially all of the assets of the
Corporation, or any other corporate reorganization, in which consolidation,
merger, sale of assets or reorganization the stockholders of the Corporation
receive distributions in cash or securities of another corporation or
corporations as a result of such consolidation, merger, sale of assets or
reorganization, shall be treated as a Liquidation Event unless the stockholders
of this Corporation immediately prior to such consolidation, merger, sale of
assets or reorganization hold or control more than fifty percent (50%) of the
voting equity securities of the successor or surviving corporation immediately
following such consolidation, merger, sale of assets or reorganization, in which
case such consolidation, merger, sale of assets or reorganization shall not be
treated as a Liquidation Event.
Section 4. Voting Rights. Except as otherwise required by law,
the Amended and Restated Certificate of Incorporation or Bylaws of the
Corporation or this Certificate of Designation, the holder of each share of
Common Stock issued and outstanding shall have one vote and the holder of each
share of Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such share of Preferred Stock could
be converted at the record date for determination of the stockholders entitled
to vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
-3-
<PAGE> 4
votes to be counted together with all other shares of stock of the Corporation
having general voting power and not separately as a class. Holders of Common
Stock and Preferred Stock shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the Corporation. Fractional votes by
the holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number.
Section 5. Conversion. The holders of Series A Preferred and
Series A-1 Preferred have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Each share of Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share at the office of the Corporation or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined: in the case of the Series A Preferred, by
dividing $6.00 by the Series A Conversion Price, determined as hereinafter
provided, in effect at the time of conversion, and, in the case of the Series
A-1 Preferred, by dividing $8.00 by the Series A-1 Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The price at which
shares of Common Stock shall be deliverable upon conversion of shares of Series
A Pre ferred shall initially be $3.00 with respect to each share of Series A
Preferred (the "Series A Conversion Price"). The price at which shares of Common
Stock shall be deliverable upon conversion of shares of Series A-1 Preferred
shall initially be $4.00 with respect to each shares of Series A-1 Preferred
(the "Series A-1 Conversion Price"). The term "Conversion Price," as used herein
shall refer to the respective Conversion Price of each series of Preferred
Stock. The initial Conversion Price shall be subject to adjustment as
hereinafter provided.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price for such series upon the election of holders of at
least a majority of the then outstanding shares of Preferred Stock.
(c) Mechanics of Conversion. No fractional shares of
Common Stock shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Before any holder of Preferred Stock shall be
entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, the holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that the holder elects to convert the same; provided,
however, that in the event of an automatic conversion pursuant to Section 5(b),
the outstanding shares of Preferred Stock shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent and provided further, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of Preferred
Stock are either delivered to the Corporation or its transfer agent as provided
-4-
<PAGE> 5
above, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable after such delivery, or such agreement and indemnification
in the case of a lost certificate, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid and a
check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted, or
in the case of automatic conversion then on the date of election by a majority
of the then outstanding shares of Preferred Stock, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
(d) (1) Adjustment of Conversion Price of Preferred Stock. The
Conversion Price shall be subject to adjustment from time to time as follows:
(i) Adjustments for Subdivisions,
Combinations or Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided by stock split, stock dividends or
otherwise, into a greater number of shares of Common Stock, the Conversion Price
then in effect shall, concurrently with the effectiveness of such subdivision,
be proportionately decreased. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
(ii) Adjustments for Stock Dividends and
Other Distributions. In the event the Corporation at any time or from time to
time makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive any distribution (excluding any repurchases of
securities by the Corporation not made on a pro rata basis from all holders of
any class of the Corporation's securities) payable in property or in securities
of the Corporation other than shares of Common Stock, and other than as
otherwise adjusted in this Section 5 or as provided in Section 2, then and in
each such event the holders of Preferred Stock shall receive at the time of such
distribution, the amount of property or the number of securities of the
Corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event.
(iii) Adjustments for Reclassification,
Exchange and Substitution. Except as provided in Section 3 upon any liquidation,
dissolution or winding up of the Corporation, if the Common Stock issuable upon
conversion of the Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), each share of Preferred Stock shall
thereafter be convertible into the number of shares of stock or other securities
or property to which a holder of the number of shares of
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<PAGE> 6
Common Stock of the Corporation deliverable upon conversion of such share of
Preferred Stock shall have been entitled upon such reorganization or
reclassification.
(2) Adjustments of Conversion Price for Diluting Issues. In
addition to the adjustment of the Conversion Price provided in Section 5(d)(1)
above, the Conversion Price shall be subject to further adjustment from time to
time as follows:
(i) Special Definitions. For purposes of this Section
5(d)(2), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" shall mean the dates on
which the first share of each series of Preferred Stock was first issued.
(3) "Convertible Securities" shall mean securities
convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section 5(d)(2)(iii), deemed
to be issued) by the Corporation after the Original Issue Date other than shares
of Common Stock issued or issuable:
(A) upon conversion of shares of the
Preferred Stock;
(B) to officers, directors and employees of,
and consultants to, the Corporation pursuant to plans and arrangements approved
by the Board of Directors;
(C) as a dividend or other distribution on
the Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section 5(d)(1);
(D) upon the exercise of options issued prior
to the Original Issue Date;
(E) to research or development collaborators
or to banks or other institutional lendors or lessors in connection with capital
asset leases or borrowings for the acquisition of capital assets, pursuant to
any arrangement approved by the Board of Directors; or
(F) by way of dividend or other distributions
on securities referred to in clauses (A), (B), (C), (D) and (E) above.
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<PAGE> 7
(ii) No Adjustment of Conversion Price. No adjustment
in the Conversion Price of a particular share of Preferred Stock shall be made
in respect of the issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the Conversion Price in effect on
the date of, and immediately prior to such issue, for such share of Preferred
Stock.
(iii) Deemed Issue of Additional Shares of Common
Stock.
(1) Options and Convertible Securities. Except as
otherwise provided in Section 5(d)(2)(i) above, in the event the Corporation at
any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of any holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 5(d)(2)(v) below) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which additional shares of
Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if:
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<PAGE> 8
(I) in the case of Convertible
Securities or Options for Common Stock, the only additional shares of Common
Stock issued were shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange, and
(II) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to which
such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or
(C) above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options which expire
by their terms not more than thirty (30) days after the date of issue thereof,
no adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 5(d)(2)(iii), but excluding stock
dividends, subdivisions or split-ups that are the subject of adjustment pursuant
to Section 5(d)(i)) without consideration or for a consideration per share less
than the Conversion Price, in effect on the date of, and immediately prior to
such issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issue, (ii) the number of shares of Common Stock
issuable upon conversion of the Preferred Stock outstanding immediately prior to
such issue and (iii) the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price; and
the denominator of which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue, (ii) the number of shares of
Common Stock issuable upon conversion of the Preferred Stock outstanding
immediately prior to such issue and (iii) the
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<PAGE> 9
number of such Additional Shares of Common Stock so issued; and provided further
that, for the purposes of this Section 5(d)(2)(iv), all shares of Common Stock
issuable upon exercise of outstanding Options or conversion of outstanding
Convertible Securities shall be deemed to be out standing, and immediately after
any Additional Shares of Common Stock are deemed issued pursuant to Section
5(d)(2)(iii), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(v) Determination of Consideration. For purposes of
this Section 5(d)(2), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation (excluding
amounts paid or payable for accrued interest or accrued dividends);
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 5(d)(2)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Option or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
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<PAGE> 10
(e) No Impairment. Except as provided in Section 8, the
Corporation will not, by amendment of its Amended and Restated Certificate of
Incorporation or this Certificate of Designation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event that the Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to effect any reclassification or capitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iii) to merge or consolidate with or into any other person
or entity, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Preferred Stock:
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (ii) and (iii) above; and
(2) in the case of the matters referred to in (ii) and
(iii) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the
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<PAGE> 11
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Preferred Stock at
the address for each such holder as shown on the books of the Corporation.
Section 6. Status of Converted Stock. In case any shares of Preferred
Stock shall be repurchased or converted pursuant to Section 5, the shares so
repurchased or converted shall be cancelled and shall not be issued by the
Corporation and this Certificate of Designation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized Preferred
Stock.
Section 7. Redemption.
(a) The Corporation may, at any time after March 26, 2001,
redeem in cash out of any funds legally available therefor, all of the
outstanding shares of the Preferred Stock.
(b) At any time after March 26, 2005, 60 days after receipt
of notice of an election of holders of at least two-thirds (2/3) of the then
outstanding shares of the applicable series of Preferred Stock (which election
shall bind all holders of such applicable series of Preferred Stock), the
Corporation shall have the obligation to redeem in cash out of any funds legally
available therefor, such outstanding shares of the such applicable series of
Preferred Stock.
(c) Any redemption shall be made for a price (the
"Redemption Price") equal to (i) one hundred ten percent (110%) of the
Liquidation Preference per share in the case of a redemption pursuant to Section
7(a) and (ii) the Liquidation Preference per share in the case of a redemption
pursuant to Section 7(b). The Corporation need not establish any sinking fund
for the redemption of the Preferred Stock.
(d) If the Corporation elects or is required to redeem
stock pursuant to Section 7(a) or (b) above, then the Corporation shall cause
written notice to be mailed, first class postage prepaid, to each holder of
record (at the close of business on the business day next preceding the day on
which notice is given) of such Preferred Stock to be redeemed, at the address
last shown on the records of the Corporation for such holder, notifying such
holder of the redemption to be effected, specifying the number of shares to be
redeemed from such holder, the redemption date (which shall be at least 30 days
after the date of such notice (the "Redemption Date")), the Redemption Price,
the place at which payment may be obtained and calling upon such holder to
surrender to the Corporation, in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in Section 7(e) below, on or after the
Redemption Date, each holder of such Preferred Stock to be redeemed shall
surrender to this Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or
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<PAGE> 12
certificates as the owner thereof and each surrendered certificate shall be
cancelled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. Nothing herein shall be deemed to prevent a holder of such
Preferred Stock from converting all or part of such holder's Preferred Stock
into Common Stock in accordance with the terms of Section 5 above at any time
prior to a Redemption Date covering such shares, and the provisions of this
Section 7 shall not apply to any shares so converted.
(e) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of shares of the Preferred Stock designated for redemption in the
Redemption Notice as holders of Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates), shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of the Preferred Stock on any Redemption Date
are insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares from holders of Preferred
Stock. The shares of Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein, including the rights
of conversion set forth in Section 5. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.
Section 8. Covenants. In addition to any other rights provided by law,
so long as at least twenty-five percent (25%) of the authorized Preferred Stock
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than a majority
of the outstanding shares of Preferred Stock:
(a) amend or repeal any provision of the Corporation's
Amended or Restated Certificate of Incorporation, certificates of designation or
Bylaws if such action would materially and adversely alter or change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Preferred Stock; or
(b) authorize or issue shares of any class or series of
stock having any preference or priority as to dividends or assets superior to or
on parity with any such preference or priority of the Preferred Stock.
ARTICLE V
The Corporation is to have perpetual existence.
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<PAGE> 13
ARTICLE VI
Except as otherwise provided in this Restated Certificate of Incorporation,
in furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, repeal, alter, amend or
rescind any or all of the Bylaws of the Corporation.
ARTICLE VII
Section 1. The number of directors of the Corporation shall be fixed
from time to time by a Bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
Section 2. Vacancies occurring on the Board of Directors for any
reason may be filled by vote of a majority of the remaining members of the Board
of Directors, although less than a quorum, at a meeting of the Board of
Directors. A person so elected by the Board of Directors to fill a vacancy shall
hold office until the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly elected and
qualified.
ARTICLE VIII
Elections of directors at an annual or special meeting need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE XI
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<PAGE> 14
To the fullest extent permitted by Delaware General Corporation Law, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article shall eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision."
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<PAGE> 15
THE UNDERSIGNED, being the President and Chief Executive Officer of the
Corporation, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly,
has hereunto set his hand this 11th day of August, 1998.
SUPERCONDUCTOR TECHNOLOGIES INC.
/s/ M. Peter Thomas
-----------------------------------------
M. Peter Thomas, President and
Chief Executive Officer
Attest:
/s/ James G. Evans
- ----------------------------------
James G. Evans, Jr., Secretary
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF
SUPERCONDUCTOR TECHNOLOGIES
The undersigned, Peter Thomas, hereby states and certifies that:
1. The undersigned is the Chief Executive Officer of Superconductor
Technologies, Inc., a Delaware corporation (the "Corporation").
2. Article IV (Section 1) of the Amended and Restated Certificate of
Incorporation of the Corporation is amended by deleting Article IV (Section 1)
in its entirety and adding a new Article IV (Section 1) to such Certificate of
Incorporation, to read as follows:
"Section 1. Designation and Amount. The
Corporation is authorized to issue two classes
of shares to be designated respectively Common
Stock and Preferred Stock. The total number of
shares of Common Stock which the Corporation
shall have authority to issue is 30,000,000,
with par value of $0.001 per share, and the
total number of shares of Preferred Stock this
Corporation shall have authority to issue is
2,000,000, with par value of $0.001 per share.
Of the Preferred Stock, 645,833 shares shall be
designated Series A Preferred Stock ("Series A
Preferred"), 125,000 shares shall be designated
Series A-1 Preferred Stock ("Series A-1
Preferred") and 1,000,000 shares shall be
designated Series B Preferred Stock ("Series B
Preferred"). The rights, preferences and
privileges of the Series B Preferred are set
forth in the Certificate of Designation of the
Series B Preferred as filed with the Secretary
of the State of the State of Delaware on
September 2, 1998.
The undesignated 229,117 shares of
Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of
the Corporation is authorized to determine or
alter the powers, designations, preferences and
rights and the qualifications, limitations or
restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and
within the limitations or restrictions stated in
any resolution or resolutions of the Board of
Directors originally fixing the number of shares
constituting any series, to increase or decrease
(but not below the number of shares of any such
series then outstanding) the number of shares of
any such
<PAGE> 2
series subsequent to the issuance of shares of
that series, to determine the designation of any
series, and to fix the number of shares of any
series. In case the number of shares of any
series shall be so decreased, the shares
constituting such decrease shall resume the
status which they had prior to the adoption of
the resolution originally fixing the number of
shares of such series.
The Corporation shall from time to time
in accordance with the laws of the State of
Delaware increase the authorized amount of its
Common Stock if at any time the number of shares
of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit
conversion of the Preferred Stock.
The rights, preferences, privileges and
restrictions granted to or imposed on the common
Stock, Series A Preferred and Series A-1
Preferred are as follows:"
3. The foregoing amendment to the Amended and Restated Certificate of
Incorporation was duly approved and adopted, in accordance with Section 242 of
the General Corporation Law of the State of Delaware, by the directors of the
Corporation.
4. The foregoing amendment to the Amended and Restated Certificate of
Incorporation was duly approved and adopted, in accordance with Section 242 of
the General Corporation Law of the State of Delaware, by the stockholders of the
Corporation entitled to vote thereon, by written consent without a meeting.
IN WITNESS WHEREOF, the undersigned does hereby acknowledge, under
penalty of perjury, that this Certificate of Amendment is the act and deed of
the undersigned, and that the facts stated herein are true.
Dated: September 3, 1998
/s/ Peter Thomas
-----------------------------------------
Peter Thomas
Chief Executive Officer
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND
PRIVILEGES OF SERIES B PREFERRED STOCK
OF
SUPERCONDUCTOR TECHNOLOGIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Peter Thomas, the Chief Executive Officer of Superconductor Technologies
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware, in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Amended and Restated Certificate of Incorporation of the said Corporation, the
said Board of Directors on August 31, 1998 adopted the following resolution
creating a series of 1,000,000 shares of Preferred Stock designated as Series B
Preferred Stock.
RESOLVED: That pursuant to the authority vested in the Board of Directors
of the Corporation by the Amended and Restated Certificate of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock, par value $0.001 per share, of the Corporation, to be designated Series B
Preferred Stock (the "Series B Preferred Stock"), initially consisting of
1,000,000 shares, and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the Series B Preferred Stock are not stated and expressed in the
Amended and Restated Certificate of Incorporation, does hereby fix and herein
state and express such designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions thereof, as
follows (all terms used herein which are defined in the Amended and Restated
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
SECTION 1. Designation and Amount. The shares of such Series B
Preferred Stock shall be designated as "Series B Preferred Stock", par value
$0.001 per share, and the number of shares constituting such series shall be
1,000,000.
SECTION 2. Rank. Except as provided in Section 9, the Series B
Preferred Stock shall rank (i) prior to the Corporation's common stock, par
value $.001 per share (the "Common Stock"); (ii) prior to any class or series of
capital stock of the Corporation hereafter created; (iii) pari passu with the
Series A Preferred Stock, the Series A-1 Preferred Stock and with any class or
series of capital stock of the Corporation hereafter created specifically
ranking, by its terms, on parity with the Series B Preferred Stock; and (iv)
junior to any class or series of capital stock of the Corporation hereafter
created
<PAGE> 2
specifically ranking, by its terms, senior to the Series B Preferred
Stock, in each case as to distribution of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary.
SECTION 3. Dividends. The holders of shares of Series B Preferred
Stock and shall be entitled to receive dividends, out of funds legally available
therefor, payable in preference and priority to any payment of any dividend on
Common Stock of the Corporation, at the rate of $.56 per share (adjusted for any
recapitalization, stock combinations, stock dividends, stock splits and the
like) per annum for the Series B Preferred Stock. Such dividends shall be
payable when, as and if declared by the Board of Directors, provided that the
right to such dividends shall be cumulative and be due and payable annually in
arrears. No dividend shall be paid on the Common Stock in any year, other than
dividends payable solely in Common Stock, until all dividends due and payable on
the Preferred Stock have been declared and paid, and then such dividends on the
Common Stock shall not be in excess of the dividends paid on the Preferred Stock
unless the amount of such excess is also paid on the Preferred Stock on an
as-converted per share basis.
SECTION 4. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary (a
"Liquidation Event"), distributions to the stockholders of the Corporation shall
be made in the following manner:
(a) The holders of Series B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership of such stock, an amount per share equal to the sum (the
"Liquidation Preference") of (i) $8.00 for each share of Series B Preferred
Stock, then held by them, adjusted for any recapitalizations, stock
combinations, stock dividends, stock splits and the like with respect to such
shares and, (ii) an amount equal to all unpaid dividends on the Series B
Preferred Stock held by them; provided however, in the event of a Liquidation
Event pursuant to Section 4(b) below that is consummated on or before September
2, 2001, the Liquidation Preference shall be $9.60 for each share of Preferred
Stock, adjusted for any recapitalizations, stock combinations, stock dividends,
stock splits and the like. If the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amount, then the entire assets
and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the aggregate preferential amount of shares of Preferred Stock outstanding as of
the date of the distribution upon the occurrence of such event. After payment
has been made to the holders of the Preferred Stock of the full amounts to which
they shall be entitled as aforesaid, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets, based on the number of shares
of Common Stock held.
(b) For purposes of this Section 4, a merger or consolidation of
the Corporation with or into any other corporation or corporations, or the
merger of any other corporation or corporations into the Corporation, or the
sale of all or substantially all of the assets of the Corporation, or any other
corporate reorganization, in which consolidation, merger, sale of assets or
reorganization the stockholders of the Corporation receive distributions in cash
or securities of another corporation or corporations as a result of such
consolidation, merger, sale of assets or reorganization, shall be treated as a
Liquidation Event unless the stockholders of this Corporation immediately prior
to such consolidation, merger, sale of assets or reorganization hold or control
more than fifty percent (50%) of
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<PAGE> 3
the voting equity securities of the successor or surviving corporation
immediately following such consolidation, merger, sale of assets or
reorganization, in which case such consolidation, merger, sale of assets or
reorganization shall not be treated as a Liquidation Event.
SECTION 5. Voting Rights. Except as otherwise required by law, the
Amended and Restated Certificate of Incorporation or Bylaws of the Corporation
or this Certificate of Designation, the holder of each share of Common Stock
issued and outstanding shall have one vote and the holder of each share of
Series B Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such share of Series B Preferred
Stock could be converted at the record date for determination of the
stockholders entitled to vote on such matters, or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. Holders of Common Stock and Series B Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation. Fractional votes by the holders of Series B Preferred
Stock shall not, however, be permitted and any fractional voting rights shall
(after aggregating all shares into which shares of Series B Preferred Stock held
by each holder could be converted) be rounded to the nearest whole number.
SECTION 6. Conversion. The holders of Series B Preferred Stock have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any transfer
agent for the Series B Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $8.00 by the
initial Conversion Price. The term "Conversion Price" as used herein shall mean
initially $4.00 and shall be subject to adjustment as hereinafter provided.
(b) Automatic Conversion. Each share of Series B Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price for such series upon the election of holders of at
least a majority of the then outstanding shares of Series B Preferred Stock.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Before any holder of Series B Preferred Stock shall
be entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, the holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Preferred Stock, and shall give written notice
(in the form of Exhibit A attached hereto) to the Corporation (the "Notice of
Conversion") at such office that the holder elects to convert the same and
specifying the date of conversion (the "Conversion Date"); provided, however,
that in the event of an automatic conversion pursuant to Section 5(b), the
outstanding shares of Series B Preferred Stock shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer
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<PAGE> 4
agent and provided further, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such automatic
conversion unless the certificates evidencing such shares of Series B Preferred
Stock are either delivered to the Corporation or its transfer agent as provided
above, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable after such delivery, or such agreement and indemnification
in the case of a lost certificate, issue and deliver at such office to such
holder of Series B Preferred Stock, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid
and a check payable to the holder in the amount of any cash amounts payable as
the result of a conversion into fractional shares of Common Stock. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series B Preferred Stock
to be converted, or in the case of automatic conversion then on the date of
election by a majority of the then outstanding shares of Series B Preferred
Stock, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) (1) Adjustment of Conversion Price of Series B Preferred
Stock. The Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments for Subdivisions, Combinations or
Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided by stock split, stock dividends or otherwise, into a
greater number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
(ii) Adjustments for Stock Dividends and Other
Distributions. In the event the Corporation at any time or from time to time
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive any distribution (excluding any repurchases of securities by
the Corporation not made on a pro rata basis from all holders of any class of
the Corporation's securities) payable in property or in securities of the
Corporation other than shares of Common Stock, and other than as otherwise
adjusted in this Section 6 or as provided in Section 3, then and in each such
event the holders of Series B Preferred Stock shall receive at the time of such
distribution, the amount of property or the number of securities of the
Corporation that they would have received had their Series B Preferred Stock
been converted into Common Stock on the date of such event.
(iii) Adjustments for Reclassification, Exchange and
Substitution. Except as provided in Section 4 upon any liquidation, dissolution
or winding up of the Corporation, if the Common Stock issuable upon conversion
of the Series B Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), each share of Series B Preferred
Stock shall thereafter be convertible into the number of shares of stock
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<PAGE> 5
or other securities or property to which a holder of the number of shares of
Common Stock of the Corporation deliverable upon conversion of such share of
Series B Preferred Stock shall have been entitled upon such reorganization or
reclassification.
(2) Adjustments of Conversion Price for Diluting Issues. In
addition to the adjustment of the Conversion Price provided in Section 6(d)(1)
above, the Conversion Price shall be subject to further adjustment from time to
time as follows:
(i) Special Definitions. For purposes of this Section
6(d)(2), the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the dates on which the
first share of each series of Series B Preferred Stock was first issued.
(3) "Convertible Securities" shall mean securities
convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 6(d)(2)(iii), deemed to
be issued) by the Corporation after the Original Issue Date other than shares of
Common Stock issued or issuable:
(A) upon conversion of shares of the Preferred Stock;
(B) to officers, directors and employees of, and
consultants to, the Corporation pursuant to plans and arrangements approved by
the Board of Directors;
(C) as a dividend or other distribution on the
Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section 6(d)(1);
(D) upon the exercise of options issued prior to the
Original Issue Date;
(E) to research or development collaborators or to
banks or other institutional lendors or lessors in connection with capital asset
leases or borrowings for the acquisition of capital assets, pursuant to any
arrangement approved by the Board of Directors; or
(F) by way of dividend or other distributions on
securities referred to in clauses (A), (B), (C), (D) and (E) above.
(ii) No Adjustment of Conversion Price. No adjustment in the
Conversion Price of a particular share of Series B Preferred Stock shall be made
in respect of the issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of
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<PAGE> 6
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue,
for such share of Series B Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common Stock.
(1) Options and Convertible Securities. Except as
otherwise provided in Section 6(d)(2)(i) above, in the event the Corporation at
any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of any holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 6(d)(2)(v) below) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which additional shares of
Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(I) in the case of Convertible Securities or
Options for Common Stock, the only additional shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such
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<PAGE> 7
Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options which expire by
their terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 6(d)(2)(iii), but excluding stock
dividends, subdivisions or split-ups that are the subject of adjustment pursuant
to Section 6(d)(i)) without consideration or for a consideration per share less
than the Conversion Price, in effect on the date of, and immediately prior to
such issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issue, (ii) the number of shares of Common Stock
issuable upon conversion of the Preferred Stock outstanding immediately prior to
such issue and (iii) the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price; and
the denominator of which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue, (ii) the number of shares of
Common Stock issuable upon conversion of the Preferred Stock outstanding
immediately prior to such issue and (iii) the number of such Additional Shares
of Common Stock so issued; and provided further that, for the purposes of this
Section 6(d)(2)(iv), all shares of Common Stock issuable upon exercise of
outstanding Options or conversion of outstanding Convertible Securities shall be
deemed to be outstanding, and immediately after any Additional Shares of Common
Stock are deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares
of Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
Section 6(d)(2), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
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<PAGE> 8
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation (excluding amounts paid
or payable for accrued interest or accrued dividends);
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 6(d)(2)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Option or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) No Impairment. Except as provided in Section 9, the
Corporation will not, by amendment of its Amended and Restated Certificate of
Incorporation or this Certificate of Designation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to
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<PAGE> 9
each holder of Series B Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series B
Preferred Stock.
(g) Notices of Record Date. In the event that the Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to effect any reclassification or capitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iii) to merge or consolidate with or into any other person
or entity, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Series B Preferred Stock:
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (ii) and (iii) above; and
(2) in the case of the matters referred to in (ii) and
(iii) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Series B Preferred
Stock at the address for each such holder as shown on the books of the
Corporation.
SECTION 7. Status of Converted Stock. In case any shares of Series B
Preferred Stock shall be repurchased or converted pursuant to Section 5, the
shares so repurchased or converted shall be cancelled and shall not be issued by
the Corporation and this Certificate of Designation shall be appropriately
amended to effect the corresponding reduction in the Corporation's authorized
Series B Preferred Stock.
SECTION 8. Redemption.
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(a) The Corporation may, at any time after September 2, 2001,
redeem in cash out of any funds legally available therefor, all of the
outstanding shares of the Series B Preferred Stock.
(b) At any time after September 2, 2005, 60 days after receipt of
notice of an election of holders of at least two-thirds (2/3) of the then
outstanding shares of the applicable series of Series B Preferred Stock (which
election shall bind all holders of such applicable series of Series B Preferred
Stock), the Corporation shall have the obligation to redeem in cash out of any
funds legally available therefor, such outstanding shares of the such applicable
series of Series B Preferred Stock.
(c) Any redemption shall be made for a price (the "Redemption
Price") equal to (i) one hundred ten percent (110%) of the Liquidation
Preference per share in the case of a redemption pursuant to Section 8(a) and
(ii) the Liquidation Preference per share in the case of a redemption pursuant
to Section 8(b). The Corporation need not establish any sinking fund for the
redemption of the Series B Preferred Stock.
(d) If the Corporation elects or is required to redeem stock
pursuant to Section 8(a)or 8(b)above, then the Corporation shall cause written
notice to be mailed, first class postage prepaid, to each holder of record (at
the close of business on the business day next preceding the day on which notice
is given) of such Series B Preferred Stock to be redeemed, at the address last
shown on the records of the Corporation for such holder, notifying such holder
of the redemption to be effected, specifying the number of shares to be redeemed
from such holder, the redemption date (which shall be at least 30 days after the
date of such notice (the "Redemption Date")), the Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in Section 8(e) below, on or after the Redemption Date, each
holder of such Series B Preferred Stock to be redeemed shall surrender to this
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. Nothing herein shall be deemed to
prevent a holder of such Series B Preferred Stock from converting all or part of
such holder's Series B Preferred Stock into Common Stock in accordance with the
terms of Section 6 above at any time prior to a Redemption Date covering such
shares, and the provisions of this Section 8 shall not apply to any shares so
converted.
(e) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of the Series B Preferred Stock designated for redemption in the
Redemption Notice as holders of Series B Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates), shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of the Series B Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series B Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares from holders of Series B Preferred Stock. The shares of Series B
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<PAGE> 11
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein, including the rights of conversion set
forth in Section 6. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series B
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.
SECTION 9.Covenants. In addition to any other rights provided by law,
so long as at least twenty-five percent (25%) of the authorized Series B
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series B Preferred Stock:
(a) amend or repeal any provision of the Corporation?s Amended or
Restated Certificate of Incorporation, certificates of designation or Bylaws if
such action would materially and adversely alter or change the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, the Series B Preferred Stock; or
(b) authorize or issue shares of any class or series of stock
having any preference or priority as to dividends or assets superior to or on
parity with any such preference or priority of the Series B Preferred Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this
Certificate to be signed by Peter Thomas, its Chief Executive Officer, this 2nd
day of September, 1998.
/s/ M. Peter Thomas
--------------------------------------
M. Peter Thomas
Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares
of Series B Preferred Stock, represented by stock certificate No(s). __________
(the "Preferred Stock Certificates") into shares of common stock ("Common
Stock") of Superconductor Technologies Inc. (the "Corporation") according to the
conditions of the Certificate of Designation of Series B Preferred Stock, as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Series B Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Act"), or pursuant
to an exemption from registration under the Act.
Date of Conversion:___________________________
Applicable Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series B Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent.
<PAGE> 1
EXHIBIT 4.2
================================================================================
SUPERCONDUCTOR TECHNOLOGIES INC.
460 WARD DRIVE
SUITE F
SANTA BARBARA, CALIFORNIA 93111
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
MARCH 26, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(CONTINUED)
PAGE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK; ISSUANCE OF WARRANTS..........................1
1.1 AUTHORIZATION.....................................................................1
1.2 SALE OF SHARES; ISSUANCE OF WARRANTS..............................................1
1.3 SUBSEQUENT SALES OF ADDITIONAL SHARES.............................................1
SECTION 2
CLOSING DATES; DELIVERY..................................................................2
2.1 CLOSING...........................................................................2
2.2 DELIVERY..........................................................................2
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................3
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS.................................3
3.2 CORPORATE POWER...................................................................3
3.3 SUBSIDIARIES......................................................................3
3.4 CAPITALIZATION....................................................................3
3.5 AUTHORIZATION.....................................................................4
3.6 FINANCIAL STATEMENTS..............................................................4
3.7 CHANGES...........................................................................5
3.8 MATERIAL OBLIGATIONS..............................................................5
3.9 MATERIAL CONTRACTS AND COMMITMENTS................................................5
3.10 INTELLECTUAL PROPERTY, TRADEMARKS, ETC............................................5
3.11 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC........................................6
3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC...........................6
3.13 LITIGATION, ETC...................................................................6
3.14 REGISTRATION RIGHTS...............................................................6
3.15 GOVERNMENTAL CONSENT, ETC.........................................................6
3.16 OFFERING..........................................................................7
3.17 BROKERS OR FINDERS................................................................7
3.18 TAX RETURNS AND PAYMENTS..........................................................7
3.19 EMPLOYEE MATTERS..................................................................7
3.20 DISCLOSURE........................................................................7
Section 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................................7
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT......................................7
4.2 INVESTMENT........................................................................8
4.3 RULE 144..........................................................................8
4.4 NO PUBLIC MARKET..................................................................8
4.5 ACCESS TO DATA....................................................................8
4.6 AUTHORIZATION.....................................................................8
4.7 BROKERS OR FINDERS................................................................9
4.8 TAX LIABILITY.....................................................................9
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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SECTION 5 CONDITIONS TO PURCHASERS' OBLIGATIONS TO CLOSE.........................................9
5.1 REPRESENTATIONS AND WARRANTIES CORRECT............................................9
5.2 COVENANTS.........................................................................9
5.3 BLUE SKY..........................................................................9
5.4 CERTIFICATE OF DESIGNATION........................................................9
5.5 RIGHTS AGREEMENT.................................................................10
5.6 COMPLIANCE CERTIFICATE...........................................................10
5.7 COMPLIANCE WITH LAW..............................................................10
5.8 OPINION OF COMPANY'S COUNSEL.....................................................10
SECTION 6 CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE..........................................10
6.1 REPRESENTATIONS..................................................................10
6.2 COVENANTS........................................................................10
6.3 BLUE SKY.........................................................................10
6.4 CERTIFICATE OF DESIGNATION.......................................................10
6.5 RIGHTS AGREEMENT.................................................................10
6.6 COMPLIANCE WITH LAW..............................................................11
SECTION 7 CONFIDENTIAL INFORMATION..............................................................11
7.1 CONFIDENTIAL BUSINESS INFORMATION................................................11
SECTION 8 MISCELLANEOUS.........................................................................11
8.1 GOVERNING LAW....................................................................11
8.2 SURVIVAL.........................................................................11
8.3 SUCCESSORS AND ASSIGNS...........................................................11
8.4 ENTIRE AGREEMENT; AMENDMENT......................................................12
8.5 NOTICES, ETC.....................................................................12
8.6 DELAYS OR OMISSIONS..............................................................12
8.7 CALIFORNIA CORPORATE SECURITIES LAW..............................................13
8.8 COUNTERPARTS.....................................................................13
8.9 SEVERABILITY.....................................................................13
8.10 TITLES AND SUBTITLES.............................................................13
8.11 EXPENSES.........................................................................13
</TABLE>
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(CONTINUED)
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EXHIBITS
A Schedule of Purchasers
B Certificate of Designation
C Warrant
D Exceptions to Representations and Warranties
E Stockholder Rights Agreement
F Compliance Certificate
G Opinion of Counsel
</TABLE>
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<PAGE> 5
SUPERCONDUCTOR TECHNOLOGIES, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of March 26, 1998 by and among Superconductor Technologies Inc., a
Delaware corporation (the "Company"), and the persons and entities listed on the
Schedule of Purchasers attached hereto as Exhibit A (the "Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK; ISSUANCE OF WARRANTS
1.1 AUTHORIZATION. The Company will, prior to the Initial Closing (as
defined below), authorize the sale and issuance of (i) up to 833,333 shares (the
"Shares") of the Company's Series A Preferred Stock ("Series A Preferred"),
having the rights, privileges and preferences as set forth in the Certificate of
Designation (the "Certificate") in the form attached to this Agreement as
Exhibit B and (ii) the Warrants (as defined below) to purchase up to 166,667
shares of the Common Stock (as defined below).
1.2 SALE OF SHARES; ISSUANCE OF WARRANTS. Subject to the terms and
conditions of this Agreement, each of the Purchasers agrees to purchase and the
Company agrees to sell and issue to each Purchaser:
(a) the number of Shares set forth in the column designated
"Number of Series A Shares" opposite such Purchaser's name on the Schedule of
Purchasers, at a cash price of $6.00 per share; and
(b) a warrant or warrants in the form attached to this Agreement
as Exhibit C (the "Warrants") which shall permit such Purchaser to initially
purchase a number of shares of Common Stock set forth in the column designated
"Warrants for Number of Common Stock" opposite such Purchaser's name on the
Schedule of Purchasers, at an exercise price of $4.00 per share.
The Company's agreement with each Purchaser is a separate agreement, and
the sale and issuance of the Shares, the Additional Shares (as defined below)
and the Warrants to each Purchaser is a separate sale and issuance.
1.3 SUBSEQUENT SALES OF ADDITIONAL SHARES.
(a) The Company shall have the option, exercisable at its sole
discretion for a period of twelve (12) months following the Initial Closing (the
"Exercise Period") by delivering written notice (the "Exercise Notice") thereof
at least ten (10) business days prior to the Closing (as defined below) to the
Purchasers, to require the Purchasers to purchase up to 333,333 additional
<PAGE> 6
Shares (the "Additional Shares") at the price and on the terms set forth in this
Agreement; provided, however, prior to exercising such option, the Company must
demonstrate to the reasonable satisfaction of the Purchasers it has completed
manufacture of at least forty-five (45) commercially saleable superfilter
systems between April 1, 1998 and August 31, 1998. Subject to the terms and
conditions hereof, each of the Purchasers agrees to purchase the same percentage
of such Additional Shares that the number of Shares purchased by it set forth on
the Schedule of Purchasers represents as a percentage of the total number of
Shares purchased by all the Purchasers set forth on the Schedule of Purchasers
(a "Proportionate Percentage"). Any unresolved dispute or controversy arising
under or in connection with this Section 1.3 shall be settled by binding
mediation by a mediator mutually selected by the Company and the Purchasers. The
direct expense of any mediation proceeding shall be borne equally by the Company
and the Purchasers and each party shall bear its own counsel fees.
(b) In connection with any sale and issuance of Additional Shares
pursuant to Section 1.3(a) above, the Company agrees to issue a Warrant or
Warrants which shall permit each Purchaser to initially purchase a number of
shares of Common Stock equal to twenty percent (20%) (rounded to the nearest
whole number) of such Purchaser's Proportionate Percentage.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING. The purchase and sale of the Shares and the Additional
Shares and the issuance of the Warrants hereunder shall take place at one or
more closings (each of which is referred to in this Agreement as a "Closing").
The initial closing (the "Initial Closing") for the Shares and the initial
Warrants shall take place on March 26, 1998 and the Closing for the Additional
Shares and additional Warrants shall take place no later than one (1) month
after the Exercise Notice. Each Closing shall be held at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, on each
Closing Date, or at such other time and place upon which the Company and the
Purchasers shall agree.
2.2 DELIVERY. At each Closing, the Company will deliver to each
Purchaser a certificate registered in such Purchaser's name representing the
number of Shares or Additional Shares that such Purchaser is purchasing against
payment of the purchase price therefor as set forth in the column designated
"Purchase Price" opposite such Purchaser's name on the Schedule of Purchasers or
as determined by multiplying the number of Additional Shares required to be
purchased pursuant to Section 1.3 by the purchase price per share of $6.00, by
cashier's or certified check payable to the Company or wire transfer of
immediately available funds per the Company's instructions. At the Initial
Closing, the Company will deliver to each purchaser a Warrant evidencing the
right to purchase a number of shares of Common Stock as set forth in the column
designated "Warrants for Number of Common Stock" opposite such Purchaser's name
on the Schedule of Purchasers. At the Closing for the Additional Shares, the
Company will deliver to each Purchaser a Warrant evidencing the right to
purchase a number of shares of Common Stock equal to twenty percent (20%)
(rounded to the nearest whole number) of such Purchaser's Proportionate
Percentage.
2
<PAGE> 7
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit D attached hereto, the Company represents
and warrants to the Purchasers as of the date of this Agreement as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business. The Company is presently qualified to do
business as a foreign corporation in each jurisdiction where the failure to be
so qualified would have a material adverse effect on the Company's business,
operating results or financial condition (a "Material Adverse Effect").
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement and that certain
Stockholder Rights Agreement substantially in the form attached hereto as
Exhibit E (the "Rights Agreement"), to sell and issue the Warrants, Shares and
Additional Shares hereunder, to issue the shares of the common stock of the
Company (the "Common Stock") issuable upon conversion of the Shares and
Additional Shares, to issue the Common Stock issuable on exercise of the
Warrants and to carry out and perform its obligations under the terms of this
Agreement and the Rights Agreement (together the "Agreements").
3.3 SUBSIDIARIES. Except for Cryo-Asia Pte Ltd., a joint venture with
Alantac in Singapore, the Company has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest in any corporation,
association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
or will, upon the filing of the Certificate, consist of 15,000,000 shares of
Common Stock, par value $0.001 per share, of which 7,707,081 shares are issued
and outstanding as of the date of this Agreement, and 2,000,000 shares of
Preferred Stock, of which 833,333 shares have been designated "Series A
Preferred" and none of which are issued and outstanding prior to the Initial
Closing. The outstanding shares have been duly authorized and validly issued in
compliance with applicable laws, and are fully paid and nonassessable. The
Company has reserved (a) 833,333 shares of Series A Preferred for issuance
hereunder, (b) 1,666,666 shares of Common Stock for issuance upon conversion of
the Series A Preferred, (c) 166,667 shares of Common Stock for issuance upon
exercise of the Warrants, (d) 1,828,909 shares of its Common Stock for issuance
to employees, consultants or directors pursuant to its 1992 Director Option
Plan, 1992 Stock Option Plan and Amended and Restated 1988 Stock Option Plan, of
which options to purchase 1,528,396 shares are issued and outstanding and (e) a
total of 150,000 shares of Common Stock for issuance upon exercise of certain
outstanding warrants. The Common Stock and the Series A Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Amended and
Restated Certificate of
3
<PAGE> 8
Incorporation (the "Certificate of Incorporation") of the Company and the
Certificate. Except as set forth above, there are no options, warrants or other
rights to purchase any of the Company's authorized and unissued capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company and
its directors necessary for the authorization, execution, delivery and
performance of the Agreements by the Company, the authorization, sale, issuance
and delivery of the Warrants, Shares and Additional Shares, the Common Stock
issuable upon conversion of the Shares and Additional Shares and upon exercise
of the Warrants, and the performance of all of the Company's obligations under
the Agreements has been taken or will be taken prior to the Initial Closing. The
Agreements, when executed and delivered by the Company, shall constitute valid
and binding obligations of the Company, enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, except that the indemnification
provisions of Section 1.10 of the Rights Agreement may further be limited by
principles of public policy. The Warrants, Shares and Additional Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences and privileges described in the certificate representing the
Warrants and the Certificate; the Common Stock issuable upon conversion of the
Shares and Additional Shares and upon exercise of the Warrants has been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement, the Certificate of Incorporation of the Company, the Certificate and
the certificate representing the Warrants will be validly issued, and will be
fully paid and nonassessable; and the Shares and Additional Shares and the
Common Stock issued upon conversion of the Shares and Additional Shares and upon
exercise of the Warrants, will be free of any liens or encumbrances, other than
any liens or encumbrances created by or imposed upon the Purchasers; provided,
however, that the Shares and Additional Shares, and the Common Stock issuable
upon conversion of the Shares and Additional Shares and upon exercise of the
Warrants, are subject to restrictions on transfer under state and/or federal
securities laws as set forth herein and in the Rights Agreement.
3.6 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
copies of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1997 (the "Reports"). The financial statements included within the
Reports are complete and correct in all material respects and accurately set out
and describe the financial condition and operating results of the Company as of
the dates and during the periods indicated therein, subject only, in the case of
financial statements included in the Quarterly Reports, to footnotes and normal
year-end adjustments.
4
<PAGE> 9
3.7 CHANGES. Since the date of the Company's last Quarterly Report on
Form 10-Q, there has not been:
(a) Any change in the assets, liabilities, financial condition,
or operations of the Company except changes in the ordinary course of business
which have not been in any case materially adverse;
(b) Any damage, destruction, or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(c) Any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) Any loans made by the Company to its employees, officers or
directors other than travel advances made in the ordinary course of business;
(e) Any declaration or payment of any dividend or other
distribution by the Company; or
(f) To the best of the Company's knowledge, any other event or
condition of any character which has materially and adversely affected the
business operations, assets or financial condition of the Company.
3.8 MATERIAL OBLIGATIONS. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Reports, and (ii)
liabilities and obligations which have been incurred subsequent to September 30,
1997, in the ordinary course of business which have not been, either in any case
or in the aggregate, material.
3.9 MATERIAL CONTRACTS AND COMMITMENTS. To the best of the Company's
knowledge, all of the contracts, agreements and instruments to which the Company
is a party and which are set forth or incorporated by reference in the Reports
(the "Material Agreements") are valid, binding and in full force and effect in
all material respects, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.10 INTELLECTUAL PROPERTY, TRADEMARKS, ETC. The Company has the right
to use, free and clear of all liens, charges, claims and restrictions, all
intellectual property, patents, trademarks, service marks, trade names,
copyrights, licenses and rights necessary to the business of the Company as
presently conducted, except to the extent that a Material Adverse Effect could
not reasonably be expected to result. To the Company's knowledge, the Company is
not infringing upon or otherwise acting adversely to the right or claimed right
of any other person under or with respect to any such intellectual property,
patents, trademarks, service marks, trade names, copyrights, licenses or rights.
5
<PAGE> 10
3.11 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of the Certificate of Incorporation or
Bylaws, each as amended to date, or in any material respect of any term or
provision of any Material Agreement, judgment, decree, order, statute, rule or
regulation applicable to the Company in any respect that could reasonably be
expected to have a Material Adverse Effect. The execution, delivery and
performance of this Agreement, and the issuance of the Warrants, Shares and
Additional Shares and the Common Stock issuable upon conversion of the Shares
and Additional Shares and upon exercise of the Warrants, have not resulted and
will not result in any material violation of, or conflict with, or constitute a
material default under, the Certificate of Incorporation or Bylaws, as amended,
nor any of the Material Agreements, nor result in the creation of, any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company.
3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof) which, if adversely determined,
would have a Material Adverse Effect. The Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality.
3.14 REGISTRATION RIGHTS. Except as set forth in the Rights Agreement
attached hereto as Exhibit E, the Company is not under any contractual
obligation to register (as defined in Section 1.2 of the Rights Agreement) any
of its presently outstanding securities or any of its securities which may
hereafter be issued.
3.15 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Warrants,
Shares and Additional Shares, and the Common Stock issuable upon conversion of
the Shares and Additional Shares and upon exercise of the Warrants, or the
consummation of any other transaction contemplated hereby or thereby, except (a)
filing of the Certificate in the office of the Delaware Secretary of State, and
(b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer, sale and issuance of
the Warrants, Shares and Additional Shares (and the Common Stock issuable upon
conversion of the Shares and Additional Shares and upon exercise of the
Warrants) under the California Corporate Securities Law of 1968, as amended, and
other applicable Blue Sky laws, which filings and qualifications, if required,
will be accomplished in a timely manner.
6
<PAGE> 11
3.16 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the
Warrants, Shares and Additional Shares to be issued in conformity with the terms
of this Agreement, and the issuance of the Common Stock to be issued upon
conversion of the Shares and Additional Shares and upon exercise of the
Warrants, constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act").
3.17 BROKERS OR FINDERS. The Company has not engaged any brokers,
finders or agents, and the Purchasers have not incurred, and will not incur,
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreements.
3.18 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the date hereof have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (ii) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.19 EMPLOYEE MATTERS. The Company does not have any collective
bargaining agreements with any of its employees and no labor union organizing
activity is pending or threatened with respect to the Company.
3.20 DISCLOSURE. To the best of the Company's knowledge, this Agreement
(including the Exhibits hereto) does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of Shares and Additional Shares by and the issuance
of the Warrants to such Purchaser and with respect only to such Purchaser, as
follows:
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT. The Purchaser (or its
principals or advisors) has substantial experience in evaluating and investing
in private placement transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests. The
Purchaser
7
<PAGE> 12
acknowledges that its investment in the Company is highly speculative and
entails a substantial degree of risk and the Purchaser is in a position to lose
the entire amount of such investment.
4.2 INVESTMENT. The Purchaser is acquiring the Warrants, Shares and
Additional Shares and the underlying Common Stock for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. The Purchaser understands that the
Warrants and Series A Preferred to be purchased hereby and the underlying Common
Stock have not been, and will not be, registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein. The Purchaser is an "accredited investor"
within the meaning of Regulation D, Rule 501(a), promulgated by the Securities
and Exchange Commission.
4.3 RULE 144. The Purchaser acknowledges that the Warrants, Shares and
Additional Shares and the underlying Common Stock must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. The Purchaser is aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker" and the
number of shares being sold during any three-month period not exceeding
specified limitations. The Purchaser understands that the certificates
evidencing the Warrants, Shares and Additional Shares will be imprinted with a
legend that prohibits the transfer of such securities unless they are registered
or such registration is not required.
4.4 NO PUBLIC MARKET. The Purchaser understands that no public market
now exists for the Warrants and the Series A Preferred to be issued by the
Company and that the Company has made no assurances that a public market will
ever exist for the Warrants and the Series A Preferred.
4.5 ACCESS TO DATA. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Purchaser has also had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction. The Purchaser
understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except as the
indemnification provisions of Section 1.10 of the Rights Agreement may be
limited by principles of public policy, and subject to laws of general
application relating to
8
<PAGE> 13
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.7 BROKERS OR FINDERS. The Purchaser has not engaged any brokers,
finders or agents, and the Company has not, and will not, incur, directly or
indirectly, as a result of any action taken by Purchasers, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreements. In the event that the preceding sentence is in
any way inaccurate, such Purchaser agrees to indemnify and hold harmless the
Company and each other Purchaser from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability) for which the Company, any other Purchaser, or
any of their officers, directors, employees or representatives, is responsible.
4.8 TAX LIABILITY. The Purchaser has reviewed with its own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by the Agreements. With respect to such matters,
the Purchaser relies solely on such advisors and not on any statements or
representations of the Company or any of its agents other than the
representations and warranties set forth herein. The Purchaser understands that
it (and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by the
Agreements.
SECTION 5
CONDITIONS TO PURCHASERS' OBLIGATIONS TO CLOSE
The Purchasers' obligations to purchase the Shares and Additional Shares
at each Closing are, unless waived by the Purchasers, subject to the fulfillment
of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in the
Agreements to be performed by the Company on or prior to the Closing shall have
been performed or complied with in all material respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the issuance of the Warrants, offer and sale of the
Shares and Additional Shares and the Common Stock issuable upon conversion of
the Shares and Additional Shares and upon exercise of the Warrants.
5.4 CERTIFICATE OF DESIGNATION. The Certificate shall have been duly
authorized, executed and filed with the Secretary of State of the State of
Delaware.
9
<PAGE> 14
5.5 RIGHTS AGREEMENT. The Company and the Purchasers shall have executed
and delivered the Rights Agreement.
5.6 COMPLIANCE CERTIFICATE. The Chief Executive Officer of the Company
shall have executed a Compliance Certificate, in the form of Exhibit F hereto,
certifying the satisfaction of the conditions to closing listed in Sections 5.1
and 5.2 hereof.
5.7 COMPLIANCE WITH LAW. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Warrants, Shares and Additional Shares and the Common Stock
issuable upon conversion of the Shares and Additional Shares and upon exercise
of the Warrants and the consummation of the transactions contemplated hereby.
5.8 OPINION OF COMPANY'S COUNSEL. Purchasers shall have received from
Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date and in substantially the form attached
as Exhibit G.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE
The Company's obligation to sell and issue the Shares and Additional
Shares at each Closing is, unless waived by the Company, subject to the
fulfillment of the following conditions:
6.1 REPRESENTATIONS. The representations and warranties made by the
Purchasers in Section 4 hereof shall be true and correct as of the Closing Date.
6.2 COVENANTS. All covenants, agreements and conditions contained in the
Agreements to be performed by Purchasers on or prior to the Closing Date shall
have been performed or complied with in all material respects.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the issuance of the Warrants, offer and sale of the
Shares and Additional Shares and the Common Stock issuable upon conversion of
the Shares and Additional Shares and upon exercise of the Warrants.
6.4 CERTIFICATE OF DESIGNATION. The Certificate shall have been duly
authorized, executed and filed with the Secretary of State of the State of
Delaware.
6.5 RIGHTS AGREEMENT. The Company and the Purchasers shall have executed
and delivered the Rights Agreement.
10
<PAGE> 15
6.6 COMPLIANCE WITH LAW. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Warrants, Shares and Additional Shares and the Common Stock
issuable upon conversion of the Shares and Additional Shares and upon exercise
of the Warrants and the consummation of the transactions contemplated hereby.
SECTION 7
CONFIDENTIAL INFORMATION
7.1 CONFIDENTIAL BUSINESS INFORMATION. The Purchasers covenant and agree
that they shall maintain the confidentiality of all non-public information
related to the business of the Company made available to them and/or any of
their representatives by the Company ("Confidential Business Information") and
shall not utilize any Confidential Business Information in connection with
purchases or sales of the Company's securities except in compliance with
applicable state and federal anti-fraud statutes. The Purchasers further
covenant and agree that they shall not disclose any Confidential Business
Information to any person or entity without the prior written consent of the
Company. The term "Purchaser" as used in this Section 7.1 includes all partners,
officers, directors, affiliates, employees, attorneys, accountants and other
agents and representatives of the Purchaser. Notwithstanding the above,
Confidential Business Information shall not include (i) information known to the
public generally, (ii) information known to the Purchaser from an independent
source prior to the receipt of such information from the Company and (iii)
information required to be disclosed by the Purchaser by court order or
otherwise required by law, provided, however, that in the event of a required
disclosure pursuant to this clause (iii), the Purchaser shall give the Company
prompt written notice of any such requirement so that the Company may seek a
protective order or other appropriate remedy. The Purchasers agree that
violation of this Section 7.1 would cause immediate and irreparable damage to
the business of the Company, and consent to the entry of immediate and permanent
injunctive relief for any violation hereof.
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and
11
<PAGE> 16
administrators of the parties hereto; provided, however, that the rights of the
Purchasers to purchase the Shares and Additional Shares and obtain the Warrants
on such purchase shall not be assignable without the prior written consent of
the Company.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that Purchasers holding a majority of the Shares and
Additional Shares (including any shares of Common Stock issued upon conversion
of the Shares and Additional Shares) may, with the Company's prior written
consent, waive, modify, or amend on behalf of all Purchasers, any provision
hereof.
8.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address, as shown on the
Schedule of Purchasers, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any Shares
or Additional Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares or
Additional Shares who has so furnished an address to the Company, or (c) if to
the Company, one copy should be sent to its address set forth on the cover page
of this Agreement and addressed to the attention of the Chief Executive Officer,
or at such other address as the Company shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
8.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
12
<PAGE> 17
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
8.11 EXPENSES. The Company and the Purchasers shall each bear their own
fees, costs and expenses incurred on their behalf with respect to the Agreement
and the transactions contemplated hereby and any amendments or waiver thereto.
13
<PAGE> 18
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
SUPERCONDUCTOR TECHNOLOGIES INC.
a Delaware corporation
By: /s/ Peter Thomas
--------------------------------------
Name: Peter Thomas
Title: Chief Executive Officer
"PURCHASER"
WILMINGTON SECURITIES, INC.
By: /s/ Andrew H. McQuarrie
--------------------------------------
Name: Andrew H. McQuarrie
Title: Vice President
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
14
<PAGE> 19
EXHIBIT A
SCHEDULE OF PURCHASERS
INITIAL CLOSING
MARCH 26, 1998
<TABLE>
<CAPTION>
WARRANTS FOR
NUMBER OF NUMBER OF
NAME AND ADDRESS SERIES A SHARES PURCHASE PRICE COMMON STOCK
- ----------------------------- --------------- -------------- -------------
<S> <C> <C> <C>
Wilmington Securities, Inc. 500,000 $3,000,000 100,000
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Andrew H. McQuarrie
TOTAL: 500,000 $3,000,000 100,000
</TABLE>
<PAGE> 1
EXHIBIT 4.3
================================================================================
SUPERCONDUCTOR TECHNOLOGIES INC.
460 WARD DRIVE
SUITE F
SANTA BARBARA, CALIFORNIA 93111
SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT
AUGUST 11, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1 Authorization and Sale of Preferred Stock; Issuance of Warrants....................... 1
1.1 Authorization..................................................................... 1
1.2 Sale of Shares; Issuance of Warrants.............................................. 1
Section 2 Closing Dates; Delivery............................................................... 1
2.1 Closing........................................................................... 1
2.2 Delivery.......................................................................... 2
Section 3 Representations and Warranties of the Company......................................... 2
3.1 Organization and Standing; Certificate and Bylaws................................. 2
3.2 Corporate Power................................................................... 2
3.3 Subsidiaries...................................................................... 2
3.4 Capitalization.................................................................... 2
3.5 Authorization..................................................................... 3
3.6 Financial Statements.............................................................. 3
3.7 Changes........................................................................... 4
3.8 Material Obligations.............................................................. 4
3.9 Material Contracts and Commitments................................................ 4
3.10 Intellectual Property, Trademarks, etc............................................ 4
3.11 Title to Properties and Assets; Liens, etc........................................ 5
3.12 Compliance with Other Instruments, None Burdensome, etc........................... 5
3.13 Litigation, etc................................................................... 5
3.14 Registration Rights............................................................... 5
3.15 Governmental Consent, etc......................................................... 5
3.16 Offering.......................................................................... 6
3.17 Brokers or Finders................................................................ 6
3.18 Tax Returns and Payments.......................................................... 6
3.19 Employee Matters.................................................................. 6
3.20 Disclosure........................................................................ 6
Section 4 Representations and Warranties of the Purchasers...................................... 6
4.1 Experience; Speculative Nature of Investment...................................... 6
4.2 Investment........................................................................ 7
4.3 Rule 144.......................................................................... 7
4.4 No Public Market.................................................................. 7
4.5 Access to Data.................................................................... 7
4.6 Authorization..................................................................... 7
4.7 Brokers or Finders................................................................ 8
4.8 Tax Liability..................................................................... 8
Section 5 Conditions to Purchasers' Obligations to Close........................................ 8
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
5.1 Representations and Warranties Correct............................................ 8
5.2 Covenants......................................................................... 8
5.3 Blue Sky.......................................................................... 8
5.4 Certificate of Designation........................................................ 8
5.5 Rights Agreement.................................................................. 9
5.6 Compliance Certificate............................................................ 9
5.7 Compliance with Law............................................................... 9
5.8 Opinion of Company's Counsel...................................................... 9
Section 6 Conditions to Company's Obligations to Close.......................................... 9
6.1 Representations................................................................... 9
6.2 Covenants......................................................................... 9
6.3 Blue Sky.......................................................................... 9
6.4 Certificate of Designation........................................................ 9
6.5 Rights Agreement.................................................................. 9
6.6 Compliance with Law............................................................... 10
Section 7 Confidential Information.............................................................. 10
7.1 Confidential Business Information................................................. 10
Section 8 Miscellaneous......................................................................... 10
8.1 Governing Law..................................................................... 10
8.2 Survival.......................................................................... 10
8.3 Successors and Assigns............................................................ 10
8.4 Entire Agreement; Amendment....................................................... 11
8.5 Notices, etc...................................................................... 11
8.6 Delays or Omissions............................................................... 11
8.7 California Corporate Securities Law............................................... 12
8.8 Counterparts...................................................................... 12
8.9 Severability...................................................................... 12
8.10 Titles and Subtitles.............................................................. 12
8.11 Expenses.......................................................................... 12
EXHIBITS
A Schedule of Purchasers
B Certificate of Designation
C Warrant
D Exceptions to Representations and Warranties
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
E Stockholder Rights Agreement
F Compliance Certificate
G Opinion of Counsel
</TABLE>
iii
<PAGE> 5
SUPERCONDUCTOR TECHNOLOGIES, INC.
SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is made as of August 11, 1998 by and among Superconductor
Technologies Inc., a Delaware corporation (the "Company"), and the persons and
entities listed on the Schedule of Purchasers attached hereto as Exhibit A (the
"Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK; ISSUANCE OF WARRANTS
1.1 AUTHORIZATION. The Company will, prior to the Closing (as defined
below), authorize the sale and issuance of (i) up to 125,000 shares (the
"Shares") of the Company's Series A-1 Preferred Stock ("Series A-1 Preferred"),
having the rights, privileges and preferences as set forth in the Certificate of
Designation (the "Certificate") in the form attached to this Agreement as
Exhibit B and (ii) the Warrants (as defined below) to purchase up to 66,667
shares of the Common Stock (as defined below).
1.2 SALE OF SHARES; ISSUANCE OF WARRANTS. Subject to the terms and
conditions of this Agreement, each of the Purchasers agrees to purchase and the
Company agrees to sell and issue to each Purchaser:
(a) the number of Shares set forth in the column designated
"Number of Series A-1 Shares" opposite such Purchaser's name on the Schedule of
Purchasers, at a cash price of $8.00 per share; and
(b) a warrant or warrants in the form attached to this Agreement
as Exhibit C (the "Warrants") which shall permit such Purchaser to initially
purchase a number of shares of Common Stock set forth in the column designated
"Warrants for Number of Common Stock" opposite such Purchaser's name on the
Schedule of Purchasers, at an exercise price of $4.00 per share.
The Company's agreement with each Purchaser is a separate agreement, and
the sale and issuance of the Shares and the Warrants to each Purchaser is a
separate sale and issuance.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING. The closing (the "Closing") for the purchase and sale of
the Shares and the issuance of the Warrants hereunder shall take place on August
11, 1998 (the "Closing"). The Closing shall be held at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
<PAGE> 6
Alto, California, or at such other time and place upon which the Company and the
Purchasers shall agree.
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser
a certificate registered in such Purchaser's name representing the number of
Shares that such Purchaser is purchasing against payment of the purchase price
therefor as set forth in the column designated "Purchase Price" opposite such
Purchaser's name on the Schedule of Purchasers, by cashier's or certified check
payable to the Company or wire transfer of immediately available funds per the
Company's instructions. At the Closing, the Company will deliver to each
purchaser a Warrant evidencing the right to purchase a number of shares of
Common Stock as set forth in the column designated "Warrants for Number of
Common Stock" opposite such Purchaser's name on the Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit D attached hereto, the Company represents
and warrants to the Purchasers as of the date of this Agreement as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business. The Company is presently qualified to do
business as a foreign corporation in each jurisdiction where the failure to be
so qualified would have a material adverse effect on the Company's business,
operating results or financial condition (a "Material Adverse Effect").
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement and that certain
Amended and Restated Stockholder Rights Agreement substantially in the form
attached hereto as Exhibit E (the "Rights Agreement"), to sell and issue the
Warrants and Shares hereunder, to issue the shares of the common stock of the
Company (the "Common Stock") issuable upon conversion of the Shares, to issue
the Common Stock issuable on exercise of the Warrants and to carry out and
perform its obligations under the terms of this Agreement and the Rights
Agreement (together the "Agreements").
3.3 SUBSIDIARIES. Except for Cryo-Asia Pte Ltd., a joint venture with
Alantac in Singapore, the Company has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest in any corporation,
association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
or will, upon the filing of the Certificate, consist of (a) 30,000,000 shares of
Common Stock, par value $0.001 per share, of which 7,715,081 shares are issued
and outstanding as of the date of this Agreement, and (b) 2,000,000 shares of
Preferred Stock, of which (i) 500,000 shares have been designated "Series A
2
<PAGE> 7
Preferred", all of which are issued and outstanding, and (ii) 125,000 shares
have been designated "Series A-1 Preferred", none of which are issued and
outstanding prior to the Closing. The outstanding shares have been duly
authorized and validly issued in compliance with applicable laws, and are fully
paid and nonassessable. The Company has reserved (a) 125,000 shares of Series
A-1 Preferred for issuance hereunder, (b) 1,250,000 shares of Common Stock for
issuance upon conversion of the Preferred Stock, (c) 166,667 shares of Common
Stock for issuance upon exercise of the warrants issued in connection with the
Series A Preferred financing and the Warrants, (d) 2,078,909 shares of its
Common Stock for issuance to employees, consultants or directors pursuant to its
1992 Director Option Plan, 1992 Stock Option Plan, Amended and Restated 1988
Stock Option Plan and 1998 Nonstatutory Option Plan, of which options to
purchase 1,809,093 shares are issued and outstanding and (e) a total of 150,000
shares of Common Stock for issuance upon exercise of certain outstanding
warrants. The Common Stock, the Series A Preferred and the Series A-1 Preferred
shall have the rights, preferences, privileges and restrictions set forth in the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") of the Company and the Certificate. Except as set forth above,
there are no options, warrants or other rights to purchase any of the Company's
authorized and unissued capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company and
its directors necessary for the authorization, execution, delivery and
performance of the Agreements by the Company, the authorization, sale, issuance
and delivery of the Warrants, Shares and the Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants, and the performance
of all of the Company's obligations under the Agreements has been taken or will
be taken prior to the Closing. The Agreements, when executed and delivered by
the Company, shall constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, except that the indemnification provisions of Section 1.10
of the Rights Agreement may further be limited by principles of public policy.
The Warrants and Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, will be fully paid and nonassessable, and
will have the rights, preferences and privileges described in the certificate
representing the Warrants and the Certificate; the Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants has been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement, the Certificate of Incorporation of the Company, the Certificate and
the certificate representing the Warrants will be validly issued, and will be
fully paid and nonassessable; and the Shares and the Common Stock issued upon
conversion of the Shares and upon exercise of the Warrants, will be free of any
liens or encumbrances, other than any liens or encumbrances created by or
imposed upon the Purchasers; provided, however, that the Shares, and the Common
Stock issuable upon conversion of the Shares and upon exercise of the Warrants,
are subject to restrictions on transfer under state and/or federal securities
laws as set forth herein and in the Rights Agreement.
3.6 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
copies of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and Quarterly Report on Form 10-Q for the fiscal quarter ended
March 28, 1998 (the "Reports"). The financial statements included within the
Reports are complete and correct in all material respects and
3
<PAGE> 8
accurately set out and describe the financial condition and operating results of
the Company as of the dates and during the periods indicated therein, subject
only, in the case of financial statements included in the Quarterly Reports, to
footnotes and normal year-end adjustments.
3.7 CHANGES. Since the date of the Company's last Quarterly Report on
Form 10-Q, there has not been:
(a) Any change in the assets, liabilities, financial condition,
or operations of the Company except changes in the ordinary course of business
which have not been in any case materially adverse;
(b) Any damage, destruction, or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(c) Any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) Any loans made by the Company to its employees, officers or
directors other than travel advances made in the ordinary course of business;
(e) Any declaration or payment of any dividend or other
distribution by the Company; or
(f) To the best of the Company's knowledge, any other event or
condition of any character which has materially and adversely affected the
business operations, assets or financial condition of the Company.
3.8 MATERIAL OBLIGATIONS. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Reports, and (ii)
liabilities and obligations which have been incurred subsequent to March 28,
1998, in the ordinary course of business which have not been, either in any case
or in the aggregate, material.
3.9 MATERIAL CONTRACTS AND COMMITMENTS. To the best of the Company's
knowledge, all of the contracts, agreements and instruments to which the Company
is a party and which are set forth or incorporated by reference in the Reports
(the "Material Agreements") are valid, binding and in full force and effect in
all material respects, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.10 INTELLECTUAL PROPERTY, TRADEMARKS, ETC. The Company has the right
to use, free and clear of all liens, charges, claims and restrictions, all
intellectual property, patents, trademarks, service marks, trade names,
copyrights, licenses and rights necessary to the business of the Company as
presently conducted, except to the extent that a Material Adverse Effect could
not reasonably be
4
<PAGE> 9
expected to result. To the Company's knowledge, the Company is not infringing
upon or otherwise acting adversely to the right or claimed right of any other
person under or with respect to any such intellectual property, patents,
trademarks, service marks, trade names, copyrights, licenses or rights.
3.11 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of the Certificate of Incorporation or
Bylaws, each as amended to date, or in any material respect of any term or
provision of any Material Agreement, judgment, decree, order, statute, rule or
regulation applicable to the Company in any respect that could reasonably be
expected to have a Material Adverse Effect. The execution, delivery and
performance of this Agreement, and the issuance of the Warrants, Shares and the
Common Stock issuable upon conversion of the Shares and upon exercise of the
Warrants, have not resulted and will not result in any material violation of, or
conflict with, or constitute a material default under, the Certificate of
Incorporation or Bylaws, as amended, nor any of the Material Agreements, nor
result in the creation of, any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company.
3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof) which, if adversely determined,
would have a Material Adverse Effect. The Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality.
3.14 REGISTRATION RIGHTS. Except as set forth in the Rights Agreement
attached hereto as Exhibit E, the Company is not under any contractual
obligation to register (as defined in Section 1.2 of the Rights Agreement) any
of its presently outstanding securities or any of its securities which may
hereafter be issued.
3.15 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Warrants,
Shares and the Common Stock issuable upon conversion of the Shares and upon
exercise of the Warrants, or the consummation of any other transaction
contemplated hereby or thereby, except (a) filing of the Certificate in the
office of the Delaware Secretary of State, and (b) qualification (or taking such
action as may be necessary to secure an exemption from qualification, if
available) of the offer, sale and issuance of the Warrants and Shares (and the
Common Stock issuable upon conversion of the Shares and upon exercise of the
Warrants) under the
5
<PAGE> 10
California Corporate Securities Law of 1968, as amended, and other applicable
Blue Sky laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.16 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the
Warrants and Shares to be issued in conformity with the terms of this Agreement,
and the issuance of the Common Stock to be issued upon conversion of the Shares
and upon exercise of the Warrants, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act").
3.17 BROKERS OR FINDERS. The Company has not engaged any brokers,
finders or agents, and the Purchasers have not incurred, and will not incur,
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreements.
3.18 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the date hereof have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (ii) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.19 EMPLOYEE MATTERS. The Company does not have any collective
bargaining agreements with any of its employees and no labor union organizing
activity is pending or threatened with respect to the Company.
3.20 DISCLOSURE. To the best of the Company's knowledge, this Agreement
(including the Exhibits hereto) does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of Shares by and the issuance of the Warrants to
such Purchaser and with respect only to such Purchaser, as follows:
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT. The Purchaser (or its
principals or advisors) has substantial experience in evaluating and investing
in private placement transactions of
6
<PAGE> 11
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser acknowledges that its
investment in the Company is highly speculative and entails a substantial degree
of risk and the Purchaser is in a position to lose the entire amount of such
investment.
4.2 INVESTMENT. The Purchaser is acquiring the Warrants, Shares and the
underlying Common Stock for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. The Purchaser understands that the Warrants and Series A-1
Preferred to be purchased hereby and the underlying Common Stock have not been,
and will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser is an "accredited investor" within the meaning
of Regulation D, Rule 501(a), promulgated by the Securities and Exchange
Commission.
4.3 RULE 144. The Purchaser acknowledges that the Warrants, Shares and
the underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available. The Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker" and the
number of shares being sold during any three-month period not exceeding
specified limitations. The Purchaser understands that the certificates
evidencing the Warrants and Shares will be imprinted with a legend that
prohibits the transfer of such securities unless they are registered or such
registration is not required.
4.4 NO PUBLIC MARKET. The Purchaser understands that no public market
now exists for the Warrants and the Series A-1 Preferred to be issued by the
Company and that the Company has made no assurances that a public market will
ever exist for the Warrants and the Series A-1 Preferred.
4.5 ACCESS TO DATA. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Purchaser has also had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction. The Purchaser
understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except as the
indemnification provisions of Section 1.10 of the Rights Agreement may be
limited by principles of public policy, and subject to laws of general
application relating to
7
<PAGE> 12
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.7 BROKERS OR FINDERS. The Purchaser has not engaged any brokers,
finders or agents, and the Company has not, and will not, incur, directly or
indirectly, as a result of any action taken by Purchasers, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreements. In the event that the preceding sentence is in
any way inaccurate, such Purchaser agrees to indemnify and hold harmless the
Company and each other Purchaser from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability) for which the Company, any other Purchaser, or
any of their officers, directors, employees or representatives, is responsible.
4.8 TAX LIABILITY. The Purchaser has reviewed with its own tax advisors
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by the Agreements. With respect to such matters,
the Purchaser relies solely on such advisors and not on any statements or
representations of the Company or any of its agents other than the
representations and warranties set forth herein. The Purchaser understands that
it (and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by the
Agreements.
SECTION 5
CONDITIONS TO PURCHASERS' OBLIGATIONS TO CLOSE
The Purchasers' obligations to purchase the Shares at the Closing are,
unless waived by the Purchasers, subject to the fulfillment of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in the
Agreements to be performed by the Company on or prior to the Closing shall have
been performed or complied with in all material respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the issuance of the Warrants, offer and sale of the
Shares and the Common Stock issuable upon conversion of the Shares and upon
exercise of the Warrants.
5.4 CERTIFICATE OF DESIGNATION. The Certificate shall have been duly
authorized, executed and filed with the Secretary of State of the State of
Delaware.
8
<PAGE> 13
5.5 RIGHTS AGREEMENT. The Company and the Purchasers shall have executed
and delivered the Rights Agreement.
5.6 COMPLIANCE CERTIFICATE. The Chief Executive Officer of the Company
shall have executed a Compliance Certificate, in the form of Exhibit F hereto,
certifying the satisfaction of the conditions to closing listed in Sections 5.1
and 5.2 hereof.
5.7 COMPLIANCE WITH LAW. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Warrants, Shares and the Common Stock issuable upon
conversion of the Shares and upon exercise of the Warrants and the consummation
of the transactions contemplated hereby.
5.8 OPINION OF COMPANY'S COUNSEL. Purchasers shall have received from
Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date and in substantially the form attached
as Exhibit G.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE
The Company's obligation to sell and issue the Shares at the Closing is,
unless waived by the Company, subject to the fulfillment of the following
conditions:
6.1 REPRESENTATIONS. The representations and warranties made by the
Purchasers in Section 4 hereof shall be true and correct as of the Closing Date.
6.2 COVENANTS. All covenants, agreements and conditions contained in the
Agreements to be performed by Purchasers on or prior to the Closing Date shall
have been performed or complied with in all material respects.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the issuance of the Warrants, offer and sale of the
Shares and the Common Stock issuable upon conversion of the Shares and upon
exercise of the Warrants.
6.4 CERTIFICATE OF DESIGNATION. The Certificate shall have been duly
authorized, executed and filed with the Secretary of State of the State of
Delaware.
6.5 RIGHTS AGREEMENT. The Company and the Purchasers shall have executed
and delivered the Rights Agreement.
6.6 COMPLIANCE WITH LAW. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the sale
and issuance of the Warrants, Shares and
9
<PAGE> 14
the Common Stock issuable upon conversion of the Shares and upon exercise of the
Warrants and the consummation of the transactions contemplated hereby.
SECTION 7
CONFIDENTIAL INFORMATION
7.1 CONFIDENTIAL BUSINESS INFORMATION. The Purchasers covenant and agree
that they shall maintain the confidentiality of all non-public information
related to the business of the Company made available to them and/or any of
their representatives by the Company ("Confidential Business Information") and
shall not utilize any Confidential Business Information in connection with
purchases or sales of the Company's securities except in compliance with
applicable state and federal anti-fraud statutes. The Purchasers further
covenant and agree that they shall not disclose any Confidential Business
Information to any person or entity without the prior written consent of the
Company. The term "Purchaser" as used in this Section 7.1 includes all partners,
officers, directors, affiliates, employees, attorneys, accountants and other
agents and representatives of the Purchaser. Notwithstanding the above,
Confidential Business Information shall not include (i) information known to the
public generally, (ii) information known to the Purchaser from an independent
source prior to the receipt of such information from the Company and (iii)
information required to be disclosed by the Purchaser by court order or
otherwise required by law, provided, however, that in the event of a required
disclosure pursuant to this clause (iii), the Purchaser shall give the Company
prompt written notice of any such requirement so that the Company may seek a
protective order or other appropriate remedy. The Purchasers agree that
violation of this Section 7.1 would cause immediate and irreparable damage to
the business of the Company, and consent to the entry of immediate and permanent
injunctive relief for any violation hereof.
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Purchasers to purchase the Shares and
obtain the Warrants on such purchase shall not be assignable without the prior
written consent of the Company.
10
<PAGE> 15
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that Purchasers holding a majority of the Shares (including
any shares of Common Stock issued upon conversion of the Shares) may, with the
Company's prior written consent, waive, modify, or amend on behalf of all
Purchasers, any provision hereof.
8.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address, as shown on the
Schedule of Purchasers, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Shares, at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Shares who has so furnished an
address to the Company, or (c) if to the Company, one copy should be sent to its
address set forth on the cover page of this Agreement and addressed to the
attention of the Chief Executive Officer, or at such other address as the
Company shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
8.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
11
<PAGE> 16
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
8.11 EXPENSES. The Company and the Purchasers shall each bear their own
fees, costs and expenses incurred on their behalf with respect to the Agreement
and the transactions contemplated hereby and any amendments or waiver thereto.
12
<PAGE> 17
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
SUPERCONDUCTOR TECHNOLOGIES INC.
a Delaware corporation
By: /s/ Peter Thomas
---------------------------------
Name: Peter Thomas
Title: Chief Executive Officer
"PURCHASER"
WILMINGTON SECURITIES, INC.
By: /s/ Andrew H. McQuarrie
---------------------------------
Name: Andrew H. McQuarrie
Title: Vice President
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
13
<PAGE> 18
EXHIBIT A
SCHEDULE OF PURCHASERS
THE CLOSING
AUGUST 11, 1998
<TABLE>
<CAPTION>
WARRANTS FOR
NUMBER OF NUMBER OF
NAME AND ADDRESS SERIES A 1 SHARES PURCHASE PRICE COMMON STOCK
- ---------------------------- ----------------- -------------- ------------
<S> <C> <C> <C>
Wilmington Securities, Inc. 125,000 $1,000,000 66,667
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Andrew H. McQuarrie
TOTAL: 125,000 $1,000,000 66,667
</TABLE>
<PAGE> 1
EXHIBIT 4.4
================================================================================
SUPERCONDUCTOR TECHNOLOGIES INC.
460 WARD DRIVE
SUITE F
SANTA BARBARA, CALIFORNIA 93111
AMENDED AND RESTATED
STOCKHOLDER RIGHTS AGREEMENT
AUGUST 11, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 Restrictions on Transferability of Securities; Compliance with
Securities Act; Registration Rights................................... 1
1.1 Restrictions on Transferability............................... 1
1.2 Certain Definitions........................................... 1
1.3 Restrictive Legend............................................ 3
1.4 Restrictions on Transfer; Notice of Proposed Transfers........ 3
1.5 Requested Registration........................................ 4
1.6 Company Registration.......................................... 6
1.7 Limitations on Subsequent Registration Rights................. 7
1.8 Expenses of Registration...................................... 7
1.9 Registration Procedures....................................... 7
1.10 Indemnification............................................... 8
1.11 Information by Holder......................................... 9
1.12 Rule 144 Reporting............................................ 9
1.13 Transfer of Registration Rights............................... 10
1.14 Standoff Agreement............................................ 10
1.15 Termination of Registration Rights............................ 10
SECTION 2 Right of First Refusal........................................... 10
2.1 Grant of Right of First Refusal............................... 10
2.2 Definition of New Securities.................................. 10
2.3 Notice of Intent to Issue New Securities; Notice Period....... 11
2.4 Offers to Third Parties....................................... 11
2.5 Assignment.................................................... 11
2.6 Termination of Right of First Refusal......................... 11
SECTION 3 Miscellaneous.................................................... 12
3.1 Governing Law................................................. 12
3.2 Survival...................................................... 12
3.3 Successors and Assigns........................................ 12
3.4 Entire Agreement; Amendment................................... 12
3.5 Notices, etc.................................................. 12
3.6 Delays or Omissions........................................... 13
3.7 Counterparts.................................................. 13
3.8 Severability.................................................. 13
3.9 Titles and Subtitles.......................................... 13
</TABLE>
-i-
<PAGE> 3
SUPERCONDUCTOR TECHNOLOGIES INC.
AMENDED AND RESTATED
STOCKHOLDER RIGHTS AGREEMENT
This Amended and Restated Stockholder Rights Agreement (the "Agreement")
is made as of August 11, 1998 between Superconductor Technologies Inc., a
Delaware corporation (the "Company"), the Purchasers of the Company's Series A
Preferred Stock (the "Series A Purchasers") pursuant to the Company's Series A
Preferred Stock Purchase Agreement dated March 26, 1998 (the "Series A
Agreement") and Purchasers of the Company's Series A-1 Preferred Stock (the
"Series A-1 Purchasers") pursuant to the Company's Series A-1 Preferred Stock
Purchase Agreement dated August 11, 1998 (the "Series A-1 Agreement"). The
Series A Purchasers and the Series A-1 Purchasers are, collectively, the
"Purchasers."
RECITALS
A. The Company and the Series A Purchasers have entered into that certain
Stockholder Rights Agreement dated as of March 26, 1998 (the "Existing
Agreement"), which established certain terms and conditions upon which the
Company's Series A Preferred Stock and certain warrants are held by the Series A
Purchasers, as set forth more particularly in the Existing Agreement.
B. Concurrently herewith, the Company and the Series A-1 Purchasers are
entering into the Series A-1 Agreement for sale by the Company and purchase by
the Series A-1 Purchasers of shares of the Company's Series A-1 Preferred Stock
and for the issuance by the Company of certain warrants to purchase shares of
the Company's Common Stock to the Series A-1 Purchasers.
C. The Company desires to provide a further inducement to the Series A-1
Purchasers to purchase shares of its Series A-1 Preferred Stock by establishing
certain terms and conditions upon which such Series A-1 Preferred Stock and
certain warrants are held by the Series A-1 Purchasers.
D. The Company and the Series A Purchasers desire to amend and restate the
Existing Agreement in its entirety, as set forth herein, to make the Series A-1
Purchasers party thereto.
NOW, THEREFORE, the parties agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Conversion
Stock (as defined below) and the Warrants (as defined below) shall not be sold,
assigned, transferred or pledged
<PAGE> 4
except upon the conditions specified in this Section 1, which conditions are
intended to ensure compliance with the provisions of the Securities Act (as
defined below). The Purchasers will cause any proposed purchaser, assignee,
transferee, or pledgee of any such securities held by the Purchasers to agree to
take and hold such securities subject to the provisions and upon the conditions
specified in this Section 1.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Closing Date" shall mean, (i) as to the Series A Purchasers, the
date of the first purchase and sale of Series A Preferred Stock and issuance of
Warrants pursuant to the Series A Agreement and (ii) as to the Series A-1
Purchasers, the date of the first purchase and sale of Series A-1 Preferred
Stock and issuance of Warrants pursuant to the Series A-1 Agreement, as the case
may be.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable
pursuant to conversion of the Preferred Stock and exercise of the Warrants.
"Holder" shall mean (i) any Purchaser holding Registrable Securities
and (ii) any person holding Registrable Securities to whom the rights under this
Section 1 have been transferred in accordance with Section 1.13 hereof.
"Initiating Holders" shall mean Holders in the aggregate of greater
than 50% of the Registrable Securities.
"Preferred Stock" shall, collectively, mean the Series A Preferred
Stock issued pursuant to the Series A Agreement and the Series A-1 Preferred
Stock issued pursuant to the Series A-1 Agreement.
"Registrable Securities" shall mean (i) the Conversion Stock, (ii)
any Common Stock acquired pursuant to the exercise of the right of first refusal
in Section 2 of this Agreement (including any shares issued by virtue of such
shares upon any stock split, stock dividend, recapitalization or similar event),
and (iii) any Common Stock of the Company issued or issuable in respect of the
Conversion Stock upon any stock split, stock dividend, recapitalization or
similar event, or any Common Stock otherwise issued or issuable in respect of
the Conversion Stock; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold or are, in
the opinion of counsel for the Company, available for sale in a single
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
-2-
<PAGE> 5
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred by the Company in complying with Sections 1.5 and 1.6
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company) and the reasonable fees and disbursements of one counsel for all
Holders.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth above, all reasonable fees and
disbursements of counsel for any Holder.
"Warrants" shall mean, collectively, (i) the Warrants issued
pursuant to the Series A Agreement and (ii) the Warrants issued pursuant to the
Series A-1 Agreement.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the Preferred
Stock, (ii) the Warrants, (iii) the Conversion Stock and (iv) any other
securities issued in respect of the Preferred Stock or the Conversion Stock upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of Section
1.4 below) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
Each Purchaser and Holder consents to the Company making a notation
on its records
-3-
<PAGE> 6
and giving instructions to any transfer agent of the Preferred Stock, the
Warrants or the Conversion Stock in order to implement the restrictions on
transfer established in this Section 1.
1.4 RESTRICTIONS ON TRANSFER; NOTICE OF PROPOSED TRANSFERS. The holder of
each certificate representing Restricted Securities by acceptance thereof agrees
to comply in all respects with the provisions of this Section 1.4. Prior to any
proposed sale, assignment, transfer or pledge of any Restricted Securities
(other than (i) a transfer not involving a change in beneficial ownership, (ii)
in transactions involving the distribution without consideration of Restricted
Securities by the Holder to any of its partners, or retired partners, or to the
estate of any of its partners or retired partners, (iii) any transfer by any
Holder to (A) any individual or entity controlled by, controlling, or under
common control with, such Holder or (B) any individual or entity with respect to
which such Holder (or any person controlled by, controlling, or under common
control with, such Holder) has the power to direct investment decisions, or (iv)
in transactions in compliance with Rule 144), and unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied, at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall be, and whose legal opinion shall be, reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
1.5 REQUESTED REGISTRATION.
(a) Request for Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to (1) at least fifty percent (50%) of
the issued and outstanding Registrable Securities or (2) not less than that
number of shares of Registrable Securities which would result in an anticipated
aggregate offering price, net of underwriting discounts and commissions, greater
than five million dollars ($5,000,000), the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
appropriate qualification
-4-
<PAGE> 7
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company;
Provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 2.5:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Prior to September 26, 1999;
(C) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(D) After the Company has effected one (1) such
registration pursuant to this subparagraph 1.5(a), and such registration has
been declared or ordered effective;
(E) If the Company shall furnish to such Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1.5 shall be deferred
for a period not to exceed one hundred eighty (180) days from the date of
receipt of written request from the Initiating Holders; provided that the
Company may not exercise this deferral right more than once per twelve (12)
month period.
Subject to the foregoing clauses (A) through (E), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). In such event, the right of any Holder to registration
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<PAGE> 8
pursuant to Section 1.5 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 1.5, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this Section 1.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time of
filing the registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
be transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
1.6 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such
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<PAGE> 9
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 1.6, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter and the Company may reduce the Registrable Securities to be included
in such registration to the extent the underwriters deem necessary. The Company
shall so advise all Holders and other holders distributing their securities
through such underwriting and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all the Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holder at the time of filing the
Registration Statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder or holder to the nearest 100 shares. If any Holder or holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public distribution prior
to one hundred eighty (180) days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
1.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
Closing Date, the Company shall not enter into any agreement granting any holder
or prospective holder of any securities of the Company registration rights with
respect to such securities unless (i) such new registration rights, including
standoff obligations, are on a pari passu basis with those rights of the Holders
hereunder, or (ii) such new registration rights, including standoff obligations,
are subordinate to the registration rights granted Holders hereunder.
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with (i) one (1) registration pursuant to Section 1.5, (ii) all
registrations pursuant to Section 1.6, shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered on
behalf of the Holders and all other Registration Expenses shall be borne by the
Holders of such securities pro rata on the basis of the number of shares so
registered.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain
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<PAGE> 10
effective for at least one hundred eighty (180) days or until the distribution
described in the Registration Statement has been completed;
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statements as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions; and
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), state securities law or any rule or regulation promulgated under such
laws applicable to the Company in connection with any such registration,
qualification or compliance, and within a reasonable period the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing
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<PAGE> 11
or defending any such claim, loss, damage, liability or action; provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and within a reasonable
period will reimburse the Company, such Holders, such directors, officers,
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section 1.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1.10 unless the failure to give such notice
is materially prejudicial to an Indemnifying Party's ability to defend such
action and provided further, that the Indemnifying Party shall not assume the
defense for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be liable for indemnification hereunder
with respect to any settlement or consent to judgment, in connection with any
claim or litigation to which these indemnification provisions apply, that has
been
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<PAGE> 12
entered into without the prior consent of the Indemnifying Party (which consent
will not be unreasonably withheld).
1.11 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.11.
1.12 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) 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 that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) So long as a Holder owns any Restricted Securities to furnish to
the Holder forthwith 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 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 and other information in the possession of or reasonably obtainable by
the Company as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such securities
without registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Holders under Sections 1.5 and 1.6 may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by the Holder,
provided that (a) such transfer may otherwise be effected in accordance with
applicable securities laws and Section 1.3 and 1.4, and (b) such assignee or
transferee acquires at least 100,000 shares of Registrable Securities.
1.14 STANDOFF AGREEMENT. In connection with any public offering of the
Company's securities, the Holder agrees, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the underwriters; provided that the officers and directors of
the Company who own stock of the Company also agree to such restrictions.
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<PAGE> 13
1.15 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to Section 1 shall terminate as to each Holder at such time as all
Registrable Securities held by such Holder may, in the opinion of counsel to the
Company (which opinion shall be addressed and rendered to Holder), be sold
within a given three month period pursuant to Rule 144 or any other applicable
exemption that allows for a resale free of registration.
SECTION 2
RIGHT OF FIRST REFUSAL
2.1 GRANT OF RIGHT OF FIRST REFUSAL. Subject to compliance with all
applicable federal and state securities laws, the Company grants to the
Purchasers the right of first refusal to purchase, pro rata, all or any part of
New Securities (as defined in this Section 2) which the Company may, from time
to time after the date of this Agreement, propose to sell and issue. A pro rata
share, for purposes of this right of first refusal, is the ratio that the sum of
the number of shares of Conversion Stock then held by a Purchaser bears to the
total outstanding Common Stock of the Company (assuming conversion of all
convertible securities and the exercise of all outstanding options and
warrants).
2.2 DEFINITION OF NEW SECURITIES. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
said shares of Common Stock or Preferred Stock. Notwithstanding the foregoing,
"New Securities" does not include (i) the Preferred Stock, the Warrants or the
Conversion Stock, (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of all or substantially all of the assets or other reorganization, (iv)
securities issuable upon exercise or conversion of currently outstanding
securities, (v) securities issued in connection with any stock split, stock
dividend or recapitalization by the Company, (vi) securities issued to the
Company's employees, officers, directors, and consultants pursuant to any
arrangement approved by the Board of Directors of the Company, and (vii)
securities issued to research or development collaborators or issued to banks or
other institutional lenders or lessors in connection with capital asset leases
or borrowings for the acquisition of capital assets, pursuant to any arrangement
approved by the Board of Directors of the Company (including securities issued
upon exercise or conversion of any such securities).
2.3 NOTICE OF INTENT TO ISSUE NEW SECURITIES; NOTICE PERIOD. In the event
the Company proposes to undertake an issuance of New Securities, it shall give
each Purchaser written notice of its intention, describing the type of New
Securities and the price and terms upon which the Company proposes to issue the
same. Each Purchaser shall have 15 days from the date of receipt of any such
notice to agree to purchase up to its pro rata share of such New Securities for
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
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<PAGE> 14
2.4 OFFERS TO THIRD PARTIES. In the event a Purchaser fails to exercise
the right of first refusal within said 15 day period, the Company shall have 90
days thereafter to sell or enter into an agreement (pursuant to which the sale
of New Securities covered thereby shall be closed, if at all, within 60 days
from the date of said agreement) to sell the New Securities not elected to be
purchased by the Purchaser at the price and upon the terms no more favorable to
the purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities in accordance with the foregoing within 60 days from
the date of said agreement, the Company shall not thereafter issue or sell any
New Securities without first offering such securities in the manner provided
above.
2.5 ASSIGNMENT. The right of first refusal granted under this Agreement is
not assignable except by each of such Purchasers to any affiliated partnership
or corporation or to a partner or retired partner of such S Purchaser or
affiliated partnership or corporation.
2.6 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
granted under this Agreement shall terminate upon the first to occur of the
following:
(i) if a Purchaser at any time holds less than 500,000
shares of Conversion Stock (appropriately adjusted for any stock split, stock
dividend or any other recapitalization), the right of first refusal shall
terminate as to such Purchaser;
(ii) if a Purchaser converts or has at any time converted
all of the Preferred Stock owned by such Purchaser, the right of first refusal
shall terminate as to such Purchaser;
(iii) the liquidation, dissolution or indefinite cessation
of business operations of the Company; or
(iv) the execution by the Company of a general assignment
for the benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company.
SECTION 3
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
internal laws of the State of California.
3.2 SURVIVAL. The covenants and agreements made herein shall survive any
investigation made by the Purchasers and the closing of the transactions
contemplated hereby.
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
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<PAGE> 15
3.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Series A Agreement,
the Series A-1 Agreement and the other documents delivered pursuant hereto on
the Closing Date for each of the Series A Agreement and the Series A-1 Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that holders of a
majority of the issued or outstanding shares of the Preferred Stock may, with
the Company's prior written consent, waive, modify or amend on behalf of all
holders, any provisions hereof.
3.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address, as shown on the
stock records of the Company, or at such other address as such Purchaser shall
have furnished to the Company in writing, or (b) if to any other holder of
Preferred Stock, at such address as such holder shall have furnished the Company
in writing, or, until any such holder so furnishes an address to the Company,
then to and at the address of the last holder of such Preferred Stock who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address set forth on the cover page of this Agreement and
addressed to the attention of the Chief Executive Officer, or at such other
address as the Company shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
3.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such nondefaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
3.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
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<PAGE> 16
3.8 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
3.9 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
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<PAGE> 17
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
SUPERCONDUCTOR TECHNOLOGIES INC.
a Delaware corporation
By: /s/ Peter Thomas
---------------------------------
Name: Peter Thomas,
Title: Chief Executive Officer
"SERIES A PURCHASER"
WILMINGTON SECURITIES, INC.
By: /s/ Andrew H. McQuarrie
---------------------------------
Name: Andrew H. McQuarrie
Title:
"SERIES A-1 PURCHASER"
WILMINGTON SECURITIES, INC.
By: /s/ Andrew H. McQuarrie
---------------------------------
Name: Andrew H. McQuarrie
Title:
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<PAGE> 1
EXHIBIT 4.5
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September
2, 1998, by and among Superconductor Technologies Inc., a Delaware corporation,
with headquarters located at 460 Ward Drive, Suite F, Santa Barbara, California
93111-2310 ("COMPANY"), and each of the purchasers set forth on the signature
pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock,
designated as Series B Preferred Stock (the "PREFERRED STOCK"), having the
rights, preferences and privileges set forth in the Certificate of Designations,
Rights and Preferences attached hereto as EXHIBIT "A" (the "CERTIFICATE OF
DESIGNATION");
C. The Preferred Stock is convertible into shares of common stock, $.001
par value per share, of the Company (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Company has authorized the issuance to the Buyers of warrants, in
the form attached hereto as EXHIBIT "B", to purchase an aggregate of One Hundred
Twenty Thousand (120,000) shares of Common Stock (the "WARRANTS");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of 500,000 shares of Preferred Stock, subject to adjustment as set
forth herein and in the Certificate of Designation and (ii) Warrants to purchase
One Hundred Twenty Thousand (120,000) shares of Common Stock, for an aggregate
purchase price of Four Million Dollars ($4,000,000).
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of shares of Preferred Stock and number of
Warrants as is set forth immediately below its name on the signature pages
hereto; and
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
<PAGE> 2
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. The Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company such number of shares of Preferred Stock (collectively,
together with any Preferred Stock issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "PREFERRED SHARES") and number of Warrants as is set forth immediately below
such Buyer's name on the signature pages hereto. The aggregate number of
Preferred Shares to be issued at the Closing is 500,000 shares and the aggregate
number of Warrants to be issued at the Closing is One Hundred Twenty Thousand
(120,000) for an aggregate purchase price of Four Million Dollars ($4,000,000),
subject to the satisfaction (or waiver) of the conditions thereto set forth in
Sections 6 and 7 below. The aggregate purchase price (the "PURCHASE PRICE")
payable by each Buyer in respect of the Preferred Stock and Warrants to be
purchased by such Buyer at the Closing is as set forth below such Buyer's name
on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares and
the Warrants, if any, to be issued and sold to it at the applicable Closing (as
defined below) by wire transfer of immediately available funds to the Company,
in accordance with the Company's written wiring instructions, against delivery
of duly executed certificates representing such number of Preferred Shares and
Warrants which such Buyer is purchasing and (ii) the Company shall deliver such
certificates and Warrants duly executed on behalf of the Company, to the Buyer,
against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver)
of the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Preferred Shares and the Warrants
pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon Eastern
Standard Time on September 2, 1998 or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the "CLOSING") shall
occur on the Closing Date at the offices of the Company, or at such other
location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally
(and not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. Investment Purpose. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES") and the Warrants and the shares of
Common Stock issuable upon exercise thereof (the "WARRANT SHARES" and,
collectively with the Preferred Shares, Warrants and Conversion Shares the
"SECURITIES") for its own account for investment only and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act.
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b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement thereunder, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, (c) sold or transferred to on "affiliate" (as defined in Rule
144 promulgated under the 1933 Act (or a successor rule) ("RULE 144")) or (d)
sold pursuant to Rule 144; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
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<PAGE> 4
g. Legends. The Buyer understands that the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT"
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such sale or transfer is
effected or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. The Buyer
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the jurisdiction
set forth immediately below such Buyer's name on the signature pages hereto.
j. Tax Liability. The Buyer has reviewed with its own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by the Agreements. With respect to
such matters, the Buyer relies solely on such advisors and not on any statements
or representations of the Company or any of its agents other than the
representations and warranties set forth herein. The Buyer understands that it
(and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement.
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<PAGE> 5
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not
reasonably be expected have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, operating results or
financial condition of the Company or on the transactions contemplated hereby or
by the agreements or instruments to be entered into in connection herewith.
Except for Cryo-Asia Pte Ltd., a joint venture with Alantac in Singapore, the
Company has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association or business
entity.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise thereof) have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered and the
Certificate of Designation has been duly filed by the Company, and (iv) each of
this Agreement and the Certificate of Designation constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement and
the Warrants, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
c. Capitalization. The authorized capital stock of the
Company consists or will, upon the filing of the Certificate of Designations,
consist of (a) 30,000,000 shares of Common Stock, par value $0.001 per share, of
which 7,715,081 shares are issued and outstanding as of the date of this
Agreement, and (b) 2,000,000 shares of Preferred Stock, of which (i) 500,000
shares have been designated "Series A Preferred", all of which are issued and
outstanding, (ii) 125,000 shares have been designated "Series A-1 Preferred",
all of which are issued and outstanding, and (iii) 1,000,000 shares have been
designated "Series B Preferred", none of which were issued and outstanding prior
to the Closing. The outstanding shares have been duly authorized and validly
issued in compliance with applicable laws, and are fully paid and nonassessable.
The Company has
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<PAGE> 6
reserved (a) 500,000 shares of Preferred Stock for issuance hereunder, (b)
2,250,000 shares of Common Stock for issuance upon conversion of the Series A
Preferred Stock, the Series A-1 Preferred Stock and the Preferred Stock, (c)
166,667 shares of Common stock for issuance upon exercise of the warrants issued
in connection with the Series A Preferred Stock financings, (d) 574,545 shares
of Common Stock for issuance upon exercise of the Warrants and the Additional
Warrants (as defined herein), (e) 2,078,909 shares of its Common Stock for
issuance to employees, consultants or directors pursuant to its 1992 Director
Option Plan, 1992 Stock Option Plan, Amended and Restated 1988 Stock Option Plan
and 1998 Nonstatutory Option Plan, of which options to purchase 1,809,093 shares
are issued and outstanding and (f) a total of 150,000 shares of Common Stock for
issuance upon exercise of certain outstanding warrants. All of such outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in SECTION 3(c) OF THE SCHEDULE OF EXCEPTIONS,
as of the effective date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Preferred Shares, the Warrants, the Conversion Shares or Warrant Shares. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock of the Company and the material rights of the holders thereof in
respect thereto.
d. Issuance of Shares. The Preferred Shares, Conversion
Shares and Warrant Shares are duly authorized and, upon issuance in accordance
with the terms of this Agreement (including the issuance of the Conversion
Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation and the Warrant Shares upon exercise of the Warrants
in accordance with the terms thereof) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion or exercise of the
Preferred Shares or Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Preferred Shares or exercise of the Warrants in accordance with this Agreement,
the Certificate of Designation and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
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<PAGE> 7
e. Series of Preferred Stock. The terms, designations,
powers, preferences and relative, participating and optional or special rights,
and the qualifications, limitations and restrictions of each series of preferred
stock of the Company (other than the Preferred Stock) are as stated in the
Certificate of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative, participating
and optional or special rights, and the qualifications, limitations and
restrictions of the Preferred Stock are as stated in the Certificate of
Designation.
f. No Conflicts. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares) will not (i) conflict with or result in a violation
of any provision of the Certificate of Incorporation or By-laws or (ii) violate
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party and which is set forth or incorporated by reference in
the Company's reports files with the SEC pursuant to the reporting requirements
of the 1934 Act (as hereinafter defined) (the "MATERIAL AGREEMENTS"), or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect). The Company of is not
in violation of its Certificate of Incorporation, By-laws or other
organizational documents and the Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default) in any material respect under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any Material Agreement, except for possible defaults as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
The business of the Company is not being conducted, and shall not be conducted
so long as a Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof. Except as disclosed in SECTION 3(f) OF THE SCHEDULE
OF EXCEPTIONS, all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the Nasdaq National Market ("NASDAQ")
and does not reasonably anticipate that the Common Stock
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<PAGE> 8
will be delisted by the Nasdaq in the foreseeable future. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing.
g. SEC Documents; Financial Statements. Since December 31,
1996, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the 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). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
December 31, 1997 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company or have been disclosed to the Buyers.
h. Absence of Certain Changes. Since December 31, 1997,
there has been no Material Adverse Effect, except as disclosed in SECTION 3(h)
OF THE SCHEDULE OF EXCEPTIONS.
i. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company threatened against or affecting the Company, or its
officers or directors in their capacity as such, that, if adversely determined,
could reasonably be expected to have a Material Adverse Effect. SECTION 3(i) OF
THE SCHEDULE OF EXCEPTIONS contains a complete list and summary description of
any pending or threatened proceeding against or affecting the Company, without
regard to whether it would have a Material
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<PAGE> 9
Adverse Effect. The Company is unaware of any facts or circumstances which might
give rise to any of the foregoing.
j. Patents, Copyrights, etc. The Company owns or possesses
the requisite licenses or rights to use all patents, patent rights, inventions,
know-how, trade secrets, trademarks, service marks, service names, trade names
and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct its
business as now operated, except to the extent that a Material Adverse Effect
could not reasonably be expected to result; or to the Company's knowledge, there
is no claim or action by any person pertaining to, or proceeding pending,
threatened which challenges the right of the Company with respect to any
Intellectual Property necessary to enable it to conduct its business as now
operated; to the best of the Company's knowledge, the Company's, current and
intended products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
k. No Materially Adverse Contracts, Etc. The Company is
not subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
l. Tax Status. Except as set forth on SECTION 3(l) OF THE
SCHEDULE OF EXCEPTIONS, the Company has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company set aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
m. Certain Transactions. Except as set forth on SECTION
3(m) OF THE SCHEDULE OF EXCEPTIONS and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed on SECTION 3(c) OF THE
SCHEDULE OF EXCEPTIONS, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
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<PAGE> 10
knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
n. Disclosure. To the best of the Company's knowledge, all
information relating to or concerning the Company set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. Except for the
transactions contemplated by this Agreement, no event or circumstance has
occurred or exists with respect to the Company or its business, properties,
prospects, operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this
purposes that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).
o. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
p. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) which requires stockholder
approval under the rules of the Nasdaq Stock Market.
q. No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Tanner Unman Securities ("Tanner Unman"), whose
commissions and fees will be paid for by the Company.
r. Permits; Compliance. The Company is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry
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<PAGE> 11
on its business as it is now being conducted , except to the extent that a
Material Adverse Effect could not reasonably be expected to result
(collectively, the "COMPANY PERMITS"), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits. The Company is not in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since December 31,
1997, the Company has not received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
s. Environmental Matters.
(i) Except as set forth in SECTION 3(s) OF THE
SCHEDULE OF EXCEPTIONS, there are, to the Company's knowledge, with respect to
the Company or any or any predecessor of the Company, no past or present
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and the Company has not received any notice with respect
to any of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(ii) To the Company's knowledge, other than those
that are or were stored, used or disposed of in compliance with applicable law,
no Hazardous Materials are contained on or about any real property currently
owned, leased or used by the Company, and no Hazardous Materials were released
on or about any real property previously owned, leased or used by the Company
during the period the property was owned, leased or used by the Company, except
in the normal course of the Company's business.
(iii) To the Company's knowledge, except as set
forth in SECTION 3(s) OF THE SCHEDULE OF EXCEPTIONS, there are no underground
storage tanks on or under any real property owned, leased or used by the Company
that are not in compliance with applicable law.
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t. Title to Property. The Company owns no real property.
The Company has good and marketable title to all personal property owned by it
which is material to the business of the Company, in each case free and clear of
all liens, encumbrances and defects except such as are described in SECTION 3(t)
OF THE SCHEDULE OF EXCEPTIONS or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company are
held by them under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
u. Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has not any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
v. Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
w. Foreign Corrupt Practices. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts
to satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the applicable closing pursuant to this Agreement under applicable
securities or
12
<PAGE> 13
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in Part I.A. of the general instructions to
Form S-3.
d. Use of Proceeds. The Company shall use the proceeds
from the sale of the Preferred Shares and the Warrants for working capital and
general corporate purposes.
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company will not, without the
prior written consent of a majority-in-interest of the Buyers, negotiate or
contract with any party to obtain additional equity financing (including debt
financing with an equity component) that involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance (taking into account the value of any warrants or options to acquire
Common Stock issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock during the period (the "LOCK-UP PERIOD") beginning on the Closing Date and
ending on the later of (i) ninety (90) days from the Closing Date and (ii)
thirty (30) days from the date the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective (plus any days in which
sales cannot be made thereunder). In addition, subject to the exceptions
described below, the Company will not conduct any equity financing (including
debt with an equity component) ("FUTURE OFFERINGS") during the period beginning
on the Closing Date and ending one hundred eighty (180) days after the end of
the Lock-up Period, unless it shall have first delivered to each Buyer, at least
fifteen (15) business days prior to the closing of such Future Offering, written
notice describing the proposed Future Offering, including the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith, and providing each Buyer an option during the ten (10) day
period following delivery of such notice to purchase its pro rata share (based
on the ratio that the number of Conversion Shares held by such Buyer bears to
the total outstanding Common Stock of the Company) of the securities being
offered in the Future Offering on the same terms as contemplated by such Future
Offering (the limitations referred to in this sentence are collectively referred
to as the "CAPITAL RAISING Limitations"). In the event the terms and conditions
of a proposed Future Offering are amended in any respect after delivery of the
notice to the Buyers concerning the proposed Future Offering, the Company shall
deliver a new notice to each Buyer describing the amended terms and conditions
of the proposed Future Offering and each Buyer thereafter shall have an option
during the ten (10) day period following delivery of such new notice to purchase
its pro rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply
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<PAGE> 14
to successive amendments to the terms and conditions of any proposed Future
Offering. The Capital Raising Limitations shall not apply to any transaction
involving (i) the Preferred Stock, the Warrants or the Conversion Shares, (ii)
securities offered to the public generally in an underwritten offering pursuant
to a registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of all or substantially all of the assets or other reorganization, (iv)
securities issuable upon exercise or conversion of currently outstanding
securities, (v) securities issued in connection with any stock split, stock
dividend or recapitalization by the Company, (vi) securities issued to the
Company's employees, officers, directors, and consultants pursuant to any
arrangement approved by the Board of Directors of the Company, and (vii)
securities issued to research or development collaborators or issued to banks or
other institutional lenders or lessors in connection with capital asset leases
or borrowings for the acquisition of capital assets, pursuant to any arrangement
approved by the Board of Directors of the Company (including securities issued
upon exercise or conversion of any such securities).
f. Expenses. The Company shall reimburse Tanner Unman for
all reasonable expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
attorneys' and consultants' fees and expenses. The Company's obligation to
reimburse Tanner Unman's expenses under this Section 4(f) shall be limited to
Thirty Thousand Dollars ($30,000), of which Fifteen Thousand Dollars ($15,000)
has previously been paid.
g. Financial Information. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after release, copies
of all press releases issued by the Company or any of its Subsidiaries; and
(iii) contemporaneously with the making available or giving to the stockholders
of the Company, copies of any notices or other information the Company makes
available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full conversion or exercise of the
outstanding Preferred Shares and Warrants and issuance of the Conversion Shares
and Warrant Shares in connection therewith (based on the Conversion Price of the
Preferred Shares or Exercise Price of the Warrants in effect from time to time).
The Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Preferred Shares and exercise of the Warrants
without the consent of each Buyer. The Company shall use its best efforts at all
times to maintain the number of shares of Common Stock so reserved for issuance
at no less than the sum of: (i) the number that is then actually issuable upon
full conversion of the Preferred Shares (based on the Conversion Price of the
Preferred Shares) and (ii) the number of shares of Common Stock issuable upon
exercise of the Warrants (based on the Exercise Price of the Warrants in effect
from time to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance
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<PAGE> 15
is below the number of Conversion Shares and Warrant Shares issued and issuable
upon conversion of the Preferred Shares and exercise of the Warrants (based on
the Conversion Price of the Preferred Shares or Exercise price of the Warrants
then in effect), the Company will promptly take all corporate action necessary
to authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of shareholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain shareholder approval of an increase in such authorized number of shares.
i. Listing. The Company shall use its best efforts to
promptly secure the listing of the Conversion Shares and Warrant Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Conversion Shares and Warrant Shares from time
to time issuable upon conversion of the Preferred Shares or exercise of the
Warrants. The Company will obtain and maintain the listing and trading of its
Common Stock on Nasdaq, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New
York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable.
j. Corporate Existence. So long as a Buyer beneficially
owns any Preferred Shares or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for trading on Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
k. No Integration. The Company will not conduct any future
offering that will be integrated with the issuance of the Securities solely for
purposes of Rule 4460(i) of the Nasdaq Stock Market.
l. Solvency. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most recent fiscal year
end and does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
15
<PAGE> 16
m. Additional Warrants. In the event that the
Determination Price (as defined herein) is less than $4.00 per share, the
Company shall be obligated to issue such number of additional warrants
("Additional Warrants") determined in accordance with the calculation set forth
below, which Additional Warrants will have an exercise price of $.01 per share.
The "Determination Price" means the greater of (i) $2.75 per share of Common
Stock or (ii) average closing bid price of the Common Stock on the ten (10)
trading days ending on March 2, 1999.
<TABLE>
<S> <C> <C>
N = ($4.00 - DP) x (I /$4.00)
--------------------------
DP
N = Number of Additional Warrants
DP = Determination Price
I = Amount of Investment
</TABLE>
The Additional Warrants will be in the form attached hereto as
EXHIBIT "D". The shares of Common Stock issuable upon conversion of the
Additional Warrants shall be considered Warrant Shares for purposes hereof and
Registrable Securities for purposes of the Registration Rights Agreement.
5 TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Preferred Shares or exercise of the Warrants in
accordance with the terms thereof (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares and Warrant Shares, prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities. If a
Buyer provides the Company with an opinion of counsel, reasonably satisfactory
to the Company in form, substance and scope, that registration of a resale by
such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares and
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
6 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation
of the Company hereunder to issue and sell the Preferred Shares and Warrants to
a Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the
16
<PAGE> 17
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The applicable Buyer shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase
Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Delaware.
d. The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
f. The Company shall have received an amendment to its
Amended and Restated Stockholders Agreement dated as of August 11, 1998, in the
form of EXHIBIT "E" hereto, duly executed by the "Purchasers" named therein.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares and Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and Warrants in accordance with Section 1(b)
above.
c. The Certificate of Designation shall have been accepted
for filing with the Secretary of State of the State of Delaware, and a facsimile
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
17
<PAGE> 18
d. The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
e. The representations and warranties of the Company shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Certificate of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
g. The Conversion Shares and the Warrant Shares shall have
been authorized for quotation on Nasdaq and trading in the Common Stock on
Nasdaq shall not have been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "F" attached hereto.
i. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement
may be executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party
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<PAGE> 19
and delivered to the other party. This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Superconductor Technologies Inc.
460 Ward Drive
Suite F
Santa Barbara, California 93111-2310
Attention: Chief Executive Officer
Facsimile: (805) 967-0342
With copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: John V. Roos, Esq.
Facsimile: (650) 493-6811
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<PAGE> 20
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change
of its address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees to
indemnify and hold harmless each of the Buyers and all their officers,
directors, employees and agents for loss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement or the Registration
Rights Agreement, including advancement of expenses as they are incurred.
j. Publicity. The Company and each of the Buyers shall
have the right to review a reasonable period of time before issuance of any
press releases, SEC, Nasdaq or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
20
<PAGE> 21
m. Confidential Business Information. The Buyers covenant
and agree that they shall maintain the confidentiality of all non-public
information related to the business of the company made available to them and/or
any of their representatives by the Company ("CONFIDENTIAL BUSINESS
INFORMATION") and shall not utilize any Confidential Business Information in
connection with purchases or sales of the Company's securities except in
compliance with applicable state and federal anti-fraud statutes. The Buyers
further covenant and agree that they shall not disclose any Confidential
Business Information to any person or entity without the prior written consent
of the Company. The term "Buyers" as used in this subsection includes all
partners, officers, directors, affiliates, employees, attorneys, accountants and
other agents and representatives of the Purchaser. Notwithstanding the above,
Confidential Business Information shall not include (i) information known to the
public generally, (ii) information known to the Buyers from an independent
source prior to the receipt of such information from the Company and (iii)
information required to be disclosed by the Buyers by court order or otherwise
required by law, provided, however, that in the event of a required disclosure
pursuant to this clause (iii), the Buyers shall give the Company prompt written
notice of any such requirement so that the Company may seek a protective order
or other appropriate remedy. The Buyers agree that violation of this subsection
would cause immediate and irreparable damage to the business of the Company, and
consent to the entry of immediate and permanent injunctive relief for any
violation hereof.
21
<PAGE> 22
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
SUPERCONDUCTOR TECHNOLOGIES INC.
By: /s/ M. Peter Thomas
- ---------------------------------------
Name: M. Peter Thomas
Title: Chief Executive Officer
WILMINGTON SECURITIES, INC.
824 Market Street
Suite 900
Wilmington, Delaware 19801
By: /s/ Andrew McQuarrie
- ---------------------------------------
Name: Andrew McQuarrie
Title: Vice President
RESIDENCE: Delaware
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
Number of Shares of Preferred Stock: 500,000
Number of Warrants: 120,000
Aggregate Purchase Price: $4,000,000
</TABLE>
22
<PAGE> 1
EXHIBIT 4.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
2, 1998, by and among Superconductor Technologies Inc., a Delaware corporation,
with its headquarters located at 460 Ward Drive, Suite F, Santa Barbara,
California 93111-2310 (the "COMPANY"), and each of the undersigned (together
with their respective affiliates and any assignee or transferee of all of their
respective rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series B
Convertible Preferred Stock (the "PREFERRED STOCK") that are convertible into
shares (the "CONVERSION SHARES") of the Company's common stock, par value $.001
per share (the "COMMON STOCK"), upon the terms and subject to the limitations
and conditions set forth in the Certificate of Designations, Rights,
Preferences, Privileges and Restrictions with respect to the Preferred Stock
(the "CERTIFICATE OF DESIGNATION") and (ii) warrants (the "WARRANTS") to acquire
an aggregate of 120,000 shares of Common Stock (the "WARRANT SHARES"), upon the
terms and conditions and subject to the limitations and conditions set forth in
the Warrants dated September 2, 1998 plus any Additional Warrants (as defined in
the Securities Purchase Agreement) (collectively, the "Warrant Shares"); and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
<PAGE> 2
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferee or assignee who becomes bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to
a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
(including any additional shares that may be issued pursuant to the Certificate
of Designation) and Warrant Shares issued or issuable and any shares of capital
stock issued or issuable as a dividend on or in exchange for or otherwise with
respect to any of the foregoing, provided, however, that such securities shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold or are, in the
opinion of counsel for the Company, available for sale in a single transaction
exempt from the registration and prospectus delivery requirements of the 1933
Act so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation such sale.
(iv) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
prior to the date which is sixty (60) days after the date of the Closing under
and as defined in the Securities Purchase Agreement (the "CLOSING DATE"), file
with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities) covering the resale of the
Registrable Securities underlying the Preferred Stock and Warrants issued or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the Rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Stock and exercise of the
Warrants
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(i) to prevent dilution resulting from stock splits, stock dividends or similar
transactions or (ii) by reason of changes in the Conversion Price of the
Preferred Stock in accordance with the terms thereof or the exercise price of
the Warrants in accordance with the terms thereof. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than the sum of the number of Conversion Shares and Warrant Shares that are then
issuable upon conversion of the Preferred Stock and the exercise of the
Warrants, without regard to any limitation on the Investor's ability to convert
the Preferred Stock or exercise the Warrants. The Company acknowledges that the
number of shares initially included in the Registration Statement represents a
good faith estimate of the maximum number of shares issuable upon conversion of
the Preferred Stock and exercise of the Warrants.
b. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed within sixty (60) days after the Closing Date or declared effective
by the SEC within one hundred twenty (120) days after the Closing Date or if,
after the Registration Statement has been declared effective by the SEC, sales
cannot be made pursuant to the Registration Statement (except as a result of an
Allowed Delay (as defined in section 3(f)), or (ii) the Common Stock is not
listed or included for quotation on the Nasdaq National Market ("NASDAQ"), the
Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX") after being so listed or
included for quotation, then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(b) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall not have any obligation to pay to the Investors any
amounts provided for in this Section 2(b) during an Allowed Delay. The Company
shall pay to each holder of the Preferred Stock or Registerable Securities an
amount equal to the Purchase Price under and as defined in the Securities
Purchase Agreement paid in respect of such Preferred Stock (and, in the case of
holders of Registerable Securities, the purchase price for the Preferred Stock
from which such Registerable Securities were converted) ("AGGREGATE SHARE
PRICE") multiplied by the Applicable Percentage (as defined below) multiplied by
the number of months (without duplication), prorated for partial months during
(1) which the events described in clauses (i) or (ii) above have occurred and
are continuing, (2) sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the prospectus included therein in accordance with
the terms of this Agreement, but excluding any days during an Allowed Delay (as
defined in Section 3(f)), or (3) that the Common Stock is not listed or included
for quotation on the Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that trading
thereon is halted after the Registration Statement has been declared effective.
The term "APPLICABLE PERCENTAGE" means 2 hundredths (.02). Such amounts shall be
paid in cash or, at the Company's option, paid in shares of Preferred Stock,
calculated based on the Purchase Price applicable to such shares and thereafter
be convertible into Common Stock at the "CONVERSION PRICE" (as defined in the
Certificate of Designation) in accordance with the terms of the Preferred Stock.
Any shares of Common Stock issued upon conversion of such amounts shall be
Registrable
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Securities. Payments of cash pursuant hereto shall be made within ten (10) days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) days, interim payments
shall be made for each such thirty (30) day period.
c. Piggy-Back Registrations. Subject to the last sentence of this
Section 2(c), if at any time prior to the expiration of the Registration Period
(as hereinafter defined) the Company shall file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities (other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to each Investor who is entitled to registration
rights under this Section 2(c) written notice of such determination and, if
within twenty (20) days after the effective date of such notice, such Investor
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities such Investor requests
to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities shall
be made pro rata among the Investors seeking to include Registrable Securities
in proportion to the number of Registrable Securities sought to be included by
such Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(c) shall only be available in the event the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
the Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.
d. Eligibility for Form S-3. The Company represents and warrants
that it meets the registrant eligibility and transaction requirements for the
use of Form S-3 for registration
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of the sale by the Initial Investors and any other Investors of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not
later than sixty (60) days after the Closing Date, a Registration Statement with
respect to the number of Registrable Securities provided in Section 2(a), and
thereafter use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible after the filing
thereof, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the Registrable
Securities (in the opinion of counsel to the Initial Investors) may be
immediately sold without restriction (including without limitation as to volume
by each holder thereof) without registration under the 1933 Act (the
"REGISTRATION PERIOD").
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Preferred Stock and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefore, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) business days after the necessity therefor arises
(based on the market price of the Common Stock and other relevant factors on
which the Company reasonably elects to rely). The Company shall use its
commercially reasonable efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. The provisions of Section 2(c) above shall be applicable with respect
to such obligation, with the sixty (60) or one hundred twenty (120) days running
from the day after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each
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amendment or supplement thereto and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
The Company will immediately notify each Investor by facsimile of the
effectiveness of the Registration Statement or any post-effective amendment. The
Company will promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws.
e. In the event Investors who hold a majority-in-interest of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of (x) the issuance by the SEC of a stop
order suspending the effectiveness of the Registration Statement, (y) the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (z) the occurrence or existence of any pending corporate
development that, in the reasonable discretion of the Company, makes it
appropriate to suspend the availability of the Registration Statement and use
its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request; provided that, for not more than twenty (20)
consecutive trading days (or a total of not more than thirty (30) trading days
in any twelve (12) month period) (or 60 trading days in any 12 month period, in
the case of an event described in clause (z) above that arises from an
acquisition or a probable acquisition or financing,
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<PAGE> 7
recapitalization, business combination or other similar transaction), the
Company may delay the disclosure of material non-public information concerning
the Company (as well as prospectus or Registration Statement updating) the
disclosure of which at the time is not, in the good faith opinion of the
Company,the best interests of the Company (an "Allowed Delay"); provided,
further, that the Company shall promptly (i) notify the Investors in writing of
the existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales under
the Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto, and shall
be obligated to pay to the Investors any amounts provided for in Section 2(b).
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
h. The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement without
prior notice to such counsel. The sections of the Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish, on
the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.
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k. The Company shall make available for inspection during normal
business hours by (i) any Investor and (ii) one firm of attorneys and one firm
of accountants or other agents retained by the Initial Investors, (collectively,
the "INSPECTORS") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure the designation and
quotation, of all the Registrable Securities covered by the Registration
Statement on the Nasdaq or, if not eligible for the Nasdaq on the Nasdaq
SmallCap and, without limiting the generality of
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<PAGE> 9
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within five (5)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as EXHIBIT 1 and an opinion of such counsel in the form
attached hereto as EXHIBIT 2.
p. Except for registration rights previously disclosed to the
Buyers prior to the execution of this Agreement, from and after the date of this
Agreement, the Company shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority-in-interest of the Registrable Securities.
q. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
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b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company.
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6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any
underwriter (as defined in the 1933 Act) for the Investors, and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used
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it. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Investor, 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 to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
12
<PAGE> 13
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
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<PAGE> 14
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (ii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
14
<PAGE> 15
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, and
Investors who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Superconductor Technologies Inc.
460 Ward Drive
Suite F
Santa Barbara, California 93111-2310
Attention: Chief Executive Officer
Facsimile: (805) 967-0342
With copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: John V. Roos, Esq.
Facsimile: (650) 493-6811
15
<PAGE> 16
If to an Investor: to the address set forth immediately below such
Investor's name on the signature pages to the Securities Purchase Agreement.
Each party shall provide notice to the other party of any change of its address.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Delaware with
respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a
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<PAGE> 17
majority of the Registrable Securities, determined as if the all of the shares
of Preferred Stock then outstanding have been converted into for Registrable
Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 18
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.
SUPERCONDUCTOR TECHNOLOGIES INC.
By: /s/ M. Peter Thomas
-----------------------------
Name: M. Peter Thomas
Title: Chief Executive Officer
WILMINGTON SECURITIES, INC.
By: /s/ Andrew McQuarrie
-----------------------------
Name: Andrew McQuarrie
Title: Vice President
<PAGE> 1
EXHIBIT 5.1
September 30, 1998
Superconductor Technologies Inc.
460 Ward Drive, Suite F
Santa Barbara, California 93111-2310
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by Superconductor Technologies, Inc., a Delaware
corporation (the "Company), with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, on or about the date hereof. The
Registration Statement relates to (a) 2,978,333 shares of the Company's Common
Stock, $.001 par value per share ("Common Stock"), of which (i) 1,291,666 shares
(the "Series A Conversion Shares") may in the future be issued upon the
conversion of certain outstanding shares of the Company's Series A Preferred
Stock (the "Series A Stock"), (ii) 250,000 shares (the "Series A-1 Conversion
Shares") may in the future be issued upon conversion of certain outstanding
shares of the Company's Series A-1 Preferred Stock (the "Series A-1 Stock"),
(iii) 1,000,000 shares (the "Series B Conversion Shares") may in the future be
issued upon conversion of certain outstanding shares of the Company's Series B
Preferred Stock (the "Series B Stock") and (iv) 436,667 shares (the"Warrant
Shares") may in the future be issued upon the exercise of certain warrants (the
"Warrants"), and (b) such presently indeterminate number of shares of Common
Stock (the "Indeterminate Shares") which may be issued upon conversion of the
Series A Stock, the Series A-1 Stock and the Series B Stock or the payment of
dividends thereon, based upon fluctuations in the conversion price thereof, in
accordance with Rule 416 under the Securities Act of 1933, as amended.
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and upon
affidavits, certificates and written statements of directors, officers and
employees of, and the accountants and transfer agent for, the Company. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including (a)
the Registration Statement, (b) the Amended and Restated Certificate of
Incorporation of the Company, (c) the By-Laws of the Company, (d) the applicable
Certificates of Designation, Preferences and Rights relating to the Series A
Stock, the Series A-1 Stock and the Series B Stock (each, the "Applicable
Certificate of Designation"), (e) stock purchase agreements relating to the
issuances of the Series A, Series A-1 and Series B Stock (each, the "Stock
Purchase Agreement"), (f) the Warrants and (g) resolutions adopted by the Board
of Directors of the Company.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the authenticity of the documents submitted to us as
originals and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or reproduced copies. We have further
assumed that all natural persons involved in the transactions contemplated by
the Registration Statement (the "Offering") have sufficient legal capacity to
enter into and perform their respective obligations and to carry out their roles
in the Offering.
<PAGE> 2
Based upon and subject to the foregoing, it is our opinion that:
(i) The Series A, Series A-1 and Series B Conversion Shares, when issued
by the Company upon the conversion of the Series A, Series A-1 and Series B
Stock in accordance with the terms of the Amended and Restated Certificate of
Incorporation of the Company and the Applicable Certificate of Designation, will
be validly issued, fully paid and non-assessable;
(ii) The Warrant Shares, if and when issued by the Company upon the
exercise of the Warrants in accordance with the terms thereof, will be validly
issued fully paid and non-assessable; and
(iii) The Indeterminate Shares, if and when issued upon the conversion the
Series A, Series A-1 or Series B Stock or as accrued dividends thereon in
accordance with the terms of the Amended and Restated Certificate of
Incorporation of the Company and the Applicable Certificate of Designation, will
be validly issued, fully paid and non-assessable.
Our opinion expressed above is limited to the General Corporation Law of
the State of Delaware and the relevant federal laws of the United States, and we
do not express any opinion concerning any other laws.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
-2-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 18, 1998, except as to Note 10 which is as of March 26, 1998 appearing
on page 26 of Superconductor Technologies Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997, which is incorporated by reference in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
September 30, 1998
