SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
SCHEDULE 13D
Amendment No. 3
Under the Securities Exchange Act of 1934
SUPERCONDUCTOR TECHNOLOGIES, INC.
(Name of Issuer)
Common Stock, $0.001 par value
(Title of Class of Securities)
867931107
(CUSIP Number)
H. Vaughan Blaxter, III
1900 Grant Building
Pittsburgh, Pennsylvania 15219
(412) 281-2620
(Name, address and telephone number of person
authorized to receive notices and communications)
September 2, 1998
Date of Event which Requires Filing of this Statement
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this statement, and is filing this
statement because of Rule 13d-1(e), 13d-1(f) or 13(d)-1(g), check the following
box [ X ]
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
C. G. GREFENSTETTE, Trustee for Various Trusts I.D. ####-##-####
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
U.S.
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
5,000
8 Shared Voting Power
3,703,333
9. Sole Dispositive Power
5,000
10 Shared Dispositive Power
3,703,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,708,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
35.17%
14 Type of Reporting Person
IN
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THOMAS G. BIGLEY, Trustee for Various Trusts I.D. #
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
U.S.
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
248,000
9. Sole Dispositive Power
10 Shared Dispositive Power
248,000
11 Aggregate Amount Beneficially Owned by Each Reporting Person
248,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
2.35%
14 Type of Reporting Person
IN
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THOMAS G. BIGLEY AND C. G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR THE CHILDREN OF JULIET
LEA HILLMAN SIMONDS I.D. #25-6193084
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
112,000
8 Shared Voting Power
9. Sole Dispositive Power
112,000
10 Shared Dispositive Power
11 Aggregate Amount Beneficially Owned by Each Reporting Person
112,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
1.06%
14 Type of Reporting Person
OO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THOMAS G. BIGLEY AND C. G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR THE CHILDREN OF AUDREY
HILLMAN FISHER I.D. #25-6193085
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
112,000
8 Shared Voting Power
9. Sole Dispositive Power
112,000
10 Shared Dispositive Power
11 Aggregate Amount Beneficially Owned by Each Reporting Person
112,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
1.06%
14 Type of Reporting Person
OO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THOMAS G. BIGLEY AND C. G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR THE CHILDREN OF HENRY
LEA HILLMAN, JR. I.D. #26=6193086
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
112,000
8 Shared Voting Power
9. Sole Dispositive Power
112,000
10 Shared Dispositive Power
11 Aggregate Amount Beneficially Owned by Each Reporting Person
112,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
1.06%
14 Type of Reporting Person
OO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THOMAS G. BIGLEY AND C. G. GREFENSTETTE, TRUSTEES UNDER
AGREEMENT OF TRUST DATED 12/30/76 FOR THE CHILDREN OF WILLIAM
TALBOTT HILLMAN I.D. #25-6193087
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
112,000
8 Shared Voting Power
9. Sole Dispositive Power
112,000
10 Shared Dispositive Power
11 Aggregate Amount Beneficially Owned by Each Reporting Person
112,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
1.06%
14 Type of Reporting Person
OO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
HENRY L. HILLMAN I.D. ####-##-####
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
U.S.
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
3,255,333
9 Sole Dispositive Power
10 Shared Dispositive Power
3,255,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,255,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
30.88%
14 Type of Reporting Person
IN
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
ELSIE HILLIARD HILLMAN I.D. ####-##-####
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
U.S.
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
3,255,333
9 Sole Dispositive Power
10 Shared Dispositive Power
3,255,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,255,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
30.88%
14 Type of Reporting Person
IN
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN & C. G. GREFENSTETTE,
TRUSTEES OF THE HENRY L. HILLMAN TRUST U/A DATED NOVEMBER
18, 1985 I.D. #18-2145466
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
3,255,333
9 Sole Dispositive Power
10 Shared Dispositive Power
3,255,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,255,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
30.88%
14 Type of Reporting Person
OO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
THE HILLMAN COMPANY I.D. #25-1011286
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Pennsylvania
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
2,819,333
9 Sole Dispositive Power
10 Shared Dispositive Power
2,819,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,819,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
26.74%
14 Type of Reporting Person
CO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
WILMINGTON INVESTMENTS, INC. I.D. #51-0344688
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
8 Shared Voting Power
2,819,333
9 Sole Dispositive Power
10 Shared Dispositive Power
2,819,333
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,819,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
26.74%
14 Type of Reporting Person
CO
<PAGE>
CUSIP NO. 867931107
1 Name of Reporting Person S.S. or I.R.S. Identification No. of above Person
WILMINGTON SECURITIES, INC. I.D. #51-0114700
2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ]
3 SEC Use Only
4 Source of Funds
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
Number of Shares Beneficially Owned by Each Reporting Person With
7 Sole Voting Power
2,819,333
8 Shared Voting Power
9 Sole Dispositive Power
2,819,333
10 Shared Dispositive Power
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,819,333
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
13 Percent of Class Represented by Amount in Row (11)
26.74%
14 Type of Reporting Person
CO
<PAGE>
SCHEDULE 13D
This statement ("Statement") constitutes the Schedule 13D filed with the
Securities and Exchange Commission (the "Commission") on September 11, 1998
(the "Filing").
Item 1. Security and Issuer
This Statement relates to the Common Stock, $0.001 par value, of
Superconductor Technologies, Inc., a Delaware corporation (the "Issuer"). The
address of the principal executive offices of the Issuer is 460 Ward Drive,
Suite F, Santa Barbara, California 93111-2310. The Common Stock is quoted on
the Nasdaq National Market under the symbol "SCON".
Item 2. Identity and Background
(a) Names of persons filing (individually, the "Registrant" and
collectively, the "Registrants"):
Wilmington Securities, Inc., a wholly-owned subsidiary of
Wilmington Investments, Inc.
Wilmington Investments, Inc., a wholly-owned subsidiary of
The Hillman Company.
The Hillman Company, a corporation controlled by Henry L.
Hillman, Elsie Hilliard Hillman and C. G. Grefenstette,
as Trustees of the Henry L. Hillman Trust U/A dated
November 18, 1985.
Henry L. Hillman, Elsie Hilliard Hillman and C. G.
Grefenstette, Trustees of the Henry L. Hillman Trust U/A
dated November 18, 1985 (the "Henry L. Hillman Trust").
Thomas G. Bigley and C. G. Grefenstette, Trustees Under Agreement
of Trust Dated 12/30/76 for the Children of Juliet Lea Hillman Simonds
(the " JLHS 1976 Trust").
Thomas G. Bigley and C. G. Grefenstette, Trustees Under Agreement
of Trust Dated 12/30/76 for the Children of Audrey Hillman Fisher
(the "AHF 1976 Trust").
Thomas G. Bigley and C. G. Grefenstette, Trustees Under Agreement
of Trust Dated 12/30/76 for the Children of Henry Lea Hillman, Jr.
(the "HLH Jr. 1976 Trust")
Thomas G. Bigley and C. G. Grefenstette, Trustees Under Agreement
of Trust Dated 12/30/76 for the Children of William Talbott Hillman
(the "WTH 1976 Trust").
C. G. Grefenstette
Thomas G. Bigley
Henry L. Hillman
Elsie Hilliard Hillman
The name, position, business address and citizenship of each director
and executive officer of the entities listed above, each controlling
person of such entities and each director and executive officer of any
person or corporation in control of said entities, is attached hereto
as Exhibit 1.
(b) Business Address
The addresses of the Registrants are as follows:
The Hillman Company, the Henry L. Hillman Trust, the JLHS 1976 Trust,
the AHF 1976 Trust, the HLH Jr. 1976 Trust and the WTH 1976 Trust
are each located at:
1900 Grant Building
Pittsburgh, Pennsylvania 15219
Wilmington Securities, Inc. and Wilmington Investments, Inc.
are each located at:
824 Market Street, Suite 900
Wilmington, Delaware 19801
C. G. Grefenstette
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Thomas G. Bigley
One Oxford Centre
28th Floor
Pittsburgh, Pennsylvania 15219
Henry L. Hillman
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Elsie Hilliard Hillman
2000 Grant Building
Pittsburgh, Pennsylvania 15219
(c) Principal occupation or employment
The principal occupations of the corporations, listed in response to
Item 2(a) are: diversified investments and operations.
The principal occupation of the Henry L. Hillman Trust is:
diversified investments and operations.
The principal occupation of the JLHS 1976 Trust is: diversified
investments and operations.
The principal occupation of the AHF 1976 Trust is: diversified
investments and operations.
The principal occupation of the HLH Jr. 1976 Trust is: diversified
investments and operations.
The principal occupation of the WTH 1976 Trust is: diversified
investments and operations.
C. G. Grefenstette
See Exhibit 1
Thomas G. Bigley
See Exhibit 1
Henry L. Hillman
See Exhibit 1
Elsie Hilliard Hillman
See Exhibit 1
(d) Criminal convictions
None of the persons named in Item 2(a)(including Exhibit 1) have been
convicted in a criminal proceeding in the last five years.
(e) Civil proceedings
None of the persons listed in response to Item 2(a) (including Exhibit
1) have in the last five years been subject to a judgment, decree or
final order as described in Item 2, subsection (e) of Schedule 13D.
(f) Citizenship
Wilmington Securities, Inc. and Wilmington Investments, Inc. are
Delaware corporations.
The Hillman Company is a Pennsylvania corporation.
The Henry L. Hillman Trust, the JLHS 1976 Trust, the AHF 1976 Trust,
the HLH Jr. 1976 Trust and the WTH 1976 Trust are Pennsylvania trusts.
C. G. Grefenstette, Thomas G. Bigley, Henry L. Hillman and Elsie
Hilliard Hillman are U.S. citizens.
Item 3. Source and Amount of Funds or Other Consideration
None.
Item 4. Purpose of Transaction
On September 2, 1998, Wilmington Securities, Inc. purchased 500,000 shares
of Series B Preferred Stock which are convertible into 1,000,000 shares of
Common Stock and a Warrant for 120,000 shares of Common Stock from the Issuer in
a private transaction for $4,000,000.
On September 3, 1998, Wilmington Securities, Inc. purchased 145,833 shares
of Series A Preferred Stock which are convertible into 291,666 shares of Common
Stock for $875,000 pursuant to Section 1.3, Put Option Clause, of the Series A
Preferred Stock Purchase Agreement dated March 26, 1998.
On September 11, 1998, Wilmington Securities, Inc. sold 350,000 shares of
the Series B Preferred Stock and 84,000 Warrants for Common Stock to the
following:
Number Number Purchase
Name of Purchaser of Shares of Warrants Price
Henry L. Hillman Trust 150,000 36,000 $1,200,000
JLHS 1976 Trust 50,000 12,000 $ 400,000
AHF 1976 Trust 50,000 12,000 $ 400,000
HLH Jr. 1976 Trust 50,000 12,000 $ 400,000
WTH 1976 Trust 50,000 12,000 $ 400,000
Except as set forth above and in Item 6 below, the Registrants have no
present plans or proposals which relate to or would result in (a) the
acquisition by any person of additional securities of the Issuer or the
disposition of securities of the Issuer, (b) an extraordinary corporate
transaction, such as a merger, reorganization, or liquidation involving the
Issuer or any of its subsidiaries, (c) a sale or transfer of a material amount
of the assets of the Issuer or any of its subsidiaries, (d) any change in the
present Board of Directors or Management of the Issuer including any plans or
proposals to change the number or term of Directors or to fill any existing
vacancies on the Board, (e) any material change in the present capitalization or
dividend policy of the Issuer, (f) any other material change in the Issuer's
business or corporate structure, (g) changes in the Issuer's charter, by-laws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person, (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange
or to cease to be authorized to be quoted in an inter-dealer quotation system
of a registered national securities association, (i) a class of equity
securities of the Issuer becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Act of 1933, or (j) any action similar to
those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) Beneficial Ownership
5,000 shares of Common Stock are owned of record and
beneficially by C. G. Grefenstette.
775,000 shares of Common Stock are owned of record and
beneficially by Wilmington Securities, Inc. Wilmington
Securities, Inc. also owns 645,833 shares of Series A Preferred
Stock which are convertible into 1,291,666 shares of Common
Stock. Wilmington Securities, Inc. owns 125,000 shares of Series
A-1 Preferred Stock which are convertible into 250,000 shares of
Common Stock. Wilmington Securities, Inc. owns 150,000 shares of
Series B Preferred Stock which are convertible into 300,000 shares
of Common Stock. Wilmington Securities, Inc. owns a Warrant for
100,000 shares of Common Stock, a Warrant for 66,667 shares of
Common Stock and a Warrant for 36,000 shares of Common Stock.
100,000 shares of Common Stock are owned of record and
beneficially by the Henry L. Hillman Trust. The Henry L Hillman Trust
owns 150,000 shares of Series B Preferred Stock which are convertible
into 300,000 shares of Common Stock and a Warrant for 36,000 shares of
Common Stock.
The JLHS 1976 Trust owns 50,000 shares of Series B Preferred Stock
which are convertible into 100,000 shares of Common Stock and a
Warrant for 12,000 shares of Common Stock.
The AHF 1976 Trust owns 50,000 shares of Series B Preferred Stock
which are convertible into 100,000 shares of Common Stock and a
Warrant for 12,000 shares of Common Stock.
The HLH Jr. 1976 Trust owns 50,000 shares of Series B Preferred Stock
which are convertible into 100,000 shares of Common Stock and a
Warrant for 12,000 shares of Common Stock.
The WTH 1976 Trust owns 50,000 shares of Series B Preferred Stock
which are convertible into 100,000 shares of Common Stock and a
Warrant for 12,000 shares of Common Stock.
(b) Power to Vote or Dispose of Shares
Each person listed above in response to Item 5(a) has the sole power
to vote and to direct the vote and the sole power to dispose of and
direct the disposition of those shares except as follows:
(i) Wilmington Investments, Inc., The Hillman Company, 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.
(ii) 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 436,000 shares of Common
Stock held beneficially by the Henry L. Hillman Trust.
(iii) As trustees of the JLHS 1976 Trust, the AHF 1976 Trust, the HLH
Jr. 1976 Trust and the WTH 1976 Trust Thomas G. Bigley and C. G.
Grefenstette may be deemed to share voting and disposition power
regarding 448,000 shares of Common Stock held beneficially by
the JLHS 1976 Trust, the AHF 1976 Trust, the HLH Jr. 1976 Trust
and the WTH 1976 Trust.
(c), (d) and (e). Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer
Wilmington Securities, Inc. entered into a Series A Preferred Stock
Purchase Agreement dated as of March 26, 1998 pursuant to which the Issuer had
an option to require Wilmington Securities, Inc. to purchase up to 333,333
additional shares of the Issuer's Series A Preferred Stock under certain
circumstances. Pursuant to the Series A-1 Preferred Stock Purchase Agreement
dated August 11, 1998 by and between Wilmington Securities, Inc. and the Issuer,
the Issuer's right to exercise such option was terminated. By subsequent
agreement between the Issuer and Wilmington Securities, Inc., the Put Option
Clause was reinstated in full as of September 3, 1998 except that (i) such
option by the Issuer to require Wilmington Securities, Inc. to purchase
additional shares ("Additional Shares") was limited to 145,883 rather than
333,333 shares of the Issuer's Series A Preferred Stock and (ii) paragraph
(b) of the Put Option Clause requiring the Issuer to issue additional
warrants to purchase shares of the Issuer's Common Stock in connection with the
sale and issuance of such Additional Shares remains null and void.
Pursuant to the Series B Preferred Stock Purchase Agreement dated as of
September 2, 1998 (the "Securities Purchase Agreement'), the Issuer is obligated
to issue, in the event that the average closing bid price of the Issuer's Common
Stock on the ten trading days ending on March 2, 1999, is less than $4.00 per
share, such number of additional warrants to purchase Common Stock (up to a
maximum of 454,545 shares) determined in accordance with the formula set forth
in the Securities Purchase Agreement. The additional warrants will have an
exercise price of $.01 per share.
Wilmington Securities, Inc. entered into a Registration Rights Agreement,
dated as of September 2, 1998 (the "Registration Rights Agreement") pursuant to
which the Issuer agreed to file a registration statement or Form S-3 covering
the resale of the Common Stock underlying the Series B Convertible Preferred
Stock and the 120,000 Common Stock Warrants issued in connection therewith.
The rights of Wilmington Securities, Inc. under the Securities Purchase
Agreement and the Registration Rights Agreement have been assigned to the Henry
L. Hillman Trust, the JLHS 1976 Trust, the AHF 1976 Trust, the HLH Jr. 1976
Trust and the WTH 1976 Trust to the extent such rights relate to the shares
and warrants purchased by such Trusts from Wilmington Securities, Inc.
Item 7. Material to be Filed as Exhibits
Exhibit 1. Information concerning officers and directors of reporting
persons and certain affiliates thereof.
Exhibit 2. Series B Preferred Stock Purchase Agreement.
Exhibit 3. Registration Rights Agreement.
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
WILMINGTON SECURITIES, INC.
/s/ Andrew H. McQuarrie
By _________________________________________
Andrew H. McQuarrie, Vice President
WILMINGTON INVESTMENTS, INC.
/s/ Andrew H. McQuarrie
By _________________________________________
Andrew H. McQuarrie, Vice President
THE HILLMAN COMPANY
/s/ Lawrence M. Wagner
By _________________________________________
Lawrence M. Wagner, President
HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN
& C. G. GREFENSTETTE, TRUSTEES OF THE HENRY
L. HILLMAN TRUST U/A DATED NOVEMBER 18,
1985
/s/ C. G. Grefenstette
By _________________________________________
C. G. Grefenstette, Trustee
THOMAS G. BIGLEY AND C. G. GREFENSTETTE,
TRUSTEES UNDER AGREEMENT OF TRUST DATED
12/30/76 FOR THE CHILDREN OF JULIET LEA
HILLMAN SIMONDS, AUDREY HILLIARD HILLMAN
HENRY LEA HILLMAN, JR., AND WILLIAM
TALBOTT HILLMAN
/s/ Thomas G. Bigley
____________________________________________
Thomas G. Bigley, Trustee
/s/ C. G. Grefenstette
____________________________________________
C. G. Grefenstette, Trustee
/s/ C. G. Grefenstette
____________________________________________
C. G. Grefenstette
/s/ Thomas G. Bigley
____________________________________________
Thomas G. Bigley
/s/ Henry L. Hillman
____________________________________________
Henry L. Hillman
/s/ Elsie Hilliard Hillman
____________________________________________
Elsie Hilliard Hillman
September 11, 1998
Date
EXHIBIT 1
PRINCIPAL OFFICERS AND DIRECTORS OF
THE HILLMAN COMPANY, ALL OF WHOM ARE U.S. CITIZENS
Name and Address Title
Henry L. Hillman Chairman of the Executive Committee
2000 Grant Building and Director
Pittsburgh, Pennsylvania 15219
C. G. Grefenstette Chairman of the Board and
2000 Grant Building Director
Pittsburgh, Pennsylvania 15219
Lawrence M. Wagner President, Chief Executive Officer
2000 Grant Building and Director
Pittsburgh, Pennsylvania 15219
H. Vaughan Blaxter, III Vice President, Secretary, General
1900 Grant Building Counsel and Director
Pittsburgh, Pennsylvania 15219
Mark J. Laskow Vice President and Director
1900 Grant Building
Pittsburgh, Pennsylvania 15219
Anthony J. Burlando Vice President - Risk Management
1900 Grant Building
Pittsburgh, Pennsylvania 15219
James R. Philp Vice President - Personnel and
2000 Grant Building Administration
Pittsburgh, Pennsylvania 15219
Richard M. Johnston Vice President - Investments and
2000 Grant Building Director
Pittsburgh, Pennsylvania 15219
John W. Hall Vice President - Accounting and
1800 Grant Building Information Services
Pittsburgh, Pennsylvania 15219
<PAGE>
Timothy O. Fisher Vice President
1900 Grant Building
Pittsburgh, Pennsylvania 15219
Bruce I. Crocker Vice President
1800 Grant Building
Pittsburgh, Pennsylvania 15219
Denis P. McCarthy Vice President
1900 Grant Building
Pittsburgh, Pennsylvania 15219
Timothy P. Hall Vice President
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Joseph C. Manzinger Vice President
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Maurice J. White Vice President, Shareholder Services
1800 Grant Building
Pittsburgh, Pennsylvania 15219
Charles H. Bracken, Jr. Treasurer
2000 Grant Building
Pittsburgh, Pennsylvania 15219
D. Richard Roesch Assistant Treasurer
1800 Grant Building
Pittsburgh, Pennsylvania 15219
Michael S. Adamcyk Assistant Secretary and
2000 Grant Building Assistant Treasurer
Pittsburgh, Pennsylvania 15219
Mary Black Strong Assistant Treasurer
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Carol J. Cusick Riley Vice President, Associate General
1900 Grant Building Counsel and Assistant Secretary
Pittsburgh, Pennsylvania 15219
Cornel Conley Controller - Corporate
1800 Grant Building
Pittsburgh, Pennsylvania 15219
Mark M. Poljak Controller - Taxes
1800 Grant Building
Pittsburgh, Pennsylvania 15219
Elsie H. Hillman Director
2000 Grant Building
Pittsburgh, Pennsylvania 15219
William Talbott Hillman Director
2000 Grant Building
Pittsburgh, Pennsylvania 15219
PRINCIPAL OFFICERS AND DIRECTORS OF
WILMINGTON INVESTMENTS, INC., ALL OF WHOM ARE U.S. CITIZENS
H. Vaughan Blaxter, III President and Secretary
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Lario M. Marini Senior Vice President and Director
100 South Road
Wilmington, Delaware 19809
Andrew H. McQuarrie Vice President, Chief Financial
824 Market Street, Suite 900 Officer, Treasurer and Director
Wilmington, Delaware 19801
Richard H. Brown Assistant Vice President and
824 Market Street, Suite 900 Assistant Secretary
Wilmington, Delaware 19801
Charles H. Bracken, Jr. Assistant Secretary and
2000 Grant Building Assistant Treasurer
Pittsburgh, Pennsylvania 15219
Jody B. Cosner Assistant Secretary
824 Market Street, Suite 900
Wilmington, Delaware 19801
Joan E. Bachner Assistant Treasurer
824 Market Street, Suite 900
Wilmington, Delaware 19801
Darlene Clarke Director
4911 Birch Circle
Wilmington, Delaware 19808
PRINCIPAL OFFICERS AND DIRECTORS OF
WILMINGTON SECURITIES, INC., ALL OF WHOM ARE U.S. CITIZENS
H. Vaughan Blaxter, III President and Secretary
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Lario M. Marini Senior Vice President and Director
100 South Road
Wilmington, Delaware 19809
Andrew H. McQuarrie Vice President, Chief Financial
824 Market Street, Suite 900 Officer, Treasurer and Director
Wilmington, Delaware 19801
Richard H. Brown Assistant Vice President and
824 Market Street, Suite 900 Assistant Secretary
Wilmington, Delaware 19801
Charles H. Bracken, Jr. Assistant Secretary and
2000 Grant Building Assistant Treasurer
Pittsburgh, Pennsylvania 15219
Jody B. Cosner Assistant Secretary
824 Market Street, Suite 900
Wilmington, Delaware 19801
Joan E. Bachner Assistant Treasurer
824 Market Street, Suite 900
Wilmington, Delaware 19801
Darlene Clarke Director
4911 Birch Circle
Wilmington, Delaware 19808
TRUSTEES OF THE HENRY L. HILLMAN TRUST U/A TRUST
DATED NOVEMBER 18, 1985, ALL OF WHOM ARE U.S. CITIZENS
Henry L. Hillman
2000 Grant Building
Pittsburgh, Pennsylvania 15219
Elsie Hilliard Hillman
2000 Grant Building
Pittsburgh, Pennsylvania 15219
C. G. Grefenstette
2000 Grant Building
Pittsburgh, Pennsylvania 15219
TRUSTEES OF THE 1976 JLHS TRUST DATED 12/30/76, THE 1976 AHF TRUST DATED
12/30/76, THE 1976 HLH TRUST DATED 12/30/76 AND THE 1976 WTH TRUST DATED
12/30/76 ALL OF WHOM ARE U.S. CITIZENS
Thomas G. Bigley
One Oxford Centre
28th Floor
Pittsburgh, Pennsylvania 15219
C. G. Grefenstette
2000 Grant Building
Pittsburgh, Pennsylvania 15219
EXHIBIT 2
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.
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.
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.
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.
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 a 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 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.
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 A 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 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
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 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 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.
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 "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 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 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.
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.
N = ($4.00 - DP) x (I )$4.00)
DP
N = Number of Additional Warrants
DP = Determination Price
I = Amount of Investment
The Additional Warrants will be in the form attached hereto as
Exhibit AD. 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 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 AE 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.
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.
<PAGE>
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 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
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.
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.
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:
Name:
Title:
WILMINGTON SECURITIES, INC.
824 Market Street
Suite 900
Wilmington, Delaware 19801
By:
Name: Andrew McQuarrie
Title: Vice President
RESIDENCE: Delaware
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 500,000
Number of Warrants: 120,000
Aggregate Purchase Price: $4,000,000
Exhibit 3
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 AWarrant 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:
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 (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 Allowe d 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
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 Investor s; 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 pursuantto Section
2(a) in accordance with the terms of this Agreement.
d. Eligibility for Form S-3. The Company represents and warrants
that it meetsthe registrant eligibility and transaction requirements for the
use of Form S-3 for registration of thesale by the Initial Investors and any
other Investors of the Registrable Securities and the Companyshall file all
reports required to be filed by the Company with the SEC in a timely manner so
as tomaintain 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 thefollowing 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 RegistrableSecurities provided in Section 2(a),
and thereafter use its best efforts to cause such RegistrationStatement
relating to Registrable Securities to become effective as soon as possible
after the filingthereof, and keep the Registration Statement effective
pursuant to Rule 415 at all times until suchdate 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) maybe immediately sold without restriction (including
without limitation as to volume by each holderthereof) without registration
under the 1933 Act (the "Registration Period").
b. The Company shall prepare and file with the SEC such amendments
(includingpost-effective amendments) and supplements to the Registration
Statement and the prospectus usedin connection with the Registration Statement
as may be necessary to keep the Registration Statementeffective at all times
during the Registration Period, and, during such period, comply with
theprovisions of the 1933 Act with respect to the disposition of all
Registrable Securities of theCompany covered by the Registration Statement
until such time as all of such Registrable Securitieshave been disposed of in
accordance with the intended methods of disposition by the seller or
sellersthereof as set forth in the Registration Statement. In the event the
number of shares available undera Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the RegistrableSecurities
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 theshort 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
thenecessity therefor arises (based on the market price of the Common Stock
and other relevant factorson 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
aspracticable 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 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,
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. 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 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 1and 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.
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.
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 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 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
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.
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
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 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]
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:
Name:
Title:
WILMINGTON SECURITIES, INC.
By:
Name:
Title:
