-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jpgh90xcL4DFU+6YG5rSsBYfnkJSDJZArinidNvChMfcHbSHiK0BsWONkTIawR0H bL8hf4YrjRG3VPk5g32fLg== 0001036288-99-000010.txt : 19990317 0001036288-99-000010.hdr.sgml : 19990317 ACCESSION NUMBER: 0001036288-99-000010 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990316 GROUP MEMBERS: C. G. GREFENSTETTE GROUP MEMBERS: ELSIE HILLIARD HILLMAN GROUP MEMBERS: HENRY L. HILLMAN GROUP MEMBERS: HILLMAN CO GROUP MEMBERS: THE 12/30/76 AHF TRUST GROUP MEMBERS: THE 12/30/76 HLHJR TRUST GROUP MEMBERS: THE 12/30/76 JLHS TRUST GROUP MEMBERS: THE 12/30/76 WTH TRUST GROUP MEMBERS: THE HILLMAN COMPANY GROUP MEMBERS: THE HLH TRUST GROUP MEMBERS: THOMAS G. BIGLEY GROUP MEMBERS: WILMINGTON INVESTMENTS, INC. GROUP MEMBERS: WILMINGTON SECURITIES, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUPERCONDUCTOR TECHNOLOGIES INC CENTRAL INDEX KEY: 0000895665 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 770153076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-42893 FILM NUMBER: 99566217 BUSINESS ADDRESS: STREET 1: 460 WARD DR STREET 2: STE F CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8056837646 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HILLMAN CO CENTRAL INDEX KEY: 0001036288 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 310 GRANT ST STREET 2: 1900 GRANT BUILDING CITY: PITTSBURGH STATE: PA ZIP: 15219 MAIL ADDRESS: STREET 1: 310 GRANT ST STREET 2: 1900 GRANT BUILDING CITY: PITTSBURGH STATE: PA ZIP: 15219 SC 13D/A 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 SCHEDULE 13D Amendment No. 5 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) February 26, 1999 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 ] 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 2,408,709 9. Sole Dispositive Power 5,000 10 Shared Dispositive Power 2,408,709 11 Aggregate Amount Beneficially Owned by Each Reporting Person 2,413,709 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 26.07% 14 Type of Reporting Person IN 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 10,000 8 Shared Voting Power 182,932 9. Sole Dispositive Power 10,000 10 Shared Dispositive Power 182,932 11 Aggregate Amount Beneficially Owned by Each Reporting Person 192,932 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 1.96% 14 Type of Reporting Person IN 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 45,733 8 Shared Voting Power 9. Sole Dispositive Power 45,733 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 45,733 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .49% 14 Type of Reporting Person OO 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 45,733 8 Shared Voting Power 9. Sole Dispositive Power 45,733 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 45,733 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .49% 14 Type of Reporting Person OO 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 45,733 8 Shared Voting Power 9. Sole Dispositive Power 45,733 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 45,733 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .49% 14 Type of Reporting Person OO 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 45,733 8 Shared Voting Power 9. Sole Dispositive Power 45,733 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 45,733 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .49% 14 Type of Reporting Person OO 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 2,225,809 9 Sole Dispositive Power 10 Shared Dispositive Power 2,225,809 11 Aggregate Amount Beneficially Owned by Each Reporting Person 2,225,809 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 24.04% 14 Type of Reporting Person IN 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 2,225,809 9 Sole Dispositive Power 10 Shared Dispositive Power 2,225,809 11 Aggregate Amount Beneficially Owned by Each Reporting Person 2,225,809 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 24.04% 14 Type of Reporting Person IN 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, 1985I.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 237,198 8 Shared Voting Power 1,988,611 9 Sole Dispositive Power 237,198 10 Shared Dispositive Power 1,988,611 11 Aggregate Amount Beneficially Owned by Each Reporting Person 2,225,809 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 24.04% 14 Type of Reporting Person OO 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 1,988,611 9 Sole Dispositive Power 10 Shared Dispositive Power 1,988,611 11 Aggregate Amount Beneficially Owned by Each Reporting Person 1,988,611 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 21.48% 14 Type of Reporting Person CO 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 1,988,611 9 Sole Dispositive Power 10 Shared Dispositive Power 1,988,611 11 Aggregate Amount Beneficially Owned by Each Reporting Person 1,988,611 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 21.48% 14 Type of Reporting Person CO 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 1,988,611 8 Shared Voting Power 9 Sole Dispositive Power 1,988,611 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 1,988,611 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 21.48% 14 Type of Reporting Person CO SCHEDULE 13D Amendment No. 5 This statement ("Statement") constitutes Amendment No. 5 to Schedule 13D filed with the Securities and Exchange Commission (the "Commission") on March 15, 1999 (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 February 26, 1999, Wilmington Securities, Inc., the Henry L. Hillman Trust, the JLHS 1976 Trust, the AHF 1976 Trust, the HLH Jr. 1976 Trust and the WTH 1976 Trust (collectively the "Investors") entered into an Exchange Agreement with the Issuer pursuant to which the Investors agreed to exchange their Series A, A-1 and B Convertible Preferred Stock and related warrants held by the Investors for shares of the Issuer's Series A-2, A-3 and B-1 Convertible Preferred Stock and replacement warrants and additional warrants (collectively the "February Warrants") that are convertible into or exercisable for shares of Common Stock, upon the terms and subject to the limitations and conditions set forth in the Certificates of Designations, Rights, Preferences, Privileges and Restrictions with respect to the Series A-2, A-3 and B-1 Preferred Stock and in the February Warrants. On March 5, 1999 Wilmington Securities, Inc. entered into a Stock Purchase Agreement with the Issuer pursuant to which Wilmington Securities, Inc. purchased 41,667 shares of Series C Preferred Stock for $3,000,000. Wilmington Securities, Inc. also received a Warrant (the "March Warrant") for 120,000 shares of Common Stock. The Series A-2, Series A-3, Series B-1 and Series C Preferred Stock of the Company, and the February Warrants and March Warrants (collectively the "Securities"), are not convertible into or exercisable for (as the case may be) shares of Common Stock in excess of 1,533,709 shares (the "19.9% Cap" or the "Allowed Conversion Shares"), unless the Company has received stockholder approval to eliminate such 19.9% Cap at a duly held meeting of stockholders in calendar 1999 (the "Stockholder Approval"). Until Stockholder Approval has been obtained (or, if Stockholder Approval is not obtained, then continuing thereafter) the 19.9% Cap shall apply and each Investor holding Securities shall have the right to convert its Preferred Stock or exercise its Warrants only up to its pro rata portion of the Allowed Conversion Shares. The table below lists the number of shares of Common Stock which each Investor may obtain by converting or exercising its Preferred Stock or Warrants, as the case may be, prior to and after Shareholder Approval. The Company has agreed in the Stock Purchase Agreement to use its best efforts to obtain Stockholder Approval at the Company's 1999 Annual Meeting of Stockholders to be held on or before June 2, 1999. Also, subject to Stockholder Approval, the Company has agreed to appoint two designees of the Investors to its Board of Directors at the first meeting of the Board following the Annual Meeting, and to use its best efforts to obtain the election of such designees at each subsequent Annual Meeting so long as Wilmington Securities, Inc. holds at least 33,750 shares of Series C Preferred Stock. The two designees of the Investors are Joseph C. Manzinger and Richard M. Johnston, each a Vice President of The Hillman Company. 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. 10,000 shares of Common Stock are owned of record and beneficially by Thomas G. Bigley. 775,000 shares of Common Stock are owned of record and beneficially by Wilmington Securities, Inc. Wilmington Securities, Inc. also owns 64,584 shares of Series A-2 Preferred Stock, 12,500 shares of Series A-3 Preferred Stock, 15,000 shares of Series B-1 Preferred Stock, 41,667 shares of Series C Preferred Stock. Wilmington Securities, Inc. also owns a Warrant for 100,000 shares of Common, Stock, a Warrant for 66,667 shares of Common Stock, a Warrant for 36,000 shares of Common Stock, a Warrant for 54,000 shares of Common Stock and a Warrant for 120, 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 also owns 15,000 shares of Series B-1 Preferred Stock, a Warrant for 36,000 shares of Common Stock and a Warrant for 9,000 shares of Common Stock. The JLHS 1976 Trust owns 5,000 shares of Series B-1 Preferred Stock, a Warrant for 12,000 shares of Common Stock and a Warrant for 3,000 shares of Common Stock. The AHF 1976 Trust owns 5,000 shares of Series B-1 Preferred Stock, a Warrant for 12,000 shares of Common Stock and a Warrant for 3,000 shares of Common Stock. The HLH Jr. 1976 Trust owns 5,000 shares of Series B-1 Preferred Stock, a Warrant for 12,000 shares of Common Stock and a Warrant for 3,000 shares of Common Stock. The WTH 1976 Trust owns 5,000 shares of Series B-1 Preferred Stock, a Warrant for 12,000 shares of Common Stock and a Warrant for 3,000 shares of Common Stock. See Exhibit 2 for the number of shares of Common Stock for which the above Securities may be converted or exercised with and without giving effect to the 19.9% Cap. (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 1,988,611 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 237,198 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 182,932 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 Pursuant to the Amended and Restated Registration Rights Agreement dated February 26, 1999, the Issuer has agreed to 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 Exchange Agreement, file with the SEC a Registration Statement on Form S-3 covering the resale of the Common Stock underlying the Series B-1 Preferred Stock and Warrants issued or issuable pursuant to the Securities Purchase Agreement dated as of September 2, 1998, 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 Series B-1 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 Series B-1 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 Series B-1 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. Pursuant to the Second Amended and Restated Stockholders Agreement dated as of February 26, 1999, Wilmington Securities, Inc. is entitled to certain demand and piggyback registration rights with respect to the Common Stock underlying the Series A-2, A-3 and C Preferred Stock and associated Warrants, and to certain rights of first refusal in connection with future issuances by the Issuer of its Common Stock or securities convertible into Common Stock. See Item 4 above for a description of certain covenants of the Company relating to elimination of the 19.9% Cap and the election of two designees of the Investors to the Board of Directors. Item 7. Material to be Filed as Exhibits Exhibit 1.Information concerning officers and directors of reporting persons and certain affiliates thereof. Exhibit 2.Conversion of the Series A-2, A-3, B-1 and C Preferred Stock and Warrants under the 19.9% Cap. Exhibit 3.Exchange Agreement Exhibit 4.Series C Preferred Stock Purchase Agreement Exhibit 5. Second Amended and Restated Stockholders Rights Agreement Exhibit 6.Amended and Restated 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 March 15, 1999 Date EX-1 2 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 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. Vice President 2000 Grant Building Pittsburgh, Pennsylvania 15219 Eric C. Johnson 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 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 Audrey H. Fisher 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 Eric C. Johnson 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 Eric C. Johnson . 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 EX-2 3
Superconductor Technologies, Inc. Conversion of Preferred Stock Number of Number of Series/ Number of Common Shares Common Shares Investor Warrant Shares Without the 19.9% Cap Under the 19.9% Cap WSI Series A-2 64,584 1,291,680 513,699 Preferred Series A-3 12,500 250,000 99,419 Preferred Series B-1 15,000 300,000 119,303 Preferred Series C 41,667 833,340 331,399 Preferred Warrant for 120,000 120,000 47,721 Common Warrant for 100,000 100,000 39,768 Common Warrant for 66,667 66,667 26,512 Common Warrant for 36,000 36,000 14,316 Common Warrant for 54,000 54,000 21,474 Common HLH Series B-1 15,000 300,000 119,303 Trust Preferred Warrant for 36,000 36,000 14,316 Common Warrant for 9,000 9,000 3,579 Common JLHS 1976 Series B-1 5,000 100,000 39,768 Trust Preferred Warrant for 12,000 12,000 4,772 Common Warrant for 3,000 3,000 1,193 Common AHF 1976 Series B-1 5,000 100,000 39,768 Trust Preferred Warrant for 12,000 12,000 4,772 Common Warrant for 3,000 3,000 1,193 Common HLH Jr. 197 Series B-1 5,000 100,000 39,768 Trust Preferred Warrant for 12,000 12,000 4,772 Common Warrant for 3,000 3,000 1,193 Common WTH 1976 Series B-1 5,000 100,000 39,768 Trust Preferred Warrant for 12,000 12,000 4,772 Common Warrant for 3,000 3,000 1,193 Common
EX-3 4 EXCHANGE AGREEMENT THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of February 26, 1999, by and among Superconductor Technologies, Inc. a Delaware corporation (the "Company"), and the current holders (each a "Holder," and collectively, the "Holders") of the Company's Series A Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, and Series B Convertible Stock and the related warrants (collectively, the "Existing Securities") in the amounts set forth on Exhibit A hereto. Background A. The Company anticipates consummating an equity financing in the future (the "Series C Preferred Financing"). B.In order to achieve compliance with NASDAQ Marketplace Rule 4460 and to meet NASDAQ's concerns regarding the past issuances of the Existing Securities, and to avoid any concerns regarding the potential future issuance of securities in a new financing, the Company's Board of Directors (the "Board") has determined it to be in the best interests of the Company and its stockholders to exchange the Existing Securities for new shares of Series A-2, A-3 and B-1 Convertible Preferred Stock and related warrants (collectively, the "New Securities") that are substantially the same as the Existing Securities except for the following features: 1.Conversion/exercise/anti-dilution features: Prior to the receipt of Stockholder Approval (as defined below), the conversion, exercise and price anti-dilution features of all the New Securities (plus: (i) the securities to be issued in the Series C Preferred Financing and (ii) the New Warrants (as defined below)) would be limited to an aggregate of 1,533,709 shares of the Company's Common Stock (the "19.9% Cap"), which represents 19.9% of the total outstanding capital stock of the Company on March 25, 1998. The stockholders will be requested to approve the elimination of the 19.9% Cap and the issuance of additional securities. The requisite vote (the "Stockholder Approval") will be a majority of the shares present and voting at the meeting, excluding any New Securities (and any securities issued in the Series C Preferred Financing). 2.Dividend features: If Stockholder Approval is not obtained, the New Securities would have a cumulative mandatory dividend equal to 20% per annum, payable in cash. Such dividends would begin to accrue as of the dates the Existing Securities were first issued. 3.Redemption Features: The New Securities will not have any redemption features. In consideration for the elimination of the redemption feature of the Existing Securities, the Company will issue warrants to purchase 75,000 shares of the Company's Common Stock at an exercise price equal to $7.00 per share (the "New Warrants"), subject to the 19.9% Cap. 4.Anti-dilution Features: The anti-dilution features will be amended to exclude the securities to be issued in the Series C Preferred Financing and to make certain other changes as set forth in the Certificates of Designation (as defined below) attached as Exhibits B, C and D hereto. C. The New Securities to be issued to the Holders in exchange for their Existing Securities will be subject to the Second Amended and Restated Stockholder Rights Agreement and the Amended Registration Rights Agreement, both of which will be entered into by the Company and the Holders before the Closing (as defined below). NOW, THEREFORE, the parties agree as follows: 1. Authorization; Issuance of Securities; Closing. (a) In connection with the transactions contemplated by this Agreement, the Board has authorized (i) the filing of Certificates of Designation of Rights, Preferences and Privileges of Series A-2, A-3 and B-1 Preferred Stock (collectively, the "Certificates of Designation") attached as Exhibits B, C, and D hereto; (ii) the exchange of the Existing Securities for the New Securities as described in Section 1(b) below; and (iii) the issuance of the New Warrants as described in Section 1(b) below. (b) Prior to the Closing (as defined below), the Company shall cause the Certificates of Designation to be filed with the Delaware Secretary of State. At the Closing, (i) the Holders shall have delivered the stock certificates and warrants representing the Existing Securities and the completed Letter of Transmittal attached as Exhibit E and; (ii) in exchange therefor, the Company shall deliver to the Holders certificates representing 127,084 shares of its New Securities, the related warrants and the New Warrants (in substantially the form attached as Exhibit F), allocated to the Holders as indicated in the attached Exhibit A. (c) The closing (the "Closing") of the transactions contemplated hereby shall be held at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California on February 26, 1999, subject to satisfaction or waiver of the conditions to Closing set forth in Section 2 below. 2. Approval from Holders. By executing this Agreement, the Holders: (i) approve the creation of Series C Preferred Stock with the rights, preferences and privileges as set forth in the Certificate of Designation delivered to the Holders and the issuance of such shares and related warrants all as set forth in the Series C Preferred Stock Purchase Agreement delivered to the Holders (the "Series C Agreement"); (ii) waive their rights of first refusal contained Section 2 of the Amended and Restated Stockholders Agreement, dated August 11, 1998, and Section 4 of the Securities Purchase Agreement, dated September 2, 1998 (the "Securities Purchase Agreement") with respect to the shares of Series C Preferred Stock, the warrants to be issued pursuant to the Series C Agreement, the Letter Agreement between the Company and Tanner Unman Securities, Inc., dated as of August 10, 1998, and the New Securities and the New Warrants pursuant to this Agreement; (iii) amend Section 4(e) of the Securities Purchase Agreement to add an additional exclusion from the definition of "Capital Raising Limitations" for the New Securities and the securities issuable under the Series C Agreement; and (iv) amend the Securities Purchase Agreement, dated September 2, 1998, to replace the form of warrant attached thereto as Exhibit B with the form of warrant attached as Exhibit I and change the references to "Series B Preferred Stock" to "Series B-1 Preferred Stock." 3. Conditions to Closing. The obligations of the parties under this Agreement are subject to the fulfillment or waiver on or before the Closing of the following conditions: (a) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the parties on or prior to the Closing shall have been performed or complied with in all material respects. (b) Second Amended and Restated Stockholder Rights Agreement and Amended and Restated Registration Rights Agreement. The parties shall have entered into the Second Amended and Restated Stockholders Rights Agreement and Amended Registration Rights Agreement in the forms attached as Exhibit G and H, respectively. (c) Receipt of all Existing Securities. The Company shall have received from the Holders all the stock certificates and warrants representing the Existing Securities as set forth on Exhibit A (or lost stock or warrant affidavits for the same) and the related Letters of Transmittal fully executed and delivered. (d) Blue Sky. The Company shall have obtained all necessary Blue Sky law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the offer and exchange of the Shares. (e) Opinion of Company Counsel. The Holders shall have received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion addressed to the Holders, dated the day of the Closing and in substantially the form attached as Exhibit J. 4. Investment Representations of the Holders. Each Holder of Existing Securities represents and warrants to the Company as follows: (a) The Holder is acquiring the New Securities for investment for his or her own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) The Holder acknowledges and understands that the New Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of such Holder's investment intent as expressed herein. The Holder is an "accredited investor" within the meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission. (c) The certificates evidencing the New Securities will be imprinted with the following legend: 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 REQUIREMENTS OF SAID ACT. 5. Miscellaneous. (a) Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of Delaware. (b) Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by any of the parties hereto and the closing of the transactions contemplated hereby. (c) Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. (d) Entire Agreement; Amendment. This Agreement and the other documents delivered pursuant hereto at the Closing constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by either (i) the party against whom enforcement of any such amendment, waiver, discharge or termination is sought or (ii) the Company and the Holders holding a majority of the then outstanding New Securities. (e) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. (f) Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without such provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. (g) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. (h) Benefits of Agreement. Nothing in this Agreement, express or implied, shall give to any person, other than the parties hereto and their successors hereunder any benefit or any legal or equitable right, remedy or claim under this Agreement. IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above. SUPERCONDUCTOR TECHNOLOGIES, INC. By: Name: Peter Thomas Title: President and Chief Executive Officer Sole Series A Preferred Stockholder: Wilmington Securities, Inc. By:____________________________ Name: Title: Sole Series A-1 Preferred Stockholder: Wilmington Securities, Inc. By:____________________________ Name: Title: Series B Preferred Stockholders: Wilmington Securities, Inc. By:_____________________________ Name: Title: Henry L. Hillman Trust Under Agreement of Trust dated November 18, 1985 By:_____________________________ C.G. Grefenstette, Trustee Juliet Lea Hillman Simonds Trust under Agreement of Trust dated December 30, 1976 for Children of Juliet Lea Hillman Simonds By:_________________________________ Thomas G. Bigley, Trustee By:_________________________________ C.G. Grefenstette, Trustee Audrey Hillman Fisher Trust under Agreement of Trust dated December 30, 1976 for Children of Audrey Hillman Fisher By:_________________________________ Thomas G. Bigley, Trustee By:_________________________________ C.G. Grefenstette, Trustee Henry Lea Hillman, Jr. Trust under Agreement of Trust dated December 30, 1976 for Children of Henry Lea Hillman, Jr. By:__________________________________ Thomas G. Bigley, Trustee By:__________________________________ C.G. Grefenstette, Trustee William Talbott Hillman Trust under Agreement of Trust dated December 30, 1976 for Children of William Talbott Hillman By:__________________________________ Thomas G. Bigley, Trustee By:__________________________________ C.G. Grefenstette EXHIBIT A
Existing Securities to be Exchanged New Securities to be Issued Holder Shares Warrants Shares Warrants New Warrants WSI 645,833 100,000 64,584 100,000 Series A Common Series A-2 Common 125,000 66,667 12,500 66,667 Series A-1 Common Series A-3 Common 150,000 36,000 15,000 36,000 54,000 Series B Common Series B-1 Common Common HLH 150,000 36,000 15,000 6,000 9,000 Trust Series B Common Series B-1 Common Common JLHS 50,000 12,000 5,000 12,000 3,000 1976 Series B Common Series B-1 Common Common Trust AHF 50,000 12,000 5,000 12,000 3,000 1976 Series B Common Series B-1 Common Common Trust HLHS Jr. 50,000 12,000 5,000 12,000 3,000 1976 Series B Common Series B-1 Common Common Trust WTH 50,000 12,000 5,000 12,000 3,000 1976 Series B Common Series B-1 Common Common Trust
Note: Each share of Preferred Stock to be issued as new securities is initially convertible into 20 shares of Common Stock. EXHIBIT B CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A-2 PREFERRED STOCK OF SUPERCONDUCTOR TECHNOLOGIES INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware I, Peter Thomas, the Chief Executive Officer of Superconductor Technologies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors on February 4, 1999 adopted the following resolution creating a series of 64,584 shares of Preferred Stock designated as Series A-2 Preferred Stock: RESOLVED: That pursuant to the authority vested in the Board of Directors of the Corporation by the Amended and Restated Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock, $0.001 par value, of the Corporation, to be designated Series A-2 Preferred Stock (the "Series A-2 Preferred"), consisting of 64,584 shares and to the extent that the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series A-2 Preferred are not stated and expressed in the Amended and Restated Certificate of Incorporation, does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Amended and Restated Certificate of Incorporation shall be deemed to have the meanings provided therein): SECTION 1. Designation and Amount. The shares of such series shall be designated as "Series A-2 Preferred", par value $0.001 per share, and the number of shares constituting such series shall be 64,584. SECTION 2. Rank. Except as provided in Section 8, the Series A-2 Preferred Stock shall rank (i) prior to the Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii) pari passu with the Series A-3 Preferred Stock, the Series B-1 Preferred Stock, and with any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, on parity with the Series A-2 Preferred Stock; and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series A-2 Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. SECTION 3. Dividends. The holders of shares of Series A-2 Preferred shall be entitled to receive dividends, out of funds legally available therefor, payable in preference and priority to any payment of any dividend on Common Stock of the Corporation, at the rate of $3.60 per share (adjusted for any recapitalization, stock combinations, stock dividends, stock splits and the like (a "Recapitalization")) per annum for the Series A-2 Preferred, provided however that in the event Stockholder Approval (as defined in Section 6(h)) is not obtained, then effective as of March 26, 1998, the $3.60 dividend amount shall be increased to $12.00 per share (as adjusted for Recapitalizations). Such dividends shall be cumulative, accrue daily (beginning March 26, 1998) and be paid quarterly, in cash or as an addition to the Series A-2 Liquidation Preference (as defined below). No dividend shall be paid on the Common Stock in any year, other than dividends payable solely in Common Stock, until all dividends due and payable on the Preferred Stock have been declared and paid, and then such dividends on the Common Stock shall not be in excess of the dividends paid on the Preferred Stock unless the amount of such excess is also paid on the Preferred Stock on an as-converted per share basis. SECTION 4. Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a "Liquidation Event"), distributions to the stockholders of the Corporation shall be made in the following manner: (a) The holders of Series A-2 Preferred shall be entitled to receive, on a pari passu basis with the holders of Series A-3, Series B-1 and any other series of Preferred Stock ranked pari passu with Series A-2 Preferred Stock but prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of any series of Preferred Stock junior to Series A-2 Preferred Stock or holders of the Common Stock by reason of their ownership of such stock, an amount per share equal to the sum (the "Series A-2 Liquidation Preference") of (i) $60.00 for each share of Series A-2 Preferred then held by them, adjusted for any Recapitalizations with respect to such shares and (ii) an amount equal to all unpaid dividends on the Series A-2 Preferred held by them; provided, however, in the event of a Liquidation Event pursuant to Section 4(b) below that is consummated on or before March 26, 2001, the Series A-2 Liquidation Preference shall be the greater of (i) $72.00 or (ii) $60.00 plus all accrued dividends for each share of Series A-2 Preferred, adjusted for any Recapitalizations. If the assets and funds thus distributed among the holders of the Preferred Stock shall be insufficient to permit the payment to such holders of their full preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock on a pari passu basis in proportion to the aggregate preferential amount of shares of Preferred Stock outstanding as of the date of the distribution upon the occurrence of such event. After payment has been made to the holders of the Preferred Stock of the full preferential amount to which they shall be entitled, the holders of the Common Stock shall be entitled to share ratably in the remaining assets, based on the number of shares of Common Stock held. (b) For purposes of this Section 4, a merger or consolidation of the Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations into the Corporation, or the sale of all or substantially all of the assets of the Corporation, or any other corporate reorganization, in which consolidation, merger, sale of assets or reorganization the stockholders of the Corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a Liquidation Event unless the stockholders of this Corporation immediately prior to such consolidation, merger, sale of assets or reorganization hold or control more than fifty percent (50%) of the voting equity securities of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a Liquidation Event. SECTION 5. Voting Rights. Except as otherwise required by law, the Amended and Restated Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation, the holder of each share of Common Stock issued and outstanding shall have one vote and the holder of each share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock could be converted, subject to the limits in Section 6(h) below, at the record date for determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, such votes to be counted together with all other shares of stock of the Corporation having general voting power and not separately as a class. Holders of Common Stock and Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes by the holders of Preferred Stock shall not, however, be permitted and any fractional voting rights shall (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) be rounded to the nearest whole number. SECTION 6. Conversion. The holders of Series A-2 Preferred have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Subject to the limits set forth in Section 6(h) below, each share of Series A-2 Preferred shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Series A-2 Preferred into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $60.00 by the Series A-2 Conversion Price, determined as hereinafter provided, in effect at the time of conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of Series A-2 Preferred shall initially be $3.00 with respect to each share of Series A-2 Preferred (the "Series A-2 Conversion Price"). The initial Series A-2 Conversion Price shall be subject to adjustment as hereinafter provided. (b) Automatic Conversion. Subject to the limits set forth in Section 6(h) below, each share of Series A-2 Preferred shall automatically be converted into shares of Common Stock at the then effective Series A-2 Conversion Price for such series upon the election of holders of at least a majority of the then outstanding shares of Series A-2 Preferred. (c) Mechanics of Conversion. The mechanics of conversion set forth in this Section 6(c) are subject to the limits set forth in Section 6(h) below. No fractional shares of Common Stock shall be issued upon conversion of Series A-2 Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Series A-2 Conversion Price. Before any holder of Series A-2 Preferred shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A-2 Preferred, and shall give written notice to the Corporation at such office that the holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section 6(b), the outstanding shares of Series A-2 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent and provided further, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series A-2 Preferred are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series A-2 Preferred, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A-2 Preferred to be converted, or in the case of automatic conversion then on the date of election by a majority of the then outstanding shares of Series A-2 Preferred, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (d) (1) Adjustment of Conversion Price of Series A-2 Preferred Stock. The Series A-2 Conversion Price shall be subject to adjustment from time to time as follows: (i) Adjustments for Subdivisions, Combinations or Consolidation of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided by stock split, stock dividends or otherwise, into a greater number of shares of Common Stock, the Series A-2 Conversion Price then in effect shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Series A-2 Conversion Price then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (ii) Adjustments for Stock Dividends and Other Distributions. In the event the Corporation at any time or from time to time makes, or fixes a record date for the determination of holders of Common Stock entitled to receive any distribution (excluding any repurchases of securities by the Corporation not made on a pro rata basis from all holders of any class of the Corporation's securities) payable in property or in securities of the Corporation other than shares of Common Stock, and other than as otherwise adjusted in this Section 6 or as provided in Section 3, then and in each such event the holders of Series A-2 Preferred shall receive at the time of such distribution, the amount of property or the number of securities of the Corporation that they would have received had their Series A-2 Preferred been converted into Common Stock on the date of such event. (iii) Adjustments for Reclassification, Exchange and Substitution. Except as provided in Section 3 upon any liquidation, dissolution or winding up of the Corporation, if the Common Stock issuable upon conversion of the Series A-2 Preferred shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), each share of Series A-2 Preferred shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such share of Series A-2 Preferred shall have been entitled upon such reorganization or reclassification. (2) Adjustments of Series A-2 Conversion Price for Diluting Issues. In addition to the adjustment of the Series A-2 Conversion Price provided in Section 6(d)(1) above, the Series A-2 Conversion Price shall be subject to further adjustment from time to time as follows: (i) Special Definitions. For purposes of this Section 6(d)(2), the following definitions shall apply: (1) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (2) "Original Issue Date" shall mean March 26, 1998. (3) "Convertible Securities" shall mean securities convertible into or exchangeable for Common Stock. (4) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section 6(d)(2)(iii), deemed to be issued) by the Corporation after the Original Issue Date other than shares of Common Stock issued or issuable: (A) upon conversion of shares of the Preferred Stock; (B) to officers, directors and employees of, and consultants to, the Corporation pursuant to plans and arrangements approved by the Board of Directors; (C) as a dividend or other distribution on the Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section 6(d)(1); (D) upon the exercise of options issued prior to the Original Issue Date; (E) to research or development collaborators or to banks or other institutional lendors or lessors in connection with capital asset leases or borrowings for the acquisition of capital assets, pursuant to any arrangement approved by the Board of Directors; (F) upon exercise of warrants outstanding on the Original Issue Date or warrants to be issued pursuant to agreements outstanding on the Original Issue Date, including without limitation the following warrants: warrant, dated as of November 22, 1997, the warrant dated as of December 21, 1998, warrants issued or issuable pursuant to the Letter Agreement between the Company and Tanner Unman Securities, Inc., dated as August 10, 1998, the warrants issued or issuable pursuant to the Exchange Agreement, any additional warrants to be issued pursuant to the Securities Purchase Agreement dated as of September 2, 1998, and any Preferred Stock purchase agreement entered into before Stockholder Approval (as defined below); (G) with the written approval of the holders of a majority of the outstanding Series A-2 Preferred; or (H) by way of dividend or other distributions on securities referred to in clauses (A), (B), (C), (D), (E), (F) and (G) above. (ii) No Adjustment of Series A-2 Conversion Price. No adjustment in the Series A-2 Conversion Price of a particular share of Series A-2 Preferred shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Series A-2 Conversion Price in effect on the date of, and immediately prior to such issue, for such share of Series A-2 Preferred. (iii) Deemed Issue of Additional Shares of Common Stock. (1) Options and Convertible Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of any holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 6(d)(2)(v) below) of such Additional Shares of Common Stock would be less than the Series A-2 Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which additional shares of Common Stock are deemed to be issued: (A) no further adjustment in the Series A-2 Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A-2 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A-2 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (I) in the case of Convertible Securities or Options for Common Stock, the only additional shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and (II) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Series A-2 Conversion Price to an amount which exceeds the lower of (i) the Series A-2 Conversion Price on the original adjustment date, or (ii) the Series A-2 Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and (E) in the case of any Options which expire by their terms not more than thirty (30) days after the date of issue thereof, no adjustment of the Series A-2 Conversion Price shall be made until the expiration or exercise of all such Options. (iv) Adjustment of Series A-2 Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that are the subject of adjustment pursuant to Section 6(d)(i)) without consideration or for a consideration per share less than the Series A-2 Conversion Price, in effect on the date of, and immediately prior to such issue, then and in such event, such Series A-2 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Series A-2 Conversion Price by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Series A-2 Conversion Price; and the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of such Additional Shares of Common Stock so issued; and provided further that, for the purposes of this Section 6(d)(2)(iv), all shares of Common Stock issuable upon exercise of outstanding Options or conversion of outstanding Convertible Securities shall be deemed to be outstanding, and immediately after any Additional Shares of Common Stock are deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares of Common Stock shall be deemed to be outstanding. (v) Determination of Consideration. For purposes of this Section 6(d)(2), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: (1) Cash and Property: Such consideration shall: (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation (excluding amounts paid or payable for accrued interest or accrued dividends); (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and (C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors. (2) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Option or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (e) No Impairment. Except as provided in Section 8, the Corporation will not, by amendment of its Amended and Restated Certificate of Incorporation or this Certificate of Designation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A-2 Preferred Stock against impairment. (f) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A-2 Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A-2 Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A-2 Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Series A-2 Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series A-2 Preferred. (g) Notices of Record Date. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to effect any reclassification or capitalization of its Common Stock outstanding involving a change in the Common Stock; or (iii) to merge or consolidate with or into any other person or entity, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the holders of Series A-2 Preferred: (1) at least twenty (20) days' prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (ii) and (iii) above; and (2) in the case of the matters referred to in (ii) and (iii) above, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to the holders of the Series A-2 Preferred at the address for each such holder as shown on the books of the Corporation. The above written notice requirement may be waived by the holders of a majority of the then outstanding Series A-2 Preferred Stock. (h) Limits on Conversion. Notwithstanding anything herein to the contrary, the Series A-2, Series A-3, and Series B-1 Preferred Stock of the Corporation and any additional shares of Preferred Stock issued by the Corporation prior to Stockholder Approval (as defined below), and the outstanding warrants to purchase Common Stock of the Corporation (issued or issuable to holders of such shares of Preferred Stock pursuant to agreements outstanding as of February 26, 1999 or entered into prior to Stockholder Approval) (collectively, the "Securities") shall not be convertible into or exercisable for (as the case may be) shares of Common Stock in excess of 1,533,709 shares (as adjusted for Recapitalizations and the like) (the "19.9% Cap" or the "Allowed Conversion Shares"), unless the Corporation has received stockholder approval to eliminate such 19.9% Cap at a duly held meeting of the stockholders in calendar 1999 (the "Stockholder Approval"). Until Stockholder Approval has been obtained (or, if Stockholder Approval is not obtained, then continuing thereafter) the 19.9% Cap shall apply and each holder of Securities (each a "Holder") shall have the right to convert its Preferred Stock or exercise its warrants only up to its pro rata portion of the Allowed Conversion Shares. A Holder may waive in writing its right to convert or exercise (or transfer to another Holder) its pro rata portion of the Allowed Conversion Shares. In the event that a Holder converts or exercises its Securities, then the number of Allowed Conversion Shares will be reduced by such amount. SECTION 7. Status of Converted Stock. In case any shares of Series A-2 Preferred shall be repurchased or converted pursuant to Section 6, the shares so repurchased or converted shall be canceled and shall not be issued by the Corporation as Series A-2 Preferred and this Certificate of Designation shall be appropriately amended to effect the corresponding reduction in the Corporation's authorized Series A-2 Preferred. SECTION 8. Covenants. In addition to any other rights provided by law, so long as at least twenty-five percent (25%) of the authorized Series A-2 Preferred shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A-2 Preferred: (a) amend or repeal any provision of the Corporation's Amended or Restated Certificate of Incorporation, certificates of designation or Bylaws if such action would materially and adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A-2 Preferred; or (b) authorize or issue shares of any class or series of stock having any preference or priority as to dividends or assets superior to or on parity with any such preference or priority of the Series A-2 Preferred. IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this Certificate to be signed by Peter Thomas, its Chief Executive Officer, this __th day of February, 1999. Peter Thomas Chief Executive Officer EXHIBIT C CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A-3 PREFERRED STOCK OF SUPERCONDUCTOR TECHNOLOGIES INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware I, Peter Thomas, the Chief Executive Officer of Superconductor Technologies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors on February 4, 1999 adopted the following resolution creating a series of 12,500 shares of Preferred Stock designated as Series A-3 Preferred Stock: RESOLVED: That pursuant to the authority vested in the Board of Directors of the Corporation by the Amended and Restated Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock, $0.001 par value, of the Corporation, to be designated Series A-3 Preferred Stock ("Series A-3 Preferred"), consisting of 12,500 shares and to the extent that the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series A-3 Preferred are not stated and expressed in the Amended and Restated Certificate of Incorporation, does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Amended and Restated Certificate of Incorporation shall be deemed to have the meanings provided therein): SECTION (1) Designation and Amount. The shares of such series shall be designated as "Series A-3 Preferred", par value $0.001 per share, and the number of shares constituting such series shall be 12,500. SECTION 2. Rank. Except as provided in Section 8, the Series A-3 Preferred Stock shall rank (i) prior to the Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii) pari passu with the Series A-2 Preferred Stock, the Series B-1 Preferred Stock, and with any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, on parity with the Series A-3 Preferred Stock; and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series A-3 Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. SECTION 3. Dividends. The holders of shares of Series A-3 Preferred shall be entitled to receive dividends, out of funds legally available therefor, payable in preference and priority to any payment of any dividend on Common Stock of the Corporation, at the rate of $4.80 per share (adjusted for any recapitalization, stock combinations, stock dividends, stock splits and the like (a "Recapitalization")) per annum for the Series A-3 Preferred, provided however, that in the event Stockholder Approval (as defined in Section 6(h)) is not obtained, then effective as of August 11, 1998, the $4.80 dividend shall be increased to $16.00 per share (as adjusted for Recapitalizations). Such dividends shall be cumulative, accrue daily (beginning August 11, 1998) and be paid quarterly in cash or as an addition to the Series A-3 Liquidation Preference (as defined below). No dividend shall be paid on the Common Stock in any year, other than dividends payable solely in Common Stock, until all dividends due and payable on the Preferred Stock have been declared and paid, and then such dividends on the Common Stock shall not be in excess of the dividends paid on the Preferred Stock unless the amount of such excess is also paid on the Preferred Stock on an as-converted per share basis. SECTION 4. Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a "Liquidation Event"), distributions to the stockholders of the Corporation shall be made in the following manner: (c) The holders of Series A-3 Preferred shall be entitled to receive, on a pari passu basis with the holders of Series A-2, Series B-1 and any series of Preferred Stock ranked pari passu with Series A-3 Preferred Stock, but prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of any series of Preferred Stock ranked junior to series A-3 Preferred Stock or holders of the Common Stock by reason of their ownership of such stock, an amount per share equal to the sum (the "Series A-3 Liquidation Preference") of (i) $80.00 for each share of Series A-3 Preferred (the "Original Purchase Price") then held by them, adjusted for any Recapitalizations with respect to such shares and, (ii) an amount equal to all unpaid dividends on the Series A-3 Preferred held by them; provided however, in the event of a Liquidation Event pursuant to Section 4(b) below that is consummated on or before March 26, 2001, the Liquidation Preference shall be the greater of (i) $96.00 or (ii) $80.00 plus all accrued dividends for each share of Series A-3 Preferred, adjusted for any Recapitalizations. If the assets and funds thus distributed among the holders of the Preferred Stock shall be insufficient to permit the payment to such holders of their full preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock on a pari passu basis in proportion to the aggregate preferential amount of shares of Preferred Stock outstanding as of the date of the distribution upon the occurrence of such event. After payment has been made to the holders of the Preferred Stock of the full preferential amounts to which they shall be entitled, the holders of the Common Stock shall be entitled to share ratably in the remaining assets, based on the number of shares of Common Stock held. (d) For purposes of this Section 4, a merger or consolidation of the Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations into the Corporation, or the sale of all or substantially all of the assets of the Corporation, or any other corporate reorganization, in which consolidation, merger, sale of assets or reorganization the stockholders of the Corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a Liquidation Event unless the stockholders of this Corporation immediately prior to such consolidation, merger, sale of assets or reorganization hold or control more than fifty percent (50%) of the voting equity securities of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a Liquidation Event. SECTION 5. Voting Rights. Except as otherwise required by law, the Amended and Restated Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation, the holder of each share of Common Stock issued and outstanding shall have one vote and the holder of each share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock could be converted, subject to the limits set forth in Section 6(h) below, at the record date for determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, such votes to be counted together with all other shares of stock of the Corporation having general voting power and not separately as a class. Holders of Common Stock and Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes by the holders of Preferred Stock shall not, however, be permitted and any fractional voting rights shall (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) be rounded to the nearest whole number. SECTION 6. Conversion. The holders of Series A-3 Preferred have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Subject to the limits set forth in Section 6(h) below, each share of Series A-3 Preferred shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Series A-3 Preferred into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $80.00 by the Series A-3 Conversion Price, determined as hereinafter provided, in effect at the time of conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of Series A-3 Preferred shall initially be $4.00 with respect to each share of Series A-3 Preferred (the "Series A-3 Conversion Price"). The initial Series A-3 Conversion Price shall be subject to adjustment as hereinafter provided. (b) Automatic Conversion. Subject to the limits set forth in Section 6(h) below, each share of Series A-3 Preferred shall automatically be converted into shares of Common Stock at the then effective Series A-3 Conversion Price for such series upon the election of holders of at least a majority of the then outstanding shares of Series A-3 Preferred. (e) Mechanics of Conversion. The mechanics of conversion set forth in this Section 6(c) are subject to the limits set forth in Section 5(h) below. No fractional shares of Common Stock shall be issued upon conversion of Series A-3 Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Series A-3 Conversion Price. Before any holder of Series A-3 Preferred shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A-3 Preferred, and shall give written notice to the Corporation at such office that the holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section 6(b), the outstanding shares of Series A-3 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent and provided further, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series A-3 Preferred are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series A-3 Preferred, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A-3 Preferred to be converted, or in the case of automatic conversion then on the date of election by a majority of the then outstanding shares of Series A-3 Preferred, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (f) (1) Adjustment of Conversion Price of Series A-3 Preferred Stock. The Series A-3 Conversion Price shall be subject to adjustment from time to time as follows: (i) Adjustments for Subdivisions, Combinations or Consolidation of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided by stock split, stock dividends or otherwise, into a greater number of shares of Common Stock, the Series A-3 Conversion Price then in effect shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Series A-3 Conversion Price then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (ii) Adjustments for Stock Dividends and Other Distributions. In the event the Corporation at any time or from time to time makes, or fixes a record date for the determination of holders of Common Stock entitled to receive any distribution (excluding any repurchases of securities by the Corporation not made on a pro rata basis from all holders of any class of the Corporation's securities) payable in property or in securities of the Corporation other than shares of Common Stock, and other than as otherwise adjusted in this Section 6 or as provided in Section 3, then and in each such event the holders of Series A-3 Preferred shall receive at the time of such distribution, the amount of property or the number of securities of the Corporation that they would have received had their Series A-3 Preferred been converted into Common Stock on the date of such event. (iii) Adjustments for Reclassification, Exchange and Substitution. Except as provided in Section 4 upon any liquidation, dissolution or winding up of the Corporation, if the Common Stock issuable upon conversion of the Series A-3 Preferred shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), each share of Series A-3 Preferred shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such share of Series A-3 Preferred shall have been entitled upon such reorganization or reclassification. (d) (2) Adjustments of Series A-3 Conversion Price for Diluting Issues. In addition to the adjustment of the Series A-3 Conversion Price provided in Section 6(d)(1) above, the Series A-3 Conversion Price shall be subject to further adjustment from time to time as follows: (i) Special Definitions. For purposes of this Section 6(d)(2), the following definitions shall apply: (1) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (2) "Original Issue Date" shall mean August 11, 1998. (3) "Convertible Securities" shall mean securities convertible into or exchangeable for Common Stock. (4) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section 6(d)(2)(iii), deemed to be issued) by the Corporation after the Original Issue Date other than shares of Common Stock issued or issuable: (A) upon conversion of shares of the Preferred Stock; (B) to officers, directors and employees of, and consultants to, the Corporation pursuant to plans and arrangements approved by the Board of Directors; (C) as a dividend or other distribution on the Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section 6(d)(1); (D) upon the exercise of options issued prior to the Original Issue Date; (E) to research or development collaborators or to banks or other institutional lendors or lessors in connection with capital asset leases or borrowings for the acquisition of capital assets, pursuant to any arrangement approved by the Board of Directors; (F) upon exercise of warrants outstanding on the Original Issue Date or warrants to be issued pursuant to agreements outstanding on the Original Issue Date, including without limitation the following warrants: warrant, dated as of November 22, 1997, the warrant dated as of December 21, 1998 and warrants issued or issuable pursuant to the Letter Agreement between the Company and Tanner Unman Securities, Inc., dated as August 10, 1998, warrants issued or issuable pursuant to the Exchange Agreement, any additional warrants to be issued pursuant to the Securities Purchase Agreement dated as of September 2, 1998, and any Preferred Stock purchase agreement entered into before Stockholder Approval (as defined below); (G) with the written approval of the holders of a majority of the outstanding Series A-3 Preferred; or (H) by way of dividend or other distributions on securities referred to in clauses (A), (B), (C), (D) (E), (F) and (G) above. (ii) No Adjustment of Series A-3 Conversion Price. No adjustment in the Series A-3 Conversion Price of a particular share of Series A-3 Preferred shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Series A-3 Conversion Price in effect on the date of, and immediately prior to such issue, for such share of Series A-3 Preferred. (iii) Deemed Issue of Additional Shares of Common Stock. (1) Options and Convertible Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of any holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 6(d)(2)(v) below) of such Additional Shares of Common Stock would be less than the Series A-3 Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which additional shares of Common Stock are deemed to be issued: (A) no further adjustment in the Series A-3 Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A-3 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A-3 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (I) in the case of Convertible Securities or Options for Common Stock, the only additional shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and (II) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Series A-3 Conversion Price to an amount which exceeds the lower of (i) the Series A-3 Conversion Price on the original adjustment date, or (ii) the Series A-3 Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and (E) in the case of any Options which expire by their terms not more than thirty (30) days after the date of issue thereof, no adjustment of the Series A-3 Conversion Price shall be made until the expiration or exercise of all such Options. (iv) Adjustment of Series A-3 Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that are the subject of adjustment pursuant to Section 6(d)(i)) without consideration or for a consideration per share less than the Series A-3 Conversion Price, in effect on the date of, and immediately prior to such issue, then and in such event, such Series A-3 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Series A-3 Conversion Price by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Series A-3 Conversion Price; and the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of such Additional Shares of Common Stock so issued; and provided further that, for the purposes of this Section 6(d)(2)(iv), all shares of Common Stock issuable upon exercise of outstanding Options or conversion of outstanding Convertible Securities shall be deemed to be outstanding, and immediately after any Additional Shares of Common Stock are deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares of Common Stock shall be deemed to be outstanding. (v) Determination of Consideration. For purposes of this Section 6(d)(2), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: (1) Cash and Property: Such consideration shall: (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation (excluding amounts paid or payable for accrued interest or accrued dividends); (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and (C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors. (2) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Option or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (g) No Impairment. Except as provided in Section 8, the Corporation will not, by amendment of its Amended and Restated Certificate of Incorporation or this Certificate of Designation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A-3 Preferred Stock against impairment. (h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A-3 Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A-3 Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A-3 Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Series A-3 Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series A-3 Preferred. (i) Notices of Record Date. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to effect any reclassification or capitalization of its Common Stock outstanding involving a change in the Common Stock; or (iii) to merge or consolidate with or into any other person or entity, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the holders of Series A-3 Preferred: (1) at least twenty (20) days' prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (ii) and (iii) above; and (2) in the case of the matters referred to in (ii) and (iii) above, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to the holders of the Series A-3 Preferred at the address for each such holder as shown on the books of the Corporation. The above written notice requirement may be waived by the holders of a majority of the then outstanding Series A-3 Preferred Stock. (h) Limits on Conversion. Notwithstanding anything herein to the contrary, the Series A-2, Series A-3, and Series B-1 Preferred Stock of the Corporation and any additional shares of Preferred Stock issued by the Corporation prior to Stockholder Approval (as defined below), and the outstanding warrants to purchase Common Stock of the Corporation (issued or issuable to holders of such shares of Preferred Stock pursuant to agreements outstanding as of February 26, 1999 or entered into prior to Stockholder Approval) (collectively, the "Securities") shall not be convertible into or exercisable for (as the case may be) shares of Common Stock in excess of 1,533,709 shares (as adjusted for Recapitalizations and the like) (the "19.9% Cap" or the "Allowed Conversion Shares"), unless the Corporation has received stockholder approval to eliminate such 19.9% Cap at a duly held meeting of the stockholders in calendar 1999 (the "Stockholder Approval"). Until Stockholder Approval has been obtained (or, if Stockholder Approval is not obtained, then continuing thereafter) the 19.9% Cap shall apply and each holder of Securities (each a "Holder") shall have the right to convert its Preferred Stock or exercise its warrants only up to its pro rata portion of the Allowed Conversion Shares. A Holder may waive in writing its right to convert or exercise (or transfer to another Holder) its pro rata portion of the Allowed Conversion Shares. In the event that a Holder converts or exercises its Securities, then the number of Allowed Conversion Shares will be reduced by such amount. SECTION 7. Status of Converted Stock. In case any shares of Series A-3 Preferred shall be repurchased or converted pursuant to Section 6, the shares so repurchased or converted shall be canceled and shall not be issued by the Corporation as Series A-3 Preferred and this Certificate of Designation shall be appropriately amended to effect the corresponding reduction in the Corporation's authorized Series A-3 Preferred. SECTION 8. Covenants. In addition to any other rights provided by law, so long as at least twenty-five percent (25%) of the authorized Series A-3 Preferred shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A-3 Preferred: (j) amend or repeal any provision of the Corporation's Amended or Restated Certificate of Incorporation, certificates of designation or Bylaws if such action would materially and adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A-3 Preferred; or (k) authorize or issue shares of any class or series of stock having any preference or priority as to dividends or assets superior to or on parity with any such preference or priority of the Series A-3 Preferred. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this Certificate to be signed by Peter Thomas, its Chief Executive Officer, this __th day of February, 1999. Peter Thomas Chief Executive Officer EXHIBIT D CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES B-1 PREFERRED STOCK OF SUPERCONDUCTOR TECHNOLOGIES INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware I, Peter Thomas, the Chief Executive Officer of Superconductor Technologies Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors on February 4, 1999 adopted the following resolution creating a series of 50,000 shares of Preferred Stock designated as Series B-1 Preferred Stock. RESOLVED: That pursuant to the authority vested in the Board of Directors of the Corporation by the Amended and Restated Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a series of Preferred Stock, par value $0.001 per share, of the Corporation, to be designated Series B-1 Preferred Stock (the "Series B-1 Preferred Stock"), consisting of 50,000 shares, and to the extent that the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series B-1 Preferred Stock are not stated and expressed in the Amended and Restated Certificate of Incorporation, does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows (all terms used herein which are defined in the Amended and Restated Certificate of Incorporation shall be deemed to have the meanings provided therein): SECTION 1. Designation and Amount. The shares of such Series B-1 Preferred Stock shall be designated as "Series B-1 Preferred Stock", par value $0.001 per share, and the number of shares constituting such series shall be 50,000. SECTION 2. Rank. Except as provided in Section 8, the Series B-1 Preferred Stock shall rank (i) prior to the Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii) pari passu with the Series A-2 Preferred Stock, the Series A-3 Preferred Stock, and with any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, on parity with the Series B-1 Preferred Stock; and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B-1 Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. SECTION 3. Dividends. The holders of shares of Series B-1 Preferred Stock shall be entitled to receive dividends, out of funds legally available therefor, payable in preference and priority to any payment of any dividend on Common Stock of the Corporation, at the rate of $5.60 per share (adjusted for any recapitalization, stock combinations, stock dividends, stock splits and the like ("Recapitalizations")) per annum for the Series B-1 Preferred Stock; provided, however, that in the event Stockholder Approval (as defined in Section 6(h) below) is not obtained, then effective as of September 2, 1998, the $5.60 dividend amount shall be increased to $16.00 per share (adjusted for Recapitalizations). Such dividends shall be cumulative, accrue daily (effective September 2, 1998), and be paid quarterly in cash or as an addition to the Series B-1 Liquidation Preference (as defined below). No dividend shall be paid on the Common Stock in any year, other than dividends payable solely in Common Stock, until all dividends due and payable on the Preferred Stock have been declared and paid, and then such dividends on the Common Stock shall not be in excess of the dividends paid on the Preferred Stock unless the amount of such excess is also paid on the Preferred Stock on an as-converted per share basis. SECTION 4. Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a "Liquidation Event"), distributions to the stockholders of the Corporation shall be made in the following manner: (a) The holders of Series B-1 Preferred Stock shall be entitled to receive, on a pari passu basis with the holders of Series A-2, Series A-3 and Series C Preferred Stock and any other series of Preferred Stock ranked pari passu with the Series B-1 Preferred Stock but prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of any series of Preferred Stock junior to Series B-1 Preferred Stock or holders of the Common Stock by reason of their ownership of such stock, an amount per share equal to the sum (the "Series B-1 Liquidation Preference") of (i) $80.00 for each share of Series B-1 Preferred Stock (the "Original Purchase Price") then held by them, adjusted for any Recapitalizations with respect to such shares and (ii) an amount equal to all unpaid dividends on the Series B-1 Preferred Stock held by them. If the assets and funds thus distributed among the holders of the Preferred Stock shall be insufficient to permit the payment to such holders of their full preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the aggregate preferential amount of shares of Preferred Stock outstanding as of the date of the distribution upon the occurrence of such event. After payment has been made to the holders of the Preferred Stock of the full preferential amounts to which they shall be entitled, the holders of the Common Stock shall be entitled to share ratably in the remaining assets, based on the number of shares of Common Stock held. (b) For purposes of this Section 4, a merger or consolidation of the Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations into the Corporation, or the sale of all or substantially all of the assets of the Corporation, or any other corporate reorganization, in which consolidation, merger, sale of assets or reorganization the stockholders of the Corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a Liquidation Event unless the stockholders of this Corporation immediately prior to such consolidation, merger, sale of assets or reorganization hold or control more than fifty percent (50%) of the voting equity securities of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a Liquidation Event. SECTION 5. Voting Rights. Except as otherwise required by law, the Amended and Restated Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation, the holder of each share of Common Stock issued and outstanding shall have one vote and the holder of each share of Series B-1 Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Series B-1 Preferred Stock could be converted, subject to the limits set forth in Section 6(h) below, at the record date for determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, such votes to be counted together with all other shares of stock of the Corporation having general voting power and not separately as a class. Holders of Common Stock and Series B-1 Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes by the holders of Series B-1 Preferred Stock shall not, however, be permitted and any fractional voting rights shall (after aggregating all shares into which shares of Series B-1 Preferred Stock held by each holder could be converted) be rounded to the nearest whole number. SECTION 6. Conversion. The holders of Series B-1 Preferred Stock have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Subject to the limits set forth in Section 6(h) below, each share of Series B-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Series B-1 Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $80.00 by the initial Series B-1 Conversion Price. The term "Series B-1 Conversion Price" as used herein shall mean initially $4.00 and shall be subject to adjustment as provided below. (b) Automatic Conversion. Subject to the limits set forth in Section 6(h) below, each share of Series B-1 Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Series B-1 Conversion Price for such series upon the election of holders of at least a majority of the then outstanding shares of Series B-1 Preferred Stock. (c) Mechanics of Conversion. The mechanics of conversion set forth in this Section 6(c) are subject to the limits set forth in Section 6(h) below. No fractional shares of Common Stock shall be issued upon conversion of Series B-1 Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Series B-1 Conversion Price. Before any holder of Series B-1 Preferred Stock shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series B-1 Preferred Stock, and shall give written notice (in the form of Exhibit A attached hereto) to the Corporation (the "Notice of Conversion") at such office that the holder elects to convert the same and specifying the date of conversion (the "Conversion Date"); provided, however, that in the event of an automatic conversion pursuant to Section 6(b), the outstanding shares of Series B-1 Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent and provided further, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series B-1 Preferred Stock are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series B-1 Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B-1 Preferred Stock to be converted, or in the case of automatic conversion then on the date of election by a majority of the then outstanding shares of Series B-1 Preferred Stock, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (d) (1) Adjustment of Conversion Price of Series B-1 Preferred Stock. The Series B-1 Conversion Price shall be subject to adjustment from time to time as follows: (i) Adjustments for Subdivisions, Combinations or Consolidation of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided by stock split, stock dividends or otherwise, into a greater number of shares of Common Stock, the Series B-1 Conversion Price then in effect shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Series B-1 Conversion Price then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (ii) Adjustments for Stock Dividends and Other Distributions. In the event the Corporation at any time or from time to time makes, or fixes a record date for the determination of holders of Common Stock entitled to receive any distribution (excluding any repurchases of securities by the Corporation not made on a pro rata basis from all holders of any class of the Corporation's securities) payable in property or in securities of the Corporation other than shares of Common Stock, and other than as otherwise adjusted in this Section 6 or as provided in Section 3, then and in each such event the holders of Series B-1 Preferred Stock shall receive at the time of such distribution, the amount of property or the number of securities of the Corporation that they would have received had their Series B-1 Preferred Stock been converted into Common Stock on the date of such event. (iii) Adjustments for Reclassification, Exchange and Substitution. Except as provided in Section 4 upon any liquidation, dissolution or winding up of the Corporation, if the Common Stock issuable upon conversion of the Series B-1 Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), each share of Series B-1 Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such share of Series B-1 Preferred Stock shall have been entitled upon such reorganization or reclassification. (2) Adjustments of Series B-1 Conversion Price for Diluting Issues. In addition to the adjustment of the Series B-1 Conversion Price provided in Section 6(d)(1) above, the Series B-1 Conversion Price shall be subject to further adjustment from time to time as follows: (i) Special Definitions. For purposes of this Section 6(e)(2), the following definitions shall apply: (1) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (2) "Original Issue Date" shall mean September 2, 1998. (3) "Convertible Securities" shall mean securities convertible into or exchangeable for Common Stock. (4) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section 6(d)(2)(iii), deemed to be issued) by the Corporation after the Original Issue Date other than shares of Common Stock issued or issuable: (A) upon conversion of shares of the Preferred Stock; (B) to officers, directors and employees of, and consultants to, the Corporation pursuant to plans and arrangements approved by the Board of Directors; (C) as a dividend or other distribution on the Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section 6(d)(1); (D) upon the exercise of options issued prior to the Original Issue Date; (E) to research or development collaborators or to banks or other institutional lendors or lessors in connection with capital asset leases or borrowings for the acquisition of capital assets, pursuant to any arrangement approved by the Board of Directors; or (F) upon exercise of warrants outstanding on the Original Issue Date or warrants to be issued pursuant to agreements outstanding on the Original Issue Date (including without limitation the following warrants: warrant, dated as of November 22, 1997, the warrants issued or issuable pursuant to the Exchange Agreement dated as of February __, 1999, the Securities Purchase Agreement dated as of September 2, 1998 and the Series C Preferred Stock Purchase Agreement, the warrant, dated as of December 21, 1998 and any securities issued or issuable pursuant to the Letter Agreement between the Company and Tanner Unman Securities, Inc., dated as August 10, 1998; (G) with the written approval of the holders of a majority of the outstanding Series B-1 Preferred; (H) by way of dividend or other distributions on securities referred to in clauses (A), (B), (C), (D), (E), (F) and (G) above. (ii) No Adjustment of Series B-1 Conversion Price. No adjustment in the Series B-1 Conversion Price of a particular share of Series B-1 Preferred Stock shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the Series B-1 Conversion Price in effect on the date of, and immediately prior to such issue, for such share of Series B-1 Preferred Stock. (iii) Deemed Issue of Additional Shares of Common Stock. (1) Options and Convertible Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of any holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 6(d)(2)(v) below) of such Additional Shares of Common Stock would be less than the Series B-1 Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which additional shares of Common Stock are deemed to be issued: (A) no further adjustment in the Series B-1 Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series B-1 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series B-1 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (I) in the case of Convertible Securities or Options for Common Stock, the only additional shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and (II) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Series B-1 Conversion Price to an amount which exceeds the lower of (i) the Series B-1 Conversion Price on the original adjustment date, or (ii) the Series B-1 Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and (E) in the case of any Options which expire by their terms not more than thirty (30) days after the date of issue thereof, no adjustment of the Series B-1 Conversion Price shall be made until the expiration or exercise of all such Options. (iv) Adjustment of Series B-1 Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that are the subject of adjustment pursuant to Section 6(d)(i)) without consideration or for a consideration per share less than the Series B-1 Conversion Price, in effect on the date of, and immediately prior to such issue, then and in such event, such Series B-1 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Series B-1 Conversion Price by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Series B-1 Conversion Price; and the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon conversion of the Preferred Stock outstanding immediately prior to such issue and (iii) the number of such Additional Shares of Common Stock so issued; and provided further that, for the purposes of this Section 6(d)(2)(iv), all shares of Common Stock issuable upon exercise of outstanding Options or conversion of outstanding Convertible Securities shall be deemed to be outstanding, and immediately after any Additional Shares of Common Stock are deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares of Common Stock shall be deemed to be outstanding. (v) Determination of Consideration. For purposes of this Section 6(d)(2), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: (1) Cash and Property: Such consideration shall: (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation (excluding amounts paid or payable for accrued interest or accrued dividends); (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and (C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors. (2) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1), relating to Options and Convertible Securities, shall be determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Option or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (e) No Impairment. Except as provided in Section 8, the Corporation will not, by amendment of its Amended and Restated Certificate of Incorporation or this Certificate of Designation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B-1 Preferred Stock against impairment. (f) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series B-1 Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series B-1 Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series B-1 Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Series B-1 Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series B-1 Preferred Stock. (g) Notices of Record Date. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to effect any reclassification or capitalization of its Common Stock outstanding involving a change in the Common Stock; or (iii) to merge or consolidate with or into any other person or entity, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the holders of Series B-1 Preferred Stock: (1) at least twenty (20) days' prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (ii) and (iii) above; and (2) in the case of the matters referred to in (ii) and (iii) above, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to the holders of the Series B-1 Preferred Stock at the address for each such holder as shown on the books of the Corporation. (h) Limits on Conversion. Notwithstanding anything herein to the contrary, the Series A-2, Series A-3, Series B-1 and Series C Preferred Stock of the Company and the outstanding warrants to purchase Common Stock of the Company (issued or issuable to holders of such shares of Preferred Stock pursuant to agreements outstanding as of February __, 1999) (collectively, the "Securities") shall not be convertible into or exercisable for (as the case may be) shares of Common Stock in excess of 1,533,709 shares (the "19.9% Cap" or the "Allowed Conversion Shares"), unless the Company has received stockholder approval to eliminate such 19.9% Cap at a duly held meeting of the stockholders in calendar 1999 (the "Stockholder Approval"). Until Stockholder Approval has been obtained (or, if Stockholder Approval is not obtained, then continuing thereafter) the 19.9% Cap shall apply and each holder of Securities (each a "Holder") shall have the right to convert or exercise its Securities only up to its pro rata portion of the Allowed Conversion Shares. A Holder may waive in writing its right to convert or exercise its pro rata portion of the Allowed Conversion Shares. In the event that a Holder converts or exercises its Securities, then the number of Allowed Conversion Shares will be reduced by such amount. SECTION 7. Status of Converted Stock. In case any shares of Series B-1 Preferred Stock shall be repurchased or converted pursuant to Section 6, the shares so repurchased or converted shall be cancelled and shall not be issued by the Corporation as Series B-1 Preferred and this Certificate of Designation shall be appropriately amended to effect the corresponding reduction in the Corporation's authorized Series B-1 Preferred Stock. SECTION 8. Covenants. In addition to any other rights provided by law, so long as at least twenty-five percent (25%) of the authorized Series B-1 Preferred Stock shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series B-1 Preferred Stock: (a) amend or repeal any provision of the Corporation's Amended or Restated Certificate of Incorporation, certificates of designation or Bylaws if such action would materially and adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series B-1 Preferred Stock; or (b) authorize or issue shares of any class or series of stock having any preference or priority as to dividends or assets superior to or on parity with any such preference or priority of the Series B-1 Preferred Stock. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this Certificate to be signed by Peter Thomas, its Chief Executive Officer, this _____ day of February, 1999. M. Peter Thomas Chief Executive Officer EXHIBIT A NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert the Series B-1 Preferred Stock) The undersigned hereby irrevocably elects to convert ______ shares of Series B-1 Preferred Stock, represented by stock certificate No(s). __________ (the "Preferred Stock Certificates") into shares of common stock ("Common Stock") of Superconductor Technologies Inc. (the "Corporation") according to the conditions of the Certificate of Designation of Series B-1 Preferred Stock, as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof). The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Series B-1 Preferred Stock shall be made pursuant to registration of the securities under the Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from registration under the Act. Date of Conversion:___________________________ Applicable Series B-1 Conversion Price:____________________ Number of Shares of Common Stock to be Issued:_____________________ Signature:____________________________________ Name:_______________________________________ Address:______________________________________ *The Corporation is not required to issue shares of Common Stock until the original Series B-1 Preferred Stock Certificate(s) (or evidence of loss, theft or destruction thereof) to be converted are received by the Corporation or its Transfer Agent. EXHIBIT E SUPERCONDUCTOR TECHNOLOGIES, INC. LETTER OF TRANSMITTAL TO: Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304-1050 Attention: Jay Hansen Telephone: (650) 493-9300 February 26, 1999 Ladies and Gentlemen: The undersigned hereby surrenders all enclosed stock certificates representing shares of the Series A, A-1, and B Preferred Stock (the "Preferred Stock") of Superconductor Technologies, Inc. (the "Company") and warrants to purchase Common Stock of the Company for exchange and cancellation pursuant to that certain Exchange Agreement dated as of February 26, 1999. Enclosed herewith are the following stock certificate(s) and/or warrant(s) of the Company: Registered Holder(s): Cert. Number Class or Series of Stock or Warrant Number of Shares Signatures Stockholder Signature Stockholder Signature Print Stockholder Name Print Stockholder Name Taxpayer Identification No. Taxpayer Identification No. Date Daytime telephone number, including area code INSTRUCTIONS 1. If this Letter of Transmittal is signed by the Registered Holder(s) of the certificate(s) and/or warrant(s) surrendered hereby, the signature(s) must correspond with the name as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. 2 If any shares or warrants are owned of record by two or more joint owners, all such owners must sign the Letter of Transmittal. 3 If any shares or warrants are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are different registrations of certificates. 4 If the Letter of Transmittal or any certificates or warrants are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers or corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing. 5. Letter of Transmittal Required: Lost Certificate(s). You will not receive the exchange certificate for your shares and/or warrants unless and until the Letter of Transmittal, duly completed and signed, is delivered together with the certificate(s) and/or warrant(s) and any required accompanying evidence of authority. If the certificate(s) and/or warrant(s) have been lost or destroyed, such should be indicated on the face of the Letter of Transmittal. In such event, please complete, sign and return with the Letter of Transmittal the attached Affidavit of Lost Stock Certificate in order to effectively surrender the certificate(s) and/or warrant(s) represented by such lost or destroyed certificate(s) and/or warrant(s). Note that a separate Lost Stock/Warrant Affidavit must be completed and signed for each lost or destroyed stock certificate and/or warrant. LOST STOCK/WARRANT AFFIDAVIT 1. The undersigned is the holder of: (i) _________ shares of Series ____ Preferred Stock of Superconductor Technologies, Inc. (the "Company"), issued on ____________, 19___ represented by Certificate Number ______ (the "Certificate") and/or (ii) a warrant to purchase ___________ shares of the Company's Common Stock. 2. The undersigned has examined his or her records and, after diligent search, is unable to find the Certificate and/or Warrant and believes said Certificate and/or Warrant to be lost. Accordingly, the undersigned certifies that the Certificate and/or Warrant shall be deemed surrendered for cancellation from this day forth. 3. The undersigned has not assigned, transferred, sold or pledged all or any part of the Certificate and/or Warrant. 4. The undersigned releases the Company from any and all liability relating to the loss of the Certificate and/or Warrant, or the issuance of a new certificate and/or warrant. The undersigned agrees to defend and indemnify and hold the Company harmless from any damage or loss caused by or in any way relating to the loss of the Certificate and/or Warrant, or the issuance of a new certificate and/or warrant. 5. In the event of discovery of the original Certificate and/or Warrant, the undersigned agrees to return it promptly to the Company, marked "canceled." 6. The undersigned hereby authorizes any officer of the Company to issue (i) a new stock certificate for _________ shares of Series _____ Preferred Stock to replace said lost Certificate and/or (ii) a new warrant to replace said lost Warrant. DATE: (signature) (print name) (address) EXHIBIT F NEW WARRANT EXHIBIT G SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENTEXHIBIT H AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT EXHIBIT I FORM OF WARRANT EXHIBIT J OPINION OF COUNSEL EX-4 5 SUPERCONDUCTOR. TECHNOLOGIES, INC. SERIES C PREFERRED STOCK PURCHASE AGREEMENT THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of March 5, 1999 by and among Superconductor Technologies Inc., a Delaware corporation (the "Company"), and Wilmington Securities, Inc. (the "Purchaser"). Section 1 Authorization and Sale of Preferred Stock; Issuance of Warrants 1.1 Authorization . The Company will, prior to the Closing (as defined below), authorize the sale and issuance of (i) 41,667 shares (the "Shares") of the Company's Series C Preferred Stock ("Series C Preferred"), having the rights, privileges and preferences as set forth in the Series C Preferred Stock Certificate of Designation (the "Certificate") in the form attached to this Agreement as Exhibit A and (ii) the Warrants (as defined below) to purchase up to 120,000 shares of the Common Stock (as defined below) at a price of $4.50 per share. 1.2 Sale of Shares; Issuance of Warrants. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase and the Company agrees to sell and issue to the Purchaser: (a) 41,667 Shares, at a cash price of $72.00 per share; and (b) a warrant or warrants in the form attached to this Agreement as Exhibit B (the "Warrants") which shall permit the Purchaser to initially purchase 120,000 shares of Company Common Stock, at an exercise price of $4.50 per share. Section 2 Closing Dates; Delivery 2.1 Closing . The closing (the "Closing") for the purchase and sale of the Shares and the issuance of the Warrants hereunder shall take place on March __, 1999. The Closing shall be held at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, or at such other time and place upon which the Company and the Purchaser shall agree. 2.2 Delivery . At the Closing, the Company will deliver to the Purchaser a certificate registered in the Purchaser's name representing the number of Shares that the Purchaser is purchasing against payment of $3,000,000 (the "Purchase Price") by cashier's or certified check payable to the Company or wire transfer of immediately available funds per the Company's instructions. Partial payment of the Purchase Price shall be made by surrender of the Demand Promissory Notes issued by the Company to the Purchaser dated February 17, 1999 and February 25, 1999 (the "Promissory Notes"). At the Closing, the Company will deliver to the Purchaser a Warrant evidencing the right to purchase 120,000 shares of Company Common Stock in the form attached as Exhibit B. Section 3 Representations and Warranties of the Company Except as set forth on Schedule of Exceptions provided to the Purchaser, the Company represents and warrants to the Purchaser as of the date of this Agreement as follows: 3.1 Organization and Standing; Certificate and Bylaws . The Company is a corporation duly organized and existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has requisite corporate power and authority to own and operate its properties and assets, and to carry on its business. The Company is presently qualified to do business as a foreign corporation in each jurisdiction where the failure to be so qualified would have a material adverse effect on the Company's business, operating results or financial condition (a "Material Adverse Effect"). 3.2 Corporate Power . The Company has all requisite legal and corporate power and authority to execute and deliver this Agreement and that certain Second Amended and Restated Stockholder Rights Agreement substantially in the form attached hereto as Exhibit C (the "Rights Agreement"), to sell and issue the Warrants and Shares hereunder, to issue the shares of the common stock of the Company (the "Common Stock") issuable upon conversion of the Shares, to issue the Common Stock issuable on exercise of the Warrants and to carry out and perform its obligations under the terms of this Agreement and the Rights Agreement (together the "Agreements"). 3.3 Subsidiaries . Except for Cryo-Asia Pte Ltd., a joint venture with Alantac in Singapore, the Company has no subsidiaries and does not otherwise own or control, directly or indirectly, any equity interest in any corporation, association or business entity. 3.4 Capitalization . (a) The authorized capital stock of the Company consists or will, upon the filing prior to the Closing of the Certificate, consist of (i) 30,000,000 shares of Common Stock, par value $0.001 per share, of which 7,724,841 shares are issued and outstanding as of March __ 1999, and (ii) 2,000,000 shares of Preferred Stock, of which (1) 645,833 shares have been designated "Series A Preferred," none of which are issued and outstanding, (2) 125,000 shares have been designated "Series A-1 Preferred," none of which are issued and outstanding, (3) 64,584 shares have been designated "Series A-2 Preferred," all of which are issued and outstanding, (4) 12,500 shares have been designated "Series A-3 Preferred," all of which are issued and outstanding, (5) 1,000,000 shares have been designated "Series B Preferred", none of which are issued and outstanding, (6) 50,000 shares have been designated "Series B-1 Preferred", all of which are issued and outstanding, and (7) 41,667 shares have been designated "Series C Preferred," none of which were issued and outstanding prior to the Closing. The Company by action of its Board of Directors will eliminate the series of Preferred Stock designated "Series A Preferred Stock," "Series A-1 Preferred Stock," and "Series B Preferred Stock" and all shares of Preferred Stock so designated shall revert to authorized and undesignated shares of Company Preferred Stock. The outstanding shares have been duly authorized and validly issued in compliance with applicable laws, and are fully paid and nonassessable. (b) As of the date of the Closing, the Company has reserved (i) 41,667 shares of Series C Preferred Stock for issuance hereunder, (ii) 3,375,020 shares of Common Stock for issuance upon conversion of all shares of Company Preferred Stock to be issued and outstanding following the Closing, consisting of (1) 1,291,680 shares for issuance upon conversion of Series A-2 Preferred Stock, (2) 250,000 shares for issuance upon conversion of Series A-3 Preferred Stock, (3) 1,000,000 shares for issuance upon conversion of Series B-1 Preferred Stock, and (4) 833,340 shares for issuance upon conversion of Series C Preferred Stock, (iii) 166,667 shares of Common Stock for issuance upon exercise of warrants issued in connection with the Series A Preferred Stock financings, (iv) 120,000 shares of Common Stock for issuance upon exercise of the Warrants issued in connection with the Series B Preferred Stock financing, (v) 120,000 shares of Common Stock for issuance upon exercise of the Warrants, (vi) 75,000 shares of Common Stock for issuance upon exercise of Warrants issued in connection with the Exchange Agreement (the "Exchange Agreement") entered into between the Company and holders of Company Preferred Stock as of February 26, 1999, (vii) 1,969,690 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 1,868,248 shares are issued and outstanding and (viii) a total of 150,000 shares of Common Stock for issuance upon exercise of certain outstanding warrants as identified in the Schedule of Exceptions. (c) The Common Stock, the Series A-2, Series A-3, Series B-1 and Series C Preferred shall have the rights, preferences, privileges and restrictions set forth in the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), a copy of which was provided to the Purchaser in connection with the Company's Series B Preferred Stock financing, the Certificate and the Certificates of Designations filed in connection with the Exchange Agreement. Except as set forth above, and in the Schedule of Exceptions, there are no options, warrants, or other rights to purchase any of the Company's authorized and unissued capital stock. 3.5 Authorization . All corporate action on the part of the Company and its directors necessary for the authorization, execution, delivery and performance of the Agreements by the Company, the authorization, sale, issuance and delivery of the Warrants, Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants, and the performance of all of the Company's obligations under the Agreements has been taken or will be taken prior to the Closing. The Agreements, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company, enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, except that the indemnification provisions of Section 1.10 of the Rights Agreement may further be limited by principles of public policy. The Warrants and Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, will be fully paid and nonassessable, and will have the rights, preferences and privileges described in the certificate representing the Warrants and the Certificate; the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants has been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, the Certificate of Incorporation of the Company, the Certificate and the certificate representing the Warrants will be validly issued, and will be fully paid and nonassessable; and the Shares and the Common Stock issued upon conversion of the Shares and upon exercise of the Warrants, will be free of any liens or encumbrances, other than any liens or encumbrances created by or imposed upon the Purchaser; provided, however, that the Shares, and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants, are subject to restrictions on transfer under state and/or federal securities laws as set forth herein and in the Rights Agreement. 3.6 Financial Statements . The Company has delivered to the Purchaser copies of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 28, 1998, June 27, 1998, and September 26, 1998 (the "Reports"). The financial statements included within the Reports are complete and correct in all material respects and accurately set out and describe the financial condition and operating results of the Company as of the dates and during the periods indicated therein, subject only, in the case of financial statements included in the Quarterly Reports, to footnotes and normal year-end adjustments. 3.7 Changes . Since the date of the Company's last Quarterly Report on Form 10-Q, there has not been: (a) Any change in the assets, liabilities, financial condition, or operations of the Company except changes in the ordinary course of business which have not been in any case materially adverse; (b) Any damage, destruction, or loss, whether or not covered by insurance, materially and adversely affecting the properties or business of the Company; (c) Any waiver or compromise by the Company of a valuable right or of a material debt owed to it; (d) Any loans made by the Company to its employees, officers or directors other than travel advances made in the ordinary course of business; (e) Any declaration or payment of any dividend or other distribution by the Company; or (f) To the best of the Company's knowledge, any other event or condition of any character which has materially and adversely affected the business operations, assets or financial condition of the Company. 3.8 Material Obligations . The Company has no material liabilities or obligations, absolute or contingent (individually or in the aggregate), except (i) the liabilities and obligations set forth in the Reports, and (ii) liabilities and obligations which have been incurred subsequent to September 26, 1998, in the ordinary course of business which have not been, either in any case or in the aggregate, material. 3.9 Material Contracts and Commitments . To the best of the Company's knowledge, all of the contracts, agreements and instruments to which the Company is a party and which are set forth or incorporated by reference in the Reports (the "Material Agreements") are valid, binding and in full force and effect in all material respects, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. 3.10 Intellectual Property, Trademarks, etc . The Company has the right to use, free and clear of all liens, charges, claims and restrictions, all intellectual property, patents, trademarks, service marks, trade names, copyrights, licenses and rights necessary to the business of the Company as presently conducted, except to the extent that a Material Adverse Effect could not reasonably be expected to result. To the Company's knowledge, the Company is not infringing upon or otherwise acting adversely to the right or claimed right of any other person under or with respect to any such intellectual property, patents, trademarks, service marks, trade names, copyrights, licenses or rights. 3.11 Title to Properties and Assets; Liens, etc . The Company has good and marketable title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the lien of current taxes not yet due and payable, and (ii) possible minor liens and encumbrances which do not in any case materially detract from the value of the property subject thereto or materially impair the operations of the Company, and which have not arisen otherwise than in the ordinary course of business. 3.12 Compliance with Other Instruments, None Burdensome, etc . The Company is not in violation of any term of the Certificate of Incorporation or Bylaws, each as amended to date, or in any material respect of any term or provision of any Material Agreement, judgment, decree, order, statute, rule or regulation applicable to the Company in any respect that could reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of this Agreement, and the issuance of the Warrants, Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants, have not resulted and will not result in any material violation of, or conflict with, or constitute a material default under, the Certificate of Incorporation or Bylaws, as amended, nor any of the Material Agreements, nor result in the creation of, any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company. 3.13 Litigation, etc . There are no actions, suits, proceedings or investigations pending against the Company or its properties before any court or governmental agency (nor, to the best of the Company's knowledge, is there any reasonable basis therefor or threat thereof) which, if adversely determined, would have a Material Adverse Effect. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 3.14 Registration Rights . Except as set forth in the Rights Agreement attached hereto as Exhibit C, and the Amended and Restated Registration Rights Agreement entered into between the Company and the holders of Company Series B-1 Preferred Stock, the Company is not under any contractual obligation to register (as defined in Section 1.2 of the Rights Agreement) any of its presently outstanding securities or any of its securities which may hereafter be issued. 3.15 Governmental Consent, etc . No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of the Agreements, or the offer, sale or issuance of the Warrants, Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants, or the consummation of any other transaction contemplated hereby or thereby, except (a) filing of the Certificate in the office of the Delaware Secretary of State, and (b) qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) of the offer, sale and issuance of the Warrants and Shares (and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants) under the California Corporate Securities Law of 1968, as amended, and other applicable Blue Sky laws, which filings and qualifications, if required, will be accomplished in a timely manner. 3.16 Offering . Subject to the accuracy of the Purchaser's representations in Section 4 hereof, the offer, sale and issuance of the Warrants and Shares to be issued in conformity with the terms of this Agreement, and the issuance of the Common Stock to be issued upon conversion of the Shares and upon exercise of the Warrants, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"). 3.17 Brokers or Finders . Except as disclosed in the Disclosure Schedule, the Company has not engaged any brokers, finders or agents, and the Purchaser has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with the Agreements. 3.18 Tax Returns and Payments . The Company has timely filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to the Company's knowledge all other taxes due and payable by the Company on or before the date hereof have been paid or will be paid prior to the time they become delinquent. The Company has not been advised (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof, or (b) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. The Company has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 3.19 Employee Matters . The Company does not have any collective bargaining agreements with any of its employees and no labor union organizing activity is pending or threatened with respect to the Company. 3.20 Disclosure . To the best of the Company's knowledge, this Agreement (including the Exhibits hereto) does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein not misleading in light of the circumstances under which they were made. Section 4 Representations and Warranties of the Purchaser The Purchaser hereby represents and warrants to the Company with respect to the purchase of Shares by and the issuance of the Warrants to such Purchaser, as follows: 4.1 Experience; Speculative Nature of Investment . The Purchaser (or its principals or advisors) has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser acknowledges that its investment in the Company is highly speculative and entails a substantial degree of risk and the Purchaser is in a position to lose the entire amount of such investment. 4.2 Investment . The Purchaser is acquiring the Warrants, Shares and the underlying Common Stock for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Warrants and Series C Preferred to be purchased hereby and the underlying Common Stock have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser is an "accredited investor" within the meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission. 4.3 Rule 144 . The Purchaser acknowledges that the Warrants, Shares and the underlying Common Stock must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from such registration is available. The Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares being sold during any three-month period not exceeding specified limitations. The Purchaser understands that the certificates evidencing the Warrants and Shares will be imprinted with a legend that prohibits the transfer of such securities unless they are registered or such registration is not required. 4.4 No Public Market . The Purchaser understands that no public market now exists for the Warrants and the Series C Preferred to be issued by the Company and that the Company has made no assurances that a public market will ever exist for the Warrants and the Series C Preferred. 4.5 Access to Data . The Purchaser has had an opportunity to discuss the Company's business, management and financial affairs with its management. The Purchaser has also had an opportunity to ask questions of officers of the Company, which questions were answered to its satisfaction. The Purchaser understands that such discussions, as well as any written information issued by the Company, were intended to describe certain aspects of the Company's business and prospects but were not a thorough or exhaustive description. 4.6 Authorization . The Agreements, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except as the indemnification provisions of Section 1.10 of the Rights Agreement may be limited by principles of public policy, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. 4.7 Brokers or Finders . The Purchaser has not engaged any brokers, finders or agents, and the Company has not, and will not, incur, directly or indirectly, as a result of any action taken by Purchaser, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with the Agreements. In the event that the preceding sentence is in any way inaccurate, such Purchaser agrees to indemnify and hold harmless the Company and each other Purchaser from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability) for which the Company, any other Purchaser, or any of their officers, directors, employees or representatives, is responsible. 4.8 Tax Liability . The Purchaser has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Agreements. With respect to such matters, the Purchaser relies solely on such advisors and not on any statements or representations of the Company or any of its agents other than the representations and warranties set forth herein. The Purchaser understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by the Agreements. Section 5 Conditions to Purchaser's Obligations to Close The Purchaser's obligations to purchase the Shares at the Closing are, unless waived by the Purchaser, subject to the fulfillment of the following conditions: 5.1 Representations and Warranties Correct . The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects as of the Closing Date. 5.2 Covenants . All covenants, agreements and conditions contained in the Agreements to be performed by the Company on or prior to the Closing shall have been performed or complied with in all material respects. 5.3 Blue Sky . The Company shall have obtained all necessary Blue Sky law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the issuance of the Warrants, offer and sale of the Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants. 5.4 Certificate of Designation . The Certificate shall have been duly authorized, executed and filed with the Secretary of State of the State of Delaware. 5.5 Rights Agreement . The Company and the Purchaser shall have executed and delivered the Rights Agreement. 5.6 Compliance Certificate . The Chief Executive Officer of the Company shall have executed a Compliance Certificate, in the form of Exhibit D hereto, certifying the satisfaction of the conditions to closing listed in Sections 5.1 and 5.2 hereof. 5.7 Compliance with Law . No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the sale and issuance of the Warrants, Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants and the consummation of the transactions contemplated hereby. 5.8 Opinion of Company's Counsel . Purchaser shall have received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion addressed to the Purchaser, dated the Closing Date and in substantially the form attached as Exhibit E. Section 6 Conditions to Company's Obligations to Close The Company's obligation to sell and issue the Shares at the Closing is, unless waived by the Company, subject to the fulfillment of the following conditions: 6.1 Representations . The representations and warranties made by the Purchaser in Section 4 hereof shall be true and correct as of the Closing Date. 6.2 Covenants . All covenants, agreements and conditions contained in the Agreements to be performed by Purchaser on or prior to the Closing Date shall have been performed or complied with in all material respects. 6.3 Blue Sky . The Company shall have obtained all necessary Blue Sky law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the issuance of the Warrants, offer and sale of the Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants. 6.4 Certificate of Designation . The Certificate shall have been duly authorized, executed and filed with the Secretary of State of the State of Delaware. 6.5 Rights Agreement . The Company and the Purchaser shall have executed and delivered the Rights Agreement. 6.6 Compliance with Law . No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the sale and issuance of the Warrants, Shares and the Common Stock issuable upon conversion of the Shares and upon exercise of the Warrants and the consummation of the transactions contemplated hereby. 6.7 Surrender of Promissory Notes . The Purchaser shall surrender the Promissory Notes upon its terms as partial payment of the Purchase Price. Section 7 Covenants 7.1 Board of Directors . The Company agrees that, provided that the Company has received Stockholder Approval (as defined in Section 6(h) of the Certificate), at the first meeting of the Company's Board of Directors following the 1999 Annual Meeting of Stockholders, the Board of Directors shall expand its size by two directors and appoint Joseph C. Manzinger and Richard M. Johnston (or such other designees of the Purchaser who shall be reasonably acceptable to the Company) (the "Purchaser Designees") to fill the vacancies created by such expansion. The Company further agrees, provided the Company has received Stockholder Approval and provided that the Purchaser then holds at least 33,750 shares of Preferred Stock of the Company, that the Company shall, subject to applicable law, use its reasonable best efforts to obtain the election of the Purchaser Designees at the next Annual Stockholder Meeting of the Company to serve until such person's successor has been duly appointed. In connection with their service on the Company's Board of Directors, the Purchaser Designees shall be su bject to and comply with the confidentiality provisions of the Purchaser under Section 8 of this Agreement. The Purchaser Designees shall also be subject to the same general conflicts-of-interest rules applicable to all other members of the Board of Directors and under such rules their access to information and participation in discussions may be reasonably restricted where a majority of non-interested directors deem a conflict or potential conflict to exist. At any time the Purchaser is no longer entitled to Board representation pursuant to this Section 7.1, then at the request of the Company, the Purchaser Designees shall immediately resign and shall immediately cease attending any meetings of the Board of Directors. 7.2 Stockholder Approval . The Company shall use its best efforts to obtain Stockholder Approval (as defined Section 6(h) of the Certificate) and to obtain approval by the Company's stockholders of the obligations of the Company under Section 7.1 of this Agreement at the Company's 1999 Annual Meeting of Stockholders to be held on or before June 2, 1999. Section 8 Confidential Information 8.1 Confidential Business Information . The Purchaser covenants and agrees that it shall maintain the confidentiality of all non-public information related to the business of the Company made available to it and/or any of its 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 Purchaser further covenants and agrees that it shall not disclose any Confidential Business Information to any person or entity without the prior written consent of the Company. The term "Purchaser" as used in this Section 8.1 includes all partners, officers, directors, affiliates, employees, attorneys, accountants and other agents and representatives of the Purchaser. Notwithstanding the above, Confidential Business Information shall not include (i) information known to the public generally, (ii) information known to the Purchaser from an independent source prior to the receipt of such information from the Company and (iii) information required to be disclosed by the Purchaser by court order or otherwise required by law, provided, however, that in the event of a required disclosure pursuant to this clause (iii), the Purchaser shall give the Company prompt written notice of any such requirement so that the Company may seek a protective order or other appropriate remedy. The Purchaser agrees that violation of this Section 8.1 would cause immediate and irreparable damage to the business of the Company, and consent to the entry of immediate and permanent injunctive relief for any violation hereof. Section 9 Miscellaneous 9.1 Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of Delaware. 9.2 Survival . The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Purchaser and the closing of the transactions contemplated hereby. 9.3 Successors and Assigns . Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto; provided, however, that the rights of the Purchaser to purchase the Shares and obtain the Warrants on such purchase shall not be assignable without the prior written consent of the Company. 9.4 Entire Agreement; Amendment . This Agreement and the other documents delivered pursuant hereto at each Closing constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that the Purchaser may, with the Company's prior written consent, waive, modify, or amend any provision hereof. 9.5 Notices, etc . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to the Purchaser, at such Purchaser's address, on the signature page of the Agreement, or at such other address as the Purchaser shall have furnished to the Company in writing, or (b) if to any other holder of any Shares, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Shares who has so furnished an address to the Company, or (c) if to the Company, one copy should be sent to its address set forth on the cover page of this Agreement and addressed to the attention of the Chief Executive Officer, or at such other address as the Company shall have furnished to the Purchaser. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. 9.6 Delays or Omissions . Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative. 9.7 California Corporate Securities Law . THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 9.8 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 9.9 Severability . In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 9.10 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. 9.11 Expenses . The Company and the Purchaser shall each bear their own fees, costs and expenses incurred on their behalf with respect to the agreement and the transactions contemplated hereby and any amendments or waiver thereto. [Signature Page Follows] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" SUPERCONDUCTOR TECHNOLOGIES INC. a Delaware corporation By: Name: Peter Thomas Title: Chief Executive Officer "PURCHASER" WILMINGTON SECURITIES, INC. By: Name: Andrew H. McQuarrie Title: Wilmington Securities, Inc. 824 Market Street, Suite 900 Wilmington, DE 19801 Attn: Andrew H. McQuarrie [Signature Page to Purchase Agreement] SUPERCONDUCTOR TECHNOLOGIES INC. 460 Ward Drive Suite F Santa Barbara, California 93111 SERIES C PREFERRED STOCK PURCHASE AGREEMENT March 5, 1999 EX-5 6 Second Amended and Restated Stockholders Agreement SUPERCONDUCTOR TECHNOLOGIES INC. SECOND AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT This Second Amended and Restated Stockholder Rights Agreement (the "Agreement") is made as of February 26, 1999 between Superconductor Technologies Inc., a Delaware corporation (the "Company"), the holders of the Company's Series A and A-1 Preferred Stock (the "Series A and A-1 Holders"), the holders of the Company's Series A-2 and A-3 Preferred Stock pursuant to the Exchange Agreement, dated as of February 26, 1999, (the "Exchange Agreement") and, upon the consummation of the Series C Preferred Stock financing, the holders of the Company's Series C Preferred Stock. The holders of the Company's Series A-2 and A-3 Preferred Stock, together with the purchasers of the Company's Series C Preferred Stock after the Closing (as defined in the Series C Preferred Stock Purchase Agreement) are, collectively, the "New Holders." RECITALS A. The Company and the Series A and A-1 Holders entered into that certain Amended and Restated Stockholder Rights Agreement, dated as of August 11, 1998 (the "Existing Agreement"), which established certain terms and conditions upon which the Company's Series A and A-1 Preferred Stock and certain warrants are held by such holders, as set forth more particularly in the Existing Agreement. B. In connection with the Exchange Agreement, the Company and the Series A and A-1 Holders have agreed, upon the terms and subject to the conditions contained therein, to exchange their shares of the Company's Series A and A-1 Preferred Stock and related warrants held by the Holders for shares of the Company's Series A-2 and A-3 Convertible Preferred Stock and related warrants that are convertible into the Conversion Stock (as defined below), upon the terms and subject to the limitations and conditions set forth in the Certificates of Designations, Rights, Preferences, Privileges and Restrictions with respect to the Series A-2 and A-3 Preferred Stock (the "Certificates of Designation"). C. To induce the Series A and A-1 Holders to execute and deliver the Exchange 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 statue (collectively, the "1933 Act"), and applicable state securities laws. D. Because the Company anticipates consummating an equity financing in the future with a proposed new Series C Preferred Stock, the Company desires to provide a further inducement to the potential purchasers to purchase the Series C Preferred Stock by establishing certain terms and conditions upon which such Series C Preferred Stock and related warrants would be held by such purchasers. E. The Company and the Series A and A-1 Holders desire to amend and restate the Existing Agreement in its entirety, as set forth herein, to make the New Holders party thereto. NOW, THEREFORE, the parties amend and restate the Existing Agreement in its entirety to read as follows: SECTION 1 Restrictions on Transferability of Securities; Compliance with Securities Act; Registration Rights 1.1 Restrictions on Transferability. The Preferred Stock, the Conversion Stock (as defined below) and the Warrants (as defined below) shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 1, which conditions are intended to ensure compliance with the provisions of the Securities Act (as defined below). The Holders will cause any proposed purchaser, assignee, transferee, or pledgee of any such securities held by the Holders to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Section 1. 1.2 Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Closing Date" shall mean, (i) as to the holders of Series A-2 and A-3 Preferred Stock, the date of the Exchange Agreement and (ii) as to the holders of Series C Preferred Stock, the date of the first purchase and sale of Series C Preferred Stock and issuance of warrants pursuant to the Series C Stock Purchase Agreement. "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Conversion Stock" means the Common Stock issued or issuable pursuant to conversion of the Preferred Stock and exercise of the Warrants. "Holder" shall mean (i) any New Holder holding Registrable Securities and (ii) any person holding Registrable Securities to whom the rights under this Section 1 have been transferred in accordance with Section 1.13 hereof. "Initiating Holders" shall mean New Holders in the aggregate of greater than 50% of the Registrable Securities. "Preferred Stock" shall, collectively, mean the Series A-2 and A-3 Preferred Stock issued pursuant to the Exchange Agreement and, after the Closing (as defined in the Series C Preferred Stock Purchase Agreement), the Series C Preferred Stock issued pursuant to the Series C Preferred Stock Purchase Agreement. "Registrable Securities" shall mean (i) the Conversion Stock, (ii) any Common Stock acquired pursuant to the exercise of the right of first refusal in Section 2 of this Agreement (including any shares issued by virtue of such shares upon any stock split, stock dividend, recapitalization or similar event), and (iii) any Common Stock of the Company issued or issuable in respect of the Conversion Stock upon any stock split, stock dividend, recapitalization or similar event, or any Common Stock otherwise issued or issuable in respect of the Conversion Stock; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or are, in the opinion of counsel for the Company, available for sale in a single transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" shall mean all expenses, except as otherwise stated below, incurred by the Company in complying with Sections 1.5 and 1.6 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company) and the reasonable fees and disbursements of one counsel for all Holders. "Restricted Securities" shall mean the securities of the Company required to bear the legend set forth in Section 1.3 hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders and, except as set forth above, all reasonable fees and disbursements of counsel for any Holder. "Warrants" shall mean, collectively, the warrants issued pursuant to the Exchange Agreement and the Series C Preferred Stock Purchase Agreement. 1.3 Restrictive Legend. Each certificate representing (i) the Preferred Stock, (ii) the Warrants, (iii) the Conversion Stock and (iv) any other securities issued in respect of the Preferred Stock or the Conversion Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable state securities laws): THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. Each New Holder and Holder consents to the Company making a notation on its records and giving instructions to any transfer agent of the Preferred Stock, the Warrants or the Conversion Stock in order to implement the restrictions on transfer established in this Section 1. 1.4 Restrictions on Transfer; Notice of Proposed Transfers. The holder of each certificate representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 1.4. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities (other than (i) a transfer not involving a change in beneficial ownership, (ii) in transactions involving the distribution without consideration of Restricted Securities by the Holder to any of its partners, or retired partners, or to the estate of any of its partners or retired partners, (iii) any transfer by any Holder to (A) any individual or entity controlled by, controlling, or under common control with, such Holder or (B) any individual or entity with respect to which such Holder (or any person controlled by, controlling, or under common control with, such Holder) has the power to direct investment decisions, or (iv) in transactions in compliance with Rule 144), and unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice to the Company of such holder's intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and shall be accompanied, at such holder's expense by either (i) an unqualified written opinion of legal counsel who shall be, and whose legal opinion shall be, reasonably satisfactory to the Company addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, or (ii) a "no action" letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company. Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 1.3 above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for such holder and the Company such legend is not required in order to establish compliance with any provision of the Securities Act. 1.5 Requested Registration. (a) Request for Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with respect to (1) at least fifty percent (50%) of the issued and outstanding Registrable Securities or (2) not less than that number of shares of Registrable Securities which would result in an anticipated aggregate offering price, net of underwriting discounts and commissions, greater than five million dollars ($5,000,000), the Company will: (i) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and (ii) as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company; Provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2.5: (A) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (B) Prior to September 26, 1999; (C) During the period starting with the date sixty (60) days prior to the Company's estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (D) After the Company has effected one (1) such registration pursuant to this subparagraph 1.5(a), and such registration has been declared or ordered effective; (E) If the Company shall furnish to such Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its stockholders for a registration statement to be filed in the near future, then the Company's obligation to use its best efforts to register, qualify or comply under this Section 1.5 shall be deferred for a period not to exceed one hundred eighty (180) days from the date of receipt of written request from the Initiating Holders; provided that the Company may not exercise this deferral right more than once per twelve (12) month period. Subject to the foregoing clauses (A) through (E), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable, after receipt of the request or requests of the Initiating Holders. (b) Underwriting. In the event that a registration pursuant to Section 1.5 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 1.5(a)(i). In such event, the right of any Holder to registration pursuant to Section 1.5 shall be conditioned upon such Holder's participation in the underwriting arrangements required by this Section 1.5, and the inclusion of such Holder's Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by a majority in interest of the Initiating Holders, but subject to the Company's reasonable approval. Notwithstanding any other provision of this Section 1.5, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement. No Registrable Securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration, and such Registrable Securities shall not be transferred in a public distribution prior to one hundred eighty (180) days after the effective date of such registration, or such other shorter period of time as the underwriters may require. 1.6 Company Registration. (a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Commission Rule 145 transaction, the Company will: (i) promptly give to each Holder written notice thereof; and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.6(a)(i). In such event the right of any Holder to registration pursuant to Section 1.6 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 1.6, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter and the Company may reduce the Registrable Securities to be included in such registration to the extent the underwriters deem necessary. The Company shall so advise all Holders and other holders distributing their securities through such underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holder at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or holder to the nearest 100 shares. If any Holder or holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to one hundred eighty (180) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require. (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.6 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. 1.7 Limitations on Subsequent Registration Rights. From and after the Closing Date, the Company shall not enter into any agreement granting any holder or prospective holder of any securities of the Company registration rights with respect to such securities unless (i) such new registration rights, including standoff obligations, are on a pari passu basis with those rights of the Holders hereunder, or (ii) such new registration rights, including standoff obligations, are subordinate to the registration rights granted Holders hereunder. 1.8 Expenses of Registration. All Registration Expenses incurred in connection with (i) one (1) registration pursuant to Section 1.5, (ii) all registrations pursuant to Section 1.6, shall be borne by the Company. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf of the Holders and all other Registration Expenses shall be borne by the Holders of such securities pro rata on the basis of the number of shares so registered. 1.9 Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Section 1, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will: (a) Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least one hundred eighty (180) days or until the distribution described in the Registration Statement has been completed; (b) Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (c) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statements as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions; and (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. 1.10 Indemnification. (a) The Company will indemnify each Holder, each of its officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 1, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), state securities law or any rule or regulation promulgated under such laws applicable to the Company in connection with any such registration, qualification or compliance, and within a reasonable period the Company will reimburse each such Holder, each of its officers and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder, controlling person or underwriter and stated to be specifically for use therein. (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and within a reasonable period will reimburse the Company, such Holders, such directors, officers, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein. (c) Each party entitled to indemnification under this Section 1.10 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1.10 unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnifying Party shall be liable for indemnification hereunder with respect to any settlement or consent to judgment, in connection with any claim or litigation to which these indemnification provisions apply, that has been entered into without the prior consent of the Indemnifying Party (which consent will not be unreasonably withheld). 1.11 Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 1.11. 1.12 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its best efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act; (b) Use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) So long as a Holder owns any Restricted Securities to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. 1.13 Transfer of Registration Rights. The rights to cause the Company to register securities granted Holders under Sections 1.5 and 1.6 may be assigned to a transferee or assignee reasonably acceptable to the Company in connection with any transfer or assignment of Registrable Securities by the Holder, provided that (a) such transfer may otherwise be effected in accordance with applicable securities laws and Section 1.3 and 1.4, and (b) such assignee or transferee acquires at least 100,000 shares of Registrable Securities. 1.14 Standoff Agreement. In connection with any public offering of the Company's securities, the Holder agrees, upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the underwriters; provided that the officers and directors of the Company who own stock of the Company also agree to such restrictions. 1.15 Termination of Registration Rights. The registration rights granted pursuant to Section 1 shall terminate as to each Holder at such time as all Registrable Securities held by such Holder may, in the opinion of counsel to the Company (which opinion shall be addressed and rendered to Holder), be sold within a given three month period pursuant to Rule 144 or any other applicable exemption that allows for a resale free of registration. SECTION 2 Right of First Refusal 2.1 Grant of Right of First Refusal. Subject to compliance with all applicable federal and state securities laws, the Company grants to the Holders the right of first refusal to purchase, pro rata, all or any part of New Securities (as defined in this Section 2) which the Company may, from time to time after the date of this Agreement, propose to sell and issue. A pro rata share, for purposes of this right of first refusal, is the ratio that the sum of the number of shares of Conversion Stock then held by a Purchaser bears to the total outstanding Common Stock of the Company (assuming conversion of all convertible securities and the exercise of all outstanding options and warrants). 2.2 Definition of New Securities. Except as set forth below, "New Securities" shall mean any shares of capital stock of the Company, including Common Stock and Preferred Stock, whether now authorized or not, and rights, options or warrants to purchase said shares of Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible into said shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, "New Securities" does not include (i) the Preferred Stock, the Warrants or the Conversion Stock, (ii) securities offered to the public generally pursuant to a registration statement under the Securities Act, (iii) securities issued pursuant to the acquisition of another corporation by the Company by merger, purchase of all or substantially all of the assets or other reorganization, (iv) securities issuable upon exercise or conversion of currently outstanding securities, (v) securities issued in connection with any stock split, stock dividend or recapitalization by the Company, (vi) securities issued to the Company's employees, officers, directors, and consultants pursuant to any arrangement approved by the Board of Directors of the Company, and (vii) securities issued to research or development collaborators or issued to banks or other institutional lenders or lessors in connection with capital asset leases or borrowings for the acquisition of capital assets, pursuant to any arrangement approved by the Board of Directors of the Company (including securities issued upon exercise or conversion of any such securities). 2.3 Notice of Intent to Issue New Securities; Notice Period. In the event the Company proposes to undertake an issuance of New Securities, it shall give each Purchaser written notice of its intention, describing the type of New Securities and the price and terms upon which the Company proposes to issue the same. Each Purchaser shall have 15 days from the date of receipt of any such notice to agree to purchase up to its pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. 2.4 Offers to Third Parties. In the event a Purchaser fails to exercise the right of first refusal within said 15 day period, the Company shall have 90 days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within 60 days from the date of said agreement) to sell the New Securities not elected to be purchased by the Purchaser at the price and upon the terms no more favorable to the Holders of such securities than specified in the Company's notice. In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities in accordance with the foregoing within 60 days from the date of said agreement, the Company shall not thereafter issue or sell any New Securities without first offering such securities in the manner provided above. 2.5 Assignment. The right of first refusal granted under this Agreement is not assignable except by each of such Holders to any affiliated partnership or corporation or to a partner or retired partner of such S Purchaser or affiliated partnership or corporation. 2.6 Termination of Right of First Refusal. The right of first refusal granted under this Agreement shall terminate upon the first to occur of the following: (i) if a Purchaser at any time holds less than 500,000 shares of Conversion Stock (appropriately adjusted for any stock split, stock dividend or any other recapitalization), the right of first refusal shall terminate as to such Purchaser; (ii) if a Purchaser converts or has at any time converted all of the Preferred Stock owned by such Purchaser, the right of first refusal shall terminate as to such Purchaser; (iii) the liquidation, dissolution or indefinite cessation of business operations of the Company; or (iv) the execution by the Company of a general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of the property and assets of the Company. SECTION 3 Miscellaneous 3.1 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of California. 3.2 Survival. The covenants and agreements made herein shall survive any investigation made by the Holders and the closing of the transactions contemplated hereby. 3.3 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 3.4 Entire Agreement; Amendment. This Agreement, the Series A Agreement, the Series A-1 Agreement and the other documents delivered pursuant hereto on the Closing Date for each of the Series A Agreement and the Series A-1 Agreement constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that holders of a majority of the issued or outstanding shares of the Preferred Stock may, with the Company's prior written consent, waive, modify or amend on behalf of all holders, any provisions hereof. 3.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a Purchaser, at such Purchaser's address, as shown on the stock records of the Company, or at such other address as such Purchaser shall have furnished to the Company in writing, or (b) if to any other holder of Preferred Stock, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Preferred Stock who has so furnished an address to the Company, or (c) if to the Company, one copy should be sent to its address set forth on the cover page of this Agreement and addressed to the attention of the Chief Executive Officer, or at such other address as the Company shall have furnished to the Holders. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. 3.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such nondefaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative. 3.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 3.8 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 3.9 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. [Signature Pages Follow] The foregoing agreement is hereby executed as of the date first above written. "COMPANY" SUPERCONDUCTOR TECHNOLOGIES INC. a Delaware corporation By: Name: Peter Thomas, Title: Chief Executive Officer "SERIES A HOLDER" WILMINGTON SECURITIES, INC. By: Name: Andrew H. McQuarrie Title: "SERIES A-1 HOLDER" WILMINGTON SECURITIES, INC. By: Name: Andrew H. McQuarrie Title: "SERIES A-2 HOLDER" WILMINGTON SECURITIES, INC. By: Name: Andrew H. McQuarrie Title: "SERIES A-3 HOLDER" WILMINGTON SECURITIES, INC. By: Name: Andrew H. McQuarrie Title: "SERIES C HOLDER" By: Name: Andrew H. McQuarrie Title: EX-6 7 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This Amended and Restated Registration Rights Agreement ("Agreement"), dated as of February 26, 1999, 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") pursuant to the Exchange Agreement by and among the parties hereto and the holders of the Company's Series A-2 and Series A-3 Preferred Stock of even date herewith (the "Exchange Agreement"). BACKGROUND A. The Company and the Initial Investors entered into that certain Registration Rights Agreement dated as of September 2, 1998 (the "Existing Agreement"), which established certain terms and conditions upon which the Company's Series B Preferred Stock and certain warrants are held by the Initial Investors, as set forth more particularly in the Existing Agreement. B. In connection with the Exchange Agreement, the Company and the Initial Investors have agreed, upon the terms and subject to the conditions contained therein, to exchange the shares of the Company's Series B Convertible Preferred Stock and related warrants held by the Initial Investors for shares of the Company's Series B-1 Convertible Preferred Stock (the "Preferred Stock") and related warrants 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"). C. To induce the Initial Investors to execute and deliver the Exchange 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; D. The Company and the Initial Investors desire to amend and restate the Existing Agreement in its entirety, as set forth herein, to make the holders of the Company's Series B-1 Preferred Stock party thereto. NOW, THEREFORE, the parties amend and restate the Existing Agreemenet in its entirety to read 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 (the "Securities Purchase Agreement") dated as of September 2, 1999 entered into between the Company and the purchasers identified therein. 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 Exchange 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 Allowed Delay. The Company shall pay to each holder of the Preferred Stock or Registerable Securities an amount equal to the Purchase Price under and as defined in the Securities Purchase Agreement paid in respect of such Preferred Stock (and, in the case of holders of Registerable Securities, the purchase price for the Preferred Stock from which such Registerable Securities were converted) ("Aggregate Share Price") multiplied by the Applicable Percentage (as defined below) multiplied by the number of months (without duplication), prorated for partial months during (1) which the events described in clauses (i) or (ii) above have occurred and are continuing, (2) sales cannot be made pursuant to the Registration Statement after the Registration Statement has been declared effective (including, without limitation, when sales cannot be made by reason of the Company's failure to properly supplement or amend the prospectus included therein in accordance with the terms of this Agreement, but excluding any days during an Allowed Delay (as defined in Section 3(f)), or (3) that the Common Stock is not listed or included for quotation on the Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the Registration Statement has been declared effective. The term "Applicable Percentage" means 2 hundredths (.02). Such amounts shall be paid in cash or, at the Company=s option, paid in shares of Preferred Stock, calculated based on the Purchase Price applicable to such shares and thereafter be convertible into Common Stock at the "Conversion Price" (as defined in the Certificate of Designation) in accordance with the terms of the Preferred Stock. Any shares of Common Stock issued upon conversion of such amounts shall be Registrable Securities. Payments of cash pursuant hereto shall be made within ten (10) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, interim payments shall be made for each such thirty (30) day period. c. Piggy-Back Registrations. Subject to the last sentence of this Section 2(c), if at any time prior to the expiration of the Registration Period (as hereinafter defined) the Company shall file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), the Company shall send to each Investor who is entitled to registration rights under this Section 2(c) written notice of such determination and, if within twenty (20) days after the effective date of such notice, such Investor shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Investor requests to be registered, except that if, in connection with any underwritten public offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which such Investor has requested inclusion hereunder as the underwriter shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Investors seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Investors; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement other than holders of securities entitled to inclusion of their securities in such Registration Statement by reason of demand registration rights. No right to registration of Registrable Securities under this Section 2(c) shall be construed to limit any registration required under Section 2(a) hereof. If an offering in connection with which an Investor is entitled to registration under this Section 2(c) is an underwritten offering, then each Investor whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. Notwithstanding anything to the contrary set forth herein, the registration rights of the Investors pursuant to this Section 2(c) shall only be available in the event the Company fails to timely file, obtain effectiveness or maintain effectiveness of the Registration Statement to be filed pursuant to Section 2(a) in accordance with the terms of this Agreement. d. Eligibility for Form S-3. The Company represents and warrants that it meets the registrant eligibility and transaction requirements for the use of Form S-3 for registration of the sale by the Initial Investors and any other Investors of the Registrable Securities and the Company shall file all reports required to be filed by the Company with the SEC in a timely manner so as to maintain such eligibility for the use of Form S-3. 3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the Registrable Securities, the Company shall have the following obligations: a. The Company shall prepare promptly, and file with the SEC not later than sixty (60) days after the Closing Date, a Registration Statement with respect to the number of Registrable Securities provided in Section 2(a), and thereafter use its best efforts to cause such Registration Statement relating to Registrable Securities to become effective as soon as possible after the filing thereof, and keep the Registration Statement effective pursuant to Rule 415 at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold and (ii) the date on which the Registrable Securities (in the opinion of counsel to the Initial Investors) may be immediately sold without restriction (including without limitation as to volume by each holder thereof) without registration under the 1933 Act (the "Registration Period"). b. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement. In the event the number of shares available under a Registration Statement filed pursuant to this Agreement is insufficient to cover all of the Registrable Securities issued or issuable upon conversion of the Preferred Stock and exercise of the Warrants, the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefore, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within twenty (20) business days after the necessity therefor arises (based on the market price of the Common Stock and other relevant factors on which the Company reasonably elects to rely). The Company shall use its commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. The provisions of Section 2(c) above shall be applicable with respect to such obligation, with the sixty (60) or one hundred twenty (120) days running from the day after the date on which the Company reasonably first determines (or reasonably should have determined) the need therefor. c. The Company shall furnish to each Investor whose Registrable Securities are included in the Registration Statement (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each 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 1 and an opinion of such counsel in the form attached hereto as Exhibit 2. p. Except for registration rights previously disclosed to the Buyers prior to the execution of this Agreement, from and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company to include any of their securities in any Registration Statement under Section 2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof without the consent of the holders of a majority-in-interest of the Registrable Securities. q. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investors of Registrable Securities pursuant to the Registration Statement. 4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the Registrable Securities, the Investors shall have the following obligations: a. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least three (3) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Investor of the information the Company requires from each such Investor. 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. [Signature Pages Follow]] 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: Henry L. Hillman Trust Under Agreement of Trust dated November 18, 1985 By: C.G. Grefenstette, Trustee Juliet Lea Hillman Simonds Trust under Agreement of Trust dated December 30, 1976 for Children of Juliet Lea Hillman Simonds By: Thomas G. Bigley, Trustee By: C.G. Grefenstette, Trustee Audrey Hillman Fisher Trust under Agreement of Trust dated December 30, 1976 for Children of Audrey Hillman Fisher By: Thomas G. Bigley, Trustee By: C.G. Grefenstette, Trustee Henry Lea Hillman, Jr. Trust under Agreement of Trust dated December 30, 1976 for Children of Henry Lea Hillman, Jr. By: Thomas G. Bigley, Trustee By: C.G. Grefenstette, Trustee William Talbott Hillman Trust under Agreement of Trust dated December 30, 1976 for Children of William Talbott Hillman By: Thomas G. Bigley, Trustee By: C.G. Grefenstette, Trustee -----END PRIVACY-ENHANCED MESSAGE-----