-----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, Kcyz8yIVhTYuqcni5HhiN86CLuPk6FGlfkgYXl6psAJYGIhcYtbdyyzc65epg+iI CXA6oLMQujPEh5t0tySlTw== 0001036288-02-000008.txt : 20021018 0001036288-02-000008.hdr.sgml : 20021018 20021018142957 ACCESSION NUMBER: 0001036288-02-000008 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20021018 GROUP MEMBERS: C. G. GREFENSTETTE GROUP MEMBERS: ELSIE HILLIARD HILLMAN GROUP MEMBERS: HENRY L. HILLMAN GROUP MEMBERS: LAWRENCE M. WAGNER GROUP MEMBERS: THE AHF 1976 TRUST GROUP MEMBERS: THE HILLMAN COMPANY GROUP MEMBERS: THE HLH 1985 TRUST GROUP MEMBERS: THE HLH JR. 1976 TRUST GROUP MEMBERS: THE JLHS 1976 TRUST GROUP MEMBERS: THE WTH 1976 TRUST GROUP MEMBERS: WILMINGTON EQUITIES, INC. 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: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 770153076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42893 FILM NUMBER: 02792520 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 IRS NUMBER: 251011286 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 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 BUSINESS PHONE: 4122812620 MAIL ADDRESS: STREET 1: 310 GRANT ST STREET 2: 1900 GRANT BUILDING CITY: PITTSBURGH STATE: PA ZIP: 15219 SC 13D/A 1 supercon.txt SCHEDULE 13D AMENDMENT NO. 10 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 SCHEDULE 13D Amendment No. 10 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) October 10, 2002 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 8 Shared Voting Power 6,183,472 9. Sole Dispositive Power 10 Shared Dispositive Power 6,183,472 11 Aggregate Amount Beneficially Owned by Each Reporting Person 6,183,472 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 24.5% 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 LAWRENCE M. WAGNER, Trustee for Various Trusts I.D. ####-##-#### 2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ] 3 SEC Use Only 4 Source of Funds OO 5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization U.S. Number of Shares Beneficially Owned by Each Reporting Person With 7 Sole Voting Power 8 Shared Voting Power 485,788 9. Sole Dispositive Power 10 Shared Dispositive Power 485,788 11 Aggregate Amount Beneficially Owned by Each Reporting Person 485,788 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 1.9% 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 C. G. GREFENSTETTE and L. M. WAGNER, 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 121,447 8 Shared Voting Power 9. Sole Dispositive Power 121,447 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 121,447 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .5% 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 C. G. GREFENSTETTE and L. M. WAGNER, 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 121,447 8 Shared Voting Power 9. Sole Dispositive Power 121,447 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 121,447 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .5% 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 C. G. GREFENSTETTE and L. M. WAGNER, 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 121,447 8 Shared Voting Power 9. Sole Dispositive Power 121,447 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 121,447 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .5% 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 C. G. GREFENSTETTE and L. M. WAGNER, 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 121,447 8 Shared Voting Power 9. Sole Dispositive Power 121,447 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 121,447 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) .5% 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 5,697,684 9 Sole Dispositive Power 10 Shared Dispositive Power 5,697,684 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,697,684 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 22.6% 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 5,697,684 9 Sole Dispositive Power 10 Shared Dispositive Power 5,697,684 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,697,684 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 22.6% 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, 1985 I.D. #18-2145466 2 Check the Appropriate Box if Member of a Group (a) [ X ] (b) [ ] 3 SEC Use Only 4 Source of Funds OO 5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Pennsylvania Number of Shares Beneficially Owned by Each Reporting Person With 7 Sole Voting Power 464,340 8 Shared Voting Power 5,233,344 9 Sole Dispositive Power 464,340 10 Shared Dispositive Power 5,233,344 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,697,684 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 22.6% 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 5,233,344 9 Sole Dispositive Power 10 Shared Dispositive Power 5,233,344 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,233,344 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 20.8% 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 5,233,344 9 Sole Dispositive Power 10 Shared Dispositive Power 5,233,344 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,233,344 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 20.8% 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 EQUITIES, INC. I.D. #51-0411204 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 5,233,344 9 Sole Dispositive Power 10 Shared Dispositive Power 5,233,344 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,233,344 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 20.8% 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 5,233,344 8 Shared Voting Power 9 Sole Dispositive Power 5,233,344 10 Shared Dispositive Power 11 Aggregate Amount Beneficially Owned by Each Reporting Person 5,233,344 12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares 13 Percent of Class Represented by Amount in Row (11) 20.8% 14 Type of Reporting Person CO SCHEDULE 13D AMENDMENT NO. 10 This statement ("Statement") constitutes Amendment No. 10 to Schedule 13D filed with the Securities and Exchange Commission (the "Commission") on February (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. ("Wilmington"), a wholly-owned subsidiary of Wilmington Equities, Inc. Wilmington Equities, 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"). C. G. Grefenstette and L. M. Wagner, Trustees Under Agreement of Trust Dated 12/30/76 for the Children of Juliet Lea Hillman Simonds (the " JLHS 1976 Trust"). C. G. Grefenstette and L. M. Wagner, Trustees Under Agreement of Trust Dated 12/30/76 for the Children of Audrey Hillman Fisher (the "AHF 1976 Trust"). C. G. Grefenstette and L. M. Wagner, Trustees Under Agreement of Trust Dated 12/30/76 for the Children of Henry Lea Hillman, Jr. (the "HLH Jr. 1976 Trust") C. G. Grefenstette and L. M. Wagner, Trustees Under Agreement of Trust Dated 12/30/76 for the Children of William Talbott Hillman (the "WTH 1976 Trust"). C. G. Grefenstette Lawrence M. Wagner 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, Wilmington Equities, 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 Lawrence M. Wagner 2000 Grant Building 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 Lawrence M. Wagner 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, Wilmington Equities, 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, Lawrence M. Wagner, 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 October 10, 2002, the Issuer entered into an Agreement and Plan of Merger (the "Merger Agreement") with Conductus, Inc., a Delaware corporation ("Conductus") and STI Acquisition, Inc., a wholly-owned subsidiary of the Issuer ("Merger Sub"). Pursuant to the Merger Agreement, and subject to the conditions set forth therein, Merger Sub will be merged with and into Conductus, as a result of which Conductus will become a wholly-owned subsidiary of the Issuer (the "Merger"). The obligations of the Issuer, Merger Sub and Conductus to consummate the Merger are subject to the condition, among others, that the private placement of securities of the Issuer contemplated by the Securities Purchase Agreement described below have been completed with gross proceeds of not less than $15,000,000 to the Issuer. As an inducement to Conductus to enter into the Merger Agreement, Wilmington, 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 "Hillman Stockholders") entered into a Voting Agreement with Conductus. Pursuant to the Voting Agreement, each of the Hillman Stockholders agrees that, so long as the Voting Agreement is in effect, at any meeting of the stockholders of the Issuer, and in any action by written consent of the stockholders of Issuer, such Hillman Stockholder will vote all shares of the Issuer owned by it: (i) in favor of the approval of the Merger and adoption of the Merger Agreement and any matter that could reasonably be expected to facilitate the Merger; (ii) against any action or agreement that would result in a breach of any representation, warranty, covenant or other obligation or agreement of the Issuer under the Merger Agreement; and (iii) against any action or agreement that would cause any condition to the obligations of the Issuer, Merger Sub or Conductus to consummate the Merger to not be satisfied. Further, each Hillman Stockholder agrees, so long as the Voting Agreement is in effect, not to transfer or subject to any encumbrances any Common Stock of the Issuer owned by such Hillman Stockholder or to transfer voting rights thereto. The Voting Agreement will terminate on the earlier of (i) the date on which the Merger Agreement is terminated or (ii) the effective time of the Merger. Also in connection with the Merger Agreement, the Hillman Stockholders and certain other unaffiliated investors (collectively the "Investors") entered into a Securities Purchase Agreement with the Issuer (the "Securities Purchase Agreement"). Pursuant to the Securities Purchase Agreement, and subject to the conditions set forth therein, the Investors severally agree to purchase Common Stock and Warrants to purchase Common Stock of the Issuer for an aggregate consideration of approximately $15,000,000 in cash. The Issuer may add additional investors to the Securities Purchase Agreement so long as the aggregate of all sales to investors thereunder does not exceed $20,000,000. At the closing under the Securities Purchase Agreement, which will be contemporaneous with the closing date of the Merger (the "Closing Date"), each of the Hillman Stockholders will purchase securities of the Issuer in the amounts and for the consideration set forth below: Name Consideration Number of Shares of Number of Warrants Common Stock (1) WSI $2,116,500 2,227,895 556,974 Henry L. Hillman Trust $187,500 197,368 49,342 JLHS 1976 Trust $49,000 51,579 12,895 AHF 1976 Trust $49,000 51,579 12,895 HLH Jr. 1976 Trust $49,000 51,579 12,895 WTH 1976 Trust $49,000 51,579 12,895
(1) Each Warrant will entitle the holder thereof, during the period commencing 181 days after the Closing Date and ending five (5) years after the Closing Date, to purchase one (1) share of Common Stock of the Issuer for a price of $1.19. If, at any time after the date which is thirty (30) months following the effective date of the Issuer's registration statement registering the Common Stock issuable upon exercise of the Warrants, the average closing bid price of the Issuer's Common Stock for ten (10) consecutive trading days exceeds $1.19, and provided all such shares are registered for resale pursuant to an effective registration statement, the Issuer may redeem the Warrants at $0.10 per warrant. All Warrants must be redeemed if any are redeemed. The obligations of the Investors under the Securities Purchase Agreement are subject to the condition, among others, that the Merger shall have been consummated. The Securities Purchase Agreement shall terminate on February 15, 2003 if the Merger closing has not occurred on or before such date. At the closing the Securities Purchase Agreement, the Investors and the Issuer will enter into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Issuer will agree to prepare and file a registration statement on Form S-3 with the Securities and Exchange Commission, within thirty (30) days following the Closing Date, so as to permit a public offering and resale by the Investors of the Common Stock purchased by them under the Securities Purchase Agreement as well as the Common Stock purchasable upon exercise of the Warrants. The Issuer will agree to use its best efforts to cause such registration statement to become effective within ninety (90) days from the Closing Date. Item 5. Interest in Securities of the Issuer (a) Beneficial Ownership 5,233,344 shares of Common Stock are owned of record and beneficially by Wilmington. 464,340 shares of Common Stock are owned of record and beneficially by the Henry L. Hillman Trust. 121,447 shares of Common Stock are owned of record and beneficially by the JLHS 1976 Trust. 121,447 shares of Common Stock are owned of record and beneficially by the AHF 1976 Trust. 121,447 shares of Common Stock are owned of record and beneficially by the HLH Jr. 1976 Trust. 121,447 shares of Common Stock are owned of record and beneficially by the WTH 1976 Trust. (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, Wilmington Equities, Inc., 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 5,232,769 shares of Common Stock held beneficially by Wilmington. (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 464,340 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 C. G. Grefenstette and L. M. Wagner may be deemed to share voting and disposition power regarding 485,788 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 The information set forth in Item 4 of this Schedule is incorporated herein by this reference. Other than as disclosed in this Schedule, as set forth in or contemplated by the Merger Agreement, the Voting Agreement or the Securities Purchase Agreement or as set forth in the Third Amended and Restated Stockholders Agreement dated as of June 24, 1999 among the Hillman Stockholders, certain other unaffiliated investors and the Issuer, filed as an exhibit to Amendment No. 7 to this Schedule, there are no contracts, arrangements, understandings or relationships among the Registrants and between such persons and any person with respect to the transfer or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits The following documents are filed as exhibits: 1. Information concerning officers and directors of reporting persons and certain affiliates thereof. 2. Agreement and Plan of Merger dated as of October 10, 2002 among Superconductor Technologies, Inc., Merger Sub, and Conductus Corporation. 3. Voting Agreement dated as of October 10, 2002 among Wilmington, the Henry L. Hillman Trust, the JLHS 1976 Trust, the AHF 1976 Trust, the HLH Jr. 1976 Trust and the WTH 1976 Trust. 4. Securities Purchase Agreement dated as of October 10, 2002 among Superconductor Technologies, Inc. and the Investors set forth on the signature pages thereto. 5. Form of Registration Rights Agreement to be executed at closing among Superconductor Technologies, Inc. and the Investors set forth on the signature pages thereto. 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, President WILMINGTON SECURITIES, INC. /s/ Andrew H. McQuarrie By _________________________________________ Andrew H. McQuarrie, 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 C. G. GREFENSTETTE AND L. M. WAGNER, 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/ C. G. Grefenstette ____________________________________________ C. G. Grefenstette, Trustee /s/ L. M. Wagner ____________________________________________ L. M. Wagner, Trustee /s/ C. G. Grefenstette ____________________________________________ C. G. Grefenstette /s/ L. M. Wagner ____________________________________________ L. M. Wagner /s/ Henry L. Hillman ____________________________________________ Henry L. Hillman /s/ Elsie Hilliard Hillman ____________________________________________ Elsie Hilliard Hillman October 10, 2002 Date EX-3 2 voting.txt VOTING AGREEMENT EXHIBIT 3 VOTING AGREEMENT FOR CERTAIN STOCKHOLDERS OF SUPERCONDUCTOR TECHNOLOGIES INC. This VOTING AGREEMENT (the "Voting Agreement") is entered into as of October 10, 2002, by and between Conductus, Inc., a Delaware corporation ("Company"), and each of the parties that are signatories hereto ("Stockholders"). Recitals A. Company and Superconductor Technologies Inc., a Delaware corporation (the "Parent"), are entering into an Agreement and Plan of Merger dated as of October 9, 2002 (the "Merger Agreement") which provides (subject to the conditions set forth therein) for the merger of a wholly owned subsidiary of Parent with and into the Company (the "Merger"). Capitalized terms not otherwise defined in this Voting Agreement shall have the meanings given to them in the Merger Agreement. B. In order to induce Company to enter into the Merger Agreement, each Stockholder, solely in his, her or its capacity as a stockholder of Parent, is entering into this Voting Agreement. Agreement Each Stockholder, intending to be legally bound, severally agrees on behalf of itself as follows: 1. Voting Of Shares. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date (as defined in Section 6), at any meeting of stockholders of Parent, however called, and in any action by written consent of the stockholders of Parent, Stockholder shall vote the Subject Securities (as defined in Section 6) or cause the Subject Securities to be voted (to the extent such securities are entitled to be voted): 1.1 in favor of the approval of the Merger and adoption of the Merger Agreement and any matter that could reasonably be expected to facilitate the Merger; 1.2 against any action or agreement that would result in a breach of any representation, warranty, covenant or other obligation or agreement of Parent under the Merger Agreement; and 1.3 against any action or agreement that would cause any provision contained in Article VII of the Merger Agreement to not be satisfied. 2. Transfer of Subject Securities. 2.1 Transfer of Subject Securities. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date, Stockholder shall not (a) cause or permit any Transfer of any of the Subject Securities to be effected; (b) tender any of the Subject Securities to any Person or (c) create or permit to exist any Encumbrance with respect to any Subject Securities (other than Encumbrances which do not affect, directly or indirectly, the right of Buyer to vote the Subject Securities as provided in this Voting Agreement). 2.2 Transfer of Voting Rights. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date, Stockholder shall ensure that: (a) none of the Subject Securities are deposited into a voting trust; and (b) no proxy is granted, and no voting agreement or similar agreement is entered into, with respect to any of the Subject Securities, other than proxies solicited by Parent in connection with the Merger, which are not inconsistent with Sections 1.1 through 1.3 above. 3. Representations and Warranties of Stockholder. Each Stockholder hereby represents and warrants severally (and not jointly) to Company as follows: 3.1 Authorization, etc. Stockholder has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Voting Agreement and to perform its obligations under this Voting Agreement. This Voting Agreement has been duly executed and delivered by Stockholder and constitute legal, valid and binding obligations of Stockholder, enforceable against Stockholder in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 3.2 Conflicts or Consents. (a) The execution and delivery of this Voting Agreement by Stockholder does not, and the performance of this Voting Agreement by Stockholder will not: (i) conflict with or violate any law, rule, regulation, order, decree or judgment applicable to Stockholder or by which it or any of its properties is or may be bound or affected; or (ii) result in or constitute (with or without notice or lapse of time) any breach of or default under, or give to any other Person (with or without notice or lapse of time) any right of termination, amendment, acceleration or cancellation of, or result (with or without notice or lapse of time) in the creation of any Encumbrance or restriction on any of the Subject Securities pursuant to, any contract to which Stockholder is a party or by which Stockholder or any of his affiliates or properties is or may be bound or affected. (b) The execution and delivery of this Voting Agreement by Stockholder does not, and the performance of this Voting Agreement by Stockholder will not, require any consent or approval of any Person. 3.3 Title to Securities. As of the date of this Voting Agreement: (a) Stockholder holds of record (free and clear of any Encumbrances or restrictions except as specifically disclosed on the signature page of this Voting Agreement) the number of outstanding shares of Parent Common Stock set forth under the heading "Shares Held of Record" on the signature page of this Voting Agreement; (b) Stockholder holds (free and clear of any Encumbrances or restrictions except as specifically disclosed on the signature page of this Voting Agreement) the options, warrants and other rights to acquire shares of Parent Common Stock set forth under the heading "Options, Warrants and Other Rights" on the signature page of this Voting Agreement; (c) Stockholder Owns the additional securities of Parent set forth under the heading "Additional Securities Beneficially Owned" on the signature page of this Voting Agreement; and (d) Stockholder does not directly or indirectly Own any shares of Parent Common Stock or other securities of Parent, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of Parent Common Stock or other securities of Parent, other than the shares and options, warrants and other rights set forth on the signature page of this Voting Agreement and other than as contemplated by the Securities Purchase Agreement. 4. Representations and Warranties of Company. Company hereby represents and warrants to each Stockholder as follows: 4.1 Authorization, etc. Company has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Voting Agreement. This Voting Agreement has been duly executed and delivered by Company, enforceable against Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 4.2 No Conflicts or Consents. (a) The execution and delivery of this Voting Agreement by Company does not: (i) conflict with or violate any law, rule, regulation, order, decree or judgment applicable to Company or by which it or any of its properties is or may be bound or affected; or (ii) result in or constitute (with or without notice or lapse of time) any breach of or default under, or give to any other Person (with or without notice or lapse of time) any right of termination, amendment, acceleration or cancellation of any contract to which Company is a party or by which Company or any of its affiliates or properties is or may be bound or affected. (b) The execution and delivery of this Voting Agreement by Company does not require any consent or approval of any Person. 5. Miscellaneous. 5.1 Survival of Representations, Warranties and Agreements. All representations, warranties, covenants and agreements made by Stockholder in this Voting Agreement shall survive until the Expiration Date. 5.2 Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Voting Agreement shall be paid solely by the party incurring such costs and expenses. 5.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or if sent by overnight courier or similar means or sent by facsimile with confirmation of receipt of transmission, to the parties as follows: if to Company: Conductus, Inc. 969 West Maude Avenue Sunnyvale, CA 94085 Facsimile No.: (408) 523-9999 Attention: Charles E. Shalvoy with a copy to: Orrick, Herrington & Sutcliffe LLP 400 Sansome Street San Francisco, CA 94111 Facsimile No.: 415-773-5759 Attention: Richard S. Grey if to the Stockholders: at the address set forth below Stockholder's signature on the signature page of this Voting Agreement with a copy to: Parent at the address set forth in the Merger Agreement. Any such notice shall be effective (a) if delivered personally, when received, (b) if sent by overnight courier, when receipted for, and (d) if sent by facsimile, when confirmation of receipt upon receipt of transmission. 5.4 Severability. In case any one or more of the provisions contained in this Voting Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a party to this Voting Agreement, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained in this Voting Agreement shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 5.5 Agreement. This Voting Agreement and the documents and instruments referred to in this Voting Agreement embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained in this Voting Agreement. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to in this Voting Agreement including the exhibits and the documents and instruments referred to in this Voting Agreement. 5.6 Assignment; Binding Effect. Neither this Voting Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties without the prior written consent of the other parties. This Voting Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. This Voting Agreement is not intended to confer any rights or remedies upon any Person other than the parties. 5.7 Specific Performance. The parties agree that irreparable damage would occur in the event that any provision of this Voting Agreement was, or is, not performed in accordance with its specific terms or was, or is, otherwise breached. Stockholder agrees that, in the event of any breach or threatened breach by Stockholder of any covenant or obligation contained in this Voting Agreement, Buyer shall be entitled (in addition to any other remedy that may be available to it, including monetary damages) to (a) a decree or order of specific performance to enforce the observance and performance of such covenant or obligation, and (b) an injunction restraining such breach or threatened breach. Stockholder further agrees that neither Buyer nor any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 0, and Stockholder irrevocably waives any right he may have to require the obtaining, furnishing or posting of any such bond or similar instrument. 5.8 Counterparts. This Voting Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 5.9 Consent and Waiver. Stockholder hereby gives any consents or waivers that are required for the consummation of the Merger or the entering into of the Merger Agreement under the terms of any agreement to which Stockholder is a party or pursuant to any other rights Stockholder may have to consent to or approve the consummation of the Merger or the entering into of the Merger Agreement. 6. Definitions. For purposes of this Voting Agreement: 6.1 "Expiration Date" shall mean the earlier of (i) the date upon which the Merger Agreement is terminated, or (ii) the Effective Time. 6.2 Stockholder shall be deemed to "Own" or to have acquired "Ownership" of a security if Stockholder is the: (i) record owner of such security; or (ii) "beneficial owner" (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of such security; provided, however, that Stockholder shall not be deemed to Own a security solely because of Stockholder's status as an executive officer, director, partner or member of a Person that owns such security. 6.3 "Subject Securities" shall mean: (i) all securities of Parent (including all shares of Parent Common Stock and all options, warrants and other rights to acquire shares of Parent Common Stock) Owned by Stockholder as of the date of this Agreement; and (ii) all additional securities of the Company (including all additional shares of Parent Common Stock and all additional options, warrants and other rights to acquire shares of Parent Common Stock) of which Stockholder acquires Ownership during the period from the date of this Agreement through the Expiration Date. 6.4 A Person shall be deemed to have effected a "Transfer" of a security if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers or disposes of such security or any interest in such security; (ii) enters into an agreement or commitment contemplating the possible sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest therein; or (iii) reduces such Person's beneficial ownership interest in or risk relating to any such security. IN WITNESS WHEREOF, Company and Stockholder have caused this Voting Agreement to be executed as of the date first written above. COMPANY CONDUCTUS, INC. _______________________________________ Signature _______________________________________ Name _______________________________________ Title Stockholders Address for Notice: WILMINGTON SECURITIES, INC. Wilmington Securities, Inc. 824 Market Street, Suite 900 Wilmington, DE 19801 By ____________________________________ Attn: Andrew H. McQuarrie Andrew H. McQuarrie, President Address for Notice: HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND C. G. c/o Maurice J. White GREFENSTETTE, TRUSTEES OF THE HENRY L. HILLMAN TRUST The Hillman Company U/A/T DATED NOVEMBER 18, 1985 1800 Grant Building Pittsburgh, PA 15219 By ____________________________________ C. G. Grefenstette, Trustee Address for Notice: C. G. GREFENSTETTE AND L. M. WAGNER, TRUSTEES U/A/T c/o Maurice J. White DATED DECEMBER 30, 1976 FOR THE CHILDREN OF JULIET LEA The Hillman Company HILLMAN SIMONDS 1800 Grant Building Pittsburgh, PA 15219 By ____________________________________ C. G. Grefenstette, Trustee By ____________________________________ L. M. Wagner, Trustee Address for Notice: C. G. GREFENSTETTE AND L. M. WAGNER, TRUSTEES U/A/T c/o Maurice J. White DATED DECEMBER 30, 1976 FOR THE CHILDREN OF AUDREY The Hillman Company HILLMAN FISHER 1800 Grant Building Pittsburgh, PA 15219 By ____________________________________ C. G. Grefenstette, Trustee By ____________________________________ L. M. Wagner, Trustee Address for Notice: C. G. GREFENSTETTE AND L. M. WAGNER, TRUSTEES U/A/T c/o Maurice J. White DATED DECEMBER 30, 1976 FOR THE CHILDREN OF HENRY LEA The Hillman Company HILLMAN, JR. 1800 Grant Building Pittsburgh, PA 15219 By ____________________________________ C. G. Grefenstette, Trustee By ____________________________________ L. M. Wagner, Trustee Address for Notice: C. G. GREFENSTETTE AND L. M. WAGNER, TRUSTEES U/A/T c/o Maurice J. White DATED DECEMBER 30, 1976 FOR THE CHILDREN OF WILLIAM The Hillman Company TALBOTT HILLMAN 1800 Grant Building Pittsburgh, PA 15219 By ____________________________________ C. G. Grefenstette, Trustee By ____________________________________ L. M. Wagner, Trustee
EX-1 3 officers.txt OFFICERS AND DIRECTORS 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 Board, Chairman of 2000 Grant Building Executive Committee and Director Pittsburgh, Pennsylvania 15219 C. G. Grefenstette Director 2000 Grant Building 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 Anthony J. Burlando Vice President - Risk Management 1900 Grant Building Pittsburgh, Pennsylvania 15219 James R. Philp Vice President - Human Resources 2000 Grant Building and Administration Pittsburgh, Pennsylvania 15219 John W. Hall Vice President - Accounting and 1800 Grant Building Information Services Pittsburgh, Pennsylvania 15219 Timothy O. Fisher Vice President and Director 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, PA 15219 Joseph C. Manzinger Vice President and Director 2000 Grant Building Pittsburgh, PA 15219 Maurice J. White Vice President, Shareholder Services 1800 Grant Building Pittsburgh, PA 15219 Eric C. Johnson Vice President, Chief Financial 2000 Grant Building Officer, Treasurer and Director 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 Anthony J. Strazisar Controller - Reporting and Analysis 1800 Grant Building Pittsburgh, Pennsylvania 15219 Edward F. Kolano Assistant Treasurer 2000 Grant Building Pittsburgh, Pennsylvania 15219 Elsie H. Hillman Director 2000 Grant Building Pittsburgh, Pennsylvania 15219 Juliet Hillman Simonds Director 2000 Grant Building Pittsburgh, PA 15219 PRINCIPAL OFFICERS AND DIRECTORS OF WILMINGTON INVESTMENTS, INC., ALL OF WHOM ARE U.S. CITIZENS Andrew H. McQuarrie Vice President, Chief Financial Officer, 824 Market Street, Suite 900 Treasurer and Director Wilmington, Delaware 19801 Lario M. Marini Senior Vice President and Director 100 South Road Wilmington, Delaware19809 Richard H. Brown Assistant Vice President and 824 Market Street, Suite 900 Assistant Secretary Wilmington, Delaware 19801 Eric C. Johnson President 2000 Grant Building Pittsburgh, Pennsylvania 15219 Jody B. Cosner Assistant Secretary and 824 Market Street, Suite 900 Assistant Treasurer Wilmington, Delaware 19801 Wanda M. Cook Vice President 824 Market Street, Suite 900 Wilmington, Delaware 19801 John W. Hall Senior Vice President 1800 Grant Building Pittsburgh, Pennsylvania 15219 Carol J. Cusick Riley Secretary 1900 Grant Building Pittsburgh, Pennsylvania 15219 Darlene Clarke Director 4911 Birch Circle Wilmington, Delaware 19808 PRINCIPAL OFFICERS AND DIRECTORS OF WILMINGTON EQUITIES, INC., ALL OF WHOM ARE U.S. CITIZENS Andrew H. McQuarrie President and Director 824 Market Street, Suite 900 Wilmington, Delaware 19801 Lario M. Marini Senior Vice President and Director 100 South Road Wilmington, Delaware19809 Richard H. Brown Assistant Vice President and 824 Market Street, Suite 900 Assistant Secretary Wilmington, Delaware 19801 Marian F. Dietrich Secretary 1900 Grant Building Pittsburgh, Pennsylvania 15219 Jody B. Cosner Assistant Secretary and 824 Market Street, Suite 900 Assistant Treasurer Wilmington, Delaware 19801 Wanda M. Cook Vice President and 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 Andrew H. McQuarrie President and Director 824 Market Street, Suite 900 Wilmington, Delaware 19801 Lario M. Marini Senior Vice President and Director 100 South Road Wilmington, Delaware19809 Richard H. Brown Assistant Vice President and 824 Market Street, Suite 900 Assistant Secretary Wilmington, Delaware 19801 Jody B. Cosner Assistant Secretary and 824 Market Street, Suite 900 Assistant Treasurer Wilmington, Delaware 19801 Darlene Clarke Director 4911 Birch Circle Wilmington, Delaware 19808 Wanda M. Cook Vice President and Treasurer 824 Market Street, Suite 900 Wilmington, Delaware 19801 Marian F. Dietrich Secretary 1900 Grant Building Pittsburgh, Pennsylvania 15219 TRUSTEES OF THE HENRY L. HILLMAN TRUST U/A DATED NOVEMBER 18, 1985, ALL OF WHOM ARE U.S. CITIZENS Henry L. Hillman 2000 Grant Building Pittsburgh, Pennsylvania 15219 Elsie Hilliard Hillman 2000 Grant Building Pittsburgh, Pennsylvania 15219 C. G. Grefenstette 2000 Grant Building Pittsburgh, Pennsylvania 15219 TRUSTEES OF THE JLHS 1976 TRUST DATED 12/30/76, THE AHF 1976 TRUST DATED 12/30/76, THE HLH 1976 TRUST DATED 12/30/76 AND THE WTH 1976 TRUST DATED 12/30/76, ALL OF WHOM ARE U.S. CITIZENS L. M. Wagner 2000 Grant Building Pittsburgh, Pennsylvania 15219 C. G. Grefenstette 2000 Grant Building Pittsburgh, Pennsylvania 15219 EX-4 4 purchase.txt SECURITIES PURCHASE AGREEMENT EXHIBIT 4 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered into as of October 9, 2002 by and among Superconductor Technologies Inc., a Delaware corporation (the "Company"), and each of the purchasers set forth on the signature pages of this Agreement (the "Investors") with reference to the following facts: A. The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"). B. The Investors desire to purchase, and the Company desires to issue and sell, upon the terms and conditions in this Agreement, (i) an aggregate of 15,833,669 shares (the "Shares") of the Company's common stock, par value $0.001 per share ("Common Stock"), at $0.95 per share and (ii) stock purchase warrants in the form attached hereto as Exhibit A (the "Warrants") to purchase up to an aggregate 3,958,418 additional shares of Common Stock (the "Warrant Shares"). D. Each Investor wishes to purchase, upon the terms and conditions in this Agreement, the number of Shares and the number of Warrants set forth immediately next to its name on the signature pages of this Agreement. E. Contemporaneous with the closing of the transactions contemplated by this Agreement, the parties will be executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to which the Company will agree to provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws. This Agreement, the Warrants and the Registration Rights Agreement are collectively referred to as the "Transaction Documents". F. The transaction contemplated by this Agreement is intended to generate a minimum of $15,000,000 and a maximum of $20,000,000 gross proceeds to the Company on the Closing Date (as defined below). The sale of securities hereunder to the Investors initially executing this Agreement will meet the minimum gross proceeds requirement, and the Company may secure additional commitments from additional Investors executing this Agreement hereafter and prior to the Closing for the sale of additional securities at the price and on the terms specified herein provided the aggregate of all sales to Investors does not exceed the maximum gross proceeds limit. NOW, THEREFORE, the Company and each of the Investors severally (and not jointly) hereby agree as follows: 1. Purchase and Sale of Shares and Warrants. 1.1 Purchase of Shares and Warrants. On the Closing Date (as defined below), the Company shall issue and sell to each Investor, and each Investor severally agrees to purchase from the Company, the number of Shares and Warrants set forth immediately next to such Investor's name on the signature pages to this Agreement. 1.2 Form of Payment. On the Closing Date, (i) each Investor shall pay the purchase price for the Shares and the Warrants to be issued and sold to it at the Closing (as defined below) (the "Purchase Price") by wire transfer of immediately available funds to the Company, in accordance with the Company's written wiring instructions, against delivery of duly executed certificates representing the Shares and duly executed Warrants which such Investor is purchasing and (ii) the Company shall deliver such certificates and Warrants duly executed on behalf of the Company, to such Investor, against delivery of such Purchase Price. 1.3 Closing Date. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 5 and 6, the date and time of the issuance and sale of the Shares and the Warrants pursuant to this Agreement (the "Closing Date") shall be 9:00 a.m., Pacific Standard Time, on the date of closing of the Merger (as defined in Section 5.5 below) or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the "Closing") shall occur on the Closing Date at the offices of Guth|Christopher LLP, 10866 Wilshire Boulevard, Suite 1250, Los Angeles, California, or at such other location as may be agreed to by the parties. 1.4 Adjustments. If at any time prior to the Closing the outstanding shares of Common Stock are subdivided into a greater number of shares or consolidated into a lesser number of shares, then proportionate adjustments shall be made to per share purchase price and number of shares of Common Stock purchased hereunder and under the form of Warrant attached hereto in order to prevent dilution and maintain the same aggregate consideration hereunder and thereunder. 2. Investors' Representations, Warranties and Covenants. Each Investor severally (and not jointly) represents, warrants and covenants to the Company solely as to such Investor that: 1.1 Investment Purpose. As of the date hereof, the Investor is purchasing the Shares, the Warrants and Warrant Shares (collectively the "Securities") for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act; provided, however, that by making the representations herein, the Investor does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. 1.2 Investor Status. The Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D. In the normal course of its business, the Investor invests in or purchases securities similar to the Securities and it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of purchasing the Securities. 1.3 Reliance on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities. 1.4 Information. The Investor and its advisors, if any, have been furnished with all materials (excluding any material nonpublic information) relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Investor or its advisors. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigation conducted by Investor or any of its advisors or representatives shall modify, amend or affect Investor's right to rely on the Company's representations and warranties contained in Section 3. The Investor understands that its investment in the Securities involves a significant degree of risk. 1.5 Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. 1.6 Transfer or Re-sale. The Investor understands that (i) except as provided in the Registration Rights Agreement, the sale or re-sale of the Securities has not been and is not being registered under the Securities Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the Securities Act, (b) the Investor shall have delivered to the Company an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, (c) the Securities are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated under the Securities Act (or a successor rule) ("Rule 144")) of the Investor who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2.6 and who is an "accredited investor" (as defined in Rule 501(a) of Regulation D) or (d) the Securities are sold pursuant to Rule 144; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to the Registration Rights Agreement). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; provided, however, that upon execution on any such pledge, the pledgee shall be subject to the restrictions on transfer of the Securities contained in this Agreement. 1.7 Legends. The Investor understands that the Shares and the Warrants and, until such time as the Warrant Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, the certificates for the Shares and Warrant Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities): The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States. The securities represented hereby may not be offered or sold in the absence of an effective registration statement for the securities under applicable securities laws unless offered, sold or transferred under an available exemption from the registration requirements of those laws. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for resale under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144(k) without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the Securities Act and such sale or transfer is effected or (c) such holder provides the Company with reasonable and customary assurances that such Security can be sold pursuant to Rule 144 and such sale or transfer is effected. The Investor agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. 1.8 Authorization; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Investor, and this Agreement constitutes, and upon execution and delivery by the Investor of the Registration Rights Agreement, such agreement will constitute, valid and binding agreements of the Investor enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar rights affecting or relating to creditors' rights generally and general principles of equity. 1.9 Residency. The Investor is a resident of the jurisdiction set forth immediately next to such Investor's name on the signature pages hereto. 1.10 Trading Limitations. The Investor will conduct any sales of Common Stock in compliance with all relevant securities laws and regulations. The Investor will not engage in any "short sales" (as defined in Rule 3b-3 under the Securities Act) prior to the effective date of the Registration Statement (as defined in the Registration Rights Agreement). This prohibition against short sales will not apply to the Investor during any period in which the Investor is prevented from publicly reselling previously acquired shares of common stock of the Company or Conductus, Inc. (or shares hereafter acquired under previously issued warrants) due to the suspension or lapse for any reason of the registration statements presently in effect under existing registration rights agreements. The Investor has not engaged in any purchases or sales of Common Stock within the past five (5) trading days. 2. Representations and Warranties of the Company. The Company represents and warrants to each Investor that: 1.1 Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power to own its properties and to carry on its business as now being conducted. Schedule 3.1 sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on (i) the holder's rights relating to the Securities, (ii) the business, operations, assets, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, (iii) the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith or (iv) the authority or the ability of the Company to perform its obligation under this Agreement, the Registration Rights Agreement or the Warrants. "Subsidiaries" means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest. 1.2 Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement and the Warrants and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and the Warrants by the Company, and the consummation by it of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Warrants and the issuance and reservation for issuance of the Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders is required, (iii) this Agreement has been duly executed and delivered by the Company, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Registration Rights Agreement and the Warrants, each of such agreements and instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar rights affecting or relating to creditors' rights generally and general principles of equity. 1.3 Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 75,000,000 shares of Common Stock, of which 25,198,270 shares are issued and outstanding, 3,643,405 shares are reserved for issuance pursuant to the Company's stock option plans, 3,461,091 shares are reserved for issuance pursuant to securities (other than the Warrants) exercisable for, or convertible into or exchangeable for shares of Common Stock, 3,958,418 shares are reserved for issuance upon exercise of the Warrants; and (ii) 2,000,000 shares of preferred stock, of which no shares are issued and outstanding. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Shares, the Warrants or Warrant Shares. The Company has made available to counsel for the Investors true and correct copies of the Company's Restated Certificate of Incorporation as in effect on the date hereof ("Certificate of Incorporation"), the Company's Bylaws, as in effect on the date hereof (the "Bylaws"), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto except for stock options granted under any benefit plan of the Company. 1.4 Issuance of Shares. The Shares are duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of stockholders of the Company and will not impose personal liability upon the holder thereof. The Warrant Shares are duly authorized and reserved for issuance and, upon exercise of the Warrants in accordance with the terms thereof, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances and will not be subject to preemptive rights or other similar rights of stockholders of the Company and will not impose personal liability upon the holder thereof. 1.5 No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Warrants by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Warrant Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or Bylaws or (ii) except as set forth on Schedule 3.5, violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, Bylaws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as a Investor owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity, except for possible or actual violations, if any, the sanctions for which would not, individually or in the aggregate, have a Material Adverse Effect. Except as specifically contemplated by this Agreement, except as set forth on Schedule 3.5 hereto, and except as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Registration Rights Agreement or the Warrants in accordance with the terms hereof or thereof or to issue and sell the Shares and Warrants in accordance with the terms hereof and to issue the Warrant Shares upon exercise of the Warrants. Except as disclosed in Schedule 3.5, all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Nasdaq National Market and does not reasonably anticipate that the Common Stock will be desisted from the Nasdaq National Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might reasonably be expected to give rise to any of the foregoing. 1.6 SEC Documents; Financial Statements. Since January 1, 2000, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the "SEC Documents"). The Company has delivered to each Investor true and complete copies of any SEC Documents, specifically requested by Investor or not filed via the Securities and Exchange Commission's EDGAR database, except for exhibits and incorporated documents, and the Company understands that Investor has secured copies of the remainder of such SEC Documents from the Securities and Exchange Commission's EDGAR database through the world wide web. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the Securities and Exchange Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior to the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Securities and Exchange Commission with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the date of such SEC Documents and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such SEC Documents, which liabilities and obligations referred to in clauses (i) and (ii), individually or in the aggregate, would not have a Material Adverse Effect. 1.7 Absence of Certain Changes. Except as disclosed in the SEC Documents, since December 31, 2001, there has been no change or development which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 1.8 Absence of Litigation. Except as disclosed in the SEC Documents, there is no action, suit, claim, proceeding or, to the knowledge of the Company and its Subsidiaries, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. 1.9 Intellectual Property. The Company and each of its subsidiaries owns or is licensed to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, permits, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and proprietary knowledge (collectively, "Intellectual Property") necessary for the conduct of its business as now being conducted and as proposed to be conducted. Except as disclosed in the SEC Documents, neither the Company nor any of its subsidiaries has received written notice that it is infringing upon or in conflict with any third party Intellectual Property. Except as set forth on Schedule 3.9, neither the Company nor any of its subsidiaries has entered into any consent, indemnification, forbearance to sue or settlement agreements with respect to the validity of the Company's or such subsidiary's ownership or right to use its Intellectual Property. The Company's Intellectual Property is valid and enforceable, and no registration relating thereto has lapsed, expired or been abandoned or canceled or is the subject of cancellation or other adversarial proceedings, and all applications therefor are pending and in good standing. The Company has complied with its contractual obligations relating to the protection of the Intellectual Property used pursuant to licenses. To the Company's knowledge, no person is infringing on or violating the Intellectual Property owned or used by the Company. 1.10 Environment. (i) There is no environmental liability, nor factors likely to give rise to any environmental liability, affecting any of the properties of the Company or any of its subsidiaries that, individually or in the aggregate, would have a Material Adverse Effect and (ii) neither the Company nor any of the subsidiaries has violated any environmental law applicable to it now or previously in effect, other than such violations or infringements that, individually or in the aggregate, have not had and will not have a Material Adverse Effect. 1.11 Title. The Company and each of its subsidiaries has good title in fee simple to all real property and good title to all personal property owned by it which is material to its business, free and clear of all liens, encumbrances and defects except for such defects in title that, individually or in the aggregate, could not have a Material Adverse Effect. Any real property and facilities held under lease by the Company or any of its subsidiaries are held by the Company or such subsidiary under valid, subsisting and enforceable leases with such exceptions which have not had and will not have a Material Adverse Effect. 1.12 Insurance. The Company and its subsidiaries maintain such insurance relating to their business, operations and assets as is appropriate to their business, assets and operations, in such amounts and against such risks as are customarily carried and insured against by owners of comparable businesses, assets and operations, and such insurance coverages will be continued in full force and effect to and including the Closing Date other than those insurance coverages in respect of which the failure to continue in full force and effect could not reasonably be expected to have a Material Adverse Effect. 1.13 No Brokers. The Company has not engaged any person to which or to whom brokerage commissions, finder's fees, financial advisory fees or similar payments are or will become due in connection with this Agreement or the transactions contemplated hereby. 1.14 Tax Status. The Company and each of its subsidiaries has made or filed all material federal, state and local income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company or the applicable subsidiary has set aside on its books provisions adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no material unpaid taxes claimed to be due by the taxing authority of any jurisdiction. The Company has not executed a waiver with respect to any statute of limitations relating to the assessment or collection of any federal, state or local tax. None of the Company's tax returns have been or is being audited by any taxing authority. 1.15 No General Solicitation. Neither the Company nor any person participating on the Company's behalf in the transactions contemplated hereby has conducted any "general solicitation" or "general advertising" as such terms are used in Regulation D, with respect to any of the Securities being offered hereby. 1.16 Securities Laws. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Securities being offered hereby under the Securities Act or cause this offering of Securities to be integrated with any prior offering of securities of the Company for purposes of the Securities Act. The offer, sale and delivery of shares of Common Stock upon exercise of the Warrants will be exempt from the registration requirements of Section 5 of the Securities Act. Assuming the truth and accuracy of the representations and warranties of the Investors set forth in Section 2 of this Agreement, the Investors will not be statutory underwriters within the meaning of Section 2(a)11 of the Securities Act. 1.17 Form S-3 Eligibility. The Company is currently eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the Securities Act. Except for obtaining the waivers disclosed on Schedule 3.5, there exist no facts or circumstances (including without limitation any required approvals or waivers of any circumstances that may delay or prevent the obtaining of accountant's consents) that would prohibit or delay the preparation and filing of a registration statement on Form S-3 with respect to the Registrable Securities (as defined in the Registration Rights Agreement). 1.18 Disclosure. All information relating to or concerning the Company and its subsidiaries set forth in this Agreement or provided to the Investors pursuant to Section 2.4 hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their businesses, properties, operations, prospects or financial conditions, which has not been publicly disclosed but, under applicable law, rule or regulation, would be required to be disclosed by the Company in a registration statement filed on the date hereof by the Company under the Securities Act with respect to a primary issuance of the Company's securities. 1.19 Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 1.20 No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement and the Warrants will not be, an "investment company" required to be registered under the Investment Company Act of 1940 (an "Investment Company"). The Company is not controlled by an Investment Company. 2. Covenants. 1.1 Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Sections 5 and 6 of this Agreement; provided, however, that the foregoing shall not obligate the Company to waive any closing conditions to the Merger. 1.2 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Investor promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Investors at the Closing pursuant to this Agreement under applicable securities or "blue sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to each Investor on or prior to the Closing Date. 1.3 Reporting Status; Eligibility to Use Form S-3. The Company's Common Stock is registered under Section 12(g) of the Exchange Act. So long as any Investor beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. The Company currently meets, and will take all necessary action to continue to meet, the "registrant eligibility" requirements set forth in the general instructions to Form S-3 for the resale of Common Stock by the Investors. The Company shall issue a press release describing the materials terms of the transaction contemplated hereby within one (1) business of the Closing Date and shall file with the SEC a Current Report on Form 8-K describing the material terms of the transaction contemplated hereby within three (3) business days of the Closing Date, which press release and Form 8-K shall be subject to prior review by the Investors. 1.4 Use of Proceeds. The Company shall use the proceeds from the sale of the Shares and the Warrants in the manner set forth in Schedule 4.4. 1.5 Reservation of Shares. The Company shall at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the full exercise of the Warrants. The Company shall not reduce the number of shares of Common Stock reserved for issuance upon exercise of the Warrants (except as a result of the issue of the Warrant Shares upon the exercise of the Warrants) without the consent of the Investors 1.6 Listing. On the Closing Date, the Company shall have applied for the listing of the Shares and Warrant Shares, in each case, upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed or quoted and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Shares from time to time issuable hereunder and all Warrant Shares from time to time issuable upon exercise of the Warrants. The Company shall use its best efforts to keep its shares of Common Stock listed in The Nasdaq Stock Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of The Nasdaq Stock Market. 1.7 No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities. 2. Conditions to the Company's Obligation to Sell. The obligation of the Company hereunder to issue and sell the Shares and Warrants to the Investors at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived in writing by the Company at any time in its sole discretion: 1.1 All of the Investors shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Company. 1.2 All of the Investors shall have delivered the Purchase Price in accordance with Section 1.2 above. 1.3 The representations and warranties of all of the Investors shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date), and all of the Investors shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investors at or prior to the Closing Date. 1.4 No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. 1.5 The Company shall have consummated the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement") dated on or about October 9, 2002 by and among the Company, STI Acquisition, Inc. and Conductus, Inc. (the "Merger"). 1.6 The purchase of the Shares and Warrants by each Investor shall have closed, resulting in gross aggregate proceeds to the Company on the Closing Date of not less than $15,000,000 nor more than $20,000,000. 2. Conditions to Each Investor's Obligation to Purchase. The obligation of each Investor hereunder to purchase the Shares and Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for such Investor's sole benefit and may be waived in writing by such Investor at any time in its sole discretion: 1.1 The Company shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Investor. 1.2 The Company shall have delivered to such Investor duly executed certificates (in such denominations as the Investor shall request) representing the Shares and duly executed Warrants in accordance with Section 1.2 above. 1.3 The Shares shall be authorized for quotation on The Nasdaq Stock Market and trading in the Common Stock or The Nasdaq Stock Market generally shall not have been suspended or be under threat of suspension by the SEC or any governing body of The Nasdaq Stock Market. 1.4 The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Investor shall have received a certificate or certificates, executed by the chief executive officer or chief financial officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Investor including, but not limited to, certificates with respect to the Company's Certificate of Incorporation, Bylaws and Board of Directors' resolutions relating to the transactions contemplated hereby. 1.5 No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement. 1.6 The Company shall have provided advance notice to The Nasdaq Stock Market of the issuance of the Shares and Warrant Shares if so required by the rules applicable thereto. 1.7 The Investor shall have received an opinion of the Company's counsel, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Investor and in substantially the same form as Exhibit C attached hereto. 1.8 From the date of this Agreement through the Closing Date, there shall not have occurred any Material Adverse Effect. 1.9 The Company shall have consummated the Merger. 1.10 The purchase of the Shares and Warrants by each Investor shall have closed, resulting in gross aggregate proceeds to the Company (including from the Investor) on the Closing Date of not less than $15,000,000 nor more than $20,000,000. 2. Confidentiality. Each Investor severally agrees on behalf of itself to maintain the confidentiality of the Merger as follows: 1.1 Definitions. "Disclosing Parties" means the Company and Conductus, Inc., the parties to the Merger. "Confidential Information" means all information or material concerning the Merger and the combined operations of the two companies following the Merger which has been or is hereafter disclosed to the Investor by either Disclosing Party, whether or not such information is identified as Confidential Information by one or both Disclosing Parties. "Recipient" means an Investor and all its affiliates, subsidiaries, and related companies of Recipient. "Representative" means Recipient's directors, officers, employees, agents, and financial, legal, and other advisors. 1.2 Expiration Date; Filing of Merger Announcement. The "Expiration Date" shall be the date of filing of a Form 8-K with the Securities Exchange Commission publicly announcing the Merger or such earlier date as the Merger is terminated. The Company shall issue a press release describing the materials terms of the Merger and file a copy of such press release with the SEC on Form 8-K within one (1) business of execution of the Merger Agreement but in no event later than five (5) business days after execution of the Merger Agreement. 1.3 Exclusions. Confidential Information does not include information that Recipient can demonstrate: (a) was in Recipient's possession prior to its being furnished to Recipient, provided the source of that information was not known by Recipient to be bound by a confidentiality agreement with or other continual, legal or fiduciary obligation of confidentiality to either of the Disclosing Parties; (b) is now, or hereafter becomes, through no act or failure to act on the part of Recipient, generally known to the public; (c) is rightfully obtained by Recipient from a third party, without breach of any obligation to either of the Disclosing Parties; or (d) is independently developed by Recipient without use of or reference to the Confidential Information. 1.4 Confidentiality. Recipient agrees to use the Confidential Information solely for the purpose of evaluating an investment in the entity formed upon completion of the Merger. Prior to the Expiration Date, Recipient and its Representatives shall not disclose any of the Confidential Information in any manner whatsoever, except as otherwise provided in Sections 7.5 and 7.6 of this Agreement, and shall hold and maintain the Confidential Information in confidence. 1.5 Permitted Disclosures. Prior to the Expiration Date, Recipient may disclose Confidential Information to Recipient's Representatives with a bona fide need to know such Confidential Information, but only to the extent necessary for such Representatives to perform services for Recipient in connection with Recipient's purpose in obtaining the information. Recipient shall be fully responsible hereunder for any unauthorized disclosure or use of Confidential Information by any of Recipient's Representatives. 1.6 Required Disclosures. Prior to the Expiration Date, Recipient may disclose Confidential Information if and to the extent that such disclosure is required by court order, provided that Recipient provides each of the Disclosing Parties a reasonable opportunity to review the disclosure before it is made and to interpose its own objection to the disclosure or seek to limit the disclosure or maintain confidentiality after disclosure. 1.7 Covenant Not to Trade Securities. Prior to the Expiration Date, Recipient and its Representatives may not buy, sell, trade or engage in any other transaction involving securities issued by either of the Disclosing Parties, including, without limitation, any option contract to buy or sell securities issued by either of the Disclosing Parties. 1.8 Irreparable Harm. Recipient understands and acknowledges that any disclosure or misappropriation of any of the Confidential Information in violation of this Agreement may cause either of the Disclosing Parties irreparable harm, the amount of which may be difficult to ascertain, and therefore agrees that each of the Disclosing Parties shall have the right to apply to a court of competent jurisdiction for specific performance and/or an order restraining and enjoining any such further disclosure or breach and for such other relief as such Disclosing Party shall deem appropriate. Such right of each of the Disclosing Parties is to be in addition to the remedies otherwise available to such Disclosing Party at law or in equity. Recipient expressly waives the defense that a remedy in damages will be adequate and any requirement in an action for specific performance or injunction for the posting of a bond by a Disclosing Party. 1.9 Existing Confidentiality Agreements. The provisions of this Section 7 supersede in their entirety any existing confidentiality or non-disclosure agreements in effect concerning the Merger and the investments contemplated herein, and such agreements shall terminate upon execution of this Agreement by the Company. The termination of such agreements does not relieve any party from liability for any breaches prior to the date of this Agreement. 2. Company's Board of Directors. The Company shall take all steps necessary to add the following individuals to its board of directors: (a) Mr. John Shoch, or another person acceptable to the current directors of the Company designated by Alloy Ventures 2002, LLC, as of the date of the next annual stockholder meeting and (b) one individual as of the Closing Date acceptable to the current directors of the Company designated jointly by Special Situations Fund III, L.P., Special Situations Fund Cayman, L.P., Special Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P. 3. Additional Investors. 3.1 Conditions for Additional Investors. The transaction contemplated by this Agreement is intended to generate a minimum of $15,000,000 and a maximum of $20,000,000 gross proceeds to the Company on the Closing Date. The sale of securities hereunder to the Investors initially executing this Agreement on the date hereof (the "Initial Investors") will meet the minimum gross proceeds requirement. The Company may add additional Investors (the "Additional Investors") to this Agreement prior to the Closing by having them execute a signature page to this Agreement for the sale of additional securities at the price and on the terms specified herein provided (a) the aggregate of all sales to Investors hereunder does not exceed $20,000,000 and (b) the Company has obtained the consent of Alloy Ventures 2002, LLC and Wellington Management Company, LLP (which consent will not be unreasonably withheld) to the sale of securities hereunder to the Additional Investors. Except as permitted in this Section 9 and subject to Section 9.3, the Company will not contract with any party to obtain additional equity financing beginning on the date hereof and ending on the Closing Date. 3.2 Right of First Refusal. Each time the Company desires to add an Additional Investor, the Company will first deliver to each Initial Investor by facsimile or email at least forty-eight (48) hours in advance a notice naming the Additional Investor and proposed amount of the investment (such investment to be at the price and on the terms specified in this Agreement). The Initial Investors and their affiliates will have an option for forty-eight (48) hours to purchase any or all of the securities being offered to the Additional Investor on the same price and terms as specified in this Agreement. Any Initial Investor may exercise such option by giving notice by facsimile or email to the Company's Chief Financial Officer within such 48-hour period to buy a specified amount of the offered securities. The closing of the sale to Additional Investors and Initial Investors exercising their option rights shall be contemporaneous with the Closing under this Agreement. To the extent that the Initial Investors, in the aggregate, elect to purchase more than all of such securities, the amount that each Initial Investor shall be entitled to purchase shall be pro rated based on the Initial Investor's Pro Rata Percentage. "Pro Rata Percentage" means, with respect to any Initial Investor, a percentage computed by dividing the Purchase Price paid hereunder by such Initial Investor by the aggregate Purchase Price paid hereunder by all of the Initial Investors. 3.3 Permitted Transactions. The limitations referred to in Sections 9.1 and 9.2 shall not apply to (i) any transaction involving issuances of securities as consideration in a merger, consolidation or acquisition of assets, or in connection with any strategic partnership, collaboration or joint venture (the primary purpose of which is not to raise capital), or as consideration for the acquisition of a business, product or license by the Company, (ii) the issuance of securities upon exercise or conversion of the Company's options, warrants or other convertible securities outstanding as of the date hereof or issued pursuant to this Agreement, (iii) the grant of additional options or warrants, or the issuance of additional securities, under any duly authorized Company stock option, stock purchase or restricted stock plan for the benefit of the Company's employees, consultants or directors; (iv) the issuance of securities in connection with the settlement of litigation; or (v) the issuance of warrants incidental to any revolving credit or similar debt financing from a financial institution engaged in the business of lending money such as a bank, trust company, insurance company or other institutional lender. 4. Governing Law; Miscellaneous. 1.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in the State of Delaware (without regard to principles of conflict of laws). Both parties irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in Delaware with respect to any suit or proceeding based on or arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company and each Investor irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company and each Investor further agrees that service of process upon a party mailed by first class mail shall be deemed in every respect effective service of process upon the party in any such suit or proceeding. Nothing herein shall affect either party's right to serve process in any other manner permitted by law. Each of the parties agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 1.2 Counterparts; Signatures by Facsimile. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other parties hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. In the event any signature is delivered by facsimile transmission, the party using such means of delivery shall cause the manually executed signature page to be physically delivered to the other parties within five (5) days of its execution. 1.3 Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. 1.4 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. 1.5 Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investors make any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Company and, by the Investors as provided in Section 10.14. 1.6 Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile and shall be effective five days after being placed in the mail, if mailed by regular United States 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 Santa Barbara, California 93111-2310 Attention: President and Chief Executive Officer Facsimile: (805) 683-9496 Telephone: (805) 690-4500 With copy to: Guth|Christopher LLP 10866 Wilshire Boulevard Suite 1250 Los Angeles, California 90024 Attention: Daniel G. Christopher, Esq. Facsimile: (310) 470-8354 Telephone: (310) 474-8809 If to an Investor: To the address set forth immediately next to such Investor's name on the signature pages hereto. Each party shall provide notice to the other party of any change in address. 1.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor any Investor shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2.6, any Investor may assign its rights hereunder to any person that purchases Securities in a private transaction from an Investor or to any of its "affiliates," as that term is defined under the Exchange Act, without the consent of the Company. 1.8 Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 1.9 Survival. The representations and warranties of the Company and the agreements and covenants of the Company shall survive the Closing notwithstanding any due diligence investigation conducted by or on behalf of the Investors; provided that the representations and warranties made to any Investor in Section 3 shall terminate on the earlier of (i) two (2) years from the date of discovery by such Investor of a breach thereof and (ii) three (3) years from the Closing Date. The Company agrees to indemnify and hold harmless each Investor and each of such Investor's officers, directors, employees, partners, members, agents and affiliates for loss or damage relating to the Securities purchased hereunder arising as a result of or related to any breach by the Company of any of its representations or covenants set forth herein. 1.10 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 1.11 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. With respect to the Company, "knowledge" shall mean the actual knowledge of the Company's directors, its Chief Executive Officer, Chief Financial Officer, Chief Technology Officer or any Vice President. 1.12 Equitable Relief. Each party acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the other parties by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, each party acknowledges that the remedy at law for a breach of its obligations hereunder will be inadequate and agrees, in the event of a breach or threatened breach by such party of the provisions of this Agreement, that the other parties shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 1.13 Termination. In the event that the Closing Date shall not have occurred on or before February 15, 2003 or the Merger Agreement is terminated prior thereto, unless the parties agree otherwise, this Agreement shall terminate at the close of business on such date. Notwithstanding any termination of this Agreement, any party not in breach of this Agreement shall preserve all rights and remedies it may have against another party hereto for a breach of this Agreement prior to or relating to the termination hereof. 1.14 Determinations. Except as otherwise expressly provided herein, all consents, approvals and other determinations to be made by the Investors pursuant to this Agreement and all waivers and amendments to or of any provisions in this Agreement prior to the Closing Date to be binding upon a Investors shall be made by such Investor and except as otherwise expressly provided herein, all consents, approvals and other determinations (other than amendments to the terms and provisions of this Agreement) to be made by the Investors pursuant to this Agreement and all waivers and amendments to or of any provisions in this Agreement after the Closing Date shall be made by Investors (excluding Investors who are affiliates of the Company) that have invested more than fifty percent (50%) of the aggregate Investment Amounts invested by all Investors (excluding Investors who are affiliates of the Company). 1.15 Expenses. The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall (a) pay at the Closing the reasonable fees and expenses of counsel to the Investors (not to exceed $30,000 for the work performed up to and including the date hereof) related to the negotiation of this Agreement and the other Transaction Documents, and (b) reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the Investors, including without limitation reimbursement of attorneys' fees and disbursements, in connection with any amendment, modification or waiver of this Agreement or the other Transaction Documents. 1.16 Waiver of Conflicts. Each of the parties acknowledges that Orrick, Herrington & Sutcliffe LLP, counsel for the Investors, has performed legal services for Conductus, Inc. in a variety of matters including in connection with the Merger and will serve as tax counsel to the Company in connection with the Merger. Accordingly, each Investor waives any conflict of interest arising from such representation. Each Investor is giving such waiver based on the understanding that Orrick, Herrington & Sutcliffe LLP has agreed that it will not represent the Investors (individually or as a group) in any litigation matter relating to the transactions contemplated hereby without a further waiver from the relevant Investors and the Company. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Signature Page to Securities Purchase Agreement IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this Agreement to be duly executed as of the date first above written. "COMPANY" SUPERCONDUCTOR TECHNOLOGIES INC. By: M. Peter Thomas President and Chief Executive Officer "INVESTORS" RESIDENCE: California ALLOY VENTURES 2002, L.P. Investment Amount: $4,868,549.55 Common Shares: 5,124,789 By: Warrant Shares: 1,281,197 Alloy Ventures 2002, LLC Title: General Partner Address for Notice: Managing Member of John F. Shoch, Ph.D. Alloy Ventures 2002, LLC Alloy Ventures 480 Cowper Street, 2nd Floor Palo Alto, CA 94301 RESIDENCE: California ALLOY PARTNERS 2002, L.P. Investment Amount: $131,450.55 Common Shares: 138,369 Warrant Shares: 34,592 By: Address for Notice: Alloy Ventures 2002, LLC John F. Shoch, Ph.D. Title: General Partner Alloy Ventures 480 Cowper Street, 2nd Floor Managing Member of Palo Alto, CA 94301 Alloy Ventures 2002, LLC RESIDENCE: Delaware WILMINGTON SECURITIES, INC. Investment Amount: $2,116,500 Common Shares: 2,227,895 Warrant Shares: 556,974 By: Address for Notice: Andrew H. McQuarrie, President Wilmington Securities, Inc. 824 Market Street, Suite 900 Wilmington, DE 19801 Attn: Andrew H. McQuarrie RESIDENCE: Pennsylvania HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND C. G. GREFENSTETTE, TRUSTEES OF THE HENRY L. HILLMAN TRUST U/A/T Investment Amount: $187,500 DATED NOVEMBER 18, 1985 Common Shares: 197,368 Warrant Shares: 49,342 By: _________________________________ C. G. Grefenstette, Trustee Address for Notice: c/o Maurice J. White The Hillman Company 1800 Grant Building Pittsburgh, PA 15219 RESIDENCE: Pennsylvania C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE CHILDREN OF Investment Amount: $49,000 JULIET LEA HILLMAN SIMONDS Common Shares: 51,57 Warrant Shares: 12,895 By: _________________________________ Address for Notice: C. G. Grefenstette, Trustee c/o Maurice J. White The Hillman Company By: _________________________________ 1800 Grant Building L. M. Wagner, Trustee Pittsburgh, PA 15219 RESIDENCE: Pennsylvania C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE CHILDREN OF Investment Amount: $49,000 HENRY LEA HILLMAN, JR. Common Shares: 51,57 Warrant Shares: 12,895 By: Address for Notice: C. G. Grefenstette, Trustee c/o Maurice J. White The Hillman Company By: 1800 Grant Building L. M. Wagner, Trustee Pittsburgh, PA 15219 RESIDENCE: Pennsylvania C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE CHILDREN OF Investment Amount: $49,000 Common Shares: 51,57 WILLIAM TALBOTT HILLMAN Warrant Shares: 12,895 Address for Notice: By: c/o Maurice J. White C. G. Grefenstette, Trustee The Hillman Company 1800 Grant Building By: Pittsburgh, PA 15219 L. M. Wagner, Trustee RESIDENCE: New York SPECIAL SITUATIONS FUND III, L.P. Investment Amount: $1,199,945 Common Shares: 1,263,100 By: Name: David Greenhouse Warrant Shares: 315,775 Title: General Partner Address for Notice: 153 E. 53rd Street, 51st Floor New York, NY 10022 RESIDENCE: New York SPECIAL SITUATIONS FUND CAYMAN, L.P. Investment Amount: $575,035Common Shares: 605,300 Warrant Shares: 151,325 Address for Notice: By: 153 E. 53rd Street, 51st Floor Name: David Greenhouse New York, NY 10022 Title: General Partner RESIDENCE: New York SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. Investment Amount: $400,045Common Shares: 421,100 Warrant Shares: 105,275 Address for Notice: By: 153 E. 53rd Street, 51st Floor Name: David Greenhouse New York, NY 10022 Title: General Partner RESIDENCE: New York SPECIAL SITUATIONS TECHNOLOGY FUND, L.P. Investment Amount: $300,010Common Shares: 315,800 Warrant Shares: 78,950 Address for Notice: By: 153 E. 53rd Street, 51st Floor Name: David Greenhouse New York, NY 10022 Title: General Partner RESIDENCE: California MICRO CAP PARTNERS, L.P. Investment Amount: $1,000,000Common Shares: 1,052,632 By: Palo Alto Investors LLC Warrant Shares: 263,158 Title: General Partner Address for Notice: Mr. Will Edwards By: Palo Alto Investors Palo Alto Investors Title: Manager 470 University Avenue Palo Alto, CA 94301 By: Name: William L. Edwards Title: President RESIDENCE: British Columbia Her Majesty the Queen in Right of the Province British Columbia Investment Amount: $95,000.00 Common Shares: 100,000 By: Wellington Management Company, LLP Warrant Shares: 25,000 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento 75 State Street By: Boston, MA 02109 Name: Julie A. Jenkins Title: Vice President and Counsel RESIDENCE: Michigan The Dow Chemical Employees' Retirement Plan Investment Amount: $185,250.00 By: Wellington Management Company, LLP Common Shares: 195,000 Title: Investment Adviser Warrant Shares: 48,750 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Michigan The Retirement Program Plan for Employees of Union Carbide Corporation Investment Amount: $152,000.00 Common Shares: 160,000 By: Wellington Management Company, LLP Warrant Shares: 40,000 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento By: 75 State Street Name: Julie A. Jenkins Boston, MA 02109 Title: Vice President and Counsel RESIDENCE: Singapore Government of Singapore Investment Corporation Pte Ltd Investment Amount: $760,000.00 Common Shares: 800,000 By: Wellington Management Company, LLP Warrant Shares: 200,000 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento By: 75 State Street Name: Julie A. Jenkins Boston, MA 02109 Title: Vice President and Counsel RESIDENCE: Maryland Howard Hughes Medical Institute Investment Amount: $209,000.00 By: Wellington Management Company, LLP Common Shares: 220,000 Title: Investment Adviser Warrant Shares: 55,000 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: New York New York State Nurses Association Pension Plan Investment Amount: $142,500.00 By: Wellington Management Company, LLP Common Shares: 150,000 Title: Investment Adviser Warrant Shares: 37,500 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Ohio Ohio Carpenters' Pension Fund Investment Amount: $95,000.00 By: Wellington Management Company, LLP Common Shares: 100,000 Title: Investment Adviser Warrant Shares: 25,000 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Ohio Laborers' District Council and Contractors' of Ohio Pension Fund Investment Amount: $61,750.00 Common Shares: 65,000 By: Wellington Management Company, LLP Warrant Shares: 16,250 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento By: 75 State Street Name: Julie A. Jenkins Boston, MA 02109 Title: Vice President and Counsel RESIDENCE: Oregon Oregon Investment Council Investment Amount: $541,500.00 By: Wellington Management Company, LLP Common Shares: 570,000 Title: Investment Adviser Warrant Shares: 142,500 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: New Jersey The Robert Wood Johnson Foundation Investment Amount: $218,500.00 By: Wellington Management Company, LLP Common Shares: 230,000 Title: Investment Adviser Warrant Shares: 57,500 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Massachusetts WTC-CIF Emerging Companies Portfolio Investment Amount: $228,000.00 By: Wellington Management Company, LLP Common Shares: 240,000 Title: Investment Adviser Warrant Shares: 60,000 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Massachusetts WTC-CTF Emerging Companies Portfolio Investment Amount: $304,000.00 By: Wellington Management Company, LLP Common Shares: 320,000 Title: Investment Adviser Warrant Shares: 80,000 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Australia Australian Retirement Fund Investment Amount: $47,500.00 By: Wellington Management Company, LLP Common Shares: 50,000 Title: Investment Adviser Warrant Shares: 12,500 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Alberta, Canada TELUS Corporation Investment Amount: $6,650.00 By: Wellington Management Company, LLP Common Shares: 7,000 Title: Investment Adviser Warrant Shares: 1,750 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Australia JB Were Global Small Companies Fund Investment Amount: $85,500.00 By: Wellington Management Company, LLP Common Shares: 90,000 Title: Investment Adviser Warrant Shares: 22,500 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: New Zealand NZ Funds Global Small Companies Trust Investment Amount: $23,750.00 By: Wellington Management Company, LLP Common Shares: 25,000 Title: Investment Adviser Warrant Shares: 6,250 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Australia Retail Employees' Superannuation Pty Ltd Investment Amount: $23,750.00 By: Wellington Management Company, LLP Common Shares: 25,000 Title: Investment Adviser Warrant Shares: 6,250 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Pennsylvania SEI Institutional Investment Trust, Small Cap Growth Fund Investment Amount: $218,500.00 Common Shares: 230,000 By: Wellington Management Company, LLP Warrant Shares: 57,500 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento By: 75 State Street Name: Julie A. Jenkins Boston, MA 02109 Title: Vice President and Counsel RESIDENCE: Pennsylvania SEI Institutional Managed Trust, Small Cap Growth Fund Investment Amount: $308,750.00 Common Shares: 325,000 By: Wellington Management Company, LLP Warrant Shares: 81,250 Title: Investment Adviser Address for Notice: Wellington Management Company, LLP Attn: Gina Di Mento By: 75 State Street Name: Julie A. Jenkins Boston, MA 02109 Title: Vice President and Counsel RESIDENCE: Alberta, Canada TELUS Foreign Equity Active Pool Investment Amount: $14,250.00 By: Wellington Management Company, LLP Common Shares: 15,000 Title: Investment Adviser Warrant Shares: 3,750 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Australia Telstra Super Pty Ltd Investment Amount: $33,250.00 By: Wellington Management Company, LLP Common Shares: 35,000 Title: Investment Adviser Warrant Shares: 8,750 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: District of Columbia Vantagepoint Aggressive Opportunities Fund Investment Amount: $304,000.00 By: Wellington Management Company, LLP Common Shares: 320,000 Title: Investment Adviser Warrant Shares: 80,000 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109 RESIDENCE: Ireland WMP (Dublin) Global Smaller Companies Equity Investment Amount: $8,550.00 By: Wellington Management Company, LLP Common Shares: 9,000 Title: Investment Adviser Warrant Shares: 2,250 Address for Notice: Wellington Management Company, LLP By: Attn: Gina Di Mento Name: Julie A. Jenkins 75 State Street Title: Vice President and Counsel Boston, MA 02109
Index of Schedules to Securities Purchase Agreement* Schedule 3.1 . . . . . . . . . . . . . . . . . . . . . . . .List of Subsidiaries Schedule 3.3 . . . . . . . . . . . . . . . . . . . . . . . .Capitalization Schedule 3.5 . . . . . . . . . . . . . . . . . . . . . . . .Required Consents Schedule 3.9 . . . . . . . . . . . . . . . . . . . . . . . .Intellectual Property Matters Schedule 4.4 . . . . . . . . . . . . . . . . . . . . . . . .Use of Proceeds ----------------------------------- * Schedules omitted from filing EX-5 5 rights.txt FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT 5 FORM OF REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT is made and entered into as of _________ ___, 2002 between the investor or investors signatory hereto (each an "Investor" and together the "Investors") and Superconductor Technologies Inc., a Delaware corporation (the "Company") with reference to the following facts: A. Simultaneously with the execution and delivery of this Agreement, the Investors are purchasing from the Company, pursuant to a Securities Purchase Agreement dated the date hereof (the "Purchase Agreement"), up to (i) an aggregate of ___________ shares (the "Shares") of the Company's common stock, par value $0.001 per share ("Common Stock"), and stock purchase warrants ("Warrants") to purchase up to ________ additional shares of Common Stock (the "Warrant Shares") (terms not defined herein shall have the meanings ascribed to them in the Purchase Agreement). B. The Company desires to grant to the Investors the registration rights set forth herein with respect to the Common Stock purchased pursuant to the Purchase Agreement and the Warrant Shares (hereinafter referred to as the "Stock" or "Securities" of the Company). NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Registrable Securities. As used herein the term "Registrable Security" means the Securities until (i) the Registration Statement has been declared effective by the Commission, and all Securities have been disposed of pursuant to the Registration Statement, (ii) all Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 ("Rule 144") (or any similar provision then in force) under the Securities Act of 1933, as amended (the "Securities Act") are met, (iii) all Securities have been otherwise transferred to holders who may trade such Securities without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such Securities not bearing a restrictive legend or (iv) such time as, in the opinion of counsel to the Company, all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act. The term "Registrable Securities" means any and/or all of the securities falling within the foregoing definition of a "Registrable Security." In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement. 2. Restrictions on Transfer. Each Investor acknowledges and understands that prior to the registration of the Securities as provided herein, the Securities are "restricted securities" as defined in Rule 144 promulgated under the Securities Act. Each Investor understands that no disposition or transfer of the Securities may be made by Investor in the absence of (i) an opinion of counsel to the Investor, in form and substance reasonably satisfactory to the Company, that such transfer may be made without registration under the Securities Act or (ii) such registration. With a view to making available to the Investors the benefits of Rule 144 under the Securities Act or any other similar rule or regulation of the Commission 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) comply with the provisions of paragraph (c)(1) of Rule 144; and (b) file with the Commission in a timely manner all reports and other documents required to be filed with the Commission pursuant to Section 13 or 15(d) under the Exchange Act by companies subject to either of such sections, irrespective of whether the Company is then subject to such reporting requirements. 3. Registration Rights With Respect to the Securities. 3.1 The Company agrees that it will prepare and file with the Securities and Exchange Commission ("Commission"), within thirty (30) days after the Closing Date a registration statement (on Form S-3, or other appropriate registration statement form) under the Securities Act (the "Registration Statement"), at the sole expense of the Company (except as provided in Section 3.3 hereof), in respect of the Investors, so as to permit a public offering and resale of the Securities under the Act by the Investors as selling stockholders and not as underwriters. The Company shall use its best efforts to cause such Registration Statement to become effective within ninety (90) days from the Closing Date. The number of shares designated in the Registration Statement to be registered shall include the Shares and Warrant Shares. The Company will notify the Investors of the effectiveness of the Registration Statement within one Trading Day of such event. 3.2 The Company will maintain the Registration Statement or post-effective amendment filed under this Section 3 effective under the Securities Act until the earlier of (i) the date that none of the Securities covered by such Registration Statement are or may become issued and outstanding, (ii) the date that all of the Securities have been sold pursuant to such Registration Statement, (iii) the date the Investors receive an opinion of counsel to the Company that the Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) all Securities have been otherwise transferred to persons who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend, or (v) all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) or any similar provision then in effect under the Securities Act in the opinion of counsel to the Company (the "Effectiveness Period"). 3.3 All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under subparagraph 3.1 and in complying with applicable securities and Blue Sky laws (including, without limitation, all attorneys' fees of the Company) shall be borne by the Company. The Investors shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Securities being registered and the fees and expenses of their counsel. The Investors and their counsel shall have a reasonable period, not to exceed five (5) trading days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the Commission, and the Company shall upon request provide each Investor with copies of any comment letters received from the Commission with respect thereto within two (2) trading days of receipt thereof. The Company shall qualify any of the Securities for sale in such states as any Investor reasonably designates and shall furnish indemnification in the manner provided in Section 6 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the sellers, or which will require the Company to qualify to do business in such state or require the Company to file therein any general consent to service of process. The Company at its expense will supply the Investors with copies of the applicable Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by the Investors. 3.4 The Company shall not be required by this Section 3 to include any Investor's Securities in any Registration Statement which is to be filed if, in the opinion of counsel to the Company, the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all Investors or transferees obtaining securities which are not "restricted securities" as defined in Rule 144 under the Securities Act. 3.5 In the event that the Registration Statement to be filed by the Company pursuant to Section 3.1 above is not declared effective by the Commission within ninety (90) days from the Closing Date (a "Registration Default"), then the Company will pay each Investor as liquidated damages for such failure and not as a penalty five percent (5%) of the Purchase Price ("Liquidated Damages Amount"). If the Registration Statement is not declared effective by the Commission within one hundred twenty (120) days of Closing, then the Company shall pay each Investor a second Liquidated Damages Amount. Such payment of the liquidated damages shall be made to the Investors in cash, within five (5) calendar days of demand; provided, however, that the payment of such liquidated damages shall not relieve the Company from its obligations to register the Securities pursuant to this Section. If the Company does not remit the payment to the Investors as set forth above, the Company will pay the Investors reasonable costs of collection, including attorneys' fees, in addition to the liquidated damages. The registration of the Securities pursuant to this provision shall not affect or limit the Investors' other rights or remedies as set forth in this Agreement. 3.6 No provision contained herein shall preclude the Company from selling securities pursuant to any Registration Statement in which it is required to include Securities pursuant to this Section 3. 3.7 If at any time or from time to time after the effective date of any Registration Statement, the Company notifies the Investors in writing of the existence of a Potential Material Event (as defined in Section 3.8 below), the Investors shall not offer or sell any Securities or engage in any other transaction involving or relating to Securities, from the time of the giving of notice with respect to a Potential Material Event until the Investors receive written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, however, that the Company may not so suspend the right to such holders of Securities for more than thirty (30) days in the aggregate (90 days in the case of an acquisition requiring the filing of audited financial statements of the acquired business under Form 8-K) during any twelve month period, during the period the Registration Statement is required to be in effect. The Company must, if lawful, give the Investors notice in writing at least two (2) trading days prior to the first day of the blackout period. 3.8 "Potential Material Event" means any of the following: (a) the possession by the Company of material information not ripe for disclosure in a registration statement, as determined in good faith by the Chief Executive Officer or the Board of Directors of the Company that disclosure of such information in a Registration Statement would be detrimental to the business and affairs of the Company; or (b) any material engagement or activity by the Company which would, in the good faith determination of the Chief Executive Officer or the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time. 4. Cooperation with Company. The Investors will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information and confirmations reasonably requested by the Company or the Commission (which shall include all information regarding the Investors and proposed manner of sale of the Registrable Securities required to be disclosed in any Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities and entering into and performing their obligations under any underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering. Nothing in this Agreement shall obligate any Investor to consent to be named as an underwriter in any Registration Statement. The obligation of the Company to register the Registrable Securities shall be absolute and unconditional as to those Securities which the Commission will permit to be registered without naming the Investors as underwriters. Any delay or delays caused by the Investors by failure to cooperate as required hereunder shall not constitute a Registration Default. 5. Registration Procedures. If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible, subject to the Investors' assistance and cooperation as reasonably required with respect to each Registration Statement: 5.1 (a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the Investors shall desire to sell or otherwise dispose of the same (including prospectus supplements with respect to the sales of securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Securities Act) and (b) take all lawful action such that each of (A) the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) the prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Effectiveness Period include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 5.2 (a) prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements thereto), provide draft copies thereof to the Investors as required by Section 3.3 and reflect in such documents all such comments as the Investors (and their counsel) reasonably may propose respecting the Selling Shareholders and Plan of Distribution sections (or equivalents) and (b) furnish to each Investor such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the Act, and such other documents, as such Investor may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such Investor; 5.3 register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as the Investors shall reasonably request (subject to the limitations set forth in Section 3.3 above), and do any and all other acts and things which may be necessary or advisable to enable each Investor to consummate the public sale or other disposition in such jurisdiction of the securities owned by such Investor; 5.4 list such Registrable Securities on the Principal Market, if the listing of such Registrable Securities is then permitted under the rules of such Principal Market; 5.5 notify each Investor at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Securities Act, of the happening of any event of which it 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 omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall use its best efforts to prepare and file a curative amendment under Section 5.1; 5.6 as promptly as practicable after becoming aware of such event, notify each Investor who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, recession or removal of such stop order or other suspension; 5.7 cooperate with the Investors to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts, as the case may be, as the Investors reasonably may request and registered in such names as the Investors may request; and, within five (5) trading days after a Registration Statement which includes Registrable Securities is declared effective by the Commission, deliver and cause legal counsel selected by the Company to deliver to the transfer agent for the Registrable Securities (with copies to the Investors) an appropriate instruction and, to the extent necessary, an opinion of such counsel; 5.8 take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Investors of their Registrable Securities in accordance with the intended methods therefor provided in the prospectus which are customary for issuers to perform under the circumstances; 5.9 in the event of an underwritten offering, promptly include or incorporate in a prospectus supplement or post-effective amendment to the Registration Statement such information as the managers reasonably agree should be included therein and to which the Company does not reasonably object and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment; and 5.10 maintain a transfer agent and registrar for its Common Stock. 6. Indemnification. 6.1 To the maximum extent permitted by law, the Company agrees to indemnify and hold harmless the Investors and each person, if any, who controls an Investor within the meaning of the Securities Act (each a "Distributing Investor") against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), to which the Distributing Investor may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent, and only to the extent, that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Investor, its counsel, affiliates or any underwriter, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Company may otherwise have. 6.2 To the maximum extent permitted by law, each Distributing Investor agrees that it will indemnify and hold harmless the Company, and each officer and director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Investor, its counsel, affiliates or any underwriter, specifically for use in the preparation thereof. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor and the amount of any damages such holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Securities included in the Registration Statement giving rise to such indemnification obligation. This indemnity agreement will be in addition to any liability which the Distributing Investor may otherwise have. 6.3 Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action against such indemnified party, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent the failure of the indemnified party to provide such written notification actually prejudices the ability of the indemnifying party to defend such action. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified parties as a group shall have the right to employ one separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party unless (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party or any other indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified party). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld so long as such settlement includes a full release of claims against the indemnified party. 7. Contribution. In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 6 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 6 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party, then the Company and the applicable Distributing Investor shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Investor on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Investor agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 7. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any other provision of this Section 7, in no event shall any (i) Investor be required to undertake liability to any person under this Section 7 for any amounts in excess of the dollar amount of the proceeds received by such Investor from the sale of such Investor's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement under which such Registrable Securities are registered under the Securities Act. 8. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by facsimile, addressed as set forth in the Purchase Agreement or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of sending by reputable courier service, fully prepaid, addressed to such address, or (c) upon actual receipt of such mailing, if mailed. Either party hereto may from time to time change its address or facsimile number for notices under this Section 8 by giving at least ten (10) days' prior written notice of such changed address or facsimile number to the other party hereto. 9. Assignment. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. The rights granted the Investors under this Agreement may be assigned to any purchaser of substantially all of the Registrable Securities (or the rights thereto) from an Investor, as otherwise permitted by the Purchase Agreement. 10. Determinations. Except as otherwise expressly provided herein, all consents, approvals and other determinations (other than amendments to the terms and provisions of this Agreement) to be made by the Investors pursuant to this Agreement and all waivers and amendments to or of any provisions in this Agreement after the Closing Date shall be made by Investors (excluding Investors who are affiliates of the Company) that have invested more than fifty percent (50%) of the aggregate Investment Amounts invested by all Investors (excluding Investors who are affiliates of the Company). 11. Counterparts/Facsimile. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when together shall constitute but one and the same instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. In lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original. 12. Remedies. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. 13. Conflicting Agreements. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise prevents the Company from complying with all of its obligations hereunder. 14. Headings. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in the State of Delaware (without regard to principles of conflict of laws). Both parties irrevocably consent to the exclusive jurisdiction of the United States federal courts and the state courts located in Delaware with respect to any suit or proceeding based on or arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts. The Company and each Purchaser irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company and each Purchaser further agrees that service of process upon a party mailed by first class mail shall be deemed in every respect effective service of process upon the party in any such suit or proceeding. Nothing herein shall affect either party's right to serve process in any other manner permitted by law. Each of the parties agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Signature Page to Registration Rights Agreement IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this Agreement to be duly executed as of the date first above written. "COMPANY" SUPERCONDUCTOR TECHNOLOGIES INC. By: M. Peter Thomas President and Chief Executive Officer "INVESTORS" RESIDENCE: ___________ WILMINGTON SECURITIES, INC. Investment Amount: $2,116,500 Common Shares: 2,227,895 Warrant Shares: 556,974 By: Andrew H. McQuarrie, President Address for Notice: Wilmington Securities, Inc. 824 Market Street, Suite 900 Wilmington, DE 19801 Attn: Andrew H. McQuarrie RESIDENCE: ___________ HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND C.G. GREFENSTETTE, TRUSTEES OF THE HENRY L. HILLMAN Investment Amount: $187,500 TRUST U/A/T DATED NOVEMBER 18, 1985 Common Shares: 197,368 Warrant Shares: 49,342 By: Address for Notice: C.G. Grefenstette, Trustee ______________________ ______________________ ______________________
RESIDENCE: ___________ C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE Investment Amount: $49,000 CHILDREN OF JULIET LEA HILLMAN SIMONDS Common Shares: 51,579 Warrant Shares: 12,895 By: Address for Notice: C.G. Grefenstette, Trustee By: L.M. Wagner, Trustee RESIDENCE: ___________ C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE Investment Amount: $49,000 CHILDREN OF AUDREY HILLMAN FISHER Common Shares: 51,579 Warrant Shares: 12,895 By: Address for Notice: C.G. Grefenstette, Trustee By: L.M. Wagner, Trustee RESIDENCE: ___________ C.G. GREFENSTETTE AND L.M. WAGNER, TRUSTEES U/A/T DATED DECEMBER 30, 1976 FOR THE Investment Amount: $49,000 CHILDREN OF HENRY LEA HILLMAN, JR. Common Shares: 51,579 Warrant Shares: 12,895 By: Address for Notice: C.G. Grefenstette, Trustee By: L.M. Wagner, Trustee
RESIDENCE: ___________ C.G. GREFENSTETTE AND L.M. WAGNER, Investment Amount: $49,000 TRUSTEES U/A/T DATED Common Shares: 51,579 DECEMBER 30, 1976 FOR Warrant Shares: 12,895 THE CHILDREN OF WILLIAM TALBOTT HILLMAN Address for Notice: By: C.G. Grefenstette, Trustee By: L.M. Wagner, Trustee
EX-2 7 merger.txt AGREEMENT AND PLAN OF MERGER EXHIBIT 2 AGREEMENT AND PLAN OF MERGER among SUPERCONDUCTOR TECHNOLOGIES INC. STI ACQUISITION, INC. and CONDUCTUS, INC. Dated as of October 10, 2002 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of October 10, 2002 (this "Agreement") among Superconductor Technologies Inc., a Delaware corporation ("Parent"), STI Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and Conductus, Inc., a Delaware corporation (the "Company"). W I T N E S S E T H WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), Parent will combine with the Company through the merger of Merger Sub with and into the Company with the Company being the surviving corporation (the "Merger"); WHEREAS, the Board of Directors of Parent has (i) approved, and deems it advisable and in the best interests of Parent and its stockholders to consummate, the Merger, upon the terms and subject to the conditions set forth in this Agreement and (ii) recommended the approval of the Merger and the adoption of this Agreement by the stockholders of Parent; WHEREAS, the Board of Directors of the Company has (i) approved, and deems it advisable and in the best interests of the Company and its stockholders to consummate, the Merger, upon the terms and subject to the conditions set forth in this Agreement and (ii) recommended the approval of the Merger and the adoption of this Agreement by the stockholders of the Company; WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to Company's willingness to enter into this Agreement, certain stockholders of Parent are entering into voting agreements (the "Voting Agreements") with Company in substantially the form attached as Exhibit A hereto; WHEREAS, for United States federal income tax purposes, the Merger is intended to qualify as a reorganization under the provisions of section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, pursuant to the Merger, (i) each outstanding share of Common Stock of the Company and all outstanding options or other rights to acquire or receive shares of Common Stock of the Company and (ii) each outstanding warrant to acquire or receive shares of Common Stock of the Company (a "Warrant") that does not by its terms terminate at or prior to the Effective Time (as defined below) shall be converted into the right to acquire or receive shares of Parent's authorized Common Stock at the rate determined in this Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows: ARTICLE I THE MERGER SECTION 1.01 The Merger. Upon the terms of this Agreement and subject to the conditions set forth in Article VII, and in accordance with the DGCL, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 1.02 Effective Time; Closing. As promptly as practicable and in no event later than the second business day following the satisfaction or, if permissible, waiver of each of the conditions set forth in Article VII (or such other date as may be agreed in writing by each of the parties hereto), the parties shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL. The term "Effective Time" means the date and time of the filing with, and the acceptance by, the Secretary of State of the State of Delaware of the Certificate of Merger (or such later time, not to exceed 30 days after such acceptance for record, as may be agreed in writing by each of the parties and specified in the Certificate of Merger). Immediately prior to the filing of the Certificate of Merger, a closing (the "Closing") will be held at the offices of Guth|Christopher LLP (or such other place as the parties hereto may agree). The date on which the Closing shall occur is referred to herein as the "Closing Date." SECTION 1.03 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 1.04 Certificate of Incorporation; Bylaws. (a) At the Effective Time, the Certificate of Incorporation of the Company as the Surviving Corporation shall be amended and restated to read the same as the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, except that Article I of the amended and restated Certificate of Incorporation of Company, instead of reading the same as the Certificate of Incorporation of Merger Sub, shall read as follows: "The name of this corporation is Conductus, Inc." (b) At the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall, subject to SECTION 6.06(a) of this Agreement, be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such Bylaws. SECTION 1.05 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES SECTION 2.01 Conversion of Securities. (a) At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities, the following actions shall occur: (i) Each share of Common Stock of the Company, par value $.0001 per share (the "Company Common Stock"), including, with respect to each such share of Company Common Stock, the associated Rights (as defined in that certain Rights Agreement dated January 29, 1998, by and between the Company and Boston EquiServe, L.P., as Rights Agent (the "Rights Plan") (all issued and outstanding shares of Company Common Stock being hereinafter collectively referred to as the "Shares"), issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to SECTION 2.01(a)(ii)) shall be converted, subject to SECTION 2.02(e), into the right to receive that number of shares of Common Stock of Parent, par value $.001 per share (the "Parent Common Stock"), equal to 0.6 (the "Exchange Ratio"). At the Effective Time, each Share shall be canceled, cease to be outstanding and cease to exist and each holder of Shares shall thereafter cease to have any rights with respect to such Shares, except the right to receive, without interest, shares of Parent Common Stock in accordance with this SECTION 2.01(a)(i) and cash for any fractional shares of Parent Common Stock in accordance with SECTION 2.02(e). (ii) Each Share held in the treasury of the Company and each Share owned by Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment or distribution shall be made with respect thereto. (iii) Each share of Common Stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one duly authorized, validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation. (b) If between the date of this Agreement and the Effective Time, the outstanding shares of Parent Common Stock or outstanding shares of Company Common Stock are changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event, the Exchange Ratio shall be correspondingly adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or similar event. (c) If any shares of Company Common Stock outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement or other agreement with the Company, then (i) the shares of Parent Common Stock issued in exchange for such shares of Company Common Stock will also be unvested and/or subject to the same repurchase option, risk of forfeiture or other condition, (ii) the certificates representing such shares of Parent Common Stock may accordingly be marked with appropriate legends and (iii) the Company shall take all action that may be necessary to ensure that, from and after the Effective Time, Parent is entitled to exercise any such repurchase option or other right set forth in any such restricted stock purchase agreement or other agreement. SECTION 2.02 Exchange of Certificates. (a) Exchange Agent. Promptly after the Effective Time, Parent shall deposit, or shall cause to be deposited, with any bank or trust company designated by Parent and reasonably satisfactory to the Company (the "Exchange Agent"), for the benefit of the holders of Shares, for exchange in accordance with this Article II through the Exchange Agent, certificates representing shares of Parent Common Stock issuable pursuant to SECTION 2.01 as of the Effective Time and cash, from time to time as required to make payments in lieu of any fractional shares pursuant to SECTION 2.02(e) (such cash and certificates for shares of Parent Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the shares of Parent Common Stock contemplated to be issued pursuant to SECTION 2.01 out of the Exchange Fund. Except as contemplated by SECTION 2.02(f) hereof, the Exchange Fund shall not be used for any other purpose. (b) Exchange Procedures. As promptly as practicable after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Shares (the "Certificates") (i) a letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock and cash in lieu of any fractional shares. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may be reasonably required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock that such holder has the right to receive in respect of the Shares formerly represented by such Certificate (after taking into account all Shares then held by such holder), cash in lieu of any fractional share of Parent Common Stock to which such holder is entitled pursuant to SECTION 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant to SECTION 2.02(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock, cash in lieu of any fractional share of Parent Common Stock to which such holder is entitled pursuant to SECTION 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant to SECTION 2.02(c) may be issued to a transferee if the Certificate representing such Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence satisfactory to the Surviving Corporation that any applicable share transfer taxes have been paid. Until surrendered as contemplated by this SECTION 2.02, each Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the certificate representing shares of Parent Common Stock, cash in lieu of any fractional share of Parent Common Stock to which such holder is entitled pursuant to SECTION 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant to SECTION 2.02(c). (c) Distributions with Respect to Unexchanged Shares of Parent Common Stock. No dividends or other distributions declared or made after the Effective Time with respect to the shares of Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby, and no cash payment in lieu of any fractional shares shall be paid to any such holder pursuant to SECTION 2.02(e), until the holder of such Certificate shall surrender such Certificate as provided in SECTION 2.02(b). Subject to the effect of escheat, tax or other applicable Laws following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) the amount of any cash payable with respect to a fractional Parent Common Share to which such holder is entitled pursuant to SECTION 2.02(e) and the amount of dividends or other distributions with a record date after the Effective Time and theretofore payable with respect to such whole shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock. (d) No Further Rights in Company Common Stock. All shares of Parent Common Stock issued upon conversion of the Shares in accordance with the terms hereof and any cash paid pursuant to SECTION 2.02(c) or (e) shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to such Shares. (e) No Fractional Shares. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Each holder of a fractional share interest shall be paid an amount in cash (without interest) equal to the product obtained by multiplying (i) such fractional share interest to which such holder (after taking into account all fractional share interests then held by such holder) would otherwise be entitled by the average closing price per share of Parent Common Stock for the 20 trading day period up to and including the trading day immediately preceding the Effective Time, as reported on The Nasdaq National Market ("Nasdaq"). As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional share interests, the Exchange Agent shall so notify Parent, and Parent shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional share interests subject to and in accordance with the terms of SECTION 2.02(b) and (c). (f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the holders of Shares for three months after the Effective Time shall be delivered to Parent, upon demand, and any holders of Shares who have not theretofore complied with this Article II shall thereafter look only to Parent for the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to SECTION 2.02(e) and any dividends or other distributions with respect to the shares of Parent Common Stock to which they are entitled pursuant to SECTION 2.02(c). Any portion of the Exchange Fund remaining unclaimed by holders of Shares as of a date that is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any person previously entitled thereto. (g) No Liability. Neither Parent nor the Surviving Corporation shall be liable to any holder of Shares for any shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash delivered to a public official pursuant to any abandoned property, escheat or similar Law. (h) Withholding Rights. Each of the Surviving Corporation, Parent and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Surviving Corporation, Parent or the Exchange Agent, as the case may be. (i) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, and, if required by the Surviving Corporation or the Exchange Agent, the posting by such person of a bond, in such reasonable amount as the Surviving Corporation or the Exchange Agent may direct, as indemnity against any claim that may be made against the Surviving Corporation or the Exchange Agent with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock, any cash in lieu of any fractional share of Parent Common Stock to which the holder thereof is entitled pursuant to SECTION 2.02(e) and any dividends or other distributions to which the holder thereof is entitled pursuant to SECTION 2.02(c). SECTION 2.03 Stock Transfer Books. (a) At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Shares thereafter on the records of the Company. From and after the Effective Time, the holders of Certificates representing Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent for any reason shall be converted into shares of Parent Common Stock, any cash in lieu of any fractional share of Parent Common Stock to which the holders thereof are entitled pursuant to SECTION 2.02(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to SECTION 2.02(c). (b) Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any person constituting an Affiliate (as defined in SECTION 3.23 below) of the Company shall not be exchanged until Parent shall have received from such person a Company Affiliate Agreement as provided in SECTION 6.15. SECTION 2.04 Company Stock Options and Stock Purchase Plan. (a) At the Effective Time, Parent shall assume (i) all options to acquire Company Common Stock (the "Company Stock Options") outstanding immediately prior to the Effective Time, whether or not exercisable and whether or not vested, under the Company's 1992 Stock Option/Stock Purchase Plan (the "Company Stock Option Plan"), and (ii) each Company Stock Option Plan, and the Company's repurchase right with respect to any unvested shares acquired through the Company Stock Option Plan, shall be assigned to Parent by virtue of the Merger and without any further action on the part of the Company or the holder of the outstanding Company Stock Option. Each Company Stock Option so assumed by Parent under this Agreement will continue to have, and be subject to, the same terms and conditions of such options immediately prior to the Effective Time (including, without limitation, any repurchase rights or vesting provisions), except that (i) each Company Stock Option will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company Stock Option multiplied by the Exchange Ratio and (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such assumed Company Stock Option will be equal to the exercise price per share of such Company Stock Option in effect immediately prior to the Effective Time divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded upward to the nearest full cent). It is the intention of the parties that each Company Stock Option assumed by Parent shall qualify following the Effective Time as an incentive stock option as defined in section 422 of the Code to the extent permitted under section 422 of the Code and to the extent such option qualified as an incentive stock option prior to the Effective Time. All purchase rights of employees outstanding as of the date of this Agreement under the Company's 1994 Employee Stock Purchase Plan (the "Company Purchase Plan") shall be exercised immediately prior to the Effective Time, and each participant in the Company Purchase Plan shall accordingly be issued shares of Company Common Stock at that time pursuant to the terms of the Company Purchase Plan and each share of Company Common Stock so issued shall by virtue of the Merger, and without any action on the part of the holder thereof, be converted into the right to receive shares of Parent Common Stock in accordance with Section 2.01(a)(i) and cash for any fractional share of Parent Common Stock in accordance with Section 2.02(e). Except with respect to the purchase rights outstanding under the Company Purchase Plan on the date of this Agreement, the Company shall not accept nor process any subscriptions or requests for the purchase of Company Common Stock under the Company Purchase Plan and any purchase rights arising after the date of this Agreement under the Company Purchase Plan shall be terminated immediately prior to the Effective Time. The Company Purchase Plan shall be terminated as of the Effective Time. (b) As soon as practicable after the Effective Time, Parent shall deliver to each person who, immediately prior to the Effective Time, was a holder of an outstanding Company Stock Option an appropriate notice setting forth such holder's rights pursuant thereto. As soon as practicable after the Effective Time (but in any event not later than 45 days following the Effective Time), Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms) that will register the shares of Parent Common Stock subject to Company Stock Options to the extent permitted by federal securities laws and shall use its reasonable efforts to maintain the effectiveness of such registration statement or registration statements for so long as such options remain outstanding. In addition, Parent shall use all reasonable efforts to cause the shares of Parent Common Stock subject to Company Stock Options to be listed on Nasdaq and such exchanges as Parent shall determine. SECTION 2.05 Warrants. At the Effective Time, each Warrant granted and outstanding immediately prior to the Effective Time, whether contingent or earned, that does not terminate by its terms at or prior to the Effective Time shall be converted into a warrant to acquire shares of Parent Common Stock, and each Warrant so converted will continue to have, and be subject to, the same terms and conditions of such Warrant immediately prior to the Effective Time, except that (i) each Warrant will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock issuable upon exercise of such Warrant prior to the Effective Time multiplied by the Exchange Ratio and (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such assumed Warrant will be equal to the exercise price per share of Company Common Stock at which such Warrant was exercisable immediately prior to the Effective Time divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded upward to the nearest whole cent). SECTION 2.06 Appraisal Rights. (a) Notwithstanding anything in this Agreement to the contrary and to the extent applicable as provided under SECTION 2.06(d), any shares of Company Common Stock ("Dissenting Shares") which are issued and outstanding immediately prior to the Effective Time and which are held by stockholders of the Company who have, before the taking of the vote of the stockholders of the Company to approve the Merger and adopt this Agreement, properly perfected their appraisal rights under Section 262 of the DGCL or the comparable provisions of the California General Corporation Law ("CGCL") (collectively, the "Appraisal Rights Provisions") will not be converted as described in SECTION 2.01 hereof, but will thereafter constitute only the right to receive payment of the fair value of such shares of Company Common Stock in accordance with any applicable provisions of the Appraisal Rights Provisions; provided, however, that all shares of Company Common Stock held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares of Company Common Stock under the Appraisal Rights Provisions shall thereupon be deemed to have been canceled and retired and to have been converted, as of the Effective Time, into the right to receive the Merger Consideration, without interest, in the manner provided in SECTION 2.01 hereof. Persons who have perfected statutory rights with respect to Dissenting Shares as aforesaid will not be paid by the Surviving Corporation as provided in this Agreement and will have only such rights as are provided by the Appraisal Rights Provisions with respect to such Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, if Parent or Merger Sub abandons or is finally enjoined or prevented from carrying out, or the stockholders rescind their approval of the Merger and adoption of, this Agreement, the right of each holder of Dissenting Shares to receive the fair value of such Dissenting Shares in accordance with the Appraisal Rights Provisions will terminate, effective as of the time of such abandonment, injunction, prevention or rescission. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL, or the CGCL if applicable, and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL, or the CGCL if applicable. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle any such demands. (c) Each dissenting stockholder who becomes entitled under the DGCL, or the CGCL if applicable, to payment for Dissenting Shares shall receive payment therefor after the Effective Time from the Surviving Corporation (but only after the amount thereof shall have been agreed upon or finally determined pursuant to the DGCL, or the CGCL if applicable) and such Dissenting Shares shall be canceled. (d) This SECTION 2.06 is intended only to govern the appraisal rights provided by the statutory Appraisal Rights Provisions and only if and to the extent such provisions are legally applicable. It does not provide any contractual appraisal rights to holders of Company Common Stock, and the provisions of this SECTION 2.06 shall be disregarded and of no effect to the extent that the Appraisal Rights Provisions are not applicable to holders of Company Common Stock. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Merger Sub that the statements contained in this ARTICLE III are true and correct except as set forth in the disclosure schedule delivered by the Company to Parent and Merger Sub concurrently with the execution of this Agreement (the "Company Disclosure Schedule"). The Company Disclosure Schedule shall be arranged according to specific sections in this ARTICLE III and shall provide exceptions to, or otherwise qualify in reasonable detail, only the corresponding section in this ARTICLE III and any other section in this ARTICLE III where it is reasonably clear, upon a reading of such disclosure without any independent knowledge on the part of the reader regarding the matter disclosed, that the disclosure is intended to apply to such other section. For purposes of this ARTICLE III, where the context requires it, the term "Company" shall refer to the Company and the Company Subsidiaries. SECTION 3.01 Organization and Qualification; Subsidiaries. The Company Disclosure Schedule sets forth the jurisdiction of incorporation of Company and each subsidiary of Company (the "Company Subsidiaries"). Each of Company and the Company Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of such jurisdiction and has all requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to obtain such governmental approvals has not had, and could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (as defined below). Each of Company and the Company Subsidiaries is duly qualified or licensed as a foreign corporation or organization to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that have not had, and could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Other than the Company Subsidiaries, there are no corporations, partnerships, joint ventures, associations or other similar entities in which Company owns, of record or beneficially, any direct or indirect equity or other similar interest or any right (contingent or otherwise) to acquire the same. The term "Company Material Adverse Effect" means any changes in or effects on the business of Company that is materially adverse to the business, condition (financial or otherwise), assets (tangible or intangible), liabilities (including contingent liabilities), or results of operations or prospects of Company, except for any such changes or effects principally resulting from or principally arising in connection with (i) any changes affecting the wireless telecommunications equipment industry that do not have a disproportionate impact on Company, (ii) any changes in general economic conditions that do not disproportionately impact Company, (iii) in and of itself, any change in the trading price of the Company Common Stock (including any proceedings which may be initiated by Nasdaq with respect to the listing status of the Company Common Stock based on the failure of the trading price to meet the minimum bid requirements), (iv) the taking of any action expressly required by the terms of this Agreement or (v) a decline in commercial product revenues attributable to the public announcement of the Merger. SECTION 3.02 Certificate of Incorporation and Bylaws. The Company has heretofore made available to Parent a complete and correct copy of its Certificate of Incorporation and Bylaws, each as amended to date. Such Certificate of Incorporation and Bylaws are in full force and effect. The Company is not in violation of any of the provisions of its Certificate of Incorporation or Bylaws. SECTION 3.03 Capitalization. (a) The authorized capital stock of the Company consists of (i) 75,000,000 shares of Company Common Stock, and (ii) 5,000,000 shares of Preferred Stock, par value $.0001 per share (the "Company Preferred Stock"). (b) As of October 5, 2002, (i) 22,519,368 shares of Company Common Stock were issued and outstanding, all of which are duly authorized, validly issued, fully paid and non-assessable, (ii) 8,967 shares of Company Common Stock were held in the treasury of the Company or by Company Subsidiaries, (iii) an aggregate of 3,371,097 shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Option Plans, of which an aggregate of 2,833,757 shares are subject to outstanding, unexercised options, (iv) 255,273 shares of Company Common Stock are reserved for issuance pursuant to the Company Purchase Plan, of which an aggregate of up to 104,135 shares are subject to outstanding purchase rights and 151,138 shares are available for future issuance, (v) no shares of Company Preferred Stock were issued or outstanding, and (vi) an aggregate of 2,819,987 shares of Company Common Stock are reserved for issuance pursuant to outstanding warrants to acquire or receive shares of Company Common Stock. (c) Except as disclosed in SECTION 3.03(b), there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Company Subsidiary, or conditionally or absolutely obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions (whether conditional or absolute) specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any capital stock or other equity interest of any Company Subsidiary, and the Merger will not give rise to any such obligations. Each outstanding share of capital stock or other equity interest of each Company Subsidiary is duly authorized, validly issued, fully paid and non-assessable, and each such share or other equity interest owned by the Company or another Company Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other Company Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. To the knowledge of the Company, there are no voting trusts, proxies or other agreements or understandings with respect to the capital stock of the Company. (d) The terms of each of the Company Stock Options Plan do not prohibit the assumption of the Company Stock Options as provided in SECTION 2.04. Neither the execution or delivery of this Agreement nor consummation of the Merger will accelerate vesting of any Company Option. SECTION 3.04 Authority Relative to This Agreement. The Company has all necessary corporate power and authority (a) to execute and deliver this Agreement, and (b) assuming the approval of the Merger and adoption of this Agreement by the requisite vote of the Company's stockholders under the DGCL, the Company's Bylaws and applicable Nasdaq rules, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated hereby have been duly and validly authorized by the unanimous vote of the board of directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger and the other transactions so contemplated (other than, with respect to the Merger, the approval of the Merger and adoption of this Agreement by the requisite vote of the Company's stockholders the DGCL, the Company's Bylaws and applicable Nasdaq rules, and the filing and recordation of appropriate merger documents as required by the DGCL). The affirmative vote of the holders of a majority of the shares of Company Common Stock outstanding on the record date for the Company Stockholder's Meeting is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger and adopt this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). SECTION 3.05 No Conflict; Required Filings and Consents. (a)a The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of the Company or any equivalent organizational documents of any Company Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in SECTION 3.05(b) have been obtained and all filings and obligations described in SECTION 3.05(b) have been made or complied with, conflict with or violate any Law applicable to the Company or (iii) conflict with, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or require any payment under, or result in the creation of a lien, claim, security interest or other charge or encumbrance on any property or asset of the Company pursuant to, any Company Contract. (a)b The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, order, authorization, registration or permit of, or filing with or notification to, any governmental entity, except for applicable requirements, if any, of the Exchange Act, the Securities Act, Nasdaq, and the filing and recordation of appropriate merger documents as required by the DGCL. SECTION 1.02 SEC Filings; Financial Statements. (a) The Company has filed all forms, reports and documents required to be filed by it with the Securities and Exchange Commission ("SEC") since January 1, 1998 (collectively, the "Company SEC Reports"). As of the respective dates they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing), (i) the Company SEC Reports complied in all material respects with the requirements of the Securities Act of 1933 (the "Securities Act") or the Securities and Exchange Act of 1934 (the "Exchange Act"), as the case may be, and (ii) none of the Company SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Company Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports was prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Regulation S-X) and each presents fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and the consolidated Company Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount). The balance sheet of the Company contained in the Company SEC Reports as of December 31, 2001 is hereinafter referred to as the "Company Balance Sheet." (c) The Company has heretofore furnished to Parent a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act. SECTION 1.03 Tax Matters. To the knowledge of the Company, neither the Company nor any of its affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of section 368(a) of the Code. The Company is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. SECTION 1.04 Brokers. No broker, finder or investment banker (other than U.S. Bancorp Piper Jaffray ("Company Financial Advisor")) is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. SECTION 1.05 Undisclosed Liabilities. The Company has no liabilities (absolute, accrued, contingent or otherwise and whether due or to become due) other than liabilities or obligations: (a) fully reflected or reserved against on the Company Balance Sheet; (b) liabilities incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice, which, individually or in the aggregate, could not reasonably be expected to have a Company Material Adverse Effect. SECTION 1.06 Absence of Certain Changes or Events. Since December 31, 2001, there has not been any Company Material Adverse Effect and the business of the Company has been conducted in the ordinary course. SECTION 1.07 Absence of Litigation. Except as disclosed under the heading "Legal Proceedings" in the Company's SEC Reports, there is no other litigation, suit, claim, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company, or any property or asset of the Company, before any court, arbitrator or governmental entity, domestic or foreign. Neither the Company nor any material property or asset of the Company is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any governmental entity, or any order, writ, judgment, injunction, decree, determination or award of any governmental entity or arbitrator. SECTION 1.08 Intellectual Property. (a) Company owns or is licensed to use, and in any event possesses sufficient and legally enforceable rights with respect to, all Company Intellectual Property (as defined below) necessary for the conduct of its business as currently conducted without, to Company's knowledge, and without having conducted any special investigation or patent or trademark search, Infringement (as defined below) of any other person's Intellectual Property, except for such items as have yet to be conceived or developed. The Company Disclosure Schedule sets forth any and all royalty obligations of Company concerning the Company Intellectual Property. Company has not developed jointly with any other Person any Intellectual Property that is material to the business of Company with respect to which such other person has any material exclusive rights. There is no Company contract pursuant to which any person has any right (whether or not currently exercisable) to use, license or otherwise exploit any material Company Intellectual Property. (b) None of the material issued patents, registered trademarks, registered service marks and registered copyrights owned by the Company has been declared invalid or unenforceable. To the Company's knowledge, no other person is infringing, misappropriating or making any unlawful or unauthorized use of any material Company Intellectual Property. The Company has not (i) licensed any of the material Company Intellectual Property to any person on an exclusive basis, or (ii) entered into any covenant not to compete or contract limiting its ability to exploit fully any material Company Intellectual Property or to transact business in any market or geographical area or with any person. (c) Except as disclosed under the heading "Legal Proceedings" in the Company's SEC Reports, to the knowledge of the Company, the Company has not been or may not be engaged in, liable for or contributing to any Infringement. The Company has received no written notice or, to its knowledge, other communication of any actual, alleged, possible or potential Infringement, or other unlawful or unauthorized use of, any Intellectual Property owned or used by any other Person. (d) The Company has taken reasonable steps to protect the Company's rights in its confidential information and trade secrets. Each employee, consultant and contractor who ha had access to proprietary Intellectual Property which is necessary for the conduct of Company's business as currently conducted, has executed an agreement to maintain the confidentiality of such Intellectual Property and has executed appropriate agreements that are substantially consistent with the Company's standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of the Company's confidential information or trade secrets to any third party. (e) "Company Intellectual Property" means all Intellectual Property that is used in any business of the Company, or that may be necessary to conduct any such businesses as conducted. "Intellectual Property" means any: (i) patent, patent application, trademark (whether registered or unregistered), trademark application, trade name, fictitious business name, service mark (whether registered or unregistered), service mark application, copyright (whether registered or unregistered), domain name, copyright application, copyright registration, maskwork, maskwork application, trade secret, know-how, customer list, franchise, system, computer software, source code, algorithm, invention, design, blueprint, engineering drawing, proprietary product, technology, proprietary right or other intellectual property right or intangible asset, or (ii) the right to use or exploit any of the foregoing. "Infringement" means infringing, misappropriating or making any unlawful or unauthorized use of any Intellectual Property owned or used by any other person. SECTION 1.09 Taxes. (a) Tax Returns. All Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including, without limitation, estimated Tax returns and reports and material information returns and reports) required to be filed with any Tax Authority (as defined below) with respect to any Taxable (as defined below) period ending on or before the Closing, by or on behalf of the Company (collectively, "Company Tax Returns" and individually a "Company Tax Return"), have been or will be completed and filed when due (including any extensions of such due date) and all amounts shown due on such Company Tax Returns on or before the Effective Time have been or will be paid on or before such date, except where the failure to complete and file such Company Tax Returns or to pay such amounts shown would not have a Company Material Adverse Effect. Except as would not have a Company Material Adverse Effect, the consolidated financial statements of the Company contained in the Company SEC Reports (i) fully accrue in accordance with GAAP all actual and contingent liabilities for Taxes (as defined below) with respect to all periods through the date of the Company Balance Sheet. All information set forth in the notes to the consolidated financial statements of the Company contained in the Company SEC Reports relating to Tax matters is correct and complete in all material respects. The Company has withheld and paid to the applicable financial institution or Tax Authority all amounts required to be withheld. As used in this SECTION 3.14, the term the "Company" means the Company and any entity included in, or required to be included in, any consolidated, combined or untaxed group with the Company. For purposes of this Agreement, the following terms have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any and all taxes including, without limitation, (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, value added, net worth, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental entity responsible for the imposition of any such tax (domestic or foreign) (a "Tax Authority"), (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period or as the result of being a transferee or successor thereof and (iii) any liability for the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnify any other person. (b) Tax Claims. No material claim for assessment or collection of Taxes is presently being asserted against Company, and Company is not a party to any pending action, proceeding, or investigation by any governmental taxing authority. SECTION 1.10 Assets Other Than Real Property. Company has good title to all material assets reflected on the Company Balance Sheet or thereafter acquired, except those sold or otherwise disposed of since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice, free and clear of all mortgages, liens, security interests or other encumbrances of any nature whatsoever except Permitted Liens. For purposes of this Agreement, "Permitted Liens" shall mean (i) mechanics', carriers', workmen's, warehousemen's, repairmen's or other like liens arising in the ordinary course of business, (ii) liens arising under original purchase price conditional sale contracts and equipment leases with third parties entered into in the ordinary course, (iii) liens for Taxes and other governmental obligations and (iv) other imperfections of title, restrictions or encumbrances, if any, which liens, imperfections of title, restrictions or other encumbrances do not materially impair the continued use in the business of the respective owner thereof, and operation of the specific assets to which they relate. This SECTION 3.14 does not relate to real property or interests in real property, which are the subject of SECTION 3.15, or to intellectual property, which is the subject of SECTION 3.12. SECTION 1.11 Real Property. (a) Owned Property. Company does not own in fee any real property. (b) Leased Property. The Company Disclosure Schedule sets forth a complete list of all real property and interests in real property leased by Company ("Company Leased Properties") and identifies any leases relating to the Leased Properties. (c) Rights in Leased Property. The lease for each of the Company Leased Properties is in full force and effect, and the interest of Company in each of the Company Leased Properties is free and clear of all mortgages, liens, security interests, easements, covenants, rights-of-way and other similar restrictions of any nature whatsoever, except (A) Permitted Liens, (B) easements, covenants, rights-of-way and other similar restrictions of record and (C) (x) zoning, building and other similar restrictions, (y) mortgages, liens, security interests or encumbrances that have been placed by any developer, landlord or other third party on property over which Company has easement rights or on any Company Leased Property and subordination or similar agreements relating thereto and (z) unrecorded easements, covenants, rights-of-way or other similar restrictions, none of which items set forth in clauses (x), (y) and (z) above materially impairs the continued use in the business of Company and the operation of the property to which they relate. SECTION 1.12 Contracts. The Company Disclosure Schedule sets forth a true and complete list of each of the following types of contracts to which Company is a party (together with the leases related to the Company Leased Properties, "Company Contracts"): (a) Employment, Independent Contractor and Consulting Agreements. (i) Any employment agreement, employment contract or any agreement or contract providing for the payment of any severance compensation by Company to any person or for the provision, vesting and/or acceleration of any employee benefits following a change of ownership or control of Company and (ii) any independent contractor or consulting agreement that has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (b) Collective Bargaining Agreements. Any employee collective bargaining agreement or other contract with any labor union; (c) Non-Competition Agreements. Any covenant or agreement that restricts the ability of Company to compete in any line of business in any place in the world; (d) Agreements with Officers and Directors. Any material agreement or contract with any officer or director of Company (other than employment agreements covered by paragraph (a) above); (e) Subleases of Leased Property. Any sublease or similar agreement under which Company makes available for use by any third party, all or any portion of any Company Leased Property; (f) Personal Property Leases. Any lease or similar agreement under which (i) Company is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third party or (ii) Company is a lessor or sublessor of, or makes available for use by any third party, any tangible personal property owned or leased by Company, in any such case which has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (g) Supply and Service Agreements. (i) Any continuing agreement or contract for the future purchase by Company of materials, supplies or equipment or (ii) any advertising agreement or arrangement, in any such case which has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (h) Indebtedness. Any agreement or contract under which Company has borrowed or loaned any money or issued any note, bond, indenture or other evidence of indebtedness or directly or indirectly guaranteed indebtedness, liabilities or obligations of others (other than endorsements for the purpose of collection in the ordinary course of business), or any other note, bond, indenture or other evidence of indebtedness where the principal amount borrowed, loaned or guaranteed is in excess of $25,000; (i) Guarantees. Any agreement or contract under which any other person has directly or indirectly guaranteed indebtedness, liabilities or obligations of Company (other than endorsements for the purpose of collection in the ordinary course of business); (j) Partnerships, Limited Liability Companies and Joint Ventures. Any partnership agreement, limited liability company agreement or other joint venture agreement to which Company is a party; and (k) Other Agreements. Any other agreement, contract, lease, license (including exclusive Intellectual Property licenses), commitment or instrument to which Company is a party or by or to which the assets or business of Company is bound or subject, which in any case has an aggregate liability after the Effective Time in excess of $25,000, and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000. Except as disclosed in the Company Disclosure Schedule, Company has performed all material obligations required to be performed by it to date under the Company Contracts to which it is a party and it is not in breach or default in any material respect thereunder and, to the knowledge of Company, no other party to any of the Company Contracts is in breach or default in any material respect thereunder. SECTION 1.13 Employee Benefit Plans; ERISA. (a) Plans. The Company Disclosure Schedule sets forth each employee pension, retirement, profit sharing, stock bonus, stock option, stock purchase, incentive, deferred compensation, hospitalization, medical, dental, vision, life insurance, accidental death and dismemberment insurance, business travel insurance, cafeteria and flexible spending, sick pay, disability, severance, golden parachute or other plan, fund, program, policy, contract or arrangement (including any contracts or agreements with certain employees that relate to the transactions contemplated by this Agreement) providing employee benefits (the "Plans") maintained or contributed to by Company. Company has delivered to Parent true, complete and correct copies of (i) each Plan (or, in the case of any unwritten Plans, descriptions thereof), (ii) the most recent annual report on Form 5500 filed with the IRS with respect to each Plan (if any such report was required), (iii) the most recent summary plan description for each Plan for which such a summary plan description is required and (iv) each trust agreement and group annuity contract relating to any Plan. Neither Company nor any corporation or trade or business (whether or not incorporated) which would be treated as a member of the controlled group including Company under Section 4001(a)(14) of ERISA (as defined below) (an "ERISA Affiliate") would be liable for any amount pursuant to Section 4062, 4063 or 4064 of ERISA, if any Plan which is subject to Title IV of ERISA were to terminate. (b) Compliance with ERISA and the Code. None of Company or any of the Plans or any trust created thereunder, or any trustee or administrator thereof, has engaged in a transaction in connection with which Company would be subject to either a material liability or civil penalty assessed pursuant to Sections 409, 502(i) or 502(1) of ERISA or a material Tax imposed pursuant to Section 4971, 4972, 4974, 4975, 4976 or 4980B of the Code. Each of the Plans has been operated and administered in all material respects in accordance with applicable Laws, including the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code. Each Plan intended to be a qualified plan under Code Section 401 has received a favorable determination letter to that effect and nothing has occurred since the issuance of such letter that would adversely affect the Tax qualification of any such Plan. There are no pending or, to the knowledge of Company, threatened claims by or on behalf of any of the Plans, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than ordinary course claims for benefits). (c) Multiemployer Plan Liabilities. None of Company or any ERISA Affiliate is, or has been within the last six years, obligated to contribute, on behalf of any current or former employee of Company, to a multiemployer plan (as defined in Section 3(37) of ERISA) and no such ERISA Affiliate is liable or reasonably expected to be liable for any withdrawal liability under Section 4201 of ERISA. (d) Accumulated Funding Deficiencies; Liens. None of the Plans or any trust established thereunder has incurred any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Plans. No contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under Section 302(f) of ERISA. (e) Employee Welfare Benefit Plans. With respect to any Plan that is an employee welfare benefit plan, (i) no such Plan is unfunded or funded through a welfare benefits fund, as such term is defined in Section 419(e) of the Code and (ii) to the knowledge of Company, each such Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code, complies with the applicable requirements of Section 4980B(f) of the Code. SECTION 1.14 Compliance with Applicable Laws. To the knowledge of Company: (a) General. Company has not received notice of any alleged violation of any applicable statutes, laws, ordinances, rules, orders and regulations of any governmental authority or instrumentality, domestic or foreign ("Laws"), except for any such violations that would not have a Company Material Adverse Effect. This SECTION 3.18 does not relate to matters with respect to Taxes or any other taxes. This SECTION 3.18(a) does not relate to environmental matters, which are the subject of SECTION 3.18(c)and (d). (b) Lobbying Regulatory Matters. Company is in compliance in all material respects with all substantive, registration and reporting requirements of the Lobbying Disclosure Act of 1995, as amended, the Foreign Agent Registration Act of 1938, as amended, the Federal Election Campaign Act, federal bribery laws and rules regarding the making of gifts to members of the United States House of Representatives, members of the United States Senate and members of the executive branch of the federal government of the United States. (c) Notices of Certain Environmental Matters. Company has not received written notice of any alleged violation of Environmental Law or liability for any release of any Hazardous Material in connection with the present or past business or properties of Company or any of the Subsidiaries, and there exists no writ, injunction, decree, order or judgment outstanding, nor any lawsuit, proceeding, citation, summons or government agency investigation relating thereto, except for any such matters that would not have a Company Material Adverse Effect. (d) Definitions. For purposes of SECTION 3.18(c) and SECTION 4.18(c): (i) "Hazardous Material" means any chemical substance the presence of which requires investigation or remediation under any federal, state or local statute, regulation, ordinance, order, or common law; or which is defined as a "hazardous waste" or "hazardous substance" under any federal, state or local statute, regulation or ordinance, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) or the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); or which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is regulated as such by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States or state or any political subdivision thereof. (ii) "Environmental Law" means any applicable statute, regulation, rule, ordinance, code, license or order, of any governmental agency, department, commission, board, bureau or instrumentality of the United States, states and political subdivisions thereof and all applicable judicial and administrative and regulatory decrees, judgments and orders relating to the protection of human health or the environment with respect to Hazardous Materials. SECTION 1.15 Employee and Labor Relations. (a) There is no labor strike, dispute, or work stoppage or lockout pending or, to the knowledge of Company, threatened against or affecting Company; (b) to the knowledge of Company, no union organizing campaign is in progress with respect to the employees of Company; (c) there is no unfair labor practice charge or complaint against Company pending or, to the knowledge of Company, threatened before the National Labor Relations Board; (d) there is no pending or, to the knowledge of Company, threatened grievance that would have a Company Material Adverse Effect; and (e) no charges with respect to or relating to Company are pending before the Equal Employment Opportunity Commission or any state agency responsible for the prevention of unlawful employment practices as to which there is a reasonable likelihood of adverse determination, other than those which, if so determined, would not have a Company Material Adverse Effect. SECTION 1.16 Affiliate Transactions. Except as covered by SECTION 3.16(a), Company has (i) not entered into any written agreement, contract, subcontract, lease, understanding, instrument, note, option, warranty, purchase order, license, insurance policy or other legally binding commitment or undertaking of any nature with any of its officers or directors, except pursuant to the provisions of the Company Stock Option Plans or Company Purchase Plan, and (ii) has no accounts or loans receivable from any officer, director or affiliate of the Company involving, in any such case, obligations of the Company in excess of $25,000. SECTION 1.17 Board Approval; State Takeover Statutes. The board of directors of the Company has (a) approved and adopted this Agreement and declared it advisable, (b) determined that this Agreement is advisable, fair to and in the best interests of the stockholders of the Company, (c) resolved to recommend adoption of this Agreement to the stockholders of the Company, and (d) resolved that the Company take all action necessary to make inapplicable any restrictions on the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement that may result from the provisions of all applicable state Takeover Laws. For purposes of this Agreement, "Takeover Laws" means (a) any "moratorium," "control share acquisition," "fair price," "supermajority," "affiliate transactions," or "business combination statute or regulation" or other similar state antitakeover laws and regulations, and (b) Section 203 of the Delaware Law. SECTION 1.18 Opinion of Financial Advisor. The Board of Directors of Company has received from Company Financial Advisor a written opinion, dated as of the date of this Agreement, satisfactory in form and substance to the Board of Directors of Company, to the effect that the Merger is fair to Company and to Company's stockholders from a financial point of view. The Company will provide a copy of such opinion to Parent subsequent to the execution of this Agreement. SECTION 1.19 Affiliates. In accordance with SECTION 6.15, the Company has set forth in the Company Disclosure Schedule a list identifying all persons who to the Company's knowledge are deemed to be "affiliates" of the Company for purposes of Rule 145 under the Securities Act ("Affiliates"). SECTION 1.20 Rights Plan. As of the date of this Agreement, the Company has taken all action necessary to amend the Rights Plan to provide that neither Parent nor any of its affiliates shall be deemed to be an Acquiring Person (as such term is, defined in the Rights Plan), that neither a Distribution Date nor Shares Acquisition Date (as each such term is defined in the Rights Plan) shall be deemed to occur and the Company Rights will not separate from the shares of Company Common Stock, in each case as a result of the execution, delivery or performance of this Agreement or the public announcement or consummation of the Merger, or the other transactions contemplated by this Agreement. SECTION 1.21 Disclosure. The representations, warranties and statements by the Company in this Agreement, the Company Disclosure Schedule and the certificates delivered pursuant hereto do not contain any untrue statement of a material fact and, when taken together with each other, do not omit to state a material fact necessary to make such representations, warranties and statements, in light of the circumstances under which they are made, not misleading. ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Parent and Merger Sub hereby represent and warrant to the Company that the statements contained in this ARTICLE IV are true and correct except as set forth in the disclosure schedule delivered by Parent to the Company concurrently with the execution of this Agreement (the "Parent Disclosure Schedule"). The Parent Disclosure Schedule shall be arranged according to specific sections in this ARTICLE IV and shall provide exceptions to, or otherwise qualify in reasonable detail, only the corresponding section in this ARTICLE IV and any other section in this ARTICLE IV in where it is reasonably clear, upon a reading of such disclosure without any independent knowledge on the part of the reader regarding the matter disclosed, that the disclosure is intended to apply to such other section. For purposes of this ARTICLE IV, where the context requires it, the term "Parent" shall mean Parent and the Parent Subsidiaries. SECTION 2.01 Organization and Qualification; Subsidiaries. The Parent Disclosure Schedule sets forth the jurisdiction of incorporation of Parent and each subsidiary of Parent (the "Parent Subsidiaries"). Each of Parent and the Parent Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of such jurisdiction and has all requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to obtain such governmental approvals has not had, and could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect (as defined below). Each of Parent and the Parent Subsidiaries is duly qualified or licensed as a foreign corporation or organization to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that have not had, and could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Other than the Parent Subsidiaries, there are no corporations, partnerships, joint ventures, associations or other similar entities in which Parent owns, of record or beneficially, any direct or indirect equity or other similar interest or any right (contingent or otherwise) to acquire the same. The term "Parent Material Adverse Effect" means any changes in or effects on the business of Parent that is materially adverse to the business, condition (financial or otherwise), assets (tangible or intangible), liabilities (including contingent liabilities), or results of operations or prospects of Parent, except for any such changes or effects principally resulting from or principally arising in connection with (i) any changes affecting the wireless telecommunications equipment industry that do not have a disproportionate impact on Parent, (ii) any changes in general economic conditions that do not disproportionately impact Parent, (iii) in and of itself, any change in the trading price of the Parent Common Stock or (iv) the taking of any action expressly required by the terms of this Agreement. SECTION 2.02 Certificate of Incorporation and Bylaws. Parent has heretofore made available to Company a complete and correct copy of the Certificate of Incorporation and Bylaws, each as amended to date of Parent and Merger Sub. Each such Certificate of Incorporation and Bylaws are in full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of its Certificate of Incorporation or Bylaws. SECTION 2.03 Capitalization. (a) The authorized capital stock of the Parent consists of (i) 75,000,000 shares of Parent Common Stock, and (ii) 2,000,000 shares of preferred stock, par value $.001 per share ("Parent Preferred Stock"). (b) As of October 5, 2002, (i) 25,198,270 shares of Parent Common Stock were issued and outstanding, all of which are duly authorized, validly issued, fully paid and non-assessable, (ii) no shares of Parent Common Stock were held in the treasury of Parent, (iii) an aggregate of 3,643,405 shares of Parent Common Stock were reserved for issuance pursuant to the Parent's 1992 Stock Option Plan, 1992 Directors Stock Option Plan, 1998 Stock Option Plan and 1999 Stock Option Plan (collectively, "Parent Stock Option Plans"), of which an aggregate of 3,192,511 shares were subject to outstanding, unexercised options, (iv) no shares of Parent Preferred Stock were issued or outstanding, and (v) an aggregate of 3,192,467 shares of Parent Common Stock were reserved for issuance pursuant to outstanding warrants to acquire or receive shares of Parent Common Stock. (c) Except as disclosed in SECTION 4.03(b), there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Parent, or conditionally or absolutely obligating Parent to issue or sell any shares of capital stock of, or other equity interests in, the Parent or any Parent Subsidiary. All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions (whether conditional or absolute) specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable. There are no outstanding obligations of Parent to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any capital stock or other equity interest of any Parent Subsidiary, and the Merger will not give rise to any such obligations. Each outstanding share of capital stock or other equity interest of each Parent Subsidiary is duly authorized, validly issued, fully paid and non-assessable, and each such share or other equity interest owned by the Parent is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on Parent's voting rights, charges and other encumbrances of any nature whatsoever. To the knowledge of the Parent, there are no voting trusts, proxies or other agreements or understandings with respect to the capital stock of Parent. (d) The authorized stock of Merger Sub consists of 10,000 shares of common stock, par value $.001 per share, all of which are duly authorized, validly issued, fully paid and non-assessable and free of any preemptive rights in respect thereof, and there are 1,000 shares of common stock outstanding, all of which are owned by Parent. The shares of Parent Common Stock to be issued pursuant to the Merger in accordance with SECTION 2.01 (i) will be duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, Parent's Certificate of Incorporation or Bylaws or any agreement to which Parent is a party or is bound and (ii) will, when issued, be registered under the Securities Act and the Exchange Act and registered or exempt from registration under applicable state securities laws. SECTION 2.04 Authority Relative to This Agreement. Parent has all necessary corporate power and authority (a) to execute and deliver this Agreement, and (b) assuming the approval of the Merger and adoption of this Agreement by the requisite vote of Parent's stockholders under the DGCL, Parent's Bylaws and applicable Nasdaq rules, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the Merger and the other transactions contemplated hereby have been duly and validly authorized by the unanimous vote of the board of directors of Parent, and no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate the Merger and the other transactions so contemplated (other than, with respect to the Merger, the approval of the Merger and adoption of this Agreement by the requisite vote of Parent's stockholders the DGCL, Parent's Bylaws and applicable Nasdaq rules, and the filing and recordation of appropriate merger documents as required by the DGCL). The affirmative vote of the holders of a majority of the shares of Parent Common Stock voting on the record date for Parent Stockholder's Meeting is the only vote of the holders of any class or series of Parent's capital stock necessary to approve the Merger and adopt this Agreement. This Agreement has been duly and validly executed and delivered by Parent and, assuming the due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). SECTION 2.05 No Conflict; Required Filings and Consents. (a)a The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of Parent or Merger Sub, (ii) assuming that all consents, approvals, authorizations and other actions described in SECTION 4.05(a) have been obtained and all filings and obligations described in SECTION 4.05(a) have been made or complied with, conflict with or violate any Law applicable to Parent or Merger Sub or (iii) conflict with, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or require any payment under, or result in the creation of a lien, claim, security interest or other charge or encumbrance on any property or asset of Parent or Merger Sub pursuant to, any Parent Contract or any contract of Merger Sub. (a)b The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, require any consent, approval, order, authorization, registration or permit of, or filing with or notification to, any governmental entity, except for applicable requirements, if any, of the Exchange Act, the Securities Act, Nasdaq, and the filing and recordation of appropriate merger documents as required by the DGCL. SECTION 1.02 SEC Filings; Financial Statements. (a) Parent has filed all forms, reports and documents required to be filed by it with the SEC since January 1, 1998 (collectively, the "Parent SEC Reports"). As of the respective dates they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing), (i) Parent SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) none of Parent SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Parent Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in Parent SEC Reports was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Regulation S-X) and each presents fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Parent and the consolidated Parent Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount). The balance sheet of the Parent contained in the Parent SEC Reports as of December 31, 2001 is hereinafter referred to as the "Parent Balance Sheet." (c) Parent has heretofore furnished to the Company a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by Parent with the SEC pursuant to the Securities Act or the Exchange Act. SECTION 1.03 Tax Matters. To the knowledge of Parent, neither Parent nor any of its affiliates has taken or agreed to take any action that would prevent the Merger from qualifying as a reorganization within the meaning of section 368(a) of the Code. Parent is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. SECTION 1.04 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent. SECTION 1.05 Undisclosed Liabilities. Parent has no liabilities (absolute, accrued, contingent or otherwise and whether due or to become due) other than liabilities or obligations: (a) fully reflected or reserved against on Parent Balance Sheet; (b) liabilities incurred since the date of Parent Balance Sheet in the ordinary course of business consistent with past practice, which, individually or in the aggregate, could not reasonably be expected to have a Parent Material Adverse Effect. SECTION 1.06 Absence of Certain Changes or Events. Since December 31, 2001, there has not been any Parent Material Adverse Effect and the business of Parent has been conducted in the ordinary course. SECTION 1.07 Absence of Litigation. Except as disclosed under the heading "Legal Proceedings" in Parent's SEC Reports, there is no other litigation, suit, claim, action, proceeding or investigation pending or, to the knowledge of Parent, threatened against Parent, or any property or asset of Parent, before any court, arbitrator or governmental entity, domestic or foreign. Neither Parent nor any material property or asset of Parent is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of Parent, continuing investigation by, any governmental entity, or any order, writ, judgment, injunction, decree, determination or award of any governmental entity or arbitrator. SECTION 1.08 Intellectual Property. (a) Parent owns or is licensed to use, and in any event possesses sufficient and legally enforceable rights with respect to, all Parent Intellectual Property (as defined below) necessary for the conduct of its business as currently conducted without, to Parent's knowledge, and without having conducted any special investigation or patent or trademark search, Infringement of any other person's Intellectual Property, except for such items as have yet to be conceived or developed. Parent Disclosure Schedule sets forth any and all royalty obligations of Parent concerning the Parent Intellectual Property. Parent has not developed jointly with any other Person any Parent Intellectual Property that is material to the business of Parent with respect to which such other person has any material exclusive rights. There is no Parent contract pursuant to which any person has any right (whether or not currently exercisable) to use, license or otherwise exploit any material Parent Intellectual Property. (b) None of the material issued patents, registered trademarks, registered service marks and registered copyrights owned by Parent has been declared invalid or unenforceable. To Parent's knowledge, no other person is infringing, misappropriating or making any unlawful or unauthorized use of any material Parent Intellectual Property. Parent has not (i) licensed any of the material Parent Intellectual Property to any person on an exclusive basis, or (ii) entered into any covenant not to compete or contract limiting its ability to exploit fully any material Parent Intellectual Property or to transact business in any market or geographical area or with any person. (c) Except as disclosed under the heading "Legal Proceedings" in Parent's SEC Reports, to the knowledge of Parent, Parent has not been or may not be engaged in, liable for or contributing to any Infringement. Parent has not received any written notice or, to its knowledge, other communication of any actual, alleged, possible or potential Infringement, unlawful or unauthorized use of, any Intellectual Property owned or used by any other person. (d) Parent has taken reasonable steps to protect Parent's rights in its confidential information and trade secrets. Each employee, consultant and contractor who has had access to proprietary Intellectual Property which is necessary for the conduct of Parent's business as currently conducted, has executed an agreement to maintain the confidentiality of such Intellectual Property and has executed appropriate agreements that are substantially consistent with Parent's standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of Parent's confidential information or trade secrets to any third party. (e) "Parent Intellectual Property" means all Intellectual Property that is used in any business of Parent, or that may be necessary to conduct any such businesses as conducted. SECTION 1.09 Taxes. (a) Tax Returns. All Tax returns, statements, reports, declarations and other forms and documents (including, without limitation, estimated Tax returns and reports and material information returns and reports) required to be filed with any Tax Authority with respect to any Taxable period ending on or before the Closing, by or on behalf of Parent (collectively, "Parent Tax Returns" and individually a "Parent Tax Return"), have been or will be completed and filed when due (including any extensions of such due date) and all amounts shown due on such Parent Tax Returns on or before the Effective Time have been or will be paid on or before such date, except where the failure to complete and file such Parent Tax Returns or to pay such amounts shown would not have a Parent Material Adverse Effect. Except as would not have a Parent Material Adverse Effect, the consolidated financial statements of Parent contained in Parent SEC Reports (i) fully accrue in accordance with GAAP all actual and contingent liabilities for Taxes (as defined below) with respect to all periods through the date of Parent Balance Sheet. All information set forth in the notes to the consolidated financial statements of Parent contained in Parent SEC Reports relating to Tax matters is correct and complete in all material respects. Parent has withheld and paid to the applicable financial institution or Tax Authority all amounts required to be withheld. As used in this SECTION 3.14, the term the "Parent" means Parent and any entity included in, or required to be included in, any consolidated, combined, or untaxed group with Parent. (b) Tax Claims. No material claim for assessment or collection of Taxes is presently being asserted against Parent, and Parent is not a party to any pending action, proceeding, or investigation by any governmental taxing authority. SECTION 1.10 Assets Other Than Real Property. Parent has good title to all material assets reflected on Parent Balance Sheet or thereafter acquired, except those sold or otherwise disposed of since the date of Parent Balance Sheet in the ordinary course of business consistent with past practice, free and clear of all mortgages, liens, security interests or other encumbrances of any nature whatsoever except Permitted Liens. This SECTION 4.14 does not relate to real property or interests in real property, which are the subject of SECTION 4.15, or to intellectual property, which is the subject of SECTION 4.12. SECTION 1.11 Real Property. (a) Owned Property. Parent does not own in fee any real property. (b) Leased Property. The Parent Disclosure Schedule sets forth a complete list of all real property and interests in real property leased by Parent ("Parent Leased Properties") and identifies any leases relating to the Parent Leased Properties. (c) Rights in Leased Property. The lease for each of the Parent Leased Properties is in full force and effect, and the interest of Parent in each of the Parent Leased Properties is free and clear of all mortgages, liens, security interests, easements, covenants, rights-of-way and other similar restrictions of any nature whatsoever, except (A) Permitted Liens, (B) easements, covenants, rights-of-way and other similar restrictions of record and (C) (x) zoning, building and other similar restrictions, (y) mortgages, liens, security interests or encumbrances that have been placed by any developer, landlord or other third party on property over which Parent has easement rights or on any Parent Leased Property and subordination or similar agreements relating thereto and (z) unrecorded easements, covenants, rights-of-way or other similar restrictions, none of which items set forth in clauses (x), (y) and (z) above materially impairs the continued use in the business of Parent and the operation of the property to which they relate. SECTION 1.12 Contracts. Parent Disclosure Schedule sets forth a true and complete list of each of the following types of contracts to which Parent is a party (together with the leases related to the Parent Leased Properties, "Parent Contracts"): (a) Employment, Independent Contractor and Consulting Agreements. (i) Any employment agreement, employment contract or any agreement or contract providing for the payment of any severance compensation to any Parent Person (as defined below) or for the provision, vesting and/or acceleration of any employee benefits following a change of ownership or control of Company and (ii) any independent contractor or consulting agreement that has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (b) Collective Bargaining Agreements. Any employee collective bargaining agreement or other contract with any labor union; (c) Non-Competition Agreements. Any covenant or agreement that restricts the ability of Parent to compete in any line of business in any place in the world; (d) Agreements with Officers and Directors. Any material agreement or contract with any officer or director of Parent (other than employment agreements covered by paragraph (a) above); (e) Subleases of Leased Property. Any sublease or similar agreement under which Parent makes available for use by any third party, all or any portion of any Parent Leased Property; (f) Personal Property Leases. Any lease or similar agreement under which (i) Parent is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third party or (ii) Parent is a lessor or sublessor of, or makes available for use by any third party, any tangible personal property owned or leased by Parent, in any such case which has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (g) Supply and Service Agreements. (i) Any continuing agreement or contract for the future purchase by Parent of materials, supplies or equipment or (ii) any advertising agreement or arrangement, in any such case which has an aggregate liability after the Effective Time in excess of $25,000 and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000; (h) Indebtedness. Any agreement or contract under which Parent has borrowed or loaned any money or issued any note, bond, indenture or other evidence of indebtedness or directly or indirectly guaranteed indebtedness, liabilities or obligations of others (other than endorsements for the purpose of collection in the ordinary course of business), or any other note, bond, indenture or other evidence of indebtedness where the principal amount borrowed, loaned or guaranteed is in excess of $25,000; (i) Guarantees. Any agreement or contract under which any other person has directly or indirectly guaranteed indebtedness, liabilities or obligations of Parent (other than endorsements for the purpose of collection in the ordinary course of business); (j) Partnerships, Limited Liability Companies and Joint Ventures. Any partnership agreement, limited liability company agreement or other joint venture agreement to which Parent is a party; and (k) Other Agreements. Any other agreement, contract, lease, license (including exclusive Intellectual Property licenses), commitment or instrument to which Parent is a party or by or to which the assets or business of Parent is bound or subject, which in any case has an aggregate liability after the Effective Time in excess of $25,000, and is not terminable by notice of less than 60 calendar days for a cost of less than $25,000. Except as disclosed in the Parent Disclosure Schedule, Parent has performed all material obligations required to be performed by it to date under the Parent Contracts to which it is a party and it is not in breach or default in any material respect thereunder and, to the knowledge of Parent, no other party to any of the Parent Contracts is in breach or default in any material respect thereunder. SECTION 1.13 Employee Benefit Plans; ERISA. (a) Plans. The Parent Disclosure Schedule sets forth each employee pension, retirement, profit sharing, stock bonus, stock option, stock purchase, incentive, deferred compensation, hospitalization, medical, dental, vision, life insurance, accidental death and dismemberment insurance, business travel insurance, cafeteria and flexible spending, sick pay, disability, severance, golden parachute or other plan, fund, program, policy, contract or arrangement (including any contracts or agreements with certain employees that relate to the transactions contemplated by this Agreement) providing employee benefits (as defined in SECTION 3.17(a) above, "Plans") maintained or contributed to by Parent. Parent has delivered to Company true, complete and correct copies of (i) each Parent Plan (or, in the case of any unwritten Parent Plans, descriptions thereof), (ii) the most recent annual report on Form 5500 filed with the IRS with respect to each Parent Plan (if any such report was required), (iii) the most recent summary plan description for each Parent Plan for which such a summary plan description is required and (iv) each trust agreement and group annuity contract relating to any Parent Plan. Neither Parent nor any ERISA Affiliate would be liable for any amount pursuant to Section 4062, 4063 or 4064 of ERISA, if any Parent Plan which is subject to Title IV of ERISA were to terminate. (b) Compliance with ERISA and the Code. None of Parent or any of its Plans or any trust created thereunder, or any trustee or administrator thereof, has engaged in a transaction in connection with which Parent would be subject to either a material liability or civil penalty assessed pursuant to Sections 409, 502(i) or 502(1) of ERISA or a material Tax imposed pursuant to Section 4971, 4972, 4974, 4975, 4976 or 4980B of the Code. Each of the Parent's Plans has been operated and administered in all material respects in accordance with applicable Laws, including ERISA and the Code. Each Parent Plan intended to be a qualified plan under Code Section 401 has received a favorable determination letter to that effect and nothing has occurred since the issuance of such letter that would adversely affect the Tax qualification of any such Plan. There are no pending or, to the knowledge of Parent, threatened claims by or on behalf of any of the Parent Plans, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than ordinary course claims for benefits). (c) Multiemployer Plan Liabilities. None of Parent or any ERISA Affiliate is, or has been within the last six years, obligated to contribute, on behalf of any current or former employee of Parent, to a multiemployer plan (as defined in Section 3(37) of ERISA) and no such ERISA Affiliate is liable or reasonably expected to be liable for any withdrawal liability under Section 4201 of ERISA. (d) Accumulated Funding Deficiencies; Liens. None of the Parent Plans or any trust established thereunder has incurred any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Plans. No contribution failure has occurred with respect to any Parent Plan sufficient to give rise to a lien under Section 302(f) of ERISA. (e) Employee Welfare Benefit Plans. With respect to any Parent Plan that is an employee welfare benefit plan, (i) no such Plan is unfunded or funded through a welfare benefits fund, as such term is defined in Section 419(e) of the Code and (ii) to the knowledge of Parent, each such Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code, complies with the applicable requirements of Section 4980B(f) of the Code. SECTION 1.14 Compliance with Applicable Laws. To the knowledge of Parent: (a) General. Parent has not received notice of any alleged violation of any applicable Laws, except for any such violations that would not have a Parent Material Adverse Effect. This SECTION 4.18(a) does not relate to matters with respect to Taxes or any other taxes. This SECTION 4.18(a) does not relate to environmental matters, which are the subject of SECTION 4.18(c). (b) Lobbying Regulatory Matters. Parent is in compliance in all material respects with all substantive, registration and reporting requirements of the Lobbying Disclosure Act of 1995, as amended, the Foreign Agent Registration Act of 1938, as amended, the Federal Election Campaign Act, federal bribery laws and rules regarding the making of gifts to members of the United States House of Representatives, members of the United States Senate and members of the executive branch of the federal government of the United States. (c) Notices of Certain Environmental Matters. Parent has not received written notice of any alleged violation of Environmental Law or liability for any release of any Hazardous Material in connection with the present or past business or properties of Parent or any of the Subsidiaries, and there exists no writ, injunction, decree, order or judgment outstanding, nor any lawsuit, proceeding, citation, summons or government agency investigation relating thereto, except for any such matters that would not have a Parent Material Adverse Effect. SECTION 1.15 Employee and Labor Relations. (a) There is no labor strike, dispute, or work stoppage or lockout pending or, to the knowledge of Parent, threatened against or affecting Parent; (b) to the knowledge of Parent, no union organizing campaign is in progress with respect to the employees of Parent; (c) there is no unfair labor practice charge or complaint against Parent pending or, to the knowledge of Parent, threatened before the National Labor Relations Board; (d) there is no pending or, to the knowledge of Parent, threatened grievance that would have a Parent Material Adverse Effect; and (e) no charges with respect to or relating to Parent are pending before the Equal Employment Opportunity Commission or any state agency responsible for the prevention of unlawful employment practices as to which there is a reasonable likelihood of adverse determination, other than those which, if so determined, would not have a Parent Material Adverse Effect. SECTION 1.16 Opinion of Financial Advisor. The Board of Directors of Parent has have received from Standard & Poor's ("Parent Financial Advisor") a written opinion, dated as of the date of this Agreement, satisfactory in form and substance to the Board of Directors of Parent, to the effect that the Merger is fair to Parent and to Parent's stockholders from a financial point of view. Parent will provide a copy of such opinion to Company subsequent to the execution of this Agreement. SECTION 1.17 Disclosure. The representations, warranties and statements by Parent in this Agreement, Parent Disclosure Schedule and the certificates delivered pursuant hereto do not contain any untrue statement of a material fact and, when taken together with each other, do not omit to state a material fact necessary to make such representations, warranties and statements, in light of the circumstances under which they are made, not misleading. ARTICLE II CONDUCT OF BUSINESS PENDING THE MERGER SECTION 2.01 Conduct of Business by Company Pending the Merger. The Company agrees that, between the date of this Agreement and the Effective Time, except as set forth in SECTION 5.01 of the Company Disclosure Schedule or as specifically contemplated by any other provision of this Agreement, unless Parent shall otherwise consent in writing: (a) the businesses of the Company shall be conducted only in, and the Company shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and (b) the Company shall use its reasonable best efforts to preserve substantially intact the business organization of the Company, to keep available the services of the current officers, employees and consultants of the Company and to preserve the current relationships of the Company with customers, suppliers, licensors, licensees, alliance partners and other persons with which the Company has business relations. By way of amplification and not limitation, except as contemplated by this Agreement or as set forth in SECTION 5.01 of the Company Disclosure Schedule, the Company shall not, between the date of this Agreement and the Effective Time, directly or indirectly, do, or propose to do, any of the following without the prior written consent of Parent: (i) Capital Stock. Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of capital stock of any class or any securities convertible into, or any right, warrants, calls, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than (a) the issuance of shares of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement, (b) the issuance of shares of Company Common Stock under the Company Purchase Plan pursuant to purchase rights outstanding on the date of this Agreement, or (c) the issuance of shares of Company Common Stock upon the exercise of Warrants outstanding on the date of this Agreement. (ii) Qualification. Intentionally take any action that could reasonably be expected to cause the Merger to fail to qualify as a "reorganization" under Section 368(a) of the Code, whether or not otherwise permitted by the provisions of this Article V or fail to take any action reasonably necessary to cause the Merger to so qualify; (iii) Dividends. Declare, set aside or pay any dividends on or make any other distributions in cash in respect of any capital stock; (iv) Charter and Bylaws. Cause, permit or propose any amendments to its Certificate of Incorporation or Bylaws (or similar governing instruments of any of its subsidiaries), except as contemplated by this Agreement, (v) Representations and Warranties. Take any action (or fail to take any action) to cause the Company's representations and warranties set forth in ARTICLE III to be untrue in any respect; (vi) Redemption. Redeem or otherwise acquire any shares of its capital stock; (vii) Employee Matters. Adopt or amend in any material respect any Plan or collective bargaining agreement, except as required by applicable Law or as contemplated by this Agreement; (viii) Compensation. (a) Grant to any executive officer or employee any increase in compensation or benefits or any rights to receive severance payments or other benefits upon a termination of employment or a change of ownership or control of the employer, except (I) as may be required under existing agreements or (II) in the ordinary course of business consistent with past practice or (b) terminate any executive officer or employee other than for cause or in the ordinary course of business, consistent with past practice; (ix) Indebtedness. Incur or assume any liabilities, obligations or indebtedness for borrowed money or guarantee any such liabilities, obligations or indebtedness, other than any liabilities, obligations or indebtedness owing to any person incurred in the ordinary course of business consistent with past practice provided that in no event shall Company incur, assume or guarantee any indebtedness for borrowed money in excess of $25,000; (x) Encumbrances. Other than in the ordinary course of business consistent with past practice, permit, allow or suffer any of its assets to be subjected to any mortgage, pledge, lien, encumbrance, restriction or charge of any kind, other than Permitted Liens; (xi) Cancellation of Indebtedness. Cancel any indebtedness owing to Company, or waive any claims or rights thereto where such indebtedness exceeds individually or in the aggregate $25,000; (xii) Related-Party Transactions. Pay, loan or advance any amount to, or sell, transfer or lease any of its assets to, or enter into any agreement or arrangement with any affiliate other than the payment of salary and the provision of benefits consistent with current salary and benefits; (xiii) Accounting Policies. Make any material change in any method of accounting or accounting practice or policy other than those required by GAAP; (xiv) Reorganizations. Acquire or agree to acquire by merging or consolidating with, or by purchasing the stock of, or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets except in the ordinary course or business; (xv) Asset Dispositions. Sell, lease or otherwise dispose of assets, except in the ordinary course or business; or (xvi) Agreements to Take Actions. Agree in writing or otherwise to take any of the actions described in SECTION 5.01(b)(i) through (xv) above. SECTION 2.02 Conduct of Business by Parent Pending the Merger. Parent agrees that, between the date of this Agreement and the Effective Time, except as set forth in SECTION 5.02 of the Parent Disclosure Schedule or as specifically contemplated by any other provision of this Agreement unless Company shall otherwise consent in writing: (a) the businesses of Parent shall be conducted only in, and Parent shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and (b) Parent shall use its reasonable best efforts to preserve substantially intact the business organization of Parent, to keep available the services of the current officers, employees and consultants of Parent and to preserve the current relationships of Parent with customers, suppliers, licensors, licensees, alliance partners and other persons with which Parent has business relations. By way of amplification and not limitation, except as contemplated by this Agreement or as set forth in SECTION 5.02 of the Parent Disclosure Schedule, Parent shall not, between the date of this Agreement and the Effective Time, directly or indirectly, do, or propose to do, any of the following without the prior written consent of Company: (i) Capital Stock. Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of capital stock of any class or any securities convertible into, or any right, warrants, calls, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than (a) the issuance of shares of Parent Common Stock upon the exercise of Parent Stock Options outstanding on the date of this Agreement under the Parent Stock Option Plans, (b) the issuance of shares of Parent Common Stock upon the exercise of Warrants outstanding on the date of this Agreement, (c) the grant of options to purchase shares of Parent Common Stock in the ordinary course of business consistent with past practice, in each case at an exercise price no less than the fair market value of share of Parent Common Stock on the date of grant, or (d) the issuance to a bank or other lender of warrants to purchase shares of Parent Common Stock in connection with the creation, renewal or extension of a credit facility for the benefit of Parent; (ii) Qualification. Intentionally take any action that could reasonably be expected to cause the Merger to fail to qualify as a "reorganization" under Section 368(a) of the Code, whether or not otherwise permitted by the provisions of this Article V or fail to take any action reasonably necessary to cause the Merger to so qualify; (iii) Dividends. Declare, set aside or pay any dividends on or make any other distributions in cash in respect of any capital stock; (iv) Charter and Bylaws. Cause, permit or propose any amendments to its Certificate of Incorporation or Bylaws (or similar governing instruments of any of its subsidiaries), except as contemplated by this Agreement, (v) Representations and Warranties. Take any action (or fail to take any action) to cause Parent's representations and warranties set forth in ARTICLE IV to be untrue in any respect; (vi) Redemption. Redeem or otherwise acquire any shares of its capital stock; (vii) Cancellation of Indebtedness. Cancel any indebtedness owing to Parent, or waive any claims or rights thereto where such indebtedness exceeds individually or in the aggregate $25,000; (viii) Related-Party Transactions. Pay, loan or advance any amount to, or sell, transfer or lease any of its assets to, or enter into any agreement or arrangement with any affiliate other than the payment of salary and the provision of benefits consistent with current salary and benefits; (ix) Accounting Policies. Make any material change in any method of accounting or accounting practice or policy other than those required by GAAP; (x) Reorganizations. Acquire or agree to acquire by merging or consolidating with, or by purchasing the stock of, or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets except in the ordinary course or business; (xi) Asset Dispositions. Sell, lease or otherwise dispose of assets, except in the ordinary course or business; or (xii) Agreements to Take Actions. Agree in writing or otherwise to take any of the actions described in SECTION 5.02(b)(i) through (xi) above. SECTION 2.03 Notification of Certain Matters. Parent shall give notice to the Company, and the Company shall give prompt notice to Parent, of (a) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate, or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied and (b) any failure or inability of Parent or the Company, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this SECTION 5.03 shall not limit or otherwise affect the representations, warranties, covenants or agreements of the Parent or the Company, as the case may be, the conditions to the obligations of the parties hereto to consummate the Merger or the remedies available hereunder to Parent or the Company, as the case may be. ARTICLE III ADDITIONAL AGREEMENTS SECTION 3.01 Registration Statement; Proxy Statement. (a) As promptly as practicable after the execution of this Agreement, (Parent and the Company shall prepare and file with the SEC proxy statements (together with any amendments thereof or supplements thereto, the "Proxy Statements") relating to the meetings of the Company's stockholders and Parent's stockholders (the "Stockholders' Meetings") to be held to consider approval of the Merger and adoption of this Agreement and (ii) a registration statement on Form S-4 (together with all amendments thereto, the "Registration Statement") in connection with the registration under the Securities Act of the shares of Parent Common Stock to be issued to the stockholders of the Company pursuant to the Merger. Each of Parent and the Company shall use its reasonable best efforts to cause the Registration Statement to become effective as promptly as practicable, and prior to the effective date of the Registration Statement, Parent shall take all or any action required under any applicable federal or state securities laws in connection with the issuance of shares of Parent Common Stock pursuant to the Merger. The Company shall furnish all information concerning the Company as Parent may reasonably request in connection with such actions and the preparation of the Registration Statement and Proxy Statement. As promptly as practicable after the Registration Statement shall have become effective, the Company and Parent shall mail the Proxy Statements to their respective stockholders. (b) Subject to SECTION 6.01(c), each of the Proxy Statements shall include the unanimous recommendation of the Board of Directors of the Company or the Parent, as applicable, to stockholders to vote in favor of approving the Merger and adoption of this Agreement and neither the Board of Directors of either the Company or Parent nor any committee thereof shall withhold, withdraw, amend, modify or change, or propose or resolve to withhold, withdraw, amend, modify or change, in each case in a manner adverse to the other party, the unanimous recommendation of the Board of Directors that the vote in favor of and adopt and approve this Agreement and approve the Merger. For purposes of this Agreement, such recommendation of the Board of Directors shall be deemed to have been modified in a manner adverse to the other party if such recommendation shall no longer be unanimous. (c) Prior to the adoption and approval of this Agreement and the approval of the Merger by the requisite vote of the stockholders of the Company, nothing in this Agreement shall prevent the Company's Board of Directors from withholding, withdrawing, amending, modifying or changing its unanimous recommendation in favor of the Merger or from accepting a Superior Proposal (as defined in SECTION 6.05(c) below) if (i) a Superior Proposal is made to the Company and is not withdrawn, (ii) the Company shall have immediately provided written notice to Parent advising Parent that the Company has received a Superior Proposal, identifying the person or entity making such Superior Proposal (a "Notice of Superior Proposal"), (iii) Parent shall not have, within five business days of Parent's receipt of the Notice of Superior Proposal, made an offer that the Company's Board of Directors by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be more favorable to the Company and its stockholders as such Superior Proposal (it being agreed that the Company's Board of Directors shall convene a meeting to consider any such offer by Parent promptly following the receipt thereof), (iv) the Board of Directors of the Company concludes in good faith, after consultation with its outside legal counsel, that, in light of such Superior Proposal, the withholding, withdrawal, amendment, modification or change of such recommendation is required in order for the Board of Directors of the Company to comply with its fiduciary obligations to the Company and its stockholders under applicable Law and (v) the Company shall not have violated any of the restrictions set forth in SECTION 6.05 or this SECTION 6.01(c). The Company shall provide Parent with at least three business days' notice of any meeting of the Company's Board of Directors at which the Company's Board of Directors is reasonably expected to consider any Competing Transaction (as defined in SECTION 6.05(b) below). Subject to applicable Law, nothing contained in this SECTION 6.01(c) shall limit the Company's obligation to convene and hold the Company Stockholders' Meeting (regardless of whether the unanimous recommendation of the Board of Directors of the Company shall have been withheld, withdrawn, amended, modified or changed). (d) Subject to SECTION 6.01(c), no amendment or supplement to either Proxy Statement or the Registration Statement will be made by Parent or the Company without the approval of the other party (such approval not to be unreasonably withheld or delayed). Each of Parent and the Company will advise the other, promptly after it receives notice thereof, of the time at which the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of the shares of Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or of any request by the SEC for amendment of either Proxy Statement or the Registration Statement or comments thereon and responses thereto or requests by the SEC for additional information. (e) The information supplied by Parent for inclusion in the Registration Statement or either Proxy Statement shall not, at (i) the time the Registration Statement is declared effective, (ii) the time either Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company or Parent, as applicable, (iii) the time of either Stockholders' Meeting and (iv) the Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If, at any time prior to the Effective Time, any event or circumstance relating to Parent or any Parent Subsidiary, or their respective officers or directors, that should be set forth in an amendment or a supplement to the Registration Statement or the Company's Proxy Statement should be discovered by Parent, Parent shall promptly inform the Company. All documents that Parent is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by this Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act. (f) The information supplied by the Company for inclusion in the Registration Statement or either Proxy Statement shall not, at (i) the time the Registration Statement is declared effective, (ii) the time either Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company or Parent, as applicable, (iii) the time of either Stockholders' Meeting and (iv) the Effective Time, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If, at any time prior to the Effective Time, any event or circumstance relating to the Company or its officers or directors, that should be set forth in an amendment or a supplement to the Registration Statement or Proxy Statement should be discovered by the Company, the Company shall promptly inform Parent. All documents that the Company is responsible for filing with the SEC in connection with the Merger or the other transactions contemplated by this Agreement will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act. SECTION 3.02 Parent Stockholders' Meeting. Parent shall (i) call and hold its Stockholders' Meeting as promptly as practicable for the purpose of voting upon the approval of the Merger and adoption of this Agreement, (ii) use its reasonable best efforts to hold its Stockholders' Meeting as soon as practicable after the date on which the Registration Statement becomes effective and (iii) shall in any event hold its Stockholders' Meeting within 45 days after the date on which the Registration Statement becomes effective. Parent shall use its reasonable best efforts to solicit from its stockholders proxies in favor of the approval of the Merger and adoption of this Agreement, and shall take all other action necessary or advisable to secure the vote or consent of stockholders required by the rules of Nasdaq or the DGCL to obtain such approvals. SECTION 3.03 Company Stockholders' Meeting. The Company shall (i) call and hold its Stockholders' Meeting as promptly as practicable for the purpose of voting upon the approval of the Merger and adoption of this Agreement, (ii) use its reasonable best efforts to hold its Stockholders' Meeting as soon as practicable after the date on which the Registration Statement becomes effective and (iii) shall in any event hold its Stockholders' Meeting within 45 days after the date on which the Registration Statement becomes effective. The Company shall use its reasonable best efforts to solicit from its stockholders proxies in favor of the approval of the Merger and adoption of this Agreement, and shall take all other action necessary or advisable to secure the vote or consent of stockholders required by the rules of Nasdaq or the DGCL, to obtain such approvals. SECTION 3.04 Access to Information; Confidentiality. (a) Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which Parent or the Company or any of their subsidiaries is a party or pursuant to applicable Law, from the date of this Agreement to the Effective Time, Parent and the Company shall (and shall cause their respective subsidiaries to): (i) provide to the other (and its officers, directors, employees, subsidiaries, accountants, consultants, legal counsel, investment bankers, advisors, agents and other representatives, collectively, "Representatives") access at reasonable times upon prior notice to the officers, employees, agents, properties, offices and other facilities of it and its subsidiaries and to the books and records thereof and (ii) furnish promptly such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of it and its subsidiaries as the other party or its Representatives may reasonably request. (b) The parties shall comply with, and shall cause their respective Representatives to comply with, all of their obligations under the Mutual Non-Disclosure Agreement dated July 11, 2002, as supplemented by a letter agreement dated August 14, 2002 (the "Non-Disclosure Agreement"), between the Company and Parent. All information obtained by the parties pursuant to paragraph (a) above shall be subject to the Non-Disclosure Agreement. (c) No investigation pursuant to this SECTION 6.04 shall affect any representation or warranty in this Agreement or any condition to the obligations of the parties hereto to consummate the Merger. SECTION 3.05 No Solicitation of Transactions. (a) The Company will not, directly or indirectly, and will instruct its Representatives not to, directly or indirectly, solicit or initiate any proposal or offer (including, without limitation, any proposal or offer to its stockholders) that constitutes, or may reasonably be expected to lead to, any Competing Transaction (as defined below), or enter into or maintain or continue discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain a Competing Transaction, or agree to or endorse any Competing Transaction, or authorize or permit any of its Representatives to take any such action. The Company shall immediately notify Parent if any proposal or offer, or any inquiry or contact with any person with respect thereto, regarding a Competing Transaction is made, and the Company shall immediately inform Parent as to the material details of any such proposal, offer, inquiry or contact, including, without limitation, the identity of the party making any such proposal, offer, inquiry or contact, and, if in writing, promptly deliver or cause to be delivered to Parent a copy of such proposal, offer, inquiry or contact and any other written material relating thereto. The Company immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to a Competing Transaction. The Company shall not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party. Notwithstanding anything to the contrary in this SECTION 6.05, the Company's Board of Directors may furnish information to, and enter into discussions with, a person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction if the Company's Board of Directors has (i) reasonably concluded after consultation with the Company Financial Advisor or other financial advisor of nationally recognized reputation that such proposal or offer constitutes a Superior Proposal (as defined below), (ii) reasonably concluded, after consultation with its outside legal counsel, that, in light of such Superior Proposal, the furnishing of such information or entering into discussions is required to comply with its fiduciary obligations to the Company and its stockholders under applicable Law, (iii) provided written notice to Parent of its intent to furnish information or enter into discussions with such person at least three business days prior to taking any such action and (iv) obtained from such person an executed confidentiality agreement on terms substantially similar to those contained in the Non-Disclosure Agreement; provided, however, that no information may be furnished and no discussions may be entered into in the event that the Company has taken any actions inconsistent with this SECTION 6.05(a); provided further, however, that the Company's Board of Directors shall furnish to Parent all information provided to the person who has made the Superior Proposal to the extent that such information has not been previously provided to Parent and shall keep Parent promptly and reasonably informed as to the status of any discussions regarding such Superior Proposal. (b) A "Competing Transaction" means any of the following involving the Company (other than the Merger and the other transactions contemplated by this Agreement): (i) a merger, consolidation, share exchange, business combination or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the assets of the Company and the Company Subsidiaries, taken as a whole; (iii) a tender offer or exchange offer for, or any offer to purchase directly from the Company, 20% or more of the outstanding voting securities of the Company; (iv) any solicitation in opposition to adoption by the Company's stockholders of this Agreement; or (v) any liquidation, dissolution, recapitalization or other significant corporate reorganization of the Company. (c) A "Superior Proposal" means an unsolicited written bona fide offer made by a third party to consummate an Acquisition Transaction (as defined below) (i) that is not attributable to a material breach by the Company of SECTION 6.05(a) hereof and (ii) on terms (including conditions to consummation of the contemplated transaction) that the Board of Directors of the Company determines, in its good faith reasonable judgment (based on the written advice of the Company Financial Advisor or another financial advisor of nationally recognized reputation), to be more favorable to the Company stockholders from a financial point of view than the terms of the Merger and with any financing required to consummate the transaction contemplated by such offer committed or likely, in the reasonable good faith judgment of the Company's Board of Directors (based on the written advice of a financial adviser of nationally recognized reputation), to be obtained by such third party on a timely basis. For purposes of this Agreement, an "Acquisition Transaction" shall mean a merger, consolidation, business combination, recapitalization, liquidation, dissolution, sale or disposition or similar transaction involving the Company pursuant to which a person (or its stockholders) would own, if consummated, all or substantially all of the outstanding capital stock of the Company (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or all or substantially all the assets of the Company and the Company Subsidiaries taken as a whole. (d) Nothing contained in this Agreement shall prohibit the Company or its Board of Directors from taking and disclosing to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act. SECTION 3.06 Directors' and Officers' Indemnification and Insurance. (a) The Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain the same provisions with respect to indemnification, advancement and director exculpation as are set forth in the Certificate of Incorporation and Bylaws of the Company on the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of persons who at any time prior to the Effective Time were entitled to indemnification, advancement or exculpation under the Certificate of Incorporation or Bylaws of the Company in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement), unless such modification is required by Law. (b) The Company shall, to the fullest extent permitted under applicable Law and regardless of whether the Merger becomes effective, indemnify and hold harmless, and, after the Effective Time, Parent and the Surviving Corporation shall, to the fullest extent permitted under applicable Law, indemnify and hold harmless, each present and former director or officer of the Company and each Company Subsidiary and each such person that served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, the "Indemnified Parties") against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, administrative or investigative, arising out of or pertaining to any action or omission in their capacities as officers or directors, in each case occurring before the Effective Time (including the transactions contemplated by this Agreement). The Company (or from and after the Effective Time, Parent and Surviving Corporation) will be entitled to participate in and, to the extent that may desire, assume the defense of any action, with counsel reasonably satisfactory to the Indemnified Party; provided, however, if any Indemnified Party reasonably believes that, by reason of an actual or potential conflict of interest, it is advisable for such Indemnified Party to be represented by separate counsel, or if the Company (or from and after the Effective Time, Parent and Surviving Corporation) shall fail to assume responsibility for such defense, such Indemnified Party may retain counsel reasonably satisfactory to Company (or from and after the Effective Time, Parent and Surviving Corporation) who will represent such Indemnified Party and the Company (or from and after the Effective Time, Parent and Surviving Corporation) shall pay all reasonable legal fees and expenses of such counsel promptly as statements therefore are received to the fullest extent permitted by applicable Law upon receipt of any undertaking contemplated by Section 145(e) of the DGCL. The Indemnified Parties and the Company (or from and after the Effective Time, Parent and Surviving Corporation) shall cooperate in the defense of any such matter; provided, however, that neither the Company, Parent nor the Surviving Corporation shall be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld or delayed). (c) For a period of six years after the Effective Time, Parent shall cause to be maintained in effect the current directors' and officers' liability insurance policies maintained by the Company and shall pay the aggregate cost of maintaining such policies for such six (6) year period up to a maximum of $700,000 plus the amount of any refund or credit resulting from the termination of the Company's directors' and officers' liability insurance policies (the "Maximum Insurance Premium"); provided, however, that the Company agrees to cooperate in good faith with Parent in order to obtain the lowest premium for the above-referenced coverage. In the event that such maximum insurance Premium is insufficient for the above-referenced coverage, the Company may spend up to the Maximum Insurance Premium to purchase such lesser coverage that may be obtained for the Maximum Insurance Premium. (d) This SECTION 6.06 is intended to be for the benefit of, and shall be enforceable by, the Indemnified Parties and their heirs and personal representatives and shall be binding on the Surviving Corporation and its successors and assigns. In the event the Company or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each case, proper provision shall be made so that the successors and assigns of the Company or the Surviving Corporation, as the case may be, honor the indemnification obligations set forth in this SECTION 6.06. SECTION 3.07 Obligations of Merger Sub. . Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement. SECTION 3.08 Further Action; Consents; Filings. (a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall use its reasonable best efforts to (i) take, or cause to be taken, all appropriate action and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the Merger and the other transactions contemplated by this Agreement, (ii) obtain from Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Parent or the Company or any of their subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement and (iii) make all necessary filings, and thereafter make any other reasonably required submissions, with respect to this Agreement, the Merger and the other transactions contemplated by this Agreement that are required under (A) the Exchange Act and the Securities Act and any other applicable federal or state securities laws, (B) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and foreign antitrust regulations, if any, applicable to the Merger and the other transactions contemplated hereunder and (C) any other applicable Law. The parties hereto shall cooperate with each other in connection with the making of all such filings, including by providing copies of all such documents to the nonfiling party and its advisors prior to filing and, if requested, by accepting all reasonable additions, deletions or changes suggested in connection therewith. (b) If required or agreed by Parent and the Company to be advisable, Parent and the Company shall file as soon as practicable after the date of this Agreement notifications under the HSR Act and shall respond as promptly as practicable to all reasonable inquiries or reasonable requests received from the Federal Trade Commission or the Antitrust Division of the Department of Justice for additional information or documentation and shall respond as promptly as practicable to all reasonable inquiries and reasonable requests received from any State Attorney General or other governmental entity in connection with antitrust matters. The parties shall cooperate with each other in connection with the making of all such filings or responses. Notwithstanding anything to the contrary in this SECTION 6.08, Parent shall not be required to agree to (i) the divestiture (including, without limitation, through a licensing arrangement) by Parent or the Company or any of their respective businesses, product lines or assets, or (ii) the imposition of any material or the ability of any of them to conduct their business or to own or exercise control of such assets, properties and stock. SECTION 3.09 Plan of Reorganization. (a) This Agreement is intended to constitute a "plan of reorganization" within the meaning of Section 1.368-2(g) of the income tax regulations promulgated under the Code. From and after the date of this Agreement and until the Effective Time, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could prevent the Merger from qualifying as a reorganization under the provisions of Section 368(a) of the Code. Following the Effective Time, neither the Surviving Corporation, Parent nor any of their affiliates shall knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could cause the Merger to fail to qualify as a reorganization under Section 368(a) of the Code. The parties hereto agree to report the Merger as a reorganization under the provisions of Section 368(a) of the Code (b) As of the date of this Agreement, the Company does not know of any reason why it would not be able to deliver to Orrick, Herrington & Sutcliffe LLP, at the date of the legal opinions referred to below, certificates substantially in compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable such firms to deliver the legal opinions contemplated by SECTION 7.02(d) and SECTION 7.03(c), and the Company hereby agrees to deliver such certificates effective as of the date of such opinions and the certifications and representations contained in such certificate will be true at the Effective Time. (c) As of the date of this Agreement, Parent and Merger Sub do not know of any reason why they would not be able to deliver to Orrick, Herrington & Sutcliffe LLP, at the date of the legal opinions referred to below, certificates substantially in compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable such firms to deliver the legal opinions contemplated by SECTION 7.02(d) and SECTION 7.03(c), and Parent hereby agrees to deliver such certificates effective as of the date of such opinions and the certifications and representations contained in such certificate will be true at the Effective Time. SECTION 3.10 Public Announcements. . The initial press release relating to this Agreement shall be a joint press release the text of which has been agreed to by each of Parent and the Company. Thereafter, unless otherwise required by applicable Law or the requirements of Nasdaq, each of Parent and the Company shall use its reasonable best efforts to consult with the other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Merger or any of the other transactions contemplated by this Agreement. SECTION 3.11 Listing. Prior to the Effective Time, to the extent required under the applicable listing agreement, Parent shall file with Nasdaq a Notification Form for Listing of Additional Shares with respect to the shares of Parent Common Stock referred to in SECTION 2.01. SECTION 3.12 Reasonable Best Efforts and Further Assurances. Subject to the terms and conditions hereof, each of the parties to this Agreement shall use reasonable best efforts to effect the transactions contemplated hereby and to fulfill and cause to be fulfilled the conditions to the Merger under this Agreement. Subject to the terms and conditions hereof, each party hereto, at the reasonable request of another party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. SECTION 3.13 Employee Benefits. All Company employees shall continue on their existing benefit plans until such time as, in Parent's sole discretion, an orderly transition can be accomplished and such employees may be transferred to employee benefit plans and programs maintained by Parent for its and its affiliates' employees in the United States. Parent shall take such reasonable actions, to the extent permitted by Parent's benefit programs, as are necessary to allow eligible employees of the Company to participate in the health, welfare and other employee benefits (it being understood that equity incentive plans are not considered employee benefits) programs of Parent or alternative benefits programs in the aggregate substantially equivalent to those applicable to employees of Parent in similar functions and positions on similar terms. Pending such action, Parent shall maintain the effectiveness of the Company's benefit plans. Each continuing employee shall be given credit, for purposes of any service requirements for participation or vesting, for his or her period of service with the Company credited under a similar benefit plan or program prior to the Closing Date. SECTION 3.14 Parent's Board of Directors. Prior to the Effective Time, Parent shall take all steps necessary to enlarge it Board of Directors, as of the Effective Time, to eleven (11) members and fill the newly created vacancies with the following three (3) individuals from the current directors of Company: Martin A. Kaplan, David L. Short and Charles E. Shalvoy. Effective as of the closing of the private equity financing described in Section SECTION 7.02(j), Parent shall take steps necessary to enlarge its Board of Directors to add one (1) individual (the "Special Situations Nominee") acceptable to the current directors of parent designated jointly by Special Situations Fund III, L.P., Special Situations Fund Cayman, L.P., Special Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P. Effective as of the date of the next annual stockholder meeting, Parent shall take all steps necessary to reduce the size of its Board of Directors to ten (10) members, consisting of (a) six (6) individuals chosen by the current directors of Parent from among the current directors of Parent, (b) two (2) individuals chosen by the current directors of Parent from among the current directors of Company (who shall be Messrs. Kaplan and Short), (c) Mr. John Shoch (or another person designated by Alloy Ventures Fund 2000, LLC acceptable to the current directors of Parent) and (d) the Special Situations Nominee. SECTION 3.15 Company Affiliate Agreements. Pursuant to SECTION 3.23, the Company Disclosure Schedule lists the names of all persons who may be deemed to be "affiliates" of the Company at for purposes of Rule 145 under the Securities Act. The Company shall use its commercially reasonable efforts to deliver a written agreement in substantially the form of Exhibit A hereto (a "Company Affiliate Agreement") executed by each person identified as an Affiliate within ten (10) days after the execution of this Agreement. (a) Financial and Other Statements. During the term of this Agreement, the Company shall furnish to Parent such current financial and other data as Parent may reasonably request from time to time. ARTICLE IV CONDITIONS TO THE MERGER SECTION 4.01 Conditions to the Obligations of Each Party. The obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following conditions: (a) Registration Statement Effective. The Registration Statement shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated by the SEC. (b) Stockholder Approval. The Merger, this Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite affirmative vote of the stockholders of the Company and of the Parent in accordance with the DGCL and the applicable corporate charter and Bylaws and the rules of Nasdaq. (c) No Order. No governmental entity or court of competent jurisdiction shall have enacted, threatened, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, injunction, executive order or award, whether temporary, preliminary or permanent (an "Order"), that is then in effect, pending or threatened and has, or would have, the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (d) Antitrust Waiting Periods. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated and any waiting period (and any extension thereof) applicable to the consummation of the Merger under any foreign antitrust Law (or any approval thereunder) shall have expired or been terminated or obtained. (e) Listing of Additional Shares. The filing with Nasdaq of a Notification Form for Listing of Additional Shares with respect to the shares of Parent Common Stock issuable (i) upon conversion of the Company Common Stock in the Merger, (ii) upon exercise of the options under the Company Stock Option Plan assumed by Parent, and (iii) upon exercise of the Warrants assumed by Parent shall have been made. SECTION 4.02 Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following additional conditions: (a) Representations and Warranties. The representations and warranties of Company contained in this Agreement shall (i) as of the date of this Agreement and (ii) as of the Effective Time (except for those representations and warranties that address matters only as of a particular date) be true and correct except to the extent that any breach of the representations and warranties could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, and Parent shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of Company to that effect. (b) Agreements and Covenants. Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time, and Parent shall have received a certificate of the Chief Executive Officer or Chief Financial Officer of the Company to that effect. (c) Consents. All consents, approvals and authorizations legally required to be obtained to consummate the Merger shall have been obtained from and made with all Governmental Entities and all consents for all material agreements, contracts, licenses, leases or other instruments (as listed on the Company Disclosure Schedule) to which the Company is a party or is bound which is required as a result of the transactions contemplated by this Agreement or the Merger shall have been obtained. (d) Tax Opinion. Parent shall have received the opinion of Orrick, Herrington & Sutcliffe LLP, based upon representations of Parent, Merger Sub and the Company and normal assumptions, to the effect that the Merger will be treated for federal income tax purposes as a reorganization qualifying under the provisions of section 368(a) of the Code and that each of Parent, Merger Sub and the Company will be a party to the reorganization within the meaning of section 368(b) of the Code, which opinion shall not have been withdrawn or modified in any material respect. The issuance of such opinion shall be conditioned on receipt by Orrick, Herrington & Sutcliffe LLP of representation letters from each of Parent and Company as contemplated in SECTION 6.09 of this Agreement. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect as of the Effective Time. (e) Resignation. All members of the Board of Directors and all officers of the Company and each Company Subsidiary shall have executed written resignations effective as of the Effective Time. (f) Fairness Opinion. Parent Financial Advisor shall not have withdrawn the opinion referenced in SECTION 4.20. (g) Material Adverse Effect. No Company Material Adverse Effect shall have occurred since the date of this Agreement. (h) Rights Plan. All actions necessary to extinguish and cancel all outstanding Rights (as defined in the Rights Plan) under the Rights Plan at the Effective Time and to render such rights inapplicable to the Merger and the other transactions contemplated by this Agreement shall have been taken. (i) Dissenting Stockholders. Either (a) the Appraisal Rights Provisions of DGCL and the CGCL are not applicable to holders of Company Common Stock in connection with the Merger or (b), if applicable, the number of shares for which holders of Company Common Stock have perfected their rights thereunder shall not exceed five percent (5.0%) of the number of shares of outstanding Company Common Stock as of the record date of the meeting of the Company's stockholders. (j) Private Equity Financing. Parent shall have closed, or concurrently with the Merger shall close, the transactions contemplated by that certain Securities Purchase Agreement dated on or about October 10, 2002, by and between Parent and the investors named therein, or another private placement equity financing on other terms satisfactory to both Parent and the Company, resulting in either case in receipt by the Parent of gross proceeds of not less than $15.0 million. (k) Affiliate Agreements. The Parent shall have received an executed copy of an Affiliate Agreement from each Affiliate of the Company. SECTION 4.03 Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following additional conditions: (a) Representations and Warranties. The representations and warranties of Parent contained in this Agreement shall (i) as of the date of this Agreement and (ii) as of the Effective Time (except for those representations and warranties that address matters only as of a particular date) be true and correct except to the extent that any breach of the representations and warranties could not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, and the Company shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of Parent to that effect. (b) Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time, and the Company shall have received a certificate of the Chief Executive Officer or Chief Financial Officer of Parent to that effect with respect to the foregoing. (c) Tax Opinion. The Company shall have received the opinion of Orrick, Herrington & Sutcliffe LLP, counsel to the Company, based upon representations of Parent, Merger Sub and the Company, and normal assumptions, to the effect that the Merger will be treated for federal income tax purposes as a reorganization qualifying under the provisions of section 368(a) of the Code and that each of Parent, Merger Sub and the Company will be a party to the reorganization within the meaning of section 368(b) of the Code, which opinion shall not have been withdrawn or modified in any material respect. The issuance of such opinion shall be conditioned on receipt by Orrick, Herrington & Sutcliffe LLP of representation letters from each of Parent and Company as contemplated in SECTION 6.10 of this Agreement. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect as of the Effective Time. (d) Fairness Opinion. Company Financial Advisor shall not have withdrawn the opinion referenced in SECTION 3.22. (e) Board of Directors. The obligations of Parent under SECTION 6.14 shall have been performed and satisfied. (f) Material Adverse Effect. No Parent Material Adverse Effect shall have occurred since the date of this Agreement. ARTICLE V TERMINATION, AMENDMENT AND WAIVER SECTION 5.01 Termination. This Agreement may be terminated and the Merger and the other transactions contemplated by this Agreement may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated by this Agreement, as follows: (a) by mutual written consent duly authorized by the Boards of Directors of each of Parent and the Company; (b) by either Parent or the Company if the Effective Time shall not have occurred on or before February 15, 2003; provided however, however that the right to terminate this Agreement under this SECTION 8.01(b) shall not be available to any party whose action or failure to act has caused the failure of the Merger to occur on or before such date; (c) by either Parent or the Company if there shall be any Order which is final and nonappealable preventing the consummation of the Merger; (d) by Parent if (i) the Board of Directors of the Company withholds, withdraws, amends, modifies or changes its unanimous recommendation of the adoption of this Agreement or the approval of the Merger or the other transactions contemplated hereby in a manner adverse to Parent or shall have resolved to do so, (ii) the Board of Directors of the Company shall have recommended to the stockholders of the Company a Competing Transaction or shall have resolved to do so or shall have entered into any letter of intent or similar document or any agreement, contract or commitment accepting any Competing Transaction, (iii) the Board of Directors of the Company fails to reject a Competing Transaction within 10 days following receipt by the Company of the proposal for such Competing Transaction, (iv) the Company shall have failed to include in the Proxy Statement the unanimous recommendation of the Company's Board of Directors in favor of the approval of the Merger or this Agreement, (v) the Company's Board of Directors fails to reaffirm its unanimous recommendation in favor of the approval of the Merger and this Agreement within five business days after Parent requests in writing that such recommendation be reaffirmed, (vi) the Company shall have breached its obligations under SECTION 6.04 or (vii) a tender offer or exchange offer for 20% or more of the outstanding shares of stock of the Company is commenced, and the Board of Directors of the Company fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders); (e) by the Company if (i) the Board of Directors of Parent withholds, withdraws, amends, modifies or changes its unanimous recommendation of the adoption of this Agreement or the approval of the Merger or the other transactions contemplated hereby in a manner adverse to the Company or shall have resolved to do so, (ii) Parent shall have failed to include in the Proxy Statement the unanimous recommendation of Parent's Board of Directors in favor of the approval of the Merger or this Agreement, (iii) Parent's Board of Directors fails to reaffirm its unanimous recommendation in favor of the approval of the Merger and this Agreement within five business days after Parent requests in writing that such recommendation be reaffirmed, (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of stock of Parent is commenced, and the Board of Directors of Parent fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders), of (v) if the Company accepts a Superior Proposal and has satisfied the conditions set forth in SECTION 6.01(c) with respect thereto; (f) by either Parent or the Company if this Agreement shall fail to receive the requisite vote for approval and adoption at the applicable Stockholders' Meeting; (g) by Parent upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth either in SECTION 7.02(a) or SECTION 7.01(b) would not be satisfied ("Terminating Company Breach"); provided, however, that if such Terminating Company Breach is curable by the Company within 30 days of the occurrence of such Terminating Company Breach through the exercise of its best efforts and for as long as the Company continues to exercise such best efforts, Parent may not terminate this Agreement under this SECTION 8.01(f) until the expiration of such 30-day period; (h) by Company upon a breach of any representation, warranty, covenant or agreement on the part of Parent and Merger Sub set forth in this Agreement, or if any representation or warranty of Parent and Merger Sub shall have become untrue, in either case such that the conditions set forth either in SECTION 7.03(a) or SECTION 7.03(b) would not be satisfied ("Terminating Parent Breach"); provided, however, that if such Terminating Parent Breach is curable by Parent and Merger Sub within 30 days of the occurrence of such Terminating Parent Breach through the exercise of their respective best efforts and for as long as Parent and Merger Sub continue to exercise such best efforts, Company may not terminate this Agreement under this SECTION 8.01(h) until the expiration of such 30-day period; or (i) by Company if the stockholders of Parent affiliated with The Hillman Company have not executed and delivered to Company within ten (10) days of the date of this Agreement a Voting Agreement in substantially the form attached hereto as Exhibit A. SECTION 5.02 Effect of Termination. Except as provided in SECTION 8.05 and SECTION 9.01, in the event of termination of this Agreement pursuant to SECTION 8.01, this Agreement shall forthwith become void, there shall be no liability under this Agreement on the part of Parent, Merger Sub or the Company or any of their respective officers or directors, and all rights and obligations of each party hereto shall cease; provided, however, that nothing herein shall relieve any party from liability for the willful breach of any of its representations and warranties, or breach of its covenants or agreements set forth in this Agreement. SECTION 5.03 Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after the approval of the Merger and adoption of this Agreement by the stockholders of the Company, no amendment may be made that would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended, except by an instrument in writing signed by each of the parties hereto. SECTION 5.04 Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. SECTION 5.05 Expenses. (a) All expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the Merger or any other transaction is consummated, except that the Company and Parent each shall pay one-half of all Compliance Expenses (as defined below) relating to printing, filing and mailing the Registration Statement and the Proxy Statements and all SEC and other regulatory filing fees incurred in connection with the Merger, the Registration Statement or the Proxy Statements. "Compliance Expenses" as used above shall include all reasonable out-of-pocket expenses incurred by a party or on its behalf in connection with or related to the printing, filing and mailing of the Registration Statement and the Proxy Statements, the solicitation of stockholder approval, the filing of any required notices under the HSR Act or other similar regulations and any other out-of-pocket expenses associated with any regulatory filing or other regulatory action associated with the Merger; provided, however, in no event shall Compliance Expenses include any fees or expenses of counsel, accountants, financial advisors, experts or consultants to a party hereto, except to the extent that any of such parties may advance an expense (such as a filing fee) that otherwise would be considered a Compliance Expense if incurred directly by a party hereto. (b) If the Company terminates this Agreement pursuant to SECTION 8.01(e)(v) and the transaction contemplated by the Superior Proposal closes, then the Company (or its successor) shall pay to Parent, in cash, not later than three business days after such closing, an amount equal to three percent (3%) of the aggregate value of such Superior Proposal, measured by the gross consideration received by the Company's stockholders as part of such Competing Transaction. If such gross consideration is payable other than in cash, the amount thereof will be considered to be the fair market value thereof, determined either by reference to an applicable market price or otherwise in good faith by the Board of Directors of the Company (or its successor). ARTICLE VI GENERAL PROVISIONS SECTION 6.01 Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement and in any certificate delivered pursuant hereto shall terminate at the Effective Time or upon the termination of this Agreement pursuant to SECTION 8.01, as the case may be, except that the agreements set forth in Articles I and II and SECTION 6.04(b), SECTION 6.06, SECTION 6.07, SECTION 6.08, SECTION 6.09 SECTION 6.10, SECTION 6.13, SECTION 6.14 and this ARTICLE IX shall survive the Effective Time and those set forth in SECTION 6.04(b), SECTION 8.02, SECTION 8.03 and SECTION 8.05 and this ARTICLE IX shall survive termination of this Agreement. SECTION 6.02 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, facsimile, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this SECTION 9.02): if to Parent or Merger Sub: Superconductor Technologies Inc. 460 Ward Drive Santa Barbara, CA 93111 Facsimile No.: (805) 683-9496 Attention: M. Peter Thomas with a copy to: Guth|Christopher LLP 10866 Wilshire Suite 1250 Los Angeles, CA 90024 Facsimile: (310) 470-8354 Attention: Daniel G. Christopher. if to the Company: Conductus, Inc. 969 West Maude Avenue Sunnyvale, CA 94085] Facsimile No.: (408) 523-9999 Attention: Charles E. Shalvoy with a copy to: Orrick, Herrington & Sutcliffe LLP 400 Sansome Street San Francisco, CA 94111 Facsimile No.: 415-773-5759 Attention: Richard S. Grey SECTION 6.03 Certain Definitions. For purposes of this Agreement, the term: (a) "affiliate" of a specified person means a person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such specified person; (b) "beneficial owner" with respect to any shares means a person who shall be deemed to be the beneficial owner of such shares (i) that such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) that such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding, or (iii) that are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (c) "business day" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in the City of San Francisco; (d) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "knowledge" or "known" means, with respect to any matter in question, if any of the executive officers of the Company or Parent, as the case may be, has actual knowledge of such matter, or would have had such actual knowledge upon reasonable inquiry of appropriate employees of Company or Parent, as applicable; (f) "person" means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (g) "subsidiary" or "subsidiaries" of any person means any corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. SECTION 6.04 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect as long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible. SECTION 6.05 Assignment; Binding Effect; Benefit. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, other than as provided in SECTION 6.06. SECTION 6.06 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. SECTION 6.07 Governing Law; Forum. (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. (b) Each party hereby irrevocably submits to the exclusive jurisdiction of the Federal courts located in the State of Delaware and the state courts of the State of Delaware in any action, suit or proceeding arising in connection with this Agreement, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein); provided, however, that such consent to jurisdiction is solely for the purpose referred to in this SECTION 9.07(b) and shall not be deemed to be a general submission to the jurisdiction of such court or in the State of Delaware other than for such purposes. SECTION 6.08 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 6.09 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 6.10 Attorney's Fees. In any dispute between the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any Person hereunder, the party or parties prevailing in such dispute will be entitled, in addition to such other relief as may be granted, to the attorneys' fees and court costs incurred by reason of such dispute. SECTION 6.11 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. SECTION 6.12 Entire Agreement. This Agreement (including the Exhibits, the Company Disclosure Schedule and the Parent Disclosure Schedule) and the Non-Disclosure Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto. *** [NEXT PAGE IS SIGNATURE PAGE] *** IN WITNESS WHEREOF, the Company, Parent, and Merger Sub have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. SUPERCONDUCTOR TECHNOLOGIES INC. By: Name: M. Peter Thomas____ __ Title: President and Chief Executive Officer STI ACQUISITION, INC. By: __ Name: M. Peter Thomas Title: President CONDUCTUS, INC. By: Name: Charles E. Shalvov Title: President and Chief Executive Officer
EXHIBIT A FORM OF VOTING AGREEMENT FOR CERTAIN STOCKHOLDERS OF PARENT This VOTING AGREEMENT (the "Voting Agreement") is entered into as of October __, 2002, by and between Conductus, Inc., a Delaware corporation ("Company"), __________________, _____________ and _____________ ("Stockholders"). Recitals A. Company and Superconductor Technologies Inc., a Delaware corporation (the "Parent"), are entering into an Agreement and Plan of Merger dated as of October ___, 2002 (the "Merger Agreement") which provides (subject to the conditions set forth therein) for the merger of a wholly owned subsidiary of Parent with and into the Company (the "Merger"). Capitalized terms not otherwise defined in this Voting Agreement shall have the meanings given to them in the Merger Agreement. B. In order to induce Company to enter into the Merger Agreement, Stockholder, solely in his, her or its capacity as a stockholder of Parent, is entering into this Voting Agreement. Agreement Each stockholder, intending to be legally bound, severally agrees on behalf of itself as follows: 1. Voting Of Shares. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date (as defined in Section 6), at any meeting of stockholders of Parent, however called, and in any action by written consent of the stockholders of Parent, Stockholder shall vote the Subject Securities (as defined in Section 6) or cause the Subject Securities to be voted (to the extent such securities are entitled to be voted): 1.1 in favor of the approval of the Merger and adoption of the Merger Agreement and any matter that could reasonably be expected to facilitate the Merger; 1.2 against any action or agreement that would result in a breach of any representation, warranty, covenant or other obligation or agreement of Parent under the Merger Agreement; and 1.3 against any action or agreement that would cause any provision contained in Article VII of the Merger Agreement to not be satisfied. 2. Transfer of Subject Securities. 2.1 Transfer of Subject Securities. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date, Stockholder shall not (a) cause or permit any Transfer of any of the Subject Securities to be effected; (b) tender any of the Subject Securities to any Person or (c) create or permit to exist any Encumbrance with respect to any Subject Securities (other than Encumbrances which do not affect, directly or indirectly, the right of Buyer to vote the Subject Securities as provided in this Voting Agreement). 2.2 Transfer of Voting Rights. Stockholder agrees that, during the period from the date of this Voting Agreement through the Expiration Date, Stockholder shall ensure that: (a) none of the Subject Securities are deposited into a voting trust; and (b) no proxy is granted, and no voting agreement or similar agreement is entered into, with respect to any of the Subject Securities, other than proxies solicited by Parent in connection with the Merger, which are not inconsistent with Sections 1.1 through 1.3 above. 3. Representations and Warranties of Stockholder. Each Stockholder hereby represents and warrants severally (and not jointly) to Company as follows: 3.1 Authorization, etc. Stockholder has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Voting Agreement and to perform its obligations under this Voting Agreement. This Voting Agreement has been duly executed and delivered by Stockholder and constitute legal, valid and binding obligations of Stockholder, enforceable against Stockholder in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 3.2 Conflicts or Consents. (a) The execution and delivery of this Voting Agreement by Stockholder does not, and the performance of this Voting Agreement by Stockholder will not: (i) conflict with or violate any law, rule, regulation, order, decree or judgment applicable to Stockholder or by which it or any of its properties is or may be bound or affected; or (ii) result in or constitute (with or without notice or lapse of time) any breach of or default under, or give to any other Person (with or without notice or lapse of time) any right of termination, amendment, acceleration or cancellation of, or result (with or without notice or lapse of time) in the creation of any Encumbrance or restriction on any of the Subject Securities pursuant to, any contract to which Stockholder is a party or by which Stockholder or any of his affiliates or properties is or may be bound or affected. (b) The execution and delivery of this Voting Agreement by Stockholder does not, and the performance of this Voting Agreement by Stockholder will not, require any consent or approval of any Person. 3.3 Title to Securities. As of the date of this Voting Agreement: (a) Stockholder holds of record (free and clear of any Encumbrances or restrictions except as specifically disclosed on the signature page of this Voting Agreement) the number of outstanding shares of Parent Common Stock set forth under the heading "Shares Held of Record" on the signature page of this Voting Agreement; (b) Stockholder holds (free and clear of any Encumbrances or restrictions except as specifically disclosed on the signature page of this Voting Agreement) the options, warrants and other rights to acquire shares of Parent Common Stock set forth under the heading "Options, Warrants and Other Rights" on the signature page of this Voting Agreement; (c) Stockholder Owns the additional securities of Parent set forth under the heading "Additional Securities Beneficially Owned" on the signature page of this Voting Agreement; and (d) Stockholder does not directly or indirectly Own any shares of Parent Common Stock or other securities of Parent, or any option, warrant or other right to acquire (by purchase, conversion or otherwise) any shares of Parent Common Stock or other securities of Parent, other than the shares and options, warrants and other rights set forth on the signature page of this Voting Agreement and other than as contemplated by the Securities Purchase Agreement. 4. Representations and Warranties of Company. Company hereby represents and warrants to each Stockholder as follows: 4.1 Authorization, etc. Company has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Voting Agreement. This Voting Agreement has been duly executed and delivered by Company, enforceable against Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 4.2 No Conflicts or Consents. (a) The execution and delivery of this Voting Agreement by Company does not: (i) conflict with or violate any law, rule, regulation, order, decree or judgment applicable to Company or by which it or any of its properties is or may be bound or affected; or (ii) result in or constitute (with or without notice or lapse of time) any breach of or default under, or give to any other Person (with or without notice or lapse of time) any right of termination, amendment, acceleration or cancellation of any contract to which Company is a party or by which Company or any of its affiliates or properties is or may be bound or affected. (b) The execution and delivery of this Voting Agreement by Company does not require any consent or approval of any Person. 5. Miscellaneous. 5.1 Survival of Representations, Warranties and Agreements. All representations, warranties, covenants and agreements made by Stockholder in this Voting Agreement shall survive until the Expiration Date. 5.2 Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Voting Agreement shall be paid solely by the party incurring such costs and expenses. 5.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or if sent by overnight courier or similar means or sent by facsimile with confirmation of receipt of transmission, to the parties as follows: if to Company: __________, Inc. ___________________ Facsimile No.: (___) __________ Attention: General Counsel with a copy to: ___________________ _____________ CA 94104 Facsimile No.: (415) 772-6268 if to the Stockholder: at the address set forth below Stockholder's signature on the signature page of this Voting Agreement with a copy to: Parent at the address set forth in the Merger Agreement. Any such notice shall be effective (a) if delivered personally, when received, (b) if sent by overnight courier, when receipted for, and (d) if sent by facsimile, when confirmation of receipt upon receipt of transmission. 5.4 Severability. In case any one or more of the provisions contained in this Voting Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a party to this Voting Agreement, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained in this Voting Agreement shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 5.5 Agreement. This Voting Agreement and the documents and instruments referred to in this Voting Agreement embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained in this Voting Agreement. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to in this Voting Agreement including the exhibits and the documents and instruments referred to in this Voting Agreement. 5.6 Assignment; Binding Effect. Neither this Voting Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties without the prior written consent of the other parties. This Voting Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. This Voting Agreement is not intended to confer any rights or remedies upon any Person other than the parties. 5.7 Specific Performance. The parties agree that irreparable damage would occur in the event that any provision of this Voting Agreement was, or is, not performed in accordance with its specific terms or was, or is, otherwise breached. Stockholder agrees that, in the event of any breach or threatened breach by Stockholder of any covenant or obligation contained in this Voting Agreement, Buyer shall be entitled (in addition to any other remedy that may be available to it, including monetary damages) to (a) a decree or order of specific performance to enforce the observance and performance of such covenant or obligation, and (b) an injunction restraining such breach or threatened breach. Stockholder further agrees that neither Buyer nor any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 0, and Stockholder irrevocably waives any right he may have to require the obtaining, furnishing or posting of any such bond or similar instrument. 5.8 Counterparts. This Voting Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 5.9 Consent and Waiver. Stockholder hereby gives any consents or waivers that are required for the consummation of the Merger or the entering into of the Merger Agreement under the terms of any agreement to which Stockholder is a party or pursuant to any other rights Stockholder may have to consent to or approve the consummation of the Merger or the entering into of the Merger Agreement. 6. Definitions. For purposes of this Voting Agreement: 6.1 "Expiration Date" shall mean the earlier of (i) the date upon which the Merger Agreement is terminated, or (ii) the Effective Time. 6.2 Stockholder shall be deemed to "Own" or to have acquired "Ownership" of a security if Stockholder is the: (i) record owner of such security; or (ii) "beneficial owner" (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of such security; provided, however, that Stockholder shall not be deemed to Own a security solely because of Stockholder's status as an executive officer, director, partner or member of a Person that owns such security. 6.3 "Subject Securities" shall mean: (i) all securities of Parent (including all shares of Parent Common Stock and all options, warrants and other rights to acquire shares of Parent Common Stock) Owned by Stockholder as of the date of this Agreement; and (ii) all additional securities of the Company (including all additional shares of Parent Common Stock and all additional options, warrants and other rights to acquire shares of Parent Common Stock) of which Stockholder acquires Ownership during the period from the date of this Agreement through the Expiration Date. 6.4 A Person shall be deemed to have effected a "Transfer" of a security if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers or disposes of such security or any interest in such security; (ii) enters into an agreement or commitment contemplating the possible sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest therein; or (iii) reduces such Person's beneficial ownership interest in or risk relating to any such security. [Signature Page Follows] IN WITNESS WHEREOF, Company and Stockholder have caused this Voting Agreement to be executed as of the date first written above. COMPANY STOCKHOLDER _______________________ _________________________ Signature Signature _______________________ __________________________ Name Name _______________________ __________________________ Title Title ADDRESS FOR STOCKHOLDER __________________________ ___________________________________________ SECTION 6.13
EXHIBIT B FORM OF AFFILIATE LETTER FOR AFFILIATES OF COMPANY [DATE] [PARENT, Inc.] [PARENT ADDRESS] Ladies and Gentlemen: The undersigned has been advised that, as of the date of this letter, the undersigned may be deemed to be an "affiliate" of Conductus, Inc., a Delaware corporation (the "Company"), as the term "affiliate" is defined for purposes of paragraph (c) of Rule 145 ("Rule 145") of the Rules and Regulations (the "Rules and Regulations") promulgated under the Securities Act of 1933, as amended (the "Securities Act"), by the Securities Exchange Commission (the "SEC"). Pursuant to the terms of the Agreement and Plan of Merger dated as of October __, 2002 between Superconductor Technologies Inc. ("Parent"), STI Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and the Company (the "Merger Agreement"), at the Effective Time, Merger Sub will be merged with and into the Company, or under certain circumstances described in the Merger Agreement, the Company will be merged with and into Parent. Capitalized terms not otherwise defined in this letter shall have the meanings given to them in the Merger Agreement. As a result of the Merger, the undersigned will receive shares of Parent Common Stock in exchange for shares of Company Common Stock owned by the undersigned. The undersigned hereby represents and warrants to, and covenants with, the Parent that, in the event the undersigned receives any Parent Common Stock in the Merger: (a) The undersigned shall not make any sale, transfer or other disposition of Parent Common Stock in violation of the Securities Act or the Rules and Regulations. (b) The undersigned has carefully read this letter and discussed its requirements and other applicable limitations upon the undersigned's ability to sell, transfer or otherwise dispose of Parent Common Stock, to the extent the undersigned has felt it necessary, with the undersigned's counsel. The undersigned acknowledges that the receipt by Parent of this letter is an inducement to Parent's obligations to consummate the Merger. (c) The undersigned has been advised that the issuance of shares of Parent Common Stock to the undersigned in the Merger is expected to be registered under the Securities Act by a Registration Statement on Form S-4. However, the undersigned has also been advised that because (i) at the time of the Merger's submission for a vote of the stockholders of the Company the undersigned may be deemed an affiliate of the Company, and (ii) the distribution by the undersigned of Parent Common Stock has not been registered under the Securities Act, the undersigned may not sell, transfer or otherwise dispose of Parent Common Stock issued to the undersigned in the Merger unless (A) such sale, transfer or other disposition has been registered under the Securities Act, (B) such sale, transfer or other disposition is made in conformity with the volume and other applicable limitations imposed by Rule 145 under the Securities Act, or (C) in the opinion of counsel reasonably acceptable to Parent, such sale, transfer or other disposition is otherwise exempt from registration under the Securities Act. (d) The undersigned understands that Parent will be under no obligation to register the sale, transfer or other disposition of Parent Common Stock by the undersigned or on the undersigned's behalf under the Securities Act or to take any other action necessary in order to make compliance with an exemption from such registration available. (e) The undersigned understands that stop transfer instructions will be given to Parent's transfer agent with respect to Parent Common Stock owned by the undersigned and that there may be placed on the certificates for the Parent Common Stock issued to the undersigned, or any substitutions therefor, a legend stating in substance: "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF A LETTER AGREEMENT DATED ________, 2002, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF [PARENT NAME]" (f) The undersigned also understands that unless the transfer by the undersigned of the undersigned's Parent Common Stock has been registered under the Securities Act or is a sale made in conformity with the provisions of this letter, Parent reserves the right, in its sole discretion, to place the following legend on the certificates issued to any transferee of shares from the undersigned: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER 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, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED." It is understood and agreed that the legend set forth in paragraph (e) or (f) above shall be removed by delivery of substitute certificates without such legend if the undersigned shall have delivered to Parent (i) a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Parent to the effect that such legend is not required for purposes of the Securities Act or (ii) reasonably satisfactory evidence or representations that the shares represented by such certificates are being or have been transferred in a transaction made in conformity with the provisions of Rule 145. Very truly yours, ________________________________ Signature ________________________________ Print Name Acknowledged this day of , 2002. [PARENT, INC.] By: Name: Title: _________________________
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