EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
February 26, 1999, by and among Superconductor Technologies, Inc. a Delaware
corporation (the "Company"), and the current holders (each a "Holder," and
collectively, the "Holders") of the Company's Series A Convertible Preferred
Stock, Series A-1 Convertible Preferred Stock, and Series B Convertible
Stock
and the related warrants (collectively, the "Existing Securities") in the
amounts set forth on Exhibit A hereto.
Background
A. The Company anticipates consummating an equity financing in the
future
(the "Series C Preferred Financing").
X.Xx order to achieve compliance with NASDAQ Marketplace Rule 4460 and
to
meet NASDAQ's concerns regarding the past issuances of the Existing
Securities, and to avoid any concerns regarding the potential future issuance
of securities in a new financing, the Company's Board of Directors (the
"Board") has determined it to be in the best interests of the Company and its
stockholders to exchange the Existing Securities for new shares of Series
X-0, X-0 and B-1 Convertible Preferred Stock and related warrants
(collectively,
the "New Securities") that are substantially the same as the Existing
Securities except for the following features:
1.Conversion/exercise/anti-dilution features: Prior to the receipt
of Stockholder Approval (as defined below), the conversion, exercise and
price anti-dilution features of all the New Securities (plus: (i) the
securities to
be issued in the Series C Preferred Financing and (ii) the New Warrants (as
defined below)) would be limited to an aggregate of 1,533,709 shares of the
Company's Common Stock (the "19.9% Cap"), which represents 19.9% of the total
outstanding capital stock of the Company on March 25, 1998. The stockholders
will be requested to approve the elimination of the 19.9% Cap and the
issuance of additional securities. The requisite vote (the "Stockholder
Approval")
will be a majority of the shares present and voting at the meeting, excluding
any New Securities (and any securities issued in the Series C Preferred
Financing).
2.Dividend features: If Stockholder Approval is not obtained, the
New Securities would have a cumulative mandatory dividend equal to 20% per
annum, payable in cash. Such dividends would begin to accrue as of the dates
the Existing Securities were first issued.
3.Redemption Features: The New Securities will not have any
redemption features. In consideration for the elimination of the redemption
feature of the Existing Securities, the Company will issue warrants to
purchase 75,000 shares of the Company's Common Stock at an exercise price
equal to $7.00 per share (the "New Warrants"), subject to the 19.9% Cap.
4.Anti-dilution Features: The anti-dilution features will be
amended to exclude the securities to be issued in the Series C Preferred
Financing and to make certain other changes as set forth in the Certificates
of Designation (as defined below) attached as Exhibits B, C and D hereto.
C. The New Securities to be issued to the Holders in exchange for their
Existing Securities will be subject to the Second Amended and Restated
Stockholder Rights Agreement and the Amended Registration Rights Agreement,
both of which will be entered into by the Company and the Holders before the
Closing (as defined below).
NOW, THEREFORE, the parties agree as follows:
1. Authorization; Issuance of Securities; Closing.
(a) In connection with the transactions contemplated by
this Agreement, the Board has authorized (i) the filing of Certificates of
Designation of Rights, Preferences and Privileges of Series X-0, X-0 and B-1
Preferred Stock (collectively, the "Certificates of Designation") attached as
Exhibits B, C, and D hereto; (ii) the exchange of the Existing Securities for
the New Securities as described in Section 1(b) below; and (iii) the issuance
of the New Warrants as described in Section 1(b) below.
(b) Prior to the Closing (as defined below), the Company
shall cause the Certificates of Designation to be filed with the Delaware
Secretary of State. At the Closing, (i) the Holders shall have delivered the
stock certificates and warrants representing the Existing Securities and the
completed Letter of Transmittal attached as Exhibit E and; (ii) in exchange
therefor, the Company shall deliver to the Holders certificates representing
127,084 shares of its New Securities, the related warrants and the New
Warrants (in substantially the form attached as Exhibit F), allocated to the
Holders as indicated in the attached Exhibit A.
(c) The closing (the "Closing") of the transactions
contemplated hereby shall be held at the offices of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx on February 26, 1999,
subject to satisfaction or waiver of the conditions to Closing set forth in
Section 2 below.
2. Approval from Holders. By executing this Agreement, the
Holders: (i) approve the creation of Series C Preferred Stock with the
rights, preferences and privileges as set forth in the Certificate of
Designation
delivered to the Holders and the issuance of such shares and related warrants
all as set forth in the Series C Preferred Stock Purchase Agreement delivered
to the Holders (the "Series C Agreement"); (ii) waive their rights of first
refusal contained Section 2 of the Amended and Restated Stockholders
Agreement, dated August 11, 1998, and Section 4 of the Securities Purchase
Agreement, dated September 2, 1998 (the "Securities Purchase Agreement") with
respect to the shares of Series C Preferred Stock, the warrants to be issued
pursuant to the Series C Agreement, the Letter Agreement between the Company
and Xxxxxx Unman Securities, Inc., dated as of August 10, 1998, and the New
Securities and the New Warrants pursuant to this Agreement; (iii) amend
Section 4(e) of the Securities Purchase Agreement to add an additional
exclusion from the definition of "Capital Raising Limitations" for the New
Securities and the securities issuable under the Series C Agreement; and (iv)
amend the Securities Purchase Agreement, dated September 2, 1998, to replace
the form of warrant attached thereto as Exhibit B with the form of warrant
attached as Exhibit I and change the references to "Series B Preferred Stock"
to "Series B-1 Preferred Stock."
3. Conditions to Closing. The obligations of the parties under
this Agreement are subject to the fulfillment or waiver on or before the
Closing of the following conditions:
(a) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the parties on or prior to the
Closing shall have been performed or complied with in all material respects.
(b) Second Amended and Restated Stockholder Rights
Agreement and Amended and Restated Registration Rights Agreement. The
parties shall have entered into the Second Amended and Restated Stockholders
Rights
Agreement and Amended Registration Rights Agreement in the forms attached as
Exhibit G and H, respectively.
(c) Receipt of all Existing Securities. The Company shall
have received from the Holders all the stock certificates and warrants
representing the Existing Securities as set forth on Exhibit A (or lost stock
or warrant affidavits for the same) and the related Letters of Transmittal
fully executed and delivered.
(d) Blue Sky. The Company shall have obtained all
necessary Blue Sky law permits and qualifications, or have the availability
of exemptions therefrom, required by any state for the offer and exchange of
the Shares.
(e) Opinion of Company Counsel. The Holders shall have
received from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to the Company, an
opinion addressed to the Holders, dated the day of the Closing and in
substantially the form attached as Exhibit J.
4. Investment Representations of the Holders. Each Holder of
Existing Securities represents and warrants to the Company as follows:
(a) The Holder is acquiring the New Securities for
investment for his or her own account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act").
(b) The Holder acknowledges and understands that the New
Securities constitute "restricted securities" under the Securities Act and
have not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of such Holder's investment intent as expressed herein. The
Holder is an "accredited investor" within the meaning of Regulation D, Rule
501(a), promulgated by the Securities and Exchange Commission.
(c) The certificates evidencing the New Securities will be
imprinted with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT.
5. Miscellaneous.
(a) Governing Law. This Agreement shall be governed in
all respects by the internal laws of the State of Delaware.
(b) Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by any of the
parties hereto and the closing of the transactions contemplated hereby.
(c) Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
(d) Entire Agreement; Amendment. This Agreement and the
other documents delivered pursuant hereto at the Closing constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
either (i) the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought or (ii) the Company and the Holders
holding a majority of the then outstanding New Securities.
(e) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one instrument.
(f) Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
and effect without such provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this Agreement
to any party.
(g) Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
(h) Benefits of Agreement. Nothing in this Agreement,
express or implied, shall give to any person, other than the parties hereto
and their successors hereunder any benefit or any legal or equitable right,
remedy or claim under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as
of the date first written above.
SUPERCONDUCTOR TECHNOLOGIES, INC.
By:
Name: Xxxxx Xxxxxx
Title: President and Chief Executive Officer
Sole Series A Preferred Stockholder:
Wilmington Securities, Inc.
By:____________________________
Name:
Title:
Sole Series A-1 Preferred Stockholder:
Wilmington Securities, Inc.
By:____________________________
Name:
Title:
Series B Preferred Stockholders:
Wilmington Securities, Inc.
By:_____________________________
Name:
Title:
Xxxxx X. Xxxxxxx Trust Under Agreement of Trust
dated November 18, 1985
By:_____________________________
X.X. Xxxxxxxxxxxx, Trustee
Juliet Xxx Xxxxxxx Xxxxxxx Trust under
Agreement of Trust dated December 30, 1976
for Children of Juliet Xxx Xxxxxxx Xxxxxxx
By:_________________________________
Xxxxxx X. Xxxxxx, Trustee
By:_________________________________
X.X. Xxxxxxxxxxxx, Trustee
Xxxxxx Xxxxxxx Xxxxxx Trust under Agreement
of Trust dated December 30, 1976 for Children
of Xxxxxx Xxxxxxx Xxxxxx
By:_________________________________
Xxxxxx X. Xxxxxx, Trustee
By:_________________________________
X.X. Xxxxxxxxxxxx, Trustee
Xxxxx Xxx Xxxxxxx, Xx. Trust under Agreement
of Trust dated December 30, 1976 for Children
of Xxxxx Xxx Xxxxxxx, Xx.
By:__________________________________
Xxxxxx X. Xxxxxx, Trustee
By:__________________________________
X.X. Xxxxxxxxxxxx, Trustee
Xxxxxxx Xxxxxxx Xxxxxxx Trust under Agreement
of Trust dated December 30, 1976 for Children
of Xxxxxxx Xxxxxxx Xxxxxxx
By:__________________________________
Xxxxxx X. Xxxxxx, Trustee
By:__________________________________
X.X. Xxxxxxxxxxxx
EXHIBIT A
Existing Securities to be Exchanged New Securities to be Issued
Holder Shares Warrants Shares Warrants New Warrants
WSI 645,833 100,000 64,584 100,000
Series A Common Series A-2 Common
125,000 66,667 12,500 66,667
Series A-1 Common Series A-3 Common
150,000 36,000 15,000 36,000 54,000
Series B Common Series B-1 Common Common
HLH 150,000 36,000 15,000 6,000 9,000
Trust Series B Common Series B-1 Common Common
JLHS 50,000 12,000 5,000 12,000 3,000
1976 Series B Common Series B-1 Common Common
Trust
AHF 50,000 12,000 5,000 12,000 3,000
1976 Series B Common Series B-1 Common Common
Trust
HLHS Jr. 50,000 12,000 5,000 12,000 3,000
1976 Series B Common Series B-1 Common Common
Trust
WTH 50,000 12,000 5,000 12,000 3,000
1976 Series B Common Series B-1 Common Common
Trust
Note: Each share of Preferred Stock to be issued as new securities is
initially convertible into 20 shares of Common Stock.
EXHIBIT B
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND
PRIVILEGES OF SERIES A-2 PREFERRED STOCK
OF
SUPERCONDUCTOR TECHNOLOGIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Xxxxx Xxxxxx, the Chief Executive Officer of Superconductor
Technologies, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance
with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors on February 4, 1999 adopted the following resolution
creating a series of 64,584 shares of Preferred Stock designated as Series
A-2 Preferred Stock:
RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by the Amended and Restated Certificate
of Incorporation, the Board of Directors does hereby provide for the issue
of a series of Preferred Stock, $0.001 par value, of the Corporation, to be
designated Series A-2 Preferred Stock (the "Series A-2 Preferred"), consisting
of 64,584 shares and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the Series A-2 Preferred are not stated and expressed in the
Amended and Restated Certificate of Incorporation, does hereby fix and
herein state and express such designations, powers, preferences and relative
and other special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the Amended
and Restated Certificate of Incorporation shall be deemed to have the meanings
provided therein):
SECTION 1. Designation and Amount. The shares of such series
shall be designated as "Series A-2 Preferred", par value $0.001 per share,
and the number of shares constituting such series shall be 64,584.
SECTION 2. Rank. Except as provided in Section 8, the Series
A-2 Preferred Stock shall rank (i) prior to the Corporation's common stock,
par value $.001 per share (the "Common Stock"); (ii) pari passu with the
Series A-3 Preferred Stock, the Series B-1 Preferred Stock, and with any
class or series of capital stock of the Corporation hereafter created
specifically
ranking, by its terms, on parity with the Series A-2 Preferred Stock; and
(iii) junior to any class or series of capital stock of the Corporation
hereafter created specifically ranking, by its terms, senior to the Series
A-2 Preferred Stock, in each case as to distribution of assets upon
liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
SECTION 3. Dividends. The holders of shares of Series A-2
Preferred shall be entitled to receive dividends, out of funds legally
available therefor, payable in preference and priority to any payment of any
dividend on Common Stock of the Corporation, at the rate of $3.60 per share
(adjusted for any recapitalization, stock combinations, stock dividends,
stock splits and the like (a "Recapitalization")) per annum for the Series
A-2
Preferred, provided however that in the event Stockholder Approval (as
defined in Section 6(h)) is not obtained, then effective as of March 26, 1998,
the
$3.60 dividend amount shall be increased to $12.00 per share (as adjusted for
Recapitalizations). Such dividends shall be cumulative, accrue daily
(beginning March 26, 1998) and be paid quarterly, in cash or as an addition
to the Series A-2 Liquidation Preference (as defined below). No dividend
shall
be paid on the Common Stock in any year, other than dividends payable solely
in Common Stock, until all dividends due and payable on the Preferred Stock
have been declared and paid, and then such dividends on the Common Stock
shall not be in excess of the dividends paid on the Preferred Stock unless
the
amount of such excess is also paid on the Preferred Stock on an as-converted
per share basis.
SECTION 4. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary (a "Liquidation Event"), distributions to the stockholders of
the
Corporation shall be made in the following manner:
(a) The holders of Series A-2 Preferred shall be entitled
to receive, on a pari passu basis with the holders of Series A-3, Series B-1
and any other series of Preferred Stock ranked pari passu with Series A-2
Preferred Stock but prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of any series of
Preferred Stock junior to Series A-2 Preferred Stock or holders of the Common
Stock by reason of their ownership of such stock, an amount per share equal
to the sum (the "Series A-2 Liquidation Preference") of (i) $60.00 for each
share of Series A-2 Preferred then held by them, adjusted for any
Recapitalizations with respect to such shares and (ii) an amount equal to all
unpaid dividends on the Series A-2 Preferred held by them; provided, however,
in the event of a Liquidation Event pursuant to Section 4(b) below that is
consummated on or before March 26, 2001, the Series A-2 Liquidation
Preference shall be the greater of (i) $72.00 or (ii) $60.00 plus all accrued
dividends for each share of Series A-2 Preferred, adjusted for any
Recapitalizations.
If the assets and funds thus distributed among the holders of the Preferred
Stock shall be insufficient to permit the payment to such holders of their
full preferential amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock on a pari passu basis in proportion to the
aggregate preferential amount of shares of Preferred Stock outstanding as of
the date of the distribution upon the occurrence of such event. After
payment has been made to the holders of the Preferred Stock of the full
preferential
amount to which they shall be entitled, the holders of the Common Stock shall
be entitled to share ratably in the remaining assets, based on the number of
shares of Common Stock held.
(b) For purposes of this Section 4, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, or the sale of all or substantially all of the assets of the
Corporation, or any other corporate reorganization, in which consolidation,
merger, sale of assets or reorganization the stockholders of the Corporation
receive distributions in cash or securities of another corporation or
corporations as a result of such consolidation, merger, sale of assets or
reorganization, shall be treated as a Liquidation Event unless the
stockholders of this Corporation immediately prior to such consolidation,
merger, sale of assets or reorganization hold or control more than fifty
percent (50%) of the voting equity securities of the successor or surviving
corporation immediately following such consolidation, merger, sale of assets
or reorganization, in which case such consolidation, merger, sale of assets
or reorganization shall not be treated as a Liquidation Event.
SECTION 5. Voting Rights. Except as otherwise required by law,
the Amended and Restated Certificate of Incorporation or Bylaws of the
Corporation or this Certificate of Designation, the holder of each share of
Common Stock issued and outstanding shall have one vote and the holder of
each share of Preferred Stock shall be entitled to the number of votes equal
to
the number of shares of Common Stock into which such share of Preferred Stock
could be converted, subject to the limits in Section 6(h) below, at the
record date for determination of the stockholders entitled to vote on such
matters,
or, if no such record date is established, at the date such vote is taken or
any written consent of stockholders is solicited, such votes to be counted
together with all other shares of stock of the Corporation having general
voting power and not separately as a class. Holders of Common Stock and
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation. Fractional votes by the
holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of
Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number.
SECTION 6. Conversion. The holders of Series A-2 Preferred
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to the limits set forth in
Section 6(h) below, each share of Series A-2 Preferred shall be convertible,
at the option of the holder thereof, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for the
Series A-2 Preferred into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $60.00 by the Series A-2
Conversion Price, determined as hereinafter provided, in effect at the time
of conversion. The price at which shares of Common Stock shall be
deliverable
upon conversion of shares of Series A-2 Preferred shall initially be $3.00
with respect to each share of Series A-2 Preferred (the "Series A-2
Conversion Price"). The initial Series A-2 Conversion Price shall be subject
to
adjustment as hereinafter provided.
(b) Automatic Conversion. Subject to the limits set forth
in Section 6(h) below, each share of Series A-2 Preferred shall automatically
be converted into shares of Common Stock at the then effective Series A-2
Conversion Price for such series upon the election of holders of at least a
majority of the then outstanding shares of Series A-2 Preferred.
(c) Mechanics of Conversion. The mechanics of conversion
set forth in this Section 6(c) are subject to the limits set forth in Section
6(h) below. No fractional shares of Common Stock shall be issued upon
conversion of Series A-2 Preferred. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Series A-2 Conversion
Price. Before any holder of Series A-2 Preferred shall be entitled to
convert the same into full shares of Common Stock and to receive certificates
therefor, the holder shall surrender the certificate or certificates therefor,
duly
endorsed, at the office of the Corporation or of any transfer agent for
the Series A-2 Preferred, and shall give written notice to the Corporation at
such office that the holder elects to convert the same; provided, however,
that in the event of an automatic conversion pursuant to Section 6(b), the
outstanding shares of Series A-2 Preferred shall be converted automatically
without any further action by the holders of such shares and whether or not
the certificates representing such shares are surrendered to the Corporation
or its transfer agent and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless the certificates evidencing
such shares of Series A-2 Preferred are either delivered to the Corporation or
its
transfer agent as provided above, or the holder notifies the Corporation or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Series A-2
Preferred, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid and a check payable
to the holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A-2 Preferred to be converted,
or in the case of automatic conversion then on the date of election by a
majority of the then outstanding shares of Series A-2 Preferred, and the
person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or
holders of such shares of Common Stock on such date.
(d) (1) Adjustment of Conversion Price of Series A-2
Preferred Stock. The Series A-2 Conversion Price shall be subject to
adjustment from time to time as follows:
(i) Adjustments for Subdivisions,
Combinations or
Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided by stock split, stock dividends or
otherwise, into a greater number of shares of Common Stock, the Series A-2
Conversion Price then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Series A-2
Conversion Price then in effect shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(ii) Adjustments for Stock Dividends and
Other Distributions. In the event the Corporation at any time or from time
to time makes, or fixes a record date for the determination of holders of
Common
Stock entitled to receive any distribution (excluding any repurchases of
securities by the Corporation not made on a pro rata basis from all holders
of any class of the Corporation's securities) payable in property or in
securities of the Corporation other than shares of Common Stock, and other
than as otherwise adjusted in this Section 6 or as provided in Section 3,
then and in each such event the holders of Series A-2 Preferred shall receive
at
the time of such distribution, the amount of property or the number of
securities of the Corporation that they would have received had their Series
A-2 Preferred been converted into Common Stock on the date of such event.
(iii) Adjustments for Reclassification,
Exchange and Substitution. Except as provided in Section 3 upon any
liquidation, dissolution or winding up of the Corporation, if the Common
Stock issuable upon conversion of the Series A-2 Preferred shall be changed
into
the same or a different number of shares of any other class or classes of
stock,
whether by capital reorganization, reclassification or otherwise (other than
a subdivision or combination of shares provided for above), each share of
Series A-2 Preferred shall thereafter be convertible into the number of shares
of
stock or other securities or property to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion of such
share of Series A-2 Preferred shall have been entitled upon such
reorganization or reclassification.
(2) Adjustments of Series A-2 Conversion Price for
Diluting Issues. In addition to the adjustment of the Series A-2 Conversion
Price provided in Section 6(d)(1) above, the Series A-2 Conversion Price
shall be subject to further adjustment from time to time as follows:
(i) Special Definitions. For purposes of
this Section 6(d)(2), the following definitions shall apply:
(1) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean
March 26, 1998.
(3) "Convertible Securities" shall
mean
securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common
Stock"
shall mean all shares of Common Stock issued (or, pursuant to Section
6(d)(2)(iii), deemed to be issued) by the Corporation after the Original
Issue
Date other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of
the Preferred Stock;
(B) to officers, directors and
employees of, and consultants to, the Corporation pursuant to plans and
arrangements approved by the Board of Directors;
(C) as a dividend or other
distribution on the Preferred Stock or pursuant to clause (i), (ii) or (iii)
of Section 6(d)(1);
(D) upon the exercise of options
issued prior to the Original Issue Date;
(E) to research or development
collaborators or to banks or other institutional lendors or lessors in
connection with capital asset leases or borrowings for the acquisition of
capital assets, pursuant to any arrangement approved by the Board of
Directors;
(F) upon exercise of warrants
outstanding on the Original Issue Date or warrants to be issued pursuant to
agreements outstanding on the Original Issue Date, including without
limitation the following warrants: warrant, dated as of November 22, 1997,
the warrant dated as of December 21, 1998, warrants issued or issuable
pursuant to the Letter Agreement between the Company and Xxxxxx Unman
Securities, Inc., dated as August 10, 1998, the warrants issued or issuable
pursuant to the Exchange Agreement, any additional warrants to be issued
pursuant to the Securities Purchase Agreement dated as of September 2, 1998,
and any Preferred Stock purchase agreement entered into before Stockholder
Approval (as defined below);
(G) with the written approval of
the holders of a majority of the outstanding Series A-2 Preferred; or
(H) by way of dividend or other
distributions on securities referred to in clauses (A), (B), (C), (D), (E),
(F) and (G) above.
(ii) No Adjustment of Series A-2 Conversion
Price. No adjustment in the Series A-2 Conversion Price of a particular
share of Series A-2 Preferred shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for
an Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Series A-2 Conversion Price in effect on the date
of, and immediately prior to such issue, for such share of Series A-2
Preferred.
(iii) Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible
Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the
event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of any holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of business
on
such record date, provided that Additional Shares of Common Stock shall not
be deemed to have been issued unless the consideration per share (determined
pursuant to Section 6(d)(2)(v) below) of such Additional Shares of Common
Stock would be less than the Series A-2 Conversion Price in effect on the date
of and immediately prior to such issue, or such record date, as the case may
be,
and provided further that in any such case in which additional shares of
Common
Stock are deemed to be issued:
(A) no further adjustment in the
Series A-2 Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or
Convertible Securities by their terms provide, with the passage of time or
otherwise,
for any increase or decrease in the consideration payable to the Corporation,
or
increase or decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the Series A-2 Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it affects such Options or
the
rights of conversion or exchange under such Convertible Securities;
(C) upon the expiration of any
such Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A-2 Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of
Convertible Securities or
Options for Common Stock, the only additional shares of Common Stock
issued were shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received
by the Corporation upon such exercise, or for the issue of all such
Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options
for Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(D) no readjustment pursuant to
clause (B) or (C) above shall have the effect of increasing the Series A-2
Conversion Price to an amount which exceeds the lower of (i) the Series A-2
Conversion Price on the original adjustment date, or (ii) the Series A-2
Conversion Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options
which expire by their terms not more than thirty (30) days after the date of
issue thereof, no adjustment of the Series A-2 Conversion Price shall be made
until the expiration or exercise of all such Options.
(iv) Adjustment of Series A-2 Conversion
Price Upon Issuance of Additional Shares of Common Stock. In the event the
Corporation shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that
are the subject of adjustment pursuant to Section 6(d)(i)) without
consideration or for a consideration per share less than the Series A-2
Conversion Price, in effect on the date of, and immediately prior to such
issue, then and in such event, such Series A-2 Conversion Price shall be
reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Series A-2 Conversion Price by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issue, (ii) the number of shares
of Common Stock issuable upon conversion of the Preferred Stock outstanding
immediately prior to such issue and (iii) the number of shares of Common
Stock which the aggregate consideration received by the Corporation for the
total
number of Additional Shares of Common Stock so issued would purchase at such
Series A-2 Conversion Price; and the denominator of which shall be the sum of
(i) the number of shares of Common Stock outstanding immediately prior to
such issue, (ii) the number of shares of Common Stock issuable upon conversion
of
the Preferred Stock outstanding immediately prior to such issue and (iii)
the number of such Additional Shares of Common Stock so issued; and provided
further that, for the purposes of this Section 6(d)(2)(iv), all shares of
Common Stock issuable upon exercise of outstanding Options or conversion of
outstanding Convertible Securities shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 6(d)(2)(iii), such Additional Shares of Common Stock
shall be deemed to be outstanding.
(v) Determination of Consideration. For
purposes of this Section 6(d)(2), the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(1) Cash and Property: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the
aggregate amount of cash received by the Corporation (excluding amounts paid
or payable for accrued interest or accrued dividends);
(B) insofar as it consists of
property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in
good faith by the Board of Directors; and
(C) in the event Additional
Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of
Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1),
relating to Options and Convertible Securities, shall be determined by
dividing
(x) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment
of such consideration) payable to the Corporation upon the exercise of such
Option or the conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities, the exercise of such Options
for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion or
exchange of
such Convertible Securities.
(e) No Impairment. Except as provided in Section 8, the
Corporation will not, by amendment of its Amended and Restated Certificate of
Incorporation or this Certificate of Designation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in
the carrying out of all the provisions of this Section 6 and in the taking of
all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A-2 Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series A-2 Conversion Price pursuant
to this Section 6, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series A-2 Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A-2 Preferred, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A-2 Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the conversion of Series A-2 Preferred.
(g) Notices of Record Date. In the event that the
Corporation shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to effect any reclassification or
capitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iii) to merge or consolidate with or into any
other person or entity, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Series A-2 Preferred:
(1) at least twenty (20) days' prior
written notice of the date on which a record shall be taken for such
dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights
to vote in respect of the matters referred to in (ii) and (iii) above; and
(2) in the case of the matters referred to
in (ii) and (iii) above, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Series A-2
Preferred at the address for each such holder as shown on the books of the
Corporation. The above written notice requirement may be waived by the
holders of a majority of the then outstanding Series A-2 Preferred Stock.
(h) Limits on Conversion. Notwithstanding anything
herein to the contrary, the Series A-2, Series A-3, and Series B-1 Preferred
Stock of the Corporation and any additional shares of Preferred Stock issued
by the Corporation prior to Stockholder Approval (as defined below), and the
outstanding warrants to purchase Common Stock of the Corporation (issued or
issuable to holders of such shares of Preferred Stock pursuant to agreements
outstanding as of February 26, 1999 or entered into prior to Stockholder
Approval) (collectively, the "Securities") shall not be convertible into or
exercisable for (as the case may be) shares of Common Stock in excess of
1,533,709 shares (as adjusted for Recapitalizations and the like) (the "19.9%
Cap" or the "Allowed Conversion Shares"), unless the Corporation has received
stockholder approval to eliminate such 19.9% Cap at a duly held meeting of
the stockholders in calendar 1999 (the "Stockholder Approval"). Until
Stockholder Approval has been obtained (or, if Stockholder Approval is not
obtained, then continuing thereafter) the 19.9% Cap shall apply and each
holder of Securities (each a "Holder") shall have the right to convert its
Preferred Stock or exercise its warrants only up to its pro rata portion of
the Allowed Conversion Shares. A Holder may waive in writing its right to
convert or exercise (or transfer to another Holder) its pro rata portion of
the Allowed Conversion Shares. In the event that a Holder converts or
exercises its Securities, then the number of Allowed Conversion Shares will
be reduced by such amount.
SECTION 7. Status of Converted Stock. In case any shares of
Series A-2 Preferred shall be repurchased or converted pursuant to Section 6,
the shares so repurchased or converted shall be canceled and shall not be
issued by the Corporation as Series A-2 Preferred and this Certificate of
Designation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized Series A-2 Preferred.
SECTION 8. Covenants. In addition to any other rights provided
by law, so long as at least twenty-five percent (25%) of the authorized
Series A-2 Preferred shall be outstanding, the Corporation shall not, without
first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series A-2 Preferred:
(a) amend or repeal any provision of the Corporation's
Amended or Restated Certificate of Incorporation, certificates of designation
or Bylaws if such action would materially and adversely alter or change the
preferences, rights, privileges or powers of, or the restrictions provided
for the benefit of, the Series A-2 Preferred; or
(b) authorize or issue shares of any class or series of
stock having any preference or priority as to dividends or assets superior to
or on parity with any such preference or priority of the Series A-2 Preferred.
IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this
Certificate to be signed by Xxxxx Xxxxxx, its Chief Executive Officer, this
__th day of February, 1999.
Xxxxx Xxxxxx
Chief Executive Officer
EXHIBIT C
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND
PRIVILEGES OF SERIES A-3 PREFERRED STOCK
OF
SUPERCONDUCTOR TECHNOLOGIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Xxxxx Xxxxxx, the Chief Executive Officer of Superconductor
Technologies, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance
with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors on February 4, 1999 adopted the following resolution
creating a series of 12,500 shares of Preferred Stock designated as Series
A-3
Preferred Stock:
RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock, $0.001 par value, of the Corporation, to be
designated
Series A-3 Preferred Stock ("Series A-3 Preferred"), consisting of 12,500
shares
and to the extent that the designations, powers, preferences and relative and
other special rights and the qualifications, limitations and restrictions of
the Series A-3 Preferred are not stated and expressed in the Amended and
Restated Certificate of Incorporation, does hereby fix and herein state and
express such designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions thereof, as
follows (all terms used herein which are defined in the Amended and Restated
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
SECTION (1) Designation and Amount. The shares of such
series shall be designated as "Series A-3 Preferred", par value $0.001 per
share, and the number of shares constituting such series shall be 12,500.
SECTION 2. Rank. Except as provided in Section 8, the Series
A-3 Preferred Stock shall rank (i) prior to the Corporation's common stock,
par value $.001 per share (the "Common Stock"); (ii) pari passu with the
Series A-2 Preferred Stock, the Series B-1 Preferred Stock, and with any
class or series of capital stock of the Corporation hereafter created
specifically
ranking, by its terms, on parity with the Series A-3 Preferred Stock; and
(iii)
junior to any class or series of capital stock of the Corporation hereafter
created specifically ranking, by its terms, senior to the Series A-3
Preferred Stock, in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
SECTION 3. Dividends. The holders of shares of Series A-3
Preferred shall be entitled to receive dividends, out of funds legally
available therefor, payable in preference and priority to any payment of any
dividend on Common Stock of the Corporation, at the rate of $4.80 per share
(adjusted for any recapitalization, stock combinations, stock dividends,
stock splits and the like (a "Recapitalization")) per annum for the Series
A-3
Preferred, provided however, that in the event Stockholder Approval (as
defined in Section 6(h)) is not obtained, then effective as of August 11,
1998, the $4.80 dividend shall be increased to $16.00 per share (as adjusted
for Recapitalizations). Such dividends shall be cumulative, accrue daily
(beginning August 11, 1998) and be paid quarterly in cash or as an addition
to the Series A-3 Liquidation Preference (as defined below). No dividend
shall
be paid on the Common Stock in any year, other than dividends payable solely
in Common Stock, until all dividends due and payable on the Preferred Stock
have been declared and paid, and then such dividends on the Common Stock
shall not be in excess of the dividends paid on the Preferred Stock unless
the
amount of such excess is also paid on the Preferred Stock on an as-converted
per share basis.
SECTION 4. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary (a "Liquidation Event"), distributions to the stockholders of
the
Corporation shall be made in the following manner:
(c) The holders of Series A-3 Preferred shall be entitled
to receive, on a pari passu basis with the holders of Series A-2, Series B-1
and any series of Preferred Stock ranked pari passu with Series A-3 Preferred
Stock, but prior and in preference to any distribution of any of the assets
or surplus funds of the Corporation to the holders of any series of Preferred
Stock ranked junior to series A-3 Preferred Stock or holders of the Common
Stock by reason of their ownership of such stock, an amount per share equal
to the sum (the "Series A-3 Liquidation Preference") of (i) $80.00 for each
share of Series A-3 Preferred (the "Original Purchase Price") then held by
them, adjusted for any Recapitalizations with respect to such shares and,
(ii) an amount equal to all unpaid dividends on the Series A-3 Preferred held
by
them; provided however, in the event of a Liquidation Event pursuant to
Section 4(b) below that is consummated on or before March 26, 2001, the
Liquidation Preference shall be the greater of (i) $96.00 or (ii) $80.00 plus
all accrued dividends for each share of Series A-3 Preferred, adjusted for
any Recapitalizations. If the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such
holders of their full preferential amount, then the entire assets and funds
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Preferred Stock on a pari passu basis in
proportion to the aggregate preferential amount of shares of Preferred Stock
outstanding as of the date of the distribution upon the occurrence of such
event. After payment has been made to the holders of the Preferred Stock of
the full preferential amounts to which they shall be entitled, the holders of
the Common Stock shall be entitled to share ratably in the remaining assets,
based on the number of shares of Common Stock held.
(d) For purposes of this Section 4, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, or the sale of all or substantially all of the assets of the
Corporation, or any other corporate reorganization, in which consolidation,
merger, sale of assets or reorganization the stockholders of the Corporation
receive distributions in cash or securities of another corporation or
corporations as a result of such consolidation, merger, sale of assets or
reorganization, shall be treated as a Liquidation Event unless the
stockholders of this Corporation immediately prior to such consolidation,
merger, sale of assets or reorganization hold or control more than fifty
percent (50%) of the voting equity securities of the successor or surviving
corporation immediately following such consolidation, merger, sale of assets
or reorganization, in which case such consolidation, merger, sale of assets
or reorganization shall not be treated as a Liquidation Event.
SECTION 5. Voting Rights. Except as otherwise required by law,
the Amended and Restated Certificate of Incorporation or Bylaws of the
Corporation or this Certificate of Designation, the holder of each share of
Common Stock issued and outstanding shall have one vote and the holder of
each share of Preferred Stock shall be entitled to the number of votes equal
to
the number of shares of Common Stock into which such share of Preferred Stock
could be converted, subject to the limits set forth in Section 6(h) below, at
the record date for determination of the stockholders entitled to vote on
such matters, or, if no such record date is established, at the date such vote
is
taken or any written consent of stockholders is solicited, such votes to be
counted together with all other shares of stock of the Corporation having
general voting power and not separately as a class. Holders of Common Stock
and Preferred Stock shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation. Fractional votes by the
holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of
Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number.
SECTION 6. Conversion. The holders of Series A-3 Preferred
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to the limits set forth in
Section 6(h) below, each share of Series A-3 Preferred shall be convertible,
at the option of the holder thereof, at any time after the date of issuance
of
such share at the office of the Corporation or any transfer agent for the
Series A-3 Preferred into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $80.00 by the Series A-3
Conversion Price, determined as hereinafter provided, in effect at the time
of conversion. The price at which shares of Common Stock shall be
deliverable
upon conversion of shares of Series A-3 Preferred shall initially be $4.00
with respect to each share of Series A-3 Preferred (the "Series A-3
Conversion Price"). The initial Series A-3 Conversion Price shall be subject
to
adjustment as hereinafter provided.
(b) Automatic Conversion. Subject to the limits set forth
in Section 6(h) below, each share of Series A-3 Preferred shall automatically
be converted into shares of Common Stock at the then effective Series A-3
Conversion Price for such series upon the election of holders of at least a
majority of the then outstanding shares of Series A-3 Preferred.
(e) Mechanics of Conversion. The mechanics of conversion
set forth in this Section 6(c) are subject to the limits set forth in Section
5(h) below. No fractional shares of Common Stock shall be issued upon
conversion of Series A-3 Preferred. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal
to such fraction multiplied by the then effective Series A-3 Conversion
Price. Before any holder of Series A-3 Preferred shall be entitled to
convert the same into full shares of Common Stock and to receive certificates
therefor, the holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for
the Series A-3 Preferred, and shall give written notice to the Corporation at
such office that the holder elects to convert the same; provided, however,
that in the event of an automatic conversion pursuant to Section 6(b), the
outstanding shares of Series A-3 Preferred shall be converted automatically
without any further action by the holders of such shares and whether or not
the certificates representing such shares are surrendered to the Corporation
or its transfer agent and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless the certificates evidencing
such shares
of Series A-3 Preferred are either delivered to the Corporation or its
transfer agent as provided above, or the holder notifies the Corporation or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Series A-3
Preferred, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid and a check payable
to the holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A-3 Preferred to be converted,
or in the case of automatic conversion then on the date of election by a
majority of the then outstanding shares of Series A-3 Preferred, and the
person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or
holders of such shares of Common Stock on such date.
(f) (1) Adjustment of Conversion Price of Series A-3
Preferred Stock. The Series A-3 Conversion Price shall be subject to
adjustment from time to time as follows:
(i) Adjustments for Subdivisions,
Combinations or Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided by stock split, stock dividends or
otherwise, into a greater number of shares of Common Stock, the Series A-3
Conversion Price then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Series A-3
Conversion Price then in effect shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(ii) Adjustments for Stock Dividends and
Other Distributions. In the event the Corporation at any time or from time
to time makes, or fixes a record date for the determination of holders of
Common
Stock entitled to receive any distribution (excluding any repurchases of
securities by the Corporation not made on a pro rata basis from all holders
of any class of the Corporation's securities) payable in property or in
securities of the Corporation other than shares of Common Stock, and other
than as otherwise adjusted in this Section 6 or as provided in Section 3,
then and in each such event the holders of Series A-3 Preferred shall receive
at
the time of such distribution, the amount of property or the number of
securities of the Corporation that they would have received had their Series
A-3 Preferred been converted into Common Stock on the date of such event.
(iii) Adjustments for Reclassification,
Exchange and Substitution. Except as provided in Section 4 upon any
liquidation, dissolution or winding up of the Corporation, if the Common
Stock issuable upon conversion of the Series A-3 Preferred shall be changed
into the
same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than
a subdivision or combination of shares provided for above), each share of
Series A-3 Preferred shall thereafter be convertible into the number of shares
of
stock or other securities or property to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion of such
share of Series A-3 Preferred shall have been entitled upon such
reorganization or reclassification.
(d) (2) Adjustments of Series A-3 Conversion Price for
Diluting Issues. In addition to the adjustment of the Series A-3 Conversion
Price provided in Section 6(d)(1) above, the Series A-3 Conversion Price
shall be subject to further adjustment from time to time as follows:
(i) Special Definitions. For purposes of
this Section 6(d)(2), the following definitions shall apply:
(1) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean
August 11, 1998.
(3) "Convertible Securities" shall
mean
securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued (or, pursuant to Section
6(d)(2)(iii), deemed to be issued) by the Corporation after the Original
Issue Date other than shares of Common Stock issued or issuable:
(A) upon conversion of shares of
the Preferred Stock;
(B) to officers, directors and
employees of, and consultants to, the Corporation pursuant to plans and
arrangements approved by the Board of Directors;
(C) as a dividend or other
distribution on the Preferred Stock or pursuant to clause (i), (ii) or (iii)
of Section 6(d)(1);
(D) upon the exercise of options
issued prior to the Original Issue Date;
(E) to research or development
collaborators or to banks or other institutional lendors or lessors in
connection with capital asset leases or borrowings for the acquisition of
capital assets, pursuant to any arrangement approved by the Board of
Directors;
(F) upon exercise of warrants
outstanding on the Original Issue Date or warrants to be issued pursuant to
agreements outstanding on the Original Issue Date, including without
limitation the following warrants: warrant, dated as of November 22, 1997,
the warrant dated as of December 21, 1998 and warrants issued or issuable
pursuant to the Letter Agreement between the Company and Xxxxxx Unman
Securities, Inc., dated as August 10, 1998, warrants issued or issuable
pursuant to the Exchange Agreement, any additional warrants to be issued
pursuant to the Securities Purchase Agreement dated as of September 2, 1998,
and any Preferred Stock purchase agreement entered into before Stockholder
Approval (as defined below);
(G) with the written approval of
the holders of a majority of the outstanding Series A-3 Preferred; or
(H) by way of dividend or other
distributions on securities referred to in clauses (A), (B), (C), (D) (E),
(F) and (G) above.
(ii) No Adjustment of Series A-3 Conversion
Price. No adjustment in the Series A-3 Conversion Price of a particular
share of Series A-3 Preferred shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Series A-3 Conversion Price in effect on the date
of, and immediately prior to such issue, for such share of Series A-3
Preferred.
(iii) Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible
Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the
event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of any holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of
such Options or, in the case of Convertible Securities and Options therefor,
the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such
record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 6(d)(2)(v) below) of such Additional Shares of Common
Stock would be less than the Series A-3 Conversion Price in effect on the date
of
and immediately prior to such issue, or such record date, as the case may be,
and
provided further that in any such case in which additional shares of Common
Stock are deemed to be issued:
(A) no further adjustment in the
Series A-3 Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or
Convertible Securities by their terms provide, with the passage of time or
otherwise,
for any increase or decrease in the consideration payable to the Corporation,
or
increase or decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the Series A-3 Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it affects such Options or
the
rights of conversion or exchange under such Convertible Securities;
(C) upon the expiration of any
such Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A-3 Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of
Convertible Securities or Options for Common Stock, the only additional
shares of Common Stock issued were shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or exchange of
such
Convertible Securities, and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received
by the Corporation upon such exercise, or for the issue of all such
Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options
for Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(D) no readjustment pursuant to
clause (B) or (C) above shall have the effect of increasing the Series A-3
Conversion Price to an amount which exceeds the lower of (i) the Series A-3
Conversion Price on the original adjustment date, or (ii) the Series A-3
Conversion Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options
which expire by their terms not more than thirty (30) days after the date of
issue thereof, no adjustment of the Series A-3 Conversion Price shall be made
until the expiration or exercise of all such Options.
(iv) Adjustment of Series A-3 Conversion
Price Upon Issuance of Additional Shares of Common Stock. In the event the
Corporation shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that
are the subject of adjustment pursuant to Section 6(d)(i)) without
consideration or for a consideration per share less than the Series A-3
Conversion Price, in effect on the date of, and immediately prior to such
issue, then and in such event, such Series A-3 Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Series A-3 Conversion Price by a
fraction, the numerator of which shall be the sum of (i) the number of shares
of Common Stock outstanding immediately prior to such issue, (ii) the number
of shares of Common Stock issuable upon conversion of the Preferred Stock
outstanding immediately prior to such issue and (iii) the number of shares of
Common Stock which the aggregate consideration received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Series A-3 Conversion Price; and the denominator of which
shall be
the sum of (i) the number of shares of Common Stock outstanding immediately
prior
to such issue, (ii) the number of shares of Common Stock issuable upon
conversion of the Preferred Stock outstanding immediately prior to such issue
and (iii) the number of such Additional Shares of Common Stock so issued;
and provided further that, for the purposes of this Section 6(d)(2)(iv), all
shares of Common Stock issuable upon exercise of outstanding Options or
conversion of outstanding Convertible Securities shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares of
Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For
purposes of this Section 6(d)(2), the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(1) Cash and Property: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation
(excluding amounts paid or payable for accrued interest or accrued dividends);
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time
of such issue, as determined in good faith by the Board of Directors; and
(C) in the event Additional
Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of
Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1),
relating to Options and Convertible Securities, shall be determined by
dividing
(x) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment
of such consideration) payable to the Corporation upon the exercise of such
Option or the conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities, the exercise of such Options
for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion or
exchange of
such Convertible Securities.
(g) No Impairment. Except as provided in Section 8, the
Corporation will not, by amendment of its Amended and Restated Certificate of
Incorporation or this Certificate of Designation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in
the carrying out of all the provisions of this Section 6 and in the taking of
all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A-3 Preferred Stock against
impairment.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series A-3 Conversion Price pursuant
to this Section 6, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series A-3 Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A-3 Preferred, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A-3 Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the
conversion of Series A-3 Preferred.
(i) Notices of Record Date. In the event that the
Corporation shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to effect any reclassification or
capitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iii) to merge or consolidate with or into any
other person or entity, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Series A-3 Preferred:
(1) at least twenty (20) days' prior
written notice of the date on which a record shall be taken for such
dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights
to vote in respect of the matters referred to in (ii) and (iii) above; and
(2) in the case of the matters referred to
in (ii) and (iii) above, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Series A-3
Preferred at the address for each such holder as shown on the books of the
Corporation. The above written notice requirement may be waived by the
holders of a majority of the then outstanding Series A-3 Preferred Stock.
(h) Limits on Conversion. Notwithstanding anything
herein to the contrary, the Series A-2, Series A-3, and Series B-1 Preferred
Stock of the Corporation and any additional shares of Preferred Stock issued
by the Corporation prior to Stockholder Approval (as defined below), and the
outstanding warrants to purchase Common Stock of the Corporation (issued or
issuable to holders of such shares of Preferred Stock pursuant to agreements
outstanding as of February 26, 1999 or entered into prior to Stockholder
Approval) (collectively, the "Securities") shall not be convertible into or
exercisable for (as the case may be) shares of Common Stock in excess of
1,533,709 shares (as adjusted for Recapitalizations and the like) (the "19.9%
Cap" or the "Allowed Conversion Shares"), unless the Corporation has received
stockholder approval to eliminate such 19.9% Cap at a duly held meeting of
the stockholders in calendar 1999 (the "Stockholder Approval"). Until
Stockholder Approval has been obtained (or, if Stockholder Approval is not
obtained, then continuing thereafter) the 19.9% Cap shall apply and each
holder of Securities (each a "Holder") shall have the right to convert its
Preferred Stock or exercise its warrants only up to its pro rata portion of
the Allowed Conversion Shares. A Holder may waive in writing its right to
convert or exercise (or transfer to another Holder) its pro rata portion of
the Allowed Conversion Shares. In the event that a Holder converts or
exercises its Securities, then the number of Allowed Conversion Shares will
be reduced by such amount.
SECTION 7. Status of Converted Stock. In case any shares of
Series A-3 Preferred shall be repurchased or converted pursuant to Section 6,
the shares so repurchased or converted shall be canceled and shall not be
issued by the Corporation as Series A-3 Preferred and this Certificate of
Designation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized Series A-3 Preferred.
SECTION 8. Covenants. In addition to any other rights provided
by law, so long as at least twenty-five percent (25%) of the authorized
Series A-3 Preferred shall be outstanding, the Corporation shall not, without
first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the outstanding shares of Series A-3 Preferred:
(j) amend or repeal any provision of the Corporation's
Amended or Restated Certificate of Incorporation, certificates of designation
or Bylaws if such action would materially and adversely alter or change the
preferences, rights, privileges or powers of, or the restrictions provided
for the benefit of, the Series A-3 Preferred; or
(k) authorize or issue shares of any class or series of
stock having any preference or priority as to dividends or assets superior to
or on parity with any such preference or priority of the Series A-3 Preferred.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused this
Certificate to be signed by Xxxxx Xxxxxx, its Chief Executive Officer, this
__th day of February, 1999.
Xxxxx Xxxxxx
Chief Executive Officer
EXHIBIT D
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND
PRIVILEGES OF SERIES B-1 PREFERRED STOCK
OF
SUPERCONDUCTOR TECHNOLOGIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Xxxxx Xxxxxx, the Chief Executive Officer of Superconductor
Technologies Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance
with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors on February 4, 1999 adopted the following resolution
creating a series of 50,000 shares of Preferred Stock designated as Series
B-1
Preferred Stock.
RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock, par value $0.001 per share, of the Corporation, to
be
designated Series B-1 Preferred Stock (the "Series B-1 Preferred Stock"),
consisting of 50,000 shares, and to the extent that the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions of the Series B-1 Preferred Stock are not stated
and expressed in the Amended and Restated Certificate of Incorporation, does
hereby fix and herein state and express such designations, powers,
preferences and relative and other special rights and the qualifications,
limitations
and restrictions thereof, as follows (all terms used herein which are defined
in
the Amended and Restated Certificate of Incorporation shall be deemed to have
the meanings provided therein):
SECTION 1. Designation and Amount. The shares of such Series
B-1 Preferred Stock shall be designated as "Series B-1 Preferred Stock", par
value $0.001 per share, and the number of shares constituting such series
shall be 50,000.
SECTION 2. Rank. Except as provided in Section 8, the Series
B-1 Preferred Stock shall rank (i) prior to the Corporation's common stock,
par value $.001 per share (the "Common Stock"); (ii) pari passu with the
Series A-2 Preferred Stock, the Series A-3 Preferred Stock, and with any
class or series of capital stock of the Corporation hereafter created
specifically
ranking, by its terms, on parity with the Series B-1 Preferred Stock; and
(iii) junior to any class or series of capital stock of the Corporation
hereafter created specifically ranking, by its terms, senior to the Series
B-1 Preferred Stock, in each case as to distribution of assets upon
liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
SECTION 3. Dividends. The holders of shares of Series B-1
Preferred Stock shall be entitled to receive dividends, out of funds legally
available therefor, payable in preference and priority to any payment of any
dividend on Common Stock of the Corporation, at the rate of $5.60 per share
(adjusted for any recapitalization, stock combinations, stock dividends,
stock splits and the like ("Recapitalizations")) per annum for the Series B-1
Preferred Stock; provided, however, that in the event Stockholder Approval
(as defined in Section 6(h) below) is not obtained, then effective as of
September 2, 1998, the $5.60 dividend amount shall be increased to $16.00 per
share (adjusted for Recapitalizations). Such dividends shall be cumulative,
accrue
daily (effective September 2, 1998), and be paid quarterly in cash or as an
addition to the Series B-1 Liquidation Preference (as defined below). No
dividend shall be paid on the Common Stock in any year, other than dividends
payable solely in Common Stock, until all dividends due and payable on the
Preferred Stock have been declared and paid, and then such dividends on the
Common Stock shall not be in excess of the dividends paid on the Preferred
Stock unless the amount of such excess is also paid on the Preferred Stock on
an as-converted per share basis.
SECTION 4. Liquidation Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary (a "Liquidation Event"), distributions to the stockholders of
the
Corporation shall be made in the following manner:
(a) The holders of Series B-1 Preferred Stock shall be
entitled to receive, on a pari passu basis with the holders of Series A-2,
Series A-3 and Series C Preferred Stock and any other series of Preferred
Stock ranked pari passu with the Series B-1 Preferred Stock but prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of any series of Preferred Stock junior to Series
B-1 Preferred Stock or holders of the Common Stock by reason of their
ownership of such stock, an amount per share equal to the sum (the "Series
B-1 Liquidation Preference") of (i) $80.00 for each share of Series B-1
Preferred
Stock (the "Original Purchase Price") then held by them, adjusted for any
Recapitalizations with respect to such shares and (ii) an amount equal to all
unpaid dividends on the Series B-1 Preferred Stock held by them. If the
assets and funds thus distributed among the holders of the Preferred Stock
shall be insufficient to permit the payment to such holders of their full
preferential amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the aggregate preferential
amount of shares of Preferred Stock outstanding as of the date of the
distribution upon the occurrence of such event. After payment has been made
to the holders of the Preferred Stock of the full preferential amounts to
which they shall be entitled, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets, based on the number of
shares of Common Stock held.
(b) For purposes of this Section 4, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, or the sale of all or substantially all of the assets of the
Corporation, or any other corporate reorganization, in which consolidation,
merger, sale of assets or reorganization the stockholders of the Corporation
receive distributions in cash or securities of another corporation or
corporations as a result of such consolidation, merger, sale of assets or
reorganization, shall be treated as a Liquidation Event unless the
stockholders of this Corporation immediately prior to such consolidation,
merger, sale of assets or reorganization hold or control more than fifty
percent (50%) of the voting equity securities of the successor or surviving
corporation immediately following such consolidation, merger, sale of assets
or reorganization, in which case such consolidation, merger, sale of assets
or reorganization shall not be treated as a Liquidation Event.
SECTION 5. Voting Rights. Except as otherwise required by law,
the Amended and Restated Certificate of Incorporation or Bylaws of the
Corporation or this Certificate of Designation, the holder of each share of
Common Stock issued and outstanding shall have one vote and the holder of
each share of Series B-1 Preferred Stock shall be entitled to the number of
votes
equal to the number of shares of Common Stock into which such share of Series
B-1 Preferred Stock could be converted, subject to the limits set forth in
Section 6(h) below, at the record date for determination of the stockholders
entitled to vote on such matters, or, if no such record date is established,
at the date such vote is taken or any written consent of stockholders is
solicited, such votes to be counted together with all other shares of stock
of the Corporation having general voting power and not separately as a class.
Holders of Common Stock and Series B-1 Preferred Stock shall be entitled to
notice of any stockholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes by the holders of Series B-1 Preferred Stock
shall not, however, be permitted and any fractional voting rights shall
(after aggregating all shares into which shares of Series B-1 Preferred Stock
held
by each holder could be converted) be rounded to the nearest whole number.
SECTION 6. Conversion. The holders of Series B-1 Preferred
Stock have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to the limits set forth in
Section 6(h) below, each share of Series B-1 Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date
of issuance of such share at the office of the Corporation or any transfer
agent for the Series B-1 Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $80.00 by
the initial Series B-1 Conversion Price. The term "Series B-1 Conversion
Price" as used herein shall mean initially $4.00 and shall be subject to
adjustment as provided below.
(b) Automatic Conversion. Subject to the limits set forth
in Section 6(h) below, each share of Series B-1 Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series B-1 Conversion Price for such series upon the election of holders of
at least a majority of the then outstanding shares of Series B-1 Preferred
Stock.
(c) Mechanics of Conversion. The mechanics of conversion
set forth in this Section 6(c) are subject to the limits set forth in Section
6(h) below. No fractional shares of Common Stock shall be issued upon
conversion of Series B-1 Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay
cash
equal to such fraction multiplied by the then effective Series B-1 Conversion
Price. Before any holder of Series B-1 Preferred Stock shall be entitled to
convert the same into full shares of Common Stock and to receive certificates
therefor, the holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for
the Series B-1 Preferred Stock, and shall give written notice (in the form of
Exhibit A attached hereto) to the Corporation (the "Notice of Conversion") at
such office that the holder elects to convert the same and specifying the
date of conversion (the "Conversion Date"); provided, however, that in the
event
of an automatic conversion pursuant to Section 6(b), the outstanding shares
of
Series B-1 Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such automatic conversion unless the certificates evidencing
such shares
of Series B-1 Preferred Stock are either delivered to the Corporation or its
transfer agent as provided above, or the holder notifies the Corporation or
its transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Series B-1
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock. Such conversion
shall be deemed to have been made immediately prior to the close of business
on the
date of such surrender of the shares of Series B-1 Preferred Stock to be
converted, or in the case of automatic conversion then on the date of
election by a majority of the then outstanding shares of Series B-1 Preferred
Stock,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) (1) Adjustment of Conversion Price of Series B-1
Preferred Stock. The Series B-1 Conversion Price shall be subject to
adjustment from time to time as follows:
(i) Adjustments for Subdivisions,
Combinations or Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be subdivided by stock split, stock dividends or
otherwise, into a greater number of shares of Common Stock, the Series B-1
Conversion Price then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Series B-1
Conversion Price then in effect shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(ii) Adjustments for Stock Dividends and
Other Distributions. In the event the Corporation at any time or from time
to time makes, or fixes a record date for the determination of holders of
Common
Stock entitled to receive any distribution (excluding any repurchases of
securities by the Corporation not made on a pro rata basis from all holders
of any class of the Corporation's securities) payable in property or in
securities of the Corporation other than shares of Common Stock, and other
than as otherwise adjusted in this Section 6 or as provided in Section 3,
then and in each such event the holders of Series B-1 Preferred Stock shall
receive at the time of such distribution, the amount of property or the number
of
securities of the Corporation that they would have received had their Series
B-1 Preferred Stock been converted into Common Stock on the date of such
event.
(iii) Adjustments for Reclassification,
Exchange and Substitution. Except as provided in Section 4 upon any
liquidation, dissolution or winding up of the Corporation, if the Common
Stock issuable upon conversion of the Series B-1 Preferred Stock shall be
changed
into the same or a different number of shares of any other class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares provided for above), each
share
of Series B-1 Preferred Stock shall thereafter be convertible into the number
of
shares of stock or other securities or property to which a holder of the
number of shares of Common Stock of the Corporation deliverable upon
conversion of such share of Series B-1 Preferred Stock shall have been
entitled upon such reorganization or reclassification.
(2) Adjustments of Series B-1 Conversion Price for
Diluting Issues. In addition to the adjustment of the Series B-1 Conversion
Price provided in Section 6(d)(1) above, the Series B-1 Conversion Price
shall be subject to further adjustment from time to time as follows:
(i) Special Definitions. For purposes of this
Section 6(e)(2), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "Original Issue Date" shall mean September 2,
1998.
(3) "Convertible Securities" shall mean
securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or, pursuant to Section 6(d)(2)(iii),
deemed to be issued) by the Corporation after the Original Issue Date other
than shares of Common Stock issued or issuable:
(A) upon conversion of shares of the
Preferred Stock;
(B) to officers, directors and employees
of,
and consultants to, the Corporation pursuant to plans and arrangements
approved by the Board of Directors;
(C) as a dividend or other distribution on
the Preferred Stock or pursuant to clause (i), (ii) or (iii) of Section
6(d)(1);
(D) upon the exercise of options issued
prior to the Original Issue Date;
(E) to research or development
collaborators
or to banks or other institutional lendors or lessors in connection with
capital asset leases or borrowings for the acquisition of capital assets,
pursuant to any arrangement approved by the Board of Directors; or
(F) upon exercise of warrants
outstanding on the Original Issue Date or warrants to be issued pursuant to
agreements outstanding on the Original Issue Date (including without
limitation the following warrants: warrant, dated as of November 22, 1997,
the warrants issued or issuable pursuant to the Exchange Agreement dated as
of
February __, 1999, the Securities Purchase Agreement dated as of September 2,
1998 and the Series C Preferred Stock Purchase Agreement, the warrant, dated
as of December 21, 1998 and any securities issued or issuable pursuant to the
Letter Agreement between the Company and Xxxxxx Unman Securities, Inc., dated
as August 10, 1998;
(G) with the written approval of the
holders
of a majority of the outstanding Series B-1 Preferred;
(H) by way of dividend or other
distributions on securities referred to in clauses (A), (B), (C), (D), (E),
(F) and (G) above.
(ii) No Adjustment of Series B-1 Conversion Price.
No
adjustment in the Series B-1 Conversion Price of a particular share of Series
B-1 Preferred Stock shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the Corporation is
less
than the Series B-1 Conversion Price in effect on the date of, and
immediately
prior to such issue, for such share of Series B-1 Preferred Stock.
(iii) Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible
Securities. Except as otherwise provided in Section 6(d)(2)(i) above, in the
event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of any holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment
of such number) of Common Stock issuable upon the exercise of such Options
or,
in the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant to
Section 6(d)(2)(v) below) of such Additional Shares of Common Stock would be
less than the Series B-1 Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which additional shares of Common
Stock are deemed to be issued:
(A) no further adjustment in the
Series B-1 Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or
Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Corporation, or
increase or decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the Series B-1 Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed
to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(C) upon the expiration of any
such Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series B-1 Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of
Convertible Securities or Options for Common Stock, the only additional
shares
of Common Stock issued were shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received
by
the Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options
for Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(D) no readjustment pursuant to
clause (B) or (C) above shall have the effect of increasing the Series B-1
Conversion Price to an amount which exceeds the lower of (i) the Series B-1
Conversion Price on the original adjustment date, or (ii) the Series B-1
Conversion Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date; and
(E) in the case of any Options
which expire by their terms not more than thirty (30) days after the date of
issue thereof, no adjustment of the Series B-1 Conversion Price shall be made
until the expiration or exercise of all such Options.
(iv) Adjustment of Series B-1 Conversion
Price Upon Issuance of Additional Shares of Common Stock. In the event the
Corporation shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
6(d)(2)(iii), but excluding stock dividends, subdivisions or split-ups that
are the subject of adjustment pursuant to Section 6(d)(i)) without
consideration or for a consideration per share less than the Series B-1
Conversion Price, in effect on the date of, and immediately prior to such
issue, then and in such event, such Series B-1 Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Series B-1 Conversion Price by a
fraction, the numerator of which shall be the sum of (i) the number of shares
of Common Stock outstanding immediately prior to such issue, (ii) the number
of shares of Common Stock issuable upon conversion of the Preferred Stock
outstanding immediately prior to such issue and (iii) the number of shares of
Common Stock which the aggregate consideration received by the Corporation
for
the total number of Additional Shares of Common Stock so issued would
purchase
at such Series B-1 Conversion Price; and the denominator of which shall be
the
sum of (i) the number of shares of Common Stock outstanding immediately prior
to such issue, (ii) the number of shares of Common Stock issuable upon
conversion of the Preferred Stock outstanding immediately prior to such issue
and (iii) the number of such Additional Shares of Common Stock so issued;
and
provided further that, for the purposes of this Section 6(d)(2)(iv), all
shares of Common Stock issuable upon exercise of outstanding Options or
conversion of outstanding Convertible Securities shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to Section 6(d)(2)(iii), such Additional Shares of
Common Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For
purposes of this Section 6(d)(2), the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(1) Cash and Property: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation
(excluding amounts paid or payable for accrued interest or accrued dividends);
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time
of
such issue, as determined in good faith by the Board of Directors; and
(C) in the event Additional
Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of
Common Stock deemed to have been issued pursuant to Section 6(d)(2)(iii)(1),
relating to Options and Convertible Securities, shall be determined by
dividing
(x) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment
of such consideration) payable to the Corporation upon the exercise of such
Option or the conversion or exchange of such Convertible Securities, or in
the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without
regard
to any provision contained therein for a subsequent adjustment of such
number)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(e) No Impairment. Except as provided in Section 8, the
Corporation will not, by amendment of its Amended and Restated Certificate of
Incorporation or this Certificate of Designation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in
the
carrying out of all the provisions of this Section 6 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series B-1 Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series B-1 Conversion Price pursuant
to
this Section 6, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of Series B-1 Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B-1 Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such
adjustments and readjustments, (ii) the Series B-1 Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock and the
amount,
if any, of other property which at the time would be received upon the
conversion of Series B-1 Preferred Stock.
(g) Notices of Record Date. In the event that the
Corporation shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to effect any reclassification or
capitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iii) to merge or consolidate with or into any
other person or entity, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of Series B-1 Preferred Stock:
(1) at least twenty (20) days' prior
written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights
to vote in respect of the matters referred to in (ii) and (iii) above; and
(2) in the case of the matters referred to
in (ii) and (iii) above, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Series B-1
Preferred Stock at the address for each such holder as shown on the books of
the Corporation.
(h) Limits on Conversion. Notwithstanding anything
herein to the contrary, the Series A-2, Series A-3, Series B-1 and Series C
Preferred Stock of the Company and the outstanding warrants to purchase
Common
Stock of the Company (issued or issuable to holders of such shares of
Preferred Stock pursuant to agreements outstanding as of February __, 1999)
(collectively, the "Securities") shall not be convertible into or exercisable
for (as the case may be) shares of Common Stock in excess of 1,533,709 shares
(the "19.9% Cap" or the "Allowed Conversion Shares"), unless the Company has
received stockholder approval to eliminate such 19.9% Cap at a duly held
meeting of the stockholders in calendar 1999 (the "Stockholder Approval").
Until Stockholder Approval has been obtained (or, if Stockholder Approval is
not obtained, then continuing thereafter) the 19.9% Cap shall apply and each
holder of Securities (each a "Holder") shall have the right to convert or
exercise its Securities only up to its pro rata portion of the Allowed
Conversion Shares. A Holder may waive in writing its right to convert or
exercise its pro rata portion of the Allowed Conversion Shares. In the event
that a Holder converts or exercises its Securities, then the number of
Allowed
Conversion Shares will be reduced by such amount.
SECTION 7. Status of Converted Stock. In case any shares of
Series B-1 Preferred Stock shall be repurchased or converted pursuant to
Section 6, the shares so repurchased or converted shall be cancelled and
shall
not be issued by the Corporation as Series B-1 Preferred and this Certificate
of Designation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized Series B-1 Preferred Stock.
SECTION 8. Covenants. In addition to any other rights provided
by law, so long as at least twenty-five percent (25%) of the authorized
Series
B-1 Preferred Stock shall be outstanding, the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of not
less than a majority of the outstanding shares of Series B-1 Preferred Stock:
(a) amend or repeal any provision of the Corporation's
Amended or Restated Certificate of Incorporation, certificates of designation
or Bylaws if such action would materially and adversely alter or change the
preferences, rights, privileges or powers of, or the restrictions provided
for
the benefit of, the Series B-1 Preferred Stock; or
(b) authorize or issue shares of any class or series of
stock having any preference or priority as to dividends or assets superior to
or on parity with any such preference or priority of the Series B-1 Preferred
Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Superconductor Technologies Inc. has caused
this
Certificate to be signed by Xxxxx Xxxxxx, its Chief Executive Officer, this
_____ day of February, 1999.
M. Xxxxx Xxxxxx
Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B-1 Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares
of Series B-1 Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of Superconductor Technologies Inc. (the "Corporation")
according to the conditions of the Certificate of Designation of Series B-1
Preferred Stock, as of the date written below. If securities are to be
issued
in the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate
is attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales
by
the undersigned of the securities issuable to the undersigned upon conversion
of the Series B-1 Preferred Stock shall be made pursuant to registration of
the securities under the Securities Act of 1933, as amended (the "Act"), or
pursuant to an exemption from registration under the Act.
Date of Conversion:___________________________
Applicable Series B-1 Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series B-1 Preferred Stock Certificate(s) (or evidence of loss,
theft
or destruction thereof) to be converted are received by the Corporation or
its
Transfer Agent.
EXHIBIT E
SUPERCONDUCTOR TECHNOLOGIES, INC.
LETTER OF TRANSMITTAL
TO: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
February 26, 1999
Ladies and Gentlemen:
The undersigned hereby surrenders all enclosed stock certificates
representing shares of the Series A, A-1, and B Preferred Stock (the
"Preferred Stock") of Superconductor Technologies, Inc. (the "Company") and
warrants to purchase Common Stock of the Company for exchange and
cancellation
pursuant to that certain Exchange Agreement dated as of February 26, 1999.
Enclosed herewith are the following stock certificate(s) and/or warrant(s) of
the Company:
Registered Holder(s):
Cert. Number Class or Series of Stock or Warrant
Number of Shares
Signatures
Stockholder Signature Stockholder Signature
Print Stockholder Name Print Stockholder Name
Taxpayer Identification No. Taxpayer Identification
No.
Date Daytime telephone number,
including area code
INSTRUCTIONS
1. If this Letter of Transmittal is signed by the Registered
Holder(s) of the certificate(s) and/or warrant(s) surrendered hereby, the
signature(s) must correspond with the name as written on the face of the
certificate(s) without alteration, enlargement or any change whatsoever.
2 If any shares or warrants are owned of record by two or more joint
owners, all such owners must sign the Letter of Transmittal.
3 If any shares or warrants are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations of certificates.
4 If the Letter of Transmittal or any certificates or warrants are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing.
5. Letter of Transmittal Required: Lost Certificate(s). You will
not
receive the exchange certificate for your shares and/or warrants unless and
until the Letter of Transmittal, duly completed and signed, is delivered
together with the certificate(s) and/or warrant(s) and any required
accompanying evidence of authority. If the certificate(s) and/or warrant(s)
have been lost or destroyed, such should be indicated on the face of the
Letter of Transmittal. In such event, please complete, sign and return with
the Letter of Transmittal the attached Affidavit of Lost Stock Certificate in
order to effectively surrender the certificate(s) and/or warrant(s)
represented by such lost or destroyed certificate(s) and/or warrant(s). Note
that a separate Lost Stock/Warrant Affidavit must be completed and signed for
each lost or destroyed stock certificate and/or warrant.
LOST STOCK/WARRANT AFFIDAVIT
1. The undersigned is the holder of: (i) _________ shares of Series
____
Preferred Stock of Superconductor Technologies, Inc. (the "Company"), issued
on ____________, 19___ represented by Certificate Number ______ (the
"Certificate") and/or (ii) a warrant to purchase ___________ shares of the
Company's Common Stock.
2. The undersigned has examined his or her records and, after diligent
search, is unable to find the Certificate and/or Warrant and believes said
Certificate and/or Warrant to be lost. Accordingly, the undersigned
certifies
that the Certificate and/or Warrant shall be deemed surrendered for
cancellation from this day forth.
3. The undersigned has not assigned, transferred, sold or pledged all
or
any part of the Certificate and/or Warrant.
4. The undersigned releases the Company from any and all liability
relating to the loss of the Certificate and/or Warrant, or the issuance of a
new certificate and/or warrant. The undersigned agrees to defend and
indemnify and hold the Company harmless from any damage or loss caused by or
in any way relating to the loss of the Certificate and/or Warrant, or the
issuance of a new certificate and/or warrant.
5. In the event of discovery of the original Certificate and/or
Warrant,
the undersigned agrees to return it promptly to the Company, marked
"canceled."
6. The undersigned hereby authorizes any officer of the Company to
issue
(i) a new stock certificate for _________ shares of Series _____ Preferred
Stock to replace said lost Certificate and/or (ii) a new warrant to replace
said lost Warrant.
DATE:
(signature)
(print name)
(address)
EXHIBIT F
NEW WARRANT
EXHIBIT G
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENTEXHIBIT H
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
EXHIBIT I
FORM OF WARRANT
EXHIBIT J
OPINION OF COUNSEL
