Document:

Superconductor Technologies Inc., Exhibit 10.2

 

Exhibit l0.2

RGC International Investors, LDC

c/o Rose Glen Capital Management, L.P.

3 Bala Plaza East, Suite 501

251 St. Asaphs Road

Bala Cynwyd, PA 19004

September 29, 2002

M. Peter Thomas

President and Chief Executive Officer

Superconductor Technologies Inc.

460 Ward Drive

Santa Barbara, California 93111-2310

	          	
	 	     Re:      Payment of Premium Amount on Series E Preferred Stock

Dear Mr. Thomas:

     This letter sets forth the agreement of RGC International Investors, LDC
(“RGC”) and Superconductor Technologies Inc. (the “Company”) relating to the
payment of certain amounts on account of shares of the Company’s Series E
Convertible Preferred Stock (the “Series E Preferred”) held by RGC. RGC
currently holds 32,500 shares of Series E Preferred. Pursuant to Article VII
of the Company’s Certificate of Designations, Preferences and Rights of the
Series E Preferred (the “Certificate of Designation”), the outstanding shares
of the Series E Preferred will automatically convert into 2,155,261 shares of
the Company’s Common Stock on September 29, 2002 (the “Automatic Conversion
Date”) and the Company shall have the option to pay the Premium Amount (as
defined in the Certificate of Designation) either (i) in cash or (ii) in shares
of Common Stock as provided in Article VII of such Certificate of Designation.
The Premium Amount payable to RGC on the Automatic Conversion Date equals the
sum of (i) $4,550,000, plus (ii) the product of (x) 128,828 and (y) the then
applicable Conversion Price (as defined in the Certificate of Designation).

 

 

     The Company hereby agrees to pay, and RGC hereby agrees to accept, as
payment for the Premium Amount due on the Automatic Conversion Date, (i) the
amount of $3,000,000 in cash and (ii) a promissory note, substantially in the
form attached hereto as Exhibit A, in the aggregate principal amount of
$1,685,636.56.

     Please acknowledge your agreement with the foregoing by countersigning
this letter and returning a copy to the undersigned.

	 	 	 	 	 
	 	RGC INTERNATIONAL INVESTORS, LDC
	 
	 	By:	Rose Glen Capital Management, L.P.,

Investment Manager
	 
	 	 	
By:
	 	RGC General Partner Corp.,

as General Partner
	 
	 	 	
By:
	 	/s/ Steve Katznelson
	 	 	 	 	

	 	 	 	 	Steve Katznelson

Managing Director

ACCEPTED AND AGREED:

SUPERCONDUCTOR TECHNOLOGIES INC.

	 	 	 	 
	By:	 	
s/m M. Peter Thomas
	 	 	

	 	 	
M. Peter Thomas

President and Chief Executive OfficerSuperconductor Technologies Inc., Exhibit 10.3

 

EXHIBIT 10.3

Promissory Note

	 	 	 
	$1,685,636.56	 	
September 29, 2002

FOR VALUE RECEIVED, SUPERCONDUCTOR TECHNOLOGIES INC., a Delaware corporation
with its principal place of business at 460 Ward Drive, Santa Barbara,
California 93111-2310 (the “Debtor”), promises to pay to the order of RGC
INTERNATIONAL INVESTORS, LDC (the “Lender”), in lawful money of the United
States of America in immediately available funds to the following address: c/o
Rose Glen Capital Management, L.P., 3 Bala Plaza East, Suite 501, 251 St.
Asaphs Road, Bala Cynwyd, Pennsylvania 19004, or at such other location as the
Lender may designate from time to time, the principal sum of ONE MILLION SIX
HUNDRED EIGHTY-FIVE THOUSAND SIX HUNDRED THIRTY-SIX AND 56/100 DOLLARS
($1,685,636.56), together with interest accruing on the outstanding principal
balance from the date hereof, as provided below:

1. Rate of Interest. Amounts outstanding under this Note will bear interest
at a rate of eight percent (8%) per annum (“Interest Rate”). Interest will be
calculated on the basis of a year of 360 days for the actual number of days in
each interest period. In no event will the rate of interest hereunder exceed
the maximum rate allowed by law.

2. Payment Terms. Interest accrued from the date hereof on the unpaid
principal balance hereof shall be payable monthly, in arrears, commencing on
October 29, 2002, and on the twenty-ninth day of each of the five months
thereafter, until March 29, 2003, in the amount of $11,237.58 per month,
subject to adjustment for any change in the interest rate in accordance with
Sections 3, 5 or 6 below. Thereafter, principal and interest shall be due and
payable in twelve equal amortizing monthly installments of $146,630.88,
(subject to adjustment for any change in the interest rate in accordance with
Sections 3, 5 or 6 below), commencing on April 29, 2003, and on the
twenty-ninth day of each of the eleven months thereafter, until March 29, 2004,
on which date all remaining outstanding principal and accrued interest shall be
due and payable in full.

If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the Commonwealth of Pennsylvania, such payment shall
be made on the next succeeding business day and such extension of time shall be
included in computing interest in connection with such payment. Payments
received will be applied to charges, fees and expenses (including attorneys’
fees), accrued interest and principal in any order the Lender may choose, in
its sole discretion.

3. Late Payments; Default Rate. If the Debtor fails to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within five calendar days of the date due and payable, the Debtor
also shall pay to the Lender a late charge equal to five percent (5%) of the
amount of such payment (the “Late Charge”). Such five day period shall not be
construed in any way to extend the due date of any such payment. Upon
maturity, whether by acceleration, demand or otherwise, and at the Lender’s
option upon the occurrence of any Event of Default (as hereinafter defined) and
during the continuance thereof, this Note shall bear interest at a rate per
annum (based on a year of 360 days and actual days elapsed) which shall be ten
percentage points (10%) in excess of the interest rate in effect from time to
time under this Note but not more than the maximum rate allowed by law (the
“Default Rate”). The Default Rate shall continue to apply whether or not
judgment shall be entered on this Note. Both the Late Charge and the Default
Rate are imposed as liquidated damages for the purpose of defraying the
Lender’s expenses incident to the handling of delinquent payments, but are in
addition to, and not in lieu of, the Lender’s exercise of any rights and
remedies hereunder or under applicable law, and any fees and expenses of any
agents or attorneys which the Lender may employ. In addition, the Default Rate
reflects the increased credit risk to the Lender of carrying a loan that is in
default. The Debtor agrees that the Late Charge and Default Rate are
reasonable forecasts of just compensation for anticipated and actual harm
incurred by the Lender and that the actual harm incurred by the Lender cannot
be estimated with certainty and without difficulty.

4. Prepayment. The indebtedness may be prepaid in whole or in part at any
time without penalty.

5. Events of Default. The occurrence of any of the following events will be
deemed to be an “Event of Default” under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note within five (5) days
when due; (ii) the occurrence of any event of default or default and the lapse
of any notice or cure period under any other debt, liability or obligation to
the Lender of the Debtor; (iii) the filing by or against the Debtor of any
proceeding in bankruptcy,

 

 

receivership, insolvency, reorganization, liquidation, conservatorship or
similar proceeding (and, in the case of any such proceeding instituted against
the Debtor, such proceeding is not dismissed or stayed within 45 days of the
commencement thereof); (iv) the Debtor or any “significant subsidiary” (as
defined in Section 210.1-02(w) of Regulation S-X promulgated under the
Securities Act of 1933, as amended) of the Debtor shall make an assignment for
the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due or apply for or consent to the appointment of a
receiver or trustee for Debtor or for all or substantially all of its property
or business or such a receiver or trustee shall otherwise be appointed, or any
levy, garnishment, attachment or similar proceeding is instituted against any
property of the Debtor or any significant subsidiary of the Debtor; (v) a
default with respect to any other indebtedness of the Debtor for borrowed money
in excess of $100,000, if the effect of such default results in the
acceleration of such debt; (vi) the commencement of any foreclosure or
forfeiture proceeding, execution or attachment against any collateral securing
the obligations of the Debtor to the Lender; (vii) the entry of a final
judgment against the Debtor and the failure of the Debtor to discharge the
judgment within ten days of the entry thereof; (viii) the Debtor ceases doing
business as a going concern; (ix) a breach by the Debtor of a representation or
warranty contained in any agreement with the Lender or the Debtor’s failure to
observe or perform any covenant or other agreement with the Lender, including
that certain Securities Purchase Agreement dated as of September 29, 2000
between the Lender and the Debtor and the agreements required thereby and
contemplated therein; (x) the Debtor sells, conveys or disposes of all or
substantially all of its assets (the presentation of any such transaction for
stockholder approval being conclusive evidence that such transaction involves
the sale of all or substantially all of the assets of the Debtor); (xi) the
Debtor, without the written consent of the Lender, pays, declares or sets apart
for such payment, any dividend or other distribution (whether in cash or
property but excluding other securities) on shares of capital stock of Debtor
or directly or indirectly through any subsidiary makes any other payment or
distribution in respect of its capital stock; (xii) the Debtor, without the
written consent of the Lender, redeems, repurchases or otherwise acquires
(whether for cash or in exchange for property or other securities or otherwise)
in any one transaction or series of related transactions, any shares of capital
stock of the Debtor or any warrants, rights or options to purchase or acquire
any such shares; provided however, that the Debtor may repurchase shares of
capital stock of the Debtor or any warrants, rights or options to purchase or
acquire any such shares of capital stock from former employees of the Debtor
pursuant to repurchase rights included in a restricted stock purchase plan for
such employees so long as (a) such plan was approved by a majority of the
independent directors of the Board of Directors of Debtor, (b) such shares were
purchased pursuant to such plan, (c) the purchase price paid by the employees
to acquire the shares was at least equal to the market value of such shares on
the date of such purchase, and (d) the Debtor repurchases such shares for no
more than the purchase price paid by such employee; (xiii) the Debtor, without
the written consent of the Lender, sells, leases or otherwise disposes of any
of its assets outside of the ordinary course of business, other than sales of
equipment with a fair market value of less than $50,000 (any consent to the
disposition of any assets may be conditioned on a specific use of the proceeds
of disposition); (xiv) the Debtor, without the written consent of the Lender,
lends money, gives credit or makes advances in excess of $100,000 to any
person, firm, joint venture or corporation or in any amount to officers,
directors, employees, subsidiaries and affiliates of the Debtor, except loans,
credits or advances in existence or committed on the date hereof and which the
Debtor has informed Lender in writing prior to the date hereof, and made in the
ordinary course of business; and (xv) the Debtor, without the written consent
of the Lender, assumes, guarantees, endorses, contingently agrees to purchase
or otherwise becomes liable upon the obligation of any officer, director,
employee, subsidiary or affiliate of the Debtor, or upon the obligation in
excess of $50,000 of any person, firm, partnership, joint venture or
corporation not an officer, director, employee, subsidiary or affiliate of the
Debtor, except by the endorsement of negotiable instruments for deposit or
collection and except assumptions, guarantees, endorsements and contingencies
in existence or committed on the date hereof and which the Debtor has informed
the Lender in writing prior to the date hereof, and similar transactions in the
ordinary course of business.

Upon the occurrence of an Event of Default: (a) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (b) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the Lender’s option and without demand or notice
of any kind, may be accelerated and become immediately due and payable; (c) at
the Lender’s option, this Note will bear interest at the Default Rate from the
date of the occurrence of the Event of Default; and (d) the Lender may exercise
from time to time any of the rights and remedies available under this Note and
available under applicable law.

6. Power to Confess Judgment. Upon the occurrence of any Event of Default as
set forth above, the Lender may institute appropriate proceedings at law or
equity to collect the outstanding principal amount and accrued but unpaid
interest then due (by acceleration or otherwise) and proceed therein to final
judgment and execution thereon, with interest, together with costs and
expenses.

 

 

The Debtor hereby empowers any attorney of any court of record, after the
occurrence of any Event of Default hereunder, to appear for the Debtor and,
with or without complaint filed, confess judgment, or a series of judgments,
against the Debtor in favor of the Lender or any holder hereof for the entire
principal balance of this Note, all accrued interest and all other amounts due
hereunder, together with costs of suit and an attorney’s commission of the
greater of 10% of such principal and interest or $1,000 added as a reasonable
attorney’s fee, and for doing so, this Note or a copy verified by affidavit
shall be a sufficient warrant. The Debtor hereby forever waives and releases
all errors in said proceedings and all rights of appeal and all relief from any
and all appraisement, stay or exemption laws of any state now in force or
hereafter enacted. Interest on any such judgment shall accrue at the Default
Rate.

No single exercise of the foregoing power to confess judgment, or a series of
judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Lender shall elect until such time as the Lender shall have
received payment in full of the debt, interest and costs. Notwithstanding the
attorney’s commission provided for in the preceding paragraph (which is
included in the warrant for purposes of establishing a sum certain), the amount
of attorneys’ fees that the Lender may recover from the Debtor shall not exceed
the actual attorneys’ fees incurred by the Lender.

7. Subordination. The payment of principal and interest on this Note is
subordinated in right of payment, to the extent and in the manner provided in
this Section 7, to the prior payment in full of all Senior Debt. No payment of
principal or interest shall be made on account of this Note upon the receipt by
Debtor from the holder of Senior Debt of notice of (i) the maturity of any part
or all of the Senior Debt, by lapse of time, acceleration or otherwise, unless
and until all matured principal and interest thereon shall have been paid in
full, (ii) any default in the payment of principal or interest on any Senior
Debt when the same becomes due and payable, unless and until such default shall
have been cured or waived, or (iii) any other default with respect to the
Senior Debt contractually permitting the holder of the Senior Debt to
accelerate the maturity thereof immediately without further notice or the
expiration of any applicable grace periods, unless and until the earlier of
such other default having been cured or waived or 60 days from the date such
notice was given; provided that a cessation in payments of principal or
interest pursuant to clause (iii) above may only occur once in any 365-day
period. For purposes of this Note, “Senior Debt” shall mean (x) all principal
(not to exceed $2,500,000), interest, fees and other sums payable from time to
time under or with respect to any revolving line of credit which Debtor may
establish from time to time with a bank or similar institution and (y) the
remaining principal (not to exceed $200,000), interest, fees and other sums
payable from time to time under that certain Master Lease Agreement dated as of
March 18, 1999 between Debtor and Leasing Technologies International, Inc.
Senior Debt shall also include any indebtedness the proceeds of which are used
to refinance, renew or replace Senior Debt in a principal amount which may not
exceed the principal amount of the Senior Debt so refinanced, renewed or
replaced. Lender agrees to execute any form of subordination agreement
reasonably requested by the holder of any Senior Debt, generally consistent
with the foregoing provisions.

8. Miscellaneous. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing (except
as may be agreed otherwise above with respect to borrowing requests) and will
be effective upon receipt. Such notices and other communications may be
hand-delivered, sent by facsimile transmission with confirmation of delivery
and a copy sent by first-class mail, or sent by nationally recognized overnight
courier service, to the addresses for the Lender and the Debtor set forth above
or to such other address as either may give to the other in writing for such
purpose. No delay or omission on the Lender’s part to exercise any right or
power arising hereunder will impair any such right or power or be considered a
waiver of any such right or power, nor will the Lender’s action or inaction
impair any such right or power. No modification, amendment or waiver of any
provision of this Note nor consent to any departure by the Debtor therefrom
will be effective unless made in a writing signed by the Lender. The Debtor
agrees to pay on demand, to the extent permitted by law, all costs and expenses
incurred by the Lender in the enforcement of its rights in this Note and in any
security therefor, including without limitation reasonable fees and expenses of
the Lender’s counsel. If any provision of this Note is found to be invalid by
a court, all the other provisions of this Note will remain in full force and
effect. The Debtor and all other makers and endorsers of this Note hereby
forever waive presentment, protest, notice of dishonor and notice of
non-payment. The Debtor also waives all defenses based on suretyship or
impairment of collateral. This Note shall bind the Debtor and its successors
and assigns, and the benefits hereof shall inure to the benefit of the Lender
and its successors and assigns; provided, however, that the Debtor may not
assign this Note in whole or in part without the Lender’s written consent and
the Lender at any time may assign this Note in whole or in part.

This Note has been delivered to and accepted by the Lender and will be deemed
to be made in the Commonwealth of Pennsylvania. THIS NOTE WILL BE INTERPRETED
AND THE RIGHTS AND LIABILITIES OF THE LENDER AND THE DEBTOR DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, EXCLUDING ITS CONFLICT

 

 

OF LAWS RULES. The Debtor hereby
irrevocably consents to the exclusive jurisdiction of any state or federal
court in the county or judicial district where the Lender’s office indicated
above is located; provided that nothing contained in this Note will prevent the
Lender from bringing any action, enforcing any award or judgment or exercising
any rights against the Debtor individually, against any security or against any
property of the Debtor within any other county, state or other foreign or
domestic jurisdiction. The Debtor acknowledges and agrees that the venue
provided above is the most convenient forum for both the Lender and the Debtor.
The Debtor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Note. No failure or delay
on the part of the Lender in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

9. WAIVER OF JURY TRIAL. THE DEBTOR IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE
DEBTOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE DEBTOR
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

The Debtor acknowledges that it has read and understood all the provisions of
this Note, including the confession of judgment and waiver of jury trial, and
has been advised by counsel as necessary or appropriate.

WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.

	 	 	 
	WITNESS / ATTEST:	 	
SUPERCONDUCTOR TECHNOLOGIES INC.
	 
	____________________________________________________	 	
By:____________________________________________________

(SEAL)
	 
	Print
Name:__________________________________________	 	
Print Name:_____________________________________________

	 
	Title:________________________________________________	 	
Title:__________________________________________________
	(Include title only if an officer of
entity signing to the right)	 	 

 

 

Disclosure for Confession of Judgment

     On or about the date hereof, Superconductor Technologies Inc. (the
“Debtor”), has executed, and/or is executing, a Term Note (the “Note”) pursuant
to which the Debtor is obligated to repay monies to RGC International
Investors, LDC (the “Lender”).

     A. The Debtor acknowledges and agrees that the Note contains provisions
under which the Lender may enter judgment by confession against the Debtor.
Being fully aware of its rights to prior notice and a hearing on the validity
of any judgment or other claims that may be asserted against it by the Lender
thereunder before judgment is entered, the Debtor hereby freely, knowingly and
intelligently waives these rights and expressly agrees and consents to the
Lender entering judgment against it by confession pursuant to the terms
thereof.

     B. The Debtor certifies that a representative of the Lender specifically
called the confession of judgment provisions in the Note to the attention of
the Debtor, and/or that the Debtor was represented by legal counsel in
connection with the Note.

	 	 	 
	WITNESS / ATTEST:	 	
SUPERCONDUCTOR TECHNOLOGIES INC.
	 
	____________________________________________________	 	
By:___________________________________________________
	 
	Print Name:__________________________________________	 	
Print Name:_____________________________________________

	 
	Title:________________________________________________	 	
Title:__________________________________________________
	(Include title only if an officer of
entity signing to the right)

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