Document:

Registration Rights Agreement, dated June 25, 2003

 

Exhibit 10.2

WMS INDUSTRIES INC.

2.75% Convertible Subordinated Notes due 2010

Registration Rights Agreement

June 25, 2003

CIBC World Markets Corp.

One World Financial Center

New York, New York 10281

Ladies and Gentlemen:

     WMS Industries Inc., a Delaware corporation (the “Company”), proposes to
issue and sell to the Purchaser (as defined herein) upon the terms set forth in
the Purchase Agreement (as defined herein) its 2.75% Convertible Subordinated
Notes due 2010 (the “Securities”). As an inducement to the Purchaser to enter
into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchaser thereunder, the Company agrees with the Purchaser
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:

	 	1.	 	Definitions.

          (a)     Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Purchase Agreement. As used in this
Registration Rights Agreement (the “Agreement”), the following defined terms
shall have the following meanings:

     “Affiliate” of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

     “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.

     “Commission” means the United States Securities and Exchange Commission,
or any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.

     “Common Stock” means the Company’s common stock, par value $0.50 per
share.

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     “DTC” means The Depository Trust Company.

     “Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i)
hereof.

     “Effective Time” means the date on which the Commission declares the Shelf
Registration Statement effective or on which the Shelf Registration Statement
otherwise becomes effective.

     “Electing Holder” has the meaning assigned thereto in Section 3(a)(iii)
hereof.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

     The term “holder” means, when used with respect to any Security, the
Holder (as defined in the Indenture) and, with respect to any Common Stock, the
record holder of such Common Stock.

     “Indenture” means the Indenture, dated as of June 25, 2003, between the
Company and BNY Midwest Trust Company, as amended and supplemented from time to
time in accordance with its terms.

     “Managing Underwriters” means the investment banker or investment bankers
and manager or managers that shall administer an underwritten offering, if any,
conducted pursuant to Section 7 hereof.

     “NASD Rules” means the rules of the National Association of Securities
Dealers, Inc., as amended from time to time.

     “Notice and Questionnaire” means a Notice of Registration Statement and
Selling Securityholder Questionnaire, substantially in the form of Exhibit A
attached hereto, relating to the Securities.

     The term “person” means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.

     “Prospectus” means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
included in the Shelf Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Shelf Registration Statement and
by all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents filed
after the date of such prospectus by the Company under the Exchange Act and
incorporated by reference therein.

     “Purchase Agreement” means the Purchase Agreement, dated as of June 20,
2003, between the Company and the Purchaser.

     “Purchaser” means CIBC World Markets Corp.

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     “Registrable Securities” means all or any portion of the Securities issued
from time to time under the Indenture and the shares of Common Stock issuable
upon conversion of such Securities; provided, however, that a security ceases
to be a Registrable Security when it is no longer a Restricted Security.

     “Restricted Security” means any Security or share of Common Stock issuable
upon conversion thereof except any such Security or share of Common Stock that
(i) has been registered pursuant to an effective registration statement under
the Securities Act and sold in a manner contemplated by the Shelf Registration
Statement, (ii) has been transferred in compliance with Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable pursuant
to paragraph (k) of such Rule 144 (or any successor provision thereto) or (iii)
has otherwise been transferred and a new Security or share of Common Stock not
subject to transfer restrictions under the Securities Act has been delivered by
or on behalf of the Company in accordance with Section 2.6 of the Indenture.

     “Rules and Regulations” means the published rules and regulations of the
Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.

     “Securities Act” means the United States Securities Act of 1933, as
amended.

     “Shelf Registration” means a registration effected pursuant to Section 2
hereof.

     “Shelf Registration Statement” means a “shelf” registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act and/or any similar
rule that may be adopted by the Commission, filed by the Company pursuant to
the provisions of Section 2 of this Agreement, including the Prospectus
contained therein, any amendments and supplements to such registration
statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such registration statement.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.

     The term “underwriter” means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement.

          (b)     Wherever there is a reference in this Agreement to a percentage of the
“principal amount” of Registrable Securities or to a percentage of Registrable
Securities, Common Stock shall be treated as representing the principal amount
of Securities which was surrendered for conversion or exchange in order to
receive such number of shares of Common Stock.

	 	2.	 	Shelf Registration.

          (a)     The Company shall, on or prior to 90 calendar days after the Closing
Date (as defined in the Purchase Agreement), file with the Commission a Shelf
Registration Statement

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relating to the offer and sale of the Registrable Securities and,
thereafter, shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to 180 calendar days after the Closing Date. The Shelf Registration
Statement shall provide for resales of all Registrable Securities held by
Electing Holders.

          (b)     The Company shall use its reasonable best efforts:

		
	 	          (i)     to keep the Shelf Registration Statement continuously effective
in order to permit the Prospectus to be usable by holders for resales of
Registrable Securities until the earlier of (A) the date on which there
are no outstanding Registrable Securities and (B) the expiration of the
holding period applicable to such Registrable Securities held by persons
that are not affiliates of the Company under Rule 144(k) of the
Securities Act or any successor previously subject to specific permitted
exceptions (such period being referred to herein as the “Effectiveness
Period”);

		
	 	          (ii)     after the Effective Time, promptly upon the request of any
holder of Registrable Securities that is not then an Electing Holder, to
take any action reasonably necessary to enable such holder to use the
Prospectus for resales of Registrable Securities, including without
limitation any action necessary to identify such holder as a selling
securityholder in the Shelf Registration Statement; provided, however,
that nothing in this subparagraph shall relieve such holder of the
obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Section 3(a) (ii) hereof; and

		
	 	          (iii)     if at any time the Securities are convertible into securities
other than Common Stock pursuant to Article Ten of the Indenture, the
Company shall, or shall cause any successor under the Indenture to, cause
such securities to be included in the Shelf Registration Statement no
later than the date on which the Securities may then be convertible into
such securities.

	 	3.	 	Registration Procedures.

          (a)     In connection with the Shelf Registration Statement, the following
provisions shall apply:

		
	 	          (i)     Within 30 calendar days after the Closing Date, the Company
shall mail the Notice and Questionnaire to the holders of Registrable
Securities. Holders of Registrable Securities shall have at least 20
calendar days from the date on which the Notice and Questionnaire is
first mailed to such holders to return a completed and signed Notice and
Questionnaire to the Company. No holder shall be entitled to be named as
a selling securityholder in the Shelf Registration Statement as of the
Effective Time. At the time the Shelf Registration Statement is declared
effective, each Electing Holder shall be named as a selling
securityholder in the Shelf Registration Statement, and no holder shall
be entitled to use the Prospectus for offers of Registrable Securities at
any time unless such holder has returned a completed and signed Notice
and Questionnaire to the Company by the deadline for response set forth
therein.

		
	 	          (ii)     After the Effective Time, the Company shall, upon the request
of

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	 	any holder of Registrable Securities that is not then an Electing
Holder, promptly send a Notice and Questionnaire to such holder. The
Company shall not be required to take any action to name such holder as a
selling securityholder in the Shelf Registration Statement or to enable
such holder to use the Prospectus for resales of Registrable Securities
until such holder has returned a completed and signed Notice and
Questionnaire to the Company.

		
	 	          (iii)     The term “Electing Holder” shall mean any holder of
Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with Section 3(a)(i) or
3(a)(ii) hereof.

          (b)     The Company shall furnish to each Electing Holder, counsel to the
Electing Holders, and the Managing Underwriters, if any, no fewer than five
Business Days prior to the initial filing of the Shelf Registration Statement,
a copy of such Shelf Registration Statement, and shall furnish to such holders,
counsel to such holders, and the Managing Underwriters, if any, no fewer than
two Business Days prior to the filing of any amendment or supplement to the
Prospectus, a copy of such amendment or supplement and shall use all reasonable
efforts to reflect in each such document when so filed with the Commission such
comments as such holders and their respective counsel reasonably may propose;
provided, however, that the Company shall make the final decision as to the
form and content of each such document. If any such Shelf Registration
Statement refers to any Electing Holder by name or otherwise as the holder of
any securities of the Company, then such Electing Holder shall have the right
to require (i) the insertion therein of language, in form and substance
reasonably satisfactory to such Electing Holder, to the effect that the holding
by such Electing Holder of such securities is not to be construed as a
recommendation by such Electing Holder of the investment quality of the
Company’s securities covered thereby and that such holding does not imply that
such Electing Holder will assist in meeting any future financial requirements
of the Company or (ii) in the event that such reference to such Electing Holder
by name or otherwise is not required by the Securities Act or any similar
Federal statute then in force, the deletion of the reference to such Electing
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.

          (c)     From the date hereof until the end of the Effectiveness Period, the
Company shall (subject to paragraph (j) below) promptly take such action as may
be necessary so that (i) each of the Shelf Registration Statement and any
amendment thereto and the Prospectus and any amendment or supplement thereto
(and each report or other document incorporated by reference therein in each
case) complies in all material respects with the Securities Act and the
Exchange Act and the respective rules and regulations thereunder, (ii) each of
the Shelf Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, not misleading and (iii) each of the Prospectus and any
supplement to the Prospectus does not at any time during the Effectiveness
Period include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

          (d)     The Company shall promptly advise each Electing Holder, and shall

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confirm such advice in writing if so requested by any such holder (which
notice pursuant to clauses (ii) through (iv) hereof shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made):

		
	 	     (i)     when the Shelf Registration Statement and any amendment thereto
has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;

	 	 
	 	     (ii)     of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation
of any proceedings for such purpose;

		
	 	     (iii)     of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included in the
Shelf Registration Statement for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and

		
	 	     (iv)     if changes in the Shelf Registration Statement or the
Prospectus are required in order that the Shelf Registration Statement
and Prospectus do not contain an untrue statement of a material fact and
do not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus,
in light of the circumstances under which they were made) not misleading.

          (e)     The Company shall use all reasonable efforts to prevent the issuance,
and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest possible
time.

          (f)     The Company shall furnish to each requesting Electing Holder, without
charge, at least one copy of the Shelf Registration Statement and all
post-effective amendments thereto, including financial statements and
schedules, and, if such holder so requests in writing, all reports, other
documents and exhibits that are filed with or incorporated by reference in the
Shelf Registration Statement.

          (g)     The Company shall, during the Effectiveness Period, deliver to each
Electing Holder, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) and any amendment or supplement thereto as such
Electing Holder may reasonably request; and the Company consents (except during
the continuance of any event described in Section 3(d)(ii)-(iv) above) to the
use of the Prospectus and any amendment or supplement thereto by each of the
Electing Holders in connection with the offering and sale of the Registrable
Securities covered by the Prospectus and any amendment or supplement thereto
during the Effectiveness Period.

          (h)     Prior to any offering of Registrable Securities pursuant to the Shelf
Registration Statement, the Company shall (i) register or qualify or cooperate
with the Electing Holders and a single counsel for the Electing Holders in
connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or “blue sky” laws of such
jurisdictions within the United States as any Electing Holder may reasonably
request, (ii) keep such registrations or qualifications in effect and comply
with such laws so as to

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permit the continuance of offers and sales in such jurisdictions for so
long as may be necessary to enable any Electing Holder or underwriter, if any,
to complete its distribution of Registrable Securities pursuant to the Shelf
Registration Statement, and (iii) take any and all other actions necessary or
advisable to enable the disposition in such jurisdictions of such Registrable
Securities; provided, however, that in no event shall the Company be obligated
to (A) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for
this Section 3(h) or (B) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof so subject.

          (i)     The Company shall cooperate with the Electing Holders to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities sold pursuant to the Shelf Registration Statement, which
certificates shall not bear any restrictive legends and, if so required by any
securities exchange upon which any Registrable Securities are listed, shall be
penned, lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall be free of any
restrictive legends and in such permitted denominations and registered in such
names as Electing Holders may request in connection with the sale of
Registrable Securities pursuant to the Shelf Registration Statement.

          (j)     Upon the occurrence of any fact or event contemplated by paragraph
3(d)(iv) above, the Company shall (subject to the next sentence) promptly
prepare a post-effective amendment or supplement to the Shelf Registration
Statement or the Prospectus, or any document incorporated therein by reference,
or file any other required document so that, as thereafter delivered to
purchasers of the Registrable Securities included therein, the Prospectus will
not include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the Company
notifies the Electing Holders in accordance with clauses (ii) through (iv) of
paragraph 3(d) above to suspend the use of the Prospectus until the requisite
changes to the Prospectus have been made, then each Electing Holder shall
suspend the use of the Prospectus and keep the notification provided pursuant
to paragraph 3(d) above confidential until (i) such Electing Holder has
received copies of the supplemented or amended Prospectus contemplated by the
preceding sentence or (ii) such Electing Holder is advised in writing by the
Company that the use of the Prospectus may be resumed and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. Notwithstanding the foregoing, but subject to Section 7
hereof, the Company shall not be required to amend or supplement the Shelf
Registration Statement, any related Prospectus or any document incorporated by
reference for a period not to exceed 60 consecutive days if the Company is in
possession of material non-public information the disclosure of which would
have a material adverse effect on the business, operations, prospects,
condition (financial or otherwise) of the Company and its subsidiaries, taken
as a whole.

          (k)     Not later than the Effective Time, the Company shall provide a CUSIP
number for the Registrable Securities that are debt securities.

          (l)     The Company shall use all reasonable efforts to comply with all
applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than
eighteen months after (i) the effective date (as defined in Rule 158(c) under
the Securities Act) of the Shelf Registration Statement, (ii) the effective

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date of each post-effective amendment to the Shelf Registration Statement,
and (iii) the date of each filing by the Company with the Commission of an
Annual Report on Form 10-K that is incorporated by reference in the Shelf
Registration Statement, an earnings statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act and the Rules
and Regulations of the Commission thereunder (including, at the option of the
Company, Rule 158).

          (m)     Not later than the Effective Time, the Company shall cause the
Indenture to be qualified under the Trust Indenture Act; in connection with
such qualification, the Company shall cooperate with the Trustee under the
Indenture and the Holders (as defined in the Indenture) to effect such changes
to the Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and the Company shall
execute, and shall use all reasonable efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner. In the event that any such amendment or
modification referred to in this Section 3(m) involves the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee thereunder
pursuant to the applicable provisions of the Indenture.

          (n)     In the event of an underwritten offering conducted pursuant to Section
7 hereof, the Company shall (subject to paragraph 3(j) above), if requested,
promptly include or incorporate in a Prospectus supplement or post-effective
amendment to the Shelf Registration Statement such information as the Managing
Underwriters reasonably agree should be included therein and to which the
Company does not reasonably object and shall (subject to paragraph 3(j) above)
make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after it is notified of the matters to be
included or incorporated in such Prospectus supplement or post-effective
amendment.

          (o)     The Company shall enter into such customary agreements (including an
underwriting agreement in customary form in the event of an underwritten
offering conducted pursuant to Section 7 hereof) and take all other appropriate
action in order to expedite and facilitate the registration and disposition of
the Registrable Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in Section 5 hereof
with respect to all parties to be indemnified pursuant to Section 5 hereof;
provided, however, the Company shall not be required to facilitate an
underwritten offering pursuant to the Shelf Registration Statement by any
holders unless the offering relates to at least $15,000,000 principal amount of
Securities or the equivalent number of shares of Common Stock in which such
Securities are convertible.

          (p)     The Company shall:

		
	 	          (i)(A) make reasonably available for inspection by requesting
Electing Holders, any underwriter participating in any disposition
pursuant to the Shelf Registration Statement, and any attorney selected
in accordance with Section 4(b) hereof, one accountant and any other
agent retained by such holders or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the

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	 	Company and its subsidiaries and (B) cause the Company’s officers,
directors and employees to supply all information reasonably requested by
such holders or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in each case, as is
customary for similar due diligence examinations; provided, however, that
all records, information and documents that are designated in writing by
the Company, in good faith, as confidential shall be kept confidential by
such holders and any such underwriter, attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding or
required by law, or such records, information or documents become
available to the public generally or through a third party without an
accompanying obligation of confidentiality; and provided further that, if
the foregoing inspection and information gathering would otherwise
disrupt the Company’s conduct of its business, such inspection and
information gathering shall, to the greatest extent possible, be
coordinated on behalf of the requesting Electing Holders and the other
parties entitled thereto by one counsel designated by and on behalf of
Electing Holders and other parties;

		
	 	          (ii)     in connection with any underwritten offering conducted pursuant
to Section 7 hereof, make such representations and warranties to the
Electing Holders participating in such underwritten offering and to the
Managing Underwriters, in form, substance and scope as are customarily
made by the Company to underwriters in primary underwritten offerings of
equity and convertible debt securities;

		
	 	          (iii)     in connection with any underwritten offering conducted
pursuant to Section 7 hereof, obtain opinions of counsel to the Company
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters) addressed to the
Managing Underwriters and each requesting Electing Holder, covering such
matters as are customarily covered in opinions requested in primary
underwritten offerings of equity and convertible debt securities and such
other matters as may be reasonably requested by such Electing Holders and
underwriters (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the opinion
and as of the Effective Time or the date of the most recent
post-effective amendment thereto, as the case may be, the absence from
the Shelf Registration Statement and the Prospectus, including the
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading);

		
	 	          (iv)     in connection with any underwritten offering conducted pursuant
to Section 7 hereof, obtain “cold comfort” letters and updates thereof
from the independent public accountants of the Company (and, if
necessary, from the independent public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to the Managing
Underwriters and each requesting Electing Holder (if such Electing Holder
has provided such letter, representations or documentation, if any,
required for such cold comfort letter to be so addressed) and the
underwriters, in customary form and covering matters of the type

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	 	customarily covered in “cold comfort” letters in connection with
primary underwritten offerings;

		
	 	          (v)     in connection with any underwritten offering conducted pursuant
to Section 7 hereof, deliver such documents and certificates as may be
reasonably requested by any Electing Holders and the Managing
Underwriters, if any, including without limitation certificates to
evidence compliance with Section 3(j) hereof and with any conditions
contained in the underwriting agreement or other agreements entered into
by the Company.

          (q)     The Company will use all reasonable efforts to cause the Common Stock
issuable upon conversion of the Securities to be listed for quotation on the
New York Stock Exchange or other stock exchange or trading system, if any, on
which the Common Stock primarily trades on or prior to the Effective Time.

          (r)     The Company shall use all reasonable efforts to take all other steps
necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.

	 	4.	 	Registration Expenses.

          (a)     All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by it whether or not any
Shelf Registration Statement is filed or becomes effective and whether or not
any securities are issued or sold pursuant to any Shelf Registration Statement.
The fees and expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. (the “NASD”) and (B)
in compliance with securities or Blue Sky laws (including without limitation
and in addition to that provided for in (b) below, reasonable fees and
disbursements of counsel for the underwriters or counsel for the holders of
Registrable Securities in connection with NASD filings and Blue Sky
qualifications of the Registrable Securities )), (ii) printing expenses
(including without limitation expenses of printing certificates for Registrable
Securities in a form eligible for deposit with DTC and of printing Prospectuses
if the printing of Prospectuses is requested by the Managing Underwriters, if
any, but excluding expenses incurred as a result of a material misstatement
provided by an Electing Holder requiring reprinting of a Prospectus), (iii)
messenger, telephone and delivery expenses, (iv) in the event of an
underwritten offering of Registrable Securities conducted pursuant to Section 7
hereof, or if in any other event the Company requires that inspection and
information gathering be coordinated by counsel for the Electing Holders as
provided in Section 3(p)(i) hereof, the Company shall pay the fees and
disbursements of counsel for the Company and one counsel for the holders of
Registrable Securities, in accordance with the provisions of Section 4(b)
hereof, (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(p)(iv) hereof (including without
limitation the expenses of any special audit and “cold comfort” letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company desires such insurance, and (vii) fees and expenses
of all other persons retained by the Company. In addition, the Company shall
pay its internal expenses (including without limitation all salaries and
expenses of its officers and employees performing

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legal or accounting duties), the expense of any annual audit, and the fees
and expenses incurred in connection with the listing of the securities on the
New York Stock Exchange. Notwithstanding the foregoing or anything in this
Agreement to the contrary, each holder of the Registrable Securities being
registered shall pay all commissions, placement agent fees and underwriting
discounts and commissions with respect to any Registrable Securities sold by it
and the fees and disbursements of any counsel or other advisors or experts
retained by such holders (severally or jointly), other than counsel and local
counsel referred to in clause (iv) above.

          (b)     In connection with any registration hereunder, the Company shall
reimburse the holders of the Registrable Securities being registered in such
registration for the reasonable fees and disbursements of not more than one
counsel chosen by the holders of a majority in amount of the Registrable
Securities (determined on a fully converted basis) for whose benefit the
applicable Shelf Registration Statement is being prepared.

	5.	 	Indemnification and Contribution.

          (a)     Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall
indemnify and hold harmless each Electing Holder and each underwriter, selling
agent or other securities professional, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers
and directors and each person who controls such Electing Holder, underwriter,
selling agent or other securities professional within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes referred to as an “Indemnified Person”) against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Shelf Registration Statement or any Prospectus contained
therein or furnished by the Company to any Indemnified Person, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of any Prospectus or
supplement thereto, in light of the circumstances in which they were made), not
misleading, and the Company hereby agrees to reimburse such Indemnified Person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are
incurred;  provided, however, that the Company shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such Shelf
Registration Statement or Prospectus, or amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided, further, however, that the foregoing indemnity agreement with respect
to any preliminary Prospectus shall not inure to the benefit of any Indemnified
Person who failed to deliver a final Prospectus (as then amended or
supplemented, provided by the Company to the several Indemnified Persons in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the relevant transaction date) to the person asserting any losses, claims,
damages and liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in any preliminary Prospectus, or
caused by any omission or alleged omission to state therein a material fact

11

 

required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the final Prospectus.

          (b)     Indemnification by the Holders and any Agents and Underwriters. Each
Electing Holder agrees, as a consequence of the inclusion of any of such
holder’s Registrable Securities in any Shelf Registration Statement, and each
underwriter, selling agent or other securities professional, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors and executive officers who sign such Shelf Registration Statement and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Shelf Registration Statement or
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, (in
the case of any Prospectus or supplement thereto, in light of the circumstances
in which they were made) not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such holder,
underwriter, selling agent or other securities professional expressly for use
therein and (ii) reimburse the Company and its directors and officers who sign
such Shelf Registration Statement for any legal or other expenses reasonably
incurred by the Company and such directors and officers in connection with
investigating or defending any such action or claim as such expenses are
incurred.

          (c)     Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) of this Section 5 of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5,
notify such indemnifying party in writing of the commencement thereof; but the
omission to so notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 5. In the case that any such action is brought against any indemnified
party it shall notify the indemnifying party of the commencement thereof and
such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such
indemnified party under this Section 5 for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, which consent will not be unreasonably withheld, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought

12

 

hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act, by or on behalf of any indemnified party.

          (d)     Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) of this Section 5 in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified
party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5(d) were determined by pro rata allocation (even if the
Electing Holders or any underwriters, selling agents or other securities
professionals or all of them were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Section 5(d). The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The obligations of
the Electing Holders and any underwriters, selling agents or other securities
professionals in this Section 5(d) to contribute shall be several in proportion
to the percentage of principal amount of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.

          (e)     Notwithstanding any other provision of this Section 5, in no event
will any (i) Electing Holder be required to undertake liability to any person
under this Section 5 for any amounts in excess of the dollar amount of the
proceeds to be received by such holder from the sale of such holder’s
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Shelf Registration Statement and (ii)
underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.

          (f)     The obligations of the Company under this Section 5 shall be in
addition to any liability that the Company may otherwise have to any
Indemnified Person and the

13

 

obligations of any Indemnified Person under this Section 5 shall be in
addition to any liability that such Indemnified Person may otherwise have to
the Company. The remedies provided in this Section 5 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to an
indemnified party at law or in equity.

     6.          Liquidated Damages. If (i) on or prior to 90 days after the Closing
Date, a Shelf Registration Statement has not been filed with the Commission,
(ii) on or prior to 180 days after the Closing Date, such Shelf Registration
Statement is not declared effective or, (iii) the Shelf Registration Statement
ceases to be effective or, for a period in excess of 60 consecutive days, the
Company otherwise prevents or restricts the Electing Holders from making sales
of Registrable Securities under such Shelf Registration Statement during the
Effectiveness Period (each, a “Registration Default”), liquidated damages
(“Liquidated Damages”) will accrue on the Registrable Securities at a rate
equal to 0.5% of the principal amount of Registrable Securities per annum from
and including the day following such Registration Default to, but excluding,
the day on which such Registration Default is cured. The Company shall notify
the Trustee as promptly as possible, but in no event more than three Business
Days after each and every date on which a Registration Default occurs.
Liquidated Damages will be paid semi-annually in arrears, with the first
semi-annual payment due on the first Interest Payment Date in respect of the
Registrable Securities following the date on which such Liquidated Damages
begin to accrue.

     7.     Underwritten Offering. Any holder of Registrable Securities who
desires to do so may sell Registrable Securities (in whole or in part) in an
underwritten offering; provided, however, the Company shall not be required to
facilitate an underwritten offering pursuant to the Shelf Registration
Statement by any holders unless the offering relates to at least $15,000,000
principal amount of Securities or the equivalent number of shares of Common
Stock in which such Securities are convertible. In any such underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by, and the underwriting
arrangements with respect thereto (including the size of the offering) will be
approved by, the holders of a majority of the Registrable Securities to be
included in such offering; provided, however, that such investment bankers and
managers and underwriting arrangements must be reasonably satisfactory to the
Company. No holder may participate in any underwritten offering contemplated
hereby unless (a) such holder agrees to sell such holder’s Registrable
Securities to be included in the underwritten offering in accordance with any
approved underwriting arrangements, (b) such holder completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of
such approved underwriting arrangements and (c) if such holder is not then an
Electing Holder, such holder returns a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within
a reasonable amount of time before such underwritten offering. The holders
participating in any underwritten offering shall be responsible for any
underwriting discounts and commissions and fees and, subject to Section 4
hereof, expenses of their own counsel. The Company shall pay all expenses
customarily borne by issuers, including but not limited to filing fees, the
fees and disbursements of its counsel and independent public accountants and
any printing expenses incurred in connection with such underwritten offering.
Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon
receipt of a request from the Managing Underwriter or a representative of
holders of a majority of the Registrable Securities to be included in an
underwritten offering to prepare and file an amendment or supplement to the
Shelf Registration Statement and Prospectus

14

 

in connection with an underwritten offering, the Company may delay the
filing of any such amendment or supplement for up to 60 days if the Company is
in possession of material non-public information the disclosure of which would
have a material adverse effect on the business, operations, prospects,
condition (financial or otherwise) of the Company and its subsidiaries, taken
as a whole.

	8.	 	Rules 144 and 144A.

          The Company agrees, for so long as any Registrable Securities remain
outstanding and during any period in which the Company (a) is not subject to
Section 13 of 15(d) of the Exchange Act, to make available, upon request of any
holder of Registrable Securities, to such holder or beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities designated by such holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Securities
pursuant to Rule 144A of the Securities Act, and (b) is subject to Section 13
of 15 (d) of the Exchange Act, to make all filings required thereby in a timely
manner in order to permit resales of such Registrable Securities pursuant to
Rule 144 of the Securities Act.

	9.	 	Miscellaneous.

          (a)     Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under this Agreement may result in
material irreparable injury to the Purchaser or the holders of Registrable
Securities for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Purchaser or any holder of Registrable Securities may
obtain such relief as may be required to specifically enforce the Company’s
obligations hereunder. The Company further agrees to waive the defense in any
action for specific performance where a remedy at law would be adequate.

          (b)     Other Registration Rights. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company shall not permit any securities other than the Registrable
Securities to be included in any Shelf Registration Statement. The rights
granted to the holders of Registrable Securities hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of the Company’s securities under any agreement in effect on the date hereof.

          (c)     Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 2
hereof and this Section 9(c)(i), the Company has obtained the written consent
of holders of all outstanding Registrable Securities and (ii) in the case of
all other provisions hereof, the Company has obtained the written consent of
holders of a majority of the outstanding principal amount of Registrable
Securities (determined on a fully converted basis) (excluding Registrable
Securities held by the Company or its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure

15

 

from the provisions hereof that relates exclusively to the rights of
holders whose Registrable Securities are being sold pursuant to a Shelf
Registration Statement and that does not affect directly or indirectly the
rights of other holders of Registrable Securities may be given by the holders
of a majority of the outstanding principal amount of Registrable Securities
(determined on a fully converted basis) being sold by such holders pursuant to
such Shelf Registration Statement.

          (d)     Third Party Beneficiary. The holders of Registrable Securities shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Purchaser, on the other hand, and shall have
the right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
holders of Registrable Securities hereunder.

          (e)     Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.

          (f)     Parties in Interest. The parties to this Agreement intend that all
holders of Registrable Securities shall be entitled to receive the benefits of
this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities that are included in a Shelf Registration Statement.
All the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto and any holder from time to time of the
Registrable Securities to the aforesaid extent. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be entitled to receive the benefits of and, if an Electing Holder, be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement to the aforesaid extent.

          (g)     Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          (h)     Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning,
construction or interpretation hereof.

          (i)     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, including without limitation
New York General Obligations Law Section 5-1401.

          (j)     Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be

16

 

enforceable to the fullest extent permitted by law.

          (k)     Survival. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Electing Holder, any director, officer or partner of such holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or
any controlling person of any of the foregoing, and shall survive the transfer
and registration of the Registrable Securities of such holder.

          (l)     Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter hereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein, with respect
to the registration rights granted with respect to the Registrable Securities.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.

     Please confirm by signing in the space provided below that the foregoing
correctly sets forth the agreement between the Company and you.

	 	 	 	 	 	 	 
	 	 	Very truly yours,
	 	 	 	 	 	 	 
	 	 	WMS INDUSTRIES INC.
	 	 	
By:
	 	/s/ Scott Schweinfurth
	 	 	 	 	

	 	 	 	 	Name:
	 	Scott D. Schweinfurth
	 	 	 	 	Title:
	 	Executive Vice President, Chief

Financial Officer and Treasurer

	 
	CIBC WORLD MARKETS CORP.

By: /s/ Andrew McInnes
	

	Name: Andrew McInnes

Title: Managing Director

17

 

EXHIBIT A

WMS Industries Inc.

Notice of Registration Statement

and

Selling Securityholder Questionnaire

(Date)

     Reference is hereby made to the Registration Rights Agreement (the
“Registration Rights Agreement”) between WMS Industries Inc. (the “Company”)
and the Purchaser named therein. Pursuant to the Registration Rights
Agreement, the Company has filed with the United States Securities and Exchange
Commission (the “Commission”) a registration statement on Form S-3 (the “Shelf
Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Company’s
2.75% Convertible Subordinated Notes due 2010 (the “Securities”) and the shares
of common stock, $0.50 par value per share (the “Common Stock”), issuable upon
conversion thereof. A copy of the Registration Rights Agreement is attached
hereto. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.

     Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included
in the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire (“Notice and Questionnaire”)
must be completed, executed and delivered to the Company’s counsel at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE].
Beneficial owners of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as
selling securityholders in the Shelf Registration Statement and (ii) may not
use the Prospectus forming a part thereof for resales of Registrable
Securities.

     Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.

     The term “Registrable Securities” is defined in the Registration Rights
Agreement to mean all or any portion of the Securities issued from time to time
under the Indenture and the shares of Common Stock issuable upon conversion of
such Securities; provided, however, that a security ceases to be a Registrable
Security when it is no longer a Restricted Security.

     The term “Restricted Security” is defined in the Registration Rights
Agreement to mean any Security or share of Common Stock issuable upon
conversion thereof except any such Security or share of Common Stock that (i)
has been registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the Shelf Registration
Statement, (ii) has been transferred in compliance with Rule 144 under the

A-1

 

Securities Act (or any successor provision thereto) or is transferable
pursuant to paragraph (k) of such Rule 144 (or any successor provision
thereto), or (iii) has otherwise been transferred and a new Security or share
of Common Stock not subject to transfer restrictions under the Securities Act
has been delivered by or on behalf of the Company in accordance with Section
2.6 of the Indenture.

ELECTION

     The undersigned holder (the “Selling Securityholder”) of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and the Registrable Securities
listed below in Item (3). The undersigned, by signing and returning this Notice
and Questionnaire, agrees to be bound with respect to such Registrable
Securities by the terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement, including without limitation Section 5 of the
Registration Rights Agreement as if the undersigned Selling Securityholder were
an original party thereto.

     The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:

QUESTIONNAIRE

     Certain capitalized terms used in this Questionnaire are defined in
Appendix l attached hereto. Capitalized terms used in this Questionnaire but
not defined in Appendix 1 have the meanings given to them in the accompanying
letter.

	 	(1)	 	(a)     Full legal name of Selling Securityholder:
	 
	 	 	 	

	 
	 	(i)	 	Is such Selling Securityholder a:
	 
	 	 	 	[  ] Corporation     [  ] General Partnership
	 
	 	 	 	[  ] Individual        [  ] Limited Partnership
	 
	 	 	 	[  ] Other (please specify:               )
	 
	 	(ii)	 	In what state is such Selling Securityholder organized or domiciled?
	 
	 	 	 	

	 
	 	(b)	 	Full legal name of Registered Holder (if not the same as in
(a) above) of Registrable Securities listed in Item (4) below:
	 
	 	 	 	

	 
	 	(c)	 	Full legal name of DTC participant (if applicable and if not
the same as (b) above) through which Registrable Securities listed
in Item (4) below are held:
	 
	 	 	 	

A-2

 

	(2)	 	Address for Notices to Selling Securityholder:

	 	 	 
	 	 	

	Telephone:

Fax:

Contact Person:	 	

	(3)	 	Beneficial Ownership of Securities by Another Entity or Individual:

	 	(a)	 	Is another entity or individual the Beneficial Owner of any
Securities or shares of Common Stock issued upon conversion of any
Securities?
	 
	 	 	 	[  ] No (skip questions (b)-(e) below)
	 
	 	 	 	[  ] Yes (answer questions (b)-(e) below)
	 
	 	(b)	 	What is the full legal name of such Beneficial Owner?
	 
	 	 	 	

	 
	 	(c)	 	Is such Beneficial Owner a:
	 
	 	 	 	[  ]  Corporation [  ]  General Partnership

[  ]  Individual    [  ]  Limited Partnership
	 
	 	 	 	[  ]  Other (please specify:                                )
	 
	 	(d)	 	In what state is such Beneficial Owner organized or domiciled?
	 
	 	 	 	

	 
	 	(e)	 	Please provide the name, address and telephone number of a
contact person for such Beneficial Owner.
	 
	 	 	 	

	 
	 	 	 	

	 
	 	 	 	

	 
	 	 	 	

	(4)	 	Beneficial Ownership of Securities:
	 
	 	 	Except as set forth below in this Item (4), the undersigned is not a
Beneficial Owner of any Securities or shares of Common Stock issued upon
conversion of any Securities.

A-3

 

	 	(a)	 	Principal amount of Registrable Securities (as defined in the
Registration Rights Agreement) Beneficially Owned:

                    
                    
                     CUSIP No(s). of such
Registrable Securities:                     
                    
     
                         
	 
	 	 	 	Number of shares of Common Stock (if any) issued upon conversion of
such Registrable Securities:
                    
                   
	 
	 	(b)	 	Principal amount of Securities other than Registrable
Securities Beneficially Owned:

                    
                    
                    
                    
                    
                    
                    
                    
                    
      
                    

CUSIP No(s). of such other Securities:

                    
               
                    
                    

Number of shares of Common Stock (if any) issued upon conversion of
such other Securities:

                    
                    
                    
                    
                    
                    
                    
                    
                    
      
                    

	 
	 	(c)	 	Principal amount of Registrable Securities that the
undersigned wishes to be included in the Shelf Registration
Statement:

                    
                    
                    
CUSIP No(s). of such
Registrable Securities to be included in the Shelf Registration
Statement:

                    
                      
           
           
           
                               
                    

		
	 	Number of shares of Common Stock (if any) issued upon conversion of
Registrable Securities that are to be included in the Shelf
Registration Statement:      
               

	(5)	 	Beneficial Ownership of Other Securities of the Company:
	 
	 	 	Except as set forth below in this Item (5), the undersigned Selling
Securityholder is not a Beneficial Owner of any shares of Common Stock or
any other securities of the Company, other than the Securities and shares
of Common Stock listed above in Item (4).
	 
	 	 	State any exceptions here:
	 
	(6)	 	Relationships with the Company:
	 
	 	 	Except as set forth below, neither the Selling Securityholder nor any of
its Affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other Material
Relationship with the Company (or its predecessors or Affiliates) during
the past three years.
	 
	 	 	State any exceptions here:

A-4

 

	(7)	 	Plan of Distribution:
	 
	 	 	Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (4) only as
follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or,
alternatively, through underwriters, broker-dealers or agents who may
receive discounts, concessions or commissions from the Selling
Stockholder or the purchaser. Such Registrable Securities may be sold in
one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices relating to the prevailing market prices at
the time of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities
exchange or quotation service on which the Registered Securities may be
listed or quoted at the time of sale, (ii) in the over-the-counter
market, (iii) in transactions otherwise than on such exchanges or
services or in the over-the-counter market, (iv) through the writing of
options, whether such options are listed on an option exchange or
otherwise, or (iv) through the settlement of short sales. In connection
with sales of the Registrable Securities or otherwise, the Selling
Securityholder may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of
the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities
short and deliver Registrable Securities to close out such short
positions, or loan or pledge Registrable Securities to broker-dealers
that in turn may sell such securities.
	 
	 	 	State any exceptions here:
	 
	(8)	 	Are you a Member, an affiliate of a Member, or a person associated with a
Member, of the National Association of Securities Dealers, Inc. (the
“NASD”)?
	 
	 	 	Yes      No      
	 
	 	 	If the answer to Question 8 is “yes”, state (a) the name of any such NASD
Member, (b) the nature of your affiliation or association with such NASD
Member, (c) information as to such NASD Member’s participation in any
capacity in the Offering or the original placement of the Securities, (d)
the number of shares of equity securities or face value of debt
securities of the Company owned by you, (e) the date such securities were
acquired and (f) the price paid for such securities.
	 
	 	 	

	 	 	
	.

A-5

 

	(9)	 	If you answered “yes” to Question 8 above, please fill out the following
table with respect to any purchases from the Company or any of its
Affiliates in a private placement within twelve months prior to the date
hereof (excluding your purchase of the Shares).

	 	 	 
	 	 	 	 	 	Amount and Name	 	 	Price or Other
	Date of Purchase	 	Seller	 	 	of Securities	 	 	Consideration
	
	 	
	 	 	
	 	 	

     Note: In no event may such method(s) of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.

     By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M. The Selling Securityholder also acknowledges that
it understands that the answers to this Questionnaire are furnished for use in
connection with the Registration Statement and any amendments or supplements
thereto filed with the SEC pursuant to the Securities Act of 1933, as amended.

     In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on which
such information is provided to the Company, the Selling Securityholder agrees
to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.

     By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (9) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.

     The Selling Securityholder acknowledges that material misstatements and
omissions of material facts in the Registration Statement and any amendments or
supplement thereto may give rise to civil and criminal liabilities to the
Company and to each officer and director of the Company signing the
Registration Statement and to other persons signing such document. As a
result, in accordance with the Selling Securityholder’s obligation under
Section 3(a) of the Registration Rights Agreement to provide such information
as may be required by law for inclusion in the Shelf Registration Statement,
the Selling Securityholder agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains in effect. All notices hereunder and pursuant to the
Registration Rights Agreement shall

A-6

 

be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:

	 	(i)	 	to the Company:

	 
	WMS Industries Inc.

800 South Northpoint Boulevard

Waukegan, IL 60085

Attention: Kathleen McJohn, General Counsel

	 	(ii)	 	with a copy to:

	 
	Shack Siegel Katz & Flaherty P.C.

530 Fifth Avenue

New York, NY 10036

Attention: Jeffrey Siegel, Esq

     Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company’s counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities Beneficially Owned by such Selling Securityholder and the
Registrable Securities listed in Item (3) above). This Agreement shall be
governed in all respects by the laws of the State of New York.

     I confirm that, to the best of my knowledge and belief, the foregoing
statements (including without limitation the answers to this Questionnaire) are
correct.

     IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.

	 	 	 	 	 
	Dated:	

	 	 
	 	 	 	 	

Selling Securityholder

(Print/type full legal name of beneficial

owner of Registrable Securities)

	 	 	 	 
	 	By:	 	

Name:
	 	 	 	
Title:

A-7

 

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT
ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY’S COUNSEL AT:

	 	 	 
	 	 	
Shack Siegel Katz & Flaherty P.C.

530 Fifth Avenue

New York, NY 10036

Attention: Jeffrey Siegel, Esq.

A-8

 

APPENDIX 1

DEFINITIONS

     For the purpose of this Questionnaire, the following definitions apply:

1.     Affiliate. As used in Questions 1 — 7 and Question 9, a person is an
“Affiliate” of a person if such person controls, is controlled by, or is under
common control with, another person. Please assume that an “Affiliate” of the
Company includes without limitation, any 5% stockholder of the Company
(including any person who owns, controls, or holds or holds an option to
acquire, and has the power to vote, 5% or more of the Company’s outstanding
voting securities). “Control” is the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of an
entity, whether through the ownership of voting securities, by contract or
otherwise.

     As used in Question 8 of this Questionnaire, an “affiliate” of an NASD
member has the following meaning:

	(1)	 	a company which controls, is controlled by or is under common
control with a member;
	 
	(2)	 	the term affiliate is presumed to include, but is not limited
to, the following:

	 	(a)	 	a company will be presumed to control a member if
the company beneficially owns 10% or more of the outstanding
voting securities of a member which is a corporation, or
beneficially owns a partnership interest in 10% or more of the
distributable profits or losses of a member which is a
partnership;
	 
	 	(b)	 	a member will be presumed to control a company if
the member and persons associated with the member beneficially
own (i) 10% or more of the outstanding subordinated debt of a
company, (ii) 10% or more of the outstanding voting securities
of a company which is a corporation or (iii) a partnership
interest in 10% or more of the distributable profits or losses
of a company which is a partnership;
	 
	 	(c)	 	a company will be presumed to be under common
control with a member if:

	 	 	 
	(i)	 	
the same natural person or company
controls both the member and company by beneficially
owning 10% or more of the outstanding voting securities
of a member or company which is a corporation, or by
beneficially owning a partnership interest in 10% or
more of the distributable profits or losses of a member
or company which is a partnership; or
	(ii)	 	
a person having the power to direct
or cause the direction of the management or policies of
the member or the company also has

A-9

 

	 
	the power to direct or cause the direction of the
management or policies of the other entity in question

     2.     Beneficial Owner. A “Beneficial Owner” of a security includes any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power and/or investment power
with respect to such security. Voting power includes “the power to vote, or to
direct the voting, of such security” and investment power includes “the power
to dispose, or to direct the disposition, of such security.”

     A person is also a Beneficial Owner of a security if he has the right to
acquire beneficial ownership of such security, at any time within sixty days,
including but not limited to, any right to acquire through: (a) the exercise of
an option, warrant or right, (b) the conversion of a convertible security, (c)
the power to revoke a trust, discretionary account or similar arrangement, or
(d) the automatic termination of a trust, discretionary account or similar
arrangement; provided, however, that if the acquisition of an option, warrant,
right, convertible security or power described in (a), (b) or (c) is for the
purpose of maintaining or obtaining control over the issuer of the security,
the holder of the option, warrant, right, convertible security or power shall,
immediately upon such acquisition and regardless of when it is exercisable, be
deemed a beneficial owner of the underlying securities.

     The possession of the legal power to vote and/or direct the disposition of
securities, absent unusual circumstances, will be sufficient to confer
beneficial ownership. Such power may be held directly, or indirectly, through
one or more controlled entities.

     3.     Material Relationship. The term “material relationship” has not been
defined by the Securities and Exchange Commission (the “SEC”). The SEC,
however, is likely to construe as material any relationship which tends to
impact arm’s length bargaining in dealings with a company, whether arising from
a close business connection, family relationship, a relationship of control or
otherwise. For example, you should conclude that you have such a relationship
with any organization of which you own, directly or indirectly, 10% more of the
outstanding voting stock, or in which you have some other substantial interest,
and with any person or organization with whom you have, or with whom any
relative (or any other person or organization as to which you have any of the
foregoing other relationships) has, a contractual relationship.

     4.     Member. Rule 0120 of the NASD’s Rules of Fair Practice defines the term
“member” to mean any individual, partnership, corporation or other legal entity
admitted to membership in the NASD, and Article l of the NASD’s By-Laws defines
the term “person associated with a member” to mean every sole proprietor,
partner, officer, director, or branch manager of any member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by such member (for example,
any employee), whether or not such person is registered or exempt from
registration with the NASD.

A-10<PAGE>

                                                                    EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

         This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of June 23, 2003 by and among Superconductor Technologies Inc.,
a Delaware corporation (the "Company"), and each of the purchasers set forth on
the signature pages of this Agreement (the "Investors") with reference to the
following facts:

         A.       The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").

         B.       The Investors desire to purchase, and the Company desires to
issue and sell, upon the terms and conditions in this Agreement, (i) an
aggregate of 5,116,278 shares (the "Shares") of the Company's common stock, par
value $0.001 per share ("Common Stock"), at $2.15 per share and (ii) stock
purchase warrants in the form attached hereto as Exhibit A (the "Warrants") to
purchase up to an aggregate of 1,279,069 additional shares of Common Stock (the
"Warrant Shares").

         D.       Each Investor wishes to purchase, upon the terms and
conditions in this Agreement, the number of Shares and the number of Warrants
set forth immediately next to its name on the signature pages of this Agreement.

         E.       Contemporaneous with the closing of the transactions
contemplated by this Agreement, the parties will be executing and delivering a
Registration Rights Agreement, in the form attached hereto as Exhibit B (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws. This
Agreement, the Warrants and the Registration Rights Agreement are collectively
referred to as the "Transaction Documents".

         NOW, THEREFORE, the Company and each of the Investors severally (and
not jointly) hereby agree as follows:

         1.       Purchase and Sale of Shares and Warrants.

                  1.1      Purchase of Shares and Warrants. On the Closing Date
(as defined below), the Company shall issue and sell to each Investor, and each
Investor severally agrees to purchase from the Company, the number of Shares and
Warrants set forth immediately next to such Investor's name on the signature
pages to this Agreement.

                  1.2      Form of Payment. On the Closing Date, (i) each
Investor shall pay the purchase price for the Shares and the Warrants to be
issued and sold to it at the Closing (as defined below) (the "Purchase Price")
against delivery of duly executed certificates representing the Shares and duly
executed Warrants which such Investor is purchasing and (ii) the Company shall
deliver such certificates and Warrants duly executed on behalf of the Company,
to such Investor, against delivery of such Purchase Price. Payment of the
Purchase Price shall be made by wire transfer of immediately available funds
through an escrow agent on terms and instructions set forth in an Escrow
Agreement dated the date hereof among the Company, RBC

<PAGE>

Dain Rauscher Inc., as agent of the Company in connection with the placement of
the Shares and Warrants to be issued and sold pursuant hereto (the "Placement
Agent"), and Marshall & Ilsley Trust Company N.A., as escrow agent.

                  1.3      Closing Date. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 5 and 6 of this Agreement, the date and
time of the issuance and sale of the Shares and the Warrants pursuant to this
Agreement (the "Closing Date") shall be 9:00 a.m., Pacific Time, on June 25,
2003 or such other time as may be agreed between the Company and the Placement
Agent in writing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall occur on the Closing Date at the offices of
Guth|Christopher LLP, 10866 Wilshire Boulevard, Suite 1250, Los Angeles,
California, or at such other location as may be agreed between the Company and
the Placement Agent in writing.

                  1.4      Adjustments. If at any time prior to the Closing the
outstanding shares of Common Stock are subdivided into a greater number of
shares or consolidated into a lesser number of shares, then proportionate
adjustments shall be made to the per share purchase price and number of shares
of Common Stock purchased hereunder and under the form of Warrant attached
hereto in order to prevent dilution and maintain the same aggregate
consideration hereunder and thereunder.

         2.       Investors' Representations, Warranties and Covenants. Each
Investor severally (and not jointly) represents, warrants and covenants to the
Company solely as to such Investor that:

                  2.1      Investment Purpose. As of the date hereof, the
Investor is purchasing the Shares and the Warrants for its own account and
without a present view towards the public sale or distribution of the Shares,
Warrants or Warrant Shares (collectively the "Securities"), except pursuant to
sales registered or exempted from registration under the Securities Act;
provided, however, that by making the representations herein, the Investor does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the
Securities Act.

                  2.2      Investor Status. The Investor is an "accredited
investor" as defined in Rule 501(a) of Regulation D. In the normal course of its
business, the Investor invests in or purchases securities similar to the Shares
and Warrants and it has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of purchasing the
Shares and Warrants.

                  2.3      Reliance on Exemptions. The Investor understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.

                  2.4      Information. The Investor and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares and Warrants which have been requested by the Investor or its advisors.
The Investor and its advisors, if any, have been afforded the

                                        6

<PAGE>

opportunity to ask questions of the Company. The Investor understands that its
investment in the Shares and Warrants involves a significant degree of risk.

                  2.5      Other Matters. The Investor has read the confidential
disclosure set forth under the heading "Other Matters" on the term sheet dated
June 5, 2003 for the offering of securities under this Agreement (the "Term
Sheet"). The Investor has been presented with an opportunity to ask questions
concerning such matters and has received all information concerning such matters
considered material by that Investor to its decision to purchase the securities
offered hereby.

                  2.6      Governmental Review. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.

                  2.7      Transfer or Re-sale. The Investor understands that
(i) except as provided in the Registration Rights Agreement, the sale or re-sale
of the Securities has not been and is not being registered under the Securities
Act or any applicable state securities laws, and the Securities may not be
transferred unless (a) the Securities are sold pursuant to an effective
registration statement under the Securities Act, (b) the Securities are sold or
transferred pursuant to an exemption from such registration provided that with
respect to a transfer or sale pursuant to this clause (b) only, the Investor,
upon the reasonable request of the Company, shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, (c) the Securities are sold or transferred
to an "affiliate" (as defined in Rule 144 promulgated under the Securities Act
(or a successor rule) ("Rule 144")) of the Investor who agrees to sell or
otherwise transfer the Securities only in accordance with this Section 2.7 and
who is an "accredited investor" (as defined in Rule 501(a) of Regulation D) or
(d) the Securities are sold pursuant to Rule 144; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register such Securities under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder (in each
case, other than pursuant to the Registration Rights Agreement). Notwithstanding
the foregoing or anything else contained herein to the contrary, the Securities
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement; provided, however, that upon execution on any such
pledge, the pledgee shall be subject to the restrictions on transfer of the
Securities contained in this Agreement.

                  2.8      Legends. The Investor understands that the Shares and
the Warrants and, until such time as the Warrant Shares have been registered
under the Securities Act as contemplated by the Registration Rights Agreement or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
the certificates for the Shares and Warrant Shares shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):

                                       7

<PAGE>

         The securities represented by this certificate have not been registered
         under the Securities Act of 1933, as amended, or the securities laws of
         any state of the United States. The securities represented hereby may
         not be offered or sold in the absence of an effective registration
         statement for the securities under applicable securities laws unless
         offered, sold or transferred under an available exemption from the
         registration requirements of those laws. Notwithstanding the foregoing,
         the securities represented by this certificate [and the securities
         issuable upon exercise of these securities] may be pledged in
         connection with a bona fide margin account or other loan or financing
         arrangement secured by such securities.

         The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for resale under an effective registration statement
filed under the Securities Act or otherwise may be sold pursuant to Rule 144(k)
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act and
such sale or transfer is effected or (c) such holder provides the Company with
reasonable and customary assurances that such Security can be sold pursuant to
Rule 144 and such sale or transfer is effected. The Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus delivery
requirements, if any.

         The Company shall cause its counsel to issue a legal opinion to the
company's transfer agent within 1 trading day after the date on which a
registration statement under which the securities may be sold is declared
effective by the SEC (the "Effective Date") to the effect that a registration
statement with respect to such securities has become effective under the
Securities Act and that such shares may be transferred without restriction under
the Securities Act. Following the Effective Date or at such earlier time as a
legend is no longer required for certain Securities, the Company will no later
than two trading days following the delivery by an Investor to the Company or
the Company's transfer agent of a legended certificate representing such
Securities, deliver or cause to be delivered to such Investor a certificate
representing such Securities that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.

                  2.9      Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Investor, and
this Agreement constitutes, and upon execution and delivery by the Investor of
the Registration Rights Agreement, such agreement will constitute, valid and
binding agreements of the Investor enforceable in accordance with their terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
rights affecting or relating to creditors' rights generally and general
principles of equity.

                  2.10     Residency. The Investor is a resident of the
jurisdiction set forth immediately next to such Investor's name on the signature
pages hereto.

                  2.11     Trading Limitations. The Investor will not directly
or indirectly sell, offer to sell, solicit offers to buy, dispose of, loan,
pledge or grant any right with respect to shares of

                                        8

<PAGE>

Common Stock, except in compliance with all relevant securities laws and
regulations. The Investor has not engaged in any sales of Common Stock within
the past ten (10) trading days

         3.       Representations and Warranties of the Company. The Company
represents and warrants to each Investor that:

                  3.1      Organization and Qualification. The Company and each
of its Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. Schedule 3.1 sets forth a list of
all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on (i) the holder's
rights relating to the Securities, (ii) the business, operations, assets,
financial condition or prospects of the Company and its Subsidiaries taken as a
whole, (iii) the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith or (iv) the authority or
the ability of the Company to perform its obligations under this Agreement, the
Registration Rights Agreement or the Warrants. "Subsidiaries" means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.

                  3.2      Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company, and the consummation by it of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Warrants and the
issuance and reservation for issuance of the Warrant Shares issuable upon
exercise of the Warrants) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its stockholders is required, (iii) this Agreement has been duly
executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Registration Rights Agreement
and the Warrants, each of such agreements and instruments will constitute, a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar rights affecting or relating to
creditors' rights generally and general principles of equity.

                  3.3      Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 125,000,000 shares of Common Stock,
of which 59,823,553 shares are issued and outstanding, 11,355,458 shares are
reserved for issuance pursuant to the Company's stock option plans, 10,294,420
shares are reserved for issuance pursuant to securities (other than the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock, 1,258,247 shares are reserved for issuance upon exercise of the Warrants;
and (ii) 2,000,000 shares of preferred stock, of which no shares are issued and
outstanding. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and nonassessable.
No shares of capital stock of the Company are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or

                                        9

<PAGE>

encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or any
of its Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement), (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) that will be triggered by
the issuance of the Shares, the Warrants or Warrant Shares, and (iv) there are
no stockholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party. The Company has
made available to counsel for the Investors true and correct copies of the
Company's Restated Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's Bylaws, as in effect on the date
hereof (the "Bylaws"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto except for stock options granted under any
benefit plan of the Company.

                  3.4      Issuance of Shares. The Shares are duly authorized
and, upon issuance in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company and will not impose personal liability upon the holder thereof. The
Warrant Shares are duly authorized and reserved for issuance and, upon exercise
of the Warrants in accordance with the terms thereof, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.

                  3.5      No Conflicts. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Warrant Shares) will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or
Bylaws or (ii) except as set forth on Schedule 3.5, violate or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate of Incorporation, Bylaws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or

                                       10

<PAGE>

any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as the Investor owns any of
the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible or actual violations, if any, the
sanctions for which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as specifically contemplated by this Agreement, except as
set forth on Schedule 3.5 hereto, and except as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrants in accordance with the terms
hereof or thereof or to issue and sell the Shares and Warrants in accordance
with the terms hereof and to issue the Warrant Shares upon exercise of the
Warrants. Except as disclosed in Schedule 3.5, all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of
Common Stock under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or delisting the Common Stock from the Nasdaq National Market.
The issuance of the Securities does not require shareholder approval, including,
without limitation, pursuant to the Nasdaq Marketplace Rules. The Company has
not in the two years preceding the date hereof received notice (written or oral)
from the NASDAQ, any stock exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange, market or trading facility. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance requirements.

                  3.6      SEC Documents; Financial Statements. Since January 1,
2000, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to each Investor true and complete
copies of any SEC Documents specifically requested by the Investor which are not
available from the SEC's EDGAR database, except for exhibits and incorporated
documents, and the Company understands that the Investor has secured copies of
the remainder of such SEC Documents from the SEC's EDGAR database. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as

                                       11

<PAGE>

have been amended or updated in subsequent filings prior to the date hereof). As
of their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such SEC Documents and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such SEC Documents,
which liabilities and obligations referred to in clauses (i) and (ii),
individually or in the aggregate, would not have a Material Adverse Effect.

                  3.7      Absence of Certain Changes. Except as disclosed in
the SEC Documents, since December 31, 2002, there has been no change or
development which individually or in the aggregate has had or could reasonably
be expected to have a Material Adverse Effect. Since the date of the latest
audited financial statements included within the SEC Documents, except as
specifically disclosed in the SEC Documents, (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not altered its method of accounting or the identity of its
auditors, (iii) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (iv) the Company has not issued any equity securities to any officer,
director or other affiliate, except pursuant to existing Company stock option
plans.

                  3.8      Absence of Litigation. Except as disclosed in the SEC
Documents, there is no action, suit, claim, proceeding or, to the knowledge of
the Company and its Subsidiaries, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries, or their
officers or directors in their capacity as such, that could have a Material
Adverse Effect.

                  3.9      Intellectual Property. The Company and each of its
subsidiaries owns or is licensed to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, permits, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary knowledge
(collectively, "Intellectual Property") necessary for the conduct of its
business as now being conducted and as proposed to be conducted. Except as
disclosed in the SEC Documents, neither the Company nor any of its subsidiaries
has received written notice that it is infringing upon or in conflict with any
third party Intellectual Property. Except as set forth on Schedule 3.9, neither
the Company nor any of its subsidiaries has entered into any consent,
indemnification, forbearance to sue or settlement agreements with respect to the
validity of the Company's or such subsidiary's ownership or right to use its
Intellectual Property. The Company's Intellectual

                                       12

<PAGE>

Property is valid and enforceable, and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are pending and
in good standing. The Company has complied with its contractual obligations
relating to the protection of the Intellectual Property used pursuant to
licenses. To the Company's knowledge, no person is infringing on or violating
the Intellectual Property owned or used by the Company.

                  3.10     Environment. (i) There is no environmental liability,
nor factors likely to give rise to any environmental liability, affecting any of
the properties of the Company or any of its subsidiaries that, individually or
in the aggregate, would have a Material Adverse Effect and (ii) neither the
Company nor any of the subsidiaries has violated any environmental law
applicable to it now or previously in effect, other than such violations or
infringements that, individually or in the aggregate, have not had and will not
have a Material Adverse Effect.

                  3.11     Title. The Company and each of its subsidiaries has
good title in fee simple to all real property and good title to all personal
property owned by it which is material to its business, free and clear of all
liens, encumbrances and defects except for such defects in title that,
individually or in the aggregate, could not have a Material Adverse Effect. Any
real property and facilities held under lease by the Company or any of its
subsidiaries are held by the Company or such subsidiary under valid, subsisting
and enforceable leases with such exceptions which have not had and will not have
a Material Adverse Effect.

                  3.12     Insurance. The Company and its subsidiaries maintain
such insurance relating to their business, operations and assets as is
appropriate to their business, assets and operations, in such amounts and
against such risks as are customarily carried and insured against by owners of
comparable businesses, assets and operations, and such insurance coverages will
be continued in full force and effect to and including the Closing Date other
than those insurance coverages in respect of which the failure to continue in
full force and effect could not reasonably be expected to have a Material
Adverse Effect. The Company and its Subsidiaries are in compliance with the
terms of such policies in all material respects. There are no claims by the
Company or any of its Subsidiaries under any such policy or instrument as to
which an insurance company is denying liability or defending under a reservation
of rights clause.

                  3.13     No Brokers. The Company has not engaged any person to
which or to whom brokerage commissions, finder's fees, financial advisory fees
or similar payments are or will become due in connection with this Agreement or
the transactions contemplated hereby except for the Placement Agent, to whom the
Company will pay a fee in respect of the sale of the Shares and Warrants to the
Investors.

                  3.14     Tax Status. The Company and each of its subsidiaries
has made or filed all material federal, state and local income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company or the applicable
subsidiary has set aside on its books provisions adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no material unpaid taxes claimed to be due by
the taxing authority of any jurisdiction. The Company has not executed a waiver
with respect to any statute of limitations relating to the assessment or
collection of any

                                       13

<PAGE>

federal, state or local tax. None of the Company's tax returns have been or is
being audited by any taxing authority.

                  3.15     No General Solicitation. Neither the Company nor any
person participating on the Company's behalf in the transactions contemplated
hereby has conducted any "general solicitation" or "general advertising" as such
terms are used in Regulation D, with respect to any of the Securities being
offered hereby.

                  3.16     Securities Laws. Neither the Company, nor any person
acting on its or their behalf the Company's behalf, has sold or offered to sell
or solicited any offer to buy the Securities by means of any form of general
solicitation or advertising. Neither the Company nor any of its Affiliates nor
any person acting on the Company's behalf has, directly or indirectly, at any
time within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D
under the Securities Act in connection with the offer and sale of the Securities
as contemplated hereby or (ii) cause the offering of the Securities pursuant to
the Transaction Documents to be integrated with prior offerings by the Company
for purposes of any applicable law (except as would not result in a violation of
applicable law), regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of The Nasdaq Stock Market.
Assuming the truth and accuracy of the representations and warranties of the
Investors set forth in Section 2 of this Agreement, the Investors will not be
statutory underwriters within the meaning of Section 2(a)11 of the Securities
Act.

                  3.17     Form S-3 Eligibility. The Company is currently
eligible to register the resale of its Common Stock on a registration statement
on Form S-3 under the Securities Act. Except for obtaining the waivers disclosed
on Schedule 3.5, there exist no facts or circumstances (including without
limitation any required approvals or waivers of any circumstances that may delay
or prevent the obtaining of accountant's consents) that would prohibit or delay
the preparation and filing of a registration statement on Form S-3 with respect
to the Registrable Securities (as defined in the Registration Rights Agreement).

                  3.18     Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the Investors or their
agents or counsel with any information that constitutes or might constitute
material, nonpublic information, except the information which will be disclosed
in the press release issued pursuant to Section 4.3. The Company understands and
confirms that each of the Investors will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Investors regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company's
reports filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act). The
Company acknowledges and agrees that no Investor makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

                                       14

<PAGE>

                  3.19     Foreign Corrupt Practices. Neither the Company, nor
any of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in the course of
his actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.

                  3.20     No Investment Company. The Company is not, and upon
the issuance and sale of the Securities as contemplated by this Agreement and
the Warrants, and the application of the proceeds therefrom, will not be, an
"investment company" required to be registered under the Investment Company Act
of 1940 (an "Investment Company"). The Company is not controlled by an
Investment Company.

                  3.21     Form of Shares. The form of certificates for the
Shares conforms to the requirements of the corporate law of the State of
Delaware.

                  3.22     Permits. The Company and each of its Subsidiaries has
all material licenses, certifications, permits, franchises, approvals,
clearances and other regulatory authorizations ("Permits") from governmental
authorities as are necessary to conduct their respective businesses as currently
conducted and to own, lease and operate their respective properties in the
manner described in the SEC Documents, except where the failure to have any such
Permit would not have a Material Adverse Effect. There is no claim, proceeding
or controversy, pending or, to the knowledge of the Company, threatened,
involving the status of or sanctions under any of the Permits. The Company and
each of the Subsidiaries has fulfilled and performed all of its material
obligations with respect to the Permits, and no event has occurred which allows,
or after notice or lapse of time would allow, the revocation, termination,
modification or other impairment of the rights of the Company or any of its
Subsidiaries under any such Permit.

                  3.23     Stabilization. Neither the Company, nor to the
Company's knowledge, any of its affiliates, has taken or may take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.

                  3.24     Material Contracts. Except for matters which are
specifically disclosed in the SEC Documents, the contracts listed as exhibits to
the SEC Documents, other than those contracts that are substantially performed
or expired by their terms, are in full force and effect on the date hereof, and
none of the Company, its Subsidiaries and, to the Company's knowledge, any other
party, is in material breach of or default under any such contract. Neither the
Company nor any of the Subsidiaries has sent or received any notice indicating
the termination of or intention to terminate any such contract, and no such
termination has been threatened by the Company, any of its Subsidiaries, or, to
the Company's knowledge, any other party.

                  3.25     Sarbanes-Oxley Act. The Company is in compliance in
all material respects with the applicable provisions of the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act"), and the rules and regulations promulgated
thereunder, that are effective and intends to

                                       15

<PAGE>

comply in all material respects with other applicable provisions of the
Sarbanes-Oxley Act, and the rules and regulations promulgated thereunder, upon
the effectiveness of such provisions.

                  3.26     Internal Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

                  3.27     Forward-Looking Statements. The information contained
in the SEC Documents regarding the Company's expectations, plans and intentions,
and any other information that constitutes "forward-looking" information within
the meaning of the Securities Act and the Exchange Act were made by the Company
on a reasonable basis and reflected the Company's good faith belief and/or
estimate of the matters described therein, in each case as of the date of the
SEC Document containing such information.

                  3.28     Acknowledgment Regarding Investors' Purchase of
Securities. The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary of
the Company or any other Investor (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
any Investor or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to the Investors' purchase of the Securities. The Company further
represents to each Investor that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

         4.       Covenants.

                  4.1      Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Sections 5 and 6
of this Agreement.

                  4.2      Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Shares and Warrants as required under Regulation D
and to provide a copy thereof to counsel for the Investors promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Investors at the Closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to each Investor on or prior to the Closing Date.

                  4.3      Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the Exchange Act. So
long as any Investor beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The Company
currently meets,

                                       16

<PAGE>

and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3 for
the resale of Common Stock by the Investors. On or before 9:30 a.m., Eastern
Daylight time, on the Closing Date, the Company shall issue a press release and,
within one (1) business day of the Closing Date, the Company shall file with the
SEC a Current Report on Form 8-K, in each case, describing the material terms of
the transactions contemplated hereby and disclosing any other material,
nonpublic information provided by or through the Company to any Investor in
connection with the issuance and sale of the Shares and Warrants (except the
information referred to under the heading "Other Matters" in the Term Sheet).
Such press release and Form 8-K shall be subject to prior review by counsel for
each Investor. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission or any regulatory agency or The Nasdaq Stock Market,
without the prior written consent of such Investor, except to the extent such
disclosure (but not any disclosure as to the controlling persons thereof) is
required by law or the regulations of The Nasdaq Stock Market, in which case the
Company shall provide such Investor with prior notice of such disclosure. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide any
Investor with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the Form 8-K described above
without the express written consent of such Investor. Each press release
disseminated during the three years preceding the date of this Agreement did not
at the time of release contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.

                  4.4      Use of Proceeds. The Company shall use the proceeds
from the sale of the Shares and the Warrants in the manner set forth in Schedule
4.4.

                  4.5      Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full exercise of the Warrants. The
Company shall not reduce the number of shares of Common Stock reserved for
issuance upon exercise of the Warrants (except as a result of the issue of the
Warrant Shares upon the exercise of the Warrants) without the consent of the
Investors

                  4.6      Listing. On the Closing Date, the Company shall have
applied for the listing of the Shares and Warrant Shares, in each case, upon
each national securities exchange and automated quotation system, if any, upon
which shares of Common Stock are then listed or quoted and shall maintain, so
long as any other shares of Common Stock shall be so listed, such listing of all
Shares from time to time issuable hereunder and all Warrant Shares from time to
time issuable upon exercise of the Warrants. The Company shall use its best
efforts to keep its shares of Common Stock listed on The Nasdaq National Market
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of The Nasdaq Stock Market.

                  4.7      No Integration. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause the offering of Securities to be integrated
with any other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its securities.

                                       17

<PAGE>

                  4.8      Furnishing of Information. As long as any Investor
owns Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Investor, the Company shall deliver to
such Investor a written certification of a duly authorized officer as to whether
it has complied with the preceding sentence. As long as any Investor owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Investors and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Investors to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to transactions for the sale of securities
pursuant to Rule 144.

                  4.9      Reimbursement. If any Investor or any of its
affiliates or any officer, director, partner, controlling person, employee,
broker or agent of a Investor or any of its affiliates (a "Related Person")
becomes involved in any capacity in any action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened (a
"Proceeding") brought by or against any person in connection with or as a result
of the transactions contemplated by the Transaction Documents other than
relating to the Registration Statement, Prospectus or other matter contemplated
by Section 6.1 of the Registration Rights Agreement, the Company will indemnify
and hold harmless such Investor or Related Person for its reasonable legal and
other expenses (including the reasonable costs of any investigation, preparation
and travel) and for any losses, claims, damages, liabilities, settlement costs
and expenses, including, without limitation, costs of preparation and reasonable
attorneys' fees (collectively, "Losses") incurred in connection therewith, as
such expenses or Losses are incurred, excluding only Losses that result directly
from such Investor's or Related Person's gross negligence or willful misconduct.
In addition, the Company shall indemnify and hold harmless each Investor and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.3 of the Registration Rights Agreement. The indemnification obligations of the
Company under this paragraph shall be in addition to any liability that the
Company may otherwise have and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Investors and
any such Related Persons. The Company also agrees that neither the Investors nor
any Related Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the transactions contemplated by the Transaction Documents,
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company arise out of or result from the bad faith, gross
negligence or willful misconduct of the applicable Investor or Related Person in
connection with such transactions or arise out of or relate to any breach by a
Investor of any of the representations, warranties or covenants made by a
Investor in this Agreement or any other Transaction Document. If the Company
breaches its obligations under any Transaction Document, then, in addition to
any other liabilities the Company may have under any Transaction Document or
applicable law, the Company shall pay or reimburse the Investors on demand for
all costs of collection and enforcement (including reasonable attorneys fees and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to reimburse the Investors on demand for all reasonable
costs of enforcing the indemnification obligations in this Section 4.9.

                                       18

<PAGE>

         5.       Conditions to the Company's Obligation to Sell. The obligation
of the Company hereunder to issue and sell the Shares and Warrants to the
Investors at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived in writing by
the Company at any time in its sole discretion:

                  5.1      All of the Investors shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.

                  5.2      All of the Investors shall have delivered the
Purchase Price in accordance with Section 1.2 above.

                  5.3      The representations and warranties of all of the
Investors shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date), and
all of the Investors shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Investors at or
prior to the Closing Date.

                  5.4      No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

         6.       Conditions to Each Investor's Obligation to Purchase. The
obligation of each Investor hereunder to purchase the Shares and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for such
Investor's sole benefit and may be waived in writing by such Investor at any
time in its sole discretion:

                  6.1      The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Investor.

                  6.2      The Company shall have delivered to such Investor
duly executed certificates (in such denominations as the Investor shall request)
representing the Shares and duly executed Warrants in accordance with Section
1.2 above.

                  6.3      The Shares shall be authorized for quotation on The
Nasdaq National Market and trading in the Common Stock or The Nasdaq National
Market generally shall not have been suspended or be under threat of suspension
by the SEC or any governing body of The Nasdaq Stock Market.

                  6.4      The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Investor
shall have received

                                       19

<PAGE>

a certificate or certificates, executed by the chief executive officer and chief
financial officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such
Investor including, but not limited to, certificates with respect to the
Company's Certificate of Incorporation, Bylaws and Board of Directors'
resolutions relating to the transactions contemplated hereby.

                  6.5      No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

                  6.6      The Company shall have provided advance notice to The
Nasdaq Stock Market of the issuance of the Shares and Warrant Shares if so
required by the rules applicable thereto.

                  6.7      The Investor shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Investor and in substantially the same form as
Exhibit C attached hereto.

                  6.8      From the date of this Agreement through the Closing
Date, there shall not have occurred any Material Adverse Effect.

         7.       Governing Law; Miscellaneous.

                  7.1      Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
The Company and each Investor irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company and each
Investor further agrees that service of process upon a party mailed by first
class mail shall be deemed in every respect effective service of process upon
the party in any such suit or proceeding. Nothing herein shall affect either
party's right to serve process in any other manner permitted by law. Each of the
parties agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

                  7.2      Counterparts; Signatures by Facsimile. This Agreement
may be executed in two or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other parties hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed signature page to be physically delivered to the other parties within
five (5) days of its execution.

                                       20
<PAGE>

                  7.3      Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

                  7.4      Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.

                  7.5      Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Investors
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the Company and, by the Investors as provided
in Section 7.14.

                  7.6      Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:

                       If to the Company:

                                Superconductor Technologies Inc.
                                460 Ward Drive
                                Santa Barbara, California 93111-2310
                                Attention: President and Chief Executive Officer
                                Facsimile: (805) 683-9496
                                Telephone: (805) 690-4500

                       With copy to:

                                Guth|Christopher LLP
                                10866 Wilshire Boulevard
                                Suite 1250
                                Los Angeles, California 90024
                                Attention: Daniel G. Christopher, Esq.
                                Facsimile: (310) 470-8354
                                Telephone: (310) 474-8809

         If to an Investor: To the address set forth immediately next to such
Investor's name on the signature pages hereto.

         Each party shall provide notice to the other party of any change in
address.

                  7.7      Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Investor shall assign this Agreement or any
rights or obligations hereunder without the prior

                                       21

<PAGE>

written consent of the other. Notwithstanding the foregoing, subject to Section
2.7, the rights and obligations of an Investor under this Agreement shall be
automatically assigned by such Investor to any transferee of all or any portion
of such Investor's Shares in any private transfer of such Shares. Upon any
transfer permitted by this Section 7.7 and made in accordance with Section 2.7,
the Company shall be obligated to such transferee to perform all of its
covenants under this Agreement as if such transferee were named as an Investor
herein. Notwithstanding anything to the contrary herein, Securities may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Securities.

                  7.8      Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

                  7.9      Survival. The representations and warranties of the
Company and the agreements and covenants of the Company shall survive the
Closing notwithstanding any due diligence investigation conducted by or on
behalf of the Investors; provided that the representations and warranties made
to any Investor in Section 3 shall terminate on the earlier of (i) two (2) years
from the date of discovery by such Investor of a breach thereof and (ii) three
(3) years from the Closing Date.

                  7.10     Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  7.11     No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party. With respect to the Company, "knowledge" shall mean the actual
knowledge of the Company's directors, its Chief Executive Officer, Chief
Financial Officer, Chief Technology Officer or any Vice President.

                  7.12     Equitable Relief. Each party acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
other parties by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, each party acknowledges that the remedy at law
for a breach of its obligations hereunder will be inadequate and agrees, in the
event of a breach or threatened breach by such party of the provisions of this
Agreement, that the other parties shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

                  7.13     Termination. In the event that the Closing Date shall
not have occurred on or before June 30, 2003, unless the Company and the
Investors agree otherwise in writing, this Agreement shall terminate at the
close of business on such date. Notwithstanding any termination of this
Agreement, any party not in breach of this Agreement shall preserve all rights
and remedies it may have against another party hereto for a breach of this
Agreement prior to or relating to the termination hereof.

                  7.14     Determinations. Except as otherwise expressly
provided herein, all consents, approvals and other determinations to be made by
the Investors pursuant to this

                                       22

<PAGE>

Agreement and all waivers and amendments to or of any provisions in this
Agreement to be binding upon an Investor shall be made by such Investor.

                  7.15     Expenses. The parties hereto shall pay their own
costs and expenses in connection herewith, except that the Company shall (a) pay
at the Closing the reasonable fees and expenses of counsel to each Investor (not
to exceed $30,000 in the aggregate for the work performed up to and including
the date hereof) related to the negotiation of this Agreement and the other
Transaction Documents, and (b) reimburse the Investors upon demand for all
reasonable out-of-pocket expenses incurred by the Investors, including without
limitation reimbursement of attorneys' fees and disbursements, in connection
with any amendment, modification or waiver of this Agreement or the other
Transaction Documents.

                  7.16     Independent Nature of Investors' Obligations and
Rights. The obligations of each Investor under any Transaction Document are
several and not joint with the obligations of any other Investor, and no
Investor shall be responsible in any way for the performance of the obligations
of any other Investor under any Transaction Document. The decision of each
Investor to purchase Shares and Warrants pursuant to this Agreement has been
made by such Investor independently of any other Investor and independently of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries
which may have been made or given by any other Investor or by any agent or
employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person)
relating to or arising from any such information, materials, statements or
opinions. Nothing contained herein or in any other Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no other Investor will be acting as agent of
such Investor in connection with monitoring its investment hereunder. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.

              *** [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] ***

                                       23

<PAGE>

                 Signature Page to Securities Purchase Agreement

         IN WITNESS WHEREOF, the undersigned Investors and the Company have
caused this Agreement to be duly executed as of the date first above written.

                                        "COMPANY"

                                        SUPERCONDUCTOR TECHNOLOGIES INC.

                                        By:_____________________________________
                                           M. Peter Thomas
                                           President and Chief Executive Officer

                                        "INVESTORS"

RESIDENCE:________________
                                        _________________________________
Investment Amount: $
                  -------------
Common Shares:_________________
Warrant Shares:________________
                                        By:_____________________________________
Address for Notice:
Mr._______________________              Title:__________________________________
__________________________
__________________________
__________________________
Ph:_______________________
Fx:_______________________

                                       B-1

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