case 2:04-cv-02680-dt-jtl document 46 filed 03/22/05 page...

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PLED Lu CLERK, U.S DISTRICT COURT Z

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CENTRAL DISTR

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ICT OF CALIFORNIA BY DEPUTY

Priority Send Enter Closed JS-5/JS-6 - JS-2/JS-3 - Scan Only_.....

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:61

1 TRELL & MANELLA LLP David Siegel (101355)

2 [email protected] Daniel P. Lefler (151253)

3 [email protected] Richard H. Zelichov (193858)

4 [email protected] Pamela K. Graham (216309)

5 pgrahamirell.com 1800 Avenue of the Stars, Suite 900

6 Los Angeles, California 90067-4276 Telephone: (310) 277-1010

7 Facsimile: (310) 203-7199

8 Attorneys for Defendants SUPERCONDUCTOR TECHNOLOGIES INC.,

9 M. PETER THOMAS, and MARTIN S. McDERMUT

10, {aditjbnal counsel on signature page]

114 L I 0

(i 0

UNITED STATES DISTRICT COURT v) 1..

CENTRAL DISTRICT OF CALIFORNIA

WESTERN DIVISION

/ IARA. BACK}IAUS, on Behalf of ) Case No. CV-04-2680 DT (JTLx) Himself and All Others Similarly Situated,) Consolidated with

) CV-04-02848 DT and CV-04-02927 DT Plaintiff, )

[lROPOS] ORDER PRELIMINARILY

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[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE. CASE NO. CV-04-260 DT (3TLx) 1255567

APPROVftG SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE

EXHIBIT A

CLASS ACTION PSLRA

PLACE: 255 East Temple Street COURTROOM: 880

Honorable Dickran Tevrizian

DOCKETED ON CM

MAR 23 2005J

BY OO

t7'

V.

SUPERCONDUCTOR TECHNOLOGIES INC., M. PETER THOMAS, and MARTIN S. MCDERMUT,

Defendants.

)

This Document Relates To: ) )

ALL ACTIONS ) )


H J.OPOSED1 ORDER PRELIMINARILY APPROVING SETTLEMENT AND

APPROVING THE FORM AND MANNER OF NOTICE

The Court has received the Stipulation of Settlement (the "Stipulation"), dated as

March 8, 2005, that has been entered into by the Lead Plaintiffs and Defendants. The Cdurt has

reviewed the Stipulation and its attached exhibits, and, good cause appearing,

IT IS HEREBY ORDERED as follows:

1. The Court, for purposes of this preliminary order (the "Notice Order"), adopts all

defined terms as set forth in the Stipulation.

2. The Court hereby certifies, for purposes of effectuating this Settlement, a

Settlement Class of all Persons (except Defendants, members of the immediate family of any

Individual Defendant, any entity in which any Defendant has a controlling interest, and the legal

representatives, heirs, successors and assigns of any such excluded party) who purchased or

otherwise acquired the common stock of STI during the period between January 9, 2004 and

March 1, 2004, inclusive. Also excluded from the Settlement Class are those Persons who timely

and validly request exclusion from the Settlement Class pursuant to the Notice of Pendency and

Proposed Settlement of Class Action ("Notice") to be sent to the Settlement Class.

3. For purposes of the settlement only, the Court hereby appoints the Lead Plaintiffs,

Marc A. Backhaus and Jay Jakubowitz, as the representatives of the Settlement Class and appoints

Lead Plaintiffs' Counsel, Federman & Sherwood, as counsel for the Settlement Class.

4. With respect to the Settlement Class, this Court expressly finds and concludes that

the requirements of Fed. R. Civ. P. 23(a) and 23(b)(3) are satisfied as: (a) the members of the

Class are so numerous that joinder of all Class members in the Class Action is impracticable;

(b) there are questions of law and fact common to the Class which predominate over any

individual questions; (c) the claims of the Lead Plaintiffs are typical of the claims of the Class;

(d) the Lead Plaintiffs and their counsel have fairly and adequately represented and protected the

interests of all of the Class members; and (e) a class action is superior to other available methods

for the fair and efficient adjudication of the controversy, considering: (i) the interests of the

members of the Class in individually controlling the prosecution of the separate actions, (ii) the

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EPROPOSED) ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE. CASE NO. CV-04.2680 DT (JTLx) 1255$67 - 1


extent and nature of any litigation concerning the controversy already commenced by members of

2 the Class, (iii) the desirability or undesirability of continuing the litigation of these claimjn this

3 particular forum, and (iv) the difficulties likely to be encountered in the management of th'e class

4 action. VP

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5. The Court preliminarily approves: (1) the settlement of the Class Action as set

6 forth in the Stipulation and (2) the proposed Plan of Allocation described in the Notice, subject to

7 the right of any Settlement Class Member to challenge the fairness, reasonableness, and adequacy

S of the Stipulation, the proposed Plan of Allocation or the fairness and adequacy of their

9 representation by Lead Plaintiffs' Counsel, and to show cause, if any exists, why a final judgment

10 dismissing the Class Action based on the Stipulation should not be ordered herein after due and

11 adequate notice to the Settlement Class has been given in conformity with this Order.

12

6. The Court approves as to form and content, and for distribution to Settlement Class

13 Members, the Notice substantially in the form of Exhibit A-i hereto, for publication of a Summary

14 Notice of Proposed Settlement ("Summary Notice") in the form of Exhibit A-2 hereto, and for

15 distribution to Settlement Class Members, a Proof of Claim and Release ("Proof of Claim") in the

16 form of Exhibit A-3 hereto.

17

7. Pending resolution of these settlement proceedings, Lead Plaintiffs and all other

18 potential Settlement Class Members, whether directly, representatively, or in any other capacity,

19 whether or not such persons have appeared in the Class Action, shall not institute or prosecute any

20 claims against the Defendants or the Released Persons which have been or could have been

21 asserted in the Class Action, or that arise out of all or any part of the subject matter of this Class

22 Action.

23

S. Lead Plaintiffs' Counsel are authorized to act on behalf of the Settlement Class with

24 respect to all acts required by, or which may be given pursuant to, the Stipulation or such other

25 I acts which are reasonably necessary to consummate the proposed Settlement set forth in the

26 Stipulation.

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(PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO CV-04.2680 DI (JTL,c) 1255567 - 2 -

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:64 a - -W

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9. Lead Plaintiffs' Counsel are hereby authorized to retain the firm of RSM

2 MeGladrey, Inc., 512 Township Line Road, One Valley Square, Suite 250, Blue Bell, PAi 19422

as Claims Administrator to supervise and administer the notice and claims procedures.

10. Lead Plaintiffs Counsel shall make reasonable efforts to identify all PersdiIs who

are members of the Settlement Class, including beneficial owners whose shares of STI common

stock are held by banks, brokerage firms, or other nominees. Lead Plaintiffs' Counsel shall cause

the Claims Administrator to send the Notice and the Proof of Claim by first class mail to all

8 Persons who appear on the transfer records of STI as having transferred to their names STI

9 common stock during the period from January 9, 2004 through March 1, 2004, inclusive. The

10 mailing of the Notice and Proof of Claim forms shall commence on or before AP, TL cQ I

11 2005 (the "Notice Date").

12

11. Pursuant to the Notice, each nominee shall either: (1) send the Notice and Proof of

13 Claim to Settlement Class Members for which they act as nominee by first class mail within ten

14 (10) days after the nominee receives the Notice; or (2) send a list of the names and addresses of

15 such beneficial owners to the Claims Administrator within ten (10) days after the nominee

16 receives the Notice and, in the event of the latter, the Claims Administrator shall send by first class

17 mail the Notice and Proof of Claim to all Settlement Class Members who are on the list received

18 from the nominee. The Claims Administrator shall, if requested, reimburse banks, brokerage

19 houses or other nominees for their reasonable out-of-pocket expenses incurred in providing notice

20 to beneficial owners who are Settlement Class Members, which expenses would not have been

21 incurred except for the sending of such notice, subject to further order of this Court with respect to

22 any dispute concerning such compensation. Lead Plaintiffs' Counsel shall file with the Court and

23 serve upon Defendants' counsel no later than seven (7) days prior to the Settlement Hearing an

24 affidavit or declaration describing the efforts taken to comply with this order and stating that the

25 mailings have been completed in accordance with the terms of this order.

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12. Within ten (10) days of the Notice Date, Lead Plaintiffs' Counsel shall publish a

27 Summary Notice substantially in the form of Exhibit A-3 hereto once in Investor's Business Daily,

28 Lead Plaintiffs' Counsel shall file with the Court and serve upon Defendants' counsel no later than

[PROPOSED] ORDER PP.ELEM!NARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO, CV.04-2680 OT (JTL) 255567 . 3 -

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:65 I.-. II

I seven (7) days prior to the Settlement Hearing an affidavit or declaration stating that the Summary

2 Notice has been published in accordance with the terms of this order, LU

3

13. The Court finds that dissemination of the Notice and Proof of Claim in th&rnanner

4 required by ¶j 10-11, and publication of the Summary Notice in the manner required by ¶12,

5 constitute the best notice practicable under the circumstances to Settlement Class Members and

6 meet the requirements of Rule 23 of the Federal Rules of Civil Procedure, due process under the

7 United States Constitution, and any other applicable law and hall constitute due and sufficient

8 notice to all Persons entitled thereto.

9

14. Any Person falling within the definition of the Settlement Class may, upon request,

10 be excluded from the Settlement. Any such Person must submit to the Claims Administrator a

ii i request for exclusion ("Request for Exclusion"), postmarked no later than JJE O , 2005.

12 A Request for Exclusion must state: (1) the name, address, and telephone number of the Person

13 requesting exclusion; (2) the Person's purchases and sales of STI common stock made during the

14 Settlement Class Period, including the dates, the number of shares of common stock, and price

15 paid or received per share for each such purchase or sale; and (3) that the Person wishes to be

16 excluded from the Settlement Class. All Persons who submit valid and timely Requests for

17 Exclusion in the manner set forth in this paragraph shall have no rights under the Stipulation, shall

18 not share in the distribution of the Settlement Fund, and shall not be bound by the Stipulation or

19 the Final Judgment,

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15. Any Settlement Class Member who objects to the settlement of the Class Action,

21 the proposed Plan of Allocation, the adequacy of representation by Lead Plaintiffs' Counsel or the

22 application of counsel for attorneys' fees, costs, and expenses, shall have a right to appear and be

23 heard at the Settlement Hearing. Any Settlement Class Member may enter an appearance through

24 counsel of such member's own choosing and at such member's own expense or may appear on

25 their own. However, no Settlement Class Member shall be heard at the Settlement Hearing unless,

26 on or before 3W V -;tQ , 2005 such Person has filed with the Court a written notice of

27 objection, and the grounds for opposing the Settlement, Plan of Allocation, or application for

28 attorneys' fees, costs and expenses. The written notice of objection must demonstrate the

(PROPOSED) ORDER PRELIM[NAPJLY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO, CV-04-2680 DT (JTLx) 1255567 - 4 -


1 objecting Person's membership in the Settlement Class including (a) the objecting Person's name,

2 address and telephone number; (b) the number of shares of STI common stock purchasednd sold

3 during the Settlement Class Period by the objecting Person; and (c) a statement of the reasons for

4 objection. The written notice of objection must be delivered to the following counsel: Fôderman

5 & Sherwood, William B. Federman, 120 N. Robinson Avenue, Suite 2720, Oklahoma City,

6 Oklahoma 3102; and hell & Manella LLP, David Siegel, Daniel P. Lefler, Richard H. Zelichov,

7 Pamela K. Graham, 1800 Avenue of the Stars, Suite 900, Los Angeles, California 90067. The

8 manner in which a notice of objection must be prepared, filed, and delivered shall be stated in the

9 Notice. Only Settlement Class Members who have filed and delivered valid and timely written

10 notices of objection will be entitled to be heard at the Settlement Hearing unless the Court orders

11 otherwise.

12

16. STI shall pay the expenses of providing notice of the proposed Settlement to the

13 Settlement Class described in 14.5 of the Stipulation up to a maximum of $50,000.00. To the

14 extent such expenses exceed $50,000.00, the Court authorizes payment out of the Settlement Fund

15 of the expenses described in ¶ 4.5 of the Stipulation.

16

17. A Settlement Hearing will be held on k144'. S , 2005, at IOOA,m, before

17 this Court to determine whether the proposed settlement of the Class Action as set forth in the

18 Stipulation, should be approved as fair, just, reasonable and adequate as to each of the Settling

19 Parties, and whether the Final Judgment approving the Settlement should be entered. The Court

20 may adjourn or continue the Settlement Hearing without further notice to Settlement Class

21 Members.

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18. At the Settlement Hearing, the Court will determine whether Lead Plaintiffs'

23 Counsel's proposed Plan of Allocation of the Net Settlement Fund should be approved.

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19. The passage of title and ownership of the Settlement Fund to the Escrow Agent in

25 accordance with the terms of the Stipulation is approved. No Person that is not a Settlement Class

26 Member or counsel for the Representative Plaintiffs shall have any right to any portion of, or in

27 the distribution of, the Settlement Fund unless otherwise ordered by the Court or otherwise

28 provided in the Stipulation.

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO, CV-04-2680 DT (JTLx) 1255567 - 5 -


H

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20. All funds held by the Escrow Agent shall be deemed and considered to be in

2 custodia legis of the Court in accordance with the Stipulation, and shall remain subject tohe

3 jurisdiction of the Court, until such time as such funds shall be distributed pursuant to the tj

4 Stipulation, the Plan of Allocation and/or further order(s) of the Court. Ln

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21. At the Settlement Hearing, the Court will determine whether the application of

6 Lead Plaintiffs' Counsel for an award of attorneys' fees, costs, and expenses should be approved.

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22. No later than sixty (60) days after the Notice Date, any Settlement Class Member

8 who wishes to participate in the Settlement Fund must submit a valid Proof of Claim form to the

9 Claims Administrator. Proof of Claim forms shall be deemed to have been submitted when

10 postmarked, if mailed by first class, or registered or certified mail, postage prepaid, addressed in

ii accordance with the instructions given in the Proof of Claim and Release. All other Proof of

12 Claim and Release forms shall be deemed to have been submitted at the time they are actually

13 received by the Claims Administrator. To be valid, a Proof of Claim must: (1) be completed in a

14 manner that permits the Claims Administrator to determine the eligibility of the claim as set forth

15 in the Proof of Claim; (2) include the release by the Claimant of all Released Persons as set forth

16 in the Stipulation; and (3) be signed with an affirmation that the information is true and correct.

17 All Settlement Class Members who do not submit valid and timely Proof of Claim forms shall be

18 forever barred from receiving any payments from the Settlement Fund, but will in all other

19 respects be subject to and bound by the provisions of the Stipulation and the Final Judgment, if

20 entered,

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23. Neither Defendants nor Defendants' counsel shall have any responsibility for the

22 Plan of Allocation of the Settlement Fund submitted by Lead Plaintiffs' Counsel and it will be

23 considered separately from the fairness, reasonableness and adequacy of the settlement.

24

24. No later than seven (7) days before the Settlement Hearing, all briefs supporting the

25 Settlement, the Plan of Allocation, and the request for attorneys' fees and expenses, shall be served

26 1 and filed.

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25. Neither the Stipulation nor the settlement contained herein, nor any act performed

28 or document executed pursuant to or in furtherance of the Stipulation or the settlement: (i) is or

(PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO. CV.04-2680 DT (JTLx) 125550 - 6 -

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:68 4.

.

may be deemed to be or may be used as an admission of, or evidence of, the validity of any

Released Claim, or of any wrongdoing or liability of the Defendants or their Related Parties; or

(ii) is or may be deemed to be or may be used as an admission of, or evidence of, any faulor

omission of any of the Defendants or their Related Parties in any civil, criminal or administrative

proceeding in any court, administrative agency or other tribunal,

26. All proceedings in the Class Action are stayed until further order of the Court,

except as may be necessary to implement the settlement or comply with the terms of the

Stipulation.

27. The Court may, for good cause, extend any of the deadlines set forth in this order

without further notice to Settlement Class Members.

DATED: MAR 2 2 OB

DICKRAU IEYRIZIAN

THE HONORABLE DTCKRAN TEVRIZIAN UNITED STATES DISTRICT JUDGE

Submitted by:

William B. Federman [email protected] Stuart W. Emmons [email protected] Federman & Sherwood 120 N. Robinson Avenue, Suite 2720 Oklahoma City, Oklahoma 73102 Telephone: (405) 235-1560 Facsimile: (405) 239-2112

Lead Plaintiffs' Counsel

and

Arthur R. Angel (214611) The Law Offices of Arthur R. Angel 1236 N. Fairfax Avenue Los Angeles, California 90046 Telephone: (323) 656-9085 Facsimile: (323) 656-9085

Liaison Counsel for Lead Plaintiffs

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO. CV-04.2680 DT (JTLx) 255567 - 7 -

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I David Siegel (101355) dsiege1ire11.com

2 Daniel P. Lefler (151253) [email protected]

3 Richard H. Zelichov (193858) [email protected]

4 Pamela K. Graham (216309) [email protected]

5 Irell & Manella LLP 1800 Avenue of the Stars, Suite 900

6 Los Angeles, California 90067 Telephone: (310) 277-1010

7 Facsimile: (310) 203-7199

Attorneys for Defendants

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[PROPOSEDI ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE FORM AND MANNER OF NOTICE, CASE NO. CV.04-2680 DT (JTLx)

1255567


LU Z

U

EXHIBIT A

MARC A. BACKHAUS, on Behalf of ) Himself and All Others Similarly Situated,)

Plaintiff,

V.

SUPERCONDUCTOR TECHNOLOGIES INC., M. PETER THOMAS, and MARTIN S. MCDERMTJT,

Defendants.

This Document Relates To:

ALL ACTIONS

Case No. CV-04-2680 DT (JTLx) Consolidated with CV-04-02848 DT and CV-04-02927 DI

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION

EXHIBIT A-i

CLASS ACTION - PSLRA

PLACE: 255 East Temple Street COURTROOM: 880

Honorable Dickran Tevriziari

II ......................................................


1 IBELL & MANELLA LLP David Siegel (101355) [email protected] Daniel P. Lefler (151253) [email protected] Richard FL Zelichov (193858) [email protected] Pamela K. Graham (216309) [email protected] 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067-4276 Telephone: (310) 277-1010 Facsimile: (310) 203-7199

Attorneys for Defendants SUPERCONDUCTOR TECHNOLOGIES INC., M. PETER THOMAS, and MARTIN S. McDERMUT

[additional counsel on signature page]

UNITED STATES DISTRICT COURT


WESTERN DIVISION

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NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-04.2680 DT (3TLx)

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1255574

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:72 n

I

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION Li

2

TO; ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED ST-HE

3

COMMON STOCK OF SUPERCONDUCTOR TECHNOLOGIES INC. ("511")

4

DURING THE PERIOD FROM JANUARY 9, 2004 THROUGH AND INCLUDING

5

MARCH 1, 2004

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR

7

RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS LITIGATION.

8

PLEASE NOTE THAT IF YOU ARE A SETTLEMENT CLASS MEMBER, YOU

9

MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE SETTLEMENT

10

DESCRIBED IN THIS NOTICE.

11

TO CLAIM YOUR SHARE OF THIS FUND, YOU MUST SUBMIT A VALID

12

PROOF OF CLAIM POSTMARKED ON OR BEFORE , 2005.

13

This Notice has been sent to you pursuant to Rule 23 of the Federal Rules of Civil

14 Procedure and an Order of the United States District Court, Central District of California (the

15 "Court"). The purpose of this Notice is to inform you of the proposed settlement of this class

16 action litigation for $4,000,000.00 and of the hearing to be held by the Court to consider the

17 fairness, reasonableness, and adequacy of the settlement. This Notice describes the rights you

18 may have in connection with the settlement and what steps you may take in relation to the

19 settlement and this class action litigation.

20

The proposed settlement creates a fund in the amount of $4,000,000.00 and will include

21 interest that accrues on the fund prior to distribution. Based on the Lead Plaintiffs' estimate of the

22 number of shares allegedly damaged and the anticipated number of claims to be submitted by

23 Class members, the average distribution per share will be approximately $0.16 before deduction of

24 Court-approved fees and expenses. However, your actual recovery from this fund will depend on

25 a number of variables including the number of claimants, the number of shares you purchased, the

26 expense of administering the claims process, and the timing of your purchases and sales, if any.

27

Lead Plaintiffs and Defendants do not agree on the average amount of damages per share

28 that would be recoverable if Lead Plaintiffs were to have prevailed on each claim alleged under

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-04-2680 DT (JTLx)

10 1255574


the Securities Exchange Act of 1934. The issues on which the Parties disagree include (1) the 0

appropriate economic model for determining the amount by which STI's common stock iVis

3 allegedly artificially inflated (if at all) during the Class Period; (2) the amount by which SiTI's

4 common stock was allegedly artificially inflated (if at all) during the Class Period; (3) thiarious

5 market forces influencing the trading price of SIT's common stock at various times during the

6 Class Period; (4) the extent to which external factors, such as general market conditions,

7 influenced the trading price of STI's common stock at various times during the Class Period;

(5) the extent to which the various matters that plaintiffs alleged were false or misleading

9 influenced (if at all) the trading price of STI's common stock at various times during the Class

10 Period; (6) the extent to which the various allegedly material facts that plaintiffs alleged were

11 omitted influenced (if at all) the trading price of STPs common stock at various times during the

12 Class Period; and (7) whether the statements made or facts omitted were actionable under the

13 federal securities laws,

14

Lead Plaintiffs believe that the proposed settlement is in the best interests of the Class. In

15 Lead Plaintiffs' view, because of the inherent risks associated with continuing to litigate and

16 proceed to trial, there was a danger that Lead Plaintiffs would not have prevailed on any of their

17 claims, in which case the Class would receive nothing. For example, Lead Plaintiffs faced the

18 possibility that all or many of the claims in this case could have been dismissed in response to

19 motions by Defendants. In addition, the amount of damages recoverable by the Class was and is

20 challenged by Defendants. In addition, Lead Plaintiffs' Counsel investigated STI's financial

21 position and has noted that STI has limited financial resources to pay any judgment even if Lead

22 Plaintiffs succeeded in the Class Action. Lead Plaintiffs' Counsel also recognized that any

23 substantial judgment in the Class Action might result in STI's bankruptcy which could leave Lead

24 Plaintiffs and the Settlement Class with no possibility of recovery. Moreover, Lead Plaintiffs'

25 Counsel has reviewed the terms of S TI's insurance coverage and noted that the policy is reduced

26 by defense costs incurred in defending the Class Action, The proposed settlement eliminates these

27 risks and provides the Class with an immediate recovery.

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NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-04-2680 DI (JTLK)

-2- 1255574


Lead Plaintiffs' Counsel have not received any payment for their services in conducting U

2 this Class Action on behalf of Lead Plaintiffs and the members of the Class, nor have theybeen

3 reimbursed for their out-of-pocket expenditures. If the settlement is approved by the Couit, Lead U

4 Plaintiffs' Counsel will apply to the Court for attorneys' fees not to exceed 30% of the settlement

5 proceeds and reimbursement of expenses not to exceed $62,000.00 to be paid from the settlement

6 proceeds. If the amount requested by counsel is approved by the Court, the average cost per share

7 would be $0.05.

S

This Notice is not an expression of any opinion by the Court about the merits of any of the

9 claims or defenses asserted by any party in this Class Action or the fairness or adequacy of the

10 proposed settlement.

11

For further information regarding this settlement you may contact: William B. Federman,

12 Federman & Sherwood, 120 N. Robinson Avenue, Suite 2720, Oklahoma City, Oklahoma 73102,

13 I. NOTICE OF HEARING ON PROPOSED SETTLEMENT

14 : A settlement hearing will be held on , 2005, at _.m., before the

15 Honorable Dickran Tevrizian, United States District Judge, at the United States Courthouse, 255

16 East Temple Street, Los Angeles, California 90012 (the "Settlement Hearing"). The purpose of

17 the Settlement Hearing will be to determine: (1) whether the settlement consisting of $4.0 million

18 in cash plus accrued interest should be approved as fair, just, reasonable and adequate to each of

19 the Settling Parties; (2) whether the proposed plan to distribute the settlement proceeds (the "Plan

20 of Allocation") is fair, just, reasonable, and adequate; (3) whether Lead Plaintiffs' Counsel have

21 adequately represented the Class; (4) whether the application by Lead Plaintiffs' Counsel for an

22 award of attorneys' fees and expenses should be approved; and (5) whether the Class Action

23 should be dismissed with prejudice. The Court may adjourn or continue the Settlement Hearing

24 without further notice to the Settlement Class.

25 II. DEFINITIONS USED IN THIS NOTICE

26

1

"Defendants" means STI, M. Peter Thomas, and Martin S. MeDermut.

27

2. "Related Parties" means each of a Defendant's past or present directors, officers,

28 employees, partners, principals, agents, underwriters, controlling shareholders, any entity in which

NOTICE OF PENDENCY AND PROPOSED SET1LEMNT OF CLASS ACTION, CASE NO. CV-04-260 DT (.ITLx)

12

1 235574

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:75 II

the Defendant and/or any member(s) of any Defendant's immediate family has or have a Li

2 controlling interest, attorneys, accountants, auditors, banks, investment banks or investmétit

3 bankers, analysts, advisors, personal or legal representatives, insurers, reinsurers, predecesors,

4 successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, associates,

5 related or affiliated entities, any members of their immediate families, or any trust of which any

6 Defendant is the trustee or settlor or which is for the benefit of any Defendant and/or member(s) of

7 his family. Any retail securities broker retained by a Settlement Class Member (and not retained

8 by STI) that specifically recommended STI stock on the secondary market to a Settlement Class

9 Member is excluded from the definition of "Related Parties."

10

3. "Released Claims!! shall collectively mean all claims (including "Unknown Claims'

11 as defined below), demands, rights, liabilities and causes of action of every nature and description

12 whatsoever, known or unknown, whether in contract, tort, equity or otherwise, whether or not

13 concealed or hidden, asserted or that might have been asserted in this or any other forum or

14 proceeding, including, without limitation, claims for negligence, gross negligence,

15 indemnification, breach of duty of care and/or breach of duty of loyalty, fraud, misrepresentation,

16 breach of fiduciary duty, negligent misrepresentation, unfair competition, insider trading,

17 professional negligence, mismanagement, corporate waste, breach of contract, or violations of any

18 state or federal statutes, rules or regulations, by or on behalf of Lead Plaintiffs, the Settlement

19 Class, or any Settlement Class Member against the Released Persons (as defined below) which are

20 based upon or related to the purchase or acquisition of STI common stock by any Settlement Class

21 Member during the Settlement Class Period and the facts, transactions, events, occurrences, acts,

22 disclosures, statements, omissions or failures to act which were or could have been alleged in the

23 Class Action, or any other forum,

24

4. "Released Persons" means each and all of the Defendants and their respective

25 1 Related Parties.

26

5. "Settlement Class" means all persons (except Defendants, members of the

27 immediate family of Defendants, any entity in which any Defendant has a controlling interest, and

28 the legal representatives, heirs, successors or assigns of any such excluded party) who purchased

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTiON, CASE NO. CV-04-2680 DT (ITLx) 13

-4- 1255574

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:76 ). .

or otherwise acquired STI common stock during the period from January 9, 2004 through

March 1, 2004, inclusive, excluding those persons who timely and validly request exclusidn from

the Settlement Class pursuant to this Notice.

6. "Settlement Class Period" or "Class Period" means the period from Januari9, 2004

through March 1, 2004, inclusive.

7. "Unknown Claims" means any Released Claims which Lead Plaintiffs or any

Settlement Class Member does not know or suspect to exist in his, her or its favor at the time of

the release of the Released Persons which, if known by him, her or it, might have affected his, her

or its settlement with and release of the Released Persons, or might have affected his, her or its

decision not to object to, or opt out of, this settlement. With respect to any and all Released

Claims, the Parties stipulate and agree that, upon the Effective Date, Lead Plaintiffs expressly

waive and relinquish, and the Settlement Class Members shall be deemed to have, and by

operation of the Judgment shall have expressly waived and relinquished, to the fullest extent

permitted by law, the provisions, rights, and benefits of § 1542 of the California Civil Code, which

provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

The Lead Plaintiffs expressly waive and the Settlement Class Members shall be deemed to, and

upon the Effective Date and by operation of the Judgment shall have waived any and all

provisions, rights and benefits conferred by any law of the United States or of any state or territory

of the United States, or principle of common law, which is similar, comparable or equivalent to

§ 1542 of the California Civil Code. Lead Plaintiffs and the Settlement Class Members may

hereafter discover facts in addition to or different from those which be, she or it now knows or

believes to be true with respect to the subject matter of the Released Claims, but each of them

hereby stipulate and agree that Lead Plaintiffs do settle and release, and each Settlement Class

Member shall be deemed to, upon the Effective Date and by operation of the Judgment shall have,

fully, finally, and forever settled and released any and all Released Claims, known or unknown,

suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden,

NOTICE OF PENDENCY AND PROPOSED SEflLEMENT OF CLASS ACTION, CASE NO CV-04-2680 DI (JTLx)

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I which now exist, or heretofore have existed upon any theory of law or equity now existing or

2 coming into existence in the future, including, but not limited to, conduct which is negligeht,

3 intentional, with or without malice, or a breach of any duty, law or rule, without regard to the

4 subsequent discovery or existence of such different or additional facts. The Parties acknowledge

that the foregoing waiver was bargained for and a key element of the Settlement of which this

release is a part.

8. "STI" means defendant Superconductor Technologies Inc., a Delaware corporation,

and all of its predecessors, successors, present and former parents, subsidiaries, divisions and

related or affiliated entities.

10 ILL THE CLASS ACTION

11

A. The Class Actions

12

On and after April 16, 2004, three federal securities class action complaints, including

13 Marc A. Backhaus v. Superconductor Technologies Inc., et at,, Case No, CV04-2680 DT (JTLx),

14 were filed against Superconductor Technologies Inc. ("STI"), M. Peter Thomas, and Martin S.

15 McDermut in the Central District of California. By an order of the Honorable Dickran Tevrizian

16 dated on or about August 2, 2004, these complaints were consolidated under the caption Backhaus

17 v. Superconductor Technologies Inc., et aL, Case No. CV04-2680 DT (JTLx) (the "Class Action"),

18 In the same order, the Court appointed Marc A. Backhaus and Jay Jakubowitz as lead plaintiffs

19 ("Lead Plaintiffs") and appointed Federman & Sherwood as lead counsel (hereinafter "Lead

20 Plaintiffs' Counsel").

21

On October 4, 2004 after conducting further review of STI's press releases and public

22 filings and after hiring a private investigator to interview certain of S TI's former employees, Lead

23 Plaintiffs' Counsel filed a First Amended Consolidated Class Action Complaint (the "First

24 Amended Complaint"). The First Amended Complaint asserted claims against STI and the

25 Individual Defendants for alleged violations of sections 10(b) and 20(a) of the Securities

26 Exchange Act of 1934 and Rule 1 Ob-5 promulgated thereunder. The First Amended Complaint

27 sought recovery for purchasers of common stock during the period from January 9, 2004 through

28 March 1, 2004, inclusive, The First Amended Complaint alleged that during the Settlement Class

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASS NO. CV-04-2680 DT (ITLx) 15 1255574

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:78 1'.

1 Period (as defined below), STI issued false and misleading statements that materially inflated

2 ST1's stock price. Lead Plaintiffs claimed primarily that STI issued false and misleading ft 3 projections of its first quarter total net revenues.

4 IV. REASONS FOR SETTLEMENT

5

Lead Plaintiffs believe that the claims asserted in the Class Action have merit and that the

6 evidence developed to date in the Class Action supports the claims asserted. Lead Plaintiffs

7 assert, and believe they would present supporting evidence at trial, that Defendants caused the

8 price of STI common stock to be artificially inflated during the Settlement Class Period by the

9 issuance of materially false statements and by omitting to state material information concerning

10 STI and that as a result Lead Plaintiffs and Settlement Class Members were injured.

11

However, Lead Plaintiffs' Counsel recognize and acknowledge the expense and length of

12 continued proceedings necessary to prosecute the Class Action through trial and through appeals.

13 Lead Plaintiffs' Counsel also have taken into account the uncertain outcome and the risk of any

14 litigation, especially in complex actions such as the Class Action, as well as the difficulties and

15 delays inherent in such litigation. Lead Plaintiffs' Counsel also are mindful of the inherent

16 problems of proof under and possible defenses to the violations asserted in the Class Action,

17 including the defenses asserted by Defendants during the Class Action, in motions on the

18 pleadings, settlement negotiations and in the mediation proceedings. In addition, Lead Plaintiffs'

19 Counsel investigated STI's financial position and has noted that STI has limited financial resources

20 to pay any judgment even if Lead Plaintiffs succeeded in the Class Action. Lead Plaintiffs'

21 Counsel also recognized that any substantial judgment in the Class Action might result in STI's

22 bankruptcy which could leave Lead Plaintiffs and the Settlement Class with no possibility of

23 recovery, Moreover, Lead Plaintiffs' Counsel has reviewed the terms of S Ti's insurance coverage

24 and noted that the policy is reduced by defense costs incurred in defending the Class Action.

25

In light of the foregoing, Lead Plaintiffs' Counsel agree with Lead Plaintiffs and believe

26 that the settlement set forth in the Stipulation confers substantial benefits upon the Settlement

27 Class (as defined above) and Settlement Class Members. Based on their evaluation, Lead

28

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-04.2680 DT (JTLX)

iE -7- 1255574


l Plaintiffs* Counsel have determined that the settlement set forth in the Stipulation is in the best

2 interests of the Lead Plaintiffs and the Settlement Class,

3 V. DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND

4

LIABILITY

5

The Defendants have denied and continue to deny each and all of the claims and

6 contentions alleged by Lead Plaintiffs on behalf of the Settlement Class. The Defendants also

7 have denied and continue to deny, inter alia, the allegations that the prices of STI stock were

8 artificially inflated by reasons of alleged misrepresentations, non-disclosures or otherwise, or that

9 Lead Plaintiffs or the Settlement Class were harmed by the conduct alleged in the Class Action.

10 Defendants believe that throughout the Settlement Class Period they fully and adequately

11 disclosed all material facts concerning STI.

12

Nonetheless, the Defendants have concluded that further conduct of the Class Action

13 would be protracted and expensive, and that it is desirable that the Class Action be fully and

14 finally settled in the manner and upon the terms and conditions set forth in the Stipulation in order

15 to limit further expense, inconvenience and distraction, to dispose of the burden of protracted

16 litigation, and to permit the operation of S Ti's business without further expensive litigation and the

17 distraction and diversion of the Company's executive personnel with respect to matters at issue in

18 the Class Action. The Defendants also have taken into account the uncertainty and risks inherent

19 in any litigation, especially in complex cases like the Class Action. The Defendants have,

20 therefore, determined that entering into the Stipulation is advisable.

21

22

23

24

25

26

27

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NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-D4-2W DI UTL,)

1255574 17

-8-


VI. TERMS OF THE PROPOSED SETTLEMENT

2

Defendants have caused or will cause to be paid into an escrow account, pursuant to the

3 terms of the Stipulation of Settlement dated as of March 8, 2005 (the "Stipulation"), cash in the

4 amount of $4.0 million (the "Settlement Fund") which has been and/or will continue to earh

5 interest for the benefit of the Settlement Class. A portion of the settlement proceeds might be used

6 for certain administrative expenses, including costs of printing and mailing this Notice, cost of

7 publishing a newspaper notice, payment of any taxes assessed against the Settlement Fund and

8 costs associated with the processing of claims submitted. In addition, as explained below, a

9 portion of the Settlement Fund may be awarded by the Court to Lead Plaintiffs' Counsel as

10 attorneys' fees and for reimbursement of out-of-pocket expenses. The balance of the Settlement

II Fund (the "Net Settlement Fund") will be distributed according to the Plan of Allocation described

12 below to Settlement Class members who submit valid and timely proof of claim forms.

13 VII. PLAN OF ALLOCATION

14

The Net Settlement Fund will be distributed to Settlement Class Members who submit

15 valid, timely Proof of Claim forms ("Authorized Claimants") under this Plan of Allocation. The

16 Plan of Allocation provides that you will be eligible to participate in the distribution of the

17 Settlement Fund only if you have a net loss on all transactions in STI common stock during the

18 Settlement Class Period.

19

For purposes of determining the amount an Authorized Claimant may recover under the

20 Plan of Allocation, Lead Plaintiffs' Counsel has consulted with their damage consultants and the

21 Plan of Allocation reflects their assessment of the damages that they believe could have been

22 recovered had Lead Plaintiffs prevailed at trial.

23

To the extent there are sufficient funds in the Net Settlement Fund, each Authorized

24 Claimant will receive an amount equal to the Authorized Claimant's claim, as defined below. If,

25 however, the amount in the Net Settlement Fund is not sufficient to permit payment of the total

26 claim of each Authorized Claimant, then each Authorized Claimant shall be paid the percentage

27 that each Authorized Claimant's claim bears to the total of the claims of all Authorized Claimants.

28 Payment in this manner shall be deemed conclusive against all Authorized Claimants.

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO, CV-04.2680 DT (3TL)

I.. 1255574


1

The total of all profits shall be subtracted from the total of all losses to determine if a

2 Settlement Class Member has a claim, Only if a Settlement Class Member had a net Ioss,L.after

3 profits from all transactions in STI common stock during the Settlement Class Period are

4 subtracted from the total of losses, will such class member be eligible to receive a distribütibn

from the Net Settlement Fund.

A claim will be calculated as follows:

1. For shares purchased on or between January 9, 2004, and February 3, 2004, the

following claims for damages shall be allowed:

a. For shares sold on or before February 3, 2004, no damages shall be

allowed;

b. For shares sold on February 4, 2004, allowed damages shall be 52.8% of the

purchase price less 46.8% of the selling price per share;

C. For shares sold on or between February 5 and March 1, 2004, allowed

damages shall be 52.8% of the purchase price less 45.0% of the selling price

per share;

d. For shares sold on or held after March 2, 2004, allowed damages shall be

52.8% of the purchase price per share;

2. For shares purchased on February 4, 2004, the following claims for damages shall

be allowed:

a. For shares sold on February 4, 2004, no damages shall be allowed;

b. For shares sold on or between February 5 and March 1, 2004, allowed

damages shall be 46.8% of the purchase price less 45.0% of the selling price

per share;

C. For shares sold on or held after March 2, 2004, allowed damages shall be


3. For shares purchased on or between February 5 and March 1, 2004, the following

27

claims for damages shall be allowed:

28

a. For shares sold on or before March 1, 2004, no damages shall be allowed;

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-4.2680 DT IflLx)

-10- 1255574

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

2.23 2.25 2.27 2.33 2.35 2.36 2.35 2.31 2.30 2.27 2.25 2.24 2.23 2.22 2.22 2.21 2.20 2.20 2.19 2.20 2.21

S $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

2,21 2.22 2.22 2.22 2.23 2.24 2.24 2.24 2.25 2.25 2.24 2.24 2.23 2.22 2.21 2.20 2.19 2.17 2.16 2.14 2.12

$ $ $ $ $ $ $ $ $ $ S $ $ $ $ $ $ $ $ $ $

2.11 2.09 2.07 2.06 2,04 2.02 2.01 1.99 1.98 1.96 1.95 1.93 1.91 1.90 1.88 1.87 1.85 1.83 1.82 1.81 1.80


b. For shares sold on or held after March 2, 2004, allowed damages shall be


In addition to the above schedule, for Rule lob-S claims, the damages for shares p.rchased

during the Class Period shall be further limited (as provided for under the Private Securitie

Litigation Reform Act of 1995) by: (i) The difference between the price paid and the price received

(out-of-pocket loss) if sold on or before March 1, 2004; (ii) The difference between the price per

share paid and the average closing price from March 2, 2004, and the date of sale if sold on or

between March 2, 2004, and May 30, 2004, as provided for in Table 1; ' (iii) The difference

between the price per share paid and $1.80 if the shares were sold after May 30, 2004, or were held

until the current date.

Table 1: Average Price Per Share for PSLRA look-back loss limitations

Date Avg. Price Date Avg. Price Date Avg. Price

I

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

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26

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3/2/2004 3/3/2004 3/4/2004 3/5/2004 3/8/2004 3/9/2004 3/10/2004 3/11/2004 3/12/2004 3/15/2004 3/16/2004 3/17/2004 3/18/2004 3/19/2004 3/22/2004 3/23/2004 3/24/2004 3/25/2004 3/26/2004 3/29/2004 3/30/2004

3/31/2004 4/1/2004 4/2/2004 4/5 /2004 4/6/2004 4/7/2004 4/8/2004 4/12/2004 4/13/2004 4/14/2004 4/15/2004 4/16/2004 4/19/2004 4/20/2004 4/21/2004 4/22/2004 4/23/2004 4/26/2004 4/27/2004 4/28/2004 4/29/2004

4/30/2004 5/3/2004 5/4/2004 5/5/2004 5/6/2004 5/7/2004 5/10/2004 5/11/2004 5/12/2004 5/13/2004 5/14/2004 5/17/2004 5/18/2004 5/19/2004 5/20/2004 5/21/2004 5/24/2004 5/25/2004 5/26/2004 5/27/2004 5/28/2004

1 For example, if one purchased shares at a price of $4.10 per share during the Class Period and sold those shares on March 8, 2004, then the claim to damages could not exceed $1.75 per share, as calculated by $4.10 less the average price of $2.35 (as shown in Table 1) from the end of the Class Period to March 8, 2004. NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV-04.2680 DI (JTLx)

20

1255574


1

The date of purchase or sale is the "contract" or"trade" date as distinguished from the cl

2 "settlement" date. The determination of the price paid per share and the price received p share,

3 shall be exclusive of all commissions, taxes, fees and charges. r

4

Multiple dates of purchase and/or sale shall be accounted for on the first-inIfirst-it

5 method ("FIFO") treating the first share purchased as the first share sold. For Settlement Class

6 Members who made multiple purchases or multiple sales during the Settlement Class Period, the

7 earliest subsequent sale shall be matched with the earliest purchase and chronologically thereafter

8 for purposes of the Claim calculations.

9

The Court has reserved jurisdiction to allow, disallow or adjust the Claim of any

10 Settlement Class Member on equitable grounds.

11 VU!. ORDER CERTIFYING A CLASS FOR PURPOSES OF SETTLEMENT

12

On , 2005, the Court certified a class, for settlement purposes only. The

13 Settlement Class is defined above.

14 IX. PARTICIPATION IN THE CLASS

15

If you fall within the definition of the Settlement Class, you will remain a Settlement Class

16 Member unless you elect to be excluded from the Settlement Class, If you do not request to be

17 excluded from the Settlement Class, you will be bound by any judgment entered in the Class

18 Action whether or not you file a Proof of Claim, including the dismissal with prejudice of any

19 Released Claims against the Defendants you may possess under Federal law, California law, or the

20 law of any state.

21

If you wish to remain a Settlement Class Member, you need do nothing (other than timely

22 file a Proof of Claim and Release if wish to participate in the distribution of the Net

23 Settlement Fund). Your interests will be represented by Lead Plaintiffs' Counsel. If you choose,

24 you may enter an appearance individually or through your own counsel at your own expense.

25

TO PARTICIPATE IN THE DISTRIBUTION OF THE NET SETTLEMENT

26 FUND, YOU MUST TIMELY COMPLETE AND RETURN THE PROOF OF CLAIM

27 1 AND RELEASE FORM THAT ACCOMPANIES THIS NOTICE. The Proof of Claim and

28 1 Release must be postmarked on or before , 2005, and delivered to the Claims

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO CV.04-2680 DI (JTLx) 1255574 -12- 21


Administrator at the address below. Unless the Court orders otherwise, if you do not timely C

submit a valid Proof of Claim, you will be barred from receiving any payments from the Net

Settlement Fund, but will in all other respects be bound by the provisions of the Stipulatiñ and

the Judgment. .

X. EXCLUSION FROM THE CLASS

You may request to be excluded from the Settlement Class. To do so, you must mail a

written request to:

STI Securities Litigation do Claims Administrator RSM McGladrey, Inc. 512 Township Line Road One Valley Square, Suite 250 Blue Bell, PA 19422

The request for exclusion must state: (1) your name, address, and telephone number; (2) all

purchases and sales of STI common stock made during the Settlement Class Period, including the

dates, the number of shares of STI common stock, and price paid or received per share for each

such purchase or sale; and (3) that you wish to be excluded from the Settlement Class. TO BE

VALID, A REQUEST FOR EXCLUSION MUST STATE ALL OF THE FOREGOING

INFORMATION. YOUR EXCLUSION REQUEST MUST BE POSTMARKED ON OR

BEFORE , 2005. If you submit a valid and timely request for exclusion, you shall have

no rights under the settlement, shall not share in the distribution of the Net Settlement Fund, and

shall not be bound by the Stipulation or the Judgment.

XJ. DISMISSAL AND RELEASES

If the proposed Settlement is approved, the Court will enter a Final Judgment and Order of

Dismissal ("Judgment"). The Judgment will dismiss the Released Claims with prejudice as to all

11 Defendants.

The Judgment will provide that all Settlement Class Members who do not validly and

timely request to be excluded from the Settlement Class shall be deemed to have released and

forever discharged all Released Claims (to the extent members of the Settlement Class have such

11 claims) against all Released Persons.

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO CV.04.260 DT (JTLx)

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1 XII. APPLICATION FOR FEES, EXPENSES AND AWARDS

2

At the Settlement Hearing, Lead Plaintiffs' Counsel will request the Court to awaid

3 attorneys' fees not to exceed 30% of the Settlement Fund, plus reimbursement of the expenses, not

4 to exceed $62,000.00, which were advanced in connection with the Class Action, plus inté'est

5 thereon. Settlement Class Members are not personally liable for any fees and expenses.

6

To date, Lead Plaintiffs' Counsel have not received any payment for their services in

7 conducting this Class Action on behalf of Lead Plaintiffs and the members of the class, nor have

8 counsel been reimbursed for their out-of-pocket expenses. The fee requested by Lead Plaintiffs'

9 Counsel would compensate counsel for their efforts in achieving the Settlement Fund for the

10 benefit of the class, and for their risk in undertaking this representation on a contingency basis. If

11 approved by the Court, the fee requested would be within the range of fees awarded to plaintiffs'

12 counsel under similar circumstances in litigation of this type.

13 XIII. CONDITIONS FOR SETTLEMENT

14

The Settlement is conditioned upon the occurrence of certain events. Those events

15 include, among other things: (1) entry of the Judgment by the Court, as provided for in the

Stipulation; and (2) expiration of the time to appeal from or alter or amend the Judgment. If, for

17 any reason, any one of the conditions described in the Stipulation is not met, the Stipulation might

18 be terminated and, if terminated, will become null and void, and the parties to the Stipulation will

19 be restored to their respective positions as of February ii, 2005.

20 XIV. THE RIGHT TO BE HEARD AT THE HEARING

21

Any Settlement Class Member who has not validly and timely requested to be excluded

22 from the Settlement Class, and who objects to any aspect of the Settlement, the Plan of Allocation,

23 the adequacy of representation by Lead Plaintiffs' Counsel, or the application for attorneys' fees,

24 costs and expenses, may appear and be heard at the Settlement Hearing. Any such Person must

25 submit a written notice of objection, postmarked on or before 2005, to each

26 of the following:

27

28

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO CV-04-2680 OT (JTLx)

23 -14- 1255574


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Clerk of the Court United States District Court Central District of California LU 312 North Spring Street Los Angeles, CA 90012

r

FEDERMAN & SHERWOOD WILLIAM B. FEDERMAN 120 N. Robinson Avenue, Suite 2720 Oklahoma City, OK 73102


IRELL & MANELLA LLP DAVID SIEGEL DANIEL?. LEFLER RICHARD H. ZELICHOV PAMELA K. GRAHAM 1800 Avenue of the Stars Suite 900 Los Angeles, CA 90067-4276


The notice of objection must demonstrate the objecting Person's membership in the

Settlement Class, including the (a) the objecting Person's name, address, and telephone number;

(b) the number of STI shares purchased and sold during the Settlement Class Period by the

objecting Person, and (c) must contain a statement of the reasons for objection. Only members of

the Settlement Class who have submitted written notices of objection in this manner will be

entitled to be heard at the Settlement Hearing, unless the Court orders otherwise.

XV. SPECIAL NOTICE TO NOMINEES

If you hold any SIT common stock purchased during the Settlement Class Period as

nominee for a beneficial owner, then, within ten (10) days after you receive this Notice, you must

either: (1) send a copy of this Notice and the Proof of Claim by first class mail to all such Persons;

or (2) provide a list of the names and addresses of such Persons to the Claims Administrator:


NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO, CV.04.2680 DT (JTLx)

125574

24 - 15 -

• Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:87 -I

1

If you choose to mail the Notice and Proof of Claim yourself, you may obtain from the

2 Claims Administrator (without cost to you) as many additional copies of these documents you

3 will need to complete the mailing.

4

Regardless of whether you choose to complete the mailing yourself or elect to h ave the

5 mailing performed for you, you may obtain reimbursement for or advancement of reasonable

6, administrative costs actually incurred in connection with forwarding the Notice and Proof of

7 Claim and which would not have been incurred but for the obligation to forward the Notice and

S Proof of Claim, upon submission of appropriate documentation.

9 XVI. EXAMINATION OF PAPERS

10

This Notice is a summary and does not describe all of the details of the Stipulation. For

11 full details of the matters discussed in this Notice, you may desire to review the Stipulation filed

12 with the Court, which may be inspected during business hours, at the office of the Clerk of the

13 Court, United States Courthouse, 312 North Spring Street, Los Angeles, California.

14

If you have any questions about the settlement of the Litigation, you may contact Lead

15 Plaintiffs' Counsel by writing:

16 FEDERMAN & SHERWOOD WILLIAM B. FEDERMAN

17 120 N. Robinson Avenue, Suite 2720

18 Oklahoma City, OK 73102

19

DO NOT TELEPHONE THE COURT OR ANY REPRESENTATIVE OF STI

20

REGARDING THIS NOTICE.

21

22 DATED: 2005

BY ORDER OF THE UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA

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NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, CASE NO. CV.04.2680 DT (JTLx)

1255574

25 -16-


LU

I.J

EXHIBIT A-2

• Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:89 Ii

1 IRELL & MANELLA LLP

2 dsiege1ire1l.com David Siegel (101355)

LU L:

Daniel P. Lefler (151253) 3 [email protected]

Richard H. Zelichov (193858)

U 4 [email protected]

Pamela K. Graham (216309) 5 pgrahamirell.com

1800 Avenue of the Stars, Suite 900 6 Los Angeles, California 90067-4276

Telephone: (310) 277-1010 7 Facsimile: (310) 203-7199

8 Attorneys for Defendants SUPERCONDUCTOR TECHNOLOGIES INC.,


10 [additional counsel on signature page]

11 UNITED STATES DISTRICT COURT

12 CENTRAL DISTRICT OF CALIFORNIA

13 WESTERN DIVISION

14 )

15 MARC A. BACKHAUS, on Behalf of ) Case No. CV-04-2680 DT (JTLx) Himself and All Others Similarly Situated,) Consolidated with

16

) CV-04-02848 DT and CV-04-02927 DT Plaintiff, )

17

) SUMMARY NOTICE FOR PUBLICATION V. )

18

) EXHIBIT A-2 SUPERCONDUCTOR )

19 TECHNOLOGIES INC., ) CLASS ACTION - PSLRA M. PETER THOMAS, and )

20 MARTIN S. MCDERMUT, ) )

21

Defendants. ) )

22

) PLACE: 255 East Temple Street 23 This Document Relates To: ) COURTROOM: 880

)

ALL ACTIONS ) Honorable Dickran Tevrizian 24

)

)

25

26

27

28

SUMMARY NOTICE FOR PUBLICATION, CASE NO, CV-04-2610 DI (STL()

26 1255606


I

SUMMARY NOTICE FOR PUBLICATION Li

2

TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIREDJTHE

3

COMMON STOCK OF SUPERCONDUCTOR TECHNOLOGIES INC. ("STI") 1

4

DURING THE PERIOD FROM JANUARY 9, 2004 THROUGH AND INCIUD1NG

5

MARCH 1, 2004

6 '

YOU ARE HEREBY NOTIFIED that the plaintiffs (the "Lead Plaintiffs") in the action

7 pending in the United States District Court, Central District of California (the "Court"), and

8 entitled Marc A. Backhaus, et al. v. Superconductor TechnolQgies Inc. , et al., Case No. 04-2680

9 DT (JTLx) (the "Class Action") have entered into a Stipulation of Settlement, dated as of March 8,

10 2005 (the "Stipulation"), with the defendants therein (the "Defendants") to resolve the issues

11 raised in the Class Action as against the Defendants.

12

PLEASE BE FURTHER ADVISED that pursuant to a Court order, a hearing will be held

13 on , 2005, at rn., before the Honorable Dickran Tevrizian, Judge of the United

14 1 States District Court, at the United States Courthouse, 255 East Temple Street, Los Angeles,

is California 90012 (the "Settlement Hearing") to determine: (1) whether the settlement of claims in

16 the Class Action in the amount of $4.0 million in cash, plus accrued interest (the "Class Action

17 Settlement Fund"), should be approved as fair, just, reasonable and adequate to all the Settling

iS Parties; (2) whether the proposed Plan of Allocation is fair, just, reasonable, and adequate;

19 (3) whether the application of Lead Plaintiffs' Counsel for an award of attorneys' fees and

20 reimbursement of expenses should be approved; and (4) whether the Class Action should be

21 dismissed with prejudice as set forth in the Stipulation of Settlement dated as of March 8, 2005

22 and filed with the Court.

23

If you purchased or otherwise acquired STI common stock during the period from

24 January 9, 2004 through and including March 1, 2004, your rights may be affected by the

25 settlement of this Class Action, including the release and extinguishment of claims you may

26 possess relating to your purchase or acquisition of STI common stock during the class period. To

27 share in the distribution of the Settlement Fund, you must establish your rights by filing a Proof of

28 Claim and Release Form on or before , 2005.

SUMMARY NOTICE FOl', PUBLICATION, CASE NO. CV-04-2680 DI (JILx)

125506 -1- 27

• Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:91

If you desire to be excluded from the Class, you must file a request for exclusion by

2005, in the manner and form explained in the detailed Notice referred to-below.

All members of the Settlement Class who have not requested exclusion from the Settlemeit Class

will be bound by any judgment entered in the Class Action pursuant to the settlement agréinent.

Any objection to the settlement, plan of allocation, or to the application for fees, costs and

expenses must be filed no later than , 2005 and show due proof of service on each of:

Clerk of the Court United States District Court Central District of California 312 North Spring Street Los Angeles, CA 90012

FEDERMAN & SHERWOOD WILLIAM B. FEDERMAN 120 N. Robinson Avenue, Suite 2720 Oklahoma City, OK 73102


IRELL & MANELLA LLP DAVID SIEGEL DANIEL P. LEFLER RICHARD H. ZELICHOV PAMELA K. GRAHAM 1800 Avenue of the Stars Suite 900 Los Angeles, CA 90067-4276


If you are a Member of the Settlement Class and have not received a detailed printed

Notice of Pendency and Proposed Settlement of Class Action and a Proof of Claim and Release

form, you may obtain copies by writing to: STI Securities Litigation, c/o Claims Administrator,

RSM McGladrey, Inc., 512 Township Line Road, One Valley Square, Suite 250, BlueBell, PA

19422. Please do not contact the Court, the Clerk's office or STI for information.

Any inquiries about the Class Action can be made in writing to Lead Plaintiffs' Counsel:

Federman & Sherwood, William B. Federman, 120 N. Robinson Avenue, Suite 2720, Oklahoma

City, Oklahoma 73102.

SUMMARY NOTICE FO PUBUCAflON, CASE NO CV-04-2680 DI (JTLx)

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1255606 -2- 28

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:92 I.

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DO NOT TELEPHONE EITHER THE COURT, THE CLERKS' OFFICES OR

2 ANY REPRESENTATIVE OF STI REGARDING THIS NOTICE.

3 -•1-•

4 DATED: 2005 BY ORDER OF THE UNITED STATES DISTRICT

5 COURT, CENTRAL DISTRICT OF CALIFORNIA

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SUMMARY NOTICE FOR PUBLICATION, CASE NO, CV-04-2680 DT (.TLx)

1255606 . - 3 - 29


LJ.J

EXHIBIT A-3


1 IRELL & MANELLA LLP David Siege' (101355)

EJ

2 dsiege1irel1.com LU

Daniel P. Lefler (151253) 3 [email protected]

Richard H. Zelichov (193858)

U

4 [email protected] Pamela K. Graham (216309)

5 pgrahainirell.com 1800 Avenue of the Stars, Suite 900

6 Los Angeles, California 90067-4276 Telephone: (310) 277-1010

7 Facsimile: (310) 203-7199

S Attorneys for Defendants SUPERCONDUCTOR TECHNOLOGIES INC.,


10 [additional counsel on signature page]

11 UNITED STATES DISTRICT COURT

12 CENTRAL DISTRICT OF CALIFORNIA

13 WESTERN DIVISION

14

15 MARC A. BACKHAUS, on Behalf of

Case No. CV-04-2680 DI (JTLx) Himself and All Others Similarly Situated, Consolidated with

16

CV-04-02848 DT and CV-04-02927 DT Plaintiff,

17

PROOF OF CLAIM AND RELEASE V.

18

EXHIBIT A-3 SUPERCONDUCTOR

19 TECHNOLOGIES INC., CLASS ACTION - PSLRA M. PETER THOMAS, and

20 MARTIN S. MCDERMUT,

21

Defendants.

22

PLACE: 255 East Temple Street This Document Relates To:

COURTROOM: 880

23 ALL ACTIONS

Honorable Dickran Tevrizian 24

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PROOF OF CLA[M AND RELEASE, CASE NO CV-04.26SO DT TL)

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PROOF OF CLAIM AND RELEASE

TO ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIREbI

SHARES OF THE COMMON STOCK OF SUPERCONDUCTOR

TECHNOLOGIES INC. ("STI") DURING THE PERIOD FROM JANUARY 9, 2004

THROUGH AND INCLUDING MARCH 1, 2004

If you purchased or otherwise acquired STI common stock during the period described

above, have not requested exclusion from the Settlement Class and are not a Defendant in this

Class Action, or a member of any of the Defendants' immediate families, an entity in which any of

the Defendants has a controlling interest, or the legal representatives, heirs, successors or assigns

of any such excluded party or otherwise excluded, you should read the accompanying Notice of

Pendency and Proposed Settlement of Class Action ("Notice") and complete this Proof of Claim

and Release Form.

IN ORDER TO BE ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT DESCRIBED IN THE ACCOMPANYING NOTICE, YOU MUST MAIL YOUR COMPLETED PROOF OF CLAIM AND RELEASE TO THE CLAIMS ADMINISTRATOR ON OR BEFORE , 2005.

GENERAL INSTRUCTIONS

1. To recover as a member of the Settlement Class based on your claims in the

STI class action (the "Class Action"), you must complete and sign this Proof of Claim and

Release. If you fail to file a properly addressed (as set forth in paragraph 3 below) Proof of Claim

and Release, your claim may be rejected and you may be precluded from any recovery from the

Settlement Fund created in connection with the proposed Settlement of the Class Action,

2. Submission of this Proof of Claim and Release, however, does not assure

that you will share in the proceeds of the settlement of the Class Action.

PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-2680 DT (JTLx)

1255624 -1- 31


3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF

CLAIM AND RELEASE POSTMARKED ON OR BEFORE , 2005, ADDRESSED

AS FOLLOWS: U


4, If you are a member of the Settlement Class and you do not timely request

exclusion in connection with the proposed settlement, you are bound by the terms of any judgment

entered in the Class Action, WHETHER OR NOT YOU SUBMIT A PROOF OF CLAIM AND

RELEASE.

5. If you are NOT a member of the Settlement Class as defined in the Notice

I of Pendency and Proposed Settlement of Class Action (the "Notice"), DO NOT submit a Proof of

Claim and Release Form.

CLAIMANT IDENTIFICATION

6. If you purchased STI common stock and held the certificate(s) in your

name, you are the beneficial purchaser as well as the record purchaser. If, however, you

purchased these securities, and the certificate(s) were registered in the name of a third party, such

as a nominee or brokerage firm, you are the beneficial purchaser and the third party is the record

purchaser.

7. Use Part I of this form entitled "Claimant Identification" to identify each

purchaser of record, if different from the beneficial purchaser ("nominee") of STI common stock

which form the basis of this claim. THIS CLAIM MUST BE FILED BY THE ACTUAL

BENEFICIAL PURCHASER OR PURCHASERS, OR THE LEGAL REPRESENTATIVE OF

SUCH PURCHASER OR PURCHASERS, OF THE STOCK UPON WHICH THIS CLAIM IS

BASED.

PROOF OF CLA!M AND RELEASE, CASE NO, CV-04-2680 DT (3rLx)

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8. All joint purchasers must sign this claim. Executors, administrators,

2 guardians, conservators and trustees must complete and sign this claim on behalf of person

3 represented by them and their authority must accompany this claim and their titles or capaêities

4 must be stated. The Social Security (or taxpayer identification) number and telephone number of

5 the beneficial owner may be used in verifying the claim. Failure to provide the foregoing

6 information could delay verification of your claim or result in rejection of the claim.

7

9. A claimant whose stock was held in a custodian account under a Uniform

8 Gift to Minors Act ("UGMA"), may file in his or her own name, if he or she is now of age. In this

9 event, the former custodian does not have to sign the Proof of Claim. Custodians under the

10 UGMA should identify themselves as beneficial purchasers, not nominees (e.g., John Smith,

11 Custodian for Jack Smith UGMA). In this instance, use the minor's Social Security Number.

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10. Corporate officers or partners filing for a claimant corporation or

13 partnership should fill in the name of the entity as the beneficial purchasers, and sign their names

14 and titles where indicated on the signature page.

15

CLAIM FORM

16

11. Use Part II of this form entitled "Schedule of Transactions in SIT Common

17 Stock, to supply all required details of your transaction(s) in these securities. If you need more

18 space or additional schedules, attach separate sheets giving all of the required information in

19 substantially the same form. Sign and print or type your name on each additional sheet.

20

12. On the schedules, provide all of the requested information with respect to

21 all of your purchases and all of your sales of SIT common stock which took place at any time

22 between January 9, 2004 through and including March 1, 2004 (the "Settlement Class Period"),

23 whether such transactions resulted in a profit or a loss. Failure to report all such transactions may

24 1 result in the rejection of your claim.

25

13. List each transaction in the Settlement Class Period separately and in

26 chronological order, by trade date, beginning with the earliest. You must accurately provide the

27 month, day and year of each transaction you list.

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PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-260 DT (flLx)

33 1255624 -3-

. Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:98 ,ji

II

14. The term "Purchase Price" means the amount paid for the securities

(exclusive of commissions and transfer taxes) and the term "Sales Price" means the amount

realized on the sale of the securities (before commissions and transfer taxes). The date o

purchase or sale is the "contract" or "trade" date as distinguished from the "settlement" dfe. The

date of covering a "short sale" is deemed to be the date of purchase of the security. The date of a

"short sale" is deemed to be the date of sale of the security.

15. Broker's confirmations or other documentation of your transactions in STI

common stock should be attached to your claim. Failure to provide this documentation could

delay verification of your claim or result in rejection of your claim. Documentation submitted will

not be returned to claimants. You are, therefore, urged to make a copy for your files of the - Proof

of Claim and Release and all documentation that you submit with it.

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PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-2680 DT (JTLx)

1255624 -4- 34


II Is

UNITED STATES DISTRICT COURT


WESTERN DIVISION

Backhaus, et al. v. Superconductor Technologies Inc., et al.

No. 04-2680 DT (JTLx)

PROOF OF CLAIM AND RELEASE

Must be Postmarked No Later Than:

2005

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Please Type or Print

PART I: CLAIMANT IDENTIFICATION

Beneficial Owner's Name (First, Middle, Last)

Street Address

City

State

Foreign Province Foreign Country

Individual Social Security Number or

Taxpayer Identification Number Corporation/Other

(work) Area Code Telephone Number

-J

14J

Zip Code

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23 (home)

24 Area Code Telephone Number

25

26 Record Owners Name (if different from beneficial owner listed above)

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PROOF OF CLAIM AND RELEASE, CASE NO, CV-04-2680 DT (JTI.x)

255624 -5- 35

. Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:100 II

PART II: SCHEDULE OF TRANSACTIONS IN SIT COMMON STOCK

A) Purchases (January 9, 2004 - March 1, 2004, inclusive) of STI common stok

Trade Date No. of Shares Mo Day Year Purchased Purchase Price

( I •j

$________________

2. $_________________ 3. $_________________

B) Sales (January 9, 2004 - March 1, 2004, inclusive) of STI common stock

Trade Date No. of Shares

MQ Day Year Sold Sale Price

1. $_______________

2. $_________________

3. $______

C) Number of shares of STI common stock held at close of trading on March 1, 2004:

YOU MUST READ AND SIGN THE RELEASE ON PAGE.

If you require additional space, attach extra schedules in the same format as above. Copies of

broker's confirmations or other documentation evidencing your transactions in STI common stock

should be attached.

PART III: SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGEMENTS

I (We) submit this Proof of Claim and Release under the terms of the Stipulation of

Settlement described in the Notice. I (We) also submit to the jurisdiction of the United States

District Court, Central District of California with respect to my claim as a Settlement Class

Member and for purposes of enforcing the release set forth herein and any Judgment which may

be entered in the Class Action. I (We) further acknowledge that I (we) am (are) bound by and

subject to the terms of any Judgment that may be entered in the Class Action.

I (We) agree to furnish additional information to the Claims Administrator to support this

claim if required to do so.

PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-2680 DI (JTLX)

1255624 -6- 36

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I PART IV: RELEASE

2

A. I (We) hereby acknowledge full and complete satisfaction of; and do herebJfully,

3 finally and forever settle, discharge and release all Released Claims (including Unknown Glaims)

4 against all Released Persons.

5

B. The terms used in this release are defined below:

6

1. "Released Claims" shall collectively mean all claims (including "Unknown

7 Claims" as defined below), demands, rights, liabilities and causes of action of every nature and

8 description whatsoever, known or unknown, whether in contract, tort, equity or otherwise, whether

9 or not concealed or hidden, asserted or that might have been asserted in this or any other forum or

10 proceeding, including, without limitation, claims for negligence, gross negligence,

11 indemnification, breach of duty of care and/or breach of duty of loyalty, fraud, misrepresentation,

12 breach of fiduciary duty, negligent misrepresentation, unfair competition, insider trading,

'3 professional negligence, mismanagement, corporate waste, breach of contract, or violations of any

14 state or federal statutes, rules or regulations, by or on behalf of Lead Plaintiffs, the Settlement

15 Class, or any Settlement Class Member against the Released Persons (as defined below) which are

16 based upon or related to the purchase or acquisition of STI common stock by any Settlement Class

17 Member during the Settlement Class Period and the facts, transactions, events, occurrences, acts,

18 disclosures, statements, omissions or failures to act which were or could have been alleged in the

19 Class Action, or any other forum.

20

2. "Unknown Claims" means any Released Claims which Lead Plaintiffs or

21 any Settlement Class Member does not know or suspect to exist in his, her or its favor at the time

22 of the release of the Released Persons which, if known by him, her or it, might have affected his,

23 her or its settlement with and release of the Released Persons, or might have affected his, her or its

24 decision not to object to, or opt out of, this settlement. With respect to any and all Released

25 Claims, the Parties stipulate and agree that, upon the Effective Date, Lead Plaintiffs expressly

26 waive and relinquish, and the Settlement Class Members shall be deemed to have, and by

27 operation of the Judgment shall have expressly waived and relinquished, to the fullest extent

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PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-26I0 DT (STLx)

1255624 -7- 37

Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:102 8. ( ;i)

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permitted by law, the provisions, rights, and benefits of § 1542 of the California Civil Code,

which provides: Ui

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if kiicwn by him must have materially affected his settlement with the debtor.

Lead Plaintiffs expressly waive and the Settlement Class Members shall be deemed to, and upon

the Effective Date and by operation of the Judgment shall have waived any and all provisions,

rights and benefits conferred by any law of the United States or of any state or territory of the

United States, or principle of common law, which is similar, comparable or equivalent to § 1542

of the California Civil Code. Lead Plaintiffs and the Settlement Class Members may hereafter

discover facts in addition to or different from those which he, she or it now knows or believes to

be true with respect to the subject matter of the Released Claims, but each of them hereby stipulate

and agree that Lead Plaintiffs do settle and release, and each Settlement Class Member shall be

deemed to, upon the Effective Date and by operation of the Judgment shall have, fully, finally, and

forever settled and released any and all Released Claims, known or unknown, suspected or

unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist,

or heretofore have existed upon any theory of law or equity now existing or coming into existence

in the future, including, but not limited to, conduct which is negligent, intentional, with or without

malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or

existence of such different or additional facts. The Parties acknowledge that the foregoing waiver

was bargained for and a key element of the Settlement of which this release is a part.

3. "Released Persons" means each and all of the Defendants, and their

respective Related Parties.

4. "Defendants" means STI, M. Peter Thomas, and Martin S. McDermut.

PROOF OF CLAIM AND RELEASE, CASE NO, CV.042680 DT (JTLx)

111255624 -8- 38

Case 2:04-cv-02680-DT-JTL Document 46

Filed 03/22/05 of 46 Page ID #:103

H

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5. "Related Parties means each of a Defendant's past or present directors,

2 officers, employees, partners, principals, agents, underwriters, controlling shareholders, any eitity

3 in which the Defendant and/or any member(s) of any Defendant's immediate family has or have a

4 controlling interest, attorneys, accountants, auditors, banks, investment banks or investment

5 bankers, analysts, advisors, personal or legal representatives, insurers, reinsurers, predecessors,

6 successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, associates,

7 related or affiliated entities, any members of their immediate families, or any trust of which any

8 Defendant is the trustee or settlor or which is for the benefit of any Defendant and/or member(s) of

9 his family. Any retail securities broker retained by a Settlement Class Member (and not retained

10 by ST1) that specifically recommended STI stock on the secondary market to a Settlement Class

11 i Member is excluded from the definition of "Related Parties."

12

6. "STI" means defendant Superconductor Technologies Inc., a Delaware

13 corporation, and all of its predecessors, successors, present and former parents, subsidiaries,

14 divisions and related or affiliated entities.

15

C. This release shall be of no force or effect unless and until the Court gives final

16 approval to the Settlement and the Effective Date occurs.

17 PART V: REPRESENTATIONS

18

I (We) hereby warrant and represent that I (we) have not assigned or transferred or

19 purported to assign or transfer, voluntarily or involuntarily, any matter released pursuant to this

20 release or any other part or portion thereof.

21

I (We) hereby warrant and represent that I (we) have included information about all of my

22 (our) purchases and sales transaction in STI common stock which occurred during the Class

23 Period and the number of shares of STI common stock held by me (us) at the close of trading on

24 March 1, 2004

25

I (We) certify that I am (we are) not subject to backup withholding under the provisions of

26 Section 3406(a) (1) (c) of the Internal Revenue Code,

27

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PROOF OF CLAIM AND RELEASE, CASE NO. CV.04.2680 DT (JTLx)

1255624 -9...


NOTE: If you have been notified by the Internal Revenue Service that you are subject to

backup withholding, please strike out the language that you are not subject to backup withholding LU

in the certification above,

I declare under penalty of peury under the laws of the State of California and the Untd

States of America that the foregoing information supplied by the undersigned is true and correct

and that this Proof of Claim and Release form was executed this day of_______________

in

(month) (year)

(City, State,,Country)

(Sign your name here)

(Type or print your name here)

(Capacity of persons signing, e.g., Beneficial Purchaser, Executor or Administrator)

ACCURATE CLAIMS PROCESSING TAKES A

SIGNIFICANT AMOUNT OF TIME 4iI

21 THANK YOU FOR YOUR PATIENCE

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PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-260 DI (fl'Lx)

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I Reminder Checklist:

2

1. Please sign the above release and declaration. Lii

3

2. Remember to attach copies of your supporting documentation, if available.

4

3. Do not send originals or copies of stock certificates.

5

4. Keep a copy of your claim form for your records,

6

5. If you desire an acknowledgment of receipt of your claim form, please send it

7

Certified Mail, Return Receipt Requested.

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6. If you move, please send us your new address.

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PROOF OF CLAIM AND RELEASE, CASE NO. CV-04-2680 DT (JTLX)

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, Case 2:04-cv-02680-DT-JTL Document 46 Filed 03/22/05 of 46 Page ID #:106

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PROOF OF SERVICE

I am employed in the County of Los Angeles, State of California. I am over the age of and not a party to the within action, My business address is 1800 Avenue of the Stars, Suite 900, 1jj Los Angeles, California 90067-4276. z

On March 21, 2005, I served the foregoing document described as [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND APPROVING THE c

FORM AND MANNER OF NOTICE on each interested party, as follows:

William B. Federman, Esq. Arthur R. Angel, Esq. Federman & Sherwood

Lee, Angel & Kent 120 N. Robinson Avenue 3250 Wilshire Boulevard

Suite 2720

Suite 1700 Oklahoma City, OK 73102

Los Angeles, CA 90010

(BY MAIL) I placed a true copy of the foregoing document in a sealed envelope addressed to each interested party, as set forth above. I placed each such envelope, with postage thereon fully prepaid, for collection and mailing at Irell & Manella LLP, Los Angeles, California. I am readily familiar with Irell & Manella LLP's practice for collection and processing of correspondence for mailing with the United States Postal Service. Under that practice, the correspondence would be deposited in the United States Postal Service on that same day in the ordinary course of business.

Executed on March 21, 2005, at Los Angeles, California.

I declare under penalty of perjury that the foregoing is true and correct.

Solange Bouhadana (Type or print name)

(Signature)

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case 2:04-cv-02680-dt-jtl document 46 filed 03/22/05 page...

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