Exhibit 10.1

SUPERCONDUCTOR TECHNOLOGIES INC.

Common Stock

($0.001 par value per share)

AT-THE-MARKET EQUITY OFFERING SALES AGREEMENT

August 9, 2011

CITADEL SECURITIES LLC

601 Lexington Avenue, 28th Floor

New York, NY 10003

Ladies and Gentlemen:

Superconductor Technologies Inc., a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions stated herein, to issue and sell
from time to time to or through Citadel Securities LLC (“Citadel”), as sales
agent and/or principal (“Agent”), shares (the “Shares”) of the Company’s common
stock, $0.001 par value per share (the “Common Stock”), having an aggregate
offering price of up to $20,000,000 on the terms set forth in Section 2 of this
Sales Agreement (the “Agreement”). The Company agrees that whenever it
determines to sell Shares directly to the Agent as principal, it will enter into
a separate agreement (each, a “Terms Agreement”) in substantially the form of
Annex I hereto, relating to such sale in accordance with Section 3 of this
Agreement.

The Company has filed with the Securities and Exchange Commission (the
“Commission”) a registration statement under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the “1933 Act”),
on Form S-3 (File No. 333-172190), in respect of the Company’s Common Stock
(including the Shares) within three years prior to the date hereof; such
registration statement, and any post-effective amendment thereto, has become
effective; and no stop order suspending the effectiveness of such registration
statement or any part thereof has been issued and no proceeding for that purpose
has been initiated or, to the knowledge of the Company, threatened by the
Commission (the base prospectus filed as part of such registration statement, in
the form in which it has most recently been filed with the Commission on or
prior to the date of this Agreement, is hereinafter called the “Base
Prospectus”; the various parts of such registration statement, including all
exhibits thereto and any prospectus supplement or prospectus relating to the
Shares that is filed with the Commission and deemed by virtue of Rule 430B under
the 1933 Act to be part of such registration statement, each as amended at the
time such part of the registration statement became effective, are hereinafter
collectively called the “Registration Statement”; the prospectus supplement
specifically relating to the Shares prepared and filed with the Commission
pursuant to Rule 424(b) under the 1933 Act is hereinafter called the “Prospectus
Supplement”; the Base Prospectus, as amended and supplemented by the Prospectus
Supplement, is hereinafter called the “Prospectus”; any reference herein to the
Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act; any reference to any amendment or
supplement to the Base Prospectus, the Prospectus Supplement or the Prospectus
shall be deemed to refer to and include any post-effective amendment to the
Registration Statement, any prospectus supplement or prospectus relating to the
Shares filed with the Commission pursuant to Rule 424(b) under the 1933 Act and
any documents filed under the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the “1934 Act”), and
incorporated therein, in each case after the date of the Base Prospectus, the
Prospectus Supplement or the Prospectus, as the case may be; any reference to
any amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the 1934 Act after the effective date of the Registration Statement
that is incorporated by reference in the Registration Statement; and any “issuer
free writing prospectus” as defined in Rule 433 under the 1933 Act relating to
the Shares is hereinafter called an “Issuer Free Writing Prospectus”).

 

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For the purposes of this Agreement, the “Applicable Time” means, with respect to
any Shares, the time of sale of such Shares pursuant to this Agreement. The
Prospectus and the applicable Issuer Free Writing Prospectus(es) issued at or
prior to such Applicable Time, taken together, collectively, and, with respect
to any Shares, together with the public offering price of such Shares, shall be
referred to herein as the “General Disclosure Package”.

Section 1. Representations and Warranties. The Company represents, warrants and
covenants to the Agent, as of the date of this Agreement, any applicable
Registration Statement Amendment Date (as defined in Section 3 below), each
Company Periodic Report Date (as defined in Section 3 below), each Applicable
Time and each Settlement Date (as defined in Section 2 below), if any, as
follows (unless such representation or warranty specifies a different time):

(a) Compliance with Registration Requirements. The Registration Statement and
any Rule 462(b) Registration Statement have been declared effective by the
Commission under the 1933 Act. The Company has complied, to its knowledge to the
Commission’s satisfaction, with all requests of the Commission for additional or
supplemental information made on or prior to the date hereof. No stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose have
been instituted or are pending or, to the Company’s knowledge, are contemplated
or threatened by the Commission.

The Base Prospectus when filed complied in all material respects with the 1933
Act and, if filed by electronic transmission pursuant to the Commission’s
Electronic Data Gathering, Analysis and Retrieval System (except as may be
permitted by Regulation S-T under the 1933 Act), was identical to the copy
thereof delivered to the Agent for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times during which a prospectus is required by
the 1933 Act to be delivered (whether physically or through compliance with Rule
153 or 172 or any similar rules, or in lieu thereof, a notice referred to in
Rule 173(a) under the 1933 Act) in connection with sales by the Agent or a
dealer (the “Prospectus Delivery Period”), complied and will comply in all
material respects with the 1933 Act and did not and will not contain any 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. As of
each Applicable Time, the General Disclosure Package (including any Prospectus
wrapper), taken as a whole, did not, and at the time of each sale of the Shares
and at each Settlement Date (as hereinafter defined in Section 2), the General
Disclosure Package, as then amended or supplemented by the Company, if
applicable, taken as a whole, will not, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Prospectus (including any Prospectus wrapper), as amended or
supplemented, as of its date and at all subsequent times during the Prospectus
Delivery Period, did not and will not contain any 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. The representations and warranties set forth in the three
immediately preceding sentences do not apply to statements in or omissions from
the Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Base Prospectus, the Prospectus or the
General Disclosure Package, or any amendments or supplements thereto, made in
reliance upon and in conformity with information relating to the Agent furnished
to the Company in writing by the Agent expressly for use therein, it being
understood and agreed that the only such information furnished by the Agent to
the Company consists of the information described in Section 7(b) below. There
are no contracts or other documents required to be described in the General
Disclosure Package or the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.

The Company is not an “ineligible issuer” in connection with the offering of the
Shares pursuant to Rules 164, 405 and 433 under the 1933 Act. Any free writing
prospectus that the Company is required to file pursuant to Rule 433(d) under
the 1933 Act has been, or will be, filed with the Commission in accordance with
the requirements of the 1933 Act. Each free writing prospectus that the Company
has filed, or is required to file, pursuant to Rule 433(d) under the 1933 Act or
that was prepared by or behalf of or used or referred to by the Company complies
or will comply in all material respects with the requirements of Rule 433 under
the 1933 Act

 

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including timely filing with the Commission or retention where required and
legending, and each such free writing prospectus, as of its issue date and at
all subsequent times through the completion of the public offer and sale of the
Shares did not, does not and will not include any information that conflicted,
conflicts with or will conflict with the information contained in the
Registration Statement, the Base Prospectus or the Prospectus, including any
document incorporated by reference therein. Except for the free writing
prospectuses, if any, indentified on Schedule A hereto, furnished to you before
first use, the Company has not prepared, used or referred to, and will not,
without your prior consent, not unreasonably withheld, prepare, use or refer to,
any free writing prospectus.

(b) Offering Materials Furnished to Agent. If so requested by the Agent, the
Company has delivered to the Agent two complete copies of the Registration
Statement, each amendment thereto and any Rule 462(b) Registration Statement and
of each consent and certificate of experts filed as a part thereof.

(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the completion of the
Agent’s distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than the Base Prospectus, the General
Disclosure Package, the Prospectus, any free writing prospectus reviewed and
consented to by the Agent, or the Registration Statement.

(d) The Sales Agreement. This Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
against the Company in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.

(e) Authorization of the Shares. The Shares have been duly authorized for
issuance and sale pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and the issuance and sale of the Shares is not subject to any
preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase the Shares, except for such rights as have been duly waived. No
approval of the stockholders of the Company under the rules and regulations of
the Nasdaq Capital Market (including Rule 5635 of the Nasdaq Marketplace Rules)
is required for the Company to issue and deliver to the Agent the Shares. All
subsequent references herein to “Nasdaq” mean the Nasdaq Capital Market or such
national securities exchange as the Shares are listed on from time to time as
the principal exchange thereof.

(f) No Applicable Registration or Other Similar Rights. There are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly waived.

(g) No Material Adverse Change. Except as otherwise disclosed in the General
Disclosure Package, subsequent to the respective dates as of which information
is given in the General Disclosure Package: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
is called a “Material Adverse Change”); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of capital stock or repurchase or redemption by the Company of any
class of capital stock.

(h) Independent Accountants. Each of Marcum LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) for the year ended December 31,
2010 and related supporting schedules, and Stonefield Josephson, Inc., who have
expressed

 

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their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) for the years ended
December 31, 2009 and 2008 and related supporting schedules, each filed with the
Commission as a part of the Registration Statement and incorporated by reference
into the Base Prospectus, the Prospectus and General Disclosure Package are an
independent registered public accounting firm with respect to the Company within
the applicable rules and regulations adopted by the Commission and the Public
Company Accounting Oversight Board (the “PCAOB”) and as required by the 1933
Act.

(i) Preparation of the Financial Statements. The financial statements filed with
the Commission as a part of the Registration Statement and included in the Base
Prospectus, the General Disclosure Package and the Prospectus present fairly in
all material respects the financial position of the Company as of and at the
dates indicated and the results of its operations and cash flows for the periods
specified. The supporting schedules included in the Registration Statement,
taken together with such financial statements, present fairly in all material
respects the information required to be stated therein. Such financial
statements and supporting schedules have been prepared in conformity with
generally accepted accounting principles as applied in the United States applied
on a consistent basis throughout 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 exclude
footnotes or may be condensed or summary statements). No other financial
statements or supporting schedules are required to be included in the
Registration Statement or the Prospectus. The financial data set forth or
incorporated by reference in the Registration Statement and the Prospectus
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement and
the Prospectus. To the Company’s knowledge, no person who has been suspended or
barred from being associated with a registered public accounting firm, or who
has failed to comply with any sanction pursuant to Rule 5300 promulgated by the
PCAOB, has participated in or otherwise aided the preparation of, or audited,
the financial statements, supporting schedules or other financial data filed
with the Commission as a part of the Registration Statement and included in the
Prospectus.

(j) Company’s Accounting System. The Company makes and keeps accurate books and
records and maintains a system of internal accounting controls sufficient to
provide reasonable assurance 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 as applied in the
United States 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. Except as disclosed in the General Disclosure
Package, the Company is not aware of any material weakness in the Company’s
internal control over financial reporting (whether or not remediated) as of
December 31, 2010 and as of the date hereof, and since December 31, 2010, there
has been no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

(k) Incorporation and Good Standing of the Company. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of Delaware and has the power and authority to own, lease and operate its
properties and to conduct its business as described in the General Disclosure
Package and the Prospectus and to enter into and perform its obligations under
this Agreement, except where the failure to be in good standing would not
reasonably be expected to result in a Material Adverse Change. The Company is
duly qualified as a foreign corporation to transact business and is in good
standing in the State of California and each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to be so qualified
or in good standing would not reasonably be expected to result in a Material
Adverse Change. Except as set forth in the General Disclosure Package, the
Company does not own or control, directly or indirectly, any corporation,
association or other entity and the Company has no subsidiaries.

(l) Capitalization and Other Capital Stock Matters. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Prospectus and
the General Disclosure Package as of the dates referred to

 

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therein (other than for subsequent issuances, if any, pursuant to employee
benefit plans described in the General Disclosure Package or changes in the
number of outstanding shares of common stock of the Company due to the issuance
of shares of common stock upon the exercise or conversion of securities
exercisable for, or convertible into, Common Stock, or as a result of the
issuance of the Shares). The Shares conform in all material respects to the
description thereof contained in the General Disclosure Package. All of the
issued and outstanding shares have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with federal and
state securities laws. None of the issued and outstanding shares was issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company other
than those accurately described in the Prospectus and the General Disclosure
Package. The description of the Company’s stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus and the General Disclosure Package accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights. All grants of options to acquire Shares (each,
a “Company Stock Option”) were validly issued and approved by the Board of
Directors of the Company, a committee thereof or an individual with authority
duly delegated by the Board of Directors of the Company or a committee thereof.
Grants of Company Stock Options were (i) made in material compliance with all
applicable laws and (ii) as a whole, made in material compliance with the terms
of the plans under which such Company Stock Options were issued. There is no and
has been no policy or practice of the Company in connection with the granting of
Company Stock Options that violates any applicable law. Except as described in
the General Disclosure Package and the Prospectus, the Company has not sold or
issued any Shares during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or
S of, the 1933 Act other than Shares issued pursuant to employee benefit plans,
qualified stock options plans or other employee compensation plans or pursuant
to outstanding options, rights or warrants.

(m) Stock Exchange Listing. The Shares are registered pursuant to Section 12(b)
of the 1934 Act and are listed on the Nasdaq Capital Market under the trading
symbol “SCON,” and the Company has taken no action designed to, or likely to
have the effect of, terminating the registration of the Shares under the 1934
Act or delisting the Shares from Nasdaq, nor has the Company received any
notification that the Commission or Nasdaq is contemplating terminating such
registration or listing, except for such notifications described in the General
Disclosure Package and the Prospectus. The Company has filed a Listing of
Additional Notification Form for the Shares on Nasdaq.

(n) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. The Company is not in violation of its charter or by-laws
and is not in default (or, with the giving of notice or lapse of time, would be
in default) (“Default”) under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the Company is a
party or by which it may be bound (including, without limitation, any credit
agreement, indenture, pledge agreement, security agreement or other instrument
or agreement evidencing, guaranteeing, securing or relating to indebtedness of
the Company), or to which any of the property or assets of the Company is
subject (each, an “Existing Instrument”), except for such Defaults as would not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Change. The Company’s execution, delivery and performance of
this Agreement, consummation of the transactions contemplated hereby and by the
General Disclosure Package and the issuance and sale of the Shares (i) have been
duly authorized by all necessary corporate action and will not result in any
violation of the provisions of the charter or by-laws of the Company, (ii) will
not conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, or require the consent of any other party to,
any Existing Instrument, except for consents that have been validly obtained and
except for such breaches, Defaults or results, or failure to obtain such
consent, as would not reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Change, and (iii) will not result in any
violation of any law, administrative regulation or administrative or court
decree applicable to the Company, except for such violations as would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Change. No consent, approval, authorization or other order of,
or registration or

 

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filing with, any court or other governmental or regulatory authority or agency,
is required for the Company’s execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby and by the
General Disclosure Package, except such as have been obtained or made or will be
made by the Company under the 1933 Act, or that may be required under applicable
state securities or blue sky laws and from the Financial Industry Regulatory
Authority (“FINRA”).

(o) No Material Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company’s
knowledge, threatened (i) against or affecting the Company, (ii) which have as
the subject thereof any officer or director of, or property owned or leased by,
the Company or (iii) relating to environmental or discrimination matters, where
in any such case (A) such action, suit or proceeding (including without
limitation, any such action, suit or proceeding for which, to the Company’s
knowledge, there is a substantial likelihood that it will be determined
adversely to the Company or such officer or director), if so determined
adversely, would reasonably be expected to result in a Material Adverse Change
or adversely affect the consummation of the transactions contemplated by this
Agreement or (B) any such action, suit or proceeding is or would be material in
the context of the sale of Shares. There are no current or pending legal,
governmental or regulatory investigations of which the Company is aware,
actions, suits or proceedings that are required under the 1933 Act to be
described in the Prospectus that are not so described. No material labor dispute
with the employees of the Company, or to the Company’s knowledge, with the
employees of any principal supplier, manufacturer, customer or contractor of the
Company, exists or, to the Company’s knowledge, is threatened or imminent.

(p) Intellectual Property Rights. The Company owns, possesses or can acquire on
reasonable terms sufficient trademarks, trade names, patent rights, copyrights,
domain names, licenses, approvals, trade secrets and other similar rights
(collectively, “Intellectual Property Rights”) reasonably necessary to conduct
its businesses as now conducted; except to the extent failure to own, possess or
acquire such Intellectual Property Rights would not reasonably be expected to
result in a Material Adverse Change. The Company has not received any notice of
infringement or conflict with asserted Intellectual Property Rights of others.
Except as would not be reasonably likely to result, individually or in the
aggregate, in a Material Adverse Change, (A) to the Company’s knowledge there is
no infringement, misappropriation or violation by third parties of any of the
Intellectual Property Rights owned by the Company; (B) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by
others challenging the rights of the Company in or to any such Intellectual
Property Rights,; (C) the Intellectual Property Rights owned by the Company and,
to the Company’s knowledge, the Intellectual Property Rights licensed to the
Company have not been adjudged by a court of competent jurisdiction invalid or
unenforceable, in whole or in part, and there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights; (D) there is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others that the Company infringes, misappropriates or otherwise
violates any Intellectual Property Rights or other proprietary rights of others,
the Company has not received any written notice of such claim; and (E) to the
Company’s knowledge, no other entity or individual has any right or claim in any
of the Company’s owned material patents, patent applications or any patent to be
issued therefrom by virtue of any contract, license or other agreement entered
into between such entity or individual and the Company or by any non-contractual
obligation, other than by written licenses granted by the Company. To the
Company’s knowledge, no employee of the Company is in or has ever been in
violation in any material respect of any term of any employment contract, patent
disclosure agreement, invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement or any restrictive covenant
to or with a former employer where the basis of such violation relates to such
employee’s employment with the Company, or actions undertaken by the employee
while employed with the Company and would reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Change. The Company is
not a party to or bound by any options, licenses or agreements with respect to
the Intellectual Property Rights of any other person or entity that are required
to be set forth in the General Disclosure Package and are not described therein.
None of the technology employed by the Company has been obtained or is being
used by the Company in violation of any contractual obligation binding on the
Company or, to the Company’s knowledge, any of its officers, directors or
employees or otherwise in violation of

 

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the rights of any persons, except in each case for such violations that would
not reasonably be expected to result in a Material Adverse Change.

(q) All Necessary Permits, etc. The Company possesses such valid and current
certificates, authorizations or permits issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct their respective
businesses as currently conducted by them and described in the General
Disclosure Package and the Prospectus, and the Company has not received any
notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to result in a Material Adverse Change.

(r) Title to Properties. Except as set forth in the General Disclosure Package,
the Company has good and marketable title to all of the real and good and valid
title to all personal property and other assets reflected as owned in the
financial statements referred to in Section 1(i) above (or elsewhere in the
General Disclosure Package) (excluding patents and patent applications covered
in Section 1(p) above), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, adverse claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company. To the Company’s knowledge, the real property,
improvements, equipment and personal property held under lease by the Company
are held under valid and enforceable leases, with such exceptions as are not
material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by the
Company.

(s) Tax Law Compliance. The Company has filed all necessary federal, state and
foreign income and franchise tax returns or has properly requested extensions
thereof and has paid all material taxes required to be paid by the Company and,
if due and payable, any related or similar assessment, fine or penalty levied
against the Company except as may be being contested in good faith and by
appropriate proceedings or as disclosed in the General Disclosure Package. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(i) above to the extent required by
generally accepted accounting principles in the U.S. in respect of all federal,
state and foreign income and franchise taxes for all periods as to which the tax
liability of the Company has not been finally determined.

(t) Company Not an “Investment Company”. The Company is not, and will not be,
either after receipt of payment for the Shares or after the application of the
proceeds therefrom as described under “Use of Proceeds” in the General
Disclosure Package and the Prospectus, an “investment company” within the
meaning of Investment Company Act of 1940, as amended, and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

(u) Insurance. The Company is insured by recognized, financially sound and
reputable institutions with policies in such amounts and with such deductibles
and covering such risks as are reasonably adequate and customary for its
business as currently conducted and described in the General Disclosure Package
and the Prospectus, including, but not limited to, policies covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and policies covering the Company for product
liability claims. The Company has no reason to believe that it will not be able
(i) to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change.

(v) No Price Stabilization or Manipulation; Compliance with Regulation M. The
Company has not taken, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Shares or any other “reference security” (as defined in Rule
100 of Regulation M under the 1934 Act (“Regulation M”)) whether to facilitate
the sale or resale of the Shares or otherwise, and has taken no action which
would directly or indirectly violate Regulation M.

 

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(w) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the Registration Statement or the Prospectus which have not been
described as required.

(x) S-3 Eligibility. At the time the Registration Statement was originally
declared effective, the Company met the then applicable requirements for use of
Form S-3 under the 1933 Act. The Company is eligible to offer and sell
securities under the Registration Statement (including, assuming no act or
omission on the part of the Agent that would make such statement untrue, the
offer and sale of the Shares) without reliance on General Instruction I.B.6 of
Form S-3.

(y) 1934 Act Compliance. The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with the
requirements of the 1934 Act, and, when read together with the other information
in the Prospectus and the General Disclosure Package, at the time the
Registration Statement and any amendments thereto become effective and at the
Settlement Date, as the case may be, will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

(z) FINRA Matters. All of the information provided to the Agent or to counsel
for the Agent by the Company, its officers and directors and, to the Company’s
knowledge, the holders of any securities (debt or equity) or options to acquire
any securities of the Company in connection with letters, filings or other
supplemental information provided to FINRA Rule 5110 or the National Association
of Securities Dealers Inc. (the “NASD”) Conduct Rule 2710 or 2720 is true,
complete and correct. Neither the Company nor, to the knowledge of the Company,
any of its affiliates (within the meaning of the NASD Conduct Rule 2720(f)(1))
directly or indirectly controls, is controlled by, or is under common control
with, or is an associated person (within the meaning of Article I, Section 1(ee)
of the By-laws of FINRA) of, any member firm of FINRA.

(aa) Statistical and Market-Related Data. The statistical, demographic and
market-related data included in the Registration Statement and the Prospectus
and General Disclosure Package are based on or derived from sources that the
Company believes to be reliable and accurate or represent the Company’s good
faith estimates that are made on the basis of data derived from such sources.

(bb) No Unlawful Contributions or Other Payments. The Company and, to the
Company’s knowledge, any employee or agent of the Company, have not made any
contribution or other payment to any official of, or candidate for, any federal,
state or foreign office in violation of any law or of the character required to
be disclosed in the Registration Statement and the Prospectus.

(cc) Disclosure Controls and Procedures; Deficiencies in or Changes to Internal
Control Over Financial Reporting. The Company has established and maintains
disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and
15d-15(e)), which (i) are designed to ensure that material information relating
to the Company is made known to the Company’s principal executive officer and
its principal financial officer by others within the Company, particularly
during the periods in which the periodic reports required under the 1934 Act are
being prepared; (ii) have been evaluated by management of the Company for
effectiveness as of the end of the Company’s most recent fiscal quarter; and
(iii) the Company’s principal executive officer and principal financial officer
concluded to be effective at the reasonable assurance level. Based on the most
recent evaluation of its internal control over financial reporting, the Company
is not aware of (i) any significant deficiencies or material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial information or (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company’s internal control over financial reporting. The Company is
not aware of any change in its internal control over financial reporting that
has occurred during its most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.

 

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(dd) Compliance with Environmental Laws. Except as described in the General
Disclosure Package or the Prospectus, and except as would not, reasonably be
expected to, singly or in the aggregate, result in a Material Adverse Change,
(i) the Company is not in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, “Hazardous Materials”) or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, “Environmental Laws”), (ii) the Company has
all permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with their requirements, (iii) there are
no pending or, to the Company’s knowledge threatened administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company, and (iv) there are no events or
circumstances that might reasonably be expected to form the basis of an order
for clean-up or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the Company relating
to Hazardous Materials or any Environmental Laws.

(ee) ERISA Compliance. The Company and any “employee benefit plan” (as defined
under the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively, “ERISA”))
established or maintained by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA. “ERISA Affiliate”
means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the “Code”) of which the Company is a member. No “reportable event” (as defined
under ERISA) has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by the Company or any of its
ERISA Affiliates. No “employee benefit plan” established or maintained by the
Company or any of its ERISA Affiliates, if such “employee benefit plan” were
terminated, would have any “amount of unfunded benefit liabilities” (as defined
under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred
or reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any “employee benefit plan” or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan”
established or maintained by the Company or any of its ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would
reasonably be expected to result in the loss of such qualification.

(ff) Sarbanes-Oxley. Except as disclosed in the Registration Statement or the
Prospectus, there is and has been no failure on the part of the Company or, to
the knowledge of the Company, any of the Company’s directors or officers, in
their capacities as such, to comply with any applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and
regulations promulgated thereunder. Each of the principal executive officer and
the principal financial officer of the Company (or each former principal
executive officer of the Company and each former principal financial officer of
the Company as applicable) has made all certifications required by Sections 302
and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms,
statements and other documents required to be filed by it or furnished by it to
the Commission. For purposes of the preceding sentence, “principal executive
officer” and “principal financial officer” shall have the meanings given to such
terms in the Sarbanes-Oxley Act.

(gg) Brokers. Except as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company any brokerage
or finder’s fee or other fee or commission as a result of any transactions
contemplated by this Agreement.

(hh) Underwriter Agreements. As of the date hereof, the Company is not a party
to any agreement with an agent or underwriter for any other “at-the-market” or
continuous equity transaction.

 

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(ii) No Outstanding Loans or Other Extensions of Credit. Since the adoption of
Section 13(k) of the 1934 Act, the Company has not extended or maintained
credit, arranged for the extension of credit, or renewed any extension of
credit, in the form of a personal loan, to or for any director or executive
officer (or equivalent thereof) of the Company except for such extensions of
credit as are permitted by Section 13(k) of the 1934 Act.

(jj) Compliance with Laws. The Company has not been advised, and has no reason
to believe, that it is not conducting business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, except where failure to be so in compliance would not result in a
Material Adverse Change. The Company has not received any notice of adverse
finding, warning letter, untitled letter or other correspondence or notice from
any other governmental authority alleging or asserting noncompliance with any
laws applicable to the Company, except for such noncompliance the correction of
which would not result in a Material Adverse Change.

(kk) Foreign Corrupt Practices Act. Neither the Company nor, to the Company’s
knowledge, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company is aware of or has taken any action, directly or
indirectly, that has resulted or would result in a violation of the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and the Company and, to
the Company’s knowledge, the Company’s affiliates have conducted their
respective businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.

(ll) Money Laundering Laws. The operations of the Company are, and have been
conducted at all times, in compliance with applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, the money laundering statutes of all applicable
jurisdictions, the rules and regulations thereunder and any related or similar
applicable rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Company,
threatened.

(mm) OFAC. Neither the Company nor, to the Company’s knowledge, any director,
officer, agent, employee, affiliate or person acting on behalf of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of this offering, or lend,
contribute or otherwise make available such proceeds to any subsidiary, joint
venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by
OFAC.

Any certificate signed by any officer of the Company and delivered to the Agent
or to counsel for the Agent shall be deemed a representation and warranty by the
Company to the Agent as to the matters covered thereby.

The Company acknowledges that the Agent and, for purposes of the opinions to be
delivered pursuant to Section 6 hereof, counsel to the Company, will rely upon
the accuracy and truthfulness of the foregoing representations and hereby
consents to such reliance.

Section 2. Sale and Delivery of Shares.

 

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(a) Subject to the terms and conditions set forth herein, the Company agrees to
issue and sell exclusively through the Agent acting as sales agent or directly
to the Agent acting as principal from time to time, and the Agent agrees to use
its commercially reasonable efforts to sell as sales agent for the Company, the
Shares. Sales of the Shares, if any, through the Agent acting as sales agent or
directly to the Agent acting as principal will be made only by methods deemed to
be an “at the market offering” as defined in Rule 415 under the 1933 Act or as
otherwise agreed to by the Agent and the Company, including by means of ordinary
brokers’ transactions on the Nasdaq, or otherwise at market prices prevailing at
the time of sale or at prices related to prevailing market prices or at
negotiated prices or, with the Company’s prior written approval, in privately
negotiated transactions. Nothing contained herein shall be deemed to restrict
the Company from undertaking a simultaneous offering of its securities, provided
the Agent is given notice pursuant to Section 3(p).

(b) The Shares are to be sold on a daily basis or otherwise as shall be agreed
to by the Company and the Agent on that trading day (other than a day on which
the Nasdaq is scheduled to close prior to its regular weekday closing time,
each, a “Trading Day”) that the Company has satisfied its obligations under
Section 6 of this Agreement and that the Company has instructed the Agent to
make such sales (the “Purchase Date”); provided that so long as the Company’s
Common Stock is not an “actively-traded security” within the meaning of Rule
101(c)(1) of Regulation M or if deemed necessary, in the Agent’s reasonable
discretion, in connection with the Agent’s initiation of research reports about
the Company, the Agent may, in its reasonable discretion, by reasonable notice
to the Company, delay the Purchase Date in respect of all or any portion of the
Shares deliverable pursuant to any Terms Agreement to such date as it determines
is reasonably necessary to ensure compliance with Regulation M and any other
applicable legal or regulatory requirements. On any Trading Day, the Company may
instruct the Agent by telephone (confirmed promptly by telecopy or email, which
confirmation will be promptly acknowledged by the Agent) as to the maximum
number of Shares to be sold by the Agent on such day (in any event not in excess
of the number available for issuance under the Prospectus and the currently
effective Registration Statement) and the minimum price per Share at which such
Shares may be sold, which may be determined using a formula, calculation or
other methodology (including an average daily volume or weighted average price).
Subject to the terms and conditions hereof, the Agent shall use its commercially
reasonable efforts to sell as sales agent all of the Shares so designated by the
Company. The Company and the Agent each acknowledge and agree that (A) there can
be no assurance that the Agent will be successful in selling the Shares, (B) the
Agent will incur no liability or obligation to the Company or any other person
or entity if they do not sell Shares for any reason other than a failure by the
Agent to use its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable law and regulations to sell such
Shares as required by this Agreement, and (C) the Agent shall be under no
obligation to purchase Shares on a principal basis except as otherwise
specifically agreed by each of the Agent and the Company pursuant to a Terms
Agreement. In the event of a conflict between the terms of this Agreement and
the terms of a Terms Agreement, the terms of such Terms Agreement will control.

(c) Notwithstanding the foregoing, the Company shall not authorize the issuance
and sale of, and the Agent as sales agent shall not be obligated to use its
commercially reasonable efforts to sell, any Shares (i) at a price lower than
the minimum price therefor authorized from time to time, or (ii) in a number in
excess of the number of Shares authorized from time to time to be issued and
sold under this Agreement, in each case, by the Company’s board of directors, or
a duly authorized committee thereof, and notified to the Agent in writing. In
addition, the Company may, upon notice to the Agent, suspend the offering of the
Shares or the Agent may, upon reasonable notice to the Company, suspend the
offering of the Shares with respect to which the Agent is acting as sales agent
for any reason and at any time; provided, however, that such suspension shall
not affect or impair the parties’ respective obligations with respect to the
Shares sold hereunder prior to the giving of such notice. Any notice given
pursuant to the preceding sentence may be given by telephone (confirmed promptly
by telecopy or email, which confirmation will be promptly acknowledged). The
Company may, upon notice to the Agent by telephone (confirmed promptly by
telecopy or email, which confirmation will be promptly acknowledged by the
Agent), seek to terminate or amend a Company instruction to the extent not
completed at the time of notice, and the Agent will use good faith efforts to
implement such termination or amendment, but shall not be obligated to take any
action that in its discretion it deems would disrupt a sale in progress but not
yet confirmed.

 

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(d) The gross sales price of any Shares sold pursuant to this Agreement by the
Agent acting as sales agent of the Company shall be the market price prevailing
at the time of sale for shares of the Company’s Common Stock sold by the Agent
on the Nasdaq, or otherwise at market prices prevailing at the time of sale or
at prices related to prevailing market prices or at negotiated prices or, with
the Company’s prior written approval, in privately negotiated transactions. The
compensation payable to the Agent for sales of Shares with respect to which the
Agent acts as sales agent shall be equal to 3.5% of the gross sales price of the
Shares for amounts of Shares sold pursuant to this Agreement. The Company may
sell Shares to the Agent, acting as principal, at a price agreed upon with the
Agent at the relevant Applicable Time and pursuant to a separate Terms
Agreement. The remaining proceeds, after further deduction for any transaction
fees imposed by any governmental, regulatory or self-regulatory organization in
respect of such sales, shall constitute the net proceeds to the Company for such
Shares (the “Net Proceeds”). The Agent shall notify the Company as promptly as
practicable if any deduction referenced in the preceding sentence will be
required. As of the date hereof, no such deductions are expected to be imposed.

(e) If acting as a sales agent hereunder, the Agent shall provide written
confirmation to the Company following the close of trading on the Nasdaq, each
day in which Shares are sold under this Agreement setting forth the number of
Shares sold on such day, the aggregate gross sales proceeds of the Shares, the
Net Proceeds to the Company and the compensation payable by the Company to the
Agent with respect to such sales.

(f) Under no circumstances shall the aggregate offering price or number, as the
case may be, of Shares sold pursuant to this Agreement and any Terms Agreement
exceed the aggregate offering price or number, as the case may be, of Shares of
Common Stock (i) set forth in the preamble paragraph of this Agreement,
(ii) available for issuance under the Prospectus and the then currently
effective Registration Statement or (iii) authorized from time to time to be
issued and sold under this Agreement or any Terms Agreement by the Company’s
board of directors, or a duly authorized committee thereof, and notified to the
Agent in writing. In addition, under no circumstances shall any Shares with
respect to which the Agent acts as sales agent be sold at a price lower than the
minimum price therefor authorized from time to time by the Company’s board of
directors, or a duly authorized committee thereof, and notified to the Agent in
writing.

(g) Settlement for sales of Shares pursuant to this Section 2 will occur on the
third business day that is also a Trading Day following the trade date on which
such sales are made, unless another date shall be agreed to by the Company and
the Agent (each such day, a “Settlement Date”). On each Settlement Date, the
Shares sold through the Agent for settlement on such date shall be delivered by
the Company to the Agent against payment of the Net Proceeds from the sale of
such Shares. Settlement for all Shares shall be effected by book-entry delivery
of Shares to the Agent’s account at The Depository Trust Company against
payments by the Agent of the Net Proceeds from the sale of such Shares in
immediately available funds delivered to an account designated by the Company.
If the Company shall default on its obligation to deliver Shares on any
Settlement Date, the Company shall (i) indemnify and hold the Agent harmless
against any loss, claim or damage arising from or as a result of such default by
the Company and (ii) pay the Agent any commission to which it would otherwise be
entitled absent such default.

(h) Notwithstanding any other provision of this Agreement, the Company and the
Agent agree that no sales of Shares shall take place, and the Company shall not
request the sale of any Shares that would be sold, and the Agent shall not be
obligated to sell, during any period in which the Company is, or could
reasonably be deemed to be, in possession of material non-public information or,
unless otherwise agreed to by the Agent in its reasonable discretion, in which
the Company’s insider trading or window policies, as they exist on the date of
this Agreement or are hereafter amended, would prohibit the purchases or sales
of the Company’s Common Stock by its employees, officers and directors.

(i) At each Applicable Time, Settlement Date, Registration Statement Amendment
Date (as defined in Section 3 below) and each Company Periodic Report Date, the
Company shall be deemed to have affirmed each representation and warranty
contained in this Agreement, modified as necessary to relate to the Registration
Statement and the Prospectus as amended to such time. Any obligation of the
Agent to use its commercially

 

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reasonable efforts to sell the Shares on behalf of the Company as sales agent
shall be subject to the continuing accuracy of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder and to the continuing satisfaction of the additional
conditions specified in Section 6 of this Agreement.

Section 3. Covenants. The Company agrees with the Agent:

(a) During the Prospectus Delivery Period, (i) that the Company will not file
any amendment or any supplement to the Registration Statement or the Prospectus
(other than documents incorporated by reference) prior to any Settlement Date
unless a copy thereof has been submitted to the Agent a reasonable period before
the filing and the Agent has not reasonably objected thereto (provided, the
failure to object shall not relieve the Company of liability or obligations
hereunder or affect the Agent’s rights to rely on the representations and
warranties herein) and will advise the Agent, promptly after it receives notice
thereof, of the time when any such amendment to the Registration Statement has
been filed or becomes effective or any amendment or supplement to the Prospectus
has been filed and to furnish the Agent with copies thereof, (ii) to file
promptly all other material required to be filed by the Company with the
Commission pursuant to Rule 433(d) under the 1933 Act, (iii) to file promptly
all reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act, (iv) to advise the Agent, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of the Prospectus or other prospectus in
respect of the Shares, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the form of the Registration Statement or the
Prospectus or for additional information, and (v) in the event of the issuance
of any such stop order or of any such order preventing or suspending the use of
the Prospectus in respect of the Shares or suspending any such qualification, to
promptly use its commercially reasonable efforts to obtain the withdrawal of
such order; and in the event of any such issuance of a notice of objection,
promptly to take such reasonable steps as may be necessary to permit offers and
sales of the Shares by the Agent, which may include, without limitation,
amending the Registration Statement or filing a new registration statement, at
the Company’s expense (references herein to the Registration Statement shall
include any such amendment or new registration statement).

(b) Promptly from time to time to take such action as the Agent may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as the Agent may reasonably request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the sale of the
Shares, provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction; and to promptly advise the Agent of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.

(c) During the Prospectus Delivery Period, the Company will make available to
the Agent, as soon as practicable after the execution of this Agreement, and
thereafter from time to time furnish to the Agent, copies of the most recent
Prospectus in such quantities and at such locations as the Agent may reasonably
request for the purposes contemplated by the 1933 Act. During the Prospectus
Delivery Period, and if at such time any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the 1934 Act any document
incorporated by reference in the Prospectus in order to comply with the 1933 Act
or the 1934 Act, to notify the Agent and to file such document and to prepare
and furnish without charge to the Agent as many written and electronic copies as
the Agent may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance.

 

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(d) To make generally available to its securityholders as soon as practicable,
but in any event not later than sixteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the 1933 Act), an
earnings statement of the Company (which need not be audited) complying with
Section 11(a) of the 1933 Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).

(e) To pay the required Commission filing fees relating to the Shares within the
time required by Rule 456(b)(1) under the 1933 Act without regard to the proviso
therein and otherwise in accordance with Rules 456(b) and 457(r) under the 1933
Act.

(f) To use the Net Proceeds received by it from the sale of the Shares pursuant
to this Agreement and any Terms Agreement in the manner specified in the General
Disclosure Package.

(g) In connection with the offering and sale of the Shares, the Company will
file with the Nasdaq all documents and notices, and make all certifications,
required by the Nasdaq of companies that have securities that are listed or
quoted on the Nasdaq and will maintain such listings or quotations.

(h) To not take, directly or indirectly, and to cause its affiliates to refrain
from taking, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, under the 1934 Act or otherwise,
the stabilization or manipulation of the price of any securities of the Company
to facilitate the sale or resale of the Shares.

(i) At each Applicable Time, each Settlement Date, each Registration Statement
Amendment Date (as defined below), each Company Periodic Report Date (as defined
below) and each date on which Shares are delivered to the Agent pursuant to a
Terms Agreement (but only if so required therein as a supplement thereto), the
Company shall be deemed to have affirmed each representation, warranty, covenant
and other agreement contained in this Agreement or any Terms Agreement. In each
Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed by the Company
in respect of any quarter in which sales of Shares were made by or through the
Agent under this Agreement or any Terms Agreement (each date on which any such
document is filed, and any date on which an amendment to any such document is
filed, a “Company Periodic Report Date”), the Company shall set forth with
regard to such quarter the number of Shares sold through the Agent under this
Agreement or any Terms Agreement and the Net Proceeds received by the Company
with respect to sales of Shares pursuant to this Agreement or any Terms
Agreement.

(j) Upon commencement of the offering of Shares under this Agreement and each
time the Shares are delivered to the Agent as principal on a Settlement Date
pursuant to a Terms Agreement and not later than three (3) Trading Days after
each (i) date the Registration Statement or the Prospectus shall be amended or
supplemented (other than (1) in connection with the filing of a prospectus
supplement that contains solely the information set forth in Section 3(i),
(2) in connection with the filing of any current reports on Form 8-K (other than
any current reports on Form 8-K which contain financial statements, supporting
schedules or other financial data, including any current report on Form 8-K
under Item 2.02 of such form that is considered “filed” under the 1934 Act) or
(3) by a prospectus supplement relating to the offering of other securities
(including, without limitation, other shares of Common Stock)) (each such date,
a “Registration Statement Amendment Date”) and (ii) Company Periodic Report
Date, the Company will furnish or cause to be furnished forthwith to the Agent a
certificate dated the date of effectiveness of such amendment or the date of
filing with the Commission of such supplement or other document, as the case may
be, in a form reasonably satisfactory to the Agent to the effect that the
statements contained in the certificate referred to in Section 6(d) of this
Agreement which were last furnished to the Agent are true and correct at the
time of such amendment, supplement or filing, as the case may be, as though made
at and as of such time (except that such statements shall be deemed to relate to
the Registration Statement, the General Disclosure Package and the Prospectus as
amended and supplemented to such time) or, in lieu of such certificate, a
certificate of the same tenor as the certificate referred to in said
Section 6(d), but modified as necessary to relate to the Registration Statement
and the Prospectus as amended and supplemented, or to the document incorporated
by reference into the Prospectus, to the time of delivery of such certificate.
As used in this paragraph, to the extent there shall be an Applicable Time on or
following the date referred to in clause

 

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(i) or (ii) above, promptly shall be deemed to be on or prior to the next
succeeding Applicable Time. The requirement to provide a certificate under this
Section 3(j) shall be waived for any Registration Statement Amendment Date or
Company Periodic Report Date occurring at a time at which no order for a sale is
pending, which waiver shall continue until the earlier to occur of the date the
Company delivers a notice to sell Shares hereunder (which for such calendar
quarter shall be considered a Registration Statement Amendment Date or Company
Periodic Report Date, as applicable) and the next occurring Registration
Statement Amendment Date; provided, however, that such waiver shall not apply
for any date on which the Company files its annual report on Form 10-K.
Notwithstanding the foregoing, if the Company subsequently decides to sell
Shares following a Registration Statement Amendment Date or Company Periodic
Report Date when the Company relied on such waiver and did not provide Agent
with a certificate under this Section 3(j), then before the Company seeks to
sell Shares or Agent accepts an order to sell any Shares, the Company shall
provide Agent with a certificate hereunder.

(k) Upon commencement of the offering of Shares under this Agreement and each
time the Shares are delivered to the Agent as principal on a Settlement Date
pursuant to a Terms Agreement (but only if so required therein as a supplement
thereto), and not later than three (3) Trading Days after each (i) Registration
Statement Amendment Date (other than arising through the amendment or supplement
to the Registration or Prospectus via incorporation by reference of documents
therein (excluding an amendment or supplement to the Registration or Prospectus
via any current reports on Form 8-K which contain financial statements,
supporting schedules or other financial data, including any current report on
Form 8-K under Item 2.02 of such form that is considered “filed” under the 1934
Act)) with respect to which the Company is obligated to deliver a certificate
under Section 3(l) and (ii) filing by the Company of an Annual Report on Form
10-K, the Company will furnish or cause to be furnished to the Agent and to
counsel to the Agent the written opinion and letter of Manatt, Phelps &
Phillips, LLP or other counsel reasonably satisfactory to the Agent, dated the
date of effectiveness of such amendment or the date of filing with the
Commission of such supplement or other document, as the case may be, in a form
and substance reasonably satisfactory to the Agent and its counsel, of the same
tenor as the opinions and letters referred to in Section 6(b) of this Agreement,
but modified as necessary to relate to the Registration Statement, the General
Disclosure Package and the Prospectus as amended and supplemented, or to the
document incorporated by reference into the Prospectus, to the time of delivery
of such opinion and letter or, in lieu of such opinion and letter, counsel last
furnishing such letter to the Agent shall furnish the Agent with a letter
substantially to the effect that the Agent may rely on such last opinion and
letter to the same extent as though each were dated the date of such letter
authorizing reliance (except that statements in such last letter shall be deemed
to relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such letter authorizing reliance). As
used in this paragraph, to the extent there shall be an Applicable Time on or
following the date referred to in clause (i) or (ii) above, promptly shall be
deemed to be on or prior to the next succeeding Applicable Time.

(l) Upon commencement of the offering of Shares under this Agreement and each
time the Shares are delivered to the Agent as principal on a Settlement Date,
and promptly after each (i) Registration Statement Amendment Date (other than
arising through the amendment or supplement to the Registration or Prospectus
via incorporation by reference therein (excluding an amendment or supplement to
the Registration or Prospectus via any current reports on Form 8-K which contain
financial statements, supporting schedules or other financial data, including
any current report on Form 8-K under Item 2.02 of such form that is considered
“filed” under the 1934 Act)) with respect to which the Company is obligated to
deliver a certificate under Section 3(l) and (ii) filing by the Company of an
Annual Report on Form 10-K, the Company will cause Marcum LLP, or other
independent accountants reasonably satisfactory to the Agent, to furnish to the
Agent a letter, dated the date of effectiveness of such amendment or the date of
filing of such supplement or other document with the Commission, as the case may
be, in form reasonably satisfactory to the Agent and its counsel, of the same
tenor as the letter referred to in Section 6(c) hereof, but modified as
necessary to relate to the Registration Statement, the General Disclosure
Package and the Prospectus, as amended and supplemented, or to the document
incorporated by reference into the Prospectus, to the date of such letter. As
used in this paragraph, to the extent there shall be an Applicable Time on or
following the date referred to in clause (i) or (ii) above, promptly shall be
deemed to be on or prior to the next succeeding Applicable Time.

 

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(m) The Company consents to Citadel (and its affiliates and agents) trading in
the Company’s Common Stock for the account of Citadel (and its affiliates and
agents) and for the account of its clients at the same time as sales of Shares
occur pursuant to this Agreement or any Terms Agreement, so long as such trading
does not render Agent incapable of compliance with its obligations hereunder or
violate applicable law.

(n) If, to the knowledge of the Company, all filings required by Rule 424 in
connection with this offering shall not have been made or the representations in
Section 1(a) shall not be true and correct on the applicable Settlement Date,
the Company will, to the extent required by applicable law, offer to any person
who has agreed to purchase Shares from the Company as the result of an offer to
purchase solicited by the Agent the right to refuse to purchase and pay for such
Shares.

(o) The Company will cooperate timely with any reasonable due diligence review
conducted by the Agent or its counsel from time to time in connection with the
transactions contemplated hereby or in any Terms Agreement, including, without
limitation, and upon reasonable notice providing information and making
available documents and appropriate corporate officers, during regular business
hours and at the Company’s principal offices or electronically or
telephonically, as the Agent may reasonably request.

(p) During the period beginning on and including the fifth business day
immediately prior to the date on which the Company has instructed the Agent to
make sales of Shares under this Agreement through and including the third
business day following the final Settlement Date with respect to the Shares sold
pursuant to such instruction, the Company will not, without (i) giving the Agent
at least five business days’ prior written notice specifying the nature of the
proposed sale and the date of such proposed sale and (ii) the Agent suspending
activity under this program for such period of time as requested by the Company
or as deemed appropriate by the Agent in light of the proposed sale,
(A) (1) offer, pledge, announce the intention to sell, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant for the sale of, lend or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for or repayable with
Common Stock, or file any registration statement under the 1933 Act with respect
to any of the foregoing (other than a shelf registration statement under Rule
415 under the 1933 Act, a registration statement on Form S-8 or post-effective
amendment to the Registration Statement) or (2) enter into any swap or other
agreement or any transaction that transfers in whole or in part, directly or
indirectly, any of the economic consequence of ownership of the Common Stock, or
any securities convertible into or exchangeable or exercisable for or repayable
with Common Stock, whether any such swap or transaction described in clause
(A) or (B) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise; or (B) directly or indirectly repurchase,
offer to repurchase, announce its intention to repurchase, or otherwise enter
into any transaction with the economic effect of repurchasing any shares of its
Common Stock. The foregoing sentence shall not apply to (x) the Shares to be
offered and sold through the Agent pursuant to this Agreement or any Terms
Agreement, (y) the issuance of shares of Common Stock upon the conversion of the
Company’s currently outstanding shares of preferred stock and (z) stock options,
restricted stock or other equity incentive awards approved by the board of
directors of the Company or the compensation committee thereof or the issuance
of Common Stock upon exercise thereof.

(q) If immediately prior to the third anniversary (the “Renewal Deadline”) of
the initial effective date of the Registration Statement, any of the Shares
remain unsold, this Agreement shall automatically terminate on such Renewal
Deadline unless prior thereto the Company has filed, if it has not already done
so and is eligible to do so, an “automatic shelf registration statement” (as
defined in Rule 405 under the 1933 Act) relating to the Shares, in a form
reasonably satisfactory to the Agent, or, if the Company is not eligible to file
an automatic shelf registration statement, the Company has filed, if it has not
already done so, file a new shelf registration statement relating to the Shares,
in a form reasonably satisfactory to the Agent. The Company will use its
commercially reasonable efforts to cause such registration statement to be
declared effective within 60 days after the Renewal Deadline. Unless this
Agreement is automatically terminated as provided above, the Company will take
all other action necessary or appropriate to permit the issuance and sale of the
Shares to continue as contemplated in the expired registration statement
relating to the Shares. References herein to the Registration Statement shall
include such new automatic shelf registration statement or such new shelf
registration statement, as the case may be.

 

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(r) The Company will give prior written notice to Agent prior to entering into
any agreement with an agent or underwriter for any other “at-the-market” or
continuous equity transaction.

Section 4. Free Writing Prospectus.

(i) The Company represents and agrees that without the prior consent of the
Agent, it has not made and will not make any offer relating to the Shares that
would constitute a “free writing prospectus” as defined in Rule 405 under the
1933 Act; and (ii) the Agent represents and agrees that, without the prior
consent of the Company, it has not made and will not make any offer relating to
the Shares that would constitute a free writing prospectus required to be filed
with the Commission

(b) The Company has complied and will comply with the requirements of Rule 433
under the 1933 Act applicable to any Issuer Free Writing Prospectus (including
any free writing prospectus identified in Section 4(a) hereof), including timely
filing with the Commission or retention where required and legending.

Section 5. Payment of Expenses. The Company covenants and agrees with the Agent
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company’s counsel and accountants in
connection with the registration of the Shares under the 1933 Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, the Base Prospectus, Prospectus Supplement, any Issuer
Free Writing Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Agent; (ii) the
cost of printing or producing this Agreement or any Terms Agreement, any Blue
Sky Memoranda, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all documented expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 3(b) hereof, including the reasonable and documented fees and
disbursements of counsel for the Agent in connection with such qualification and
in connection with the Blue Sky Surveys, such counsel fees reducing the dollar
cap in clause (v) below dollar for dollar; (iv) any documented filing fees
incident to, and the reasonable and documented fees and disbursements of counsel
for the Agent in connection with, any required review by FINRA of the terms of
the sale of the Shares, such counsel fees reducing the dollar cap in clause
(v) below dollar for dollar; (v) the reasonable and documented fees and expenses
of counsel to the Agent in connection with this Agreement and the offering
contemplated hereby, in an amount not to exceed $75,000 (less any reductions
from clauses (iii) or (iv)) in the aggregate under this Agreement; (vi) all fees
and expenses in connection with listing or quoting the Shares on the Nasdaq;
(vii) the cost of preparing the Shares; (vii) the costs and charges of any
transfer agent or registrar or any dividend distribution agent; and (ix) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that, except as provided in this Section, and Section 7
hereof, the Agent will pay all of its own costs and expenses, including the fees
of its counsel, transfer taxes on resale of any of the Shares by it, and any
advertising expenses connected with any offers it may make.

Section 6. Conditions of the Agent’s Obligation. The obligations of the Agent
hereunder shall be subject, in its discretion, to the condition that all
representations and warranties and other statements of the Company herein or in
certificates of any officer of the Company delivered pursuant to the provisions
hereof are true and correct as of the time of the execution of this Agreement,
the date of any executed Terms Agreement and as of each Registration Statement
Amendment Date, Company Periodic Report Date, Applicable Time and Settlement
Date, to the condition that the Company shall have performed in all material
respects all of its obligations hereunder theretofore to be performed, and the
following additional conditions:

(a) The Prospectus Supplement shall have been filed with the Commission pursuant
to Rule 424(b) under the 1933 Act on the business day immediately following the
date hereof and in accordance with Section 3(a) hereof, any other material
required to be filed by the Company pursuant to Rule 433(d) under the 1933 Act
shall have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission and no notice of objection of the Commission to the
use of the form of the Registration Statement or any post-effective amendment

 

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thereto pursuant to Rule 401(g)(2) under the 1933 Act shall have been received;
no stop order suspending or preventing the use of the Prospectus or any Issuer
Free Writing Prospectus shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the reasonable satisfaction of the
Agent.

(b) On every date specified in Section 3(k) hereof and on such other dates as
reasonably requested by the Agent, Manatt, Phelps & Phillips, LLP, counsel for
the Company, shall have furnished to the Agent a written opinion or opinions and
a negative assurance letter, dated as of such date, in form and substance
reasonably satisfactory to the Agent, and substantially similar to the form
attached as Annex III hereto.

(c) At the dates specified in Section 3(l) hereof and on such other dates as
reasonably requested by the Agent, the independent accountants of the Company
who have certified the financial statements of the Company included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectus shall have furnished to the Agent a letter dated as
of the date of delivery thereof and addressed to the Agent in form and substance
reasonably satisfactory to the Agent and its counsel, containing statements and
information of the type ordinarily included in accountants’ “comfort letters” to
underwriters with respect to the financial statements of the Company included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectus.

(d) (i) Upon commencement of the offering of Shares under this Agreement and on
such other dates as reasonably requested by the Agent, the Company will furnish
or cause to be furnished promptly to the Agent a certificate of an officer in a
form reasonably satisfactory to the Agent stating the minimum price for the sale
of such Shares pursuant to this Agreement and the maximum number of Shares that
may be issued and sold pursuant to this Agreement or, alternatively, maximum
gross proceeds from such sales, as authorized from time to time by the Company’s
board of directors or a duly authorized committee thereof or, in connection with
any amendment, revision or modification of such minimum price or maximum Share
number or amount, a new certificate with respect thereto and (ii) on each date
specified in Section 3(j) and on such other dates as reasonably requested by the
Agent, the Agent shall have received a certificate of the Company executed by an
executive officer of the Company, whom shall be the Chief Executive Officer or
the Chief Financial Officer, dated as of the date thereof, certifying, after
reasonable inquiry, that (A) there has been no Material Adverse Change since the
date as of which information is given in the General Disclosure Package and the
Prospectus as then amended or supplemented (other than by documents incorporated
by reference and filed publicly on EDGAR), (B) the representations and
warranties in Section 1 hereof are true and correct as of such date (or as of
any earlier date specified therein), (C) no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the Company’s knowledge, are contemplated or threatened by
the Commission, (D) the Company has complied with all of the agreements entered
into in connection with the transaction contemplated herein and satisfied all
conditions on its part to be performed or satisfied.

(e) Since the date of the latest audited financial statements then included or
incorporated by reference in the General Disclosure Package and the Prospectus,
no Material Adverse Change shall have occurred.

(f) The Company shall have complied with the provisions of Section 3(c) hereof
with respect to the timely furnishing of prospectuses.

(g) On such dates as reasonably requested by the Agent, the Company shall have
cooperated with and permitted Agent to conduct due diligence sessions, in form
and substance satisfactory to the Agent.

(h) All filings with the Commission required by Rule 424 under the 1933 Act to
have been filed by each Applicable Time or related Settlement Date shall have
been made within the applicable time period prescribed for such filing by Rule
424 (without reliance on Rule 424(b)(8)).

(j) The Shares shall have received approval for listing or quotation on the
Nasdaq prior to the first Settlement Date.

 

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(i) Prior to any Settlement Date, the Company shall have furnished to the Agent
such further information, documents or certificates as the Agent may reasonably
request.

Section 7. Indemnification.

(a) The Company will indemnify and hold harmless the Agent against any losses,
claims, damages or liabilities, joint or several, to which the Agent may become
subject, under the 1933 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 the Registration Statement, the Base Prospectus, the Prospectus
Supplement or the Prospectus or any amendment or supplement thereto, any Issuer
Free Writing Prospectus or any “issuer information” filed or required to be
filed pursuant to Rule 433(d) under the 1933 Act, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Agent for any legal or other expenses reasonably incurred
by the Agent 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 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 the Registration
Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus, or
any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in
reliance upon and in conformity with written information furnished to the
Company by the Agent expressly for use therein, it being understood and agreed
upon that the only such information furnished by the Agent consists of the
information in the Prospectus as specified in Annex II hereto.

(b) The Agent will indemnify and hold harmless the Company against any losses,
claims, damages or liabilities to which the Company may become subject, under
the 1933 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 the
Registration Statement, the Base Prospectus, the Prospectus Supplement or the
Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing
Prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, 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 the Registration Statement, the Base
Prospectus, the Prospectus Supplement or the Prospectus, or any such amendment
or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon
and in conformity with written information furnished to the Company by the Agent
expressly for use therein, it being understood and agreed upon that the only
such information furnished by the Agent consists of the information in the
Prospectus as specified in Annex II hereto; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.

(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection except and then only to the extent such
indemnifying party is materially prejudiced thereby. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the 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 reasonably 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, the
indemnifying party shall not be liable to such indemnified party under this
Section 7 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

 

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the indemnified party, not 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 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) If the indemnification provided for in this Section 7 is unavailable to hold
harmless an indemnified party under subsection (a) or (b) above 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 benefits received by the Company on the one
hand and the Agent on the other from the offering of the Shares to which such
loss, claim, damage or liability (or action in respect thereof) relates. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Agent on the other 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 benefits received by the Company on the
one hand and the Agent on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total commissions received by the Agent. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Agent on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Agent agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(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 in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Agent shall not be required to contribute
any amount in excess of the amount by which the total compensation received by
the Agent with respect to sales of the Shares sold by it to the public exceeds
the amount of any damages which the Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

(e) The obligations of the Company under this Section 7 shall be in addition to
any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to the directors, officers, employees, attorneys and
agents of the Agent and to each person, if any, who controls the Agent within
the meaning of the 1933 Act or is controlled by or under common control with the
Agent and each broker dealer affiliate of the Agent; and the obligations of the
Agent under this Section 7 shall be in addition to any liability which the Agent
may otherwise have and shall extend, upon the same terms and conditions, to each
director, officer, employee, attorney and agent of the Company and to each
person, if any, who controls the Company within the meaning of the 1933 Act.

Section 8. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and the Agent, as set forth in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement, 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 the Agent or any controlling
person of the Agent, or the Company, or any officer or director or controlling
person of the Company, and shall survive delivery of and payment for the Shares.

 

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Section 9. No Advisory or Fiduciary Relationship. The Company acknowledges and
agrees that (i) the Agent is acting solely in the capacity of an arm’s length
contractual counterparty to the Company with respect to the offering of Shares
contemplated hereby (including in connection with determining the terms of such
offering) and (ii) the Agent has not assumed an advisory or fiduciary
responsibility in favor of the Company with respect to the offering contemplated
hereby or the process leading thereto (irrespective of whether the Agent has
advised or is currently advising the Company on other matters) or any other
obligation to the Company except the obligations expressly set forth in this
Agreement and (iii) the Company has consulted its own legal and financial
advisors to the extent it deemed appropriate. The Company agrees that it will
not claim that the Agent has rendered advisory services of any nature or
respect, or owe a fiduciary or similar duty to the Company, in connection with
such transaction or the process leading thereto.

Section 10. Termination.

(a) The Company shall have the right, by giving 5 days prior written notice as
hereinafter specified, to terminate this Agreement in its sole discretion at any
time. Any such termination shall be without liability of any party to any other
party, except that (i) with respect to any pending sale through the Agent for
the Company, the obligations of the Company, including in respect of
compensation of the Agent, shall remain in full force and effect notwithstanding
such termination; and (ii) the provisions of Section 1, Section 5, Section 7 and
Section 8 of this Agreement shall remain in full force and effect
notwithstanding such termination.

(b) The Agent shall have the right, by giving written notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 1, Section 5, Section 7 and Section 8 of
this Agreement shall remain in full force and effect notwithstanding such
termination.

(c) This Agreement shall remain in full force and effect until and unless
terminated pursuant to Section 10(a) or (b) above or otherwise by mutual
agreement of the parties; provided that any such termination by mutual agreement
or pursuant to this clause (c) shall in all cases be deemed to provide that
Section 1, Section 5, Section 7 and Section 8 of this Agreement shall remain in
full force and effect.

(d) Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided that such termination shall not be
effective until the close of business on the date of receipt of such notice by
the Agent or the Company, as the case may be. If such termination shall occur
prior to the Settlement Date for any sale of Shares, such sale shall settle in
accordance with the provisions of Section 2(h) hereof.

(e) In the case of any purchase by the Agent pursuant to a Terms Agreement, the
Agent may terminate this Agreement, at any time at or prior to the Settlement
Date (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the General
Disclosure Package or the Prospectus, any Material Adverse Change, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Agent, impracticable or inadvisable
to market the Shares or to enforce contracts for the sale of Shares, or (iii) if
trading in any securities of the Company has been suspended or materially
limited by the Commission or the Nasdaq, or if trading generally on the NYSE or
Nasdaq has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, FINRA or
any other governmental authority, or (iv) a material disruption has occurred in
commercial banking or securities settlement or clearance services in the United
States, or (v) if a banking moratorium has been declared by either Federal or
New York authorities.

(f) Subject to the additional limitations set forth in Section 5 of this
Agreement, in the event of termination of this Agreement prior to the sale of
any Shares, the Agent shall be entitled only to reimbursement of its
out-of-pocket expenses actually incurred.

 

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Section 11. Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and if to Citadel shall be delivered or sent by mail, telex
or facsimile transmission to:

Citadel Securities LLC

601 Lexington Avenue, 28th Floor

New York, NY 10003

Fax No. (646) 403-8268

Attention: Clare Pierce

and if to the Company to:

Superconductor Technologies Inc.

460 Ward Drive

Santa Barbara, CA 93111

Fax: (805) 967—342

Attention: Chief Financial Officer

Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.

Section 12. Parties. This Agreement shall be binding upon, and inure solely to
the benefit of, the Agent and the Company and, to the extent provided in
Sections 7 and 8 hereof, the officers, directors, employees, attorneys and
agents of the Company and the Agent and each person who controls the Company or
the Agent, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of Shares through the Agent shall be deemed a
successor or assign by reason merely of such purchase.

Section 13. Time of the Essence. Time shall be of the essence of this Agreement.
As used herein, the term “business day” shall mean any day when the Commission’s
office in Washington, D.C. is open for business.

Section 14. Waiver of Jury Trial. The Company and the Agent hereby irrevocably
waive, to the fullest extent permitted by applicable law, any and all right to
jury trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.

Section 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICTS OF LAW.

Section 16. Counterparts. This Agreement and any Terms Agreement may be executed
by any one or more of the parties hereto and thereto in any number of
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
This Agreement and any Terms Agreement may be delivered by any party by
facsimile or other electronic transmission.

Section 17. Severability. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent and the Company in accordance with its terms.

 

Very truly yours, SUPERCONDUCTOR TECHNOLOGIES INC. By:  

 

  Name:   Title:

 

Accepted as of the date hereof: CITADEL SECURITIES LLC By:  

 

  Name:   Title:

 

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Annex I

SUPERCONDUCTOR TECHNOLOGIES INC.

Common Stock

($0.001 par value per share)

TERMS AGREEMENT

CITADEL SECURITIES LLC

601 Lexington Avenue, 28th Floor

New York, NY 10003

Attn:

Ladies and Gentlemen:

Superconductor Technologies Inc., a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions stated herein and in the
At-the-Market Equity Offering Sales Agreement, dated August 9, 2011 (the “Sales
Agreement”), between the Company and Citadel Securities LLC (the “Agent”), to
issue and sell to the Agent the securities specified in the Schedule hereto (the
“Purchased Securities”). All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Sales Agreement.

Each of the provisions of the Sales Agreement not specifically related to the
solicitation by the Agent, as agent of the Company, of offers to purchase
securities is incorporated herein by reference in its entirety, and shall be
deemed to be part of this Terms Agreement to the same extent as if such
provisions had been set forth in full herein. Each of the representations and
warranties set forth therein shall be deemed to have been made at and as of the
date of this Terms Agreement and the Applicable Time, except that each
representation and warranty in Section 1 of the Sales Agreement which makes
reference to the Prospectus (as therein defined) shall be deemed to be a
representation and warranty as of the date of the Sales Agreement in relation to
the Prospectus, and also a representation and warranty as of the date of this
Terms Agreement and the Settlement Date in relation to the Prospectus as amended
and supplemented to relate to the Purchased Securities.

An amendment to the Registration Statement (as defined in the Sales Agreement),
or a supplement to the Prospectus, as the case may be, relating to the Purchased
Securities, in the form heretofore delivered to the Agent is now proposed to be
filed with the Securities and Exchange Commission.

Subject to the terms and conditions set forth herein and in the Sales Agreement
which are incorporated herein by reference, the Company agrees to issue and sell
to the Agent and the latter agrees to purchase from the Company the number of
shares of the Purchased Securities at the time and place and at the purchase
price set forth in the Schedule hereto.

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Agent and the Company in accordance with its terms.

 

Very truly yours, SUPERCONDUCTOR TECHNOLOGIES INC. By:  

 

  Name:   Title:

 

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Accepted as of the date hereof: CITADEL SECURITIES LLC By:  

 

  Name:   Title:

 

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Annex II

Information Supplied by the Agent

As sales agent, Citadel will not engage in any transactions that stabilize the
Company’s common stock.

Subject to the terms and conditions of this Agreement, Citadel will use its
commercially reasonable efforts to sell shares of common stock on the Company’s
behalf on a daily basis or as otherwise agreed upon by the Company and Citadel.

 

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Annex III

Form of Manatt Legal Opinion

 

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