Escrow Agreement




Exhibit 10.2


ESCROW AGREEMENT


      THIS ESCROW AGREEMENT (this “Agreement”) is made as of March 21, 2001, by
and among Illinois Superconductor Corporation, a corporation incorporated under
the laws of Delaware (the “Company”), Paul Revere Capital Partners, Ltd.
(“Purchaser”), and Epstein Becker & Green, P.C., having an address at 250 Park
Avenue, New York, NY 10177 (the “Escrow Agent”). Capitalized terms used but
not defined herein shall have the meanings set forth in the Common Stock
Purchase Agreement referred to in the first recital.


      WHEREAS, the Purchaser will from time to time as requested by the Company,
purchase shares of the Company’s Common Stock and Warrants from the Company as
set forth in that certain Common Stock Purchase Agreement (the “Purchase
Agreement”) dated the date hereof between the Purchaser and the Company, which
shares shall be issued pursuant to the terms and conditions contained herein
and in the Purchase Agreement; and


      WHEREAS, the Company and the Purchaser have requested that the Escrow
Agent hold in escrow and then distribute the initial documents and certain
funds which are conditions precedent to the effectiveness of the Purchase
Agreement, and have further requested that upon each exercise of a Draw Down,
the Escrow Agent hold the relevant documents and the applicable purchase price
pending receipt by Purchaser of the securities issuable upon such Draw Down;


      NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:


ARTICLE I


TERMS OF THE ESCROW FOR THE INITIAL CLOSING


      1.1.  The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and documents which
are referenced in Section 4.2 of the Purchase Agreement.


      1.2.  At the Initial Closing, the Company shall deliver to the Escrow
Agent:



		
	 	      (i) the sum of $25,000 for the
Purchaser’s legal and administrative expenses;




		
	 	      (ii) the original executed Company
counterpart of this Escrow Agreement; and











		
	 	(iii) the original executed Company
counterpart of the Purchase Agreement.



      1.3.  Upon receipt of the foregoing, and receipt of executed counterparts
from Purchaser of the Purchase Agreement and this Escrow Agreement, the Escrow
Agent shall immediately transfer the sum of $25,000 to Epstein Becker & Green,
P.C. for the Purchaser’s legal and administrative costs and shall then arrange
to have the Purchase Agreement and this Escrow Agreement delivered to the
parties.


      1.4  Wire transfers to the Escrow Agent (not address for notice or delivery
of documents) shall be made as follows:



		
	 	Epstein Becker & Green, P.C.

Master Escrow Account

Chase Manhattan Bank

1411 Broadway —Fifth Floor

New York, New York 10018

ABA No. 021000021

Account No. 035 1 346036

Attention: L. Borneo



ARTICLE II


TERMS OF THE ESCROW FOR EACH DRAW DOWN


      2.1.  Each time the Company shall send a Draw Down Notice to the Purchaser
as provided in the Purchase Agreement, it shall send a copy, by facsimile, to
the Escrow Agent.


      2.2.  Each time the Purchaser shall purchase Shares pursuant to a Draw
Down, the Purchaser shall send the applicable Purchase Price of the Draw Down
Shares to the Escrow Agent. Upon receipt of such funds, the Escrow Agent shall
advise the Company that it has received the funds for such Draw Down Shares.
The Company shall promptly, but no later than one (1) Trading Day after receipt
of such funding notice from the Escrow Agent:



			
		(i)	cause its transfer agent to issue the
Draw Down Shares to the Purchaser via DTC’s DWAC system
to the account specified by the Purchaser from time to
time;




			
		(ii)	deliver a Form 424(b) supplemental
prospectus to the Purchaser; and




			
		(iii)	the applicable Warrant.




      2.3.  Upon receipt of written confirmation from the transfer agent or from
the Purchaser that such Draw Down Shares have been so deposited and the Warrant
and the supplemental prospectus have been so delivered, the Escrow Agent shall,
within one (1) Trading

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Day, wire 96% of the Purchase Price of such Draw Down Shares per the
written instructions of the Company, net of $1,000 as escrow expenses to the
Escrow Agent, and wire the remaining 4% of the Purchase Price per the written
instructions of Ladenburg Thalmann & Co. Inc.


      2.4.  In the event that such Draw Down Shares are not in the Purchaser’s
DTC account and the opinion and supplemental prospectus are not delivered to
the Purchaser within two (2) Trading Days of the date of the Escrow Agent’s
notice, then Purchaser shall have the right to demand, by notice, the return of
the Purchase Price, and such Draw Down Notice shall be deemed cancelled.


ARTICLE III


MISCELLANEOUS


      3.1.  No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.


      3.2.  All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as set forth in the Purchase Agreement.


      3.3.  This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties
hereto.


      3.4.  This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by their respective agents duly authorized in writing
or as otherwise expressly permitted herein.


      3.5.  Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine.
This Escrow Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.


      3.6.  The parties hereto expressly agree that this Escrow Agreement shall
be governed by, interpreted under and construed and enforced in accordance with
the laws of the State of New York. Except as expressly set forth herein, any
action to enforce, arising out of, or relating in any way to, any provisions of
this Escrow Agreement shall be brought in the Federal or state courts of New
York, New York as is more fully set forth in the Purchase Agreement.

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      3.7.  The Escrow Agent’s duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, Purchaser and the Escrow
Agent.


      3.8.  The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for
any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith, excepting only its own gross negligence or willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent’s attorneys-at-law (other than Escrow Agent itself)
shall be conclusive evidence of such good faith.


      3.9.  The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.


      3.10.  The Escrow Agent shall not be liable in any respect on account of
the identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder or hereunder.


      3.11.  The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent’s duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from
time to time, notwithstanding its duties as the Escrow Agent hereunder. The
Company consents to the Escrow Agent in such capacity as legal counsel for the
Purchaser and waives any claim that such representation represents a conflict
of interest on the part of the Escrow Agent. The Company understands that the
Purchaser and the Escrow Agent are relying explicitly on the foregoing
provision in entering into this Escrow Agreement.


      3.12.  The Escrow Agent’s responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Purchaser. In the event of any such resignation, the Purchaser and the
Company shall appoint a successor Escrow Agent.


      3.13.  If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

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      3.14.  It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
documents or the escrow funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent’s sole discretion (1) to
retain in the Escrow Agent’s possession without liability to anyone all or any
part of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a final
order, decree or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings
or (2) to deliver the escrow funds and any other property and documents held by
the Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.


      3.15.  The Company and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees,
agents and representatives from any and all claims, liabilities, costs or
expenses in any way arising from or relating to the duties or performance of
the Escrow Agent hereunder or the transactions contemplated hereby or by the
Purchase Agreement other than any such claim, liability, cost or expense to the
extent the same shall have been determined by final, unappealable judgment of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Escrow Agent.


[SIGNATURE PAGE FOLLOWS]


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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of this 21st day of March, 2001.




		
	 	ILLINOIS SUPERCONDUCTOR CORPORATION
	 
	 	By: /s/ Charles F. Willes

       Charles F. Willes, Chief Financial Officer
	 
	 	PAUL REVERE CAPITAL PARTNERS, LTD.
	 
	 	By: /s/ David Sims
	 	
       Name:


       Title:
	 
	 	ESCROW AGENT:
	 

	 	EPSTEIN BECKER & GREEN, P.C.
	 
	 	By: /s/ Robert F. Charron


       Robert F. Charron, Authorized Signatory




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