exv10w1



 




Exhibit 10.1




____________ Shares




SUPERCONDUCTOR
TECHNOLOGIES INC.



Shares of Common Stock
($0.001 par value)




PLACEMENT AGENT AGREEMENT




August 10, 2005




SG COWEN & CO., LLC

1221 Avenue of the Americas

New York, New York 10020



Dear Sirs:




     Superconductor Technologies Inc., a Delaware corporation (the “Company”), proposes to sell to
the Purchasers, pursuant to the terms of this Placement Agent Agreement (this “Agreement”) and the
Subscription Agreements in the form of Exhibit A attached hereto (the “Subscription
Agreements”) entered into with the Purchasers identified therein (each a “Purchaser” and,
collectively, the “Purchasers”), an aggregate of (i) 20,547,945 shares of Common Stock, $0.001 par
value (the “Common Stock”), of the Company and (ii) 4,109,589 warrants substantially in the form of
Exhibit B hereto (the “Warrants,” such number of warrants being equal to twenty percent
(20%) of the number of shares of stock proposed to be sold by the Company to the Purchasers) to
purchase the Common Stock. The aggregate of 17,123,288 shares so proposed to be sold is
hereinafter referred to as the “Firm Stock” and the 3,424,658 warrants so proposed to be sold is
hereinafter referred to as the “Firm Warrants,” and together with the Firm Stock, the “Firm
Securities”). The Company also proposes to sell to the Purchasers, upon the terms and conditions
set forth in Section 3(b) hereof, up to an additional 3,424,658 shares of Common Stock (such number
of shares of Common Stock being equal to twenty percent (20%) of the number of shares of Firm Stock
proposed to be sold by the Company to the Purchasers, the “Option Stock,” and together with the
Firm Stock, the “Stock”) and 684,932 warrants to purchase the Common Stock (such number of warrants
being equal to twenty percent (20%) of the number of shares of Option Stock proposed to be sold by
the Company to the Purchasers, the “Option Warrants,” and together with the Option Stock, the
“Option Securities”). The Firm Securities and the Option Securities are hereinafter collectively
referred to as the “Securities.” The Company hereby confirms its agreement with SG Cowen & Co.,
LLC (“SG Cowen”) as follows (certain terms used herein are defined in Section 13 hereof):


1. AGREEMENT TO ACT AS PLACEMENT AGENT; PLACEMENT OF SECURITIES. On the basis of the
representations, warranties and agreements of the Company herein contained, and subject to all the
terms and conditions of this Agreement:





(a) The Company hereby authorizes SG Cowen to act as its exclusive agent (in such capacity,
the “Placement Agent”) to solicit offers for the purchase of all or part of the Securities
from the Company in connection with the proposed offering of the Securities (the
“Offering”). Until the final Closing Date, the Company shall not,



 









 






without the prior consent of the Placement Agent, solicit or accept offers to purchase
Securities otherwise than through the Placement Agent.




(b) The Placement Agent agrees, as agent of the Company, to use its best efforts to solicit
offers to purchase the Securities from the Company on the terms and subject to the
conditions set forth in the Base Prospectus (as defined below) and the Prospectus Supplement
(as defined below). The Placement Agent shall make commercially reasonable efforts to assist
the Company in obtaining performance by each Purchaser whose offer to purchase Securities
has been solicited by the Placement Agent and accepted by the Company, but the Placement
Agent shall not, except as otherwise provided in this Agreement, be obligated to disclose
the identity of any potential purchaser or have any liability to the Company in the event
any such purchase is not consummated for any reason. Under no circumstances will the
Placement Agent be obligated to purchase any Securities for its own account and, in
soliciting purchases of Securities, the Placement Agent shall act solely as the Company’s
agent and not as principal. Notwithstanding the foregoing and except as otherwise provided
in Section 1(c), it is understood and agreed that the Placement Agent (or its
affiliates) may, solely at its discretion and without any obligation to do so, purchase
Securities as principal.




(c) Subject to the provisions of this Section 1, offers for the purchase of
Securities may be solicited by the Placement Agent as agent for the Company at such times
and in such amounts as the Placement Agent deems advisable. The Placement Agent shall
communicate to the Company, orally or in writing, each reasonable offer to purchase
Securities received by it as agent of the Company. The Company shall have the sole right to
accept offers to purchase the Securities and may reject any such offer, in whole or in part.
The Placement Agent shall have the right, in its discretion reasonably exercised, without
notice to the Company, to reject any offer to purchase Securities received by it, in whole
or in part, and any such rejection shall not be deemed a breach of its agreement contained
herein.




(d) The purchases of the Securities by the Purchasers shall be evidenced by the execution of
the Subscription Agreements by each of the parties thereto.




(e) As compensation for services rendered, on each Closing Date the Company shall pay to the
Placement Agent by wire transfer of immediately available funds to an account or accounts
designated by the Placement Agent, an amount equal to six percent (6%) of the gross proceeds
received by the Company from the sale of the Securities on such Closing Date.




(f) No Securities which the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company, until such Securities
shall have been delivered to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Securities to a Purchaser whose offer it
has accepted, the Company shall indemnify and hold the Placement Agent harmless against any
loss, claim or damage arising from or as a result of such default by the Company.




(g) The Placement Agent shall make reasonable efforts to obtain a communication from the
National Association of Securities Dealers, Inc. (“NASD”) indicating that



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the NASD shall have raised no objection to the fairness and reasonableness of the placement
agent terms and arrangements.


2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ITS SUBSIDIARY. The Company and its
Subsidiary (as defined below) represent and warrant to, and agree with, the Placement Agent and the
Purchasers that:





(a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933,
as amended (the “Securities Act”), and has filed with the Securities and Exchange Commission
(the “Commission”) a registration statement on such form (Registration File No. 333-111818),
which became effective as of March 17, 2004, for the registration under the Securities Act
of the Securities, including, but not limited to, any shares of Common Stock issuable upon
exercise of the Warrants (the “Warrant Stock”). Such registration statement meets the
requirements set forth in Rule 415(a)(1)(x) under the Securities Act and complies with said
Rule. The Company will file with the Commission pursuant to, and in compliance with, Rule
424(b) under the Securities Act, and the rules and regulations (the “Rules and Regulations”)
of the Commission promulgated thereunder, a supplement to the form of prospectus included in
such registration statement relating to the placement of the Securities and the plan of
distribution thereof. Such registration statement, including the exhibits thereto, as
amended at the date of this Agreement, is hereinafter called the “Registration Statement”;
such prospectus in the form in which it appears in the Registration Statement is hereinafter
called the “Base Prospectus”; and the supplemented form of prospectus, in the form in which
it will be filed with the Commission pursuant to Rule 424(b) (including the Base Prospectus
as so supplemented) is hereinafter called a “Prospectus Supplement.” Any reference herein to
the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the documents incorporated by reference therein (the “Incorporated
Documents”) pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), on or before the date of this Agreement, or
the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be; and
any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to
refer to and include the filing of any document under the Exchange Act after the date of
this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as
the case may be, deemed to be incorporated therein by reference. All references in this
Agreement to financial statements and schedules and other information which is “contained,”
“included,” “described,” “set forth” or “stated” in the Registration Statement, the Base
Prospectus or the Prospectus Supplement (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other information
which is or is deemed to be incorporated by reference in the Registration Statement, the
Base Prospectus or the Prospectus Supplement, as the case may be. No stop order suspending
the effectiveness of the Registration Statement or the use of the Base Prospectus or the
Prospectus Supplement has been issued, and no proceeding for any such purpose is pending or
has been initiated or, to the Company’s knowledge, is threatened by the Commission.



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(b) The Registration Statement (and any further documents to be filed with the Commission)
contains all exhibits and schedules as required by the Securities Act. Each of the
Registration Statement and any post-effective amendment thereto, at the time it became
effective, complied in all material respects with the Securities Act and the Exchange Act
and the applicable Rules and Regulations and did not and, as amended or supplemented, if
applicable, 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. The Base Prospectus and the Prospectus Supplement, each as of its respective
date, comply in all material respects with the Securities Act and the Exchange Act and the
applicable Rules and Regulations. Each of the Base Prospectus and the Prospectus Supplement,
as amended or supplemented, did not and will not contain as of the date thereof any untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made, not
misleading. The Incorporated Documents, when they were filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and the applicable Rules
and Regulations, and none of such documents, when they were filed with the Commission,
contained any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and any further documents so filed
and incorporated by reference in the Base Prospectus or Prospectus Supplement, when such
documents are filed with the Commission, will conform in all material respects to the
requirements of the Exchange Act and the applicable Rules and Regulations, as applicable,
and will not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. Notwithstanding the foregoing,
the Company makes no representations or warranties as to information, if any, contained in
or omitted from the Prospectus Supplement or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the Company by or
on behalf of the Placement Agent specifically for use in the Registration Statement or the
Prospectus Supplement, which information the parties hereto agree is limited to the
Placement Agent’s Information as defined in Section 15. No post-effective amendment to the
Registration Statement reflecting any facts or events arising after the date thereof which
represent, individually or in the aggregate, a fundamental change in the information set
forth therein is required to be filed with the Commission. There are no documents required
to be filed with the Commission in connection with the Offering that (x) have not been filed
as required pursuant to the Securities Act or (y) will not be filed within the requisite
time period. There are no contracts or other documents required to be described in the Base
Prospectus or Prospectus Supplement, or to be filed as exhibits or schedules to the
Registration Statement, which have not been described or filed as required.




(c) The Company has delivered, or will as promptly as practicable deliver, to the Placement
Agent complete conformed copies of the Registration Statement and of each consent and
certificate of experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and the Base Prospectus and the Prospectus Supplement, as
amended or supplemented, in such quantities and at such places as the Placement Agent
reasonably requests. Neither the Company nor any of its directors and officers has
distributed and none of them will distribute, prior to the completion of the distribution of
Securities, any offering material in connection with the offering and sale of the Securities
other than the Base Prospectus, the Prospectus



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Supplement, the Registration Statement, copies of the documents incorporated by reference
therein and any other materials permitted by the Securities Act.




(d) Each of the Company and Conductus, Inc., a wholly-owned subsidiary of the Company (the
“Subsidiary”), has been duly organized and are validly existing as corporations or other
legal entities in good standing (or the equivalent thereof, if any) under the laws of their
respective jurisdictions of incorporation, are duly qualified to do business and are in good
standing (or the equivalent thereof, if any) as foreign corporations in each jurisdiction in
which their respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and has all power and authority necessary to own or
hold their respective properties and to conduct the businesses in which they are engaged,
except where the failure to be so qualified and in good standing or have such power or
authority would not have, singularly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operations, business, properties or prospects
of the Company and its Subsidiary taken as a whole (a “Material Adverse Effect”).




(e) The Securities and the Warrant Stock to be issued and sold by the Company pursuant to
the Subscription Agreements have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and validly issued,
fully paid and nonassessable and free of any preemptive or similar rights. The Securities
and the Warrant Stock conform to the description thereof contained in the Base Prospectus
and the Prospectus Supplement.




(f) The Company has an authorized capitalization as set forth in the Base Prospectus and the
Prospectus Supplement, all of the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and non-assessable,
have been issued in compliance with federal and state securities laws, and conform to the
description thereof contained in the Base Prospectus and the Prospectus Supplement. None of
the outstanding shares of Common Stock 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 or its
Subsidiary that have been granted by the Company other than those accurately described in
the Base Prospectus and the Prospectus Supplement. The description of the Company’s stock
option, stock bonus and other stock plans or arrangements, and the options or other rights
granted thereunder, as described in the Base Prospectus and the Prospectus Supplement
accurately and fairly present the information required to be shown with respect to such
plans, arrangements, options and rights.




(g) All the outstanding shares of capital stock of the Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable and, except to the extent set forth in
the Base Prospectus and the Prospectus Supplement, are owned directly by the Company, and
except as set forth on Schedule I are free and clear of any claim, lien, encumbrance,
security interest, defect or restriction upon voting or transfer or any other claim of any
kind (“Liens”).




(h) The Company has the full right, power and authority to enter into this Agreement, each
of the Subscription Agreements and the Warrants and to perform



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and to discharge its obligations hereunder and thereunder; and this Agreement, each of the
Subscription Agreements and the Warrants has been duly authorized, executed and delivered by
the Company, and constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.




(i) The execution, delivery and performance of this Agreement, each of the Subscription
Agreements and the Warrants by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the Company or its
Subsidiary is a party or by which the Company or its Subsidiary is bound or to which any of
the property or assets of the Company or its Subsidiary is subject, except where such
conflict, breach, violation or default would not reasonably be expected to have a Material
Adverse Effect, nor will such actions result in any violation of the provisions of the
charter or by-laws of the Company or its Subsidiary or any statute, law, rule or regulation
or any judgment, order or decree of any court or governmental agency or body having
jurisdiction over the Company or its Subsidiary or any of their properties or assets.




(j) There is no franchise, contract, lease, instrument or other document of a character
required by the Securities Act or the Rules and Regulations to be described in the Base
Prospectus and the Prospectus Supplement, or to be filed as an exhibit to the Registration
Statement, which is not described or filed as required; and all statements summarizing any
such franchises, contracts, leases, instruments or other documents or legal matters
contained in the Registration Statement are accurate and complete in all material respects.
Other than as described in the Base Prospectus and the Prospectus Supplement, no such
franchise, contract, lease, instrument or other document has been suspended or terminated
for convenience or default by the Company or any of the other parties thereto, the Company
has not sent or received any communication regarding intent not to renew any such franchise,
contract, lease, instrument or other document, and the Company has not received notice or
any other knowledge of any such pending or threatened suspension, termination or
non-renewal, except for such pending or threatened suspensions, terminations or non-renewals
that would not reasonably be expected to, singularly or in the aggregate, have a Material
Adverse Effect.




(k) All existing minute books of the Company and its Subsidiary, including all existing
records of all meetings and actions of the board of directors (including, Audit,
Compensation, Nomination/Corporate Governance and other board committees) and stockholders
of the Company through the date of the latest meeting and action (collectively, the
“Corporate Records”) have been made available to the Placement Agent and counsel for the
Placement Agent. All such Corporate Records are complete and accurately reflect, in all
material respects, all transactions referred to in such Corporate Records. There are no
material transactions, agreements or other actions of the Company that are not properly
approved and/or recorded in the Corporate Records.




(l) No consent, approval, authorization, filing with or order of or registration with, any
court or governmental agency or body is required in connection with the transactions
contemplated herein or in the Subscription Agreements, except such as have been obtained or
made under the Securities Act or the Exchange Act and such as



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may be required under the securities, or blue sky, laws of any jurisdiction or the by-laws
and rules of the NASD in connection with the offer and sale of the Securities by the Company
in the manner contemplated herein and in the Base Prospectus and the Prospectus Supplement.




(m) Except as described in the Base Prospectus and the Prospectus Supplement, (i) no person
has the right, contractual or otherwise, to cause the Company to issue or sell to it any
            shares of Common Stock or shares of any other capital stock or other equity interests of the
Company, (ii) no person has any preemptive rights, resale rights, rights of first refusal or
other rights to purchase any shares of Common Stock or shares of any other capital stock or
other securities of the Company, and (iii) except as provided herein, no person has the
right to act as an underwriter, placement agent or financial advisor to the Company in
connection with and as a result of the offer and sale of the Securities, in the case of each
of the foregoing clauses (i), (ii) and (iii), whether as a result of the filing or
effectiveness of the Registration Statement or the sale of the Securities as contemplated
thereby or otherwise; no person has the right, contractual or otherwise, to cause the
Company to register under the Securities Act any shares of Common Stock or shares of any
other capital stock or other securities of the Company, or to include any such shares or
interests in the Registration Statement or the offering contemplated thereby, whether as a
result of the filing or effectiveness of the Registration Statement or the sale of the
Securities as contemplated thereby or otherwise, except for persons and entities who have
expressly waived such right or who have been given timely and proper notice and have failed
to exercise such right within the time or times required under the terms and conditions of
such right, and the Company is not required to file any registration statement for the
registration of any securities of any person or register any such securities pursuant to any
other registration statement filed by the Company under the Securities Act for a period of
at least 90 days after the date hereof.




(n) The financial statements, together with the related notes and schedules, of the Company
included in the Base Prospectus, the Prospectus Supplement or the Registration Statement, or
incorporated by reference therein, as the case may be, present fairly the financial
condition, results of operations and cash flows of the Company and its consolidated
subsidiary and other consolidated entities as of the dates and for the periods indicated,
comply in all material respects with the Securities Act and the Rules and Regulations
thereunder, and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved. No other
financial statements or supporting schedules or exhibits are required by the Securities Act
or the Rules and Regulations thereunder to be included in the Base Prospectus, the
Prospectus Supplement or the Registration Statement, or incorporated by reference therein,
as the case may be.




(o) Except as set forth in the Base Prospectus and the Prospectus Supplement, there is no
legal or governmental proceeding pending to which the Company or its Subsidiary is a party
or of which any property or assets of the Company or its Subsidiary is the subject which is
required to be described in the Base Prospectus or the Prospectus Supplement and is not
described therein, or which, singularly or in the aggregate, if determined adversely to the
Company or its Subsidiary, might have a Material Adverse Effect or would prevent or
adversely affect the ability of the Company to perform its obligations under this Agreement;
and to the Company’s



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knowledge, no such proceedings are threatened or contemplated by governmental authorities or
threatened by others.




(p) The Company and its Subsidiary have good and marketable title to all property (real and
personal) described in the Registration Statement, the Base Prospectus and the Prospectus
Supplement as being owned by the Company or its Subsidiary, free and clear of all Liens,
except for those Liens that do not materially interfere with the use made or proposed to be
made of such property by the Company or its Subsidiary or that would not have a Material
Adverse Effect; all the property described in the Registration Statement, the Base
Prospectus and the Prospectus Supplement as being held under lease by the Company or its
Subsidiary is held thereby under valid, subsisting and enforceable leases except where the
failure of a lease to be valid, subsisting or enforceable would not have a Material Adverse
Effect.




(q) Neither the Company nor its Subsidiary is (i) in violation of any provision of its
charter or bylaws, (ii) in default in any respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the due performance or
observance of any term, covenant, or condition of any indenture, contract, lease, mortgage,
deed of trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or by which it is bound or to which any of its
property or assets is subject, or (iii) in violation in any respect of any statute, law,
rule, regulation, ordinance, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having jurisdiction
over the Company, its Subsidiary or any of its properties, as applicable, except, with
respect to clauses (ii) and (iii), any violations or defaults which, singularly or in the
aggregate, would not have a Material Adverse Effect.




(r) The contracts described in the Company’s regular reports on Forms 10-Q, 10-K, and 8-K as
filed by the Company with the Commission or incorporated by reference therein that are
material to the Company are in full force and effect on the date hereof, and neither the
Company nor, to the Company’s knowledge, any other party to such contracts is in breach of
or default under any of such contracts which would have a Material Adverse Effect.




(s) No labor problem or dispute with the employees of the Company exists or, to the
Company’s knowledge, is threatened or imminent, which might be expected to have a Material
Adverse Effect. The Company is not aware that any key employee or significant group of
employees of the Company or its Subsidiary plans to terminate employment with the Company or
such Subsidiary.




(t) Each of the Company and its Subsidiary has fulfilled its obligations, if any, under the
minimum funding standards of Section 302 of the United States Employee Retirement Income
Security Act of 1974 (“ERISA”) and the regulations and published interpretations thereunder
with respect to each “plan” (as defined in Section 3(3) of ERISA and such regulations and
published interpretations) in which employees of the Company and its Subsidiary are eligible
to participate and each such plan is in compliance in all material respects with the
presently applicable provisions of ERISA and such regulations and published interpretations.
No “prohibited transaction” (as defined in Section 406 of ERISA, or Section 4975 of the
Internal



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Revenue Code of 1986, as amended from time to time (the “Code”)) has occurred with respect
to any employee benefit plan which could have a Material Adverse Effect. Each of the
Company and its Subsidiary has not incurred any unpaid liability to the Pension Benefit
Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to
any such plan under Title IV of ERISA. Each “pension plan” (as defined in ERISA) for which
the Company would have any liability that is intended to be qualified under Section 401(a)
of the Code is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which could cause the loss of such qualification.




(u) Each of the Company and its Subsidiary carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries; all such insurance is fully in force on
the date hereof and will be fully in force on each Closing Date.




(v) Each of the Company and its Subsidiary has made all filings, applications and
submissions required by, and possesses all approvals, licenses, certificates,
certifications, clearances, consents, exemptions, marks, notifications, orders, permits and
other authorizations issued by, the appropriate federal, state or foreign regulatory
authorities necessary to conduct its businesses (collectively, “Permits”), except for such
Permits which the failure to obtain would not have a Material Adverse Effect, and is in
compliance with the terms and conditions of all such Permits; all of such Permits held by
each of the Company and its Subsidiary are valid and in full force and effect; there is no
pending or threatened action, suit, claim or proceeding which may cause any such Permit to
be limited, revoked, cancelled, suspended, modified or not renewed and each of the Company
and its Subsidiary has not received any notice of proceedings relating to the limitation,
revocation, cancellation, suspension, modification or non-renewal of any such Permit which,
singularly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated by the Base
Prospectus or the Prospectus Supplement.




(w) PriceWaterhouseCoopers LLP, who has certified certain financial statements of the
Company and delivered their report with respect to the audited consolidated financial
statements and schedules included in the Base Prospectus, the Prospectus Supplement or the
Registration Statement, or incorporated by reference therein, as the case may be, are
independent public accountants with respect to the Company within the meaning of the
Securities Act and the Rules and Regulations.




(x) Each of the Company and its Subsidiary has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof (except in any
case in which the failure so to file would not have a Material Adverse Effect, except as set
forth in the Base Prospectus and the Prospectus Supplement) and has paid all taxes required
to be paid by it and any other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or as would not have a Material
Adverse Effect, except as set forth in the Base Prospectus and the Prospectus Supplement.



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(y) The principal executive officer and principal financial officer of the Company have made
all certifications required by the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “Sarbanes-Oxley Act”), and the statements contained
in any such certification are complete and correct. The Company maintains “disclosure
controls and procedures” (as defined in Rule 13a-14(c) under the Exchange Act), and such
controls and procedures are designed (i) to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms and (ii) to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company’s management, including its principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding required
disclosure. The Company does not have any material weaknesses in internal controls, and
there has been no fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls. The Company is
otherwise in compliance in all respects with all applicable effective provisions of the
Sarbanes-Oxley Act and the rules and regulations promulgated by the Commission (and intends
to comply with all applicable provisions that are not yet effective upon effectiveness).




(z) Each of the Company and its Subsidiary 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 authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability of 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 the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences.




(aa) Each of the Company and its Subsidiary (i) is in compliance in all material respects
with any and all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) has received
and is in compliance with all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (iii) has not received notice of
any actual or potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants, except where
such non-compliance with Environmental Laws, failure to receive required permits, licenses
or other approvals, or liability would not, individually or in the aggregate, have a
Material Adverse Effect, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated by the Base Prospectus and the Prospectus
Supplement (exclusive of any supplement thereto). The Company has not been named as a
“potentially responsible party” under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.




(bb) There has been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of medical wastes, toxic wastes, hazardous



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wastes or hazardous substances by the Company or its Subsidiary (or, to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or its Subsidiary in violation of any applicable
Environmental Law which would require remedial action under any applicable Environmental
Law, except for any violation or remedial action which would not cause, singularly or in the
aggregate with all such violations and remedial actions, a Material Adverse Effect; there
has been no material spill, discharge, leak, emission, injection, escape, dumping or release
of any kind onto such property or of any medical wastes, toxic wastes, hazardous wastes or
hazardous substances due to or caused by the Company or its Subsidiary or with respect to
which the Company or its Subsidiary had knowledge, except for any such spill, discharge,
leak, emission, injection, escapes, dumpings or releases which would not cause or would not
be reasonably likely to cause, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings or releases, a Material Adverse
Effect; and the terms “hazardous substances,” “toxic wastes,” “hazardous wastes” and
“medical wastes” shall have the meanings specified in any applicable Environmental Laws.




(cc) In the ordinary course of its business, the Company periodically reviews the effect of
Environmental Laws on the business, operations and properties of each of the Company and its
Subsidiary, in the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws, or any permit,
license or approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singularly or in the
aggregate, have a Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated by the Base Prospectus
and the Prospectus Supplement.




(dd) Each of the Company and its Subsidiary own, possess, license or have other rights to
use all foreign and domestic patents, patent applications, trade and service marks, trade
and service mark registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, Internet domain names, know-how and other intellectual property
necessary for the conduct of the Company’s business as now conducted or as proposed in the
Base Prospectus and the Prospectus Supplement to be conducted (collectively, the
“Intellectual Property”). Except as set forth in Schedule I and in the Base
Prospectus and the Prospectus Supplement (i) there are no rights of third parties to any
such Intellectual Property; (ii) to the Company’s knowledge, there is no infringement by
third parties of any such Intellectual Property; (iii) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the
Company’s and its Subsidiary’s rights in or to any such Intellectual Property, and the
Company is unaware of any facts which would form a reasonable basis for any such claim; (iv)
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; (v)
there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others that the Company and its Subsidiary infringe or otherwise violate any
patent, trademark, copyright, trade secret or other proprietary rights of others, and the
Company is unaware of any other fact which would form a reasonable basis for any such claim;



11









 






(vi) to the Company’s knowledge, there is no third-party patent or published patent
application which contains claims for which an Interference Proceeding could be reasonably
commenced against any patent or patent application that is part of the Intellectual
Property; (vii) there is no pending or, to the best of the Company’s knowledge, threatened
action, suit, proceeding or claim by others claiming the ownership of and interest in the
Intellectual Property; and (viii) each of the Company and its Subsidiary have taken all
steps necessary to perfect its ownership of and interest in the Intellectual Property;
except with respect to clauses (i) through (vii) any right, infringement, action, or claim
which would not be likely to have a Material Adverse Effect.




(ee) No relationship, direct or indirect, exists between or among the Company on the one
hand and the directors, officers, stockholders, customers or suppliers of the Company on the
other hand which is required to be described in the Base Prospectus and the Prospectus
Supplement and which is not so described.




(ff) Neither the Company nor any other person associated with or acting on behalf of the
Company including, without limitation, any director, officer, agent or employee of the
Company or its Subsidiary, has, directly or indirectly, while acting on behalf of the
Company or its Subsidiary (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses, or received or retained any funds, relating to
political activity; (ii) made any unlawful payment from corporate funds to, or received or
retained any unlawful funds from, foreign or domestic government officials or employees or
to or from foreign or domestic political parties or campaigns; (iii) violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful
payment or received or retained any other unlawful funds.




(gg) Neither the Company nor its Subsidiary is or, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as described in the Base
Prospectus and the Prospectus Supplement, will become an “investment company” as defined in
the Investment Company Act of 1940, as amended.




(hh) No forward-looking statement (within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act) contained in the Base Prospectus and the Prospectus
Supplement has been made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith.




(ii) Other than as contemplated by this Agreement, neither the Company nor its Subsidiary is
a party to any contract, agreement or understanding with any person that would give rise to
a valid claim against the Company or the Placement Agent for a brokerage commission,
finder’s fee or like payment in connection with the offering and sale of the Securities.




(jj) Neither the Company nor its Subsidiary has sustained, since the date of the latest
audited financial statements included in the Base Prospectus, the Prospectus Supplement or
the Registration Statement, or incorporated by reference therein, as the case may be, any
material loss or interference with its business from fire, explosion, flood, terrorist act
or other calamity, whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth in or contemplated by
the Base Prospectus and the Prospectus Supplement.



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(kk) Except as set forth in or as otherwise contemplated by the Registration Statement, the
Base Prospectus or the Prospectus Supplement, subsequent to the respective dates as of which
information is given in the Registration Statement, the Base Prospectus and the Prospectus
Supplement, there has not been (i) any material adverse change, or any development that
would reasonably be expected to result in a material adverse change, in the business,
properties, management, financial condition or results of operations of the Company taken as
a whole, (ii) any transaction which is material to the Company taken as a whole, (iii) any
obligation, direct or contingent (including any off-balance sheet obligations), incurred by
the Company outside the ordinary course of business, which is material to the Company taken
as a whole, (iv) any change in the capital stock (other than the issuance of shares of
Common Stock upon exercise of stock options and warrants disclosed as outstanding in the
Registration Statement, the Base Prospectus and the Prospectus Supplement and the grant of
options under existing stock option plans described in the Registration Statement, the Base
Prospectus and the Prospectus Supplement) or outstanding indebtedness of the Company or (v)
any dividend or distribution of any kind declared, paid or made on the capital stock of the
Company.




(ll) Any statistical and market-related data included in the Registration Statement, the
Base Prospectus or the Prospectus Supplement are based on or derived from sources that the
Company believes to be reliable and accurate, and the Company has obtained the written
consent to the use of such data from such sources to the extent required.




(mm) The Stock is registered under the Exchange Act and is duly listed and admitted and
authorized for trading, subject to official notice of issuance, on the Nasdaq National
Market (“Nasdaq”) and the Company has taken no action designed to terminate, or likely to
have the effect of terminating the registration of the Common Stock under the Exchange Act
or delisting or suspending from trading the Common Stock from Nasdaq, nor, except as
described on Schedule I hereto, has the Company received any information suggesting that the
Commission or the NASD is contemplating terminating or suspending such registration or
listing.




(nn) Neither the Company nor its Subsidiary nor any of their officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed or intended
to stabilize or manipulate the price of any security of the Company, or which caused or
resulted in, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.




(oo) Neither the Company nor its Subsidiary nor any of their officers, directors or
affiliates has offered, or caused any Placement Agent to offer, Stock to any person with the
intent to influence unlawfully (i) a customer or supplier of the Company or its Subsidiary
to alter the customer’s or supplier’s level or type of business with the Company or its
Subsidiary, or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its Subsidiary or any of their respective products or
services.




(pp) There are no affiliations with the NASD among the Company’s officers, directors or, to
the knowledge of the Company, any five percent or greater stockholder of the Company, except
as set forth in the Base Prospectus, the



13









 






Prospectus Supplement or the Registration Statement or otherwise disclosed in writing to the
Placement Agent.




(qq) The Company has provided the Placement Agent true, correct, and complete copies of all
documentation pertaining to any extension of credit in the form of a personal loan made,
directly or indirectly, by the Company to any director or executive officer of the Company,
or to any family member or affiliate of any director or executive officer of the Company
that is currently outstanding; and since December 31, 2003, the Company has not, directly or
indirectly, including its Subsidiary: (i) extended credit, arranged to extend credit, or
renewed any extension of credit, in the form of a personal loan, to or for any director or
executive officer of the Company, or to or for any family member or affiliate of any
director or executive officer of the Company; or (ii) made any material modification,
including any renewal thereof, to any term of any personal loan to any director or executive
officer of the Company, or any family member or affiliate of any director or executive
officer, which loan was outstanding on December 31, 2003, except as disclosed in the Base
Prospectus, the Prospectus Supplement or the Registration Statement.




(rr) The Company has taken all necessary actions to ensure that, upon and at all times after
the Nasdaq National Market shall have approved the Stock and the Warrant Stock for
inclusion, it will be in compliance with all applicable corporate governance requirements
set forth in the Nasdaq National Marketplace Rules that are then in effect and is actively
taking steps to ensure that it will be in compliance with other applicable corporate
governance requirements set forth in the Nasdaq National Marketplace Rules not currently in
effect upon and all times after the effectiveness of such requirements.




(ss) No approval of the stockholders of the Company under the rules and regulations of any
trading market is required for the Company to issue and deliver to the Purchasers the
Securities and the Warrant Stock, including such as may be required pursuant to Rule 4350 of
the Nasdaq National Marketplace Rules.



     Any certificate signed by any officer of the Company and delivered to the Placement Agent or
counsel for the Placement Agent in connection with the offering of the Securities shall be deemed a
representation and warranty by the Company and its Subsidiary, as to the matters covered thereby,
to the Placement Agent and the Purchasers.


3. THE CLOSING.




     (a) First Closing. The time and date of closing and delivery of the documents required to be
delivered to the Placement Agent pursuant to Section 6 hereof in connection with the initial
purchase and sale of the Firm Securities (the “First Closing”) shall be at 10:00 A.M., local time,
on August 16, 2005 at the office of Guth|Christopher LLP, located at 10866 Wilshire Blvd, Suite
1250, Los Angeles, California 90024. (the “First Closing Date”). At the First Closing, the Company
will cause the transfer agent for the Firm Stock and Firm Warrants to deliver to each Purchaser the
number of shares of Firm Stock and Firm Warrants set forth on the signature page to such
Purchaser’s Subscription Agreement under the heading “Firm Shares” and “Firm Warrants,”,”
respectively, registered in the name of the Purchaser or, if so indicated on the Investor
Questionnaire attached as Exhibit A thereto, in the name of a nominee designated by such
Purchaser.



14









 





     (b) Option Closing. Pursuant to the terms of the Subscription Agreements, each Purchaser
shall have the option (the “Option”) to purchase the number of shares of Option Stock and Option
Warrants set forth on the signature page to such Purchaser’s Subscription Agreement under the
headings “Option Shares” and “Option Warrants,”,” respectively. The Option may be exercised as to
all or any part of the Option Securities at any time, and from time to time, during the period
beginning on the day after the First Closing Date (or, if such day is not a Business Day, the next
Business Day) and ending on the day which is ninety (90) Business Days after the First Closing Date
(or, if such day is not a Business Day, the next Business Day) (the “Option Period”). No Option
Securities shall be sold and delivered unless the Purchaser purchases the Firm Securities at the
First Closing. The right to purchase the Option Securities or any portion thereof may be
surrendered and terminated at any time during the Option Period upon notice by a Purchaser to the
Company and the Placement Agent.



     The Option, if exercised, shall be exercised by written notice (the “Option Notice”) being
given to the Company and the Placement Agent by the Purchaser setting forth the number of shares of
Option Stock and Option Warrants to be purchased by such Purchaser. The completion of the purchase
and sale of Option Securities (an “Option Closing”) will occur at a place and time (each, an
“Option Closing Date,” and together with the First Closing Date, the “Closing Dates”) to be
specified by the Company and the Placement Agent, and of which such Purchaser will be notified in
advance by the Placement Agent. Each Option Closing shall in no event be earlier than two (2)
Business Days nor later than five (5) Business Days after written notice is given. At an Option
Closing, the Company will cause the transfer agent for the Securities to deliver to the Purchaser
the number of shares of Option Stock and Option Warrants as set forth in the Option Notice
registered in the name of the Purchaser or, if so indicated on the Investor Questionnaire attached
as Exhibit A to the Subscription Agreement, in the name of a nominee designated by the
Purchaser.




4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the Placement Agent and the
Purchasers:





(a) (i) to make no further amendment or supplement prior to the Closing Dates to the
Registration Statement or any amendment or supplement to the Prospectus Supplement, without
the Placement Agent’s consent, which consent shall not be unreasonably withheld; (ii) for so
long as the delivery of a prospectus is required in connection with the offering or sale of
the Securities or the Warrant Stock, to advise the Placement Agent promptly after it
receives notice thereof, of the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the Prospectus Supplement or any
amended Prospectus Supplement has been filed and to furnish the Placement Agent with copies
thereof; (iii) subsequent to the date of the Prospectus Supplement and for so long as the
delivery of a prospectus is required in connection with the offering or sale of the
Securities and the Warrant Stock, to promptly file all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission and Nasdaq
pursuant to Section 13(a), 15 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus Supplement and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Securities and the Warrant Stock; (iv) to advise
the Placement Agent, promptly after it receives notices thereof, (x) of any request by the
Commission to amend the Registration Statement or to amend or supplement the Prospectus
Supplement or for additional information and (y) of the



15









 






issuance by the Commission, of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or any order directed at any
Incorporated Document or any amendment or supplement thereto or any order preventing or
suspending the use of the Base Prospectus or the Prospectus Supplement or any amendment or
supplement thereto, of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, of the institution or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus Supplement or for additional information; and, (v) in
the event of the issuance of any stop order or of any order preventing or suspending the use
of the Base Prospectus or Prospectus Supplement or suspending any such qualification,
promptly to use its reasonable best efforts to obtain the withdrawal of such order.




(b) To comply with the Securities Act and the Exchange Act, and the Rules and Regulations
thereunder, so as to permit the completion of the distribution of the Securities and the
Warrant Stock as contemplated in this Agreement and the Prospectus Supplement. If during the
period in which a prospectus is required by law to be delivered by a Placement Agent or a
dealer in connection with the distribution of Securities contemplated by the Prospectus
Supplement and the Warrant Stock, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Placement Agent or counsel for
the Placement Agent, it becomes necessary to amend or supplement the Prospectus Supplement
in order to make the statements therein, in the light of the circumstances existing at the
time the Prospectus Supplement is delivered to a purchaser, not misleading, or, if it is
necessary at any time to amend or supplement the Prospectus Supplement to comply with any
law, the Company promptly will prepare and file with the Commission, and furnish at its own
expense to the Placement Agent and to dealers, an appropriate amendment to the Registration
Statement or supplement to the Prospectus Supplement so that the Prospectus Supplement as so
amended or supplemented will not, in the light of the circumstances when it is so delivered,
be misleading, or so that the Prospectus Supplement will comply with such law. Before
amending the Registration Statement or supplementing the Base Prospectus in connection with
the Offering, the Company will furnish the Placement Agent with a copy of such proposed
amendment or supplement and will not file such amendment or supplement to which the
Placement Agent reasonably objects.




(c) To furnish promptly to the Placement Agent and to counsel for the Placement Agent a copy
of the Registration Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits filed therewith.




(d) To deliver promptly to the Placement Agent such number of the following documents as the
Placement Agent shall reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment thereto (in each case
excluding exhibits), (ii) the Base Prospectus, (iii) the Prospectus Supplement (not later
than 10:00 A.M., New York time, on the Business Day following the execution and delivery of
this Agreement) and any amendment or supplement thereto (not later than 10:00 A.M., New York
City time, on the Business Day following the date of such amendment or supplement); and (iv)
any document incorporated by reference in the Base Prospectus or Prospectus Supplement. The



16









 






Company will pay the expenses of printing or other production of all documents relating to
the Offering.




(e) To make generally available to its stockholders as soon as practicable, but in any event
not later than eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Securities Act), an earning statement of the Company (which
need not be audited) complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).




(f) To promptly take from time to time such actions as the Placement Agent may reasonably
request to qualify the Securities and the Warrant Stock for offering and sale under the
securities, or blue sky, laws of such jurisdictions (including without limitation any
post-filing requirements) as the Placement Agent may designate and to continue such
qualifications in effect for so long as required for the distribution of the Securities and
the Warrant Stock, and the Company will pay the fee of the NASD in connection with its
review of the Offering, if applicable. The Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or to file a general
consent to service of process in any jurisdiction.




(g) Not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell,
or otherwise dispose of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days from the date of the
Prospectus Supplement without the prior written consent of SG Cowen, other than the
Company’s sale of the Securities and issuance of shares or options to purchase shares
pursuant to qualified stock option plans, currently outstanding options, warrants or rights.
If (i) the Company issues an earnings release or material news or a material event relating
to the Company occurs during the last 17 days of the lock-up period, or (ii) prior to the
expiration of the lock-up period, the Company announces that it will release earnings
results during the 16-day period beginning on the last day of the lock-up period, the
restrictions imposed by this Section 4(g) shall continue to apply until the expiration of
the 18-day period beginning on the issuance of the earnings release or the occurrence of the
material news or material event.




(h) Prior to the First Closing Date, to furnish to the Placement Agent, as soon as they have
been prepared, copies of any unaudited interim consolidated financial statements of the
Company for any periods subsequent to the periods covered by the financial statements
appearing or incorporated by reference in the Base Prospectus, the Prospectus Supplement or
the Registration Statement.




(i) Prior to the First Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the Placement Agent is
notified), without the prior written consent of the Placement Agent, unless in the judgment
of the Company and its counsel, and after notification to the Placement Agent, such press
release or communication is required by law. In such event, the Company shall consult with
the Placement Agent as to the contents of such press release. During the period from the
First Closing Date to the final Closing Date, the Company agrees not to issue any press
release or other communication



17









 






directly or indirectly or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the Placement Agent is
notified), without (i) providing the Purchasers, at the time of issuance, with a copy of any
press release or other communication so issued or (ii) preparing and filing with the
Commission a Current Report on Form 8-K attaching as an exhibit thereto any written
materials relating to such press release, communication or press conference.




(j) To apply the net proceeds from the sale of the Securities as set forth in the Prospectus
Supplement under the heading “Use of Proceeds.”




(k) To comply in all material respects with all applicable securities and other applicable
laws, rules and regulations, including, without limitation, the Sarbanes-Oxley Act, and use
its best efforts to cause the Company’s directors and officers, in their capacities as such,
to comply with such laws, rules and regulations, including, without limitation, the
provisions of the Sarbanes-Oxley Act.




(l) To engage and maintain, at its expense, a registrar and transfer agent for the Stock.




(m) To not take any action prior to the First Closing Date which would require the
Prospectus Supplement to be amended or supplemented pursuant to Section 4(b).




(n) To supply the Placement Agent with copies of all correspondence to and from, and all
documents issued to and by, the Commission in connection with the registration of the
Securities and the Warrant Stock under the Securities Act.




(o) The Company will use its best efforts to ensure that the Stock is quoted on the Nasdaq
National Market at the Closing Date.




(p) The Company shall reserve and keep available at all times, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue the Warrant Stock.


5. PAYMENT OF EXPENSES. The Company agrees with the Placement Agent to pay (a) the costs incident
to the authorization, issuance, sale, preparation and delivery of the Securities and the Warrant
Stock to the Purchasers and any taxes payable in that connection; (b) the costs incident to the
Registration of the Securities and the Warrant Stock under the Securities Act; (c) the costs
incident to the preparation, printing and distribution of the Registration Statement, Base
Prospectus and Prospectus Supplement and any amendments and exhibits thereto or any document
incorporated by reference therein, and the costs of printing, reproducing and distributing, this
Agreement by mail, telex or other means of communication; (d) the fees and expenses (including
reasonable related fees and expenses of counsel for the Placement Agent) incurred in connection
with filings made with the NASD, (e) any applicable listing or other fees; (f) the fees and
expenses of qualifying the Securities and the Warrant Stock under the securities laws of the
several jurisdictions as provided in Section 4(f) and of preparing, printing and
distributing Blue Sky Memoranda (including related fees and expenses of counsel to the Placement
Agent); (g) all fees and expenses of the registrar and transfer agent of the Securities; (h) all
reasonable legal fees, expenses and costs




18









 




incurred by the Placement Agent in connection with this Agreement and the transactions contemplated
hereby, and (i) all other costs and expenses incident to the performance of the obligations of the
Company under this Agreement (including, without limitation, the fees and expenses of the Company’s
counsel and the Company’s independent accountants and the travel and other expenses incurred by
Company personnel in connection with any “roadshow” including, without limitation, any expenses
advanced by the Placement Agent on the Company’s behalf (which will be promptly reimbursed));
provided that, except as otherwise provided in Sections 7 and 9, the Company shall not be
obligated to pay for fees and expenses incurred by the Placement Agent in excess of $125,000.



6. Conditions to the Obligations of the Placement Agent and the Purchasers, and the Sale of the
Securities. The respective obligations of the Placement Agent and the Purchasers, and the
closing of the sale of the Securities hereunder are subject to the accuracy, when made and on each
Closing Date, of the representations and warranties on the part of the Company and its Subsidiary
contained herein, to the accuracy of the statements of the Company and its Subsidiary made in any
certificates pursuant to the provisions hereof, to the performance by the Company and its
Subsidiary of their obligations hereunder, and to each of the following additional terms and
conditions:





(a) No stop order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or threatened by the
Commission, and any request for additional information on the part of the Commission (to be
included in the Registration Statement, the Base Prospectus or the Prospectus Supplement or
otherwise) shall have been complied with to the reasonable satisfaction of the Placement
Agent. Any filings required to be made by the Company in accordance with Section
4(a) shall have been timely filed with the Commission.




(b) The Placement Agent shall not have discovered and disclosed to the Company on or prior
to each Closing Date that the Registration Statement, the Base Prospectus or the Prospectus
Supplement or any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of counsel for the Placement Agent, is material or omits to state any
fact which, in the opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.




(c) All corporate proceedings and other legal matters incident to the authorization, form,
execution, delivery and validity of each of this Agreement, the Securities, the Warrant
Stock, the Registration Statement, the Base Prospectus and the Prospectus Supplement and all
other legal matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel for the Placement
Agent, and the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.




(d) The Placement Agent shall have received from Guth|Christopher LLP, such counsel’s
written opinion, addressed to the Placement Agent and the Purchasers and dated as of (A) the
First Closing Date and (B) the First Option Closing Date (the “First Option Closing Date”),
in form and substance reasonably satisfactory to the Placement Agent as set forth in
Exhibit C attached hereto.



19









 






     Guth|Christopher LLP shall also have furnished to the Placement Agent a written
statement, addressed to the Placement Agent and dated as of (A) the First Closing Date and
(B) the First Option Closing Date, in form and substance satisfactory to the Placement
Agent, to the effect that (x) such counsel has acted as counsel to the Company in connection
with the preparation of the Registration Statement, (y) based on such counsel’s examination
of the Registration Statement and such counsel’s investigations made in connection with the
preparation of the Registration Statement and conferences with certain officers and
employees of and with auditors for and counsel to the Company, such counsel has no reason to
believe that (I) the Registration Statement, as of its effective date, contained any untrue
statement of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or that the
Base Prospectus or the Prospectus Supplement contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they were made,
not misleading or (II) any document incorporated by reference in the Base Prospectus or the
Prospectus Supplement or any further amendment or supplement to any such incorporated
document made by the Company prior to the Closing Date, when they became effective or were
filed with the Commission, as the case may be, contained, in the case of a registration
statement which became effective under the Securities Act, any untrue statement of a
material fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or, in the case of other
documents which were filed under the Exchange Act with the Commission, any untrue statement
of a material fact or omitted to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made, not
misleading; it being understood that such counsel need express no opinion as to the
financial statements or other financial data contained in the Registration Statement, the
Base Prospectus or the Prospectus Supplement.




(e) The Placement Agent shall have received from Brown Raysman Millstein Felder & Steiner
LLP, such opinion or opinions, dated the First Closing Date and addressed to the Placement
Agent, with respect to the issuance and sale of the Securities, the Registration Statement,
the Base Prospectus, the Prospectus Supplement (together with any supplement thereto) and
other related matters as the Placement Agent may reasonably require, and the Company shall
have furnished to such counsel such documents as they request for the purpose of enabling
them to pass upon such matters.




(f) The Company shall have furnished to the Placement Agent and the Purchasers a
certificate, dated as of each Closing Date , executed by its Chief Executive Officer and its
Chief Financial Officer stating that (i) such officers have carefully examined the
Registration Statement, the Base Prospectus and the Prospectus Supplement and, in their
opinion, the Registration Statement (including the Base Prospectus) as of its effective date
and the Prospectus Supplement, as of each such effective date, did not include any untrue
statement of a material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) since the effective
date of the Registration Statement no event has occurred which should have been set forth in
a supplement or amendment to the Registration Statement, the Base Prospectus or the
Prospectus Supplement, (iii) to



20









 






their knowledge after reasonable investigation, as of such Closing Date, the representations
and warranties of the Company and its Subsidiary in this Agreement are true and correct and
the Company and its Subsidiary have complied with all agreements and covenants contained in
this Agreement and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date, (iv) subsequent to the date of the most recent
financial statements included or incorporated by reference in the Base Prospectus and the
Prospectus Supplement, there has been no change in the financial position or results of
operation of the Company and its Subsidiary that could have a Material Adverse Effect, or
any change, or any development including a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects of the Company and
its Subsidiary taken as a whole, except as set forth in the Base Prospectus and the
Prospectus Supplement, and (v) the Registration Statement became effective on March 17,
2004, and to their knowledge, as of such Closing Date (I) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings for that
purpose have been commenced or are pending before or are contemplated by the Commission and
(II) no action has been taken by any governmental agency, body or official, and no
injunction, restraining order or order of any nature by any federal or state court has been
issued, which would prevent the issuance of the Securities.




(g) At the Execution Time, the Placement Agent shall have received from
PriceWaterhouseCoopers LLP a letter, addressed to the Placement Agent and dated such date,
in form and substance satisfactory to the Placement Agent (i) confirming that they are
independent certified public accountants with respect to the Company within the meaning of
the Securities Act and the Rules and Regulations and (ii) stating the conclusions and
findings of such firm with respect to the financial statements and certain financial
information contained or incorporated by reference in the Base Prospectus and the Prospectus
Supplement.




(h) On (A) the First Closing Date and (B) the First Option Closing Date, the Placement Agent
shall have received a letter (the “bring-down letter”) from PriceWaterhouseCoopers LLP
addressed to the Placement Agent and dated as of such Closing Date confirming, as of the
date of the bring-down letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given in the Base
Prospectus and the Prospectus Supplement as of a date not more than three Business Days
prior to the date of the bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its letter delivered to
the Placement Agent concurrently with the execution of this Agreement pursuant to
Section 6(g).




(i) (i) Neither the Company nor its Subsidiary shall have sustained since the date of the
latest audited financial statements included or incorporated by reference in the Base
Prospectus and the Prospectus Supplement any loss or interference with its business from
fire, explosion, flood, terrorist act or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth in or contemplated by the Base Prospectus and the Prospectus
Supplement, and (ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or its Subsidiary or any



21









 






change, or any development involving a prospective change, in or affecting the business,
general affairs, management, financial position, stockholders’ equity, results of operations
or prospects of the Company and its Subsidiary, otherwise than as set forth in or
contemplated by the Base Prospectus and the Prospectus Supplement, the effect of which, in
any such case described in clause (i) or (ii), is, in the judgment of the Placement Agent,
so material and adverse as to make it impracticable or inadvisable to proceed with the sale
or delivery of the Securities on the terms and in the manner contemplated by the Base
Prospectus and the Prospectus Supplement.




(j) The Stock is registered under the Exchange Act and, as of the Closing Date, the Stock
shall be listed and admitted and authorized for trading on the Nasdaq National Market, and
satisfactory evidence of such actions shall have been provided to the Placement Agent. The
Company shall have taken no action designed to, or likely to have the effect of terminating
the registration of the Stock under the Exchange Act or delisting or suspending from trading
the Stock from Nasdaq, nor, except as set forth on Schedule I, has the Company
received any information suggesting that the Commission or Nasdaq is contemplating
terminating such registration or listing.




(k) Subsequent to the execution and delivery of this Agreement, there shall not have
occurred any of the following: (i) trading in securities generally on the New York Stock
Exchange, the Nasdaq National Market or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any exchange or in
the over-the-counter market, shall have been suspended or minimum or maximum prices or
maximum ranges for prices shall have been established on any such exchange or such market by
the Commission, by such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state
authorities or a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, (iii) the United States shall have
become engaged in hostilities, or the subject of an act of terrorism, there shall have been
an escalation in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv) there shall have
occurred any other calamity or crisis or any change in general economic, political or
financial conditions in the United States or elsewhere, if the effect of any such event in
clause (iii) or (iv) makes it, in the sole judgment of the Placement Agent, impracticable or
inadvisable to proceed with the sale or delivery of the Securities and the Warrant Stock on
the terms and in the manner contemplated by the Base Prospectus and the Prospectus
Supplement.




(l) No action shall have been taken and no statute, rule, regulation or order shall have
been enacted, adopted or issued by any governmental agency or body which would, as of each
Closing Date, prevent the issuance or sale of the Securities or the Warrant Stock or
materially and adversely affect or potentially and adversely affect the business or
operations of the Company; and no injunction, restraining order or order of any other nature
by any federal or state court of competent jurisdiction shall have been issued as of each
Closing Date which would prevent the issuance or sale of the Securities or the Warrant Stock
or materially and adversely affect or potentially and adversely affect the business or
operations of the Company.



22









 






(m) The Company shall have prepared and filed with the Commission a Current Report on Form
8-K with respect to the Offering, including as an exhibit thereto this Agreement and any
other documents relating thereto.




(n) The Company shall have entered into Subscription Agreements with each of the Purchasers
and such agreements shall be in full force and effect.




(o) Prior to each Closing Date, the Company shall have furnished to SG Cowen such further
information, certificates and documents as SG Cowen may reasonably request.



     All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Placement Agent.


7. Indemnification and Contribution.





(a) The Company shall indemnify and hold harmless the Placement Agent, its officers,
employees, representatives and agents and each person, if any, who controls the Placement
Agent within the meaning of the Securities Act (collectively the “Placement Agent
Indemnified Parties” and each a “Placement Agent Indemnified Party”) against any loss,
claim, damage or liability, joint or several, or any action in respect thereof, to which
that Placement Agent Indemnified Party may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material fact contained
in the Base Prospectus, the Registration Statement or the Prospectus Supplement or in any
amendment or supplement thereto, (ii) the omission or alleged omission to state in the Base
Prospectus, the Registration Statement or the Prospectus Supplement or in any amendment or
supplement thereto a material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any breach of the representations and warranties of
the Company contained herein or (iv) any act or failure to act, or any alleged act or
failure to act, by the Placement Agent in connection with, or relating in any manner to, the
Securities, the Warrant Stock or the Offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i), (ii) or (iii) above; (provided that the
Company shall not be liable in the case of any matter covered by this clause (iv) to the
extent that it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such act or failure
to act undertaken or omitted to be taken by such Placement Agent through its gross
negligence or willful misconduct) and shall reimburse each Placement Agent Indemnified Party
promptly upon demand for any legal or other expenses reasonably incurred by that Placement
Agent Indemnified Party in connection with investigating or preparing to defend or defending
against or appearing as a third party witness in connection with any such loss, claim,
damage, liability or action 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, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from the Base
Prospectus, the Registration Statement or the Prospectus Supplement or any such amendment or
supplement in reliance upon and in conformity with written



23









 






information furnished to the Company by or on behalf of the Placement Agent specifically for
use therein, which information the parties hereto agree is limited to the Placement Agent’s
Information (as defined in Section 15). This indemnity agreement is not exclusive
and will be in addition to any liability, which the Company might otherwise have and shall
not limit any rights or remedies which may otherwise be available at law or in equity to
each Placement Agent Indemnified Party.




(b) The Placement Agent shall indemnify and hold harmless the Company its officers,
employees, representatives and agents, each of its directors and each person, if any, who
controls the Company within the meaning of the Securities Act (collectively the “Company
Indemnified Parties” and each a “Company Indemnified Party”) against any loss, claim, damage
or liability, joint or several, or any action in respect thereof, to which the Company
Indemnified Parties may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the Base Prospectus,
the Registration Statement or the Prospectus Supplement or in any amendment or supplement
thereto or (ii) 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, but in each
case only to the extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Placement Agent specifically for use
therein, and shall reimburse the Company Indemnified Parties for any legal or other expenses
reasonably incurred by such parties in connection with investigating or preparing to defend
or defending against or appearing as third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided that the
parties hereto hereby agree that such written information provided by the Placement Agent
consists solely of the Placement Agent’s Information. This indemnity agreement is not
exclusive and will be in addition to any liability, which the Placement Agent and the
Purchasers might otherwise have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to the Company Indemnified Parties.
Notwithstanding the provisions of this Section 7(b), in no event shall any indemnity
by the Placement Agent under this Section 7(b) exceed the total compensation
received by such Placement Agent in accordance with Section 1(e).




(c) Promptly after receipt by an indemnified party under this Section 7 of notice of
any claim or the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under this Section 7,
notify the indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall
not relieve it from any liability which it may have under this Section 7 except to
the extent it has been materially prejudiced by such failure; and, provided,
further, that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have to an indemnified party otherwise than under this
Section 7. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party to the



24









 






indemnified party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this Section 7
for any legal or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized by the indemnifying party in writing, (ii) such
indemnified party shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to those available to
the indemnifying party and in the reasonable judgment of such counsel it is advisable for
such indemnified party to employ separate counsel or (iii) the indemnifying party has failed
to assume the defense of such action in accordance with the terms hereof and employ counsel
reasonably satisfactory to the indemnified party, in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by the Placement Agent, if the
indemnified parties under this Section 7 consist of any Placement Agent Indemnified
Party, or by the Company if the indemnified parties under this Section 7 consist of
any Company Indemnified Parties. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 7(a) and 7(b) shall use all reasonable
efforts to cooperate with the indemnifying party in the defense of any such action or claim.
Subject to the provisions of Section 7(d) below, no indemnifying party shall be
liable for any settlement, compromise or consent to the entry of judgment in connection with
any such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action (other than a judgment entered with the
consent of such indemnified party), the indemnifying party agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability by reason of such
settlement or judgment.




(d) If at any time an indemnified party shall have requested that an indemnifying party
reimburse the indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by this
Section 7 effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the request for
reimbursement, (ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.




(e) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under Section 7(a) or
7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified
party,



25









 






contribute to the amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one hand and the
Placement Agent on the other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Placement Agent on the other
with respect to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand and the
Placement Agent on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities purchased under
this Agreement (before deducting expenses) received by the Company bears to the total
compensation received by the Placement Agent with respect to the Securities purchased under
this Agreement. 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 Placement Agent on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such untrue statement
or omission; provided that the parties hereto agree that the written information
furnished to the Company by the Placement Agent for use in the Prospectus Supplement
consists solely of the Placement Agent’s Information. The Company and the Placement Agent
agree that it would not be just and equitable if contributions pursuant to this Section
7(e) were to be determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7(e)
shall be deemed to include, for purposes of this Section 7(e), 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 Section
7(e), the Placement Agent shall not be required to contribute any amount in excess of
the total compensation received by such Placement Agent in accordance with Section
1(e) less the amount of any damages which such Placement Agent has otherwise paid or
become liable to pay by reason of any 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 Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.


8. Termination.  The obligations of the Placement Agent hereunder and of the
Purchasers under the Subscription Agreements may be terminated by the Placement Agent, in its
absolute discretion by notice given to the Company prior to delivery (including electronic
delivery) of and payment for the Securities if, prior to that time, any of the events described in
Sections 6(i) or 6(l) have occurred or if the Purchasers shall decline to purchase
the Securities for any reason permitted under this Agreement or the Subscription Agreements.



9. Reimbursement of Placement Agent’s Expenses.  If the sale of the Securities
provided for herein is not consummated because any condition to the obligations of the Placement
Agent and the Purchasers set forth in Section 6 hereof is not satisfied, because of


26









 






any termination pursuant to Section 8 hereof or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of a default by the Placement Agent, the Company will reimburse the
Placement Agent upon demand for all out-of-pocket expenses (including fees and disbursements of
counsel and any expenses advanced by the Placement Agent on the Company’s behalf) that shall have
been incurred by the Placement Agent in connection with this Agreement and the proposed purchase
and sale of the Securities and, upon demand, the Company shall pay the full amount thereof to SG
Cowen.



10. Successors; Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Placement Agent, the Purchasers, the Company, and
their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person other than the persons mentioned in the preceding sentence any
legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of no other person;
except that the representations, warranties, covenants, agreements and indemnities of the Company
contained in this Agreement shall also be for the benefit of the Placement Agent Indemnified
Parties and the Purchasers (provided that the Purchasers may only rely on the indemnities
of the Company contained in this Agreement to the extent they are in connection with a third party
claims) and the indemnities of the Placement Agent shall also be for the benefit of the Company
Indemnified Parties. It is understood that the Placement Agent’s responsibilities to the Company
are solely contractual in nature and the Placement Agent does not owe the Company, or any other
party, any fiduciary duty as a result of this Agreement.



11. Survival of Indemnities, Representations, Warranties, etc. The respective
indemnities, covenants, agreements, representations, warranties and other statements of the Company
and the Placement Agent, as set forth in this Agreement or made by them respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any investigation made by or
on behalf of the Placement Agent, the Company, the Purchasers or any person controlling any of them
and shall survive delivery of and payment for the Securities and the Warrant Stock.



12. Notices. All statements, requests, notices and agreements hereunder shall
be in writing, and:





(a) if to the Placement Agent, shall be delivered or sent by mail, telex or facsimile
transmission to SG Cowen & Co., LLC, 1221 Avenue of the Americas, New York, New York 10020,
Attention: Veronica Iuliano, Esq. (Fax: (212) 278-7995), with a copy to: Brown Raysman
Millstein Felder & Steiner LLP, 900 Third Avenue, New York, New York 10022, Attention:
Stuart Bressman, Esq. (Fax: 212-895-2900).




(b) if to the Company shall be delivered or sent by mail, telex or facsimile transmission to
Superconductor Technologies Inc., 460 Ward Drive, Santa Barbara, California, 93111,
Attention: Martin S. McDermut (Fax: 805-967-0342), with a copy to: Guth|Christopher LLP,
10866 Wilshire Blvd, Suite 1250, Los Angeles, California 90024, Attention: Lisa Hamilton
Klein, Esq. (Fax: 310-470-8354).


13. Definitions of Certain Terms.  The terms which follow, when used in this
Agreement, shall have the meanings indicated.




27









 









     “Business Day” shall mean any day on which the Nasdaq National Market is open for
trading.




     “Effective Date” shall mean each date and time that the Registration Statement (and any
post-effective amendment or amendments thereto) became or becomes effective.




     “Execution Time” shall mean the date and time that this Agreement is executed and
delivered by the parties hereto.




     “Interference Proceeding” shall have the meaning set forth in 35 U.S.C. § 135.




     “To the Company’s knowledge” and words of similar import shall mean that which any
director or officer of the Company knows or should have known using the exercise of
reasonable due diligence.


14. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.



15. Placement Agent’s Information. The parties hereto acknowledge and agree that, for
all purposes of this Agreement, the Placement Agent’s Information consists solely of the statements
concerning the Placement Agent contained in the third paragraph under the heading “Plan of
Distribution” in the Prospectus Supplement.



16. Partial Unenforceability. 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.



17. General. This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof. In this Agreement, the
masculine, feminine and neuter genders and the singular and the plural include one another. The
section headings in this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be amended or modified,
and the observance of any term of this Agreement may be waived, only by a writing signed by the
Company and the Placement Agent.



18. Counterparts. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.




28









 








     If the foregoing is in accordance with your understanding of the agreement between the Company
and the Placement Agent, kindly indicate your acceptance in the space provided for that purpose
below.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Very truly yours,
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	SUPERCONDUCTOR TECHNOLOGIES INC.
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Accepted as of
the date first above written:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SG COWEN & CO., LLC	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 






29









 






Exhibit A




Form of Subscription Agreement




30









 








Exhibit B




Form of Warrant




31









 








Exhibit C




Legal Opinion of Guth|Christopher LLP




32









 








Schedule I

Exceptions



2(g) The Company’s lender Silicon Valley Bank has a security interest in the stock of the
Subsidiary.



2(dd) There is a pending third party objection to Superconductor’s Amplink trademark registration.



2(mm) and 6(j) The Company has received a notice of deficiency from NASDAQ which was filed on a
Form 8-K dated April 4, 2005.





33