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                                                                   EXHIBIT 10.18




                              EMPLOYMENT AGREEMENT

         Employment Agreement dated and effective as of January 1, 1997, (this
"AGREEMENT"), between ILLINOIS SUPERCONDUCTOR CORPORATION, a Delaware
corporation (with its successors and assigns, referred to as the "COMPANY"),
and ORA E. SMITH ("SMITH").

                             PRELIMINARY STATEMENT

         Smith is now employed as the president and chief executive officer of 
the Company.

         The Company desires to continue to employ Smith, and Smith wishes to
continue to be employed by the Company, upon the terms and subject to the
conditions set forth in this Agreement.  The Company and Smith also wish to
enter into the other agreements set forth in this Agreement, all of which are
related to Smith's employment under this Agreement.

                                   AGREEMENT

         Smith and the Company therefore agree as follows:

         1.  EMPLOYMENT FOR TERM.  The Company hereby employs Smith and Smith
hereby accepts employment with the Company for the period beginning on January
1, 1997 and ending on December 31, 1997 (the "TERM"), or upon the earlier
termination of the Term pursuant to Section 6 below.  The end of the Term for
any reason shall end Smith's employment under this Agreement, but shall not
terminate Smith's or the Company's other obligations set forth in this
Agreement.

         2.  POSITION AND DUTIES.  During the Term, Smith shall serve as the
president and chief executive officer of the Company.  During the Term, Smith
shall also hold such additional positions and titles as the Board of Directors
of the Company (the "BOARD") may determine from time to time.  During the Term,
Smith shall devote substantially all of his business time and best efforts to
his duties as an employee of the Company.

         3.  COMPENSATION.

         (a)  BASE SALARY.  The Company shall pay Smith a base salary,
beginning on the first day of the Term and ending on the last day of the Term,
of not less than $203,960 per annum, payable at least monthly on the Company's
regular pay cycle for professional employees.

         (b)  OTHER AND ADDITIONAL COMPENSATION.  Section 3(a) establishes a
minimum salary during the Term, and shall not preclude the Board from awarding
Smith a higher salary or any bonuses or stock options in the discretion of the
Board during the Term at any time.
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         4.  EMPLOYEE BENEFITS.  During the Term, Smith shall be entitled to
the employee benefits, including vacation, health and other insurance benefits,
and deferred compensation arrangements, made available by the Company to any
other employee of the Company.  During the Term, Smith shall also be entitled
to a car allowance of $650 per month, or such greater amount as the Board shall
determine in its discretion.

         5.  EXPENSES.  The Company shall reimburse Smith for actual
out-of-pocket expenses incurred by him in the performance of his services for
the Company (in accordance with the Company's policy for such reimbursements
applicable to the Company's executive officers on the same terms generally
offered to such officers), upon the receipt of appropriate documentation of
such expenses.

         6.  TERMINATION.

         (a)  GENERAL.  The Term shall end immediately upon Smith's death.  The
Company may end the Term at any time for any reason or no reason, with or
without "Cause" (as defined in Section 7(a) below) in the absolute discretion
of the Board (but subject to the Company's obligations under this Agreement).

         (b)  NOTICE OF TERMINATION.  Promptly after it ends the Term, the
Company shall give Smith notice of the termination, including a statement of
whether the termination was for Cause.  The Company's failure to give notice
under this Section 6(b) shall not, however, affect the validity of the
Company's termination of the Term.

         7.  SEVERANCE BENEFITS.

         (a)  "CAUSE" DEFINED.  "Cause" means (i) willful malfeasance or
willful misconduct by Smith in connection with his employment; (ii) Smith's
gross negligence in performing any of his duties under this Agreement; (iii)
Smith's conviction of, or entry of a plea of guilty to, or entry of a plea of
nolo contendere with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; (iv) Smith's willful breach of any written
policy applicable to all employees adopted by the Company concerning conflicts
of interest, political contributions, standards of business conduct or fair
employment practices, procedures with respect to compliance with securities
laws or any similar matters, or adopted pursuant to the requirements of any
government contract or regulation; or (v) material breach by Smith of any of
his agreements in this Agreement.

         (b)  TERMINATION WITHOUT CAUSE.  If the Company ends the Term prior to
December 31, 1997, other than for Cause, or if Smith resigns as an employee or
officer of the Company prior to December 31, 1997, then the Company shall make
the "Severance Payments" (as defined below) to Smith for and during the
"Severance Period" (as defined below).  The Severance Payment shall be payable
in proportionate amounts at least monthly


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on the Company's regular pay cycle for professional employees and (if the last
day of the Severance Period is not the last day of a pay period) on the last
day of the Severance Period.

         For purposes of this Agreement: (i) the term "SEVERANCE PAYMENT"
means, for the period of 180 days from the commencement of the Severance
Period, an amount equal to Smith's base salary in effect on the day prior to
the date on which the Severance Period commences, and thereafter during the
Severance Period an amount equal to 50% of Smith's base salary in effect at the
time the Severance Period commenced; and (ii) the term "SEVERANCE PERIOD" means
the period commencing on the day following the date of termination of Smith's
employment with the Company and ending on the second anniversary of the date of
termination, subject to earlier termination as of the date that Smith commences
full time employment with any other person or entity.

         (c)  TERMINATION FOR ANY OTHER REASON.  If the Company ends the Term
for Cause, or if the Term ends as a result of Smith's death, then the Company
shall have no obligation to pay Smith any amount, whether for salary, benefits,
bonuses, or other compensation or expense reimbursements of any kind, accruing
after the end of the Term, and such rights shall, except as otherwise required
by law, be forfeited immediately upon the end of the Term.

         8.  CONFIDENTIALITY, OWNERSHIP, AND COVENANTS OF NON-COMPETITION AND
NON-SOLICITATION.

         (a)  "COMPANY INFORMATION" AND "INVENTIONS" DEFINED.  "COMPANY
INFORMATION" means all information, knowledge or data of or pertaining to (i)
the Company, and (ii) any other person, firm, corporation or business
organization with which the Company may do business during the Term, that is
not in the public domain (and whether relating to methods, processes,
techniques, discoveries, pricing, marketing or any other matters).
"INVENTIONS" collectively refers to any and all inventions, trade secrets,
ideas, processes, formulas, source and object codes, data, programs, other
works of authorship, know-how, improvements, discoveries, developments,
designs, and techniques regarding any of the foregoing.

         (b)     CONFIDENTIALITY.  Except as provided in the next two
sentences, Smith covenants and agrees that all Company Information shall be
kept secret and confidential at all times during and after the end of the Term
and shall not be used or divulged by him outside the scope of his employment as
contemplated by this Agreement, except as the Company may otherwise expressly
authorize by action of the Board.  In the event that Smith is requested in a
judicial, administrative or governmental proceeding to disclose any of the
Company Information, Smith will promptly so notify the Company so that the
Company may seek a protective order or other appropriate remedy and/or waive
compliance with this Agreement.  If disclosure of any of the Company
Information is required, Smith may furnish the material so required to be
furnished, but Smith will furnish only that portion of the Company Information
that legally is required.





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         (c)  OWNERSHIP.  Smith hereby assigns to the Company all of Smith's
right (including patent rights, copyrights, trade secret rights, and all other
rights throughout the world), title and interest in and to Inventions, whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by Smith, either alone or jointly
with others, during the course of the performance of services for the Company.
Smith shall also assign to, or as directed by, the Company, all of Smith's
right, title and interest in and to any and all Inventions, the full title to
which is required to be in the United States government by a contract between
the Company and the United States government or any of its agencies.  The
provisions of Sections 8(a), 8(b) and this Section 8(c) are not intended to
supersede or limit the effect of any prior confidentiality or proprietary
rights agreements previously executed by Smith.

         (d)  PERIOD DEFINED.  "NON-COMPETITION PERIOD" means the period
beginning on the day following the date of termination of Smith's employment
with the Company and ending on the second anniversary of the date of
termination of Smith's employment with the Company.

         (e)     COVENANTS OF NON-COMPETITION AND NON-SOLICITATION.  Smith
acknowledges that his services pursuant to this Agreement are unique and
extraordinary, that the Company will be dependent upon Smith for the
development and growth of its business and related functions, and that he will
continue to develop personal relationships with significant customers of the
Company and to have control of confidential information concerning, and lists
of customers of, the Company.  Smith further acknowledges that the business of
the Company is international in scope and cannot be confined to any particular
geographic area.  For the foregoing reasons, Smith covenants and agrees that
during the Non- Competition Period Smith shall not, directly or indirectly,
engage in, be financially interested in, represent, render any advice or
services to, or be employed by, any other business (conducted for profit or not
for profit) that is engaged in the development or production of (i) high
temperature superconducting materials, (ii) radio frequency filter devices, or
(iii) fault current limiter devices, in any such case for or related to uses
which are or could reasonably deemed to be competitive with the current or
currently contemplated business of the Company in the world.  For the reasons
acknowledged by Smith at the beginning of this Section 8(e), Smith additionally
acknowledges, covenants, and agrees that, during the Non-Competition Period,
Smith shall not, directly or indirectly, whether on his own behalf or on behalf
of any other person or entity, in any manner (A) solicit the business of or
otherwise contact in any commercial capacity any person or entity that was a
customer, supplier, or contractor of the Company for the purpose of obtaining
business of the type performed by the Company, or (B) solicit for employment
any persons who were officers or employees of the Company upon the date of
termination of his employment hereunder or at any time during a ninety-day
period preceding such date, or aid any competitive business organization in any
attempt to hire any such officers or employees of the Company.





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         (f)  EQUITABLE REMEDIES.  Smith acknowledges, covenants and agrees
that, in the event he shall violate any provisions of this Section 8, the
Company will not have an adequate remedy at law and will therefore be entitled
to enforce each such provision by temporary or permanent injunctive or
mandatory relief obtained in an action or proceeding, without the necessity of
proving damage or posting of any bond of any kind whatsoever, and without
prejudice to any other remedies that may be available at law or in equity.  The
foregoing restrictions shall not preclude Smith from the ownership of not more
than three percent (3%) of the voting securities of any corporation whose
voting securities are registered under Section 12(g) of the Securities Exchange
Act of 1934, even if its business competes with that of the Company.

         9.      SUCCESSORS AND ASSIGNS.

         (a)     SMITH.  This Agreement is a personal contract, and the rights
and interests that the Agreement accords to Smith may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him.  Smith shall not have
any power of anticipation, alienation or assignment of the payments
contemplated by this Agreement, all rights and benefits of Smith shall be for
the sole personal benefit of Smith, and no other person shall acquire any
right, title or interest under this Agreement by reason of any sale,
assignment, transfer, claim or judgment or bankruptcy proceedings against
Smith.  Except as so provided, this Agreement shall inure to the benefit of and
be binding upon Smith and his personal representatives, distributees and
legatees.

         (b)     THE COMPANY.  This Agreement shall be binding upon the Company
and inure to the benefit of the Company and of its successors and assigns,
including (but not limited to) any corporation that may acquire all or
substantially all of the Company's assets or business or into or with which the
Company may be consolidated or merged.  This Agreement shall continue in full
force and effect in the event that the Company sells all or substantially all
of its assets, merges or consolidates, otherwise combines or affiliates with
another business, dissolves and liquidates, or otherwise sells or disposes of
substantially all of its assets.  The Company's obligations under this
Agreement shall cease, however, if the successor to, the purchaser or acquiror
either of the Company or of all or substantially all of its assets, or the
entity with which the Company has affiliated, shall assume in writing the
Company's obligations under this Agreement (and deliver an executed copy of
such assumption to Smith), in which case such successor or purchaser, but not
the Company, shall thereafter be the only party obligated to perform the
obligations that remain to be performed on the part of the Company under this
Agreement.

         10.     ENTIRE AGREEMENT.  Except as specifically set forth in a
separate letter agreement concerning certain matters related to the
relationship between Smith and the Company following the end of the Term, this
Agreement represents the entire agreement between the parties concerning
Smith's employment with the Company during the Term and supersedes all prior
negotiations, discussions, understandings and agreements, whether





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written or oral, between Smith and the Company relating to the subject matter
of this Agreement.  The prior employment agreement between the Company and
Smith with respect to the period through December 31, 1996, shall remain in
full force and effect with respect to all matters addressed in such prior
employment agreement occurring on or before the effective date of this
Agreement.

         11.     AMENDMENT OR MODIFICATION, WAIVER.  No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing signed by Smith and by a duly authorized officer of the Company
other that Smith.  No waiver by any party to this Agreement of any breach by
another party of any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same time, any prior time or any subsequent time.

         12.     NOTICES. All notices, demands or other communications of any
kind to be given or delivered under this Agreement shall be in writing and
shall be deemed to have been properly given if (a) delivered by hand, (b)
delivered by a nationally recognized overnight courier service, (c) sent by
registered or certified United States Mail, return receipt requested and first
class postage prepaid, or (d) facsimile transmission followed by a confirmation
copy delivered by a nationally recognized overnight courier service.  Such
communications shall be sent to the parties at their respective addresses as
follows:


If to Smith:                               Ora E. Smith
                                           921 Fisher Lane
                                           Winnetka, Illinois  60093

If to the Company:                         Illinois Superconductor Corporation
                                           451 Kingston Court
                                           Mt. Prospect, Illinois 60056
                                           Attention:  Chairman of the Board

with a copy to:                            Bruce A. Zivian, Esq.
                                           Eilenberg & Zivian
                                           30 N. LaSalle Street, Suite 2900
                                           Chicago, Illinois  60602

Either party may change such address for delivery to the other party by
delivery of a notice in conformity with the provisions of this section
specifying such change.  Notice shall be deemed to have been properly given (i)
on the date of delivery, if delivery is by hand, (ii) three (3) days after the
date of mailing if sent by certified or registered mail, (iii) one (1) day
after date of delivery to the overnight courier if sent by overnight courier,
or (iv) the next business day after the date of transmission by facsimile.





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         13.     SEVERABILITY.  If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable shall not be affected, and
each provision of this Agreement shall be validated and shall be enforced to
the fullest extent permitted by law.  If for any reason any provision of this
Agreement containing restrictions is held to cover an area or to be for a
length of time that is unreasonable or in any other way is construed to be too
broad or to any extent invalid, such provision shall not be determined to be
entirely null, void and of no effect; instead, it is the intention and desire
of both the Company and Smith that, to the extent that the provision is or
would be valid or enforceable under applicable law, any court of competent
jurisdiction shall construe and interpret or reform this Agreement to provide
for a restriction having the maximum enforceable area, time period and such
other constraints or conditions (although not greater than those contained
currently contained in this Agreement) as shall be valid and enforceable under
the applicable law.

         14.     SURVIVORSHIP.  The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.

         15.     HEADINGS.  All descriptive headings of sections and paragraphs
in this Agreement are intended solely for convenience of reference, and no
provision of this Agreement is to be construed by reference to the heading of
any section or paragraph.

         16.     WITHHOLDING TAXES.  All salary, benefits, reimbursements and
any other payments to Smith under this Agreement shall be subject to all
applicable payroll and withholding taxes and deductions required by any law,
rule or regulation of and federal, state or local authority.

         17.     APPLICABLE LAW:  JURISDICTION.  The laws of the State of
Illinois shall govern the interpretation, validity and performance of the terms
of this Agreement, without reference to rules relating to conflicts of law.
Any suit, action or proceeding against Smith with respect to this Agreement, or
any judgment entered by any court in respect thereof, may be brought in any
court of competent jurisdiction in the State of Illinois, as the Company may
elect in its sole discretion, and Smith hereby submits to the nonexclusive
jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment.

         18.     INTERPRETATION AND CONSTRUCTION.  Each of the parties to this
Agreement has been represented by their own counsel, each has reviewed and
approved this Agreement as executed, and neither party shall be charged with
the responsibility of having drafted any provision of this Agreement so as to
cause any rule of strict construction to be applied against such party.





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         IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.




                                         ILLINOIS SUPERCONDUCTOR CORPORATION


                                         By:     _______________________________
                                                 Steven Lazarus
                                                 Chairman of the Board


                                                 _______________________________
                                                 ORA E. SMITH








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