and such other representations and agreements as may be required by the Companypursuant to the provisions of the Plan. The Exercise Notice shall be signed by theOptionee and shall be delivered in person or by certified mail to the Secretary ofthe Company. The Exercise Notice shall be accompanied by payment of the aggregateExercise Price as to all Exercised Shares. This Option shall be deemed to beexercised upon receipt by the Company of such fully executed Exercise Noticeaccompanied by such aggregate Exercise Price.No Shares shall be issued pursuant to the exercise of this Option unless suchissuance and exercise complies with all relevant provisions of law and therequirements of any stock exchange or quotation service upon which the Shares arethen listed. Assuming such compliance, for income tax purposes the Exercised Sharesshall be considered transferred to the Optionee on the date the Option is exercisedwith respect to such Exercised Shares.     C. Method of Payment. Payment of the aggregate Exercise Price shall be by any ofthe following, or a combination thereof, at the election of the Optionee: (1) cash; or  (2) check; or  (3) delivery of a properly executed exercise notice together withsuch other documentation as the Administrator and the broker, if applicable,shall require to effect an exercise of the Option and delivery to the Companyof the sale or loan proceeds required to pay the exercise price; or  (4) surrender of other Shares which (i) in the case of Sharesacquired upon exercise of an option, have been owned by the Optionee for morethan six (6) months on the date of surrender, **and**(ii) have a Fair MarketValue on the date of surrender equal to the aggregate Exercise Price of theExercised Shares; or  (5) delivery of Optionee’s promissory note (the “Note”) in theform attached hereto as Exhibit D, in the amount of the aggregate ExercisePrice of the Exercised Shares together with the execution and delivery by theOptionee of the Security Agreement attached hereto as Exhibit C. The Noteshall bear interest at a rate no less than the “applicable federal rate”prescribed under the Code and its regulations at time of purchase, and shallbe secured by a pledge of the Shares purchased by the Note pursuant to theSecurity Agreement.
 

 
D. Non-Transferability of Option. Unless determined otherwise by the Administrator,an Option may not be transferred in any manner otherwise than by will or by the laws ofdescent or distribution and may be exercised during the lifetime of Optionee only by theOptionee. The terms of the Plan and this Option Agreement shall be binding upon theexecutors, administrators, heirs, successors and assigns of the Optionee.E. Term of Option. This Option may be exercised only within the term set out in theNotice of Grant, and may be exercised during such term only in accordance with the Plan andthe terms of this Option Agreement.F. Optionee’s Representations. In the event the Shares purchasable pursuant to theexercise of this Option have not been registered under the Securities Act of 1933, asamended, at the time this Option is exercised, Optionee shall, if required by the Company,concurrently with the exercise of all of any portion of this Option, deliver to the Companyhis Investment Representation Statement in the form attached hereto as Exhibit B, and shallread the applicable rules of the Commissioner of Corporations attached to such InvestmentRepresentation Statement.G. Tax Consequences. Some of the federal tax consequences relating to this Option,as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE,AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAXADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.     (1) Exercising the Option.          (a) Nonqualified Stock Option “NSO”. If the Option does not qualify as an ISO,the Optionee may incur regular federal income tax liability upon exercise. The Optioneewill be treated as having received compensation income (taxable at ordinary income taxrates) equal to the excess, if any, of the fair market value of the Exercised Shares on thedate of exercise over their aggregate Exercise Price. If the Optionee is an employee, theCompany will be required to withhold from his or her compensation or collect from Optioneeand pay to the applicable taxing authorities an amount equal to a percentage of thiscompensation income at the time of exercise.          (b) Incentive Stock Option (“ISO”). If this Option qualifies as an ISO, theOptionee will have no regular income tax liability upon its exercise, although the excess,if any, of the fair market value of the Exercised Shares on the date of exercise over theiraggregate Exercise Price will be treated as an adjustment to the alternative minimum taxfor federal tax purposes and may subject the Optionee to alternative minimum tax in theyear of exercise.
 

 
     (2) Disposition of Shares.          (a) NSO. If the Optionee holds NSO Shares for at least one year afterexercise, any gain realized on disposition of the Shares will be treated as long-termcapital gain for federal income tax purposes.          (b) ISO. If the Optionee holds ISO Shares for at least one year after exerciseor two years after the grant date, any gain realized on disposition of the Shares will betreated as long-term capital gain for federal income tax purposes. With recent tax lawchanges, please consult your tax adviser for more information on holding periods and taxrates. If the Optionee disposes of ISO Shares within one year after exercise or two yearsafter the grant date, any gain realized on such disposition will be treated as compensationincome (taxable at ordinary income rates) to the extent of the excess, if any, of the**lessor of**(A) the difference between the **fair market value of the Shares acquired on thedate of exercise**and the aggregate Exercise Price, or (B) the different between the **saleprice**of such Shares and the aggregate Exercise Price.     (3) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sellsor otherwise disposes of any of the Shares acquired pursuant to an ISO on or before thelater of (i) two years after the grant date, or (ii) one year after the exercise date, theOptionee shall immediately notify the Company in writing of such disposition. The Optioneeagrees that he or she may be subject to income tax withholding by the Company on thecompensation income recognized from such early disposition of ISO Shares by payment in cashor out of the current earnings paid to the Optionee.
 

 
**EXHIBIT A****SUPERCONDUCTOR TECHNOLOGIES INC.****AMENDED AND RESTATED 1992 STOCK OPTION PLAN****EXERCISE NOTICE** 1. Exercise of Option. Effective as of today,                                        , 199                                   , theundersigned (“Purchaser”) herby elects to purchase                                  shares (the “Shares”) of theCommon Stock of Superconductor Technologies Inc. (the “Company”) under and pursuant to theCompany’s Amended and Restated 1992 Stock Option Plan (the “Plan”) and the Stock OptionAgreement dated                      (the “Option Agreement”). The purchase price for the Shares shallbe $                    , as required by the Option Agreement.  2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchaseprice for the Shares.  3. Representations of Purchaser. Purchaser acknowledges that Purchase has received,read and understood the Plan and the Option Agreement and agrees to abide by and be bound bytheir terms and conditions.  4. Rights as Shareholder. Subject to the terms and conditions of this Agreement,Purchaser shall have all of the rights of a shareholder of the Company with respect to theShares from and after the date that Purchaser delivers full payment of the Exercise Priceuntil such time as Purchaser disposes of the Shares.  5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse taxconsequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaserrepresents that Purchaser has consulted with any tax consultants Purchaser deems advisablein connection with the purchase or disposition of the Shares and that Purchaser is notrelying on the Company for any tax advice.  6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporatedherein by reference. This Agreement, the Plan and the Option Agreement constitute the entireagreement of the parties and supersede in their entirety all prior undertakings andagreements of the Company and Purchaser with respect to the subject matter hereof, and suchagreement is governed by California law except for that body of law pertaining to conflictof laws.             Submitted by:   Accepted by:               PURCHASER   SUPERCONDUCTOR TECHNOLOGIES INC                 By:        Signature     Its:                                 Print Name                         Address:   Address:                 460 Ward Drive, Suite F                 Santa Barbara, CA 93111-2310