Document:

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                                                                    EXHIBIT 10.3

                           CHAMPION ENTERPRISES, INC.

                      EXECUTIVE OFFICER SEVERANCE PAY PLAN

                       (EFFECTIVE AS OF DECEMBER 1, 2004)

                                  INTRODUCTION

      The purpose of the Plan is to enable Champion Enterprises, Inc., to offer
certain protections to its executive officers if their employment is terminated
by the Company without Cause or by the Participant with Good Reason. Capitalized
terms and phrases used herein shall have the meanings ascribed thereto in
Article I.

                                   ARTICLE I.
                                   DEFINITIONS

      1.1   AFFILIATE shall mean each of the following:

            (a)   any Subsidiary;

            (b)   any Parent;

            (c)   any corporation, trade or business (including, without
      limitation, a partnership or limited liability company) which is directly
      or indirectly controlled 50% or more (whether by ownership of stock,
      assets or an equivalent ownership interest or voting interest) by the
      Company or one of its Affiliates; and

            (d)   any other entity in which the Company or any of its Affiliates
      has a material equity interest and which is designated as an "Affiliate"
      by resolution of the Committee.

      1.2   BASE SALARY shall mean the Participant's annual base compensation
rate for services paid by the Company to the Participant at the time immediately
prior to the Participant's termination of employment, as reflected in the
Company's payroll records. Base Salary shall not include commissions, bonuses,
overtime pay, incentive compensation, benefits paid under any qualified plan,
any group medical, dental or other welfare benefit plan, noncash compensation or
any other additional compensation but shall include amounts reduced pursuant to
the Participant's salary reduction agreement under Sections 125, 132(f)(4) or
401(k) of the Code, if any, or a nonqualified elective deferred compensation
arrangement, if any, to the extent that in each such case the reduction is to
base compensation.

      1.3   BOARD shall mean the board of directors of the Company from time to
time.

      1.4   CAUSE shall mean

            (a)   a Participant's dishonesty in Participant's financial dealings
      with, or on behalf of, the Company;

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            (b)   a Participant's commission of, indictment for or pleading
      guilty or nolo contendere to a crime by the Participant which constitutes:

                  (i)   a felony (other than a traffic related offense), or

                  (ii)  a misdemeanor involving moral turpitude which, may
                        reasonably be expected to have an adverse effect on the
                        Company, its business, reputation or interest.

            (c)   a Participant's material breach the terms of Participant's
      employment contract or any other contract or agreement between the
      Participant and the Company, which breach, if curable, is not cured within
      20 days of the giving of written notice thereof to the Participant;

            (d)   a Participant's material violation of the Company's code of
      conduct, code of ethics or any other written policy or a material breach
      by the Participant of a fiduciary duty or responsibility to the Company;

            (e)   the refusal of a Participant to follow the lawful policies and
      directives of the Board or a more senior officer within five days of the
      giving of written notice thereof to the Participant;

            (f)   the willful misconduct or gross negligence of a Participant
      with regard to the Company or in the performance of Participant's duties
      that is materially injurious to the Company; or

            (g)   the willful and continued failure of a Participant to attempt
      to perform the Participant's duties with the Company (other than for any
      such failure resulting from the Participant's incapacity due to physical
      or mental illness) after written notice of such failure has been give to
      the Participant.

      1.5   CODE shall mean the Internal Revenue Code of 1986, as amended.

      1.6   COMMITTEE shall mean the Compensation and Human Resources Committee
appointed by the Board from time to time to administer the Plan. Notwithstanding
the foregoing, if, and to the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee shall be
exercised by the Board and all references herein to the Committee shall be
deemed to be references to the Board.

      1.7   COMPANY shall mean Champion Enterprises, Inc., it Affiliates and any
successors as provided in Article VI hereof.

      1.8   DISABILITY shall mean a Participant's disability that would qualify
as such under the Company's long-term disability plan without regard to any
waiting periods set forth in such plan.

      1.9   EFFECTIVE DATE shall mean December 1, 2004.

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      1.10  ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

      1.11  GOOD REASON shall mean the occurrence of any of the following
events, without the express written consent of a Participant, unless such events
are fully corrected in all material respects by the Company within 30 days
following written notification by the Participant to the Company that
Participant intends to terminate Participant's employment hereunder for one of
the reasons set forth below:

            (a)   any reduction or diminution (except temporarily during any
      period of physical or mental incapacity) in the Participant's titles or a
      material reduction or diminution in the Participant's authorities, duties
      or responsibilities or reporting requirements;

            (b)   any reduction in the Participant's Base Salary (other than an
      across-the-board reduction of not more than 10% of Base Salary applicable
      to executive officers generally);

            (c)   Company's material breach the terms of Participant's
      employment contract or any other contract or agreement between the
      Participant and the Company; or

            (d)   the Participant is required to relocate to a principal place
      of employment more than 60 miles from Participant's principal place of
      employment with the Company.

      1.12  PARENT shall mean any parent corporation of the Company within the
meaning of Section 424(e) of the Code.

      1.13  PARTICIPANT shall mean any employee of the Company designated by the
Board as an "officer" for purposes of Section 16 of the Securities Exchange Act
of 1934, provided, however, the President and Chief Executive Officer shall not
be a Participant in this Plan.

      1.14  PLAN shall mean the Champion Enterprises, Inc. Executive Officer
Severance Pay Plan.

      1.15  SEVERANCE BENEFIT shall mean a severance benefit calculated and paid
in accordance with Section 2.1 below.

      1.16  SEVERANCE PERIOD shall mean the 18-month period (or such other
period specified by the Committee in writing to a Participant at the time such
participant first becomes a Participant) following a termination of a
Participant's employment by the Company without Cause or by a Participant for
Good Reason.

      1.17  SUBSIDIARY shall mean any corporation that is defined as a
subsidiary corporation in Section 424(f) of the Code.

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                                   ARTICLE II.
                                    BENEFITS

      2.1   ELIGIBILITY FOR BENEFITS. Upon the Participant's termination of
employment by the Company without Cause or by Participant for Good Reason,
subject to Sections 2.3, 2.4, 2.5 and 2.6 below, Participant shall receive
during the Severance Period salary continuation payments, distributed on normal
payroll dates, equal to the Participant's Base Salary less any other severance
payments provided by the Company through any other agreement or other
Company-sponsored program. Payment of the Severance Benefit for the 13th through
18th months of the Severance Period shall be conditioned on the Participant not
having commenced subsequent employment, including self-employment, and shall be
subject to the provisions of Section 2.3. The Participant shall give the Company
written notice of the Participant's commencing subsequent employment within 5
days of such commencement date.

      In the event that a Participant has a written agreement pursuant to which
the Company is obligated to pay a termination or severance benefit in an amount
greater than the Severance Benefit payable to such Participant under the Plan,
such Participant shall be entitled to accept such greater severance benefit in
lieu of the Severance Benefit payable under the Plan provided that such
Participant complies with all other terms and conditions of the Plan. If the
Participant is covered by a change in control agreement and becomes entitled to
payments or benefits thereunder, no Severance Benefit shall be payable
hereunder.

      A Participant shall not be entitled to a Severance Benefit if the
Participant's employment is terminated:

            (i)   by the Company for Cause,

            (ii)  by the Participant other than for Good Reason, or

            (iii) on account of the Participant's retirement, death or
                  Disability.

      2.2   COBRA BENEFITS. Subject to (i) the Participant's compliance with the
obligations in Sections 2.3, 2.4, 2.5 and 2.6 below and (ii) the Participant's
timely election of continuation coverage under the Consolidated Budget Omnibus
Reconciliation Act of 1985, as amended ("COBRA") and the Participant's continued
copayment of premiums at the same level and cost to the Participant as if the
Participant were an employee of the Company (excluding, for purposes of
calculating cost, an employee's ability to pay premiums with pre-tax dollars),
the Company shall pay the applicable COBRA continuation coverage premiums under
the Company's health insurance plan that generally applies to a Participant
entitled to receive a Severance Benefit for a Participant and his or her
dependents until the earliest of:

            (a)   a Participant ceasing to be entitled to receive a Severance
      Benefit;

            (b)   for each of a Participant and his or her dependents, when such
      person ceases to be eligible for COBRA; or

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            (c)   a Participant commencing other substantially full-time
      employment, including self-employment, that offers a health care program.

      With regard to (b) above, if a Participant or any of his or her dependents
cease to be eligible for COBRA, the Company's obligation to pay any premium for
such person shall cease, but the Company's obligation to pay the premium for the
Participant or any dependent who is still eligible for COBRA shall continue.
Participant shall promptly notify the Company if he or she becomes covered by a
health care program of a subsequent employer.

      2.3   NO DUTY TO MITIGATE/SET-OFF. During the first 12 months of the
Severance Period, no Participant entitled to receive a Severance Benefit
hereunder shall be required to seek other employment or to attempt in any way to
reduce any amounts payable to him or her pursuant to this Plan and the amount of
the Severance Benefit payable hereunder shall not be reduced by any compensation
earned by the Participant as a result of employment by another employer or
otherwise. Thereafter, for the remainder of the Severance Period and in order to
continue receiving a Severance Benefit, a Participant shall seek in good faith
other employment consistent with the Participant's skills, experience and
educational background and any compensation earned by a Participant as a result
of such other employment shall be set off against the Severance Benefit
otherwise payable to the Participant. In the event of the Participant's breach
of any provision hereunder, including without limitation, Sections 2.5 and 2.6,
the Participant shall be obligated to repay, and the Company shall be entitled
to recover, any payments previously made to the Participant hereunder.

      2.4   RELEASE REQUIRED. Any amounts payable and benefits provided pursuant
to this Plan shall only be payable or provided if the Participant delivers to
the Company and does not revoke a general release of all claims of any kind
whatsoever that the Participant has or may have against the Company and its
affiliates and their officers, directors and employees known or unknown as of
the date of his or her termination of employment occurring up to the release
date in such form as reasonably requested by the Company.

      2.5   RESTRICTIVE COVENANTS. As a condition of the receipt of any
Severance Benefit by any Participant, the Participant shall be deemed to have
agreed to the following provisions:

            (a)   CONFIDENTIALITY. The Participant agrees that the Participant
      shall not at any time, directly or indirectly, use, make available, sell,
      disclose or otherwise communicate to any person, other than in the course
      of the Participant's assigned duties and for the benefit of the Company,
      any nonpublic, proprietary or confidential information, knowledge or data
      relating to the Company, any of its subsidiaries, affiliated companies or
      businesses, which shall have been obtained by the Participant during the
      Participant's employment by the Company. The foregoing shall not apply to
      information that (i) was known to the public prior to its disclosure to
      the Participant; (ii) becomes generally known to the public subsequent to
      disclosure to the Participant through no wrongful act of the Participant
      or any representative of the Participant; or (iii) the Participant is
      required to disclose by applicable law, regulation or legal process
      (provided that the Participant provides the Company with prior notice of
      the contemplated

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      disclosure and reasonably cooperates with the Company at its expense in
      seeking a protective order or other appropriate protection of such
      information).

            (b)   NONSOLICITATION. During the Participant's employment with the
      Company and for the two year period thereafter, the Participant agrees
      that the Participant will not, except in the furtherance of the
      Participant's duties for the Company, directly or indirectly, individually
      or on behalf of any other person, firm, corporation or other entity, (i)
      solicit, aid or induce any employee, representative or agent of the
      Company or any of its subsidiaries or affiliates to leave such employment
      or retention or to accept employment with or render services to or with
      any other person, firm, corporation or other entity unaffiliated with the
      Company or hire or retain any such employee, representative or agent, or
      take any action to materially assist or aid any other person, firm,
      corporation or other entity in identifying, hiring or soliciting any such
      employee, representative or agent, (ii) solicit, aid or induce any
      customer of the Company or any of its subsidiaries or affiliates to
      purchase goods or services then sold by the Company or any of its
      subsidiaries or affiliates from another person, firm, corporation or other
      entity or assist or aid any other persons or entity in identifying or
      soliciting any such customer or (iii) solicit, aid or induce any vendor of
      the Company or any of its subsidiaries or affiliates to provide goods or
      services then provided to the Company or any of its subsidiaries or
      affiliates to another person, firm, corporation or other entity or assist
      or aid any other persons or entity in identifying or purchasing goods or
      services from such vendor. An employee, representative or agent shall be
      deemed covered by this paragraph while so employed or retained and for six
      months thereafter. Subpart (ii) shall not be violated by general
      advertising or solicitation not specifically targeted at activities of the
      Company.

            (c)   NONCOMPETITION. The Participant acknowledges that the
      Participant performs services of a unique nature for the Company that are
      irreplaceable, and that the Participant's performance of such services to
      a competing business will result in irreparable harm to the Company.
      Accordingly, during the Participant's employment and for the two year
      period thereafter, the Participant agrees that the Participant will not,
      directly or indirectly, own, manage, operate, control, be employed by
      (whether as an employee, consultant, independent contractor or otherwise,
      and whether or not for compensation) or render services to any person,
      firm, corporation or other entity, in whatever form, engaged in the
      production, sales or marketing of manufactured housing or any other
      material business in which the Company or any of its subsidiaries or
      affiliates is engaged on the date of termination (or, if earlier, the date
      of determination) or in which they have planned, on or prior to such date,
      to be engaged in on or after such date, in any locale of any country in
      which the Company conducts business. This Section 2.5(c) shall not prevent
      the Participant from owning not more than two percent of the total shares
      of all classes of stock outstanding of any publicly held entity engaged in
      such business.

            (d)   NONDISPARAGEMENT. The Participant shall not make or induce
      other persons or entities to make any negative statements as to the
      Company, its affiliates, employees, past or present officers, directors,
      products, services, businesses or reputation. Notwithstanding the
      foregoing, truthful statements made in the course of sworn testimony

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      in administrative, judicial or arbitral proceedings (including, without
      limitation, depositions in connection with such proceedings) shall not be
      subject to this Section 2.5(d).

            (e)   REFORMATION. If it is determined by a court of competent
      jurisdiction in any state that any restriction in this Section 2.5 is
      excessive in duration or scope or is unreasonable or unenforceable under
      the laws of that state, it is the intention of the parties that such
      restriction may be modified or amended by the court to render it
      enforceable to the maximum extent permitted by the law of that state.

            (f)   FURTHER ACKNOWLEDGMENT. The Participant acknowledges that the
      restrictive covenants (including, without limitation, confidentiality and
      non-competition) in any other agreement with the Company previously signed
      by the Participant shall not be affected by this Plan and that the
      restrictive covenants therein shall continue to apply after a termination
      of employment in accordance with the terms of such restrictive covenants.

            (g)   SURVIVAL OF PROVISIONS. The obligations contained in this
      Section 2.5 shall survive any termination of the Plan and shall be fully
      enforceable thereafter.

      2.6   COOPERATION. As a condition of the receipt of any Severance Benefit
by any Participant, the Participant shall be deemed to have agreed to the
provisions of this Section 2.6. Upon the receipt of reasonable notice from the
Company (including its outside counsel), the Participant agrees that while
employed by the Company and thereafter, the Participant will respond and provide
information with regard to matters in which the Participant has knowledge as a
result of the Participant's employment with the Company, and will provide
reasonable assistance to the Company, its affiliates and their respective
representatives in defense of any claims that may be made against the Company or
its affiliates, and will assist the Company and its affiliates in the
prosecution of any claims that may be made by the Company or its affiliates, to
the extent that such claims may relate to the period of the Participant's
employment with the Company. The Participant agrees to promptly inform the
Company if the Participant becomes aware of any lawsuits involving such claims
that may be filed or threatened against the Company or its affiliates. The
Participant also agrees to promptly inform the Company (to the extent the
Participant is legally permitted to do so) if the Participant is asked to assist
in any investigation of the Company or its affiliates (or their actions),
regardless of whether a lawsuit or other proceeding has then been filed against
the Company or its affiliates with respect to such investigation, and shall not
do so unless legally required. Upon presentation of appropriate documentation,
the Company shall pay or reimburse the Participant for all reasonable
out-of-pocket travel, duplicating or telephonic expenses incurred by the
Participant in complying with this Section 2.6.

      2.7   Equitable Relief and Other Remedies.

            (a)   Since the Company's remedies at law for a breach or threatened
      breach of any of the provisions of Sections 2.5 or 2.6 would be
      inadequate, in addition to any remedies at law, the Company, without
      posting any bond, shall be entitled to obtain

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      equitable relief in the form of specific performance, temporary
      restraining order, a temporary or permanent injunction or any other
      equitable remedy which may then be available.

            (b)   In the event of a material violation of Sections 2.5 or 2.6,
      any Severance Benefit being paid to the Participant shall immediately
      cease.

                                  ARTICLE III.
                                     FUNDING

      This Plan shall be funded out of the general assets of the Company as and
when benefits are payable under this Plan. All Participants shall be solely
unsecured creditors of the Company and, if a bankruptcy proceeding of the
Company is pending, the Participants shall be solely unsecured creditors of the
Company with administrative priority. If the Company decides in its sole
discretion to establish any advance accrued reserve on its books against the
future expense of benefits payable hereunder, or if the Company decides in its
sole discretion to fund a trust under this Plan, such reserve or trust shall not
under any circumstances be deemed to be an asset of this Plan.

                                  ARTICLE IV.
                           ADMINISTRATION OF THE PLAN

      4.1   PLAN ADMINISTRATOR. The general administration of the Plan on behalf
of the Company (as plan administrator under Section 3(16)(A) of ERISA) shall be
placed with the Committee.

      4.2   REIMBURSEMENT OF EXPENSES OF PLAN COMMITTEE. The Company shall pay
or reimburse the members of the Committee for all reasonable expenses incurred
in connection with their duties hereunder.

      4.3   ACTION BY THE PLAN COMMITTEE. Decisions of the Committee shall be
made by a majority of its members attending a meeting at which a quorum is
present (which meeting may be held telephonically), or by written action in
accordance with applicable law. Subject to the terms of this Plan and provided
that the Committee acts in good faith, the Committee shall have the authority to
determine a Participant's participation and benefits under the Plan and to
interpret and construe the provisions of the Plan.

      4.4   DELEGATION OF AUTHORITY. The Committee may delegate any and all of
its powers and responsibilities hereunder to other persons by formal resolution
filed with and accepted by the Board. Any such delegation shall not be effective
until it is accepted by the Board and the persons designated and may be
rescinded at any time by written notice from the Committee to the person to whom
the delegation is made.

      4.5   RETENTION OF PROFESSIONAL ASSISTANCE. The Committee may employ such
legal counsel, accountants and other persons as may be required in carrying out
its work in connection with the Plan.

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      4.6   ACCOUNTS AND RECORDS. The Committee shall maintain such accounts and
records regarding the fiscal and other transactions of the Plan and such other
data as may be required to carry out its functions under the Plan and to comply
with all applicable laws.

      4.7   CLAIMS/DISPUTES PROCEDURE.

            (a)   Any claim by a Participant or beneficiary ("Claimant") with
      respect to eligibility, participation, contributions, benefits or other
      aspects of the operation of the Plan shall be made in writing to the
      Committee. The Committee shall provide the Claimant with the necessary
      forms and make all determinations as to the right of any person to a
      disputed benefit. If a Claimant is denied benefits under the Plan, the
      Committee or its designee shall notify the Claimant in writing of the
      denial of the claim within 90 days (such period may be extended to 180
      days) after the Plan receives the claim, provided that in the event of
      special circumstances such period may be extended.

            (b)   If the initial 90 day period is extended, the Committee or its
      designee shall, within 90 days of receipt of the claim, notify the
      Claimant in writing of such extension. The written notice of extension
      will indicate the special circumstances requiring the extension of time
      and provide the date by which the Committee expects to make a
      determination with respect to the claim. If the extension is required due
      to the Claimant's failure to submit information necessary to decide the
      claim, the period for making the determination will be tolled from the
      date on which the extension notice is sent to the Claimant until the
      earlier of (i) the date on which the Claimant responds to the Plan's
      request for information or (ii) expiration of the 45 day period commencing
      on the date that the Claimant is notified that the requested additional
      information must be provided. If notice of the denial of a claim is not
      furnished within the required time period described herein, the claim
      shall be deemed denied as of the last day of such period.

            (c)   If the claim is wholly or partially denied, the notice to the
      Claimant shall set forth:

                  (i)   the specific reason or reasons for the denial;

                  (ii)  specific reference to pertinent Plan provisions upon
                        which the denial is based;

                  (iii) a description of any additional material or information
                        necessary for the Claimant to perfect the claim and an
                        explanation of why such material or information is
                        necessary;

                  (iv)  appropriate information as to the steps to be taken and
                        the applicable time limits if the Claimant wishes to
                        submit the adverse determination for review; and

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                  (v)   a statement of the Claimant's right to bring a civil
                        action under Section 502(a) of ERISA following an
                        adverse determination on review (collectively, the
                        "Notice Requirements").

            (d)   If the claim has been denied, the Claimant may submit the
      claim for review. Any request for review of a claim must be made in
      writing to the Committee no later than 60 days after the Claimant receives
      notification of denial or, if no notification was provided, the date the
      claim is deemed denied. The claim will then be reviewed by the Committee.
      The Claimant or his duly authorized representative may:

                  (i)   upon request and free of charge, be provided with access
                        to, and copies of, relevant documents, records, and
                        other information relevant to the Claimant's claim; and

                  (ii)  submit written comments, documents, records, and other
                        information relating to the claim. The review of the
                        claim determination shall take into account all
                        comments, documents, records, and other information
                        submitted by the Claimant relating to the claim, without
                        regard to whether such information was submitted or
                        considered in the initial claim determination.

            (e)   The decision of the Committee shall be made within 60 days
      (such period may be extended to 120 days) after receipt of the Claimant's
      request for review, unless special circumstances require an extension.

            (f)   If the initial 60 day period is extended, the Committee or its
      designee shall, within 60 days of receipt of the claim, notify the
      Claimant in writing of such extension. The written notice of extension
      will indicate the special circumstances requiring the extension of time
      and provide the date by which the Committee expects to make a
      determination with respect to the claim. If the extension is required due
      to the Claimant's failure to submit information necessary to decide the
      claim, the period for making the determination will be tolled from the
      date on which the extension notice is sent to the Claimant until the
      earlier of (i) the date on which the Claimant responds to the Plan's
      request for information or (ii) expiration of the 45 day period commencing
      on the date that the Claimant is notified that the requested additional
      information must be provided. If notice of the denial of a claim is not
      furnished within the required time period described herein, the claim
      shall be deemed denied as of the last day of such period.

            (g)   If an extension of time is required, the Claimant shall be
      notified in writing of such extension. The written notice of extension
      will indicate the special circumstances requiring the extension of time
      and the date by which the Committee expects to make a determination with
      respect to the claim. If the extension is required due to the Claimant's
      failure to submit information necessary to decide the claim on review, the
      period for making the determination will be tolled from the date on which
      the extension notice is sent to the Claimant until the earlier of (i) the
      date on which the

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      Claimant responds to the Plan's request for information or (ii) expiration
      of the 45-day period commencing on the date that the Claimant is notified
      that the requested additional information must be provided. In any event,
      a decision shall be rendered not later than 120 days after receipt of the
      request for review. If notice of the decision upon review is not furnished
      within the required time period described herein, the claim on review
      shall be deemed denied as of the last day of such period.

            (h)   The Committee's decision on the Claimant's claim for review
      will be communicated to the Claimant in writing. If the claim on review is
      denied, the notice to the Claimant shall provide a statement that the
      Claimant is entitled to receive, upon request and free of charge,
      reasonable access to, and copies of, all documents, records and other
      information relevant to the claim, and also set forth the Notice
      Requirements (other than subsection (c)(iv)).

            (i)   The claims procedures set forth in this section are intended
      to comply with U.S. Department of Labor Regulation Section 2560.503-1 and
      should be construed in accordance with such regulation. In no event shall
      it be interpreted as expanding the rights of Claimants beyond what is
      required by U.S. Dept. of Labor Section 2560.503-1.

            (j)   A Claimant shall not be required to exhaust all administrative
      remedies under this Section 4.7 prior to commencing any action in Federal
      court.

      4.8   INDEMNIFICATION. The Committee, its members and any person
designated pursuant to Section 4.4 above shall not be liable for any action or
determination made in good faith with respect to the Plan. The Company shall, to
the extent permitted by law, by the purchase of insurance or otherwise,
indemnify and hold harmless each member of the Committee and each director,
officer and employee of the Company for liabilities or expenses they and each of
them incur in carrying out their respective duties under this Plan, other than
for any liabilities or expenses arising out of such individual's willful
misconduct or fraud.

                                   ARTICLE V.
                            AMENDMENT AND TERMINATION

      The Company reserves the right to amend or terminate, in whole or in part,
any or all of the provisions of this Plan at any time, provided that in no event
shall any amendment reducing the benefits provided hereunder or any Plan
termination be effective prior to the later of the third anniversary of the
Effective Date or the date twelve months after the date the Company gives the
Participants written notice of such amendment or termination. Notwithstanding
anything in this Plan to the contrary, if the Company becomes obligated to make
any payment to the Participant pursuant to the terms hereof, then this Plan
shall remain in effect for such purposes until all of the Company's obligations
hereunder are fulfilled. Without limiting the generality of the foregoing, the
Company may amend the Plan at any time, retroactively or otherwise, as may be
necessary to preserve the intended tax characteristics of the Plan, including,
without limitation, such amendments necessary to address the requirements of
Section 409A of the Code.

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                                   ARTICLE VI.
                                   SUCCESSORS

      For purposes of this Plan, the Company shall include any and all
successors and assignees, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all the business or assets
of the Company and such successors and assignees shall perform the Company's
obligations under this Plan, in the same manner and to the same extent that the
Company would be required to perform if no such succession or assignment had
taken place. In such event, the term "Company", as used in this Plan, shall mean
the Company, as hereinbefore defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by the terms and
provisions of this Plan.

                                  ARTICLE VII.
                                  MISCELLANEOUS

      7.1   RIGHTS OF PARTICIPANTS. Nothing herein contained shall be held or
construed to create any liability or obligation upon the Company to retain any
Participant in its service. All Participants shall remain subject to discharge
or discipline to the same extent as if this Plan had not been put into effect.

      7.2   GOVERNING LAW. This Plan shall be governed by the laws of the State
of Michigan (without reference to rules relating to conflicts of law).

      7.3   WITHHOLDING. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Plan.

      7.4   SEVERABILITY. In case any provision of this Plan be deemed or held
to be unlawful or invalid for any reason, such fact shall not adversely affect
the other provisions of this Plan unless such determination shall render
impossible or impracticable the functioning of this Plan, and in such case, an
appropriate provision or provisions shall be adopted so that this Plan may
continue to function properly.

      7.5   ASSIGNMENT AND ALIENATION. The benefits payable to the Participant
under the Plan shall not be subject to alienation, transfer, assignment,
garnishment, execution or levy of any kind and any attempt to cause any benefits
to be so subjected shall not be recognized.

      7.6   COMMUNICATIONS. All announcements, notices and other communications
regarding this Plan will be made by the Company in writing.

      7.7   ERISA PLAN. This Plan constitutes an unfunded compensation
arrangement for members of a select group of the Company's management, and any
exemptions under ERISA, as applicable to such an arrangement, shall be
applicable to the Plan.

      7.8   ENTIRE AGREEMENT. Except as specified herein and any change in
control agreement, this Plan sets forth the entire understanding of the Company
with respect to the subject matter hereof and supersedes all existing severance
plans, agreements and understandings

                                       12
<PAGE>

(whether oral or written) between the Company and the Participants with respect
to the subject matter herein.

      7.9   NOT AN AGREEMENT OF EMPLOYMENT. This is not a Plan or an agreement
assuring employment and the Company reserves the right to terminate any
Participant's employment at any time with or without Cause, subject to the
payment provisions hereof. Participant's shall have no claim against the Company
hereunder or for deprivation of the right to receive the amounts hereunder as a
result of any termination that does not specifically satisfy the requirements
hereof or as a result of any other action taken by the Company. Except as
provided herein, the foregoing shall not affect a Participant's rights under any
other agreement with the Company.

                                       13exv10w1

 

Exhibit 10.1

15,600,000 Shares

SUPERCONDUCTOR TECHNOLOGIES INC.

Common Stock

PLACEMENT AGENCY AGREEMENT

November 22, 2004

Needham & Company, Inc.

445 Park Avenue

New York, New York 10022

Ladies and Gentlemen:

     Superconductor Technologies Inc., a Delaware corporation (the “Company”),
proposes to issue and sell to certain investors (collectively, the “Investors”)
up to an aggregate of 15,600,000 shares (the “Shares”) of the Company’s Common
Stock, par value $0.001 per share (the “Common Stock”). The Company desires to
engage you as its exclusive placement agent (the “Placement Agent”) in
connection with the issuance and sale of the Shares. The Shares are described
more fully in the Prospectus that is referred to below.

     The Company confirms its agreements with the Placement Agent as follows:

     1. Agreement to Act as Placement Agent.

     (a) On the basis of the representations, warranties and agreements of the
Company herein contained and subject to all of the terms and conditions of
this Agreement, the Company engages the Placement Agent to act as its exclusive
placement agent in connection with the issuance and sale of the Shares and the
Placement Agent hereby agrees, as an agent of the Company, to use its
commercially reasonable efforts to solicit offers to purchase the Shares upon
the terms and conditions set forth in the Prospectus (as defined below). Prior
to the earlier of (i) the date on which this Agreement is terminated and (ii)
the Closing Date (as defined below), the Company shall not, without the prior
consent of the Placement Agent, solicit or accept offers to purchase Common
Stock (other than pursuant to the exercise of options or warrants to purchase
shares of Common Stock that are outstanding as of the date hereof) otherwise
than through the Placement Agent in accordance herewith.

     (b) As compensation for the services rendered hereunder, on the Closing
Date (as defined below), the Company shall pay to the Placement Agent, by wire
transfer of immediately available U.S. funds payable to the order of the
Placement Agent, to an account or accounts designated by the Placement Agent,
an amount equal to 6% of the gross proceeds received by the Company from the
sale of the Shares (the “Fee”). The Placement Agent may, in its discretion,
retain other brokers or dealers to act as sub-agents on the Placement Agent’s
behalf in connection with the offering of the Shares.

     (c) This Agreement shall not give rise to a commitment by the Placement
Agent or any of its affiliates to underwrite or purchase any of the Shares or
otherwise provide any financing, and the Placement Agent shall have no
authority to bind the Company in respect of the sale of any Shares. The
Company shall have the sole right to accept offers to purchase the Shares 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 Shares received by it, in whole or in
part, and any such rejection shall not be deemed a breach of its agreement
contained herein. The sale of the Shares shall be made pursuant to purchase
agreements in the form attached hereto as Exhibit A (the “Purchase
Agreements”).

 

 

     2. Delivery and Payment. Subject to the terms and conditions hereof,
delivery of the Shares shall be made by the Company to the Investors, and
payment of the purchase price shall be made by the Investors, at the office of
Needham & Company, Inc. 445 Park Avenue, New York, New York 10022, at 10:00
a.m., New York City time, on or before November 24, 2004 or at such time on
such other date as may be agreed upon in writing by the Company and the
Placement Agent (such date of delivery and payment is hereinafter referred to
as the “Closing Date”). Payment of the purchase price for the Shares shall be
made to or upon the order of the Company by wire transfer payable in same-day
funds to the Company, upon delivery of the Shares, through the facilities of
The Depository Trust Company, to such persons, and shall be registered in such
name or names and shall be in such denominations, as the Placement Agent may
request at least one business day before the Closing Date. Payment of the
purchase price for the Shares shall be made on the Closing Date by the
Investors directly to or upon the order of the Company. The cost of original
issue tax stamps and other transfer taxes, if any, in connection with the
issuance and delivery of the Shares by the Company to the respective Investors
shall be borne by the Company.

     3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to the Placement Agent that:

     (a) The Company meets the requirements for the use of Form S-3, a
registration statement (Registration No. 333-111818) on Form S-3 relating to
the Shares, including a base prospectus relating to the Shares (the “Base
Prospectus”) and such amendments thereof as may have been required to the date
of this Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the “Act”), and the rules and regulations
(collectively referred to as the “Rules and Regulations”) of the Securities and
Exchange Commission (the “Commission”) thereunder, and has been filed with and
has been declared effective by the Commission, and the offering of the Shares
complies with Rule 415 under the Act. Copies of such registration statement
and amendments and of each related Base Prospectus have been delivered to the
Placement Agent. A final prospectus supplement to the Base Prospectus relating
to the Shares and the offering thereof will be filed promptly by the Company
with the Commission in accordance with Rule 424(b) of the Rules and
Regulations. The term “Registration Statement” means the registration
statement as amended at the time it became effective (the “Effective Date”),
including all financial statements, exhibits and schedules thereto and any
information deemed to be included by Rule 430A of the Rules and Regulations,
and includes any registration statement relating to the offering contemplated
by this Agreement and filed pursuant to Rule 462(b) of the Rules and
Regulations. The term “Prospectus Supplement” means the final prospectus
supplement to the Base Prospectus relating to the Shares and the offering
thereof as first filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations. The term “Prospectus” means the Base Prospectus together with
the Prospectus Supplement, except that if such Base Prospectus is amended or
supplemented on or prior to the date on which the Prospectus Supplement was
first filed pursuant to Rule 424(b) of the Rules and Regulations, the term
“Prospectus” shall mean the Base Prospectus as so amended or supplemented and
as supplemented by the Prospectus Supplement. Any reference herein to the
Registration Statement, the Base Prospectus, the Prospectus Supplement, or the
Prospectus shall be deemed to refer to and include the documents incorporated
by reference therein, and any reference herein to the terms “amend,”
"amendment” or “supplement” with respect to the Registration Statement, the
Base Prospectus, the Prospectus Supplement, or the Prospectus shall be deemed
to refer to and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), after the Effective
Date, the date of any preliminary prospectus or the date of the Prospectus, as
the case may be, and deemed to be incorporated therein by reference.

     (b) No order preventing or suspending the use of the Base Prospectus, the
Prospectus Supplement, or the Prospectus has been issued by the Commission, and
no stop order suspending the effectiveness of the Registration Statement
(including any related registration statement filed pursuant to Rule 462(b)
under the Act) or any post-effective amendment thereto has been issued, and no
proceeding for that purpose has been initiated or threatened by the Commission.
On the Effective Date, the date (if any) the Base Prospectus, the Prospectus
Supplement, or the Prospectus is first filed with the Commission pursuant to
Rule 424(b), at all times during the period through and including the Closing
Date and when any post-effective amendment to the Registration Statement
becomes effective or any amendment or supplement to the Prospectus is filed
with the Commission, the Registration Statement and the Prospectus (as amended
or as supplemented if the Company shall have filed with the Commission any
amendment or supplement thereto), including the financial statements included
or incorporated by reference in the Prospectus, did and will comply with all
applicable provisions of the Act, the Exchange Act, the rules and regulations
under the Exchange Act (the “Exchange Act Rules and Regulations”), and the
Rules and Regulations and will contain all

2

 

statements required to be stated therein in accordance with the Act, the
Exchange Act, the Exchange Act Rules and Regulations, and the Rules and
Regulations. On the Effective Date and when any post-effective amendment to
the Registration Statement becomes effective, no part of the Registration
Statement, the Base Prospectus or any such amendment or supplement thereto did
or will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, the date the Base
Prospectus or any amendment or supplement to the Base Prospectus, including the
Prospectus Supplement, is filed with the Commission and at the Closing Date,
the Prospectus did not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The foregoing representations and warranties in this Section 3(b) do not apply
to any statements or omissions made in reliance on and in conformity with
information relating to the Placement Agent furnished in writing to the Company
by the Placement Agent specifically for inclusion in the Registration Statement
or Prospectus or any amendment or supplement thereto. The Company acknowledges
that the statements set forth in the eighth paragraph under the heading “Plan
of Distribution” in the Prospectus Supplement constitute the only information
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent specifically for inclusion in the Registration Statement, the
Base Prospectus, the Prospectus Supplement, or the Prospectus or any amendment
or supplement thereto.

     (c) The documents that are incorporated by reference in the Base
Prospectus, the Prospectus Supplement and the Prospectus or from which
information is so incorporated by reference, when they became or become
effective or were or are filed with the Commission, as the case may be,
complied or will comply in all material respects with the requirements of the
Act or the Exchange Act, as applicable, and the Rules and Regulations or the
Exchange Act Rules and Regulations, as applicable; and any documents so filed
and incorporated by reference subsequent to the Effective Date shall, when they
are filed with the Commission, comply in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and the Rules and
Regulations or the Exchange Act Rules and Regulations, as applicable.

     (d) The Company does not own, and at the Closing Date, will not own,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any
corporation, firm, partnership, joint venture, association or other entity,
other than the subsidiaries listed in Exhibit 21 to the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2003 (the “Subsidiaries”).
Conductus, Inc., a Delaware corporation (“Conductus”) is the Company’s only
active Subsidiary. Each of the Company and Conductus is, and at the Closing
Date will be, a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Company and Conductus has, and at the Closing Date will have, full power and
authority to conduct all the activities conducted by it, to own or lease all
the assets owned or leased by it and to conduct its business as described in
the Registration Statement and the Prospectus. Each of the Company and
Conductus is, and at the Closing Date will be, duly licensed or qualified to do
business and in good standing as a foreign corporation in all jurisdictions in
which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such license or qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not materially and adversely affect the Company and Conductus, taken as a
whole, or their respective businesses, properties, business prospects,
conditions (financial or other) or results of operations, taken as a whole
(such effect is referred to herein as a “Material Adverse Effect”). All of the
outstanding shares of capital stock of Conductus have been duly authorized and
validly issued and are fully paid and nonassessable, and owned by the Company
free and clear of all claims, liens, charges and encumbrances; there are no
securities outstanding that are convertible into or exercisable or exchangeable
for capital stock of Conductus. The Company and Conductus are not, and at the
Closing Date will not be, engaged in any discussions or a party to any
agreement or understanding, written or oral, regarding the acquisition of an
interest in any corporation, firm, partnership, joint venture, association or
other entity where such discussions, agreements or understandings would require
amendment to the Registration Statement pursuant to applicable securities laws.
Complete and correct copies of the certificate of incorporation and of the
by-laws of the Company and Conductus and all amendments thereto have been
delivered to the Placement Agent, and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date.

     (e) The Company has authorized, issued and outstanding capital stock as
set forth under the caption “Capitalization” in the Prospectus as of the date
set forth therein. All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued and are fully paid and
nonassessable and were issued in

3

 

compliance with all applicable state and federal securities laws; the
Shares have been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and nonassessable; and no preemptive
or similar rights exist with respect to any of the Shares or the issue and sale
thereof. The description of the capital stock of the Company incorporated by
reference in the Registration Statement and the Prospectus is, and at the
Closing Date will be, complete and accurate in all respects. Except as set
forth in the Prospectus, the Company does not have outstanding, and at the
Closing Date will not have outstanding, any options to purchase, or any rights
or warrants to subscribe for, or any securities or obligations convertible
into, or any contracts or commitments to issue or sell, any shares of capital
stock, or any such warrants, convertible securities or obligations. No further
approval or authority of stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares as contemplated
herein. The certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the Company.

     (f) The financial statements and schedules included or incorporated by
reference in the Registration Statement or the Prospectus present fairly the
financial condition of the Company and Conductus as of the respective dates
thereof and the results of operations and cash flows of the Company and
Conductus for the respective periods covered thereby, all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the entire period involved, except as otherwise disclosed in the
Prospectus. No other financial statements or schedules of the Company are
required by the Act, the Exchange Act, the Exchange Act Rules and Regulations
or the Rules and Regulations to be included in the Registration Statement or
the Prospectus. PricewaterhouseCoopers LLP (the “Accountants”), who have
reported on such financial statements and schedules, are independent
accountants with respect to the Company as required by the Act and the Rules
and Regulations and Rule 3600T of the Public Company Accounting Oversight Board
(“PCAOB”). The summary and selected financial and statistical data included in
the Registration Statement present fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented in the Registration Statement.

     (g) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus and prior to or on the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company (other than in connection with the exercise of
options to purchase the Company’s Common Stock granted pursuant to the
Company’s stock option plans from the shares reserved therefore or exercise of
warrants as described in the Registration Statement), or any Material Adverse
Effect arising for any reason whatsoever, (ii) neither the Company nor any of
its Subsidiaries has incurred nor will any of them incur, except in the
ordinary course of business as described in the Prospectus, any material
liabilities or obligations, direct or contingent, nor has the Company or any of
its Subsidiaries entered into nor will it enter into, except in the ordinary
course of business as described in the Prospectus, any material transactions
other than pursuant to this Agreement and the transactions referred to herein
and (iii) the Company has not and will not have paid or declared any dividends
or other distributions of any kind on any class of its capital stock.

     (h) The Company is not, will not become as a result of the transactions
contemplated hereby, and will not conduct its business in a manner that would
cause it to become, an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940, as amended.

     (i) Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or Conductus or any of
their respective officers in their capacity as such, nor any basis therefor,
before or by any federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding might have a Material Adverse
Effect.

     (j) The Company and Conductus has, and at the Closing Date will have,
performed all the obligations required to be performed by it, and is not, and
at the Closing Date will not be, in default, under any contract or other
instrument to which it is a party or by which its property is bound or
affected, which default might have a Material Adverse Effect. To the knowledge
of the Company, no other party under any contract or other instrument to which
it or Conductus is a party is in default in any respect thereunder, which
default might have a Material Adverse Effect. Neither the Company nor
Conductus is and at the Closing Date will not be, in violation of any provision
of its certificate or articles of organization or by-laws or other
organizational documents.

4

 

     (k) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated
herein, except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or Blue Sky laws
or the by-laws and rules of the National Association of Securities Dealers,
Inc. (the “NASD”) in connection with the public offering of the Shares.

     (l) The Company has full corporate power and authority to enter into this
Agreement and each Purchase Agreement. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with the terms hereof. Each Purchase Agreement has been duly authorized and,
as of the Closing Date, will have been executed and delivered by the Company
and constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with the terms thereof. The performance of
this Agreement and the Purchase Agreements and the consummation of the
transactions contemplated hereby will not result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of the Company
pursuant to the terms or provisions of, or result in a breach or violation of
any of the terms or provisions of, or conflict with or constitute a default
under, or give any party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, the certificate or articles
of incorporation or by-laws of the Company or Conductus, any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease, contract or
other agreement or instrument to which the Company or Conductus is a party or
by which the Company, Conductus or any of their respective properties is bound
or affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body
applicable to the business or properties of the Company or Conductus.

     (m) The Company and Conductus have good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
described in the Prospectus or are not material to the business of the Company
or Conductus. The Company and Conductus have valid, subsisting and enforceable
leases for the properties described in the Prospectus as leased by them. The
Company and Conductus own or lease all such properties as are necessary to
their respective operations as now conducted or as proposed to be conducted,
except where the failure to so own or lease would not have a Material Adverse
Effect.

     (n) There is no document, contract, permit or instrument, affiliate
transaction or off-balance sheet transaction (including, without limitation,
any “variable interests” in “variable interest entities,” as such terms are
defined in Financial Accounting Standards Board Interpretation No. 46) of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described or filed as required. All such contracts to which the Company or
Conductus is a party have been duly authorized, executed and delivered by the
Company or Conductus, constitute valid and binding agreements of the Company or
Conductus and are enforceable against and by the Company or Conductus in
accordance with the terms thereof.

     (o) No statement, representation, warranty or covenant made by the Company
in this Agreement or made in any certificate or document required by Section 5
of this Agreement to be delivered to the Placement Agent was or will be, when
made, inaccurate, untrue or incorrect.

     (p) The Company has not distributed, and will not distribute prior to the
Closing Date, any offering material in connection with the offering and sale of
the Shares other than any preliminary prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
Neither the Company nor any of its directors, officers or controlling persons
has taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
that has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.

     (q) No holder of securities of the Company has rights to the registration
of any securities of the Company because of the filing of the Registration
Statement, which rights have not been waived by the holder thereof as of the
date hereof.

5

 

     (r) The Common Stock is registered under Section 12(g) of the Exchange Act
and the Company has filed an application to list the Shares on the Nasdaq
National Market (“NNM”), and has received notification that the listing has
been approved, subject to notice of issuance of the Shares.

     (s) Except as disclosed in or specifically contemplated by the Prospectus
(i) each of the Company and Conductus owns or has adequate rights to use all
trademarks, trade names, domain names, patents, patent rights, mask works,
copyrights, technology, know-how (including trade secrets and other unpatented
or unpatentable proprietary or confidential information, systems or
procedures), service marks, trade dress rights, and other intellectual property
(collectively, “Intellectual Property”) and has such other licenses, approvals
and governmental authorizations, in each case sufficient to conduct its
business as now conducted and as now proposed to be conducted, and to the
Company’s and Conductus’ knowledge, none of the foregoing Intellectual Property
rights owned or licensed by the Company or Conductus is invalid or
unenforceable, (ii) the Company has no knowledge of any infringement by it or
Conductus of Intellectual Property rights of others, where such infringement
could have a Material Adverse Effect, (iii) the Company is not aware of any
infringement, misappropriation or violation by others of, or conflict by others
with rights of the Company or Conductus with respect to, any Intellectual
Property, (iv) there is no claim being made against the Company or Conductus
or, to the knowledge of the Company and Conductus, any employee of the Company
or Conductus, regarding Intellectual Property or other infringement that could
have a Material Adverse Effect, and (v) the Company and Conductus have not
received any notice of infringement with respect to any patent or any notice
challenging the validity, scope or enforceability of any Intellectual Property
owned by or licensed to the Company or Conductus, in each case the loss of
which patent or Intellectual Property (or loss of rights thereto) would have a
Material Adverse Effect.

     (t) The Company and Conductus has filed all federal, state, local and
foreign income tax returns that have been required to be filed and has paid all
taxes and assessments received by it to the extent that such taxes or
assessments have become due. Neither the Company nor Conductus has any tax
deficiency that has been or, to the knowledge of the Company, might be
asserted or threatened against it that could have a Material Adverse Effect.

     (u) The pro forma financial information set forth in the Registration
Statement reflects, subject to the limitations set forth in the Registration
Statement as to such pro forma financial information, the results of operations
of the Company and its consolidated Subsidiaries purported to be shown thereby
for the periods indicated and conforms to the requirements of Regulation S-X of
the Rules and Regulations and management of the Company believes (i) the
assumptions underlying the pro forma adjustments are reasonable, (ii) that such
adjustments have been properly applied to the historical amounts in the
compilation of such pro forma statements and notes thereto, and (iii) that such
statements and notes thereto present fairly, with respect to the Company and
its consolidated Subsidiaries, the pro forma financial position and results of
operations and the other information purported to be shown therein at the
respective dates or for the respective periods therein specified.

     (v) The Company or Conductus owns or possesses all authorizations,
approvals, orders, licenses, registrations, other certificates and permits of
and from all governmental regulatory officials and bodies, necessary to conduct
their respective businesses as contemplated in the Prospectus, except where the
failure to own or possess all such authorizations, approvals, orders, licenses,
registrations, other certificates and permits would not have a Material Adverse
Effect. There is no proceeding pending or threatened (or any basis therefor
known to the Company) that may cause any such authorization, approval, order,
license, registration, certificate or permit to be revoked, withdrawn,
cancelled, suspended or not renewed; and each of the Company and Conductus is
conducting its business in compliance with all laws, rules and regulations
applicable thereto (including, without limitation, all applicable federal,
state and local environmental laws and regulations) except where such
noncompliance would not have a Material Adverse Effect.

     (w) The Company and Conductus maintain insurance of the types and in the
amounts generally deemed adequate for its business, including, but not limited
to, insurance covering real and personal property owned or leased by the
Company and Conductus against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.

     (x) Neither the Company nor Conductus has nor, to the Company’s
knowledge, any of its or their respective employees or agents at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation
of law, or (ii) made any payment

6

 

to any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.

     (y) The books, records and accounts of the Company and Conductus
accurately and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the results of operations of, the Company
and Conductus. The Company and Conductus maintain (x) systems of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of the Company’s consolidated financial statements in accordance
with generally accepted accounting principles and to maintain asset
accountability, (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, and
(y) disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Exchange Act).

     (z) There are no affiliations or associations between any member of the
NASD and any of the Company’s officers, directors, or 5% or greater
securityholders, except as set forth in the Registration Statement and the
Prospectus.

     4. Agreements of the Company. The Company covenants and agrees with the
Placement Agent as follows:

     (a) The Company will not, during such period as the Prospectus is required
by law to be delivered in connection with sales of the Shares, file any
amendment or supplement to the Registration Statement or the Prospectus, unless
a copy thereof shall first have been submitted to the Placement Agent within a
reasonable period of time prior to the filing thereof and the Placement Agent
shall not have objected thereto in good faith.

     (b) The Company will notify the Placement Agent promptly, and will confirm
such advice in writing, (i) when any post-effective amendment to the
Registration Statement becomes effective, (ii) of any request by the Commission
for amendments or supplements to the Registration Statement or the Prospectus
or for additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, (iv) of
the happening of any event during the period mentioned in the second sentence
of Section 4(e) that in the judgment of the Company makes any statement made in
the Registration Statement or the Prospectus untrue or that requires the making
of any changes in the Registration Statement or the Prospectus in order to make
the statements therein, in the light of the circumstances in which they are
made, not misleading, and (v) of receipt by the Company or any representative
or attorney of the Company of any other communication from the Commission
relating to the Company, the Registration Statement, any preliminary
prospectus, the Base Prospectus, the Prospectus Supplement or the Prospectus.
If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A of the Rules and Regulations, the
Company will comply with the provisions of and make all requisite filings with
the Commission pursuant to said Rule 430A and notify the Placement Agent
promptly of all such filings. If the Company elects to rely upon Rule 462(b)
under the Act, the Company shall file a registration statement under Rule
462(b) with the Commission in compliance with Rule 462(b) by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement, and the Company shall at
the time of filing either pay to the Commission the filing fee for such Rule
462(b) registration statement or give irrevocable instructions for the payment
of such fee pursuant to the Rules and Regulations.

     (c) The Company will furnish to the Placement Agent, without charge, a
copy of one signed copy of each of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Placement Agent, without
charge, a copy of the Registration Statement and any pre- or post-effective
amendment thereto, including financial statements and schedules but without
exhibits.

     (d) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.

7

 

     (e) From time to time, the Company will deliver to the Placement Agent,
without charge, as many copies of the Prospectus or any amendment or supplement
thereto as the Placement Agent may reasonably request. The Company consents to
the use of the Prospectus or any amendment or supplement thereto by the
Placement Agent, both in connection with the offering or sale of the Shares and
for any period of time thereafter during which the Prospectus is required by
law to be delivered in connection therewith. If during such period of time any
event shall occur that in the judgment of the Company or counsel to the
Placement Agent should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
the Placement Agent, without charge, such number of copies of such supplement
or amendment to the Prospectus as the Placement Agent may reasonably request.
The Company will not file any document under the Exchange Act or the Exchange
Act Rules and Regulations before the termination of the offering of the Shares,
if such document would be deemed to be incorporated by reference into the
Prospectus, that is not approved by the Placement Agent after reasonable notice
thereof.

     (f) Prior to any public offering of the Shares, the Company will cooperate
with the Placement Agent and counsel to the Placement Agent in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Placement Agent may
request; provided, that in no event shall the Company be obligated to qualify
to do business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to general service of process in any
jurisdiction where it is not now so subject.

     (g) The Company will, so long as required under the Rules and Regulations,
furnish to its stockholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of income,
stockholders’ equity and cash flow of the Company and its consolidated
Subsidiaries, if any, certified by independent public accountants) and, as soon
as practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its Subsidiaries, if any, for such quarter in reasonable detail.

     (h) During the period of five years commencing on the date hereof, the
Company will furnish to the Placement Agent copies of such financial statements
and other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock, and will
furnish to the Placement Agent a copy of each annual or other report it shall
be required to file with the Commission.

     (i) The Company will make generally available to holders of its securities
as soon as may be practicable, but in no event later than the Availability Date
(as defined below), an earning statement (which need not be audited but shall
be in reasonable detail) covering a period of 12 months commencing after the
Effective Date that will satisfy the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations). For the purpose of the
preceding sentence, “Availability Date” means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such Effective
Date, except that if such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “Availability Date” means the 90th day after the end of
such fourth fiscal quarter. The Company’s filing of Reports on Form 10-Q and
Form 10-K via the SEC’s Electronic Data Gathering and Retrieval system will be
deemed to satisfy the requirements in this Section 4(i).

     (j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay or reimburse
if paid by the Placement Agent all costs and expenses incident to the
performance of the obligations of the Company under this Agreement and in
connection with the transactions contemplated hereby, including but not limited
to costs and expenses of or relating to (i) the preparation, printing and
filing of the Registration Statement and exhibits to it, each preliminary
prospectus, the Base Prospectus, each Prospectus Supplement, the Prospectus,
and any amendment or supplement to any of the foregoing, (ii) the preparation
and delivery of certificates representing the Shares, (iii) furnishing
(including costs of shipping and mailing) such copies of the Registration
Statement, the Base Prospectus, the Prospectus Supplement, the Prospectus and
any preliminary prospectus, and all amendments and supplements thereto, as may
be requested by the Placement Agent for use in connection with the offering and
sale of the Shares, (iv) the listing of the Shares on the NNM, (v) any filings
required to be made by the Placement Agent or the Company with the NASD, and
the fees,

8

 

disbursements and other charges of counsel for the Placement Agent in
connection therewith, (vi) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 4(f), including the fees, disbursements and
other charges of counsel to the Placement Agent in connection therewith, and
the preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (vii) fees, disbursements and other charges of counsel to the
Company and of the Accountants, (viii) the transfer agent for the Shares, and
(ix) any travel expenses of the Company’s officers, directors and employees and
any other expenses of the Company in connection with attending or hosting
meetings with prospective Investors. The Company shall reimburse the Placement
Agent, upon request, for all out-of-pocket costs and expenses promptly
following receipt by the Company promptly upon receipt by the Company of an
invoice from the Placement Agent.

     (k) The Company will not at any time, directly or indirectly, take any
action designed or that might reasonably be expected to cause or result in, or
that will constitute, stabilization of the price of the shares of Common Stock
to facilitate the sale or resale of any of the Shares.

     (l) The Company will apply the net proceeds from the offering and sale of
the Shares to be sold by the Company in the manner set forth in the Prospectus
under “Use of Proceeds.”

     (m) During the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the Prospectus, without the prior
written consent of Needham & Company, Inc., the Company will not (1) offer,
sell, contract to sell, pledge, grant options, warrants or rights to purchase,
or otherwise dispose of any equity securities of the Company or any other
securities convertible into or exchangeable for its Common Stock or other
equity security (other than pursuant to employee stock option plans disclosed
in the Prospectus or pursuant to the conversion of convertible securities or
the exercise of warrants in each case outstanding on the date of this
Agreement) or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or
risks of ownership of shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise.

     (n) During the period of 90 days after the date of the Prospectus, the
Company will not, without the prior written consent of Needham & Company, Inc.,
grant options to purchase shares of Common Stock at a price less than the price
at which the Shares have been offered to the public. During the period of 90
days after the date of the Prospectus, the Company will not file with the
Commission or cause to become effective any registration statement relating to
any securities of the Company without the prior written consent of Needham &
Company, Inc.

     (o) The Company will cause each of its executive officers, and directors
and certain stockholders designated by the Placement Agent to enter into
lock-up agreements with the Placement Agent to the effect that they will not,
without the prior written consent of Needham & Company, Inc., sell, contract to
sell or otherwise dispose of any shares of Common Stock or rights to acquire
such shares according to the terms set forth in Exhibit B hereto.

     5. Conditions of the Obligations of the Placement Agent. The obligations
of the Placement Agent hereunder are subject to the following conditions:

     (a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. If the Company has elected to rely upon Rule
462(b), the registration statement filed under Rule 462(b) shall have become
effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement.

     (b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or
registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the
Commission or such authorities, (iv) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Placement Agent and the
Placement Agent does not object thereto in good faith, and (v) the Placement
Agent shall have received certificates, dated the Closing Date and signed by
the Chief Executive Officer

9

 

and the Chief Financial Officer of the Company (who may, as to proceedings
threatened, rely upon the of their information and belief), to the effect of
clauses (i), (ii) and (iii) of this paragraph.

     (c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company or any of its Subsidiaries, whether or not arising
from transactions in the ordinary course of business, in each case other than
as described in or contemplated by the Registration Statement and the
Prospectus, and (ii) the Company shall not have sustained any material loss or
interference with its business or properties from fire, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree,
which is not described in the Registration Statement and the Prospectus, if in
the judgment of the Placement Agent any such development makes it impracticable
or inadvisable to consummate the offering of the Shares.

     (d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company, any of its Subsidiaries, or
any of or their officers or directors in their capacities as such, before or by
any federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would, in the judgment of
the Placement Agent, have a Material Adverse Effect or if, in the judgment of
the Placement Agent, any such development makes it impracticable or inadvisable
to consummate the offering of the Shares.

     (e) Each of the representations and warranties of the Company contained
herein shall be true and correct in all respects (in the case of any
representation or warranty containing a materiality or Material Adverse Effect
qualification) or in all material respects at the Closing Date and all
covenants and agreements contained herein to be performed on the part of the
Company and all conditions contained herein to be fulfilled or complied with by
the Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with.

     (f) The Placement Agent shall have received an opinion, dated the Closing
Date, satisfactory in form and substance to the Placement Agent and counsel for
the Placement Agent, from Guth|Christopher, counsel to the Company, with
respect to the following matters:

     (i) Each of the Company and Conductus is a corporation duly
organized validly existing and in good standing under the laws of the
State of Delaware; has full corporate power and authority to conduct all
the activities conducted by it, to own or lease all the assets owned or
leased by it and to conduct its business as described in the Registration
Statement and Prospectus; and is duly qualified to conduct business and
is in good standing as a foreign corporation in all jurisdictions in
which the nature of the activities conducted by it or the character of
the assets owned or leased by it makes such qualification necessary and
where the failure to be qualified would have a material and adverse
effect on the business or financial condition of the Company.

     (ii) The Shares to be sold by the Company in the Offering have been
duly authorized and, when issued and paid for as contemplated by this
Agreement and the respective Purchase Agreements, will be validly issued,
fully paid and nonassessable, and are not subject to preemptive or
similar rights pursuant to the Certificate or Bylaws or by statute or any
agreement filed as an exhibit to the Documents Incorporated by Reference,
or to our knowledge, any other agreement by which the Company is bound.

     (iii) All of the outstanding shares of capital stock of Conductus
have been duly authorized and validly issued and are fully paid and
nonassessable, and, to such counsel’s knowledge, are owned by the Company
free and clear of all claims, liens, charges and encumbrances. To such
counsel’s knowledge, there are no securities outstanding that are
convertible into or exercisable or exchangeable for capital stock of
Conductus.

     (iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the Prospectus
in the column titled “Actual” under the caption “Capitalization” (except
for subsequent issuances, if any, pursuant to this Agreement or pursuant
to reservations,

10

 

agreements, employee benefit plans or the exercise of convertible
securities, options or warrants referred to in the Prospectus). To such
counsel’s knowledge, except as disclosed in or specifically contemplated
by the Prospectus, there are no outstanding options, warrants or other
rights calling for the issuance of, and no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital
stock of the Company. The description of the capital stock of the
Company incorporated by reference in the Registration Statement and the
Prospectus conforms in all material respects to the terms thereof.

     (v) To such counsel’s knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company or any of its
Subsidiaries is a party or to which any of their respective properties is
subject that are required to be described in the Registration Statement
or the Prospectus but are not so described.

     (vi) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required
for the consummation by the Company of the transactions contemplated on
its part under this Agreement or the respective Purchase Agreements,
except such as have been obtained or made under the Act or the Rules and
Regulations and such as may be required under state securities or Blue
Sky laws or the by-laws and rules of the NASD in connection with the
offering by the Placement Agent of the Shares.

     (vii) The Company has full corporate power and authority to enter
into this Agreement and the Purchase Agreements. This Agreement and each
Purchase Agreement has been duly authorized, executed and delivered by
the Company.

     (viii) The execution and delivery of this Agreement and the Purchase
Agreements, the compliance by the Company with all the respective terms
hereof and thereof the consummation of the transactions contemplated
hereby and thereby (a) do not contravene any provision of applicable laws
the Certificate of Incorporation or By-Laws of the Company or of
Conductus, or to such counsel’s knowledge, any provision of any
applicable federal or state law, rule or regulation (other than state
securities or Blue Sky laws or regulations to which we give no opinion),
and (b) to such counsel’s knowledge, will not (i) result in the creation
or imposition of any lien, charge or encumbrance upon any of the assets
of the Company or Conductus pursuant to the terms and provisions of; (ii)
conflict with, result in a breach or violation of any of the terms or
provisions of; (iii)constitute a default under, or give any party a right
to terminate any of its obligations under; or (iv) result in the
acceleration of any obligation under, any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument which is listed as an exhibit to the Documents
Incorporated by Reference or, to such counsel’s knowledge, any other
agreement, document or instrument, to which the Company or Conductus is a
party or by which the Company and Conductus, or any of their respective
properties is bound or affected, or (c) violate or conflict with (i) any
judgment, ruling, decree or order known to such counsel or (ii) any
statue, rule or regulation of any court or other governmental agency or
body, applicable to the business or properties of the Company or
Conductus.

     (ix) To such counsel’s knowledge, (i) there is no document or
contract of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described or filed or incorporated by
reference as required, and (ii) each description of such contracts and
documents that is contained or incorporated by reference in the
Registration Statement and Prospectus fairly presents in all material
respects the information required under the Act and the Rules and
Regulations.

     (x) The statements on page 17 of the Prospectus under the caption
“Description of Common and Preferred Stock” and the statements under the
caption “Risk Factors – Anti-takeover provisions in our charter documents
and under California law could prevent or delay a change in control,
which could negatively impact the value of our common stock by
discouraging a favorable merger or acquisition of us” in the Prospectus,
insofar as the statements constitute a summary of documents referred to
therein or

11

 

matters of law, are accurate summaries and fairly and correctly
present, in all material respects, the information called for with
respect to such documents and matters.

     (xi) The Company is not an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act of
1940, as amended.

     (xii) The Firm Shares and Option Shares to be sold by the Company
have been duly authorized for listing on the Nasdaq National Market,
subject to official notice of issuance.

     (xiii) To such counsel’s knowledge, except as stated in the
Prospectus or in this Agreement, no holder of securities of the Company
has rights, which have not been waived or satisfied, to require the
Company to register with the Commission shares of Common Stock or other
securities, as part of the transactions contemplated by this Agreement.

     (xiv) The Registration Statement has become effective under the Act,
and to such counsel’s knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or is pending, threatened
or contemplated.

     (xv) The Registration Statement and the Prospectus comply as to form
in all material respects with the requirements of the Act and the Rules
and Regulations (other than the financial statements, schedules and other
financial and statistical data contained in or incorporated by reference
into the Registration Statement or the Prospectus, as to which such
counsel need express no opinion).

     (xvi) Such counsel has participated in the preparation of the
Registration Statement and Prospectus and has no reason to believe that,
as of the Effective Date the Registration Statement, or any amendment or
supplement thereto, (other than the financial statements, schedules and
other financial data contained therein, as to which such counsel need
express no opinion) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, or any amendment or supplement thereto, as of its date and
the Closing Date and, if later, the Option Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(other than the financial statements, schedules and other financial data
contained therein, as to which such counsel need express no opinion).

     (xvii) The Documents Incorporated by Reference (other than the
financial statements, schedules and other financial and statistical data
contained therein, as to which such counsel need express no opinion),
when they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act and the
Exchange Act Rules and Regulations.

     In rendering such opinion, such counsel may rely upon as to matters of
local law on opinions of counsel satisfactory in form and substance to the
Placement Agent and counsel for the Placement Agent, provided that the opinion
of counsel to the Company shall state that they are doing so, that they have no
reason to believe that they and the Placement Agent are not entitled to rely on
such opinions and that copies of such opinions are to be attached to the
opinion.

     In addition, such counsel shall state that in connection with such
counsel’s participation in the preparation of the Registration Statement and
Prospectus, such counsel has no reason to believe that, as of the Effective
Date the Registration Statement, or any amendment thereto, (other than the
financial statements, schedules and other financial data contained or
incorporated by reference therein, as to which such counsel need express no
opinion) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, or any amendment or
supplement thereto, as of its date and the Closing Date, contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were

12

 

made, not misleading (other than the financial statements, schedules and
other financial data contained or incorporated by reference therein, as to
which such counsel need express no opinion).

     (g) The Placement Agent shall have received an opinion, dated the Closing
Date, from Gray Cary Ware & Freidenrich LLP, counsel to the Placement Agent,
with respect to the Registration Statement, the Prospectus and this Agreement,
which opinion shall be satisfactory in all respects to the Placement Agent.

     (h) Concurrently with the execution and delivery of this Agreement, the
Accountants shall have furnished to the Placement Agent a letter, dated the
date of its delivery, addressed to the Placement Agent and in form and
substance satisfactory to the Placement Agent, confirming that they are
independent accountants with respect to the Company and its Subsidiaries as
required by the Act and the Exchange Act and the Rules and Regulations and with
respect to certain financial and other statistical and numerical information
contained or incorporated by reference in the Registration Statement. At the
Closing Date, the Accountants shall have furnished to the Placement Agent a
letter, dated the date of its delivery, which shall confirm, on the basis of a
review in accordance with the procedures set forth in the letter from the
Accountants, that nothing has come to their attention during the period from
the date of the letter referred to in the prior sentence to a date (specified
in the letter) not more than three days prior to the Closing Date, which would
require any change in their letter dated the date hereof if it were required to
be dated and delivered at the Closing Date.

     (i) At the Closing Date, there shall be furnished to the Placement Agent a
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, in form and
substance satisfactory to the Placement Agent, to the effect that:

     (i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed
under the Exchange Act and deemed to be incorporated by reference into
the Prospectus) and (A) as of the date of such certificate, such
documents are true and correct in all material respects and do not omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein not untrue or misleading and (B) in
the case of the certificate delivered at the Closing Date, since the
Effective Date no event has occurred as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein not untrue or misleading.

     (ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct.

     (iii) Each of the covenants required to be performed by the Company
herein on or prior to the date of such certificate has been duly, timely
and fully performed and each condition herein required to be satisfied or
fulfilled on or prior to the date of such certificate has been duly,
timely and fully satisfied or fulfilled.

     (j) On or prior to the Closing Date, the Placement Agent shall have
received the executed agreements referred to in Section 4(o).

     (k) The Shares shall be qualified for sale in such jurisdictions as the
Placement Agent may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing
Date.

     (l) Prior to the Closing Date, the Shares shall have been duly authorized
for listing on the NNM upon official notice of issuance.

     (m) The Company shall have furnished to the Placement Agent such
certificates, in addition to those specifically mentioned herein, as the
Placement Agent may have reasonably requested as to the accuracy and
completeness at the Closing Date of any statement in the Registration Statement
or the Prospectus, as to the accuracy at the Closing Date of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Placement Agent.

13

 

     6. Indemnification.

     (a) The Company will indemnify and hold harmless the Placement Agent, the
directors, officers, employees and agents of the Placement Agent and each
person, if any, who controls the Placement Agent within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement, the Base Prospectus, any Prospectus Supplement or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state in such document a material fact required to be stated in it
or necessary to make the statements in it not misleading in the light of the
circumstances in which they were made, or arise out of or are based in whole or
in part on any inaccuracy in the representations and warranties of the Company
contained herein or any failure of the Company to perform its obligations
hereunder or under law in connection with the transactions contemplated hereby;
provided, however, that the Company will not be liable to the extent that such
loss, claim, liability, expense or damage arises from the sale of the Shares to
any Investor and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent expressly for inclusion in any preliminary prospectus, the
Registration Statement, the Base Prospectus, any Prospectus Supplement or the
Prospectus. The Company acknowledges that the statements set forth in the
eighth paragraph under the heading “Plan of Distribution” in the Prospectus
constitute the only information relating to the Placement Agent furnished in
writing to the Company by the Placement Agent expressly for inclusion in any
preliminary prospectus, the Registration Statement, the Base Prospectus, any
Prospectus Supplement or the Prospectus. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.

     (b) The Placement Agent will indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who signs the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Placement Agent, as set
forth in Section 6(a), but only insofar as losses, claims, liabilities,
expenses or damages arise out of or are based on any untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to the Placement Agent furnished in
writing to the Company by the Placement Agent expressly for use in any
preliminary prospectus, the Registration Statement, the Base Prospectus, any
Prospectus Supplement or the Prospectus. The Company acknowledges that the
statements set forth in the eighth paragraph under the heading “Plan of
Distribution” in the Prospectus constitute the only information relating to the
Placement Agent furnished in writing to the Company by the Placement Agent
expressly for use in any preliminary prospectus, the Registration Statement,
the Base Prospectus, any Prospectus Supplement or the Prospectus. This
indemnity will be in addition to any liability that the Placement Agent might
otherwise have.

     (c) Any party that proposes to assert the right to be indemnified under
this Section 6 shall, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party in writing of the commencement of such action, enclosing
with such notice a copy of all papers served, but the omission so to notify
such indemnifying party will not relieve it from any liability that it may have
to any indemnified party under the foregoing provisions of this Section 6
unless, and only to the extent that, such omission results in the loss of
substantive rights or defenses by the indemnifying party. If any such action
is brought against any indemnified party and it notifies the indemnifying party
of its commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation incurred by the indemnified party in
connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other

14

 

charges of such counsel will be at the expense of such indemnified party
unless (i) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (ii) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from
or in addition to those available to the indemnifying party, (iii) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (iv) the indemnifying party has
not in fact employed counsel reasonably satisfactory to the indemnified party
to assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the reasonable
fees, disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All
such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement (i) includes
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of an indemnified party. An indemnifying party will not be liable
for any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld or delayed).

     (d) If the indemnification provided for in this Section 6 is applicable in
accordance with its terms but for any reason is held to be unavailable to or
insufficient to hold harmless an indemnified party under paragraphs (a), (b)
and (c) of this Section 6 in respect of any losses, claims, liabilities,
expenses and damages referred to therein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than the Placement
Agent, such as persons who control the Company within the meaning of the Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who also may be liable for contribution) by such indemnified party
as a result of such losses, claims, liabilities, expenses and damages 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 hand. The
relative benefits received by the Company, on the one hand, and the Placement
Agent, on the other hand, shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by
the Company bear to the total Fee received by the Placement Agent pursuant to
this Agreement. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault of the Company, on the one hand, and the Placement Agent, on the other
hand, with respect to the statements or omissions that resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering.
Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Placement Agent, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the Placement Agent agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were to be
determined by pro rata allocation or by any other method of allocation that
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, liability, expense or damage, or action in respect thereof, referred to
above in this Section 6(d) shall be deemed to include, for purposes of this
Section 6(d), 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 6(d), in no case
shall the Placement Agent be required to contribute any amount in excess of the
Fee received by the Placement Agent pursuant to this Agreement. No person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section
6(d), any person who controls a party to this Agreement within the meaning of
the Act will have the same rights to contribution as that party, and each
officer of the Company who

15

 

signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof.
Any party entitled to contribution, promptly after receipt of notice of
commencement of any action against any such party in respect of which a claim
for contribution may be made under this Section 6(d), will notify any such
party or parties from whom contribution may be sought, but the omission so to
notify will not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have under this Section 6(d).
No party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).

     (e) The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any investigation made by or on behalf of the Placement Agent, (ii) acceptance
by the Investors of any of the Shares and payment therefor, or (iii) any
termination of this Agreement.

     7. Reimbursement of Certain Expenses. In addition to its other
obligations under Section 6 of this Agreement, the Company hereby agrees to
reimburse the Placement Agent on a quarterly basis for all reasonable legal and
other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon, in whole or in part, any statement or omission or alleged statement
or omission, or any inaccuracy in the representations and warranties of the
Company contained herein or failure of the Company to perform its or their
respective obligations hereunder or under law, all as described in Section 6,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligations under this Section 7 and the possibility that
such payment might later be held to be improper; provided, however, that, to
the extent any such payment is ultimately held to be improper, the persons
receiving such payments shall promptly refund them.

     8. Termination. The obligations of the Placement Agent under this
Agreement may be terminated at any time on or prior to the Closing Date, by
notice to the Company from the Placement Agent, without liability on the part
of the Placement Agent to the Company if in the sole judgment of the Placement
Agent, (i) trading in any of the equity securities of the Company shall have
been suspended or limited by the Commission or by The Nasdaq Stock Market, (ii)
trading in securities generally on The Nasdaq Stock Market shall have been
suspended or limited or minimum or maximum prices shall have been generally
established on such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon
trading in securities generally by such exchange, by order of the Commission or
any court or other governmental authority, The Nasdaq Stock Market, (iii) a
general banking moratorium shall have been declared by either federal or New
York State authorities or any material disruption of the securities settlement
or clearance services in the United States shall have occurred, or (iv) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States,
any outbreak or material escalation of hostilities involving the United States,
a declaration of a national emergency or war by the United States, or other
calamity or crisis, either within or outside the United States, shall have
occurred, the effect of which is such as to make it, in the sole judgment of
the Placement Agent, impracticable or inadvisable to proceed with completion of
the placement of the Shares.

     If this Agreement is terminated pursuant to Section 8 hereof, the Company
shall not be under any liability to the Placement Agent except as provided in
Sections 4(j), 6 and 7 hereof; but, if for any other reason this Agreement is
terminated or the placement of the Shares is not consummated or if for any
reason the Company shall be unable to perform its obligations hereunder, the
Company will reimburse the Placement Agent for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the
Placement Agent) incurred by the Placement Agent in connection with this
Agreement or the offering contemplated hereunder.

     9. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 460 Ward
Drive, Santa Barbara, California 93111-2310 Attention: Chief Executive
Officer, with a copy to Daniel Christopher, Esq., Guth|Christopher, 10866
Wilshire Boulevard, Suite 1250, Los Angeles, California 90024, or (b) if to the
Underwriters, to Needham & Company, Inc., 445 Park Avenue, New York, New York
10022, Attention: Corporate Finance Department, with a copy to Marty B.
Lorenzo, Esq., Gray Cary Ware & Freidenrich LLP, 4365 Executive Drive, Suite
1100, San Diego, California 92121. Any such notice shall be effective only
upon receipt.

16

 

Any notice under such Section 8 or 9 may be made by telecopier or
telephone, but if so made shall be subsequently confirmed in writing.

     This Agreement has been and is made solely for the benefit of the
Placement Agent, the Company, and the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement.

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.

     This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.

     In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

     The Company and the Placement Agent each hereby waives any right it may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.

     Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Placement Agent.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	Superconductor Technologies Inc.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Title:

Confirmed as of the date first

above mentioned:

NEEDHAM & COMPANY, INC.

	 	 	 	 	 
	By:

	 	 	 	 
	

	 	
 	 	 
	

	 	Title:	 	 

17

 

EXHIBIT A

FORM OF PURCHASE AGREEMENT

Superconductor Technologies, Inc.

460 Ward Drive

Santa Barbara, CA 93111

Ladies and Gentlemen:

     The undersigned,    (the “Investor”), hereby confirms
and agrees with you as follows:

     1. This Purchase Agreement (the “Agreement”) is made as of November 22,
2004 between Superconductor Technologies, Inc., a Delaware corporation (the
"Company”), and the Investor.

     2. As of the Closing (as defined below) and subject to the terms and
conditions hereof, the Company and the Investor agree that the Investor will
purchase from the Company and the Company will issue and sell to the Investor
   shares (the “Shares”) of common stock, par value $  per share,
of the Company (“Common Stock”), for a purchase price of $  per share, or an
aggregate purchase price of $   . The Investor acknowledges that the
offering of the Shares is not a firm commitment underwriting and that there is
no minimum offering amount.

     3. The completion of the purchase and sale of the Shares shall occur at a
closing (the “Closing”) which is expected to occur on or about November 29,
2004. After the execution of this Agreement by the Investor, the Investor shall
remit to the Company by wire transfer to the account designated by the Company
in this Agreement the amount of funds equal to the aggregate purchase price of
the Shares. Unless otherwise requested by the Investor and agreed to by the
Company, the Shares purchased by the Investor will be delivered by electronic
book-entry at The Depository Trust Company (“DTC”), registered in the
Investor’s name and address as set forth below, and will be released by
Registrar and Transfer Company, the Company’s transfer agent (the “Transfer
Agent”), to the Investor at the Closing. After the execution of this Agreement
by the Investor, the Investor shall direct the broker-dealer at which the
account or accounts to be credited with the Shares are maintained to set up a
deposit/withdrawal at custodian (“DWAC”) instructing the Transfer Agent to
credit such account or accounts with the Shares.

     4. The offering and sale of the Shares are being made pursuant to the
Registration Statement and Prospectus (as such terms are defined below). The
Investor acknowledges that the Company intends to enter into purchase
agreements in substantially the same form as this Agreement with certain other
investors and intends to offer and sell (the “Offering”) up to 15,600,000
shares of Common Stock pursuant to the Registration Statement and Prospectus.
In the event the Offering terminates, this Agreement shall automatically
terminate without notice and without liability to any party.

     5. The Company shall deliver to the Investor and file with the Securities
and Exchange Commission (the “Commission”) a prospectus and prospectus
supplement (collectively the “Prospectus”) with respect to the Registration
Statement reflecting the offering of the Shares in conformity with the
Securities Act (as defined below), including Rule 424(b) thereunder. The
Investor agrees that such Prospectus may be delivered to it in electronic form.

     6. The Company has entered into a Placement Agency Agreement, dated
November 22, 2004 (the “Placement Agency Agreement”), with Needham & Company,
Inc. (the “Placement Agent”), which will act as the Company’s placement agent
with respect to the Offering and receive a fee in connection with the sale of
the Shares. A copy of the Placement Agency Agreement is available upon request.
The Investor’s obligation to purchase the Shares shall be subject to the
condition that the Placement Agent shall not have (a) terminated the Placement
Agency Agreement pursuant to the terms thereof or (b) determined that the
conditions to closing in the Placement Agency Agreement have not been
satisfied.

A-1

 

     7. The Company hereby makes the following representations, warranties and
covenants to the Investor:

          (a) The Company has authorized, issued and outstanding capital stock as
set forth under the caption “Capitalization” in the Prospectus as of the date
set forth therein. All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued and are fully paid and
nonassessable and were issued in compliance with all applicable state and
federal securities laws; the Shares have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid and
nonassessable; and no preemptive or similar rights exist with respect to any of
the Shares or the issue and sale thereof. The description of the capital stock
of the Company incorporated by reference in the Registration Statement and the
Prospectus is, and at the Closing Date will be, complete and accurate in all
respects. Except as set forth in the Prospectus, the Company does not have
outstanding, and at the Closing Date will not have outstanding, any options to
purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
any shares of capital stock, or any such warrants, convertible securities or
obligations. No further approval or authority of stockholders or the Board of
Directors of the Company will be required for the issuance and sale of the
Shares as contemplated herein. The certificates evidencing the Shares are in
due and proper legal form and have been duly authorized for issuance by the
Company.

          (b) The Company has full corporate power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with the terms hereof, except as
may be limited by the laws of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally or by general principles of equity.
The performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or conflict with or constitute a default under, or give any
party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, the certificate or articles of
incorporation or by-laws of the Company, any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note agreement
or other evidence of indebtedness, lease, contract or other agreement or
instrument to which the Company is a party or by which the Company, or any of
its respective properties is bound or affected, or violate or conflict with any
judgment, ruling, decree, order, statute, rule or regulation of any court or
other governmental agency or body applicable to the business or properties of
the Company.

          (c) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated
herein, except such as have been obtained under the Securities Act of 1933 or
the Rules and Regulations and such as may be required under state securities or
Blue Sky laws or the by-laws and rules of the National Association of
Securities Dealers, Inc. (the “NASD”) in connection with the public offering of
the Shares.

          (d) The Common Stock is registered under Section 12(g) of the Exchange Act
and the Company has listed the Shares on the Nasdaq National Market (“NNM”) by
filing a Notification Form: Listing of Additional Shares.

          (e) The Company’s Registration Statement on Form S-3 (File No. 333-114815)
(including all information or documents incorporated by reference therein, the
"Registration Statement”), which include a base prospectus relating to the
Shares (the “Base Prospectus”), was declared effective by the Commission on
March 17, 2004. The Registration Statement is effective on the date hereof and
the Company has not received notice that the Commission has issued or intends
to issue a stop order with respect to the Registration Statement or that the
Commission otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened in writing to do so. The “Plan of Distribution” section in the
Prospectus describes the issuance and sale of the Shares. Each part of the
Registration Statement, when it became effective, did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. As of the date the Base Prospectus or any amendment or supplement
to the Base Prospectus, including the Prospectus Supplement, was or is filed
with the Commission and at the Closing Date, the Prospectus did not and will
not contain any untrue statement

A-2

 

of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

          (f) The representations and warranties of the Company set forth in Section
7(a)-(g) shall survive the Closing for a period of twelve (12) months from the
Closing.

          (g) The Company shall (i) before the opening of trading on the Nasdaq
National Market on the next trading day after the date hereof, issue a press
release, disclosing all material aspects of the transactions contemplated
hereby and (ii) make such other filings and notices in the manner and time
required by the Commission with the respect to the transaction contemplated
hereby. The Company shall not identify the Investor by name in any press
release or public filing, or otherwise publicly disclose the Investor’s name,
without the Investor’s prior, written consent, unless required by law or the
rules and regulations of the Commission or any self-regulatory organization
which the Company or its securities are subject.

     8. The Investor hereby makes the following representations, warranties and
covenants to the Company:

          (a) On the date hereof and at the Closing, the Investor, together with its
affiliates (as that term is defined under Rule 405 of the Securities Act), does
not beneficially own 5% or more of the common stock of the Company. The
Investor represents that it has received the Prospectus prior to or in
connection with its receipt of this Agreement. The Investor in connection with
its decision to purchase the Shares relied only upon the Prospectus and the
documents incorporated by reference therein, and the representations and
warranties of the Company contained herein.

          (b) The Investor, together with its affiliates (as that term is defined
under Rule 405 of the Securities Act), has not, prior to the date of this
Agreement, sold, offered to sell, solicited offers to buy, disposed of, loaned,
pledged or granted any right with respect to (collectively, a “Disposition”),
the Shares purchased in the Offering. Such prohibited hedging or other
transactions would include, without limitation, effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to the Shares purchased in the offering made by the
Prospectus. Additionally, the Investor, has not engaged in any short sales of
the Company’s common stock within the past ten (10) trading days.

          (c) The Investor shall not issue any press release or make any other
public announcement relating to this Agreement unless (i) the content thereof
is mutually agreed to by the Company and the Investor or (ii) the Investor is
advised by its counsel that such press release or public announcement is
required by law.

          (d) The Investor has the requisite power and authority to enter into and
to consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Investor and the consummation by it of the transactions
contemplated hereunder have been duly authorized by all necessary action on the
part of the Investor. This Agreement has been duly executed by the Investor
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Investor enforceable against the Investor
in accordance with its terms, except as may be limited by any bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors’ rights generally or by general
principles of equity.

          (e) The Investor understands that nothing in this Agreement or any other
materials presented to the Investor in connection with the purchase or sale of
the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax or investment advisors as it, in its sole discretion,
deems necessary or appropriate in connection with its purchase of the Shares.

          (f) The Investor represents that (a) it has had no position, office or
other material relationship within the past three years with the Company or
persons known to it to be affiliates of the Company, (b) neither it, nor any
group of which it is a member or to which it is related, beneficially owns
(including the right to acquire or vote) any securities of the Company, and (c)
it is not a, and it has no direct or indirect affiliation or association with
any, NASD member as of the date hereof.

A-3

 

     9. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York, without giving effect to the
principles of conflicts of law.

     10. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which, when taken together,
shall constitute but one instrument, and shall become effective when one or
more counterparts have been signed by each party hereto and delivered to the
other parties.

[Remainder of page intentionally left blank.]

A-4

 

     Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.

	 	 	 
	

	 	Name of Investor:  _________________________________
	 
	 	 
	

	 	By:  ____________________________________________
	 
	 	 
	

	 	Print Name:  ______________________________________
	 
	 	 
	

	 	Title:  ___________________________________________
	 
	 	 
	

	 	Address:  ________________________________________
	 
	 	 
	 
	 	________________________________________________
	 
	 	 
	 
	 	________________________________________________
	 
	 	 
	

	 	Tax ID No.: _______________________________________
	 
	 	 
	

	 	Contact Name:  ____________________________________
	 
	 	 
	

	 	Telephone: _______________________________________
	 
	 	 
	

	 	Name in which book-entry should be made (if different):
	 
	 	 
	 
	 	________________________________________________

AGREED AND ACCEPTED:

Superconductor Technologies, Inc.

a Delaware corporation

	 	 	 	 	 
	By:

	 	 	 	 
	

	 	
 	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 

Superconductor Technologies, Inc. hereby directs that the purchase price for
the Shares of common stock being sold to the Investor pursuant to this
Agreement be wired to the following account:

	 	 	 
	 

	 	Bank:_____________________
	

	 	*
	

	 	ABA#_____________________
	

	 	Credit to:_____________________
	

	 	Account No._____________________
	

	 	Re: Superconductor Technologies, Inc.

*Complete address, if needed:

A-5

 

EXHIBIT B

FORM OF LOCK-UP AGREEMENT

November __, 2004

NEEDHAM & COMPANY, INC.

445 Park Avenue

New York, New York 10022

Ladies and Gentlemen:

     The undersigned is a holder of securities of Superconductor Technologies,
Inc., a Delaware corporation (the “Company”), and wishes to facilitate the
public offering of shares of the Common Stock (the “Common Stock”) of the
Company (the “Offering”). The undersigned recognizes that such Offering will
be of benefit to the undersigned.

     In consideration of the foregoing and in order to induce you to act as
placement agent in connection with the Offering, the undersigned hereby agrees
that, during the period commencing as of the date hereof and ending on the date
that is ninety (90) days after the date of the final Prospectus Supplement
relating to the Offering (the “Lock-Up Period”), the undersigned will not,
without the prior written approval of Needham & Company, Inc., directly or
indirectly, (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The preceding sentence
notwithstanding, if the Offering does not occur within six months of the date
of this Agreement, the undersigned’s obligations pursuant to this Agreement
shall be null and void. If (a) during the last 17 days of the Lock-Up Period
the Company issues an earnings release or material news or a material event
relating to the Company occurs or (b) 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 Agreement 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. In addition, the
undersigned agrees that, without the prior written consent of Needham &
Company, Inc., the undersigned will not, during the Lock-Up Period, make any
demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. The undersigned confirms that he, she or it
understands that you, as placement agent, and the Company will rely upon the
representations set forth in this Agreement in proceeding with the Offering.
The undersigned further confirms that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns. The undersigned agrees and consents
to the entry of stop transfer instructions with the Company’s transfer agent
against the transfer of securities held by the undersigned except in compliance
with this Agreement.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	
 
	

	 	(Name)
	 
	 	 
	

	 	
 
	

	 	(Address)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]