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EXHIBIT 4.22
AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this "AMENDMENT TO NOTE
AGREEMENT") dated as of March 31, 1999, by and among Xxxxxxx Associates, L.P., a
limited partnership organized and existing under the laws of Delaware
("XXXXXXX"), Westgate International, L.P., a limited partnership organized and
existing under the laws of the Cayman Islands ("WESTGATE"), Alexander Finance,
LP, a limited partnership organized and existing under the laws of Illinois
("ALEXANDER"), State Farm Mutual Automobile Insurance Company, an insurance
company organized and existing under the laws of Illinois ("State Farm"), Spring
Point Partners, L.P., a limited partnership organized and existing under the
laws of California and Spring Point Offshore Fund, a corporation organized and
existing under the laws of the Cayman Islands (each, a "2% NOTE PURCHASER" and
collectively, the "2% NOTE PURCHASERS"), and Illinois Superconductor
Corporation, a corporation organized and existing under the laws of Delaware
(the "COMPANY").
W I T N E S S E T H
WHEREAS, as of May 15, 1998, the Company and the Purchasers entered
into a Securities Purchase Agreement (the "2% NOTE AGREEMENT"), pursuant to
which the Purchasers purchased from the Company: (i) $10,350,000 in aggregate
principal amount of 2% Senior Convertible Notes of the Company due May 15, 2002
(the "2% NOTES") and (ii) warrants (the "2% NOTE WARRANTS") to purchase an
aggregate of 4,140,000 shares of the Company's common stock, par value $.001 per
share ("COMMON STOCK"), at an exercise price of $3.75 per share;
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of March
31, 1999 (the "6% NOTE Agreement"), Elliott, Westgate, Alexander and State Farm
(the "6% NOTE PURCHASERS"), are purchasing: (i) $3,300,000 in principal amount
of 6% Senior Convertible Notes of the Company due May 15, 2002 (the "6% NOTES");
and (ii) warrants to purchase an aggregate of 1,320,000 shares of Common Stock
at $1.4625 per share (the "6% NOTE WARRANTS");
WHEREAS, in connection with the 6% Note Agreement, the Company, the 2%
Note Purchasers and the 6% Note Purchasers (collectively, the "INVESTORS")
desire that the terms of the 2% Note Agreement, the 2% Notes and the 2% Note
Warrants be amended to reflect the exercise of certain rights thereunder from
the date hereof going forward; and
WHEREAS, pursuant to the terms of the 6% Note Agreement, the Company
and the 6% Note Purchasers desire that certain of the 2% Notes and 2% Note
Warrants held by the 6% Note Purchasers and set forth in the Schedule of
Purchasers to the 6% Note Agreement (the "DESIGNATED 2% NOTES" and the
"DESIGNATED 2% NOTE WARRANTS", respectively) be amended to reflect certain terms
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement, the Company and the Investors hereby agree as follows:
1. BOARD SEATS. That portion of Section 3.12 of the 2% Note Agreement
following the first two sentences thereof is hereby amended to read in its
entirety as follows:
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"Until such time as the amount of Common Stock
issuable upon conversion of the then outstanding 2%
Notes (including the Designated 2% Notes) and 6%
Notes is less than 5% of then outstanding Common
Stock (the "MINIMUM AMOUNT"), the Company shall cause
the individuals originally designated hereunder by
holders of the 2% Notes (or such other individual(s)
designated by a plurality of the Investment Amount
(as defined below) as replacement(s), and acceptable
to a majority of the members of the Board of
Directors (not including the Investors' designees),
such acceptance not to be unreasonably withheld) to
be nominated to the Board of Director(s) of the
Company and will solicit proxies from stockholders
voting in favor of such nominees. For so long as the
Investors have the right to appoint members to the
Company's Board of Directors pursuant to this Section
3.12, the Company covenants not to increase the size
of its Board of Directors above nine (9) members.
Notwithstanding the foregoing, any holder of 2% Notes
(including the Designated 2% Notes) or 6% Notes may
elect, upon notice to the Company , which notice may
be rescinded by a subsequent notice received no
earlier than 61 days following the date the prior
notice is received, to waive its right to participate
in the foregoing selection of members of the
Company's Board of Directors, provided that for
purposes of the Minimum Amount, the amount of Common
Stock issuable upon conversion of such holder's 6%
Notes and 2% Notes (including Designated 2% Notes)
shall be counted. As used herein, "Investment Amount"
shall refer to the sum of the principal amount
outstanding on (i) the 6% Notes; and (ii) the 2%
Notes (including the Designated 2% Notes.)
2. FUTURE FINANCINGS. Section 3.13 of the 2% Note Agreement is hereby
deleted in its entirety and replaced with the following provision:
"For so long as any 6% Notes, 6% Note Warrants, 2%
Notes (including Designated 2% Notes) and 2% Note
Warrants (including Designated 2% Note Warrants)
shall be outstanding, in the event that the Company
shall seek any financing (excluding a firm commitment
underwritten public offering or the issuance of the
Company's securities in connection
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with a strategic partnership or joint venture), it
shall: (i) provide reasonable notice to the Investors
holding such securities of its intention to seek
financing and (ii) provide such Investors with a
reasonable opportunity to submit a proposal for
financing.
3. FURTHER COVENANT OF THE COMPANY. Section 3.17A of the 2% Note
Agreement is hereby amended to read in its entirety as follows:
"Furthermore, the Company covenants that for as long
as the amount outstanding of the Investment Amount is
at least $5,625,000, the Company, will not, without
the prior written approval of at least $5,625,000 of
the Investment Amount:
(i) consolidate with or merge into any other
person, or permit any other person to
consolidate or merge into it;
(ii) sell, lease or otherwise dispose of all or
substantially all of its assets;
(iii) amend its certificate of incorporation
(other than to effect an increase in the
authorized capital stock of the Company);
(iv) adopt any plan pursuant to which capital
stock of the Company or rights to purchase
capital stock of the Company are issued,
except for (A) a director compensation plan
to be implemented during 1999; and (B) for
the adoption and amendment of employee
benefit plans, if any, only if such adoption
or amendment does not authorize shares of
Common Stock equaling more than 20% of the
then outstanding shares of Common Stock and
does not provide for options having a
exercise price less than the market price of
Common Stock; or
(v) engage in any transaction, which pursuant to
the rules of any securities market or
exchange on which the Common Stock is
traded, requires approval of holders of the
Common Stock.
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The Company covenants that within ten (10) days of (i) the applicable
holders of the 6% Notes, and 2% Notes (including Designated 2% Notes) notifying
the Company that they do or do not object to the Company engaging in the action
for which their approval has been sought or (ii) the lapse of the 10 Business
Day period without the Company being notified by the applicable holders as to
whether or not they object to the Company engaging in such action, each pursuant
to this Section 3.17A, the Company will either (x) publicly disclose the
information disclosed to the holders of the 6% Notes and 2% Notes (including
Designated 2% Notes) pursuant to this Section 3.17A which it deems to be
material, non-public information and with respect to the balance of such
information, if any, notify such holders in writing that it does not deem such
information to be material, non-public information and that it will not deem
such information to have been misappropriated if such holders trade in the
Common Stock while in possession of such information, or (y) notify such holders
in writing that it does not deem the information disclosed to the holders of the
6% Notes and 2% Notes (including Designated 2% Notes) pursuant to this Section
3.17A to be material, non-public information and that it will not deem such
information to have been misappropriated if such holders trade in the Common
Stock while in possession of such information; provided that the Company
acknowledges that if, and only if, it fails to do either (x) or (y) within the
applicable ten (10) day period, the holders of the 6% Notes and 2% Notes
(including Designated 2% Notes) may publicly disclose such information.
4. PURCHASER OWNERSHIP OF COMMON STOCK. Section 3.15 of the 2% Note
Agreement is hereby deleted in its entirety.
5. RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED OR DILUTED. Section
3.16 of the 2% Note Agreement is hereby amended to insert the following on the
fifth line thereof after "Nasdaq National Market (" but before "unless...":
"unless such delisting shall be due to failure to
comply with the maintenance criteria set forth in
NASD Rule 4450 (or any successor rule) with respect
to "(i) minimum bid price or (ii) net tangible assets
or"
6. CONSENT TO ISSUANCE OF 6% NOTES AS PARI PASSU OBLIGATIONS. The 2%
Note Purchasers hereby consent to the issuance of the 6% Notes as obligations
which are pari passu with the 2% Notes.
7. AMENDMENTS TO ALL 2% NOTES.
(a) Events of Default. Section 5(a) "Events of Default" of each of the
2% Notes is hereby amended to add at the end of the sentence beginning `An
"Event of Default" is. . .', the following clause:
"; or (vii) if any principal payments under any of
the Company's 6% Senior Convertible Notes due May 15,
2002 are accelerated."
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(b) Limitation on Beneficial Ownership of Common Stock. Each of the 2%
Notes is hereby amended to add the following paragraph (j) to Section 3 thereof:
"(j) Notwithstanding anything to the contrary herein,
the Holder may not use its ability to convert this
Note if such conversion would result in the total
number of shares of Common Stock deemed beneficially
owned by the Holder (other than by virtue of the
ownership of this Note or ownership of other
securities that have limitations on a holder's right
to convert or exercise similar to those limitations
set forth herein), together with all shares of Common
Stock deemed beneficially owned by the Holder's
Affiliates (as defined in the Purchase Agreement)
that would be aggregated for purposes of determining
a group under Section 13(d) of the Exchange Act,
exceeding 9.9% of the total issued and outstanding
shares of the Company's Common Stock (the "Restricted
Ownership Percentage"); provided that (w) the Holder
shall have the right, at any time and from time to
time, to reduce the Restricted Ownership Percentage
applicable to it immediately upon written notice to
the Company, (x) the Holder shall have the right to
increase its Restricted Ownership Percentage and
otherwise waive in whole or in part the restrictions
of this Section 3(j) immediately upon written notice
to the Company in the event of an occurrence or
notice of an intended or pending Change of Control
(as defined in the Purchase Agreement) (a "Change of
Control Notice") or the delivery by the Company of a
notice of a redemption of the Notes or the Company's
6% Senior Convertible Notes by the Company (a
"Redemption Notice"), and (y) the Holder can make
subsequent adjustments pursuant to (w) or (x) any
number of times (which adjustment shall be effective
immediately). The delivery of a Conversion Notice by
the Holder shall be deemed a representation by the
Holder that it is in compliance with this Section
3(j).
(c) Amendments to Events. Section 3(c)(i) of each of the 2% Notes is
hereby amended to insert the following in clause (e) thereof after "delisted
from the Nasdaq National Market (" but before "unless":
"unless such delisting shall be due to failure to
comply with the maintenance criteria set forth in
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NASD Rule 4450 (or any successor rule) with respect
to (i) minimum bid price or (ii) net tangible assets
or"
8. AMENDMENT OF 2% NOTE WARRANTS. Each of the 2% Note Warrants is
hereby amended to add the following paragraph (f) to Section 3 thereof:
"(f) Notwithstanding anything to the contrary herein,
the Holder may not use its ability to exercise this
Warrant if such exercise would result in the total
number of shares of Common Stock deemed beneficially
owned by the Holder (other than by virtue of the
ownership of this Warrant or ownership of other
securities that have limitations on a holder's right
to convert or exercise similar to those limitations
set forth herein), together with all shares of Common
Stock deemed beneficially owned by the Holder's
Affiliates (as defined in the Purchase Agreement)
that would be aggregated for purposes of determining
a group under Section 13(d) of the Exchange Act,
exceeding 9.9% of the total issued and outstanding
shares of the Company's Common Stock (the "Restricted
Ownership Percentage"); provided that (w) the Holder
shall have the right, at any time and from time to
time, to reduce the Restricted Ownership Percentage
applicable to it immediately upon written notice to
the Company, (x) the Holder shall have the right to
increase its Restricted Ownership Percentage and
otherwise waive in whole or in part the restrictions
of this Section 3(f) immediately upon written notice
to the Company in the event of an occurrence or
notice of an intended or pending Change of Control
(as defined in the Purchase Agreement) (a "Change of
Control Notice") or the delivery by the Company of a
notice of a redemption of the Company's 6% Senior
Convertible Notes or the Company's 2% Senior
Convertible Notes by the Company (a "Redemption
Notice") and (y) the Holder can make subsequent
adjustments pursuant to (w) or (x) any number of
times (which adjustment shall be effective
immediately). The delivery of an exercise notice by
the Holder shall be deemed a representation by the
Holder that it is in compliance with this paragraph.
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9. AMENDMENT TO THE DESIGNATED 2% NOTES. In addition to the changes set
forth in Section 6 herein, each of the Designated 2% Notes is hereby amended,
effective the date hereof, as follows:
(a) Interest Rate. The interest on the Designated 2% Notes shall be
increased from 2% to 6% per annum.
(b) Payment and Calculation of Interest. The existing accrued interest
on the Designated 2% Notes on the date hereof shall be paid in the manner set
forth in Section 3(a)(ii) in the form of Amended Designated 2% Notes referred to
in paragraph (e) below.
(c) Conversion Price. The Conversion Price shall be reduced from $1.50
to $1.125, subject to further adjustments pursuant to the terms of the
Designated 2% Notes.
(d) Benefits of 6% Note Agreement. The Designated 2% Notes shall be
entitled to the benefits of the provisions contained in the 6% Note Agreement
which apply to them.
(e) Other Changes. The Designated 2% Notes shall be further amended, as
provided in the form of Amended Designated 2% Notes, attached as Exhibit A
hereto.
(f) Amended Designated 2% Notes. Concurrently with the execution of
this Amendment to Note Agreement, the 6% Note Purchasers shall exchange their
existing Designated 2% Notes for amended Designated 2% Notes in the Form of
Exhibit A, reflecting the amendment set forth in paragraphs (a) through (e)
above and the amendments in Section 6 herein.
10. AMENDMENT TO THE DESIGNATED 2% NOTE WARRANTS. In addition to the
changes set forth in Section 7 herein, each of the Designated 2% Note Warrants
is hereby amended, effective the date hereof, as follows:
(a) Exercise Price. The Exercise Price shall be reduced from $3.75 to
$1.4625 per share (subject to further adjustment set forth in the Designated 2%
Note Warrants).
(b) Expiration Date. The Expiration Date shall be March 31, 2002.
(c) Amended Designated 2% Note Warrants. Concurrently with the
execution of this Amendment to Note Agreement, the 6% Note Purchasers shall
exchange their existing certificates representing the Designated 2% Note
Warrants for certificates, in the Form of Exhibit B hereto, reflecting the
changes, set forth in paragraphs (a) and (b) above and the amendments in Section
7 herein.
11. EFFECT OF AMENDMENT. As amended herein, the 2% Note Agreement, the
2% Notes, the Designated 2% Notes, the 2% Note Warrants and the Designated 2%
Note Warrants shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized persons as of the date first
indicated above.
Company:
ILLINOIS SUPERCONDUCTOR CORPORATION
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
Purchasers:
XXXXXXX ASSOCIATES, L.P.
By: /s/ Authorized Signatory
Name:
Title:
WESTGATE INTERNATIONAL, L.P.
By: Martley International, L.P.
As Attorney-in-fact
By: /s/ Authorized Signatory
Name:
Title:
ALEXANDER FINANCE, LP
By: /s/ Authorized Signatory
Name:
Title:
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STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Vice President - Common Stocks
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Investment Officer
SPRING POINT PARTNERS, L.P.
By:
Name:
Title:
SPRING POINT OFFSHORE FUND
By:
Name:
Title:
