AMENDMENT TO AND CONSENT AND WAIVER UNDER LOAN DOCUMENTS
Exhibit 10.3.
AMENDMENT
TO AND CONSENT AND WAIVER UNDER
LOAN
DOCUMENTS
AMENDMENT
TO AND CONSENT AND WAIVER
UNDER THE LOAN DOCUMENTS (“Agreement”),
dated as of January 3, 2008,
by and among Manchester Securities Corporation, a New York corporation (“Manchester”), Alexander
Finance, L.P. an Illinois limited partnership (“Alexander” and together with
Manchester, the “Lenders”), ISCO International
, Inc., a Delaware corporation (the “Company”), Spectral
Solutions, Inc., a Colorado corporation (“Spectral”) and Illinois
Superconductor, a Canada corporation, an Ontario corporation (“ISCO Canada” and together
with Spectral, the “Guarantors”).
W
I T N E S S E T
H
WHEREAS,
pursuant to a certain
Third Amended and Restated Loan Agreement, dated as of November 10, 2004, as
amended (the “Loan
Agreement”), by and among the Lenders, the Company, and the Guarantors,
the Lenders have provided loan commitments to the Company as evidenced by the
amended and restated notes (the “Amended and Restated Notes”),
issued pursuant to the Amendment to Loan Documents (the “Amendment to Loan Documents”)
by and among the Company, the Lenders, and the Guarantors dated June 26, 2007,
and convertible into shares of the Company’s common stock.
WHEREAS,
the Amended and
Restated Notes and certain other obligations have been guaranteed by the
Guarantors, who are subsidiaries of the Company, each such guaranty being made
pursuant to separate Fourth Amended and Restated Guaranties dated as of June
21,
2006, as amended (the “Guaranties”);
WHEREAS,
the Amended and
Restated Notes and certain other obligations have been secured by the assets
of
the Company and the Guarantors pursuant to a certain Fourth Amended and Restated
Security Agreement, dated as of June 22, 2006, as amended, by and among the
Company, the Lenders and the Guarantors (the “Security Agreement”, and
together with this Agreement, the Loan Agreement, the Amendment to Loan
Documents, the Amended and Restated Notes, and the Guaranties, the “Loan
Documents”);
WHEREAS,
the Company, a
wholly-owned subsidiary of the Company (“Merger Subsidiary”), and
Clarity Communication Systems Inc. (“Clarity”) propose to enter
into a transaction (the “Merger”) pursuant to an
Agreement and Plan of Merger dated November 13, 2007 (the “Merger Agreement”) in which
the Company would acquire Clarity by merger of Clarity with and into Merger
Subsidiary and the Company would issue shares (the “Share Issuance”) of its common
stock in exchange for all of the outstanding shares of Clarity capital stock
and
to satisfy certain employee benefit obligations;
WHEREAS,
among the conditions
to closing the Merger under the Merger Agreement, the Company is required to
(i)
obtain financing in an amount equal to $1,500,000 (the “Additional Funds”) to fund the
initial operations of the combined entity after the Merger and transaction
expenses of the Company incurred in connection with the Merger and (ii) to
pay
off the amount outstanding (the “Pay-off Amount”) under
Clarity’s line of credit agreement (the “Clarity Line of Credit”),
which is expected to be approximately $1,000,000;
WHEREAS,
upon the payoff of
the Clarity Line of Credit: (i) all assets of Clarity will be pledged
to secure the Company’s obligations to the Lenders, pursuant to an amendment to
the Security Agreement; (ii) Clarity will issue a guaranty of the Company’s
obligations to the Lenders; and (iii) Clarity will execute financing statements
to be filed in the appropriate jurisdiction, perfecting the lien of the Lenders
in Clarity’s assets.
WHEREAS,
Alexander has agreed
to loan the Company the Additional Funds on terms and conditions substantially
similar to the Amended and Restated Notes and the Lenders have agreed to waive
certain covenants in the Loan Agreement and consent to the Merger and the Share
Issuance;
WHEREAS,
the Lenders wish to
consent to the Merger, the Share Issuance and the transactions contemplated
thereby and waive (i) in so far as the acquisition of Clarity in the Merger
is a
material change to the Company’s business pursuant to Section 4.1(b) of the Loan
Agreement, the requirement that the Company continue to conduct its business,
in
all material respects, as conducted on the date of the Loan Agreement and (ii)
the prohibition of the Company to directly or indirectly create, assume,
guarantee, or otherwise become or remain directly or indirectly liable with
respect to any indebtedness other than the exceptions described therein, upon
paying the Pay-Off Amount at the closing of the Merger and Manchester wishes
to
consent to the issuance of New Amended and Restated Note (as defined
below);
NOW,
THEREFORE, in
consideration of the foregoing premises and the covenants contained herein
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto agree as follows (capitalized terms
used
and not defined herein shall have the meaning set forth in the Loan
Agreement):
1. Issuance
of New Amended and Restated Notes. Alexander
shall loan by
the end of the date hereof the Additional Funds to the Company pursuant to
wire
instructions previously provided by the Company to Alexander and the Company
shall issue to Alexander the new Amended and Restated Note (the “New Amended and Restated
Note”) in the form attached hereto as Exhibit A and
executed by the Company and delivered to Alexander on the date
hereof. The initial conversion price of the New Amended and Restated
Note shall be $0.20 per share, the initial conversion price of the Amended
and
Restated Notes.
2. Consent
and Waiver under the Loan Agreement. Each of the
Lenders hereby consents to the Merger, the Share Issuance, the payment of the
Pay-Off Amount, and the transactions contemplated thereby and with respect
to
the foregoing irrevocably waives (i) the requirement under Section 1.6(b) of
the
Loan Agreement to use such cash proceeds received in connection with the Merger,
the Share Issuance, the issuance of the New Amended and Restated Note, and
the
transactions contemplated thereby to prepay the Amended and Restated Notes,
(ii) in so far as
the acquisition of Clarity in the Merger is a material change to the Company’s
business pursuant to Section 4.1(b) of the Loan Agreement, the requirement
that
the Company continue to conduct its business, in all material respects, as
conducted on the date of the Loan Agreement and (iii) the prohibition of the
Company pursuant to Section 4.3 of the Loan Agreement to directly or indirectly
create, assume, guarantee, or otherwise become or remain directly or indirectly
liable with respect to any indebtedness other than the exceptions described
therein, upon paying the Pay-Off Amount at the closing of the
Merger. These consents and waivers are one-time consents and waivers
and shall not be deemed to be a waiver of Sections 1.6(b), 4.1(b) or 4.3 of
the
Loan Agreement with respect to any other material changes to the Company’s
business or the issuance of capital stock or the issuance, assumption of, or
liability with respect to, other indebtedness.
3. Amendment
of Loan Agreement. The Loan
Agreement is hereby amended by modifying the terms and references to the Amended
and Restated Notes to include the New Amended and Restated Note in accordance
with this Agreement.
4. Amendment
of Security
Agreement and Guaranties.
(a) The
Security Agreement is hereby amended by modifying the term “Obligations,” as
defined in Section 2 of the Security Agreement, to refer to the Loan Agreement,
the Amended and Restated Notes, the New Amended and Restated Note, and Restated
Guaranties (all as defined therein) as modified by this Agreement.
(b) Each
of
the Guaranties is modified such that the definition of “Obligations” in Section
1(a) thereof, is hereby amended to include the Amended and Restated Notes,
the
New Amended and Restated Note, the Loan Agreement and Security Agreement (as
such terms are defined in the Guaranties) as amended by this
Agreement.
(c) Upon
the
payoff of the Clarity Line of Credit, the Company shall cause Clarity, as a
wholly-owned subsidiary of the Company: (i) to pledge and grant a security
interest in all of its assets to the Lenders, to secure the Company and
Clarity’s obligations to the Lenders; (ii) issue a guaranty to the Lenders,
guaranteeing the Company’s obligation to the Lenders; and (iii) execute and file
financing statements, in the appropriate location, to perfect the liens
described in clause (i) above, in each case pursuant to documentation
satisfactory to the Lenders.
5. Registration
Rights Agreement. The Company
and
Alexander shall execute and deliver the Registration Rights Agreement (the
“Registration Rights
Agreement”) as of the date hereof in the form attached hereto as Exhibit
B.
6. Representations;
Warranties
and Covenants.
(a) The
Company hereby restates to the Lenders the representations in Section 2.1 of
the
Loan Agreement and Section 3 of the Security Agreement, as of the date hereof
(other than the representation in Section 2.1(g) of the Loan Agreement, which
is
made as of the date of the Loan Agreement), except that (i) with respect to
Section 2.1(a) of the Loan Agreement, in addition to the Guarantors, the
Company’s subsidiaries include ISCO Delaware, LLC and ISCO Illinois, Inc and
(ii) with respect to Section 2.1(c), the capitalization of the Company is as
set
forth in the Company’s SEC Documents. The Guarantors hereby restate
their respective representations in Section 3 of the Security Agreement and
Section 8 of the Guaranties, as of the date hereof. The Lenders
hereby restate their representations in Section 2.2 of the Loan Agreement,
as of
the date hereof.
(b) The
Company also represents and warrants to Alexander that assuming (without any
independent investigation or verification by or on behalf of the Company) the
accuracy of the representations and warranties of the Lenders set forth in
the
Loan Agreement, the issuance of the New Amended and Restated Note is exempt
from
registration under Section 5 of the Securities Act. Neither the
Company nor any person acting on its behalf has taken or will take any action
which might subject the offering, issuance or sale of the New Amended and
Restated Note to the registration requirements of Section 5 of the Securities
Act.
(c) The
Company covenants to Alexander to use its best efforts to obtain within one
(1)
year from the date hereof the requisite stockholder and AMEX approvals described
in the New Amended and Restated Note, as well as AMEX’s approval for the listing
of the shares underlying the New Amended and Restated Note (the “New Conversion
Shares”) on AMEX.
(d) The
Company further covenants to Alexander that upon obtaining the requisite
stockholder and AMEX approvals described in the New Amended and Restated Note
and upon issuance in accordance with this Agreement, the Amendment to Loan
Documents, the Loan Agreement, and the terms of the New Amended and Restated
Note, the New Conversion Shares into which the New Amended and Restated Note
is
convertible will be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes (other than transfer taxes where the
New
Amended and Restated Note has been transferred and other than any taxes due
because of actions by Alexander), liens and charges with respect to the issue
thereof and the holders of such New Conversion Shares shall be entitled to
all
rights and preferences accorded to a holder of shares of the Company’s common
stock
7. Stock
Legends. Alexander agrees to the imprinting, so long as is
required by this Section 5, of the following legend on its New Amended and
Restated Note and the New Conversion Shares:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The
New
Conversion Shares shall not contain the legend set forth above if the issuance
thereof occurs at any time while the registration statement (“Registration Statement”) filed
pursuant to the Registration Rights Agreement is effective under the Securities
Act, or in the event that the New Conversion Shares may be sold pursuant to
Rule
144(k) under the Securities Act. The Company agrees that it will
provide Alexander, upon request, with a certificate or certificates representing
New Conversion Shares free from such legend at such time as such legend is
no
longer required hereunder. Alexander agrees that, in connection with
any transfer of New Conversion Shares by it pursuant to an effective
registration statement under the Securities Act, it will comply with the
prospectus delivery requirements of the Securities Act provided copies of a
current prospectus relating to such effective registration statement are or
have
been supplied to Alexander.
8. Press
Release. The Company
and
the Lenders shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby and neither the Company nor any Lender shall issue any such press release
or otherwise make any such public statement without the prior consent of the
other, which consent shall not be unreasonably withheld or delayed, except
that
no prior consent shall be required if such disclosure is required by law, in
which such case the disclosing party shall provide the other party with prior
notice of such public statement.
9. Miscellaneous.
(a)
As modified hereby, the Loan Documents shall remain in full force and
effect.
(b)
The Company shall, upon request of the Lenders, reimburse them for their legal
expenses incurred in the preparation of this Agreement and for related
transactions.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the
parties have caused this Agreement to be executed and delivered by their
respective officers thereunto duly authorized, as of the date first above
written.
ISCO
INTERNATIONAL, INC.
By:
/s/ Xxxxx
Xxxx
Name:
Xxxxx Xxxx
Title:
Interim Chief Executive Officer
SPECTRAL
SOLUTIONS, INC.
By:
/s/
Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
CFO
ILLINOIS
SUPERCONDUCTOR CANADA CORPORATION
By:
/s/
Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
CFO
MANCHESTER
SECURITIES CORPORATION
By:
/s/
Xxxxxx
Xxxxxxxxx
Name:
Xxxxxx Xxxxxxxxx
Title:
Vice President
ALEXANDER
FINANCE, L.P.
By:
/s/ Xxxxxxxx X.
Xxxxxxxx
Name:
Xxxxxxxx X. Xxxxxxxx
Title:
President: Bun Partners, Inc.
Its:
General Partner
COLLATERAL
AGENT
UNDER
SECURITY AGREEMENT:
MANCHESTER
SECURITIES CORPORATION
By:
/s/ Xxxxxx
Xxxxxxxxx
Name:
Xxxxxx Xxxxxxxxx
Title:
Vice President
EXHIBIT
A
FORM
OF
NEW AMENDED AND RESTATED NOTE
EXHIBIT
B
REGISTRATION
RIGHTS AGREEMENT
