AUGUST 2008 LOAN AGREEMENT
EXHIBIT
10.1
AUGUST
2008 LOAN AGREEMENT
AUGUST 2008
LOAN AGREEMENT (“Agreement”) dated as of August
18, 2008 (the “Closing
Date”) 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”) and ISCO
International, Inc., a corporation organized and existing under the laws of
Delaware and formerly known as Illinois Superconductor Corporation (the “Company”).
W I T N E S S E T H:
Whereas,
the Company and the Lenders previously entered into that certain 2008
Loan Agreement, dated as of May 29, 2008 (the “2008 Loan Agreement”),
pursuant to which the Lenders, severally, but not jointly, agreed to make the
Company advances in an aggregate amount of up to $2,500,000;
Whereas,
the Company and the Lenders now desire to reduce the aggregate amount of
advances that may be made under the 2008 Loan Agreement by $550,000, and that
such amount be included in the aggregate amount of advances that may be under
this August 2008 Loan Agreement;
Whereas,
the Company now desires to borrow from the Lenders, and the Lenders desire to
advance to the Company, subject to the terms and provisions of this Agreement
and further subject to their absolute discretion, from time to time during the
period commencing on the date hereof until August 1, 2010 (the “Termination Date”), amounts up
to the sum of their aggregate individual Commitments as set forth on Schedule A attached
hereto;
Whereas,
the Company and the Lenders desire that the amounts advanced by the Lenders to
the Company hereunder (the “Loans”) with respect to the
Commitments set forth in Section 1.1 below, be evidenced by secured notes
convertible into shares of the Company’s Common Stock, par value $0.001 per
share (the “Common
Stock”), having the rights and privileges set forth in the notes in the
form and substance of Exhibit A in the
aggregate principal amount of up to $3,000,000 (the “Convertible Notes”) hereto and
which will be secured by all of the assets of the Company and its subsidiaries
pursuant to a Seventh Amended and Restated Security Agreement in the form and
substance of Exhibit
B hereto (the “Security
Agreement”);
Whereas,
pursuant to an Amended and Restated Guaranty in favor of the Lenders
dated the date hereof and in the form and substance of Exhibit C hereto (the
“Guaranty”), the
Company’s subsidiary, Clarity Communication Systems Inc. (the “Guarantor”) will guaranty the
Company’s obligations under this Agreement, the Security Agreement and the
Convertible Notes (and the other notes described in the Security
Agreement);
Whereas,
pursuant to the Registration Rights Agreement, of even date herewith and
in the form and substance of Exhibit D hereto (the
“Registration Rights
Agreement”), the Company shall register under the Securities Act of 1933,
as amended (the “Securities
Act”), the Conversion Shares (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:
ARTICLE
1
AMOUNT AND TERMS OF
LOANS
Section
1.1 The Advances;
Commitment. Each Lender severally and further subject to such Lender’s
sole and absolute discretion and not jointly with the other Lender, agrees, on
the terms and conditions hereinafter set forth, to make advances (“Advances”) to the Company from
time to time on any Business Day (as defined below) during the period commencing
on the date hereof and terminating on the Termination Date. Any such
Advances by a Lender shall be in an aggregate amount outstanding not to exceed
at any time such Lender’s Commitment; provided, however, that the
aggregate amount available to be borrowed under the “Commitments” shall not
exceed $3,000,000. The aggregate Commitments of the Lenders are set
forth on Schedule
A hereto. Within the limits of each Lender's Commitment in
effect from time to time, and subject to both the Lenders’ discretion (as
referred to above) and the terms and conditions set forth above, the Company may
borrow under this Section 1.1. The Loans shall be evidenced by the
Convertible Notes, which in turn are guaranteed by the Guaranties and secured
pursuant to the Security Agreement.
As used
herein, “Business Day”
shall mean any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are required or authorized to
close.
Section
1.2 Amendment to the 2008 Loan
Agreement. In consideration of each Lender’s Commitment pursuant to
Section 1.1 hereof, the parties hereto acknowledge and agree that the aggregate
amount of advances available under the 2008 Loan Agreement shall be permanently
reduced by $550,000, and the Company agrees that it shall not be entitled to
advances in excess of $1,950,000 in the aggregate under the 2008 Loan Agreement
and that it shall not make any request to the Lenders under the 2008 Loan
Agreement for advances in excess of such amount.
Section
1.3 Cross-Default. Any
Event of Default under a note issued pursuant to the Third Amended and Restated
Loan Agreement, dated as of November 10, 2004, entered into by and among the
Company and Lenders, as amended from time to time (the “2004 Loan Agreement”), a note
issued pursuant to the Securities Purchase Agreement, dated as of June 22, 2006,
entered into by and among the Company and the Lenders, as amended from time to
time (the “2006 Purchase
Agreement”), the note issued to Alexander dated as of January 3, 2008
(the “January 2008
Note”), or a note issued under the 2008 Loan Agreement (the
“2008 Note” and with the
notes issued pursuant to the 2004 Loan Agreement and the 2006 Purchase
Agreement, each as amended from time to time, collectively being referred to
herein as the “Prior ISCO
Notes”) shall be an Event of Default with respect to the Convertible
Notes.
Section
1.4 Making the
Advances.
(a) Each set
of Advances made by the Lenders (a “Borrowing”) after the date
hereof shall be made on notice (a “Borrowing Request”), given not
later than 11:00 A.M. (New York City time) on the first or fifteenth day of the
month, by the Company to the Lenders, which date shall be five (5) Business Days
prior to the date of the proposed Borrowing. Each Borrowing Request
shall be by telecopier and email, in substantially the form of Exhibit E hereto,
specifying therein the requested (i) date of such Borrowing and (ii) aggregate
amount of such Borrowing. The amount of such Borrowing shall be at
least $250,000 (or less only if such amount is the balance of the Advances
available under the Convertible Notes at such time). In the event
that no Default (as defined below) or Event of Default (as defined in the
Convertible Notes) shall have occurred and be continuing and all conditions to a
Borrowing (including those set forth in Article III) shall have been satisfied
and each Lender, in its sole and absolute discretion, shall have deemed it
advisable to make the requested Advance, then the Company shall be entitled to
make Borrowings under the Financing Documents (as defined in Section 1.10
below).
(b) Notwithstanding
the foregoing, no Loan shall be made unless both Lenders shall have agreed to
fund their respective Advances. If either Lender does not agree to
make its Advance, then the other shall not make its Advance.
(c) The
aggregate indebtedness of the Company hereunder to each Lender shall be
evidenced by one or more Convertible Notes.
Section
1.5 Repayment. On
the Termination Date, the Company shall repay to the Lenders the outstanding
principal amount of the Advances evidenced by the Convertible Notes, together
with (a) all accrued interest (such interest accruing whether or not allowable
under any applicable bankruptcy laws after a bankruptcy filing by the Company)
and (b) all other amounts due under the Loan Documents. Upon any of
the Company’s obligations hereunder or under the other Loan Documents (as
defined in Section 4.1 below) becoming due and payable (by acceleration or
otherwise), the Lenders shall be entitled to immediate payment of such
obligations.
Section
1.6 Termination of the
Commitments. On the Termination Date the Commitments of the
Lenders shall be terminated in whole and the Convertible Notes shall be due and
payable in their entirety.
Section
1.7 Prepayments. The
Company may not prepay any portion of the Loans at any time prior to the
Termination Date.
Section
1.8 Interest. Interest
shall accrue on the Advances as set forth in the Convertible Notes.
Section
1.9 Payments and
Computations.
(a) The
Company shall make each payment hereunder and under the Convertible Notes not
later than 3 P.M. (New York City time) on the day when due, in U.S. dollars, to
the Lenders at accounts designated by the Lenders to the Company.
(b) All
computations of interest, fees, and charges shall be made by the Lenders on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, fees, or charges are payable. Each determination
by the Lenders of an interest rate, fee, or charge hereunder shall be conclusive
and binding for all purposes, absent manifest error.
(c) Whenever
any payment hereunder or under the Convertible Notes shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest or fees, as the case may
be.
Section
1.10 Financing
Documents. Concurrently with the execution and delivery of
this Agreement and the Convertible Notes, the Company is delivering to the
Lenders the following additional documents, each dated as of the date hereof,
the execution and delivery of which are a condition to the Lenders’ Commitments
set forth in Section 1.1(a) above:
(i) the
Guaranty;
(ii) the
Security Agreement;
(iii) Amendments
(the “UCC Amendments”)
to UCC financing statements, naming Lenders as the secured parties and the
Company as the debtor (the “UCC
Financing Statements” and together with the UCC Amendments, the “Amended UCC Financing
Statements”) if required by Lenders;
(iv) Amendments
(the “PTO Amendments”)
to Patent and Trademark financing statements naming the Lenders as secured
parties and the Company as the debtor (the “Patent and Trademark Financing
Statements” and together with the PTO Amendments, the “Amended Patent and Trademark
Statements”) if required by Lenders;
(v) The
Registration Rights Agreement;
(vi) Legal
Opinion of outside counsel to the Company, in the form of Exhibit F hereto
delivered not later than five (5) Business after the date hereof.
(vii) A
secretary’s certificate and an incumbency certificate each in a form
satisfactory to the Lenders; and
(viii) UCC Lien
Searches.
It shall
be an Event of Default under the Convertible Notes if the legal opinion referred
to in clause (v) above is not delivered within five (5) Business Days of the
date hereof.
Section
1.11 This
Agreement, the Guaranties, the Security Agreement, the Convertible Notes, the
Amended UCC Financing Statements and the Amended Patent and Trademark Financing
Statements are collectively referred to herein as the “Financing
Documents.”
ARTICLE
2
REPRESENTATIONS AND
WARRANTIES
Section
2.1 Representations, Warranties
and Agreements of the Company. The Company hereby makes the
following representations and warranties to the Lenders as of the date
hereof:
(a) Organization and
Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than the
Guarantor. The Company is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of the Loan Documents in
any material respect, (y) have a material adverse effect on the results of
operations, assets, or financial condition of the Company or (z) adversely
impair in any material respect the Company’s ability to perform fully on a
timely basis its obligations under the Loan Documents (a “Material Adverse
Effect”).
(b) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by the
Financing Documents, and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Financing
Documents by the Company and the consummation by it of the transactions
contemplated thereby, have been duly authorized by all requisite corporate
action on the part of the Company. Each of the Financing Documents
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 2.1(c). No shares of Common Stock are entitled to preemptive
or similar rights, nor is any holder of the Common Stock entitled to preemptive
or similar rights arising out of any agreement or understanding with the Company
by virtue of any of the Financing Documents. Except as disclosed in
Schedule 2.1(c), there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to,
securities, rights or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock.
(d) Issuance of Conversion
Shares. The shares of Common Stock issuable upon conversion of
the Convertible Notes (the “Conversion Shares”) have been
reserved for issuance and when issued in accordance with the terms of the
Convertible Notes will be duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock.
(e) No
Conflicts. The execution, delivery and performance of the
Financing Documents by the Company and the consummation by the Company of the
transactions contemplated thereby, do not and will not (i) conflict with or
violate any provision of its certificate of incorporation or by-laws or (ii)
conflict with, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the
Company is subject (including Federal and state securities laws and
regulations), or by which any material property or asset of the Company is bound
or affected, except in the case of each of clauses (ii) and (iii), such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, do not
have a Material Adverse Effect.
(f) Consents and
Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other person in connection with the execution, delivery and performance by
the Company of the Financing Documents other than: (i) the filing of the
Amendments to the UCC and Patent and Trademark Financing Statements if any are
required by Lenders; and (ii) in all other cases, where the failure to obtain
such consent, waiver, authorization or order, or to give or make such notice or
filing, would not materially impair or delay the ability of the Company to
effect the transactions contemplated by this Agreement free and clear of all
liens and encumbrances of any nature whatsoever or would not otherwise have a
Material Adverse Effect (the approvals referred to in clause (i) are hereinafter
referred to as the “Required
Approvals”). The Company has no reason to believe that it will
be unable to obtain the Required Approvals.
(g) Private
Offering. Assuming (without any independent investigation or
verification by or on behalf of the Company) the accuracy of the representations
and warranties of Lenders set forth herein, the offer and sale of the
Convertible Notes and the issuance of the Conversion Shares are 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 Convertible Notes to
the registration requirements of Section 5 of the Securities Act.
(h) SEC
Documents. The Company has filed all reports or other filings
required to be filed by it under Securities Act and the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the
date hereof (the foregoing materials being collectively referred to herein as
the “SEC Documents”), on
a timely basis. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, and none of the SEC Documents, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in
the SEC Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the Securities and
Exchange Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise indicated in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. Since the date of the financial
statements included in the Company’s last filed Annual Report on Form 10-K,
there has been no event, occurrence or development that has had a Material
Adverse Effect which is not specifically disclosed in any of the SEC
Documents.
(i) Compliance with Obligations
to the Lenders. The Company is in compliance with all of its
obligations to the Lenders, including without limitation, pursuant to prior
agreements.
(j) Shell
Company Status. The Company is not presently, and has never been, an issuer of
the kind described in paragraph (i)(1) of Rule 144 under the Securities
Act.
Section
2.2 Representations and
Warranties of Lenders. Each Lender severally hereby makes the
following representations and warranties to the Company as to itself only as of
the date hereof:
(a) Organization;
Authority. The Lender is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite legal power and authority to
enter into and to consummate the transactions contemplated hereby, by the
Security Agreement and by the Convertible Notes and otherwise to carry out its
obligations hereunder and thereunder. The purchase by the Lender of
its Convertible Notes and the Commitments, if any, under this Agreement and the
making of Loans from time to time hereunder at such Lender’s discretion, has
been duly authorized by all necessary action on the part of the
Lender. This Agreement has been duly executed and delivered by the
Lender and constitutes its valid and legally binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights generally and to
general principles of equity.
(b) Investment
Intent. Each Lender is acquiring its Convertible Notes and any
Conversion Shares for its own account and without a present intention to
distribute or resell it in violation of applicable securities
laws. No Lender will offer, sell, transfer, assign, pledge or
hypothecate any portion of the Convertible Notes or the Conversion Shares in the
absence of a registration under the Securities Act, or pursuant to an applicable
exemption from, federal and applicable state securities laws.
(c) Experience. The
Lender has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Convertible Notes and the Conversion Shares and
has so evaluated the merits and risks of such investment.
(d) Ability of Lender to Bear
Risk of Investment; Accredited Investor. The Lender is able to
bear the economic risk of an investment in the Convertible Notes and the
Conversion Shares at the present time, is able to afford a complete loss of such
investment. The Lender is an “accredited investor” as such term is
defined in Rule 501 under the Securities Act.
(e) Access to
Information. The Lender acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the Convertible Notes and the merits and risks of investing in the
Convertible Notes and the Conversion Shares; (ii) access to information about
the Company and the Company’s financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment.
ARTICLE
3
CONDITIONS TO
ADVANCES
Any
making of any Advance by each Lender is subject to the satisfaction at or before
the date of such Advance of each of the conditions set forth
below. These conditions are for the benefit of each Lender and may be
waived by such Lender at any time at its discretion.
(a) Discretion of
Lender. The Lender shall have determined, in its sole and
absolute discretion that the making of such Advance is desirable;
(b) Absence of Default or Event of
Default. There shall be no Event of Default (as defined in the
Convertible Notes) or any event which, with the passage of time and/or the
giving of notice, would constitute an Event of Default (“Default”);
(c) Accuracy of the Company’s
Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be true and correct in all
material respects as of the date of this Agreement, as of the date on which the
Borrowing Request with respect to such Borrowing was delivered by the Company to
the Lenders, and as of the date of such Borrowing as though made at that time
(except for representations and warranties as of an earlier date, which shall be
true and correct in all material respects as of such date); provided, that any
representations and warranties which are limited by their terms to materiality
shall have been or shall be (as applicable) true and correct in all
respects.
(d) Performance by the
Company. The Company shall have performed all agreements and
satisfied all conditions required to be performed or satisfied by the Company at
or prior to the delivery of the Borrowing Request and at or prior to the
Borrowing.
(e) Legality and
Possibility. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by the
Financing Documents.
(f) Security. No
changes to the type, validity and sufficiency of the Lender’s collateral
security shall have occurred, in the good faith judgment of the Lender, to cause
the value of such collateral to be impaired.
(g) Miscellaneous. The
Company shall have delivered to the Lenders such other documents relating to the
transactions contemplated by this Agreement and the other Financing Documents as
the Lenders may reasonably request.
ARTICLE
4
COVENANTS
Section
4.1 Affirmative
Covenants. The Company covenants that from the date hereof and
for so long as any portion of the Loans or other obligation under (a) the
Financing Documents, (b) the 2004 Loan Agreement, (b) the 2006 Purchase
Agreement, (c) the 2008 Loan Agreement, (d) each Prior ISCO Note, (e) the
Registration Rights Agreements entered into by and among the Company and Lenders
relating to the securities issued or to be issued pursuant to the 2004 Loan
Agreement, 2006 Purchase Agreement and/or any of the Prior ISCO Notes (the
“Registration Rights
Agreements” and collectively with the Financing Documents, 2004 Loan
Agreement, 2006 Purchase Agreement, the 2008 Loan Agreement and Prior ISCO
Notes, the “Loan
Documents”) shall remain outstanding, it will observe or perform each of
the following unless such observance or performance is expressly waived by the
Lenders in writing:
(a) Corporate
Existence. It will maintain its corporate existence in good
standing and remain qualified to do business as a foreign corporation in each
jurisdiction in which the nature of its activities or the character of the
properties it owns or leases makes such qualification necessary.
(b) Continuation of
Business. Except as set forth on Schedule 4.1(b), it will
continue to conduct its business, in all material aspects, as conducted on the
day hereof in compliance in all material respects with all applicable rules and
regulations of applicable governmental authorities.
Section
4.2 Dividends; Stock
Repurchases. So long as any Convertible Notes remain
outstanding, the Company will not declare any dividends on any shares of any
class of its capital stock (other than dividends consisting solely of Common
Stock or rights to purchase Common Stock of the Company), or apply any of its
property or assets to the purchase, redemption or other retirement of, or set
apart any sum for the payment of any dividends on, or for the purchase,
redemption or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shares of any class of its capital
stock.
Section
4.3 Incurrence of Debt; Liens;
Transfer of Assets to Subsidiaries. For so long as any
Commitments or portion of the Loans (or any other obligation under the Loan
Documents) remain outstanding, neither the Company nor any subsidiary of the
Company shall:
(a) Directly
or indirectly create, incur, assume, guarantee, or otherwise become or remain
directly or indirectly liable with respect to, any indebtedness of any kind,
other than (i) indebtedness under the Convertible Notes; (ii) indebtedness under
the 2004 Loan Agreement, the 2006 Purchase Agreement, the 2008 Loan Agreement
and the Prior ISCO Notes, (iii) other indebtedness to the Lenders which
indebtedness is either expressly subordinated in writing to the indebtedness
under the Loan Documents or is, with the prior written consent of the Lenders,
pari passu to the indebtedness under the Loan Documents; or (iv) indebtedness to
trade creditors in the ordinary course of business consistent with past
practice.
(b) Directly
or indirectly create, incur, assume or permit to exist any lien, pledge, charge
or encumbrance on or with respect to any of its property or assets (including
any document or instrument in respect of goods or accounts receivable) whether
now owned or held or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens.
(c) Directly
or indirectly transfer any of its assets to any subsidiary of the
Company.
As used
herein, “Permitted Liens” means (i) liens granted under the Security Agreement;
(ii) liens imposed by mandatory provisions of law such as materialmen’s,
mechanic’s or warehousemen’s; (iii) liens for taxes, assessments and
governmental charges or levies imposed upon the Company or any subsidiaries or
their income, profits or property, if the same are not yet due and payable or if
the same are contested in good faith and as to which adequate reserves have been
provided; (iv) pledges or deposits made to secure payment of worker’s
compensation insurance, unemployment insurance, pensions or social security
programs or to secure the performance of letters of credits, bids, tenders,
public or statutory obligations, surety, performance bonds and other similar
obligations; (v) encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that such do not impair
the use of such property for the uses intended and none of which is violated by
existing or proposed structures or land use and (vi) the liens and
encumbrances disclosed on Schedule A of the Security Agreement.
Section
4.4 Convertible Prior ISCO
Notes. With
respect to any of the Prior ISCO Notes that are convertible into shares of the
Company’s common stock, the provisions of the applicable registration rights
agreement relating to such Prior ISCO Notes shall continue to
apply.
Section
4.5 AMEX
Rule. Notwithstanding any other provision of this Agreement,
the Convertible Notes and the Registration Rights Agreement, the total number of
Conversion Shares issuable upon conversion of the Convertible Notes at prices
below the “book or market value” (as such terms are used in Section 713 of the
AMEX Company Guide) of the Common Stock on the date hereof shall be no more than
19.9% of the Common Stock issued and outstanding on the date hereof, which
number shall be subject to readjustment for any stock split, stock dividend or
reclassification of the Common Stock.
ARTICLE
5
LEGEND AND
STOCK
Section
5.1 Stock
Legends. Each Lender agrees to the imprinting, so long as is
required by this Section 5.1, of the following legend on its Convertible Notes
and 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
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 Conversion Shares may be sold
pursuant to Rule 144(b)(1)(i) under the Securities Act. The Company
agrees that it will provide each Lender, upon request, with a certificate or
certificates representing Conversion Shares free from such legend at such time
as such legend is no longer required hereunder. Each Lender agrees
that, in connection with any transfer of 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 such Lender.
ARTICLE
6
MISCELLANEOUS
Section
6.1 Fees and
Expenses. The Company shall pay, concurrently with the
execution and delivery of this Agreement, the reasonable fees and expenses of
legal counsel for the Lenders incident to the negotiation, preparation,
execution, delivery and performance of the Loan Documents incurred to date and,
thereafter, upon request of a Lender, the Company, shall pay any additional fees
and expenses incurred by the Lenders and incident to the filing, negotiation,
preparation, performance or amendment of the Loan Documents.
Section
6.2 Entire
Agreement. This Agreement, together with the Convertible
Notes, the Security Agreement, the Guaranties, the Registration Rights Agreement
and the other Loan Documents, contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters.
Section
6.3 Notices. Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) when sent by facsimile, upon receipt if received on a
business day prior to 5:00 p.m. (Central Time), or the first Business Day
following such receipt if received on a business day after 5:00 p.m. (Central
Time); or (iii) upon receipt, when deposited with a nationally recognized
overnight express courier service, fully prepaid, in each case properly
addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the
Company: ISCO
International, Inc.
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▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
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Fax: (▇▇▇)
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With
copies to:
McGuireWoods
LLP
Suite
4100
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Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If to
Manchester: Manchester
Securities Corporation
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Attn: ▇▇▇▇
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Fax: (▇▇▇)
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With
copies to:
Kleinberg,
Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
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Attn: ▇▇▇▇▇▇▇▇
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Fax: (▇▇▇)
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If to
Alexander: Alexander
Finance, LP
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▇▇▇▇▇▇▇▇,
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Attn: ▇▇▇▇▇▇▇▇
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Fax: (▇▇▇)
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With
copies to:
▇▇▇▇
▇▇▇▇▇ LLP
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Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇)
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or such
other address or facsimile number as may be designated in writing hereafter, in
the same manner, by such person.
Section
6.4 Amendments;
Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and by Lenders holding at least 75% of the Commitments; or, in the
case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.
Section
6.5 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
6.6 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. Neither the Company nor any Lender may assign this Agreement
or any rights or obligations hereunder (other than an assignment from a Lender
to an affiliate of such Lender) without the prior written consent of the other;
provided that in the event of an assignment by a Lender requiring the Company’s
consent, the Company’s consent shall not be unreasonably
withheld. Any transfer made in violation of this provision shall be
null and void. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section
6.7 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
Section
6.8 Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
Section
6.9 Survival. The
agreements, representations and warranties and covenants contained in this
Agreement shall survive the delivery of the Convertible Notes pursuant to this
Agreement and any Advances made thereunder.
Section
6.10 Counterpart and Facsimile
Signatures. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the executing party with the same force and
effect as if such facsimile signature page were an original
thereof.
Section
6.11 Publicity. 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.
Section
6.12 Severability. In
case any one or more of the provisions of this Agreement shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this
Agreement.
Section
6.13 Payment of
Expenses. The Company agrees to pay all costs and expenses,
including reasonable attorneys’ fees and expenses, which may be incurred by any
Lender in successfully enforcing any Loan Document, including without limitation
in enforcing Section 6.14 below.
Section
6.14 Indemnification. The
Company hereby agrees to indemnify, defend and hold harmless each Lender and its
respective partners, shareholders, officers, affiliates, employees or agents
(“Indemnified Parties”),
from and against any and all losses, claims, damages, liabilities and costs,
including reasonable legal fees (collectively “Losses”) (i) incurred as a
result of the breach by the Company or any subsidiary of any representation,
covenant or other provision in any Loan Document; (ii) incurred as a result of
entering into this Agreement; (iii) incurred in enforcing this Section 6.14 or
(iv) incurred involving a third-party claim and arising out of the acquisition,
holding and/or enforcement by such Lender of any of the Loan
Documents.
Section
6.15 Like Treatment of
Lenders. Neither the Company nor any of its affiliates shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee, payment for the redemptions or exchange of the Convertible
Notes, or any Advance thereunder or otherwise, to any holder of Convertible
Notes, for or as an inducement to, or in connection with the solicitation of,
any consent, waiver or amendment of any terms or provisions of the Loan
Documents, unless such consideration is required to be paid to all holders of
Convertible Notes bound by such consent, waiver or amendment whether or not such
holders so consent, waive or agree to amend and whether or not such holders
tender their Convertible Notes for redemption or exchange. The
Company shall not, directly or indirectly, redeem to prepay any Advances unless
such offer of redemption is made pro rata to all holders on identical
terms.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed by their
respective authorized persons as of the date first indicated above.
ISCO
INTERNATIONAL, INC.
By: /s/ ▇▇▇▇
▇▇▇▇▇▇
Name: ▇▇▇▇
▇▇▇▇▇▇
Title: Chief
Financial Officer
MANCHESTER
SECURITIES CORPORATION
By: /s/ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Title: Vice
President
ALEXANDER
FINANCE, L.P.
By: /s/
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title President Bun Partners, Inc.
Its: General
Partner