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EXHIBIT 4.3
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
ILLINOIS SUPERCONDUCTOR CORPORATION
and
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
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Dated as of June 6, 1997
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of June 6, 1997, between Southbrook International Investments, Ltd., a
corporation organized and existing under the laws of the British Virgin Islands
(the "Purchaser"), and Illinois Superconductor Corporation, a corporation
organized and existing under the laws of the State of Delaware (the "Company").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred"), the
Company's Series C Convertible Preferred Stock, par value $.001 per share (the
"Series C Preferred"), the Company's Series D Convertible Preferred Stock, par
value $.001 per share (the "Series D Preferred"), the Company's Series E
Convertible Preferred Stock, par value $.001 per share (the "Series E
Preferred") and the Company's Series F Convertible Preferred Stock, par value
$.001 per share (the "Series F Preferred") (the Series B Preferred, Series C
Preferred, Series D Preferred, Series E Preferred and Series F Preferred are
collectively referred to as the "Preferred Stock" and shares of Preferred Stock
issued and sold in accordance with this Agreement are referred to as the
"Shares").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. (a) Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchaser and the Purchaser
shall purchase (i) 600 shares of Series B Preferred (the "Series B Shares");
(ii) up to 1,000 shares of Series C Preferred; (iii) up to 1,000 shares of
Series D Preferred; (iv) up to 1,000 shares of Series E Preferred; and (v) up to
1,000 shares of Series F Preferred. Notwithstanding anything to the contrary set
forth in this Agreement, the aggregate number of Shares (as defined below) to be
sold hereunder shall not exceed 3,000 (the "Maximum Share Amount").
(b) The Series B Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series B
Terms"), which shall be incorporated into a Certificate of Designation to be
approved by the Purchaser and filed on or prior to the Series B Closing (as
defined below) by the Company with the Secretary of State of Delaware (the
"Series B Designation"). The Series C Preferred, Series D Preferred, Series E
Preferred and Series F Preferred, if and when issued, shall have respective
rights, preferences and privileges identical to the Series B Terms, mutatis
mutandis, and shall rank pari passu with the Series B Preferred with regard to
dividends, liquidation, voting rights and any other preferential rights
designated therein, except that the Conversion Price (as defined
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below) for conversion of said Shares shall reset as of the Original Issue Date
(as defined below) for such Shares.
The Series C Preferred, Series D Preferred, Series E Preferred and
Series F Preferred shall be authorized pursuant to certificates of designation
to be prepared by the Company, subject to the approval of the Purchaser, and
filed on or prior to the Series C Closing Date (as defined below), Series D
Closing Date (as defined below), Series E Closing Date (as defined below) or
Series F Closing Date (as defined below), as applicable, by the Company with the
Secretary of State of Delaware (such certificates of designation, together with
the Series B Designation, are referred to as the "Certificates of Designation").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series B Terms; and "Market Price" as at any date
shall mean the average Per Share Market Value for the five (5) Trading Days
immediately preceding such date. The Company's "Market Capitalization" shall be
determined by taking the weighted volume average of the Per Share Market Value
for the fifteen (15) Trading Days immediately prior to each applicable Closing
Date (as defined below) and by multiplying such 15 day weighted volume average
by the number of outstanding shares of the Company's Common Stock on the date
preceeding the applicable Closing Date.
1.2 Purchase Price. The purchase price per Share shall be $5,000.
1.3 The Closings.
(a) The Series B Closing. (i) The closing of the purchase and
sale of the Series B Shares (the "Series B Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, immediately
following the execution hereof or such later date as the parties shall agree,
but not prior to the date that the conditions set forth in Section 4.1 have been
satisfied or waived by the appropriate party. The date of the Series B Closing
is hereinafter referred to as the "Series B Closing Date." At the Series B
Closing, the Company shall sell and issue to the Purchaser, and the Purchaser
shall purchase, the Series B Shares for an aggregate purchase price of
$3,000,000.
(ii) At the Series B Closing, (a) the Company shall
deliver to the Purchaser one or more stock certificates representing the Series
B Shares and the Initial Warrant (as defined in Section 3.17), each registered
in the name of the Purchaser, and all other documents, instruments and writings
required to have been delivered at or prior to the Series B Closing by the
Company pursuant to this Agreement and the Registration Rights Agreement, dated
the date hereof, by and between the Company and the Purchaser, in the form of
Exhibit B (the "Registration Rights Agreement"), and (b) the Purchaser shall
deliver to the Company $3,000,000, in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose prior to the Series B Closing Date, and all documents,
instruments and writings required to have been
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delivered at or prior to the Series B Closing by the Purchaser pursuant to this
Agreement and the Registration Rights Agreement.
(b) The Series C Closing. (i) The closing of the purchase and
sale of the Series C Preferred to be issued and sold at such closing in
accordance herewith (the "Series C Shares", and such closing the "Series C
Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on such date
(which may not be prior to the fifteenth Trading Day after receipt of the notice
described hereafter in this paragraph (b)) as the Company may designate in a
written notice to the Purchaser (a "Subsequent Financing Notice") relating to
the Series C Shares which the Company may deliver no earlier than 60 days after
the date hereof and no later than 150 days after the date hereof (such 150th
day, the "Series C Closing Expiration Date"), which Subsequent Financing Notice
shall set forth the number of shares of Series C Preferred that the Company
intends to sell to the Purchaser, provided, however that such number shall not
be in excess of (i) 400 shares, if the Company's Market Capitalization (not
inclusive of the proceeds from the Series C Closing) is less than $45,000,000,
(ii) 600 shares, if the Company's Market Capitalization (not inclusive of the
proceeds from the Series C Closing) is between $45,000,000 and $64,999,999,
(iii) 800 shares, if the Company's Market Capitalization (not inclusive of the
proceeds from the Series C Closing) is between $65,000,000 and $84,999,999, and
(iv) 1000 shares, if the Company's Market Capitalization (not inclusive of the
proceeds from the Series C Closing) is in excess of $84,999,999.
(ii) At the Series C Closing, (a) the Company shall
deliver to the Purchaser one or more stock certificates representing the Series
C Shares registered in the name of the Purchaser and all documents, instruments
and writings required to have been delivered at or prior to the Series C Closing
by the Company pursuant to this Agreement and the Registration Rights Agreement
and (b) the Purchaser shall deliver to the Company (1) the purchase price for
the Series C Shares being purchased as determined pursuant to Section 1.2 in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose and delivered to
the Purchaser prior to the Series C Closing Date and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Series C Closing by the Purchaser pursuant to this Agreement and the
Registration Rights Agreement.
(c) The Series D Closing. (i) The closing of the purchase and
sale of the shares of Series D Preferred to be issued and sold at such closing
in accordance herewith (the "Series D Shares", and such closing the "Series D
Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on such date
(which may not be prior to the fifteenth Trading Day after receipt of the notice
described hereafter in this paragraph (c)) as the Company may designate in a
Subsequent Financing Notice relating to the Series D Shares which the Company
may deliver no earlier than the later of 60 days after (x) such date as the
Registration Statement (defined below) with respect to the Series C Shares is
declared effective (provided, however, that any days during which the holder of
the Series C Shares was not permitted to sell Series C Shares pursuant to an
effective Registration Statement, shall be added to such sixty (60) day period)
and (y) the Series C Closing Expiration Date, and not later than 150 days from
the Series C Closing Expiration Date (the "Series D Closing Expiration Date"),
which Subsequent Financing Notice shall set forth the number of
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shares of Series D Preferred that the Company intends to sell to the Purchaser,
provided, however that such number shall not be in excess of (i) 400 shares, if
the Company's Market Capitalization (not inclusive of the proceeds from the
Series D Closing) is less than $45,000,000, (ii) 600 shares, if the Company's
Market Capitalization (not inclusive of the proceeds from the Series D Closing)
is between $45,000,000 and $64,999,999, (iii) 800 shares, if the Company's
Market Capitalization (not inclusive of the proceeds from the Series D Closing)
is between $65,000,000 and $84,999,999, and (iv) 1000 shares, if the Company's
Market Capitalization (not inclusive of the proceeds from the Series D Closing)
is in excess of $84,999,999.
(ii) At the Series D Closing, (a) the Company shall deliver to the
Purchaser one or more stock certificates representing the Series D Shares and
either the Subsequent Warrant or the Intermediate Warrant (each as defined in
Section 3.17), as the case may be, each registered in the name of the Purchaser
and all documents, instruments and writings required to have been delivered at
or prior to the Series D Closing by the Company pursuant to this Agreement and
the Registration Rights Agreement and (b) the Purchaser shall deliver to the
Company (1) the purchase price for the Series D Shares being purchased as
determined pursuant to Section 1.2 in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose and delivered to the Purchaser prior to the Series D
Closing Date and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series D Closing by the Purchaser pursuant to
this Agreement and the Registration Rights Agreement.
(d) The Series E Closing. (i) The closing of the purchase and sale of
the shares of Series E Preferred to be issued and sold at such closing in
accordance herewith (the "Series E Shares", and such closing the "Series E
Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on such date
(which may not be prior to the fifteenth Trading Day after receipt of the notice
described hereafter in this paragraph (d)) as the Company may designate in a
Subsequent Financing Notice relating to the Series E Shares which the Company
may deliver no earlier than the later of 60 days after (x) such date as the
Registration Statement with respect to the Series D Shares is declared effective
(provided, however, that any days during which the holder of the Series D Shares
was not permitted to sell Series D Shares pursuant to an effective Registration
Statement, shall be added to such sixty (60) day period) and (y) the Series D
Closing Expiration Date, and not later than 150 days from the Series D Closing
Expiration Date (the "Series E Closing Expiration Date"), which Subsequent
Financing Notice shall set forth the number of shares of Series E Preferred that
the Company intends to sell to the Purchaser; provided, however that such number
shall not be in excess of the lesser of (1)(i) 400 shares, if the Company's
Market Capitalization (not inclusive of the proceeds from the Series E Closing)
is less than $45,000,000, (ii) 600 shares, if the Company's Market
Capitalization (not inclusive of the proceeds from the Series E Closing) is
between $45,000,000 and $64,999,999, (iii) 800 shares, if the Company's Market
Capitalization (not inclusive of the proceeds from the Series E Closing) is
between $65,000,000 and $84,999,999, and (iv) 1000 shares, if the Company's
Market Capitalization (not inclusive of the proceeds from the Series E Closing)
is in excess of $84,999,999; and
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(2) the Maximum Share Amount minus the number of Series B Shares, Series C
Shares and Series D Shares previously sold hereunder.
(ii) At the Series E Closing, (a) the Company shall deliver to the
Purchaser one or more stock certificates representing the Series E Shares and
the Final Warrant (as defined in Section 3.17), if applicable each registered in
the name of the Purchaser and all documents, instruments and writings required
to have been delivered at or prior to the Series E Closing by the Company
pursuant to this Agreement and the Registration Rights Agreement and (b) the
Purchaser shall deliver to the Company (1) the purchase price for the Series E
Shares being purchased as determined pursuant to Section 1.2 in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company and delivered to the Purchaser prior to the Series E
Closing Date and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series E Closing by the Purchaser pursuant to
this Agreement and the Registration Rights Agreement.
(e) The Series F Closing. (i) In the event that the Company has issued
and sold less than the Maximum Share Amount, the Company may designate in a
Subsequent Financing Notice relating to the Series F Shares, which the Company
may deliver no earlier than the later of 60 days after (x) such date as the
Registration Statement with respect to the Series E Shares is declared effective
(provided, however, that any days during which the holder of the Series E Shares
was not permitted to sell Series E Shares pursuant to an effective Registration
Statement, shall be added to such sixty (60) day period) and (y) the Series E
Closing Expiration Date, and not later than 150 days from the Series E Closing
Expiration Date, the number of shares of Series F Preferred to be issued and
sold thereat in accordance herewith (the "Series F Shares") that the Company
intends to sell to the Purchaser, provided, however that such number may not
exceed the Maximum Share Amount minus the number of Series B Shares, Series C
Shares, Series D Shares and Series E Shares previously sold by the Company
hereunder. The closing of the purchase and sale of the Series F Shares (the
"Series F Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on
such date (which may not be prior to the fifteenth Trading Day after receipt of
the notice described above in this paragraph (e))
(ii) At the Series F Closing, (a) the Company shall deliver to the
Purchaser one or more stock certificates representing the Series F Shares
registered in the name of the Purchaser and all documents, instruments and
writings required to have been delivered at or prior to the Series F Closing by
the Company pursuant to this Agreement and the Registration Rights Agreement and
(b) the Purchaser shall deliver to the Company (1) the purchase price for the
Series F Shares being purchased as determined pursuant to Section 1.2 in United
States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company and delivered to the Purchaser prior to the
Series F Closing Date and (2) all documents, instruments and writings required
to have been delivered at or prior to the Series F Closing by the Purchaser
pursuant to this Agreement and the Registration Rights Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(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. 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
Transaction Documents (as defined below) in any material respect, (y) have a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, taken as a whole or (z)
adversely impair in any material respect the Company's ability to perform fully
on a timely basis its obligations under the Transaction 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 hereby and by the Warrants (as defined below), the Certificates of
Designation, the Registration Rights Agreement, and otherwise to carry out its
obligations hereunder and thereunder. This Agreement, the Certificates of
Designation, the Registration Rights Agreement and the Warrants are collectively
referred to as the "Transaction Documents". The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby has been duly authorized by all necessary
action on the part of the Company. Each of the Transaction Documents has been
duly executed by the Company and when delivered in accordance with the terms
hereof will constitute 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. The Company is not in
violation of any of the provisions of its Restated Certificate of Incorporation,
By-laws or other charter documents, each as amended as of the date hereof.
(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 Transaction Documents.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any
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character whatsoever relating to, or, except as a result of the purchase and
sale of the Shares and Warrants hereunder, 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 or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of the
Company, except as specifically disclosed in the SEC Documents (defined below)
or Schedule 2.1(c), no Person beneficially owns (as determined pursuant to Rule
13d- 3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the Common
Stock.
(d) Issuance of Shares and Underlying Shares. The Shares and the
Warrants are duly authorized, and when issued and paid for in accordance with
the terms hereof, shall be validly issued, fully paid and nonassessable. The
Company, as at the Series B Closing Date, Series C Closing Date, Series D
Closing Date, Series E Closing Date and Series F Closing Date, as the case may
be, will have and at all times while the Shares and any Warrants are outstanding
will maintain an adequate reserve of duly authorized shares of Common Stock to
enable it to perform its obligations under this Agreement, the Warrants and the
Certificates of Designation with respect to the number of Shares and Warrants
issued and outstanding at such Closing Date and in no circumstances shall such
reserved and available shares of Common Stock be less than the sum of (i) two
times the number of shares of Common Stock which would be issuable upon
conversion of the Shares issued pursuant to the terms hereof (the "Underlying
Shares") with respect to the number of Shares issued and outstanding at such
Closing Date were such conversion effected on the Original Issue Date for such
Shares and (ii) the number of shares of Common Stock which would be issuable
upon exercise in full of the Warrants (the "Warrant Shares") issued and
outstanding at such Closing Date. When issued in accordance with the terms
hereof and the Certificates of Designation, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable; and when issued upon
exercise of the Warrants in accordance with their respective terms, the Warrant
Shares will be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of the
Transaction 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 bylaws (each as
amended through the date hereof) or (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or 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) to the knowledge of the Company, 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,
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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. Except as specifically set forth in
Schedule 2.1(f), 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
Transaction Documents, except for (i) the filings of the Certificates of
Designation with respect to the Shares with the Secretary of State of Delaware,
which filings shall be effected prior to the Series B Closing Date, the Series C
Closing Date, the Series D Closing Date, the Series E Closing Date and the
Series F Closing Date, as appropriate, (ii) the filing of the registration
statements contemplated by the Registration Rights Agreement (the "Underlying
Securities Registration Statement(s)") with the Securities and Exchange
Commission (the "Commission"), which shall be filed in the time periods set
forth in the Registration Rights Agreement, (iii) the application(s) or any
letter(s) acceptable to the Nasdaq National Market for the listing of the
Underlying Shares and the Warrant Shares with the Nasdaq National Market, which
shall be filed in accordance with Section 3.9 hereof (and with any other
national securities exchange or market on which the Common Stock is then
listed), (iv) any filings, notices or registrations under applicable state
securities laws, and (v) other than, 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 Series B Closing, the Series C Closing, the Series D
Closing, the Series E Closing or the Series F Closing and to deliver to the
Purchaser the Shares (and, upon conversion of the Shares thereunder, the
Underlying Shares) or the Warrants (and, upon exercise of the Warrants, the
Warrant Shares) in the manner contemplated hereby and by the Registration Rights
Agreement free and clear of all liens and encumbrances of any nature whatsoever
(together with the consents, waivers, authorizations, orders, notices and
filings referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials (as hereinafter defined) or in Schedule 2.1(g), there is no
action, suit, notice of violation, proceeding or investigation pending or, to
the best knowledge of the Company, threatened against or affecting the Company
or any of its properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, county, local or foreign) which
(i) adversely affects the legality, validity or enforceability of any of the
Transaction Documents or the Shares (ii) could, individually or in the
aggregate, have a Material Adverse Effect or (iii) could, individually or in the
aggregate, materially impair the ability of the Company to perform fully on a
timely basis its obligations under the Transaction Documents.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other
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agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not, in any such case
(individually or in the aggregate), (x) adversely affect the legality, validity
or enforceability of any of the Transaction Documents, (y) have a Material
Adverse Effect or (z) adversely impair the Company's ability or obligation to
perform fully on a timely basis its obligations under any of the Transaction
Documents.
(i) Schedules. The Schedules to this Agreement furnished by or on
behalf of the Company do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(j) Private Offering. Assuming (without any independent investigation
or verification by or on behalf of the Company) the accuracy of the
representations and warranties of the Purchaser set forth in Section 2.2, the
offer and sale of the Shares, the Warrants, the Underlying Shares and the
Warrant Shares are exempt from registration under Section 5 of the Securities
Act of 1933, as amended (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 such Shares, the Warrants, the
Underlying Shares or the Warrant Shares to the registration requirements of
Section 5 of the Securities Act.
(k) SEC Documents. The Company has filed all reports required to be
filed by it under 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 (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Documents" and, together with the Schedules to this
Agreement furnished by or on behalf of the Company and any press releases issued
by the Company, the "Disclosure Materials") on a timely basis, or has received a
valid extension of such time of filing. 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
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 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 Quarterly
Report on Form 10-Q or last filed Annual Report on Form 10-K, whichever has been
most recently filed with the Commission, there has been no event,
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occurrence or development that has had a Material Adverse Effect which is not
specifically disclosed in any of the Disclosure Materials.
(l) Seniority. No class of equity securities of the Company is senior
to the Shares in right of payment, whether upon liquidation, dissolution or
otherwise.
(m) Investment Company. The Company is not controlled by, or under
common control with, an affiliate (an "Affiliate") of an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(n) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor, finder, investment banker, or bank
with respect to the transactions contemplated by this Agreement.
(o) Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Shares, the
Warrants, the Underlying Shares or the Warrant Shares other than the Disclosure
Materials and other filings by the Company pursuant to the Exchange Act prior to
the date hereof, and any amendments and supplements thereto prepared in
compliance herewith or (ii) solicited any offer to buy or sell the Shares, the
Warrants, the Underlying Shares or the Warrant Shares by means of any form of
general solicitation or advertising.
(p) Form S-3 Eligibility. The Company is, and at the Closing Date
will be, eligible to register securities for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(q) Exclusivity. The Company shall not issue and sell the Preferred
Stock to any Person other than the Purchaser other than with the specific prior
written consent of the Purchaser.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase by the Purchaser of the
Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of the Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Purchaser or on its
behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser, 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.
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(b) Investment Intent. The Purchaser is acquiring the Shares, the
Warrants, the Underlying Shares and the Warrant Shares for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Shares, Warrants, Underlying Shares or Warrant Shares or any part thereof
or interest therein, without prejudice, however, to the Purchaser's right,
subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or any part of such
Shares, Underlying Shares, Warrants or Warrant Shares pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption from such registration.
(c) Purchaser Status. At the time the Purchaser was offered the
Shares and the Warrants, it was, and at the date hereof, it is, and at each
Closing Date and each exercise date under the Warrants, it will be, an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
(d) Experience of Purchaser. The Purchaser either alone or together
with its representatives, 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 Shares, the Warrants, the Underlying
Shares and the Warrant Shares, and has so evaluated the merits and risks of such
investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is
able to bear the economic risk of an investment in the Shares, the Warrants, the
Underlying Shares and the Warrant Shares, and, at the present time, is able to
afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further 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 offering of the Shares and the Warrants, and the merits and risks of
investing in the Shares and the Warrants; (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 and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(g) Prohibited Transactions. The Shares and the Warrants are not
being acquired, directly or indirectly, with the assets of any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.
(h) Reliance. The Purchaser understands and acknowledges that (i) the
Shares and the Warrants are being offered and sold to the Purchaser without
registration
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under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and the Purchaser
hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If the Purchaser should decide to dispose of
Shares or any portion of the Warrants (and upon conversion or exercise thereof,
as the case may be, any of the Underlying Shares or Warrant Shares) held by it,
the Purchaser understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from the registration requirements of the
Securities Act. In connection with any transfer of any Shares, any portion of
the Warrants or any Underlying Shares or Warrant Shares other than pursuant to
an effective registration statement or to the Company, the Company may require
the transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
(b) The Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Shares, the Warrants, the
Underlying Shares and the Warrant Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] [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.
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[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET
FORTH IN A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
JUNE 6, 1997, BETWEEN ILLINOIS SUPERCONDUCTOR CORPORATION (THE
"COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
The Underlying Shares issuable upon conversion of Shares and
the Warrant Shares issuable upon exercise of the Warrants, as the case may be,
shall not contain the legend set forth above if the conversion of such Shares or
exercise of the Warrants, as the case may be, occurs at any time while the
Underlying Shares Registration Statement is effective under the Securities Act
or in the event there is not an effective Underlying Shares Registration
Statement at such time, if in the written opinion of counsel to the Company
experienced in the area of United States securities laws determines that such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Shares, the Warrants, the Underlying Shares and the Warrant
Shares shall also bear any other legends required by applicable Federal or state
securities laws, which legends shall be removed when not required in accordance
with this Section 3.1(b). The Company agrees that it will provide the Purchaser,
upon request, with a certificate or certificates representing Underlying Shares
and Warrant Shares, free from such legend at such time as such legend is no
longer required hereunder. The Purchaser agrees that, in connection with any
transfer of Underlying Shares or Warrant 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. The Company makes no
representation, warranty or agreement as to the availability of any exemption
from registration under the Securities Act with respect to any resale of Shares,
Warrants, Underlying Shares or Warrant Shares.
3.2 Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as the Purchaser owns Shares,
Underlying Shares, Warrants or Warrant Shares, the Company covenants to timely
file (or obtain extensions in respect thereof) all reports required to be filed
by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Purchaser with true and complete copies
of all such filings. If the Company is not at the time required to file reports
pursuant to such sections, it will prepare and furnish to the Purchaser annual
and quarterly financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially similar to those
that would otherwise be required to be included in reports required by Section
13(a) or 15(d) of the Exchange Act in the time period that such filings would
have been required to have been made under the Exchange Act.
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3.4 Copies and Use of Disclosure Materials. The Company shall furnish
the Purchaser, without charge, as many copies of the Disclosure Materials, and
any amendments or supplements thereto, as the Purchaser may reasonably request.
The Company consents to the use of the SEC Documents, and any amendments and
supplements thereto, by the Purchaser in connection with resales of the Shares,
the Underlying Shares or the Warrant Shares.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares and the Warrant
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchaser may request and shall continue such qualification at all times through
the third anniversary of the last Closing Date; provided, however, that neither
the Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to take
any action that would subject the Company to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
3.6 Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate of the Company shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares, the Warrants, the Underlying Shares or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Shares, the Warrants, the Underlying Shares or the Warrant Shares to the
Purchaser.
3.7 Certain Agreements. From the date hereof through the final Closing
Date for which Shares are issued and sold hereunder, the Company shall not and
shall cause the Subsidiaries not to, without the consent of the Purchaser, (i)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Purchaser; (ii) declare, authorize, set
aside or pay any dividend or other distribution with respect to the Common Stock
in excess of $250,000, except as permitted under the Certificates of Designation
and as would not adversely affect the rights of the Purchaser hereunder or under
the Certificates of Designation; (iii) repay, repurchase or offer to repay,
repurchase or otherwise acquire shares of its Common Stock in excess of
$1,000,000 in any manner which adversely affects the rights of the Purchaser
hereunder or under the Certificates of Designation; or (iv) enter into any
agreement with respect to any of the foregoing.
3.8 Purchaser Ownership of Common Stock. The Purchaser or any of its
Affiliates may not use its ability to convert Shares hereunder or under the
terms of the Certificates of Designation or to use its ability to acquire shares
of Common Stock upon exercise of the Warrants, to the extent that such
conversion or exercise would result in the Purchaser beneficially owning (for
purposes of Rule 13d-3 under the Exchange Act) more than 4.999% of the
outstanding shares of the Common Stock. The Company undertakes to promptly, upon
its receipt of a notice of conversion of Shares or exercise of the Warrants,
notify the Purchaser of the number of shares of Common Stock which would be
issuable to
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the Purchaser or any of its Affiliates if the requested conversion or exercise
were effected in full, whereupon, if the Company determines that such conversion
or exercise would result in the Purchaser beneficially owning in excess of
4.999% of the outstanding shares of Common Stock on such date, the Purchaser
hereby consents to the Company converting or exercising up to an amount equal to
4.999% of the outstanding shares of Common Stock; provided, however, that if ten
days shall have elapsed since Purchaser has declared an event of default under
any Transaction Document and such event shall not have been cured to Purchaser's
satisfaction prior to the expiration of such ten-day period, the provisions of
this Section 3.8 shall be null and void ab initio.
3.9 Listing of Underlying Shares. The Company shall (a) not later than
the fifth Business Day following the applicable Closing Date prepare and file
with the Nasdaq National Market (as well as any other national securities
exchange or market on which the Common Stock is then listed) an additional
shares listing application or a letter acceptable to the Nasdaq National Market
covering and listing such number of shares of Common Stock as required under the
applicable Certificate of Designation, (b) take all steps necessary to cause the
Underlying Shares and Warrant Shares issuable upon conversion of the Preferred
Stock or the exercise of the Warrants at the applicable Closing Date to be
approved for listing in the Nasdaq National Market (as well as on any other
national securities exchange or market on which the Common Stock is then listed)
as soon as possible thereafter, and (c) provide to the Purchaser evidence of
such listing, and the Company shall maintain the listing of its Common Stock on
such exchange.
3.10 Conversion Procedures. Exhibit C attached hereto sets forth the
procedures with respect to the conversion of the Preferred Stock, including the
forms of conversion notice to be provided upon conversion, instructions as to
the procedures for conversion, the form of legal opinion, if necessary, that
shall be rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchaser to exercise
its right of conversion smoothly and expeditiously.
3.11 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted. In the event that at any time within the three-year period after the
last Closing Date trading in the shares of the Common Stock is suspended on
(other than as a result of the suspension of trading in securities on such
market generally or temporary suspensions pending the release of material
information) or delisted from the Nasdaq National Market (unless the Common
Stock is listed for trading the New York Stock Exchange, the American Stock
Exchange, or Nasdaq SmallCap Market within three Trading Days), for more than
three consecutive Trading Days or five Trading Days in the aggregate, at the
Purchaser's option exercisable by written notice to the Company, the Company
shall redeem all Shares owned by the Purchaser and all Underlying Shares then
held by such Purchaser, at an aggregate purchase price equal to (A) the product
of the per Share Market Value as of the Trading Day immediately preceding the
day of such notice multiplied by the number of shares of Common Stock into which
the Shares and the Warrants to be purchased are then convertible or exercisable
(or in the case of Underlying Shares, the number of Underlying Shares to be
purchased), plus (B) interest on such amount accruing from the 7th day after
such notice until paid at the rate of 15% per annum.
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3.12 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Shares or Underlying Shares
otherwise required under this Agreement or the Registration Rights Agreement
would be prohibited by the relevant provisions of the Delaware General
Corporation Law, such redemption shall be effected as soon as it is permitted
under such law; provided, however, that interest payable by the Company with
respect to any such redemption shall continue to accrue in accordance with
Section 3.11.
3.13 Redemption Restrictions. Notwithstanding any provision of this
Agreement to the contrary, if any redemption of Shares or Underlying Shares
otherwise required under this Agreement or the Registration Rights Agreement
would be prohibited in the absence of consent from any lender of the Company or
any of the Subsidiaries, or by the holders of any class of securities of the
Company, the Company shall use its best efforts to obtain such consent as
promptly as practicable after the redemption is required. Interest payable by
the Company with respect to any such redemption shall continue to accrue until
such consent is obtained. Nothing contained in this Section 3.13 shall be
construed as a waiver by the Purchaser of any rights it may have by virtue of
any breach of any representation or warranty of the Company herein as to the
absence of any requirement to obtain any such consent.
3.14 Notice of Breaches. Each of the Company and the Purchaser shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement or in the Registration
Rights Agreement, as well as any events or occurrences arising after the date
hereof and prior to, with respect to the Series B Closing, the Series B Closing
Date, with respect to the Series C Closing, the Series C Closing Date, with
respect to the Series D Closing, the Series D Closing Date, with respect to the
Series E Closing, the Series E Closing Date, or with respect to the Series F
Closing, the Series F Closing Date, which would reasonably be likely to cause
any representation or warranty or other agreement of such party, as the case may
be, contained herein to be incorrect or breached as of such Closing Date.
However, no disclosure by either party pursuant to this Section 3.15 shall be
deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the holders of the Shares a copy of any written statement in support of or
relating to such claim or notice.
3.15 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver Underlying Shares in accordance with the terms and
conditions and time period set forth in the respective Certificates of
Designation, and to deliver Warrants Shares in accordance with the terms and
conditions and time periods set forth in the Warrants.
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3.16 Intentionally Omitted.
3.17 The Warrants.
(a) The Initial Warrant. At the Series B Closing, the Company
shall issue to the Purchaser, a common stock purchase warrant (the "Initial
Warrant"), pursuant to which the Purchaser shall have the right at any time
thereafter through the fourth anniversary of the date of issuance thereof, to
acquire 62,500 shares of Common Stock at an exercise price per share equal to
125% of the Conversion Price on the Series B Closing Date.
(b) The Subsequent Warrant. If the Company shall issue and
sell all or any portion of the Series D Shares on the Series D Closing Date,
then the Company shall issue to the Purchaser a common stock purchase warrant
(the "Subsequent Warrant") pursuant to which the Purchaser shall have the right
at any time thereafter through the fourth anniversary of the date of issuance
thereof, to acquire 62,500 shares of Common Stock at an exercise price per share
equal to 125% of the Conversion Price on the Series D Closing Date.
(c) The Intermediate Warrant. If the Company shall not, for
any reason, issue and sell all or a portion of the Series D Shares on the Series
D Closing Date, then the Company shall issue to the Purchaser, on the Series D
Closing Expiration Date, a common stock purchase warrant (the "Intermediate
Warrant") pursuant to which the Purchaser shall have the right at any time
thereafter through the fourth anniversary of the date of issuance thereof, to
acquire 31,250 shares of Common Stock at an exercise price per share equal to
125% of the Conversion Price on the Series D Closing Expiration Date.
(d) The Final Warrant. If the Company issues the Intermediate
Warrant, upon the earlier to occur of (1) the sale of some or a portion of the
Series E Shares of (2) the sale or some or a portion of the Series F Shares, if
any, the Company shall issue to the Purchaser, at the applicable Closing Date, a
common stock purchase warrant (the "Final Warrant") pursuant to which the
Purchaser shall have the right at any time thereafter through the fourth
anniversary of the date of issuance thereof, to acquire 31,250 shares of Common
Stock at an exercise price per share equal to 125% of the Conversion Price on
the applicable Closing Date. The Initial Warrant, the Subsequent Warrant, the
Intermediate Warrant and the Final Warrant are collectively referred to herein
as the "Warrants". The Form of Warrants is attached as Exhibit E hereto. In no
event shall the Company be obligated to issue Warrants for more than 125,000
shares of Common Stock in the aggregate.
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ARTICLE IV
CONDITIONS
4.1 (a) Conditions Precedent to the Obligation of the Company to Sell
the Series B Shares. The obligation of the Company to sell the Series B Shares
hereunder is subject to the satisfaction, or waiver by the Company, at or before
the Series B Closing, of each of the following conditions:
(i) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Series B Closing
Date, as though made on and as of such date (except for representations and
warranties that speak as of a specific date);
(ii) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Series B Closing;
(iii) No Injunction. 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 this Agreement or the Registration Rights Agreement; and
(iv) Required Approvals. All Required Approvals shall have been
obtained other than those relating solely to the Series C, Series D, Series E
Shares or Series F Shares.
(b) Conditions Precedent to the Obligation of the Purchaser to
Purchase the Series B Shares. The obligation of the Purchaser hereunder to
acquire and pay for the Series B Shares is subject to the satisfaction or waiver
by the Purchaser, at or before the Series B Closing, of each of the following
conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth herein and in the
Registration Rights Agreement shall be true and correct in all material respects
as of the date when made and as of the Series B Closing Date as though made on
and as of such date (except for representations and warranties that speak as of
a specific date);
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Series B Closing;
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(iii) No Injunction. 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 this Agreement or the Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event had or could reasonably be expected to have a Material
Adverse Effect and no material adverse change in the financial condition or
prospects of the Company shall have occurred which is not disclosed in the
Disclosure Materials;
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the Commission or
on the Nasdaq National Market (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company and other than a suspension of trading on the Nasdaq National Market if
the Common Stock is listed for trading, and not suspended, on The Nasdaq
SmallCap Market within one business day after such suspension);
(vi) Listing of Common Stock. The Common Stock shall have
at all times between the date hereof and the Series B Closing Date been, and on
the Series B Closing Date be, listed for trading on The Nasdaq National Market,
the Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock
Exchange;
(vii) Legal Opinion. The Company shall have delivered to
the Purchaser the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company
("▇▇▇▇▇▇ ▇▇▇▇▇▇"), in substantially the form attached hereto as Exhibit D;
(viii) Required Approvals. All Required Approvals shall have
been obtained other than those relating solely to the Series C, the Series D,
the Series E Shares or the Series F Shares;
(ix) Shares of Common Stock. On or prior to the Series B
Closing Date, the Company shall have duly reserved for issuance upon conversion
of Series B Shares and exercise of the Warrants such number of Underlying Shares
as required by the terms of the Registration Rights Agreement and 62,500 Warrant
Shares;
(x) Delivery of Stock Certificates. The Company shall
have delivered to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in escrow, pending the Series B Closing
Date the stock certificate(s) representing the Series B Shares, registered in
the name of the Purchaser, each in form satisfactory to the Purchaser;
(xi) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement;
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(xii) Initial Warrant. The Company shall have executed and
delivered the Initial Warrant in accordance with the
terms of the Agreement;
(xiii) Certificate of Designation. The Series B Designation
shall have been duly filed with the Secretary of State of Delaware, and the
Company shall have delivered a copy thereof to the Purchaser certified as filed
by the office of the Secretary of State of Delaware;
(xiv) Company Certificates. The Purchaser shall have
received a certificate, dated the Series B Closing Date, signed by the Secretary
or an Assistant Secretary of the Company and certifying (i) that attached
thereto is a true, correct and complete copy of (A) the Company's Restated
Certificate of Incorporation, as amended to the date thereof, (B) the Company's
By-Laws, as amended to the date thereof, and (C) resolutions duly adopted by the
Board of Directors of the Company authorizing the execution, delivery and (where
appropriate) filing of the Transaction Documents and the Series B Certificates
of Designation and the issuance and sale of the Series B Shares, the Initial
Warrant, the Underlying Shares and the Warrant Shares and (ii) the incumbency of
the officers executing the Transactions Documents, the Series B Certificate of
Designation and the Initial Warrant; and
(xv) Change of Control. No Change of Control (as hereafter
defined) shall have occurred between the date hereof and the Series B Closing
Date.
4.2 Conditions Precedent to the Obligation of the Purchaser to
Purchase the Series C Shares, the Series D Shares, the Series E Shares and the
Series F Shares. The obligation of the Purchaser hereunder to acquire and pay
for the Series C Shares, the Series D Shares, the Series E Shares and the Series
F Shares is subject to the satisfaction or waiver by the Purchaser, at or before
the Series C Closing, the Series D Closing, Series E Closing and the Series F
Closing, as applicable, of each of the following conditions:
(i) Series B Closing. The Series B Closing shall have
occurred.
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
and in the Registration Rights Agreement shall be true and correct in all
material respects as of the date when made and as of the Series C Closing Date,
the Series D Closing Date, the Series E Closing Date and the Series F Closing
Date, as applicable, as though made on and as of such date (except for
representations and warranties that speak as of a specific date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Series C Closing Date, the Series D Closing Date, the Series E Closing
Date or the Series F Closing Date, as applicable;
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(iv) Underlying Securities Registration Statements. With
respect to the Series C Closing, the Underlying Securities Registration
Statement with respect to the Underlying Shares issuable on conversion of all
outstanding Series B Shares and with respect to the Warrant Shares issuable upon
exercise of the Warrants shall have been declared effective under the Securities
Act by the Commission; with respect to the Series D Closing, the Underlying
Securities Registration Statement with respect to the Underlying Shares issuable
on conversion of all outstanding Series C Shares shall have been declared
effective under the Securities Act by the Commission; with respect to the Series
E Closing, the Underlying Securities Registration Statement with respect to the
Underlying Shares issuable on conversion of all outstanding Series D Shares
shall have been declared effective under the Securities Act by the Commission;
and with respect to the Series F Closing, the Underlying Securities Registration
Statement with respect to the Underlying Shares issuable on conversion of all
outstanding Series E Shares shall have been declared effective under the
Securities Act by the Commission; and in each such case such Underlying
Securities Registration Statement shall have remained effective and shall not be
subject to any stop order and no stop order shall be pending or threatened until
the earlier of such Closing Date or the date upon which all of the Underlying
Shares issuable upon conversion of the applicable Preferred Stock and Shares
issuable upon conversion of the applicable Warrants have been resold pursuant to
such Underlying Securities Registration Statement;
(v) No Injunction. 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 this Agreement or the Registration Rights Agreement relating to
the issuance or conversion of any of the Shares or exercise of any of the
Warrants;
(vi) Adverse Changes. Since the date of the financial
statements included in the Company's last filed Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior to the
date of this Agreement, no event had or could reasonably be expected to have, a
Material Adverse Effect which has not specifically been disclosed on Schedule
2.1(g) hereto prior to the date of this Agreement shall have occurred, nor shall
there have occurred a material adverse change in the financial conditions or
prospects of the Company, which is not disclosed in the Disclosure Materials;
(vii) Management. There has been no significant changes in
the senior management of the Company;
(viii) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended for more than two
Trading Days by the Commission or on the Nasdaq National Market (except for any
suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company and except if, at the time there is
any suspension on the Nasdaq National Market, the Common Stock is then listed
and approved for trading on the Nasdaq SmallCap Market, the American Stock
Exchange or the New York Stock Exchange, within one (1) trading day thereof);
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(ix) Listing of Common Stock. The Common Stock shall have
been at all times between the Series B Closing Date, the Series C Closing Date,
the Series D Closing Date, the Series E Closing Date and the Series F Closing
Date, as applicable, and on such applicable Closing Date be, listed for trading
on the Nasdaq National Market, Nasdaq SmallCap Market, the American Stock
Exchange or the New York Stock Exchange.
(x) Change of Control. No Change of Control in the
Company shall have occurred. "Change of Control" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity of in
excess of 50% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
(xi) Market Price of Common Stock. The Per Share Market
Value for the Company's Common Stock for the preceding twenty (20) Trading Days
prior to the Series C Closing Date, Series D Closing Date, Series E Closing Date
and Series F Closing Date, as applicable, shall not have been less than $6.00
per share of Common Stock.
(xii) Legal Opinion. The Company shall have delivered to
the Purchaser an opinion of outside legal counsel to the Company in
substantially the form attached hereto as Exhibit D and dated the applicable
Closing Date;
(xiii) Required Approvals. All Required Approvals shall have
been obtained;
(xiv) Shares of Common Stock. On each of the Series C
Closing Date, the Series D Closing Date, the Series E Closing Date and Series F
Closing Date, as applicable, the Company shall have reserved for issuance to the
Purchaser two times the number of Underlying Shares which would be issuable upon
conversion in full of the Series C Shares, the Series D Shares, the Series E
Shares or Series F Shares, as applicable, assuming such conversion occurred on
the Original Issue Date for such Shares;
(xv) Delivery of Stock Certificates. The Company shall
have delivered to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in escrow, pending the applicable Closing
the stock certificate(s) representing the Shares, being purchased at such
Closing, registered in the name of such Purchaser, each in form satisfactory to
the Purchaser; and
(xvi) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion, if any, of
Shares issued prior to the applicable Closing and otherwise performed its
obligations in accordance with the terms, conditions and timing requirements of
each applicable Certificate of Designation and (b) shall
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have delivered Warrant Shares upon exercise of the Warrants and otherwise
performed its obligations in accordance with the terms of the Warrants.
(xvii) Warrants. The Company shall have delivered the
applicable Warrants in accordance with the terms of this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, except as set forth in
the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Shares pursuant
hereto. The Purchaser shall be responsible for the Purchaser's own tax liability
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement.
5.2 Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificates of Designation (each when filed) and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered on a
business day after during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
Illinois Superconductor Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: Southbrook International Investments, Ltd.
c/o Trippoak Advisors
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Aronsohn & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 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 both the Company and the Purchaser; 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 either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 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.
5.6 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 Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
5.7 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.
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5.8 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.
5.9 Survival. The agreements and covenants contained in Article
III and this Article V shall survive the delivery and conversion of the Shares
pursuant to this Agreement. and the representations and warranties of the
Company and the Purchasers contained in Article II shall survive until a date
that is two years after the last Closing Date at which Shares are issued
hereunder.
5.10 Execution. 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 party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and the Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party 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.
5.12 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 affecting 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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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.
Company:
ILLINOIS SUPERCONDUCTOR CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
Purchaser:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Asst. Secretary
28
SCHEDULE 2.1(C)
The authorized, issued and outstanding capital stock of the Company
consists of the following:
Preferred Stock, $.001 par value, 100,000 shares authorized, no shares
issued and outstanding
Common Stock, $.001 par value, 15,000,000 shares authorized, 5,051,287
shares issued and outstanding
The Company also has outstanding warrants to purchase 646,927 shares
of Common Stock and options to purchase 841,905 shares of Common Stock.
The Company has a stockholders rights plan (the "Rights Plan")
pursuant to which a Series A Right is associated and trades with each share of
Common Stock outstanding. Each Series A Right will entitle its holder, under
certain circumstances described in the Rights Plan, to purchase one
one-thousandth of a share of the Company's Series A Junior Participating
Preferred Stock, $.001 par value per share, for $200 (subject to adjustment) or
receive shares of Common Stock having a market value of two times the exercise
of the Series A Right and one Series B Right.
29
SCHEDULE 2.1(F)
NONE
30
SCHEDULE 2.1(G)
NONE