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C/o Stonington Management Corporation - ISCO INTERNATIONAL INC - 3-22-2000 by ISCOI-Agreements

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									EXHIBIT 10.22 Elliott Associates, L.P., 712 Fifth Avenue New York, New York 10019 Westgate International, L.P. c/o Stonington Management Corporation 712 Fifth Avenue New York, New York 10019 Alexander Finance, L.P. 1560 Sherman Avenue Evanston, Illinois 60201 December 28, 1999 Illinois Superconductor Corporation 451 Kingston Court Mt. Prospect, Illinois 60056 RE: EXERCISE OF OPTION Ladies and Gentlemen: Reference is made to the Investment Agreement, dated as of November 5, 1999 (as amended by the letter dated November 12, 1999) (the "Investment Agreement"), by and among you (the "Company") and the undersigned (the "Investors"). Capitalized terms used herein without definition have the meaning set forth in the Investment Agreement. 1. EXERCISE OF OPTION (a) Pursuant to Section 7 of the Investment Agreement, the Investors hereby notify the Company of their exercise of the option, contained in such section, to purchase additional Notes and Warrants which shall contain the terms and provisions described in such section. (b) Pursuant to the foregoing exercise, the Investors shall purchase (the "Option Purchase") an aggregate of $1,000,000 principal amount of Notes and Warrants to purchase 400,000 shares of Common Stock, in the respective amounts set forth on Schedule I hereto, for aggregate consideration of $1,000,000 (the "Option Purchase Price"). This option exercise shall be without prejudice to the rights of the Investors, pursuant to Section 7 of the Investment Agreement, to invest up to an additional $4,000,000 in the Company.

2. CLOSING OF OPTION PURCHASE. (a) The closing of the Option Purchase shall take place at the offices of Kleinberg, Kaplan, Wolff & Cohen, P.C. on December 29, 1999 (the "Closing Date") at 1 p.m. Eastern Standard Time. (b) The Notes and Warrants purchased pursuant to the Option Purchase shall be deemed to be outstanding on the Closing Date for all purposes. Within fourteen days of the Closing Date, the Company shall deliver to the Investors, in physical form, the Notes and Warrants purchased by them pursuant to the Option Purchase. The delivery of payment by wire transfer to an account designated by the Company by each Investor of the portion of the Option Purchase Price applicable to it as set forth in Schedule I shall constitute a payment delivered to the Company in satisfaction of such Investor's obligation to pay its share of the Option Purchase Price hereunder.

2. CLOSING OF OPTION PURCHASE. (a) The closing of the Option Purchase shall take place at the offices of Kleinberg, Kaplan, Wolff & Cohen, P.C. on December 29, 1999 (the "Closing Date") at 1 p.m. Eastern Standard Time. (b) The Notes and Warrants purchased pursuant to the Option Purchase shall be deemed to be outstanding on the Closing Date for all purposes. Within fourteen days of the Closing Date, the Company shall deliver to the Investors, in physical form, the Notes and Warrants purchased by them pursuant to the Option Purchase. The delivery of payment by wire transfer to an account designated by the Company by each Investor of the portion of the Option Purchase Price applicable to it as set forth in Schedule I shall constitute a payment delivered to the Company in satisfaction of such Investor's obligation to pay its share of the Option Purchase Price hereunder. (c) In addition to the foregoing, within fourteen days of the Closing Date, the Company shall deliver in physical form, the Notes and Warrants purchased by the undersigned from the Company on November 5, 1999. (d) The Company agrees to pay the legal fees and disbursements incurred by the Investors in connection with the Option Purchase and shall pay the invoice for such fees and disbursements within seven days of the receipt thereof. 3. REPRESENTATIONS AND WARRANTIES. (a) The Company hereby restates, as of the date hereof, the representations and warranties set forth in Section 8 of the Investment Agreement, with respect to the Notes and Warrants being issued pursuant to the Option Purchase, except as set forth on Schedule 111, hereto. For purposes of the foregoing restatement of representations, (i) references to Transaction Documents shall refer only to this Agreement and, with respect to solely the consummation of the Option Purchase, the Transaction Documents referred to in the Investment Agreement, and (ii) the date referred to in Section 2.1(s) shall be deemed to refer to November 15,1999. (b) The Investors hereby restate the representations set forth in Section 9(a) of the investment agreement with respect to the Notes and Warrants being purchased pursuant to the Option Purchase. [signature page follows] 2

Please indicate your acceptance and agreement of the terms contained herein by countersigning this Agreement and returning a signed copy to the undersigned. Sincerely, ELLIOTT ASSOCIATES, L.P. By: WESTGATE INTERNATIONAL, L.P. By: Martley International, Inc. Attorney-in-Fact By: ALEXANDER FINANCE, L.P. By: Bradford T. Whitmore President: Bun Partners, Inc. its General Partner AGREED TO AND ACCEPTED

Please indicate your acceptance and agreement of the terms contained herein by countersigning this Agreement and returning a signed copy to the undersigned. Sincerely, ELLIOTT ASSOCIATES, L.P. By: WESTGATE INTERNATIONAL, L.P. By: Martley International, Inc. Attorney-in-Fact By: ALEXANDER FINANCE, L.P. By: Bradford T. Whitmore President: Bun Partners, Inc. its General Partner AGREED TO AND ACCEPTED ILLINOIS SUPERCONDUCTOR CORPORATION By: 3
SCHEDULE I

PURCHASER --------Elliott Associates, L.P. Westgate International, L.P. Alexander Finance, LP

PURCHASE PRICE -------------$277,778 $277,778 $444,444

PRINCIPAL AMOUNT OF NOTES PURCHASED -----------------$277,778 $277,778 $444,444

AMOUNT OF WARRANTS PURCHASED -----------------111,111 111,111 177,778

Schedule II to Agreement Dated December 28, 1999 The Company generally incorporates information from its SEC filings as disclosures for these schedules. The Company further notes that: 2.1(c): The 3rd Quarter 1999 10-Q has the Company's current capitalization prior to giving effect to these transactions. Additional holders of 5% of the Company's Common Stock, if any, may be disclosed in Schedules 13D or 13G filed with the Securities and Exchange Commission. Options have continued to be granted. 2.1 d): As recognized in Section 12 of the Investment Agreement, additional shares must be authorized and a charter amendment is necessary to authorize such shares. 2.1(e)/(f): See 2.1(d) above with respect to the need for a charter amendment. The factoring agreement with Franklin Capital will be in breach if a lien is created on the inventory and accounts without the prior written consent of the factor. The Company will not list shares of its Common Stock, and will register such shares as and when required by the Registration Rights Agreement as modified by Section 5 of the Investment Agreement. The Company will reflect the Option Purchase in a Form 8-K filing and a Form S-2 supplemental filing. 2.1 (g): To the Company's knowledge, there is no pending litigation except

SCHEDULE I

PURCHASER --------Elliott Associates, L.P. Westgate International, L.P. Alexander Finance, LP

PURCHASE PRICE -------------$277,778 $277,778 $444,444

PRINCIPAL AMOUNT OF NOTES PURCHASED -----------------$277,778 $277,778 $444,444

AMOUNT OF WARRANTS PURCHASED -----------------111,111 111,111 177,778

Schedule II to Agreement Dated December 28, 1999 The Company generally incorporates information from its SEC filings as disclosures for these schedules. The Company further notes that: 2.1(c): The 3rd Quarter 1999 10-Q has the Company's current capitalization prior to giving effect to these transactions. Additional holders of 5% of the Company's Common Stock, if any, may be disclosed in Schedules 13D or 13G filed with the Securities and Exchange Commission. Options have continued to be granted. 2.1 d): As recognized in Section 12 of the Investment Agreement, additional shares must be authorized and a charter amendment is necessary to authorize such shares. 2.1(e)/(f): See 2.1(d) above with respect to the need for a charter amendment. The factoring agreement with Franklin Capital will be in breach if a lien is created on the inventory and accounts without the prior written consent of the factor. The Company will not list shares of its Common Stock, and will register such shares as and when required by the Registration Rights Agreement as modified by Section 5 of the Investment Agreement. The Company will reflect the Option Purchase in a Form 8-K filing and a Form S-2 supplemental filing. 2.1 (g): To the Company's knowledge, there is no pending litigation except (i) as disclosed the SEC filings, and (ii) Steve Levy v. Illinois Superconductor Corporation, filed in Delaware Chancery Court on or about December 14, 1999. 2.1(h):See 2.1(e)/f, above. 2.1 (i): The Company has not recently reviewed the voluminous schedules previously delivered and the company does not now make or update such representations and schedules. 2.1 (k): The Disclosure Materials also include the Company's Annual Report on Form 10-Q for the year ended December 31, 1998, its Quarterly Reports on Form 10-K for the quarters ended March 31, June 30, 1999 and September 30, 1999, and its Current Reports on Form 8-K filed in 1999. Elliott and Grace have been updated on the Company's financial and business situation, including at a meeting with those investors during their due diligence in connection with their November, 1999 investment in the Company, and as a result of affiliates of Elliott having joined the Company's board of directors in November, 1999. That information, including the written handouts from the aforementioned due diligence meeting, is incorporated by reference. 5

2.1(l) The obligations to Franklin Capital under the factoring agreement are pari passu with the notes held by Elliott and Grace, including the 6% Notes, but may in certain respects have a senior lien. 2.1(p): Registration under Form S-3 may no longer be available to the Company. A registration under Form S-2 may be available. 2.1(s): See SEC filings. Elliott and Grace are aware of the terms of the factoring agreement with Franklin Factor. 6

Schedule II to Agreement Dated December 28, 1999 The Company generally incorporates information from its SEC filings as disclosures for these schedules. The Company further notes that: 2.1(c): The 3rd Quarter 1999 10-Q has the Company's current capitalization prior to giving effect to these transactions. Additional holders of 5% of the Company's Common Stock, if any, may be disclosed in Schedules 13D or 13G filed with the Securities and Exchange Commission. Options have continued to be granted. 2.1 d): As recognized in Section 12 of the Investment Agreement, additional shares must be authorized and a charter amendment is necessary to authorize such shares. 2.1(e)/(f): See 2.1(d) above with respect to the need for a charter amendment. The factoring agreement with Franklin Capital will be in breach if a lien is created on the inventory and accounts without the prior written consent of the factor. The Company will not list shares of its Common Stock, and will register such shares as and when required by the Registration Rights Agreement as modified by Section 5 of the Investment Agreement. The Company will reflect the Option Purchase in a Form 8-K filing and a Form S-2 supplemental filing. 2.1 (g): To the Company's knowledge, there is no pending litigation except (i) as disclosed the SEC filings, and (ii) Steve Levy v. Illinois Superconductor Corporation, filed in Delaware Chancery Court on or about December 14, 1999. 2.1(h):See 2.1(e)/f, above. 2.1 (i): The Company has not recently reviewed the voluminous schedules previously delivered and the company does not now make or update such representations and schedules. 2.1 (k): The Disclosure Materials also include the Company's Annual Report on Form 10-Q for the year ended December 31, 1998, its Quarterly Reports on Form 10-K for the quarters ended March 31, June 30, 1999 and September 30, 1999, and its Current Reports on Form 8-K filed in 1999. Elliott and Grace have been updated on the Company's financial and business situation, including at a meeting with those investors during their due diligence in connection with their November, 1999 investment in the Company, and as a result of affiliates of Elliott having joined the Company's board of directors in November, 1999. That information, including the written handouts from the aforementioned due diligence meeting, is incorporated by reference. 5

2.1(l) The obligations to Franklin Capital under the factoring agreement are pari passu with the notes held by Elliott and Grace, including the 6% Notes, but may in certain respects have a senior lien. 2.1(p): Registration under Form S-3 may no longer be available to the Company. A registration under Form S-2 may be available. 2.1(s): See SEC filings. Elliott and Grace are aware of the terms of the factoring agreement with Franklin Factor. 6

EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-88716, Form S8 No. 333-06003, Form S-3 No. 333-02846, Form S-3 No. 333-29797, Form S-3 No. 333-36089, Form S3 No. 333-41731 and Form S-3 No. 333-56601) of Illinois Superconductor Corporation and in the related Prospectuses of our report, dated February 25, 2000, with respect to the financial statements and schedule of Illinois Superconductor Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1999.

2.1(l) The obligations to Franklin Capital under the factoring agreement are pari passu with the notes held by Elliott and Grace, including the 6% Notes, but may in certain respects have a senior lien. 2.1(p): Registration under Form S-3 may no longer be available to the Company. A registration under Form S-2 may be available. 2.1(s): See SEC filings. Elliott and Grace are aware of the terms of the factoring agreement with Franklin Factor. 6

EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-88716, Form S8 No. 333-06003, Form S-3 No. 333-02846, Form S-3 No. 333-29797, Form S-3 No. 333-36089, Form S3 No. 333-41731 and Form S-3 No. 333-56601) of Illinois Superconductor Corporation and in the related Prospectuses of our report, dated February 25, 2000, with respect to the financial statements and schedule of Illinois Superconductor Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP Chicago, Illinois March 17, 2000

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES

12 MOS DEC 31 1999 JAN 01 1999 DEC 31 1999 723,711 0 211,141 35,340 1,092,713 2,420,700 8,089,169 5,433,808 6,039,159 1,588,976 13,659,905 0 0 15,753 (9,307,465) 6,039,159 2,408,604 2,408,604 5,923,173 5,923,173 5,956,568 (52,650) 12,634,745 (21,971,065) 0 (21,971,065) 0 (745,197) 0

EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-88716, Form S8 No. 333-06003, Form S-3 No. 333-02846, Form S-3 No. 333-29797, Form S-3 No. 333-36089, Form S3 No. 333-41731 and Form S-3 No. 333-56601) of Illinois Superconductor Corporation and in the related Prospectuses of our report, dated February 25, 2000, with respect to the financial statements and schedule of Illinois Superconductor Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP Chicago, Illinois March 17, 2000

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED

12 MOS DEC 31 1999 JAN 01 1999 DEC 31 1999 723,711 0 211,141 35,340 1,092,713 2,420,700 8,089,169 5,433,808 6,039,159 1,588,976 13,659,905 0 0 15,753 (9,307,465) 6,039,159 2,408,604 2,408,604 5,923,173 5,923,173 5,956,568 (52,650) 12,634,745 (21,971,065) 0 (21,971,065) 0 (745,197) 0 (22,716,262) (1.77) (1.77)

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED

12 MOS DEC 31 1999 JAN 01 1999 DEC 31 1999 723,711 0 211,141 35,340 1,092,713 2,420,700 8,089,169 5,433,808 6,039,159 1,588,976 13,659,905 0 0 15,753 (9,307,465) 6,039,159 2,408,604 2,408,604 5,923,173 5,923,173 5,956,568 (52,650) 12,634,745 (21,971,065) 0 (21,971,065) 0 (745,197) 0 (22,716,262) (1.77) (1.77)


								
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