loandocument010308.htm

Exhibit 10.3.

    AMENDMENT
      TO AND CONSENT AND WAIVER UNDER

    LOAN
      DOCUMENTS

    


    


    AMENDMENT
      TO AND CONSENT AND WAIVER
      UNDER THE LOAN DOCUMENTS (“Agreement”),
      dated as of January 3, 2008,
      by and among Manchester Securities Corporation, a New York corporation (“Manchester”), Alexander
      Finance, L.P. an Illinois limited partnership (“Alexander” and together with
      Manchester, the “Lenders”), ISCO International
      , Inc., a Delaware corporation (the “Company”), Spectral
      Solutions, Inc., a Colorado corporation (“Spectral”) and Illinois
      Superconductor, a Canada corporation, an Ontario corporation (“ISCO Canada” and together
      with Spectral, the “Guarantors”).

     

    W
      I T N E S S E T
      H

    


    WHEREAS,
      pursuant to a certain
      Third Amended and Restated Loan Agreement, dated as of November 10, 2004, as
      amended (the “Loan
      Agreement”), by and among the Lenders, the Company, and the Guarantors,
      the Lenders have provided loan commitments to the Company as evidenced by the
      amended and restated notes (the “Amended and Restated Notes”),
      issued pursuant to the Amendment to Loan Documents (the “Amendment to Loan Documents”)
      by and among the Company, the Lenders, and the Guarantors dated June 26, 2007,
      and convertible into shares of the Company’s common stock.

     

     

    WHEREAS,
      the Amended and
      Restated Notes and certain other obligations have been guaranteed by the
      Guarantors, who are subsidiaries of the Company, each such guaranty being made
      pursuant to separate Fourth Amended and Restated Guaranties dated as of June
      21,
      2006, as amended (the “Guaranties”);

     

     

    WHEREAS,
      the Amended and
      Restated Notes and certain other obligations have been secured by the assets
      of
      the Company and the Guarantors pursuant to a certain Fourth Amended and Restated
      Security Agreement, dated as of June 22, 2006, as amended, by and among the
      Company, the Lenders and the Guarantors (the “Security Agreement”, and
      together with this Agreement, the Loan Agreement, the Amendment to Loan
      Documents, the Amended and Restated Notes, and the Guaranties, the “Loan
      Documents”);

     

     

    WHEREAS,
      the Company, a
      wholly-owned subsidiary of the Company (“Merger Subsidiary”), and
      Clarity Communication Systems Inc. (“Clarity”) propose to enter
      into a transaction (the “Merger”) pursuant to an
      Agreement and Plan of Merger dated November 13, 2007 (the “Merger Agreement”) in which
      the Company would acquire Clarity by merger of Clarity with and into Merger
      Subsidiary and the Company would issue shares (the “Share Issuance”) of its common
      stock in exchange for all of the outstanding shares of Clarity capital stock
      and
      to satisfy certain employee benefit obligations;

     

     

    WHEREAS,
      among the conditions
      to closing the Merger under the Merger Agreement, the Company is required to
      (i)
      obtain financing in an amount equal to $1,500,000 (the “Additional Funds”) to fund the
      initial operations of the combined entity after the Merger and transaction
      expenses of the Company incurred in connection with the Merger and (ii) to
      pay
      off the amount outstanding (the “Pay-off Amount”) under
      Clarity’s line of credit agreement (the “Clarity Line of Credit”),
      which is expected to be approximately $1,000,000;

     

     

    WHEREAS,
      upon the payoff of
      the Clarity Line of Credit:  (i) all assets of Clarity will be pledged
      to secure the Company’s obligations to the Lenders, pursuant to an amendment to
      the Security Agreement; (ii) Clarity will issue a guaranty of the Company’s
      obligations to the Lenders; and (iii) Clarity will execute financing statements
      to be filed in the appropriate jurisdiction, perfecting the lien of the Lenders
      in Clarity’s assets.

     

     

    WHEREAS,
      Alexander has agreed
      to loan the Company the Additional Funds on terms and conditions substantially
      similar to the Amended and Restated Notes and the Lenders have agreed to waive
      certain covenants in the Loan Agreement and consent to the Merger and the Share
      Issuance;

     

     

    WHEREAS,
      the Lenders wish to
      consent to the Merger, the Share Issuance and the transactions contemplated
      thereby and waive (i) in so far as the acquisition of Clarity in the Merger
      is a
      material change to the Company’s business pursuant to Section 4.1(b) of the Loan
      Agreement, the requirement that the Company continue to conduct its business,
      in
      all material respects, as conducted on the date of the Loan Agreement and (ii)
      the prohibition of the Company to directly or indirectly create, assume,
      guarantee, or otherwise become or remain directly or indirectly liable with
      respect to any indebtedness other than the exceptions described therein, upon
      paying the Pay-Off Amount at the closing of the Merger and Manchester wishes
      to
      consent to the issuance of New Amended and Restated Note (as defined
      below);

     

     

    NOW,
      THEREFORE, in
      consideration of the foregoing premises and the covenants contained herein
      and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the parties hereto agree as follows (capitalized terms
      used
      and not defined herein shall have the meaning set forth in the Loan
      Agreement):

     

    1. Issuance
      of New Amended and Restated Notes. Alexander
      shall loan by
      the end of the date hereof the Additional Funds to the Company pursuant to
      wire
      instructions previously provided by the Company to Alexander and the Company
      shall issue to Alexander the new Amended and Restated Note (the “New Amended and Restated
      Note”) in the form attached hereto as Exhibit A and
      executed by the Company and delivered to Alexander on the date
      hereof.  The initial conversion price of the New Amended and Restated
      Note shall be $0.20 per share, the initial conversion price of the Amended
      and
      Restated Notes.

     

    2. Consent
      and Waiver under the Loan Agreement.  Each of the
      Lenders hereby consents to the Merger, the Share Issuance, the payment of the
      Pay-Off Amount, and the transactions contemplated thereby and with respect
      to
      the foregoing irrevocably waives (i) the requirement under Section 1.6(b) of
      the
      Loan Agreement to use such cash proceeds received in connection with the Merger,
      the Share Issuance, the issuance of the New Amended and Restated Note, and
      the
      transactions contemplated thereby to prepay the Amended and Restated Notes,
      (ii)  in so far as
      the acquisition of Clarity in the Merger is a material change to the Company’s
      business pursuant to Section 4.1(b) of the Loan Agreement, the requirement
      that
      the Company continue to conduct its business, in all material respects, as
      conducted on the date of the Loan Agreement and (iii) the prohibition of the
      Company pursuant to Section 4.3 of the Loan Agreement to directly or indirectly
      create, assume, guarantee, or otherwise become or remain directly or indirectly
      liable with respect to any indebtedness other than the exceptions described
      therein, upon paying the Pay-Off Amount at the closing of the
      Merger.  These consents and waivers are one-time consents and waivers
      and shall not be deemed to be a waiver of Sections 1.6(b), 4.1(b) or 4.3 of
      the
      Loan Agreement with respect to any other material changes to the Company’s
      business or the issuance of capital stock or the issuance, assumption of, or
      liability with respect to, other indebtedness.

     

    3. Amendment
      of Loan Agreement.  The Loan
      Agreement is hereby amended by modifying the terms and references to the Amended
      and Restated Notes to include the New Amended and Restated Note in accordance
      with this Agreement.

     

    4. Amendment
      of Security
      Agreement and Guaranties.

     

    (a) The
      Security Agreement is hereby amended by modifying the term “Obligations,” as
      defined in Section 2 of the Security Agreement, to refer to the Loan Agreement,
      the Amended and Restated Notes, the New Amended and Restated Note, and Restated
      Guaranties (all as defined therein) as modified by this Agreement.

     

    (b) Each
      of
      the Guaranties is modified such that the definition of “Obligations” in Section
      1(a) thereof, is hereby amended to include the Amended and Restated Notes,
      the
      New Amended and Restated Note, the Loan Agreement and Security Agreement (as
      such terms are defined in the Guaranties) as amended by this
      Agreement.

     

    (c) Upon
      the
      payoff of the Clarity Line of Credit, the Company shall cause Clarity, as a
      wholly-owned subsidiary of the Company: (i) to pledge and grant a security
      interest in all of its assets to the Lenders, to secure the Company and
      Clarity’s obligations to the Lenders; (ii) issue a guaranty to the Lenders,
      guaranteeing the Company’s obligation to the Lenders; and (iii) execute and file
      financing statements, in the appropriate location, to perfect the liens
      described in clause (i) above, in each case pursuant to documentation
      satisfactory to the Lenders.

     

    5. Registration
      Rights Agreement.  The Company
      and
      Alexander shall execute and deliver the Registration Rights Agreement (the
      “Registration Rights
      Agreement”) as of the date hereof in the form attached hereto as Exhibit
      B.

     

    6. Representations;
      Warranties
      and Covenants.

     

    (a) The
      Company hereby restates to the Lenders the representations in Section 2.1 of
      the
      Loan Agreement and Section 3 of the Security Agreement, as of the date hereof
      (other than the representation in Section 2.1(g) of the Loan Agreement, which
      is
      made as of the date of the Loan Agreement), except that (i) with respect to
      Section 2.1(a) of the Loan Agreement, in addition to the Guarantors, the
      Company’s subsidiaries include ISCO Delaware, LLC and ISCO Illinois, Inc and
      (ii) with respect to Section 2.1(c), the capitalization of the Company is as
      set
      forth in the Company’s SEC Documents.  The Guarantors hereby restate
      their respective representations in Section 3 of the Security Agreement and
      Section 8 of the Guaranties, as of the date hereof.  The Lenders
      hereby restate their representations in Section 2.2 of the Loan Agreement,
      as of
      the date hereof.

     

    (b) The
      Company also represents and warrants to Alexander that assuming (without any
      independent investigation or verification by or on behalf of the Company) the
      accuracy of the representations and warranties of the Lenders set forth in
      the
      Loan Agreement, the issuance of the New Amended and Restated Note is exempt
      from
      registration under Section 5 of the Securities Act.  Neither the
      Company nor any person acting on its behalf has taken or will take any action
      which might subject the offering, issuance or sale of the New Amended and
      Restated Note to the registration requirements of Section 5 of the Securities
      Act.

     

    (c) The
      Company covenants to Alexander to use its best efforts to obtain within one
      (1)
      year from the date hereof the requisite stockholder and AMEX approvals described
      in the New Amended and Restated Note, as well as AMEX’s approval for the listing
      of the shares underlying the New Amended and Restated Note (the “New Conversion
      Shares”) on AMEX.

     

    (d) The
      Company further covenants to Alexander that upon obtaining the requisite
      stockholder and AMEX approvals described in the New Amended and Restated Note
      and upon issuance in accordance with this Agreement, the Amendment to Loan
      Documents, the Loan Agreement, and the terms of the New Amended and Restated
      Note, the New Conversion Shares into which the New Amended and Restated Note
      is
      convertible will be duly authorized, validly issued, fully paid and
      nonassessable and free from all taxes (other than transfer taxes where the
      New
      Amended and Restated Note has been transferred and other than any taxes due
      because of actions by Alexander), liens and charges with respect to the issue
      thereof and the holders of such New Conversion Shares shall be entitled to
      all
      rights and preferences accorded to a holder of shares of the Company’s common
      stock

     

    7. Stock
      Legends.  Alexander agrees to the imprinting, so long as is
      required by this Section 5, of the following legend on its New Amended and
      Restated Note and the New Conversion Shares:

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
      AND
      EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
      AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
      TO
      AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS.

     

    The
      New
      Conversion Shares shall not contain the legend set forth above if the issuance
      thereof occurs at any time while the registration statement (“Registration Statement”) filed
      pursuant to the Registration Rights Agreement is effective under the Securities
      Act, or in the event that the New Conversion Shares may be sold pursuant to
      Rule
      144(k) under the Securities Act.  The Company agrees that it will
      provide Alexander, upon request, with a certificate or certificates representing
      New Conversion Shares free from such legend at such time as such legend is
      no
      longer required hereunder.  Alexander agrees that, in connection with
      any transfer of New Conversion Shares by it pursuant to an effective
      registration statement under the Securities Act, it will comply with the
      prospectus delivery requirements of the Securities Act provided copies of a
      current prospectus relating to such effective registration statement are or
      have
      been supplied to Alexander.

     

    8. Press
      Release.  The Company
      and
      the Lenders shall consult with each other in issuing any press releases or
      otherwise making public statements with respect to the transactions contemplated
      hereby and neither the Company nor any Lender shall issue any such press release
      or otherwise make any such public statement without the prior consent of the
      other, which consent shall not be unreasonably withheld or delayed, except
      that
      no prior consent shall be required if such disclosure is required by law, in
      which such case the disclosing party shall provide the other party with prior
      notice of such public statement.

     

    9. Miscellaneous.

     

    (a)           
      As modified hereby, the Loan Documents shall remain in full force and
      effect.

     

    (b)           
      The Company shall, upon request of the Lenders, reimburse them for their legal
      expenses incurred in the preparation of this Agreement and for related
      transactions.

     

    [Signature
      Page Follows]

     


    
      
        
          


           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the
      parties have caused this Agreement to be executed and delivered by their
      respective officers thereunto duly authorized, as of the date first above
      written.

     

    ISCO
      INTERNATIONAL, INC.

     

    


    By:           
      /s/ Ralph
      Pini

    Name:                 
      Ralph Pini

    Title:                 
      Interim Chief Executive Officer

    


    SPECTRAL
      SOLUTIONS, INC.

    


    


    By:
/s/
      Frank
      Cesario

    Name:
      Frank Cesario

    Title:
      CFO

    


    ILLINOIS
      SUPERCONDUCTOR CANADA CORPORATION

    


    


    By:
/s/
      Frank
      Cesario

    Name:
      Frank Cesario

    Title:
      CFO

    


    MANCHESTER
      SECURITIES CORPORATION

    


    


    By:
/s/
      Elliot
      Greenberg

    Name:                 
      Elliot Greenberg

    Title:                 
      Vice President

    


    


    ALEXANDER
      FINANCE, L.P.

    


    


    By:
      /s/ Bradford T.
      Whitmore

    Name:
      Bradford T. Whitmore

    Title:
      President: Bun Partners, Inc.

           Its:
      General Partner

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    COLLATERAL
      AGENT

    UNDER
      SECURITY AGREEMENT:

    


    MANCHESTER
      SECURITIES CORPORATION

    


    


    By:
      /s/ Elliot
      Greenberg

    Name:                 
      Elliot Greenberg

    Title:                 
      Vice President


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    FORM
      OF
      NEW AMENDED AND RESTATED NOTE


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    REGISTRATION
      RIGHTS AGREEMENT