clarityguarantee.htm


    Exhibit 10.3


     

    GUARANTY

     

    OF

     

    CLARITY
      COMMUNICATION SYSTEMS INC.

     

    ISCO
      INTERNATIONAL, INC., a
      corporation organized and existing under the laws of Delaware (“ISCO”) and the
      corporate parent of CLARITY
      COMMUNICATION SYSTEMS INC., a corporation organized and existing under
      the laws of the State of Illinois (“Guarantor”), has
      issued to MANCHESTER SECURITIES
      CORPORATION, a corporation
      organized
      under the laws of the State of New York (“Manchester”), and
ALEXANDER
      FINANCE LP, an
      Illinois limited partnership (“Alexander”, and
      together with Manchesters, “Payees”):  (i)
      5% Senior Secured Convertible Notes in the aggregate amount of $5,000,000 issued
      on June 22, 2006 (the “June 2006 Notes”)
      pursuant to  the Securities Purchase Agreement, dated as of the date
      thereof, by and among ISCO and the Payees (the “Securities Purchase
      Agreement”), (ii) 7% Senior Secured Convertible Notes due August 1, 2009,
      issued on June 26, 2007 in the aggregate principal amount of up to $10,200,000
      (the “2007
      Notes”), and (iii) with respect to Alexander only, a 7% Senior Secured
      Convertible Note due August 1, 2009, issued on January 3, 2008 in the aggregate
      principal amount of up to $1,500,000 (the “2008 Note”), in the
      case of (ii) and (iii) above pursuant to the Third Amended and Restated Loan
      Agreement dated November 10, 2004, as amended (the “Loan Agreement”), and
      (v).  The June 2006 Notes together with the 2007 Notes, and the 2008
      Note shall collectively be referred to herein as, the “Notes”.

     

    Section
      1. Guaranty.

     

    (a) In
      consideration of Payees purchasing the Notes and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      Guarantor hereby absolutely, irrevocably and unconditionally guarantees to
      Payees the full payment and performance when due of any and all obligations
      and
      undertakings of ISCO under the Notes, the Loan Agreement, and the Fifth Amended
      and Restated Security Agreement (the “Security Agreement”)
      entered into pursuant to the Loan Agreement and the Securities Purchase
      Agreement (such obligations and undertakings shall hereinafter be referred
      to as
      the “Obligations”),
      together with all reasonable attorneys' fees, disbursements and all other costs
      and expenses of collections reasonably incurred by Payees in enforcing any
      of
      such Obligations and/or this Guaranty.

     

    (b) Notwithstanding
      the provisions of Section 1(a), Guarantor’s obligations hereunder shall not
      exceed the maximum amount that would not be subject to avoidance under
      fraudulent conveyance, fraudulent transfer, and other similar laws.

     

    Section
      2. Certain
      Guarantor Waivers.

     

    (a) Waivers
      of Notice,
      Etc.  Guarantor waives notice of acceptance of this Guaranty
      and notice of the creation or performance of any of the Obligations, and waives
      presentment, demand of payment, protest or notice of protest, notice of dishonor
      or nonperformance of any of the Obligations, suit or taking other action or
      non-action by Payees, ISCO or any other guarantor against, and any other notice
      to, any party liable thereon (including, without limitation,
      Guarantor).  Guarantor also hereby waives any notice of default by
      ISCO and any other notice to which Guarantor might otherwise be entitled, the
      right to interpose any counterclaim or consolidate any other action with an
      action on this Guaranty, and the benefit of any statute of limitations affecting
      its liabilities hereunder or the enforcement hereof.  No act or
      omission of any kind in connection with any of the foregoing shall in any way
      impair or otherwise affect the legality, validity, binding effect or
      enforceability of any term or provision of this Guaranty or any of the
      obligations of Guarantor hereunder.

     

    (b) Guaranty
      Not
      Affected.  Guarantor hereby covenants, agrees and consents that
      Payees may, at any time and from time to time (whether or not after revocation
      or termination of this Guaranty), without incurring responsibility to Guarantor,
      and without impairing or releasing any of the obligations of Guarantor hereunder
      and, upon or without any terms or conditions, and in whole or in part: (i)
      agree
      with ISCO to change the manner, place or terms of performance, including
      (without limitation) any change or extend the time of performance of, renew
      or
      alter, any of the Obligations, any security therefor, or any other liability
      incurred directly or indirectly in respect thereof, or to make any other change
      in the Obligations, and the guaranty herein made shall apply to the Obligations
      as so changed, extended, renewed or altered; (ii) take additional security,
      for
      or sell, exchange, release, surrender, substitute, realize upon or otherwise
      deal with in any manner and in any order any property by whomsoever at any
      time
      pledged or mortgaged to secure, or howsoever securing, any of the Obligations
      or
      any other liabilities (including any of those hereunder) incurred directly
      or
      indirectly in respect thereof or hereof, and/or any offset thereagainst; (iii)
      exercise or refrain from exercising any rights against ISCO or others
      (including, without limitation, Guarantor) or otherwise act or refrain from
      acting; (iv) settle or compromise any Obligation, any security therefor, or
      any
      liability (including any of those hereunder) incurred directly or indirectly
      in
      respect thereof or hereof, and/or subordinate the performance of all or any
      part
      thereof to the performance of any of the Obligations (whether due or not) to
      creditors of ISCO other than Payees and Guarantor; (v) apply any sums by
      whomsoever paid or howsoever realized to any Obligation regardless of what
      Obligations remain unperformed; (vi) cancel, compromise, modify, or waive the
      provisions of any document relating to any of the Obligations; (vii) release
      any
      other guarantor or surety of the Obligations; and (viii) grant ISCO any
      indulgence as Payees may, in their sole discretion, determine.

     

    (c) Failure
      to Perfect Lien,
      Etc.  No failure by Payees to file, record or otherwise perfect
      any lien or security interest, nor any improper filing or recording, nor any
      failure by Payees to insure or protect any security nor any other dealing (or
      failure to deal) with any security by Payees with respect to any of the
      Obligations, shall impair or release any of the obligations of Guarantor
      hereunder.  No invalidity, irregularity or unenforceability of all or
      any part of the Obligations or of any security therefor shall affect, impair
      or
      be a defense to this Guaranty, and this Guaranty is a primary obligation of
      Guarantor.

     

    (d) Waiver
      of
      Subrogation.  No payment by Guarantor except the indefeasible
      performance in full of the Obligations shall entitle Guarantor to be subrogated
      to any of the rights of Payees.  Guarantor shall have no right of
      reimbursement or indemnity whatsoever and no right of recourse to or with
      respect to any assets or property of ISCO or to any security for the
      Obligations, unless and until all of the Obligations have been indefeasibly
      performed in full, other than as such reimbursement or indemnity rights are
      waived in the next paragraph below.

     

    (e) Payment
      Guaranty; Waiver of
      Defenses, Counterclaims, Etc.  Guarantor hereby agrees that
      this Guaranty constitutes guaranty of payment, performance and compliance (and
      not a guaranty of collection only), and waives any right to require that any
      resort be had by Payees to ISCO or any other guarantor or to any security
      pledged with respect to the performance of any of the
      Obligations.  Further, this guaranty of payment is absolute and
      unconditional, and shall remain valid, binding and fully enforceable
      irrespective of any circumstance of any nature that might otherwise constitute
      a
      defense, offset, claim, abatement or counterclaim that Guarantor or ISCO may
      assert against Payees with respect to any of the Obligations or otherwise,
      including, but not limited to, failure of consideration, fraudulent inducement,
      breach of warranty, payment, statute of frauds, statute of limitations, accord
      and satisfaction, and usury, and irrespective of the validity, legality, binding
      effect or enforceability of the terms of any agreement or instrument relating
      to
      any of the Obligations.  Guarantor hereby absolutely, unconditionally
      and irrevocably waives any and all rights to assert any such defenses, offsets,
      claims, abatements and counterclaims.  In the event Payees are not
      permitted or otherwise unable (because of the pendency of any bankruptcy,
      insolvency, receivership or other similar proceeding) to accelerate the
      Obligations but would otherwise be permitted to do so at such time pursuant
      to
      the Loan Agreement, Payees may demand performance in full under this Guaranty
      as
      if all of the Obligations had been duly accelerated, and Guarantor will not
      raise, and hereby expressly waives, any claim or defense with respect to such
      acceleration.

     

    Section
      3. Remedies.  In
      the case of any proceedings to collect any obligations of Guarantor, Guarantor
      shall pay all costs and expenses of every kind for collection and enforcement
      of
      this Guaranty, including attorneys' fees and disbursements.  Upon the
      occurrence and during the continuance of any failure of any of the Obligations
      to be performed when due, Payees may elect to nonjudicially or judicially
      foreclose against any real or personal property security it holds for the
      Obligations, or accept an assignment of any such security in lieu of foreclosure
      or compromise or adjust any part of the Obligations, or make any other
      accommodation with ISCO or any other guarantor, pledgor or surety, or exercise
      any other remedy against ISCO or any other guarantor, pledgor or surety, or
      any
      security, in accordance with and subject to the provisions of the documents
      creating such security interests.  No such action by Payees will
      release, limit or otherwise affect the obligations of Guarantor to Payees,
      even
      if the effect of that action is to deprive Guarantor of the right to collect
      any
      reimbursement from ISCO or any other person for any sums paid to
      Payees.

     

    Section
      4. Reinstatement,
      Indemnification, Etc.  If claim is ever made upon Payees for
      repayment, return, restoration or other recovery of any amount or amounts
      received by Payees in payment or on account of any of the Obligations, and
      Payees repay all or part of such amount: (a) because such payment or application
      of proceeds is or may be avoided, invalidated, declared fraudulent, set aside
      or
      determined to be void or voidable as a preferential transfer, fraudulent
      conveyance, impermissible set off or a diversion of trust funds; or (b) for
      any
      other reason, including (without limitation) by reason of (i) any judgment,
      decree or order of any court or administrative body having jurisdiction over
      Payees or any of their property, or (ii) any settlement or compromise of any
      such claim effected by Payees with any such claimant (including ISCO); then,
      and
      in such event, Guarantor agrees that any such judgment, decree, order,
      settlement or compromise shall be binding upon Guarantor, notwithstanding any
      revocation hereof or the cancellation of any Notes or other instrument or
      document evidencing any of the Obligations and the obligations of Guarantor
      hereunder shall continue to apply, or shall automatically (and without further
      action) be reinstated if not then in effect, as case may be, and Guarantor
      shall
      be and remain liable to Payees hereunder for the amount so repaid or recovered
      to the same extent as if such amount had never originally been received by
      Payees.  Guarantor hereby indemnifies Payees, and agrees to reimburse
      and hold Payees harmless on demand, from and against all actions, claims,
      losses, judgments, damages, amounts paid in settlement and expenses (including
      reasonable attorneys' fees and court costs) brought against or incurred by
      Payees and arising out of, relating to or in connection with any of the
      Obligations.

     

    Section
      5. Waiver
      of
      Rights, Etc.  No delay on the part of Payees in exercising any
      of their options, powers or rights, or partial or single exercise thereof,
      shall
      constitute a waiver thereof.  No waiver of any of their rights
      hereunder, and no modification or amendment of this Guaranty, shall be deemed
      to
      be made by Payees unless the same shall be in writing, duly signed by an officer
      of each Payee on behalf of such Payee, and each such waiver, if any, shall
      apply
      only with respect to the specific instance involved, and shall in no way impair
      the rights of Payees or the obligations of Guarantor to Payees in any other
      respect at any other time.

     

    Section
      6. Enforcement,
      Etc.  Payees, in their sole discretion, may proceed to exercise
      or enforce any right, power, privilege, remedy or interest that Payees may
      have
      under this Guaranty, the Obligations or any applicable law: at law, in equity,
      in rem or in any other forum available under applicable law; without notice
      except as otherwise expressly required by law provided herein; without pursuing,
      exhausting or otherwise exercising or enforcing any other right, power,
      privilege, remedy or interest that Payees may have against or in respect of
      Guarantor, the Obligations, ISCO, any other guarantor, surety, pledgor,
      collateral or any other person or thing; and without regard to any act or
      omission of Payees or any other person.  Each Payee may enforce this
      Guaranty individually as to its portion of the Obligations.

     

    Section
      7. Reliance.  Guarantor
      expressly acknowledges that Guarantor has not received or relied upon any oral
      or written agreements, understandings, representations or warranties from Payees
      or any other party with respect to this Guaranty (or any of Guarantor's
      obligations hereunder), and that this Guaranty contains the entire understanding
      of the parties with respect to the subject matter hereof and supersedes and
      replaces any and all prior oral or written agreements and understandings with
      respect thereto.

     

    Section
      8. Representations,
      Warranties and Agreements of Guarantor.  Guarantor hereby makes
      the following representations and warranties to Payees as of the date
      hereof:

     

    (a) Organization
      and
      Qualification.  Guarantor is a corporation, duly incorporated,
      validly existing and in good standing under the laws of the State of Illinois,
      with the requisite corporate power and authority to own and use its properties
      and assets and to carry on its business as currently
      conducted.  Guarantor has no subsidiaries.  Guarantor 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 this Guaranty in any material respect, (y) have a material adverse
      effect on the results of operations, assets, prospects, or financial condition
      of Guarantor or (z) adversely impair in any material respect Guarantor's ability
      to perform fully on a timely basis its obligations under this Guaranty (a “Material Adverse
      Effect”).

     

    (b) Authorization;
      Enforcement.  Guarantor has the requisite corporate power and
      authority to enter into and to consummate the transactions contemplated by
      this
      Guaranty, and otherwise to carry out its obligations hereunder.  The
      execution and delivery of this Guaranty by Guarantor and the consummation by
      it
      of the transactions contemplated hereby have been duly authorized by all
      requisite corporate action on the part of the Guarantor.  This
      Guaranty has been duly executed and delivered by Guarantor and constitutes
      the
      valid and binding obligation of Guarantor enforceable against Guarantor in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors'
      rights and remedies or by other equitable principles of general
      application.

     

    (c) No
      Conflicts.  The execution, delivery and performance of this
      Guaranty by Guarantor and the consummation by Guarantor of the transactions
      contemplated thereby do not and will not (i) conflict with or violate any
      provision of its Articles of Incorporation or By-laws or (ii) conflict with,
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which Guarantor is a party, or (iii) result in a violation of
      any
      law, rule, regulation, order, judgment, injunction, decree or other restriction
      of any court or governmental authority to which Guarantor is subject (including
      Federal and state securities laws and regulations), or by which any material
      property or asset of Guarantor is bound or affected, except in the case of
      each
      of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments,
      accelerations, cancellations and violations as could not, individually or in
      the
      aggregate, have or result in a Material Adverse Effect.  The business
      of Guarantor 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.

     

    (d) Consents
      and
      Approvals.  Guarantor 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 govern-mental authority or other
      person in connection with the execution, delivery and performance by Guarantor
      of this Guaranty.

     

    Section
      9. Successors
      and Assigns.  This Guaranty is binding upon Guarantor and its
      successors or assigns, and shall inure to the benefit of Payees and their
      respective successors and assigns.

     

    Section
      10. Modification,
      Etc.  This Guaranty cannot be terminated or changed orally and
      no provision hereof may be modified or waived except in writing by the holders
      of 75% of the outstanding principal amount of the Notes.

     

    Section
      11. Section
      and Other Headings.  The Sections and other headings contained
      in this Guaranty are for reference purposes only and shall not affect the
      meaning or interpretation of this Guaranty.

     

    Section
      12. Governing
      Law.  THIS GUARANTY AND THE RIGHTS OF PAYEES AND THE
      OBLIGATIONS OF GUARANTOR HEREUNDER SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
      WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES
      OF
      CONFLICTS OF LAW OR CHOICE 0F LAW.

     

    Section
      13. Severability.  In
      the event that any term or provision of this Guaranty shall be finally
      determined to be superseded, invalid, illegal or otherwise unenforceable
      pursuant to applicable law by a governmental authority having jurisdiction
      and
      venue, that determination shall not impair or otherwise affect the validity,
      legality or enforceability (a) by or before that authority of the remaining
      terms and provisions of this Guaranty, which shall be enforced as if the
      unenforceable term or provision were deleted, or (b) by or before any other
      authority of any of the terms and provisions of the Guaranty.

     

    Section
      14. Consent
      to Jurisdiction.  Guarantor hereby irrevocably submits to the
      exclusive jurisdiction and venue of any New York state and federal court located
      in New York County, New York, over any action or proceeding arising out of
      any
      dispute between Guarantor and Payees, and Guarantor further irrevocably consents
      to the service of any process in any such action or proceeding by the mailing
      of
      a copy of such process to Guarantor at the address set forth below.

     

    Section
      15. Waiver
      of
      Jury Trial, Inconvenient Forum.  GUARANTOR AND,
      BY
      ACCEPTING THIS GUARANTY, PAYEES, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
      WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY, OR THE TRANSACTIONS
      CONTEMPLATED HEREBY, AND ANY RIGHT TO OBJECT TO INCONVENIENT FORUM OR IMPROPER
      VENUE IN NEW YORK COUNTY, NEW YORK.  GUARANTOR HEREBY CERTIFIES THAT
      NO REPRESENTATIVE OR AGENT OF PAYEES NOR PAYEES' COUNSEL HAS

     


    REPRESENTED,
      EXPRESSLY OR OTHERWISE, THAT PAYEES WOULD NOT, IN THE EVENT OF SUCH LITIGATION,
      SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL.  GUARANTOR ALSO
      ACKNOWLEDGES THAT PAYEES HAVE BEEN INDUCED TO ACCEPT THIS GUARANTY BY, AMONG
      OTHER THINGS, THE FOREGOING WAIVER OF TRIAL BY JURY.

    

      Dated
        the
        31st  day
        of January, 2008

       

    

     

    CLARITY
      COMMUNICATION SYSTEMS INC.

     

    By:                /s/
      Frank
      Cesario                                                


     

    Address: 
      2640 White Oak Circle, Ste C, Aurora, IL  60502