Document:

Guaranty

 

Exhibit 10.5

GUARANTY

OF

SPECTRAL SOLUTIONS, INC.

     ISCO INTERNATIONAL, INC., a corporation organized and existing under the
laws of Delaware and formerly known as Illinois Superconductor Corporation
(“ISCO”) and the corporate parent of SPECTRAL SOLUTIONS, INC., a corporation
organized and existing under the laws of the State of Colorado (“Guarantor”),
has issued to MANCHESTER SECURITIES CORPORATION, a corporation organized under
the laws of the State of New York, and ALEXANDER FINANCE LP, an Illinois
limited partnership (collectively, “Payees”), 9 1/2% secured grid notes due
March 31, 2004, in the aggregate principal amount of up to $4,000,000 (the
“Notes”) pursuant to the Loan Agreement dated October 23, 2002 (the “Loan
Agreement”).

     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 Security Agreement (the “Security Agreement”) being entered into pursuant
to the Loan 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 its 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,

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 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.

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     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.

     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 Colorado, 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

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 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 Certificate of Incorporation or By-laws or (ii) conflict with,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which 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 govern-mental 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

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 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 23rd day of October, 2002

SPECTRAL SOLUTIONS, INC.

	By:	 /s/ Amr Abdelmonem	   
	 	
	   

	Address:	

	c/o ISCO International,
451 Kingston Court	 
	
	 

	Mt. Prospect, IL 60056
	
	 

6Guaranty

 

Exhibit 10.6

GUARANTY

OF

ILLINOIS SUPERCONDUCTOR CANADA CORPORATION

     ISCO INTERNATIONAL, INC., a corporation organized and existing under the
laws of Delaware and formerly known as Illinois Superconductor Corporation
(“ISCO”) and the corporate parent of ILLINOIS SUPERCONDUCTOR CANADA
CORPORATION, a corporation organized and existing under the laws of the
Province of Ontario, Canada (“Guarantor”), has issued to MANCHESTER SECURITIES
CORPORATION, a corporation organized under the laws of the State of New York,
and ALEXANDER FINANCE L.P., an Illinois limited partnership (collectively,
“Payees”), 9 1/2% secured grid notes due March 31, 2004, in the aggregate
principal amount of up to $4,000,000 (the “Notes”) pursuant to the Loan
Agreement dated October 23, 2002 (the “Loan Agreement”).

     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 Security Agreement (the “Security Agreement”) being entered into pursuant
to the Loan 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 its 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,

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 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.

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     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.

     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
Province of Ontario, Canada, 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 Guarantor. This
Guaranty has been duly executed and delivered by Guarantor and constitutes the
valid and binding obligation of

4

 

 Guarantor enforceable against the 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 Certificate of Incorporation or By-laws or (ii) conflict with,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which 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 governmental 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 OF 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

5

 

 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 23rd day of October, 2002

ILLINOIS SUPERCONDUCTOR CANADA CORPORATION

	By:	 /s/ Amr Abdelmonem	   
	 	
	   

	Address:	

	c/o ISCO International,
451 Kingston Court	 
	
	 

	Mt. Prospect, IL 60056
	
	 

6

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