Document:

ex10.htm

    EXHIBIT
10.2(o)

    

      TWELFTH AMENDMENT TO AMENDED
AND RESTATED

       

      REVOLVING AND TERM LOAN
AGREEMENT

       

      THIS TWELFTH AMENDMENT TO AMENDED AND
RESTATED REVOLVING AND TERM LOAN AGREEMENT (this "Amendment"), made and
effective as of the 22nd day of February, 2008, is by and among CAVALIER HOMES, INC., a
Delaware corporation, CAVALIER
HOME BUILDERS, LLC, a Delaware limited liability company, CAVALIER REAL ESTATE CO.,
INC., a Delaware corporation, QUALITY HOUSING SUPPLY, LLC, a
Delaware limited liability company, CIS FINANCIAL SERVICES, INC.,
an Alabama corporation f/k/a "Cavalier Acceptance Corporation", and RIDGE POINTE MANUFACTURING,
LLC, an Alabama limited liability company (individually, a "Borrower" and
collectively, the "Borrowers"), and FIRST COMMERCIAL BANK, an
Alabama state banking corporation (the "Lender").

       

      RECITALS:

       

      A.           The
Lender and the Borrowers, either by original execution or subsequent assumption,
are parties to that certain Amended and Restated Revolving and Term Loan
Agreement dated as of March 31, 2000, as amended by that certain First Amendment
to Amended and Restated Revolving and Term Loan Agreement dated as of September
29, 2000, as further amended by that certain Second Amendment to Amended and
Restated Revolving and Term Loan Agreement dated as of May 4, 2001, as further
amended by that certain Third Amendment to Amended and Restated Revolving and
Term Loan Agreement entered into during June 2002, as further amended by that
certain Fourth Amendment to Amended and Restated Revolving and Term Loan
Agreement dated as of October 25, 2002, and as further amended by that certain
Fifth Amendment to Amended and Restated Revolving and Term Loan Agreement
entered into as of August 6, 2003, Sixth Amendment to Amended and Restated
Revolving and Term Loan Agreement entered into as of October 26, 2004, Seventh
Amendment to Amended and Restated Revolving and Term Loan Agreement entered into
as of October 25, 2005, Eighth Amendment to Amended and Restated Revolving and
Term Loan Agreement entered into as of December 6, 2005, and Ninth Amendment to
Amended and Restated Revolving and Term Loan Agreement entered into as of May
23, 2006, and Tenth Amendment to Amended and Restated Revolving and Term Loan
Agreement entered into as of February 21, 2007, and Eleventh Amendment to
Amended and Restated Revolving and Term Loan Agreement entered into as of June
26, 2007, (as heretofore amended, the "Loan Agreement").  On December
19, 2007, The Home Place, LLC was dissolved, and on December 20, 2007, BRC
Components, Inc. was dissolved.  Each were heretofore “Borrowers”
under the Loan Agreement.  The assets of each were distributed to
other Borrowers and they are accordingly no longer “Borrowers”
hereunder.  On December 14, 2007, Cavalier Properties, Inc., merged
with and into Cavalier Real Estate Co., Inc., with Cavalier Real Estate Co.,
Inc. as the surviving corporation.  Unless otherwise defined herein or
unless the context shall expressly indicate otherwise, all capitalized terms
which are used herein shall have their respective meanings given to them in the
Loan Agreement.

       

      B.           The
Lender and the Borrowers have agreed to amend the Loan Agreement to alter the
maximum principal amount of the Revolving Loan and to make certain other
revisions, all as herein set forth.

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 1

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree, each with the other, as
follows:

       

      1.           The
Loan Agreement is hereby amended by changing the definition of “Borrowing Base”
in Schedule I to read in its entirety as follows:

       

      “Borrowing Base” means
a principal amount equal to the lesser of (i) $17,500,000 or (ii) the Adjusted
Collateral Loan Value.  The “Adjusted Collateral Loan Value means the
Collateral Loan Value reduced by (i) Lender’s outstanding liability with respect
to any Letters of Credit and (ii) the sum of $2,500,000.

       

      2.           The
Loan Agreement is hereby amended by changing the definition of “Collateral Loan
Value” in Schedule I to read in its entirety as follows:

       

      "Collateral Loan
Value" means a principal amount equal to the sum of eighty percent (80%)
of the value of Eligible Accounts and the lesser of (i) the Inventory Cap and
(ii) fifty percent (50%) of the value of Eligible Inventory consisting of
finished goods and forty percent (40%) of Eligible Inventory consisting of raw
materials; all as determined by Lender from time to time in accordance with the
Agreement.

       

      3.           The
Loan Agreement is hereby amended by changing the definition of “Eligible
Inventory” in Schedule I to read in its entirety as follows:

       

      "Eligible Inventory"
shall mean the Inventory of the Borrowers consisting of raw materials and
finished goods valued at the lesser of cost or current market value, all of
which Inventory is, at any given time, (a) not damaged or defective in any way;
(b) not sold or segregated for sale and reflected as an Account of any Borrower;
(c) not consigned Inventory; (d) not inventory-in-transit or located in a place
other than at the locations listed in Exhibit H; (e) not constituting packaging
materials and supplies; (f) not Inventory evidenced by negotiable warehouse
receipts or by non-negotiable warehouse receipts or documents of title which
have not been issued in the name of Lender; (g) not subject to a document of
title such as a warehouse receipt or bill of lading; (h) not work-in-process
Inventory; (i) not subject to any lien in favor of any Person other than Lender,
and (j) not Inventory otherwise deemed ineligible by Lender in its sole
discretion.

       

      4.           The
Loan Agreement is hereby amended by changing the definition of “Loan Termination
Date” in Schedule I to read in its entirety as follows:

       

      "Loan Termination
Date" means (i) with respect to the Revolving Loan, the earlier of (A)
April 15, 2009 or (B) the date at which the maturity of the Revolving Note may
be accelerated pursuant to Section 9.2 of the Agreement; and (ii) with respect
to any Term Loan, the earlier of (A) the maturity date of the applicable Term
Note or (B) the date to which the maturity of the applicable Term Note may be
accelerated pursuant to Section 9.2 of the Agreement.

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 2

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      5.           The
Loan Agreement is hereby amended by changing the definition of “Revolving Loan
Commitment” in Schedule I to read in its entirety as follows:

       

      “Revolving Loan
Commitment” means the Lender’s commitment to lend to Borrowers up to the
sum of $17,500,000,000 in principal amount outstanding from time to time
pursuant to Article II of the Agreement, and subject to the terms of the
Agreement; provided that under no circumstances shall the Revolving Loan
Commitment at any time exceed the Borrowing Base.

       

      6.           The
Loan Agreement is hereby amended by changing the definition of “Revolving Loan
Rate” in Schedule I to read in its entirety as follows:

       

      "Revolving Rate" means
a variable per annum rate of interest determined as follows: (i) if the
Consolidated Tangible Net Worth of the Borrowers is greater than $62,000,000,
then the Revolving Rate shall be equal to the Prime Rate minus one-half percent (.5%);
(ii) if the Consolidated Tangible Net Worth of the Borrowers is greater than
$56,500,000 but less than or equal to $62,000,000, then the Revolving Rate shall
be equal to the Prime Rate; (iii) if the Consolidated Tangible Net Worth of the
Borrowers is greater $38,000,000 but less than or equal to $56,500,000, then the
Revolving Rate shall be equal to the Prime Rate plus three-quarters percent
(0.75%); and (iv) if the Consolidated Tangible Net Worth of the Borrowers is
equal to or less than $38,000,000, then the Revolving Rate shall be equal to the
Prime Rate plus one and
one-quarter percent (1.25%).  The Revolving Rate will change to
reflect any change in the Prime Rate, as and when the Prime Rate
changes.

       

      7.           Schedule
I of the Loan Agreement is hereby amended by adding the following definition of
“Adjusted Net Earnings”:

       

      “Adjusted Net Earnings” shall mean
with respect to any fiscal period, means the net earnings (or loss) after
provision for income taxes for such fiscal period of Borrower.

       

      8.           
Schedule I of the Loan Agreement is hereby amended by adding the following
definition of “Inventory Cap”:

       

      “Inventory Cap” shall
mean the sum of $8,000,000, said sum being the maximum amount of Eligible
Inventory that can be counted in the Borrower Base.

       

      9.           The
definitions of Special Receivables and Temporary Advance Period in Schedule I of
the Loan Agreement are hereby deleted.

       

      10.           Section
2.9 of the Loan Agreement is hereby amended by adding the following subsection
“D”:

       

      (D)           Notwithstanding
the foregoing, the total aggregate principal amount of Letters of Credit
outstanding at any time shall not exceed $6,500,000.

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 3

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      11.           Section
7.3(A) of the Loan Agreement is hereby amended to read in its entirety as
follows:

       

      7.3           Financial
Covenants.

       

      (A)           Cavalier
Homes will maintain at all times:

       

      (1)           A
ratio of Current Assets to Current Liabilities of not less than 1.1 to
1.0.

       

      (2)           A
ratio of Consolidated Liabilities to Consolidated Tangible Net Worth of not more
than 1.5 to 1.0.

       

      (3)           A
ratio of Consolidated Cash Flow (measured on an historical basis) to Debt
Service of not less than 1.35 to 1.00 in each fiscal year.

       

      (4)           Consolidated
Adjusted Net Earnings in each fiscal year of at least $100,000.

       

      (5)           Minimum
cash and cash equivalents of $5,000,000.

       

      12.           Pursuant
to the terms of the Real Property Security Documents, the sale of any of the
Real Estate Collateral requires payment in full of the indebtedness secured
thereby.  Borrower and Lender agree that during such time as no Event
of Default has occurred and is continuing and notwithstanding such provisions,
Borrower shall be entitled to sell any of said collateral provided it gives
Lender thirty (30) days’ notice of the proposed sale and Lender receives at
least 75% of the gross proceeds of the sale for application to the principal
balance of Real Estate Loan.

       

      13.           Each
of the parties hereto consents to the removal of BRC Components, Inc., The Home
Place, LLC, and Cavalier Properties, Inc., as Borrowers hereunder.

       

      14.           Contemporaneously
herewith, Borrower is executing in favor of Bank a renewal Revolving Promissory
Note, which Note will hereafter evidence the indebtedness represented by the
Revolving Loan as provided in the Loan Agreement.

       

      15.           As
a condition to the effectiveness of this Amendment: (i) Borrower shall pay
directly or reimburse Lender for all fees, expenses and out-out-pocket costs
incurred by the Lender, any and all filing fees, recording fees or taxes,
documentary stamp or intangibles taxes, and reasonable expenses and fees of
Lender's legal counsel, incurred in connection with the preparation, amendment,
modification or enforcement of this Amendment and all other documents executed
and delivered in connection herewith; (ii) Borrower shall execute and deliver to
Lender all further documents and perform all other acts which Lender reasonably
deems necessary or appropriate to perfect or protect its security for the
Obligations; and (iii) Borrower shall have delivered to Lender such other
documentation, if any, as may be requested by Lender to satisfy Lender that this
Amendment, and all other documents and instruments executed by Borrower in
connection with this Amendment or in furtherance hereof, have each been duly
authorized, executed and delivered on behalf of Borrower, and constitute valid
and

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 4

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      binding
obligations of Borrower.  In addition to the fees outlined in the
foregoing sentence, upon execution of this Amendment, Borrower shall pay to Bank
a facility fee of $43,750.00, which shall be deemed fully earned at the
execution of this Amendment and shall not be subject to rebate except as may be
required by any Applicable Law.

       

      16.           Except
as otherwise expressly set forth in this Amendment, all Collateral described in
any agreement providing security for any Obligation of the Borrowers, or any of
them, shall remain subject to the liens, pledges, security interests and
assignments of any such agreements as security for the Obligations, and all
other indebtedness described therein; nothing contained in this Amendment shall
be construed to constitute a novation of any of the indebtedness evidenced by
the Notes, as amended, or to release, satisfy, discharge or otherwise affect or
impair in any manner whatsoever (a) the validity or enforceability of any of the
indebtedness evidenced by the Notes, as amended; (b) the liens, pledges,
security interests, assignments and conveyances effected by the Loan Agreement,
the Security Documents and any other agreement securing any of the Notes, as
amended, or the priority thereof; (c) the liability of any maker, endorser,
surety, guarantor or other Person that may now or hereafter be liable under or
on account of any of the Notes, as amended, or any agreement securing any or all
of the Notes, as amended; or (d) any other security or instrument now or
hereafter held by Lender as security for or as evidence of any of the
above-described indebtedness. Without in any way limiting the foregoing, each
Borrower acknowledges and agrees that the indebtedness evidenced by each of the
Notes is and shall remain secured by the Collateral described in the Loan
Agreement and in the Security Documents.

       

      17.           Borrowers,
jointly and severally, hereby represent and warrant to Lender that (i) the
officers of each Borrower executing this Amendment have been duly authorized to
do so and such Amendment and the Loan Agreement are valid and binding upon each
Borrower which is a party thereto in every respect, enforceable in accordance
with their terms, (ii) each and every representation and warranty set forth in
Article VI of the Loan Agreement is true and correct as of the date hereof,
(iii) no Event of Default, nor any event that, upon notice or lapse of time or
both, would constitute an Event of Default, has occurred and is continuing, and
(iv) as of the date hereof, it has no defenses or offsets with respect to the
Obligations, as herein modified.

       

      18.           Unless
otherwise expressly modified or amended hereby, all terms and conditions of the
Loan Agreement as heretofore amended shall remain in full force and effect, and
the same, as amended hereby, are hereby ratified and confirmed in all
respects.  This Amendment shall inure to and be binding upon and
enforceable by Borrowers and Lender and their respective successors and
assigns.  This Amendment may be executed in one or more counterparts,
each of which when executed and delivered shall constitute an original. All such
counterparts shall together be deemed to be one and the same instrument. The
parties agree that any facsimile signature of any party on any counterpart
original of this Amendment shall be deemed to be an original signature of such
party for all purposes and shall fully bind the party whose facsimile signature
appears on the counterpart original.  Time is of the essence in the
performance of each and every term, covenant, condition and agreement set forth
herein.

       

      [No
further text this page; Signature page follows.]

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 5

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be properly executed and delivered
as of the day and year first above written.

       

      

      
        	 
      	
                BORROWERS:

              
	 
      	 
      	 
      
	 
      	
                CAVALIER
      HOMES, INC., a Delaware corporation

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      MICHAEL R. MURPHY

              
	 
      	
                Print
      Name:

              	
                Michael
      R. Murphy

              
	 
      	
                Title:

              	
                Vice
      President

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                CAVALIER
      HOME BUILDERS, LLC, a Delaware limited liability
company

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      MICHAEL R. MURPHY

              
	 
      	
                Print
      Name:

              	
                Michael
      R. Murphy

              
	 
      	
                Title:

              	
                President

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                CAVALIER
      REAL ESTATE CO., INC., a Delaware corporation

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      MICHAEL R. MURPHY

              
	 
      	
                Print
      Name:

              	
                Michael
      R. Murphy

              
	 
      	
                Title:

              	
                President

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                QUALITY
      HOUSING SUPPLY, LLC, a Delaware limited liability
  company

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      MICHAEL R. MURPHY

              
	 
      	
                Print
      Name:

              	
                Michael
      R. Murphy

              
	 
      	
                Title:

              	
                Vice
      President

              
	 
      	 
      	 
      
	 
      	 
      	 
      

      

      

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 6

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      

      
        	 
      	
                CIS
      FINANCIAL SERVICES, INC., an Alabama corporation

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      HEATHER L. YORK

              
	 
      	
                Print
      Name:

              	
                Heather
      L. York

              
	 
      	
                Title:

              	
                Secretary

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                RIDGE
      POINTE MANUFACTURING, LLC, an Alabama limited liability
      company

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      MICHAEL R. MURPHY

              
	 
      	
                Print
      Name:

              	
                Michael
      R. Murphy

              
	 
      	
                Title:

              	
                Managing
      Member

              
	 
      	 
      	 
      

      

      

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 7

                    	 
      

            

            

          

           

        

        
           

          
            

          

        

        
           

        

      

      
         

        
          	 
      	
                  LENDER:

                
	 
      	 
      	 
      
	 
      	
                  FIRST
      COMMERCIAL BANK, an Alabama banking corporation

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/
      JAMES W. BRUNSTAD

                
	 
      	
                  Print
      Name:

                	
                  James
      W. Brunstad

                
	 
      	
                  Title:

                	
                  Senior
      Vice President

                

        

      

       

       

      
        
          
            
              	
                      1640654
      v5

                    	
                      Exhibit
      “A” - 8employagreement.htm

Exhibit 10.1

    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (the “Agreement”) is made
and entered into as of February 19, 2008 (the “Effective Date”), by
and between ISCO INTERNATIONAL, INC. (the “Company”), and AMR
ABDELMONEM, an individual (the “Executive”), with
reference to the following facts:

     

    WHEREAS,
The Company is headquartered in Illinois and designs, manufactures, and
distributes products relating to wireless telecommunications
systems;

     

    WHEREAS,
Executive is a senior executive with broad general management and technical
experience in the wireless industry;

     

    WHEREAS,
Executive is currently employed by the Company as Chief Operating officer and
Chief Technical Officer; and

     

    WHEREAS,
The Company and Executive wish to continue their employment relationship,
subject to the terms and conditions set forth in this Agreement.

     

    NOW,
THEREFORE, based on the above premises and in consideration of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

     

    SECTION
1. Employment with the
Company.  

     

    1.1. Position and
Duties.  Subject to the terms set forth herein, the Company
agrees to continue the employment of Mr. Abdelmonem as Chief Operating Officer
and Chief Technical Officer reporting to the President & CEO of the Company,
and Executive hereby accepts such continued employment.  Executive
shall serve in an executive capacity and shall perform such duties as are
customarily associated with his position, consistent with the bylaws of the
Company and as reasonably required by Company.

     

    1.2. Full Time and Best
Efforts.  Executive will perform his duties faithfully and to
the best of his ability and will devote his full business time and effort to the
performance of his duties hereunder.  Executive will not engage in any
other employment or business activities for any direct or indirect remuneration
that would be directly harmful or detrimental to, or that may compete with, the
business and affairs of the Company, or that would interfere with his duties
hereunder.  Executive acknowledges that frequent travel may be
necessary in carrying out his duties hereunder.

     

    SECTION
2. At-Will
Employment.  Executive’s
employment with the Company is “at-will” and may be terminated at any time with
or without cause by either party.  Termination of the employment
relationship is the right of each party and will not constitute a breach of this
Agreement.  No provision of this Agreement shall be construed as
conferring upon Executive a right to continue as an employee or executive of the
Company or any subsidiary or affiliated entity.  In the event of
termination, Executive will voluntarily and immediately resign from the Board
and any similar position with any subsidiary or affiliate.

     

    SECTION
3. Compensation.

     

    3.1. Base
Salary.  The Company will compensate Executive for services
rendered hereunder at the annual rate of $255,000 in 2008 and thereafter (or
such greater amount as may then be determined by the Company) in accordance with
the Company’s normal payroll practices and subject to payroll deductions as may
be necessary or customary for the Company’s salaried employees.

     

    3.2. Performance
Bonus.  As further described in this Section 3.2,
Executive will be eligible for an annual performance bonus based upon the
achievement of specified corporate and individual performance
goals.

     

    3.2.1. The
performance bonus will be separately arranged between Executive and Company, and
may be changed by the Company’s Board of Directors and/or its properly
designated Compensation Committee.  It is expected that awards under
this program would begin at 80% of plan achievement and increase until 130% of
plan achievement, and that up to one million additional shares of restricted
stock with immediate vesting may be awarded, in aggregate.  In
addition, additional awards, in cash and/or restricted stock, may be considered
upon performance in excess of 130%.  Executive understands and
acknowledges that future expectations and awards under this program may be
changed in good faith by the Company.

     

    3.2.2. The
performance goals applicable to any particular fiscal year will be determined by
the Company and will be communicated to Executive following the Board’s adoption
of the Company’s budget for that fiscal year.  The Company will
determine in good faith whether the goals for any year have been
achieved.  In addition, the Company may in good faith make adjustments
to such goals so that departures from the Company’s operating plan, changes in
accounting principles, acquisitions, dispositions, mergers, consolidations and
other transactions, events or factors influencing the achievement or measurement
of such goals do not affect the operation of this section in a manner
inconsistent with its intended purpose of encouraging growth in the shareholder
value.  In any case, no bonus will be payable to Executive if he fails
to be employed by the Company through the last day of the applicable year (or,
in the case of a termination by the Company for Cause, through the date of
actual bonus payment).

     

    3.2.3. Any
bonuses payable under this Section 3.2 will
be paid within thirty (30) days following the approval by the Audit Committee of
the Board of the Company’s audited financial statements for the applicable
fiscal year.

     

    3.3. Equity Incentive
Compensation.  The Company will grant to Executive a restricted
stock award in substantially the form attached hereto as Exhibit
A.

     

    SECTION
4. Benefits.  Executive shall
be entitled to participate in the employee benefit plans and programs of the
Company, if any, to the extent that his position, tenure, salary, age, health
and other qualifications make him eligible to participate in such plans or
programs, subject to the rules and regulations applicable
thereto.  The Company reserves the right to cancel or change the
benefit plans and programs it offers to its employees at any
time.  The Executive shall be entitled to receive four (4) weeks of
annual paid vacation in accordance with the Company’s vacation policy for its
senior executives.  Executive shall be entitled to all paid holidays
the Company makes available to its employees.

     

    SECTION
5. Business
Expenses.  The Company shall reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive’s duties hereunder, in
accordance with the Company’s expense reimbursement policy as in effect from
time to time.

     

    SECTION
6. Termination.

     

    6.1. Termination Without Cause or
for Good Reason.  If Executive’s employment ceases due to a
termination by the Company other than for Cause or a resignation by Executive
with Good Reason, then subject to Executive’s compliance with the provisions of
Section 11
below (the “Covenants”),
Executive shall be entitled to receive the following:

     

    6.1.1. a lump
sum payment equal to 50% of Executive’s base salary (at the rate in effect on
the date of termination); and

     

    6.1.2. an annual
bonus for the fiscal year of termination equal to 25% of Executive’s base salary
(at the rate in effect on the date of termination), if corporate and individual
performance for the portion of the fiscal year that has transpired prior to the
date of termination meet or exceed a pro-rata portion of the corporate and
individual performance goals specified by the Company under Section 3.2 for that
fiscal year; and

     

    6.1.3. waiver of
the applicable premium for COBRA continuation coverage for a period of six
months.

     

    The
severance benefits described in this Section 6.1 are
in lieu of, not in addition to, any other severance arrangement maintained by
the Company.

     

    6.2. Other
Terminations.  In the event of any cessation of Executive’s
employment other than as described above in Section 6.1, all
salary, benefits and other compensation will cease at the time of such
termination and, subject to the terms of any benefit plans then in force and
applicable to Executive, the Company will have no further liability or
obligation hereunder by reason of such termination.

     

    6.3. Mitigation.  Except
as may be expressly provided elsewhere in this Agreement, the Executive shall
not be required to mitigate the amount of any payment or benefit contemplated by
this Section 6
(whether by seeking new employment or in any other manner).  No such
payment shall be reduced by earnings that the Executive may receive from any
other source.

     

    SECTION
7. Modified
Reduction.  Notwithstanding any other provisions of this
Agreement to the contrary, in the event that any payments or benefits received
or to be received by Executive in connection with Executive’s employment with
the Company (or termination thereof) would subject Executive to the excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the “ Excise
Tax”), and if the net after-tax amount (taking into account all
applicable taxes payable by Executive, including without limitation any Excise
Tax) that Executive would receive with respect to such payments or benefits does
not exceed the net after-tax amount Executive would receive if the amount of
such payments and benefits were reduced to the maximum amount which could
otherwise be payable to Executive without the imposition of the Excise Tax,
then, only the extent necessary to eliminate the imposition of the Excise Tax,
such payments and benefits shall be reduced, in the order and as to the type
specified by Executive.

     

    SECTION
8. Condition
to Severance Payments.  All severance
payments and other benefits provided under Section 6.1 are
conditioned on Executive’s continuing compliance with this Agreement and the
Company’s policies and Executive’s execution (and non-revocation) of a release
of claims and covenant not to sue substantially in the form provided in Exhibit B upon
termination of employment.

     

    SECTION
9. Insurance
and Indemnification.  The Company will
keep in effect during Executive’s employment and for three (3) years
thereafter director and officer’s liability insurance comparable in amount and
scope to its present policy covering current and former directors and
officers.  The Company will indemnify Executive for acts performed or
omissions made in his capacity as an officer or director of the Company to the
extent provided in the Company’s by-laws, as in effect on the date
hereof.

     

    SECTION
10. Definitions.

     

    10.1. Base
Salary.  “Base Salary” means Executive’s annualized base salary
under Section 3.1.

     

    10.2. Cause.  “Cause”
means the occurrence of any of the following:  (1) Executive’s
refusal, failure or inability to perform (other than due to illness or
disability) his duties or to follow the lawful directives of the Board; in such
event prior to termination, the Board shall provide written notice of the bases
of termination, meet with Executive within five days of the notice of
termination, and Executive shall have ten days thereafter to cure the conduct;
(2) misconduct or gross negligence by Executive in the course of
employment; (3) Executive’s conviction of, or the entry of a plea of guilty
or nolo contendere to, a crime involving moral turpitude or that otherwise could
reasonably be expected to have an material adverse effect on the operations,
condition or reputation of the Company, (4) a material breach by Executive
of any agreement with, lawful policy of or fiduciary duty owed to the Company;
or (5) alcohol abuse or use of controlled drugs other than in accordance
with a physician’s prescription.  For avoidance of doubt, a cessation
of employment due to a disability entitling Executive to benefits under any
Company maintained or provided long-term disability plan or policy will not
constitute a termination by the Company “without Cause.”

     

    10.3. Good
Reason.  “Good Reason” means, without Executive’s express
written consent, a material adverse change to Executive’s duties or
responsibilities, unless Executive is provided with comparable duties and
responsibilities with respect to the same business unit, or a change in
Executive’s reporting obligations.  However, the foregoing will not
constitute Good Reason unless: (x) the Executive provides the Company with
written objection to the event or condition within 90 days following the
occurrence thereof, (y) the Company does not reverse or otherwise cure the
event or condition within fifteen (15) days of receiving that written objection,
and (z) the Executive resigns his employment within thirty (30) days
following the expiration of that cure period.

     

    SECTION
11. Covenants.  In
recognition of the compensation, incentive compensation opportunities and
severance protection provided to Executive pursuant to this Agreement, the
Executive agrees to be bound by the provisions of this Section 11.  These
provisions will apply without regard to whether any cessation of the Executive’s
employment is initiated by the Company or the Executive, and without regard to
the reason for that cessation.

     

    11.1. Non-Solicitation and
Non-Competition.  While employed by the Company and for the six
month period following the cessation of that employment for any reason (without
regard to whether that cessation is initiated by Executive or the Company),
Executive will not do any of the following, directly or indirectly, without the
prior written consent of the Company (except in his capacity as an officer or
director of the Company):

     

    11.1.1. solicit,
entice or induce any person, firm or corporation who or which is a client or
customer of the Company or any of its subsidiaries to become a client or
customer of any other person, firm or corporation involved in activities that
are the same as, or in direct competition with, the business activities carried
on by the Company (or being definitively planned by the Company at the time of
the cessation of Executive’s employment)(a “Competing
Business”);

     

    11.1.2. influence
or attempt to influence any customer of the Company or its subsidiaries to
terminate or modify any written or oral agreement or course of dealing with the
Company or its subsidiaries;

     

    11.1.3. influence
or attempt to influence any person to terminate or modify any employment,
consulting, agency, distributorship, licensing or other similar relationship or
arrangement with the Company or its subsidiaries; or

     

    11.1.4. engage in
(as a principal, shareholder, partner, director, officer, agent, employee,
consultant or otherwise) or be financially interested in any Competing
Business.  Nothing contained in this subsection shall prevent
Executive from holding for investment up to five percent (5%) of any class of
equity securities of a company whose securities are publicly traded on a
national securities exchange or in a national market system.

     

    11.2. Non-Disclosure.  Executive
shall not use for Executive’s personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company other than Company, any “Confidential
Information,” which term shall mean any information regarding the
business methods, business policies, policies, procedures, techniques, research
or development projects or results, historical or projected financial
information, budgets, trade secrets, or other knowledge or processes of, or
developed by, Company or any other confidential information relating to or
dealing with the business operations of Company, made known to Executive or
learned or acquired by Executive while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the general public.  The
foregoing provisions of this subsection shall apply during and after the period
when the Executive is an employee of the Company and shall be in addition to
(and not a limitation of) any other legally applicable protections of the
Company’s interest in confidential information, trade secrets, and the
like.  At the termination of Executive’s employment with Company,
Executive shall return to the Company all copies of Confidential Information in
any medium, including computer tapes and other forms of data
storage.

     

    11.3. Intellectual Property &
Company Creations.

     

    11.3.1. Ownership.  All
right, title and interest in and to any and all ideas, inventions, designs,
technologies, formulas, methods, processes, development techniques, discoveries,
computer programs or instructions (whether in source code, object code, or any
other form), computer hardware, algorithms, plans, customer lists, memoranda,
tests, research, designs, specifications, models, data, diagrams, flow charts,
techniques (whether reduced to written form or otherwise), patents, patent
applications, formats, test results, marketing and business ideas, trademarks,
trade secrets, service marks, trade dress, logos, trade names, fictitious names,
brand names, corporate names, original works of authorship, copyrights,
copyrightable works, mask works, computer software, all other similar intangible
personal property, and all improvements, derivative works, know-how, data,
rights and claims related to the foregoing that have been or are conceived,
developed or created in whole or in part by the Executive (a) at any time and at
any place that relates to the business of the Company, as then operated,
operated in the past or under consideration or development or (b) as a result of
tasks assigned to Executive by the Company (collectively, “Company Creations”),
shall be and become and remain the sole and exclusive property of the Company
and shall be considered “works made for hire” as that term is defined pursuant
to applicable statutes and law.

     

    11.3.2. Assignment.  To
the extent that any of the Company Creations may not by law be considered a work
made for hire, or to the extent that, notwithstanding the foregoing, Executive
retains any interest in or to the Company Creations, Executive hereby
irrevocably assigns and transfers to the Company any and all right, title, or
interest that Executive has or may have, either now or in the future, in and to
the Company Creations, and any derivatives thereof, without the necessity of
further consideration.  Executive shall promptly and fully disclose
all Company Creations to the Company and shall have no claim for additional
compensation for Company Creations.  The Company shall be entitled to
obtain and hold in its own name all copyrights, patents, trade secrets,
trademarks, and service marks with respect to such Company
Creations.

     

    11.3.3. Disclosure &
Cooperation.  Executive shall keep and maintain adequate and
current written records of all Company Creations and their development by
Executive (solely or jointly with others), which records shall be available at
all times to and remain the sole property of the Company.  Executive
shall communicate promptly and disclose to the Company, in such form as the
Company may reasonably request, all information, details and data pertaining to
any Company Creations.  Executive further agrees to execute and
deliver to the Company or its designee(s) any and all formal transfers and
assignments and other documents and to provide any further cooperation or
assistance reasonably required by the Company to perfect, maintain or otherwise
protect its rights in the Company Creations.  Executive hereby
designates and appoints the Company or its designee as Executive’s agent and
attorney-in-fact to execute on Executive’s behalf any assignments or other
documents deemed necessary by the Company to perfect, maintain or otherwise
protect the Company’s rights in any Company Creations.

     

    11.4. Acknowledgments.  Executive
acknowledges that the Covenants are reasonable and necessary to protect the
Company’s legitimate business interests, its relationships with its customers,
its trade secrets and other confidential or proprietary
information.  Executive further acknowledges that the duration and
scope of the Covenants are reasonable given the nature of this Agreement and the
position Executive holds or will hold within the Company.  Executive
further acknowledges that the Covenants are included herein to induce the
Company to enter into this Agreement and that the Company would not have entered
into this Agreement or otherwise enhanced Executive’s Compensation in the
absence of the Covenants.  Finally, Executive also acknowledges that
any breach, willful or otherwise, of the Covenants will cause continuing and
irreparable injury to the Company for which monetary damages, alone, will not be
an adequate remedy.

     

    11.5. Enforcement.

     

    11.5.1. Judicial
Modification.  If any court determines that the Covenants, or
any part thereof, is unenforceable because of the duration or scope of such
provision, that court will have the power to modify such provision and, in its
modified form, such provision will then be enforceable.

     

    11.5.2. Liquidated
Damages.  The parties acknowledge that significant damages will
be caused by a breach of any of the Covenants, but that such damages will be
difficult to quantify.  Therefore, the parties agree that if Executive
breaches any of the Covenants, in addition to any other remedies available to
the Company, liquidated damages will be paid by Executive in the following
manner:

     

    (i) any
Company stock options, stock appreciation rights, restricted stock units or
similar equity incentives then held by Executive, whether or not then vested,
will be immediately and automatically forfeited;

     

    (ii) any
shares of restricted stock issued by the Company, then held by Executive or his
permitted transferee and then subject to forfeiture will be immediately and
automatically forfeited; and

     

    (iii) any
obligation of the Company to provide severance pay or benefits will
cease.

     

    11.5.3. Disgorgement.  In
addition to the remedies specified above and any other relief awarded by any
court, if Executive breaches any of the Covenants, he will be required to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by him as a result of
any such breach and the Company will be entitled to injunctive or other
equitable relief to prevent further breaches of the Covenants by
Executive.

     

    11.5.4. Extension of
Restrictions.  If Executive breaches Section 11.1 in
any respect, the duration of the restrictions therein contained will be extended
for a period equal to the period that Executive was in breach of such
restrictions.

     

    SECTION
12. Successors
and Assigns.  The Company may
assign its rights under this Letter to any successor to all or substantially all
of its assets and business by means of liquidation, dissolution, merger,
consolidation, transfer of assets, or otherwise.  Without the written
consent of the Company, Executive shall not assign or transfer this Agreement or
any right or obligation under this Agreement to any other person or
entity.

     

    SECTION
13. Notice
Clause.  Any notice or
other communication required or permitted to be given under this Agreement will
be given in writing and will be deemed effective on the day delivered in person,
or the business day after the day on which such notice was mailed registered or
certified mail, postage prepaid, addressed as follows:

     

    if to the Executive:
to his home address then on file in the Company’s personnel
records;

     

    if to the Company: to
the Company’s principal executive offices, c/o Chief Financial
Officer;

     

    or to
such other address as either party may duly specify by notice given in the
manner described above.

     

    SECTION
14. Governing
Law.  This Agreement
shall be governed by and construed in accordance with the internal substantive
laws, but not the choice of law rules, of the State of Illinois.

     

    SECTION
15. Severability.  The invalidity or
unenforceability of any provision of this Agreement, or any terms hereof, shall
not affect the validity or enforceability of any other provision or term of this
Agreement.

     

    SECTION
16. Wage
Claims.  The parties intend that all obligations to pay
compensation to Executive be obligations solely of the
Company.  Therefore, intending to be bound by this provision,
Executive hereby waives any right to claim payment of amounts owed to him, now
or in the future, from directors or officers of the Company in the event of the
Company’s insolvency.

     

    SECTION
17. Integration.  This Agreement
and any other agreement referred to herein or executed contemporaneously
herewith represent the entire agreement and understanding between the parties as
to the subject matter herein and supersedes all prior or contemporaneous
agreements whether written or oral,  provided, however, that
Executive will at all times be bound by all applicable Company policies in then
effect, including (without limitation) the Company’s ethics guidelines and
insider trading policies.  No waiver, alteration, or modification of
any of the provisions of this Agreement shall be binding unless in writing and
signed by duly authorized representatives of the parties hereto.

     

    SECTION
18. Taxes.  All payments and
transfers of property, whether made pursuant to this Agreement or otherwise,
shall be subject to withholding of applicable income and employment taxes.

     

    SECTION
19. Compliance
with Section 409A of the Code.  Notwithstanding
any other provision of this Agreement, no payment will be made hereunder earlier
than a date consistent with Section 409A of the Code or related
guidance.

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, on ___________, 2008.

     

    
      	 
      	 
      	 
      
	
              AMR
      ABDELMONEM

            	 
      	
              ISCO
      INTERNATIONAL, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
               
      By:

            	 
      
	 
      	 
      	 
      
	 
      	
               
      Title:

            	 
      

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    [Restrictive
Stock Award Agreement]

     

    

     

    
      
        
          A-1

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    RELEASE AND
NON-DISPARAGEMENT AGREEMENT

     

    THIS
RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made as
of the ___ day of _______, _____ by and between AMR ABDELMONEM (the “Executive”) and ISCO
INTERNATIONAL, INC. (the “Company”).

     

    WHEREAS,
the Executive’s employment as an executive of the Company has terminated;
and

     

    WHEREAS,
pursuant to Section 6 of the
Employment and Restrictive Covenant Agreement by and between the Company and the
Executive dated __________, 2008 (the “Agreement”), the Company has
agreed to pay the Executive certain amounts and to provide him with certain
rights and benefits, subject to the execution of this Release.

     

    NOW
THEREFORE, in consideration of these premises and the mutual promises contained
herein, and intending to be legally bound hereby, the parties agree as
follows:

     

    SECTION
1. Consideration.  The Executive
acknowledges that: (i) the payments, rights and benefits set forth in Section 6.1 of
the Agreement constitute full settlement of all his rights under the Employment
Agreement, (ii) he has no entitlement under any other severance or similar
arrangement maintained by the Company, and (iii) except as otherwise
provided specifically in this Release, the Company does not and will not have
any other liability or obligation to the Executive.  The Executive
further acknowledges that, in the absence of his execution of this Release, the
benefits and payments specified in Section 6.1 of
the Employment Agreement would not otherwise be due to him.

     

    SECTION
2. Release and Covenant Not to
Sue.

     

    2.1. The
Executive hereby fully and forever releases and discharges the Company, and all
predecessors and successors, assigns, stockholders, affiliates, officers,
directors, trustees, employees, agents and attorneys, past and present (the
Company and each such person or entity is referred to as a “Released Person”) from any and
all claims, demands, liens, agreements, contracts, covenants, actions, suits,
causes of action, obligations, controversies, debts, costs, expenses, damages,
judgments, orders and liabilities, of whatever kind or nature, direct or
indirect, in law, equity or otherwise, whether known or unknown, arising through
the date of this Release, out of the Executive’s employment by the Company or
the termination thereof, including, but not limited to, any claims for relief or
causes of action under the Age Discrimination in Employment Act, 29 U.S.C.
§ 621 et seq., or
any other federal, state or local statute, ordinance or regulation regarding
discrimination in employment and any claims, demands or actions based upon
alleged wrongful or retaliatory discharge or breach of contract under any state
or federal law.

     

    2.2. The
Executive expressly represents that he has not filed a lawsuit or initiated any
other administrative proceeding against a Released Person and that he has not
assigned any claim against a Released Person.  The Executive further
promises not to initiate a lawsuit or to bring any other claim against the other
arising out of or in any way related to the Executive’s employment by the
Company or the termination of that employment.  This Release will not
prevent the Executive from filing a charge with the Equal Employment Opportunity
Commission (or similar state agency) or participating in any investigation
conducted by the Equal Employment Opportunity Commission (or similar state
agency); provided,
however, that any claims by the Executive for personal relief in
connection with such a charge or investigation (such as reinstatement or
monetary damages) would be barred.

     

    2.3. The
foregoing will not be deemed to release the Company from claims solely to
enforce this Release or Sections 6.1 or
9 of the
Agreement.

     

    SECTION
3. Restrictive
Covenants.  The Executive acknowledges that Section 11 of
the Agreement will survive the termination of his employment.  The
Executive affirms that those restrictive covenants are reasonable and necessary
to protect the legitimate interests of the Company, that he received adequate
consideration in exchange for agreeing to those restrictions and that he will
abide by those restrictions.

     

    SECTION
4. Non-Disparagement.  The
Executive will not disparage any Released Person or otherwise take any action
that could reasonably be expected to adversely affect the personal or
professional reputation of any Released Person.  Similarly, the
Company (meaning, solely for this purpose, the Company’s officers, directors and
agents specifically authorized to communicate on its behalf) will not disparage
the Executive or otherwise take any action that could reasonably be expected to
adversely affect his personal or professional reputation.

     

    SECTION
5. Cooperation.  The Executive
further agrees that, subject to reimbursement of his reasonable expenses, he
will cooperate fully with the Company and its counsel with respect to any matter
(including litigation, investigations, or governmental proceedings) in which the
Executive was in any way involved during his employment with the
Company.  The Executive shall render such cooperation in a timely
manner on reasonable notice from the Company.

     

    SECTION
6. Rescission
Right.  The Executive expressly acknowledges and recites that
(a) he has read and understands the terms of this Release in its entirety,
(b) he has entered into this Release knowingly and voluntarily, without any
duress or coercion; (c) he has been advised orally and is hereby advised in
writing to consult with an attorney with respect to this Release before signing
it; (d) he was provided twenty-one (21) calendar days after receipt of the
Release to consider its terms before signing it; and (e) he is provided
seven (7) calendar days from the date of signing to terminate and revoke this
Release, in which case this Release shall be unenforceable, null and
void.  The Executive may revoke this Release during those seven (7)
days by providing written notice of revocation to the Company at the address
specified in Section
13 of the Agreement.

     

    SECTION
7. Challenge.  If the Executive
violates or challenges the enforceability of any provisions of this Release or
Section 11
of the Agreement, no further payments, rights or benefits under Section 6 of the
Agreement will be due to the Executive.

     

    SECTION
8. Miscellaneous.

     

    8.1. No Admission of
Liability.  This Release is not to be construed as an admission
of any violation of any federal, state or local statute, ordinance or regulation
or of any duty owed by the Company to the Executive.  There have been
no such violations, and the Company specifically denies any such
violations.

     

    8.2. No
Reinstatement.  The Executive agrees that he will not apply for
reinstatement with the Company or seek in any way to be reinstated, re-employed
or hired by the Company in the future.

     

    8.3. Successors and
Assigns.  This Release shall inure to the benefit of and be
binding upon the Company and the Executive and their respective successors,
permitted assigns, executors, administrators and heirs.  The Executive
not may make any assignment of this Release or any interest herein, by operation
of law or otherwise.  The Company may assign this Release to any
successor to all or substantially all of its assets and business by means of
liquidation, dissolution, merger, consolidation, transfer of assets, or
otherwise.

     

    8.4. Severability.  Whenever
possible, each provision of this Release will be interpreted in such manner as
to be effective and valid under applicable law.  However, if any
provision of this Release is held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability will not affect any
other provision, and this Release will be reformed, construed and enforced as
though the invalid, illegal or unenforceable provision had never been herein
contained.

     

    8.5. Entire Agreement;
Amendments.  Except as otherwise provided herein, this Release
contains the entire agreement and understanding of the parties hereto relating
to the subject matter hereof, and merges and supersedes all prior and
contemporaneous discussions, agreements and understandings of every nature
relating to the subject matter hereof.  This Release may not be
changed or modified, except by an agreement in writing signed by each of the
parties hereto.

     

    8.6. Governing
Law.  This Release shall be governed by, and enforced in
accordance with, the laws of the State of Illinois, without regard to the
application of the principles of conflicts of laws.

     

    8.7. Counterparts and
Facsimiles.  This Release may be executed, including execution
by facsimile signature, in multiple counterparts, each of which shall be deemed
an original, and all of which together shall be deemed to be one and the same
instrument.

     

    

     

    IN
WITNESS WHEREOF, the Company has caused this Release to be executed by its duly
authorized officer, and the Executive has executed this Release, in each case as
of the date first above written.

     

    
      	 
      	 
      	 
      
	
              AMR
      ABDELMONEM

            	 
      	
              ISCO
      INTERNATIONAL, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
               
      By:

            	 
      
	 
      	 
      	 
      
	 
      	
               
      Title:

            	 
      

    

    

     

    

     

    

    
      
        
          B-1

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