Document:

Secured 14% Grid Note

 Exhibit 10.4 
  
 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW OR AN EXEMPTION THEREFROM. 
  
 14% SECURED GRID NOTE 
  

			
	U.S.$113,100	 	Dated: July 23, 2004
	Note No.: C-1	 	Mt. Prospect, Illinois

  
 FOR VALUE RECEIVED,
the undersigned, ISCO INTERNATIONAL, INC., a Delaware corporation formerly known as ILLINOIS SUPERCONDUCTOR CORPORATION with offices at 451 Kingston Court, Mt. Prospect, Illinois 60056 (“Borrower”), promises to pay to the order of
MANCHESTER SECURITIES CORPORATION, a New York corporation at 712 Fifth Avenue, New York, New York 10019, or its registered assigns (“Lender”), in lawful money of the United States, the principal sum of One Hundred Thirteen Thousand
and One Hundred Dollars (U.S.$113,100), or, if less, the outstanding principal amount of Advances (as defined in Loan Agreement) made to Borrower pursuant to the Second Amended and Restated Loan Agreement dated as of the date hereof to which
Borrower, Lender and Alexander Finance, L.P. (“Alexander”) are parties (the “Loan Agreement”), as shown on the Grid Schedule attached as Schedule 1 hereto, due April 1, 2005, (the “Maturity
Date”), and to pay interest on the principal sum outstanding under this Note at the rate of the lesser of 14% per annum or the highest rate permitted by law, compounded annually, which interest shall also be due and payable on the Maturity
Date, or such earlier date upon acceleration in accordance with the terms hereof. Accrual of interest shall commence on the first day to occur after the date hereof and shall continue until payment in full of the principal sum and all other amounts
due hereunder have been made. The principal of, and interest on, this Note are payable in such currency of the United States of America as of the time of payment is legal tender for payment of public and private debts. This Note is one of the Notes
(the “2004 Notes”) issued pursuant to the Loan Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Loan Agreement. 
  
 This Note is subject to the following additional provisions: 
  
 1. Interest and Payment Application. Interest shall be
calculated on a 360 day year simple interest basis and paid for the actual number of days elapsed. All interest due hereunder shall be payable at the Maturity Date. Notwithstanding anything contained herein, the outstanding principal balance and
interest due hereunder shall bear interest, from and after the occurrence and during the continuance of an Event of Default (as defined below) hereunder, at the rate equal to the lower of twenty percent (20%) per annum, compounded annually, or the
highest rate permitted by law, and from and after such time interest shall be payable from time to time on demand. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to accrued
and unpaid interest and fees and any remaining amount to principal. 

 2. Prepayment. Borrower may pre-pay all or any part of this Note at any time upon
thirty (30) days prior written notice to Lender, without cost or penalty in accordance with the provisions of Section 1.6(a) of the Loan Agreement, and must pre-pay this Note in the circumstances described in Section 1.6(b) of the Loan Agreement.

  
 3. No Impairment. Borrower shall not
intentionally take any action which would impair the rights of Lender hereunder. 
  
 4. Obligations Absolute. No provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time,
place and rate, and in the manner, herein prescribed. 
  
 5.
Advances Under the Loan Agreement. Upon the closing of each Advance made by Lender under the Loan Agreement, Lender shall adjust the grid schedule attached to this Note as Schedule 1 to reflect the principal amount and the terms of
such Advance. Notwithstanding anything to the contrary contained herein or in the Loan Agreement, Lender’s failure to so adjust the grid schedule shall not in any manner affect Borrower’s obligation to repay the amount of any Advances made
by Lender under the Loan Agreement in accordance with the terms of the Loan Agreement and this Note. 
  
 6. Defaults and Remedies. 
  
 (a) Events of Default. An “Event of Default” is: (i) default in payment of the principal amount or accrued but unpaid
interest thereon of any of the 2004 Notes or any of the Notes issued by the Company on October 24, 2003 to the Lender and Alexander, as amended on February 24, 2004 (the “2003 Notes”) or any of the Notes issued by the Company on
October 23, 2002 to the Lender and Alexander, as amended on February 24, 2004 (the “2002 Notes” and together with the 2004 Notes and 2003 Notes, the “Loan Notes”) on or after the date such payment is due, (ii)
failure by Borrower for ten (10) days after notice to it, to comply with any other material provision of any of the Loan Notes or the Loan Agreement; (iii) an Event of Default under the Security Agreement (as defined below); (iv) a breach by
Borrower of its representations or warranties in the Loan Agreement; (v) any default under or acceleration prior to maturity of any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by Borrower or a subsidiary of Borrower or for money borrowed the repayment of which is guaranteed by Borrower or a subsidiary of Borrower, whether such indebtedness or guarantee now exists or shall be created
hereafter, provided that the obligations with respect to any such borrowed or accelerated amount exceeds, in the aggregate, $500,000; (vi) any money judgment, writ or warrant of attachment, or similar process in excess of $500,000 in the
aggregate shall be entered or filed against Borrower or a subsidiary of Borrower or any of their respective properties or other assets and shall remain unpaid, unvacated, unbonded and unstayed for a period of 45 days; (vii) if Borrower or any
subsidiary of Borrower pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) has an involuntary case commenced against it, and such case is not dismissed within 30 days of such commencement or consents to

  

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 the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it
for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (viii) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law that: (1) is for relief against Borrower in an involuntary case; (2) appoints a Custodian of Borrower or for all or substantially all of its property; or (3) orders the liquidation of the Company or
any subsidiary, and the order or decree remains unstayed and in effect for ninety (90) days. The terms “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. The term
“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. 
  
 (b) Remedies. If an Event of Default occurs and is continuing with respect to any of the Loan Notes, Lender may declare all of the then outstanding
principal amount of this Note, including any accrued and unpaid interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in clauses (vii) and (viii) of Section 6(a) above,
this Note shall become due and payable without further action or notice. 
  
 7. Waivers of Demand, Etc. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, hereby
expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, all other notices whatsoever and bringing of suit and diligence in taking any
action to collect amounts called for hereunder, and will be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection
of any amount called for hereunder. 
  
 8. Replacement
Note. In the event that Lender notifies Borrower that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for the outstanding principal amount, if different than that shown
on the original Note), shall be delivered to Lender, provided that Lender executes and delivers to Borrower an agreement reasonably satisfactory to Borrower to indemnify Borrower from any loss incurred by it in connection with this Note. 

 
 9. Loan Agreement; Security Agreement; Guaranties. This Note
is being issued to Lender in connection with the Loan Agreement and is entitled to the benefits thereof. In addition Borrower’s obligations under this Note are guaranteed by the Amended and Second Restated Guaranties (the
“Guaranties”) of Spectral Solutions, Inc. and Illinois Superconductor Canada Corporation, subsidiaries of Borrower (the together, the “Guarantors”) and this Note is entitled to the benefits thereof.
Borrower’s obligations under this Note are also secured, pursuant to the terms of the Second Amended and Restated Security Agreement, dated as of July     , 2004, by and among Borrower, Guarantors, Lender and
Alexander (the “Security Agreement”), by all the assets of Borrower and Guarantors. 
  
 10. Payment of Expenses. Borrower agrees to pay all debts and expenses, including reasonable attorneys’ fees and expenses, which may be
incurred by Lender in preparing, administering or enforcing this Note and/or collecting any amount due under this Note, the Loan Agreement, the Security Agreement or the Guaranties. 
  

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 11. Savings Clause. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If
any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate
shall be reduced so as not to exceed the maximum amount allowable under law. 
  
 12. Amendment. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by both Borrower and Lender; except that Sections 4 and 6
hereof may not be amended, nor the interest rate or principal amount hereunder increased or the maturity date hereunder shortened, without the consent of the holders of 75% of the aggregate principal maximum amount of the outstanding Loan Notes.

  
 13. Assignment Etc. Lender may not transfer or
assign any of its rights or interests in or to this Note or any part hereof (other than to any affiliate of such Lender) without the prior written consent of the Borrower, such consent not to be unreasonably withheld; provided, however, that Lender
may mortgage, encumber or transfer this Note or any of its rights or interest in and to this Note or any part hereof in accordance with applicable securities laws, rules and regulations. Each assignee, transferee and mortgagee shall have the right
to transfer or assign its interest in accordance with the prior sentence. Each such assignee, transferee and mortgagee shall have all of the rights of Lender under this Note, the Loan Agreement, the Security Agreement and the Guaranties. This Note
shall be binding upon Borrower and its successors and shall inure to the benefit of Lender and its successors and assigns. Any transfer made in violation of this provision shall be null and void. 
  
 14. No Waiver. No failure on the part of Lender to exercise,
and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Lender of any right, remedy or power hereunder preclude any other or future exercise of any other right,
remedy or power. Each and every right, remedy or power hereby granted to Lender or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by Lender from time to time. 
  
 15. Miscellaneous. Unless otherwise provided herein, any notice
or other communication to Borrower hereunder shall be sufficiently given if in writing and personally delivered or mailed to Borrower by certified mail, return receipt requested, at its address set forth above or such other address as it may
designate for itself in such notice to Lender, and communications shall be deemed to have been received when delivered personally or, if sent by mail or facsimile, then when actually received by the party to whom it is addressed. Whenever the sense
of this Note requires, words in the singular shall be deemed to include the plural and 
  

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 words in the plural shall be deemed to include the singular. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may (1) renew, extend (repeatedly and for any
length of time) or modify this Note (in accordance with Section 12 above), or release any party or any guarantor or collateral, (2) impair, fail to realize upon or perfect any security interest Lender may have from time to time in collateral, or (3)
take any other action deemed necessary by Lender, in each case without the consent of or notice to anyone and without releasing Borrower or any guarantor from any liability. 
  
 16. Choice of Law and Venue; Waiver of Jury Trial. THIS NOTE SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that all actions or proceedings arising directly or indirectly from or in connection with this Note shall, at Lender’s sole option, be litigated
only in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York, in each case, located in New York County, New York. Borrower consents to the exclusive jurisdiction and venue of the
foregoing courts and consents that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of New York or the Southern District of New York by certified or registered
mail, return receipt requested, directed to Borrower at its address set forth in this Note (and service so made shall be deemed “personal service” and be deemed complete five (5) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules of said courts. BORROWER HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS NOTE. 
  
 IN WITNESS WHEREOF, Borrower has caused this instrument to be duly
executed by an officer thereunto duly authorized. 
  

			
	 ISCO INTERNATIONAL, INC.

		
	 By:
	 	  

	 Name:
	 	 Amr Abdelmonem, Ph.D.

	 Title:
	 	 Chief Executive Officer

  
 ATTEST: 
  

	
	

  

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 SCHEDULE 1 
  

(Grid Schedule of Advances Made Under the Loan Agreement) 
  

							
	 Date

	 	 Principal Amount
 of Advance

	 	 Interest Rate

	  	Maturity Date

  

 - 6 -Second Amended and Restated Guaranty of Spectral Solutions

 EXHIBIT 10.5 
  
 SECOND AMENDED AND RESTATED 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”): (i) 91⁄2% secured grid notes due April 1, 2005, as amended, in the aggregate
principal amount of up to $4,000,000 (the “2002 Notes”), (ii) 14% secured grid notes due April 1, 2005, as amended, in the aggregate principal amount of $2,000,000 (the “2003 Notes”), and (iii) 14% secured grid notes due April 1,
2005, in the aggregate principal amount of $500,000 (the “2004 Notes” and together with the 2002 Notes and the 2003 Notes, the “Notes”), in each case pursuant to the Loan Agreement dated October 23, 2002 as previously amended and
as amended and restated as of the date hereof (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, as previously amended and as amended and restated as of the date hereof (the
“Security Agreement”) 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 
  

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 a guaranty of collection only), and waives any right to require that any resort be had by Payees to ISCO or any other
guarantor or to any security pledged with respect to the performance of any of the Obligations. Further, this guaranty of payment is absolute and unconditional, and shall remain valid, binding and fully enforceable irrespective of any circumstance
of any nature that might otherwise constitute a defense, offset, claim, abatement or counterclaim that Guarantor or ISCO may assert against Payees with respect to any of the Obligations or otherwise, including, but not limited to, failure of
consideration, fraudulent inducement, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction, and usury, and irrespective of the validity, legality, binding effect or enforceability of the terms of any
agreement or instrument relating to any of the Obligations. Guarantor hereby absolutely, unconditionally and irrevocably waives any and all rights to assert any such defenses, offsets, claims, abatements and counterclaims. In the event Payees are
not permitted or otherwise unable (because of the pendency of any bankruptcy, insolvency, receivership or other similar proceeding) to accelerate the Obligations but would otherwise be permitted to do so at such time pursuant to the Loan Agreement,
Payees may demand performance in full under this Guaranty as if all of the Obligations had been duly accelerated, and Guarantor will not raise, and hereby expressly waives, any claim or defense with respect to such acceleration. 
  
 Section 3. Remedies. In the case of any proceedings to collect
any obligations of Guarantor, Guarantor shall pay all costs and expenses of every kind for collection and enforcement of this Guaranty, including attorneys’ fees and disbursements. Upon the occurrence and during the continuance of any failure
of any of the Obligations to be performed when due, Payees may elect to nonjudicially or judicially foreclose against any real or personal property security it holds for the Obligations, or accept an assignment of any such security in lieu of
foreclosure or compromise or adjust any part of the Obligations, or make any other accommodation with ISCO or any other guarantor, pledgor or surety, or exercise any other remedy against ISCO or any other guarantor, pledgor or surety, or any
security, in accordance with and subject to the provisions of the documents creating such security interests. No such action by Payees will release, limit or otherwise affect the obligations of Guarantor to Payees, even if the effect of that action
is to deprive Guarantor of the right to collect any reimbursement from ISCO or any other person for any sums paid to Payees. 
  
 Section 4. Reinstatement, Indemnification, Etc. If claim is ever made upon Payees for repayment, return, restoration or other recovery of
any amount or amounts received by Payees in payment or on account of any of the Obligations, and Payees repay all or part of such amount: (a) because such payment or application of proceeds is or may be avoided, invalidated, declared fraudulent, set
aside or determined to be void or voidable as a preferential transfer, fraudulent conveyance, impermissible set off or a diversion of trust funds; or (b) for any other reason, including (without limitation) by reason of (i) any judgment, decree or
order of any court or administrative body having jurisdiction over Payees or any of their property, or (ii) any settlement or compromise of any such claim effected by Payees with any such claimant (including ISCO); then, and in such event, Guarantor
agrees that any such judgment, decree, order, settlement or compromise shall be binding upon Guarantor, notwithstanding any revocation hereof or the cancellation of any Notes or other instrument or document evidencing any of the Obligations and the
obligations of Guarantor hereunder shall continue to apply, or shall automatically (and without further action) be reinstated if not then in effect, as case may be, and Guarantor shall be and remain liable to Payees hereunder for the amount so
repaid or 
  

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 recovered to the same extent as if such amount had never originally been received by Payees. Guarantor hereby indemnifies
Payees, and agrees to reimburse and hold Payees harmless on demand, from and against all actions, claims, losses, judgments, damages, amounts paid in settlement and expenses (including reasonable attorneys’ fees and court costs) brought against
or incurred by Payees and arising out of, relating to or in connection with any of the Obligations. 
  
 Section 5. Waiver of Rights, Etc. No delay on the part of Payees in exercising any of their options, powers or rights, or partial or single
exercise thereof, shall constitute a waiver thereof. No waiver of any of their rights hereunder, and no modification or amendment of this Guaranty, shall be deemed to be made by Payees unless the same shall be in writing, duly signed by an officer
of each Payee on behalf of such Payee, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Payees or the obligations of Guarantor to Payees in any other respect at
any other time. 
  
 Section 6. Enforcement, Etc.
Payees, in their sole discretion, may proceed to exercise or enforce any right, power, privilege, remedy or interest that Payees may have under this Guaranty, the Obligations or any applicable law: at law, in equity, in rem or in any other forum
available under applicable law; without notice except as otherwise expressly required by law provided herein; without pursuing, exhausting or otherwise exercising or enforcing any other right, power, privilege, remedy or interest that Payees may
have against or in respect of Guarantor, the Obligations, ISCO, any other guarantor, surety, pledgor, collateral or any other person or thing; and without regard to any act or omission of Payees or any other person. Each Payee may enforce this
Guaranty individually as to its portion of the Obligations. 
  
 Section 7. Reliance. Guarantor expressly acknowledges that Guarantor has not received or relied upon any oral or written agreements, understandings, representations or warranties from Payees or any other party with respect to
this Guaranty (or any of Guarantor’s obligations hereunder), and that this Guaranty contains the entire understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior oral or written
agreements and understandings with respect thereto. 
  
 Section 8.
Representations, Warranties and Agreements of Guarantor. Guarantor hereby makes the following representations and warranties to Payees as of the date hereof: 
  
 (a) Organization and Qualification. Guarantor is a corporation, duly incorporated, validly existing and in good
standing under the laws of the State of 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”). 
  

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 (b) Authorization; Enforcement. Guarantor has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this Guaranty, and otherwise to carry out its obligations hereunder. The execution and delivery of this Guaranty by Guarantor and the consummation by it of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of the Guarantor. This Guaranty has been duly executed and delivered by Guarantor and constitutes the valid and binding obligation of Guarantor enforceable against Guarantor in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application. 
  
 (c) No Conflicts. The execution, delivery and performance of this Guaranty by Guarantor and the consummation by Guarantor of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its
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. 
  

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 Section 13. Severability. In the event that any term or provision of this Guaranty shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a governmental authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or
enforceability (a) by or before that authority of the remaining terms and provisions of this Guaranty, which shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any other authority of any of the terms and
provisions of the Guaranty. 
  
 Section 14. Consent to
Jurisdiction. Guarantor hereby irrevocably submits to the exclusive jurisdiction and venue of any New York state and federal court located in New York County, New York, over any action or proceeding arising out of any dispute between
Guarantor and Payees, and Guarantor further irrevocably consents to the service of any process in any such action or proceeding by the mailing of a copy of such process to Guarantor at the address set forth below. 
  
 Section 15. Waiver of Jury Trial, Inconvenient Forum. GUARANTOR
AND, BY ACCEPTING THIS GUARANTY, PAYEES, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY, OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND ANY RIGHT TO OBJECT TO INCONVENIENT FORUM OR IMPROPER VENUE IN NEW YORK COUNTY, NEW YORK. GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PAYEES NOR PAYEES’ COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT PAYEES WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL. GUARANTOR ALSO ACKNOWLEDGES THAT PAYEES HAVE BEEN INDUCED TO ACCEPT THIS GUARANTY BY, AMONG OTHER THINGS, THE FOREGOING WAIVER OF TRIAL BY
JURY. 
  
 Dated the 23rd day of July, 2004 
  
 SPECTRAL SOLUTIONS, INC. 
  

			
	 By:
	 	  

		
	 Address:
	 	 
	
	

	
	

  

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