Exhibit 10.1

GUARANTY

     GUARANTY (the “Guaranty”), dated as of July 16, 2008, by, Valcent USA Inc.,
a Nevada corporation, Valcent Manufacturing, Ltd., a Texas limited partnership,
Valcent Management LLC, a Nevada limited liability company, Vertigro Algae
Technologies LLC, a Texas limited liability company, and Valcent Products EU
Limited, a corporation organized under the laws of the United Kingdom, each with
an address of Suite 1010 - 789 West Pender Street, Vancouver, British Columbia,
Canada V6C 1H2 (each a “Guarantor”, collectively, the “Guarantors”), in favor of
the Purchasers identified in the Purchase Agreement (as defined below)
(collectively, and together with their respective successors, transferees and
assigns, “Secured Parties”).

     WHEREAS, the Guarantors are subsidiaries or affiliates of Valcent Products
Inc. (the “Borrower”); and

     WHEREAS, in accordance with certain senior secured convertible notes, dated
as of the date hereof(the “Notes”), executed by the Borrower, and certain
related agreements between the Borrower and the Secured Parties (collectively,
as amended, restated, or extended from time to time, the “Loan Documents”), the
Secured Parties have agreed to loan to the Borrower up to Two Million, Two
Hundred Forty Thousand Dollars ($2,428,160) (the “Loan”); and

     WHEREAS, the Secured Parties’ willingness to extend the loan is conditioned
upon the Guarantors executing and delivering this Guaranty; and

     WHEREAS, the aforesaid Loan will be beneficial to the Guarantors inasmuch
as the proceeds of the Loan to the Borrower will indirectly benefit the
Guarantors;

     NOW, THEREFORE, in order to induce the Secured Parties to make the Loan to
the Borrower pursuant to the Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the Guarantors, the Guarantors hereby agree as follows:

     1.     Guaranty of Payment and Performance. Subject to the limitations
described in Paragraph 4, the Guarantors hereby jointly and severally guarantee
to the Secured Parties the full and punctual payment when due (whether at
maturity, by acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the Borrower to the Secured
Parties, whether direct or indirect, absolute or contingent, due or to become
due, secured or unsecured, now existing or hereafter arising or acquired
(whether by way of discount, letter of credit, lease, loan, overdraft or
otherwise), including without limitation all obligations under the Note
(collectively, the “Obligations”). This Guaranty is an absolute, unconditional
and continuing guaranty of the full and punctual payment and performance of the
Obligations and not of their collectibility only and is in no way conditioned
upon any requirement that the Secured Parties first attempt to collect any of
the Obligations from the Borrower or resort to any security or other means of
obtaining their payment. Should the Borrower default in the payment or
performance of any of the Obligations, the obligations of each Guarantor
hereunder shall become immediately due and payable to the Secured Parties,
without demand or notice of any nature, all of which are expressly

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waived by each Guarantor. Payments by each Guarantor hereunder may be required
by the Secured Parties on any number of occasions.

     2.     Guarantors’ Agreement to Pay. Each Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Secured Parties, on
demand, all reasonable costs and expenses (including court costs and reasonable
legal expenses) incurred or expended by the Secured Parties in collection with
enforcement of this Guaranty, together with interest on amounts recoverable
under this Guaranty from the time such amounts become due under this Guaranty
until payment, at the rate per annum equal to the default rate set forth in the
Note; provided that if such interest exceeds the maximum amount permitted to be
paid under applicable law, then such interest shall be reduced to such maximum
permitted amount.

     3.     Unlimited Guaranty; Covenant. Except as described in Paragraph 4,
the liability of each Guarantor hereunder shall be unlimited to the extent of
the Obligations and the other obligations of each Guarantor hereunder
(including, without limitation, under Section 2 above). The Guarantors hereby
covenant and agree not to take or refrain from taking any action that would
constitute an Event of Default under the Notes, including, without limitation,
any distribution to members or stockholders or sales of assets prohibited by the
terms of the Notes.

     4.     Guaranty of Vertigro Algae Technologies LLC. Notwithstanding any
other provision of this Guaranty or the Loan Documents, with respect to Vertigro
Algae Technologies LLC (“Vertigro”), this Guaranty only applies to Vertigro as a
guarantor to the extent of the lesser of: (i) 130% of the Vertigro Advances (as
defined below); or (ii) the amount of the Notes outstanding. The lesser of (i)
and (ii) is defined as the “Release Payment.” If and when Vertigro pays the
Release Payment to the Secured Parties (or attempts to pay the Release Payment
and, in lieu thereof, and within ten (10) days after the notice of such
prepayment by Vertigro and prior to such prepayment, a Secured Party converts
the portion of the Note to be prepaid), Vertigro’s obligations hereunder shall
be deemed fulfilled and Vertigro shall be released as a Debtor and Guarantor
under the Security Agreement of even date herewith. As used herein, the
“Vertigro Advances” means the aggregate principal amount of the following: (i)
any cash loans from the Borrower or any Subsidiary (as defined in the Purchase
Agreement, dated as of the date hereof, between the Borrower and the Secured
Parties) to Vertigro, (ii) any advances or equity investments by the Borrower or
any Subsidiary to or in Vertigro occurring on or after the date hereof, (iii)
the difference between the price of any products or services sold or provided by
Vertigro to the Borrower or any Subsidiary and the fair market value of such
products or services (but not less than zero), (iv) the difference between the
price of any products or services sold or provided by the Borrower or any
Subsidiary to Vertigro and the fair market value of such products or services
(but not less than zero), and (v) any debt forgiveness or assumption of any
liability of Vertigro by the Borrower or any Subsidiary. Any payment of the
Release Payment shall be made on a pro rata basis among the Secured Parties, and
shall be applied by a Secured Party: first, to fees and expenses due and owing
pursuant to the Loan Documents, second, to interest (if any) due and owing
pursuant to the Loan Documents, and third, to principal outstanding under, and
redemption fees due in respect of, the Note held by such Secured Party. Vertigro
acknowledges and agrees that any redemption effected pursuant to this Section 4
as a result of a Release Payment shall be at 130% of the principal amount of the
portion of the Note so redeemed. On and after Vertigro is released pursuant to
this Section 4, it shall not accept or demand any Vertigro Advances, and, if so
received, it shall hold the same in trust for the benefit of the Secured
Parties.

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     5.     Waivers by Guarantors; Secured Party’s Freedom to Act. Each
Guarantor agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Secured Parties with respect thereto. Each Guarantor waives
presentment, demand, protest, notice of acceptance, notice of Obligations
incurred and all other notices of any kind, all defenses which may be available
to Borrower by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Borrower, and all suretyship defenses generally. Without limiting the
generality of the foregoing, each Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of each Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of any Secured Party to assert any claim or demand or to enforce any
right or remedy against the Borrower; (ii) any extensions or renewals of any
Obligation; (iii) any rescissions, waivers, amendments or modifications of any
of the terms or provisions of any agreement evidencing, securing or otherwise
executed in connection with any Obligation (provided, that, the obligations of
each Guarantor hereunder shall be appropriately modified to reflect any
amendment or modification of the Obligations); (iv) the substitution or release
of any entity primarily or secondarily liable for any Obligation; (v) the
adequacy of any rights any Secured Party may have against any collateral or
other means of obtaining repayment of the Obligations; (vi) the impairment of
any collateral securing the Obligations, including without limitation the
failure to perfect or preserve any rights a Secured Party might have in such
collateral or the substitution, exchange, surrender, release, loss or
destruction of any such collateral; or (vii) any other act or omission which
might in any manner or to any extent vary the risk of any Guarantor or otherwise
operate as a release or discharge of any other Guarantor, all of which may be
done without notice to any Guarantor.

     6.     Unenforceability of Obligations Against Borrower. If for any reason
the Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from the Borrower by operation of law or for any other reason, except as
described in Paragraph 4 this Guaranty shall nevertheless be binding on each
Guarantor to the same extent as if each Guarantor at all times had been the
principal obligor on all such Obligations. In the event that acceleration of the
time for payment of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of any agreement evidencing,
securing or otherwise executed in connection with any Obligation shall be
immediately due and payable by each Guarantor.

     7.     Subrogation; Subordination. Until the payment and performance in
full of all Obligations, no Guarantor shall exercise any rights against the
Borrower arising as a result of payment by any Guarantor hereunder, by way of
subrogation or otherwise, and will not prove any claim in competition with any
Secured Party or its affiliates in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; no Guarantor will claim any
set-off or counterclaim against the Borrower in respect of any liability of any
Guarantor to the Borrower; and each Guarantor waives any benefit of and any
right to participate in any collateral which may be held by any Secured Party.
The payment of any amounts due with respect to any indebtedness of the Borrower
now or hereafter held by any Guarantor is hereby subordinated to the prior
payment

 

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in full of the Obligations. Each Guarantor agrees that after the occurrence of
any default in the payment or performance of the Obligations, after the
expiration of any applicable cure period, it will not demand, sue for or
otherwise attempt to collect after such time any such indebtedness of the
Borrower to such Guarantor until the Obligations shall have been paid in full.
If, notwithstanding the foregoing sentence, any Guarantor shall collect, enforce
or receive any amounts in respect of such indebtedness. such amounts shall be
collected, enforced and received by such Guarantor as trustee for the Secured
Parties and be paid over to the Secured Parties on account of the Obligations
without affecting in any manner the liability of any Guarantor under the other
provisions of this Guaranty.

     8.     Further Assurances. Each Guarantor agrees to do all such things and
execute all such documents, as a Secured Party may consider reasonably necessary
or desirable to give full effect to this Guaranty and to perfect and preserve
the rights and powers of a Secured Party hereunder.

     9.     Termination; Reinstatement. Except as described in Paragraph 4 this
Guaranty shall remain in full force and effect until the earlier of: (i) the
Obligations are paid in full and not subject to any recapture or preference in
bankruptcy or similar proceedings or (ii) the Secured Parties are given written
notice of each Guarantor’s intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the whole
or any part of the Obligations. No such notice under (ii) above shall be
effective against a Secured Party unless received and acknowledged by an officer
of a Secured Party. No notice under (ii) above shall affect any rights of a
Secured Party or of any affiliate hereunder with respect to any Obligations
incurred prior to such notice. This Guaranty shall continue to be effective or
be reinstated. notwithstanding any notice or termination, if at any time any
payment made or value received with respect to an Obligation is rescinded or
must otherwise be returned by a Secured Party upon the insolvency. bankruptcy or
reorganization of the Borrower, or otherwise, all as though such payment had not
been made or value received.

     10.     Successors and Assigns. This Guaranty shall be jointly and
severally binding upon each Guarantor, its successors and assigns, and shall
inure to the benefit of and be enforceable by the Secured Parties and their
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, upon the receipt of the Borrower’s prior written consent
which shall not be unreasonably withheld the Secured Parties may assign or
otherwise transfer any agreement or any note held by it evidencing. securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein. to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set forth in the agreement
evidencing such assignment. transfer or participation, with all the rights in
respect thereof granted to the Secured Parties herein.

     11.     Amendments and Waivers. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by any Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Secured Parties
holding a majority of the pl1ncipal amount of the Notes. No failure on the part
of a Secured Party to exercise, and no delay in exercising. any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

 

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     12.     Notices. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantors, at the address set forth above, and if to a Secured Party, at the
address set forth in the Purchase Agreement (as defined in the Note).

     13.     Governing Law; Consent to Jurisdiction. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of New York
without reference to its conflicts of laws provisions. Each Guarantor agrees
that any suit for the enforcement of this Guaranty may be brought in the courts
of the State of New York or any federal court sitting therein and consents to
the non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon the Guarantors by mail at the address specified in
Section 12 hereof. Each Guarantor hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
was brought in an inconvenient court. Any enforcement action relating to this
Guarantee may be brought by motion for summary judgment in lieu of a complaint
pursuant to Section 3213 of the New York Civil Practice Law and Rules. In no
event shall the rate of interest payable hereunder exceed the maximum rate (if
any) permitted by applicable law.

     14.     WAIVER OF JURY TRIAL. EACH GUARANTOR AND, BY THEIR ACCEPTANCE OF
THIS GUARANTY, EACH SECURED PARTY, HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF: (A) THIS
GUARANTY OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THE
OBLIGATIONS; (B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF; OR (C) ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN ANY GUARANTOR
AND ANY SECURED PARTY.

     15.     Certain References. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the person, persons, entity or entities may require. The terms
“herein”, “hereof “ or “hereunder” or similar terms used in this Guaranty refer
to this entire Guaranty and not only to the particular provision in which the
term is used.

     16.     Miscellaneous. This Guaranty, together with the Security Agreement,
delivered by the Guarantors as of the date hereof to the Secured Parties,
constitutes the entire agreement of the Guarantors with respect to the matters
set forth herein. The rights and remedies herein provided are cumulative and not
exclusive of any remedies provided by law or any other agreement, and this
Guaranty shall be in addition to any other guaranty of the Obligations. The
invalidity or unenforceability of anyone or more sections of this Guaranty shall
not affect the validity or enforceability of its remaining provisions. Captions
are for the ease of reference only and shall not affect the meaning of the
relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural, masculine, feminine and
generic forms of the terms defined. The obligations of each Guarantor shall be
joint and several.

 

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     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date appearing in the introductory paragraph of this
Guaranty.

VALCENT USA INC.

By:  PERRY A. MARTIN
        Name: Perry A. Martin
        Title: President

VALCENT MANUFACTURING, INC.

By:  PERRY A. MARTIN
        Name: Perry A. Martin
        Title: President

VALCENT MANAGEMENT LLC

By:  PERRY A. MARTIN
        Name: Perry A. Martin 
        Title: President

VERTIGRO ALGAE TECHNOLOGIES, LLC

By:  F. GEORGE ORR
        Name: F. George Orr
        Title: CFO & Director

VALCENT PRODUCTS EU LIMITED

By:  M. GLEN KERTZ
        Name: M. Glen Kertz
        Title: Director

 

 

 

 

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