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Exhibit 10.5
 
GUARANTY AGREEMENT
 
THIS GUARANTY AGREEMENT (“Guaranty Agreement”), dated as of June 29, 2012, is
executed and delivered by Richard J. Kurtz, an individual (“Guarantor”) to
Enhanced Capital Texas Fund, LP, as Agent under the Note Purchase Agreement
(“Agent”), as follows:
 
Definitions
 
The following terms shall have the following meanings wherever used in this
Guaranty Agreement:
 
“Agent” has the meaning specified in the introductory paragraph hereof.
 
“Applicable Law” means all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of governmental authorities.
 
“Borrower” means Lapolla Industries, Inc., a Delaware corporation.
 
“Full Payment” means the full and indefeasible cash payment of all Obligations
under the Note Purchase Agreement.
 
“Guaranteed Obligations” means the Obligations from time to time owing by
Borrower to the Purchasers under or in respect of the Note Purchase Agreement,
including without limitation, all unpaid principal and accrued interest
thereunder and all costs, fees and expenses owing by Borrower to Purchasers with
respect thereto.
 
“Guarantor” has the meaning specified in the introductory paragraph hereof.
 
“Guaranty Agreement” has the meaning specified in the introductory paragraph
hereof.
 
“Note Purchase Agreement” means the certain Note Purchase Agreement, dated as of
June 29, 2012, between Borrower, Agent and Enhanced Jobs for Texas Fund, LLC (as
such agreement may be renewed, extended, amended, restated, amended and
restated, supplemented, increased, restated, replaced or otherwise modified from
time to time).
 
“Obligations” means the “Obligations” as defined in the Note Purchase Agreement
(which definition is incorporated herein by reference), which includes but is
not limited to the Guaranteed Obligations.
 
“Person” means any individual, corporation, limited liability company,
partnership, joint venture, joint stock company, land trust, business trust,
unincorporated organization, governmental authority or other entity.
 
“Pledge Agreement” means that certain pledge agreement dated as of the date
hereof between Guarantor and Agent.
 
“Properly Contested” means with respect to any obligation of the Guarantor, (a)
the obligation is subject to a bona fide dispute regarding amount of the
Guarantor’s liability to pay; (b) the obligation is being properly contested in
good faith by appropriate proceedings promptly instituted and diligently
pursued; (c) non-payment could not have a Material Adverse Effect, nor result in
forfeiture or sale of any assets of the Guarantor; (d) no Lien is imposed on the
assets of the Guarantor, unless bonded and stayed to the satisfaction of Agent;
and (e) if the obligations results from entry of a judgment or other order, such
judgment or order is stayed pending appeal or other judicial review.
 
 
 

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“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any governmental
authority, including any interest, additions to tax or penalties applicable
thereto.
 
Other terms defined in the Note Purchase Agreement, wherever used herein, unless
otherwise defined herein, shall have the same meanings in this Guaranty
Agreement as are provided by the Note Purchase Agreement, and each of such
definitions hereby is deemed to be incorporated herein by reference.  Guarantor
expressly acknowledges that he has read and is familiar with all such
incorporated definitions and agrees that incorporation of same herein shall be
deemed to have the same effect and enforceability herein as though each of such
incorporated definitions is set forth herein at length.
 
RECITALS:
 
A.           Borrower and Agent have executed and entered into the Note Purchase
Agreement, which (among other things) provides for loans by Purchasers to
Borrower on the terms and conditions prescribed therein.
 
B.           This Guaranty Agreement is required by the Note Purchase Agreement
and Guarantor’s execution and delivery hereof is a condition (among other
conditions) to the making of the loans under the Note Purchase Agreement.
 
C.            Guarantor owns a majority of the issued and outstanding Capital
Stock of Borrower and has determined that (i) Guarantor will directly and
indirectly benefit from the availability of financing to Borrower under the Note
Purchase Agreement and the other transactions evidenced by and contemplated by
the Loan Documents, (ii) Guarantor will benefit, directly and indirectly, from
executing and delivering this Guaranty Agreement and (iii) it is in Guarantor’s
best interest to execute and deliver and, if called upon to do so, to perform
his obligations under this Guaranty Agreement.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Guarantor hereby agrees as follows:
 
1.             Guaranty of Guaranteed Obligations.  This Guaranty Agreement is
executed by Guarantor pursuant to the Note Purchase Agreement and is for the
benefit of Agent and the Purchasers.  As an inducement to the Purchasers to
enter into the Loan Documents and make the loans and other financial
accommodations to Borrower under the Loan Documents, for value received,
Guarantor hereby unconditionally, irrevocably and absolutely guarantees to Agent
the prompt and Full Payment of the Guaranteed Obligations when due or declared
to be due and at all times thereafter.
 
2.             Nature of Guaranty.  This Guaranty Agreement is and shall be an
absolute, unconditional, irrevocable and continuing unlimited guaranty of
payment, and not solely of collection.  Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Note
Purchase Agreement and the other Loan Documents, without setoff or counterclaim,
and regardless of any Applicable Law now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Agent with respect
thereto.  The Guaranteed Obligations may be increased, reduced or paid in full
at any time and from time to time without affecting the liability or obligation
of Guarantor under this Guaranty Agreement with respect to all Guaranteed
Obligations, whenever incurred or arising.  All Guaranteed Obligations now or
hereafter arising shall be conclusively presumed to have been made or acquired
in acceptance hereof.  Guarantor shall be liable, jointly and severally, with
Borrower and any other Person now or hereafter obligated in respect of the
payment of the Guaranteed Obligations, or any portion thereof.  It is the
intention of Guarantor and Agent that Guarantor’s liabilities and obligations
hereunder shall not be discharged except by Guarantor’s Full Payment of such
liabilities and obligations and then only to the extent of such payment (to the
extent not otherwise satisfied by Borrower or any other Person now or hereafter
obligated in respect of the Guaranteed Obligations).  To secure the Guarantor’s
obligations under this Guaranty, the Guarantor has executed the Pledge
Agreement.
 
3.             Representations and Warranties.  Guarantor hereby represents and
warrants to Agent as follows:
 
 
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(a)   This Guaranty Agreement is a legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.
 
(b)   Guarantor has filed all federal, and all material state and local tax
returns and other reports that he is required by law to file, and has paid, or
made provision for the payment of, all federal Taxes and all other material
Taxes upon him, his income and his properties that are due and payable, except
to the extent being Properly Contested.
 
(c)   Guarantor is in compliance, in all material respects with all Applicable
Law, except where noncompliance could not reasonably be expected to have a
Material Adverse Effect.
 
(d)   Guarantor has received and will receive a direct and indirect material
benefit from the transactions evidenced by and contemplated in the Note Purchase
Agreement and the other Loan Documents.  The value of the consideration received
and to be received by Guarantor is reasonably worth at least as much as the
liability and obligation of Guarantor hereunder.
 
(e)   Guarantor is currently informed of the financial condition of Borrower and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Guaranteed Obligations.  Guarantor has read
and understands the terms and conditions of the Loan Documents.  Guarantor is
familiar with, and has had an opportunity to review the books and records
regarding, the financial condition of Borrower and is familiar with the value of
any and all property intended to be security for the payment of all or any part
of the Guaranteed Obligations; provided that Guarantor is not relying on such
financial condition or the existence or value of any such security as an
inducement to enter into this Guaranty Agreement.  Guarantor has adequate means
to obtain, on a continuing basis, information concerning the financial condition
of Borrower.  Guarantor has not been induced to enter into this Guaranty
Agreement on the basis of a contemplation, belief, understanding or agreement
that any Person other than Guarantor will be liable to pay the Guaranteed
Obligations.  Agent has not made any representation, warranty or statement to
Guarantor in order to induce Guarantor to execute this Guaranty Agreement.
 
(f)            Each brokerage or other security account maintained by Guarantor
as of the date of this Guaranty Agreement is listed as follows: (a) UBS, (b)
Merrill Lynch, (c) Cantone Research, Inc., and (d) Wells Fargo Advisors.
 
(g)   The signature page to this Guaranty Agreement contains Guarantor’s full
legal name and the address of his legal residence.
 
4.             Covenants.  Guarantor agrees that until the Full Payment of
Obligations:
 
(a)           Guarantor promises to deliver to Agent:
 
(i)        promptly as soon as available and in any event within 90 days after
the close of each Fiscal Year, financial statements for Guarantor, in form and
substance satisfactory to Agent, certified by Guarantor as being true and
correct in all material respects;
 
(ii)       promptly upon opening any brokerage or other securities account other
than as listed in Section 3(f), written notice providing the name, account
promptly as soon as available and in any event within 30 days after the last day
of each March, June, September and December, copies of the monthly statement for
each of Guarantor’s brokerage or other securities accounts as of the last day of
such month; and
 
(iii)     such other reports and information (financial or otherwise) as Agent
may request from time to time in connection with Guarantor’s financial condition
or business.
 
 
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(b)   Guarantor shall comply with all Applicable Law with respect to Guarantor
unless failure to comply (other than failure to comply with any laws relating to
terrorism or money laundering, including the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
of 2001) could not reasonably be expected to have a Material Adverse Effect.
 
(c)           Guarantor shall pay and discharge all material Taxes prior to the
date on which they become delinquent or penalties attach, unless such Taxes are
being Properly Contested.
 
(d)           Guarantor shall notify Agent promptly if his legal residence
changes from that listed on the signature page hereto.
 
(e)           Guarantor shall not take any action that would result in the
occurrence of a Change of Control.
 
(f)            Guarantor’s net worth shall at all times be no less than twice
the aggregate amount of the Guaranteed Obligations then outstanding;
 
(g)           The sum (i) of Guarantor’s (x) unencumbered cash plus (y) Cash
Equivalents shall be no less than (ii) 1.25 times the aggregate amount of the
Guaranteed Obligations then outstanding.
 
5.             Obligations Not Impaired.  Guarantor agrees that his obligations
hereunder and under the other Loan Documents to which he is a party shall not be
released, diminished, impaired, reduced or affected by the occurrence of any one
or more of the following events: (i) lack of organizational authority of
Borrower; (ii) any receivership, insolvency, bankruptcy or other proceedings
affecting Borrower or its property; (iii) partial or total release or discharge
of Borrower or other Person from the performance of any obligation contained in
any instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Obligations, whether occurring pursuant to any Applicable Law or
otherwise; (iv) any change in the time, manner or place of payment of, or in any
other term of, or any increase in the amount of, all the Guaranteed Obligations,
or any portion thereof, or any other amendment or waiver of any term of, or any
consent to departure from any requirement of, any of the Loan Documents; (v) the
taking or accepting of any collateral security for all or any part of the
Guaranteed Obligations, this Guaranty Agreement or any other guaranty; (vi) the
taking or accepting of any other guaranty for all or any part of the Guaranteed
Obligations; (vii) any failure to acquire, perfect or continue any Lien on
Collateral securing all or any part of the Guaranteed Obligations or on any
other property securing this Guaranty Agreement; (viii) any exchange, release or
subordination of any Lien on any Collateral, or any release, amendment, waiver
or subordination of any term of any guaranty of the Guaranteed Obligations or
any other impairment of any collateral security or guaranty now or hereafter
securing all or any part of the Guaranteed Obligations; (ix) any failure to
dispose of any collateral security at any time securing all or any part of the
Guaranteed Obligations in a commercially reasonable manner or as otherwise may
be required by any Applicable Law; (x) any merger, reorganization, consolidation
or dissolution of Borrower, any sale, lease or transfer of any or all of the
assets of Borrower, or any change in name, business, organization, location,
composition, structure or organization of Borrower; (xi) any Change of Control
or any other change in the shareholders of Borrower; (xii) any invalidity or
unenforceability of or defect or deficiency in any of the Loan Documents; (xiii)
avoidance or subordination of the Guaranteed Obligations, or any portion
thereof; (xiv) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower because any interest contracted for, charged, or
received in respect of the Guaranteed Obligations exceeds the amount permitted
by any Applicable Law; (xv) any waiver, consent, extension, forbearance, or
granting of any indulgence by Agent with respect to the Guaranteed Obligations
or any provision of any of the Loan Documents; (xvi) any delay in or lack of
enforcement of any remedies under the Loan Documents; (xvii) the act of creating
all or any part of the Guaranteed Obligations is ultra vires, or the officers or
other representatives creating all or any part of the Guaranteed Obligations
acted in excess of their authority; (xviii) any election of remedies by Agent;
(xix) any of the Loan Documents were forged; (xx) the election by Agent in any
proceeding under the Bankruptcy Code of the application of Section 1111(b)(2)
thereof; (xxi) any borrowing or grant of a security interest by Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code, or the use of
cash collateral by Borrower, or any consent by Agent to any of the foregoing;
(xxii) the disallowance in bankruptcy of all or any portion of the claims of any
of Agent for payment of any of the Guaranteed Obligations; or (xxiii) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense available to Borrower or Guarantor, (other than Full Payment of the
Guaranteed Obligations).
 
 
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6.             Consent and Waiver.
 
(a)           Guarantor hereby waives, to the maximum extent permitted under
Applicable Law: (i) notice of acceptance of this Guaranty Agreement or other
Loan Documents to which he is a party; (ii) notice of any loans or other
financial accommodations made or extended under the Loan Documents; (iii) notice
of the amount of the Guaranteed Obligations; (iv) notice of any adverse change
in the financial condition of Borrower or other Person or of any other fact that
might affect Guarantor’s risk with respect to the Guaranteed Obligations; (v)
notice of presentment for payment, demand, protest, and notice thereof, notice
of intent to accelerate, notice of acceleration, notice of dishonor, diligence,
or promptness in enforcement and indulgences of every kind as to the Guaranteed
Obligations; (vi) notice of any of the events or circumstances enumerated in
paragraph 5 hereof, and all other notices and demands to which Guarantor might
otherwise be entitled (except if such notice is specifically required to be
given to Guarantor hereunder or under any of the Loan Documents to which
Guarantor is a party); (vii) any requirement that Agent protect, secure,
perfect, or insure any Lien on any Collateral or other property as security for
the Guaranteed Obligations or exhaust any right or take any action against
Borrower or other Person or any Collateral; (viii) the benefit of any statute of
limitation applicable to enforcement of the Guaranteed Obligations, or any
portion thereof, or any Liens in the Collateral or other property as security
for the Guaranteed Obligations; (ix) all rights by which Guarantor might be
entitled to require suit against Borrower or other Person in respect of any of
the Guaranteed Obligations; or (x) any other defense of Borrower or other Person
(other than Full Payment of the Guaranteed Obligations).
 
(b)           Guarantor hereby waives and agrees not to assert against Agent, to
the extent allowed by any Applicable Law: (i) any defense available to Borrower
against Agent arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the Guaranteed
Obligations or any Lien in the Collateral or any other property as security for
the Guaranteed Obligations; and (ii) any right or defense arising by reason of
any claim or defense based upon an election of remedies by Agent under any
Applicable Law.
 
(c)           Agent shall have the right to seek recourse against Guarantor to
the fullest extent provided for herein, and no election by Agent to proceed in
one form of action or proceeding, or against any party, or on any obligation,
shall constitute a waiver of Agent’s right to proceed in any other form of
action or proceeding or against other parties unless Agent has expressly waived
such right in writing.  Without limiting the foregoing, no action or proceeding
by Agent under any document or instrument evidencing the Guaranteed Obligations
shall serve to diminish the liability of Guarantor under this Guaranty Agreement
or other Loan Documents to which he is a party until Full Payment of the
Guaranteed Obligations.
 
(d)           To the maximum extent permitted under Applicable Law, Guarantor
waives, and agrees that his liability hereunder shall not be affected by, any
neglect, delay, omission, failure, or refusal of Agent to (i) exercise or
properly or diligently exercise any right or remedy with respect to any or all
of the Guaranteed Obligations or the collection thereof or any Collateral or
other security for or Guaranty of the Guaranteed Obligations, or any portion
thereof, (ii) take or prosecute, or properly or diligently take or prosecute,
any action for the collection of any or all of the Guaranteed Obligations
against Borrower or other Person in respect of any or all of the Guaranteed
Obligations, (iii) foreclose or prosecute, or properly or diligently foreclose
or prosecute, any action in connection with any agreement, document, or
instrument or arrangement evidencing, securing, or otherwise affecting all or
any part of the Guaranteed Obligations, or (iv) mitigate damages or take any
other action to reduce, collect, or enforce the Guaranteed Obligations.
 
(e)           Agent may at any time, without the consent of or notice to
Guarantor, without incurring responsibility to Guarantor and without impairing,
releasing, reducing, or affecting the obligations of Guarantor hereunder: (i)
change the manner, place, or terms of payment of all or any part of the
Guaranteed Obligations, or renew, extend, modify, rearrange, refinance, refund,
or alter all or any part of the Guaranteed Obligations; (ii) sell, exchange,
release, surrender, subordinate, realize upon, or otherwise deal with in any
manner and in any order any Collateral and any Lien securing all or any part of
the Guaranteed Obligations or setoff against all or any part of the Guaranteed
Obligations; (iii) neglect, delay, omit, fail, or refuse to take or prosecute
any action for the collection of all or any part of the Guaranteed Obligations
or this Guaranty Agreement or other Loan Documents or to take or prosecute any
action in connection with any of the Loan Documents; (iv) exercise or refrain
from exercising any rights against Borrower, any other Person, or otherwise act
or refrain from acting; (v) settle or compromise all or any part of the
Guaranteed Obligations or subordinate the payment of all or any part of the
Guaranteed Obligations to the payment of any obligations, indebtedness, or
liabilities which may be due or become due to Agent or others; (vi) apply any
deposit balance, fund, payment, collections through process of law or otherwise,
or other property of Borrower or any other Person to the satisfaction of
indebtedness or obligations of Borrower to Agent not guaranteed under this
Guaranty Agreement; (vii) release all or any one or more parties to any one or
more of the Loan Documents or grant other indulgences to Borrower or any other
Person in respect thereof; (viii) amend or modify in any manner and at any time
or from time to time any of the Loan Documents; (ix) partially or fully release
or enforce, exchange, release or waive any security for the Guaranteed
Obligations, or any portion thereof; and (x) bring suit against any and all
Persons liable or obligated in respect of the Guaranteed Obligations,
collectively together, jointly and severally, or separately, and apply any
amounts obtained by Agent in such manner as Agent may elect, subject to the Loan
Documents.
 
 
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(f)            Should Agent seek to enforce the obligations hereunder by action
in any court or otherwise, Guarantor waives, to the maximum extent permitted
under Applicable Law, any requirement, substantive or procedural, that (i)
rights or remedies be enforced first against Borrower or any other Person liable
for all or any part of the Guaranteed Obligations, including, without
limitation, that a judgment first be rendered against any such Person, or that
Borrower or any other such Person should be joined in such cause or (ii)
enforcement shall first be made against any Collateral or other property which
shall ever have been given to secure all or any part of the Guaranteed
Obligations.  Such waiver shall be without prejudice to Agent’s right to proceed
against Borrower or any other Person, whether by separate action or by joinder.
 
(g)            If, in connection with the exercise of any of its rights and
remedies, Agent shall forfeit any of its rights or remedies, including, without
limitation, its right to a deficiency judgment in respect of the Guaranteed
Obligations, whether because of any Applicable Law pertaining to election of
remedies, disposition of collateral, or the like, Guarantor hereby consents to
such action by Agent and waives any claim based upon such action.  Any action
which results in the denial or impairment of any such right to seek a deficiency
judgment against Borrower or any other Person shall not impair the obligation of
Guarantor to Full Payment of the Guaranteed Obligations or any other obligation
of Guarantor contained herein.
 
(h)            Guarantor agrees that if, after the occurrence and during the
continuance of an Event of Default, Agent is prevented by any Applicable Law
from exercising its right to accelerate the maturity of all or any portion of
the Guaranteed Obligations, to collect interest thereon, or to enforce or
exercise any other right or remedy with respect thereto, or Agent is prevented
from taking any action to enforce any Lien in the Collateral or any other
property as security for the Guaranteed Obligations, Guarantor shall pay to
Agent, on demand, the amount that would otherwise have been due and payable had
such rights and remedies been permitted to be exercised by Agent, as the case
may be.
 
(i)             Guarantor hereby assumes sole responsibility for keeping himself
informed of the financial condition of Borrower and each other Person liable for
all or any part of the Guaranteed Obligations, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations or any part
thereof.  Guarantor agrees that Agent shall not have any obligation or duty to
advise him of any such condition or any such circumstance.
 
(j)             Guarantor consents and agrees that Agent shall not be under any
obligation to marshal any assets in favor of Guarantor or otherwise in
connection with obtaining payment of any or all of the Guaranteed Obligations
from any Person or source.
(k)            Guarantor agrees that Agent may, at any time and from time to
time in its discretion and with or without valuable consideration, allow
substitution or withdrawal of Collateral or other security and release
Collateral or other security without impairing or diminishing the liabilities or
obligations of Guarantor hereunder.
 
(l)             Guarantor agrees that Agent shall not be liable for any failure
to use diligence or care in the collection of the Guaranteed Obligations, in the
creation or perfection of any lien, security interest, or assignment intended as
security, or in preserving the liability of any Person liable or obligated on
the Guaranteed Obligations.
 
 
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(m)           All payments by Borrower and proceeds of Collateral shall be
applied to the Obligations as provided by the Note Purchase Agreement.
 
7.             Default.
 
(a)            Upon the occurrence and during the continuation of an Event of
Default and at any time following the death of Richard J. Kurtz, Guarantor
agrees to pay to Agent, for the benefit of Purchasers, at Agent’s office located
in New York County, New York or at such other place as Agent may specify to
Guarantor in writing, on demand by Agent and without further notice of dishonor
and without notice of any kind to any other Person, the full unpaid amount of
the Guaranteed Obligations, in immediately available funds, or such lesser
amount, if any, as may then be due and payable and demanded by Agent from time
to time.  If acceleration of the time for payment of any amount payable by
Borrower or any other Person under or with respect to any of the Guaranteed
Obligations is stayed or otherwise delayed upon the insolvency, bankruptcy, or
reorganization of Borrower or any other Person, all such amounts otherwise
subject to acceleration under the terms of the Guaranteed Obligations shall
nonetheless be payable by Guarantor hereunder promptly on demand by Agent, and
Guarantor expressly and unconditionally agrees to make Full Payment of the
Guaranteed Obligations.
 
(b)           The occurrence of any of the following shall constitute a
“Guarantor Default” under this Agreement:
 
(i)        Garantor fails to make Full Payment of the Guaranteed Obligations
within three (3) Business Days of demand by Agent.
 
(ii)      The Guarantor shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee or custodian or any of his
property, or shall generally fail to pay his debts as they become due, or shall
make a general assignment for the benefit of creditors; the Guarantor shall file
a voluntary petition in bankruptcy, or seeking reorganization, in order to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time (“Bankruptcy Code”), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against the Guarantor, or the Guarantor
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or the Guarantor shall be adjudicated a
bankrupt, or an order for relief shall be entered against the Guarantor by any
court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
 
8.             No Waiver, Remedies.
 
(a)            No failure on the part of Agent to exercise, and no delay in
exercising, any right or remedy hereunder or under the Pledge Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy.  In no event shall any waiver of the
provisions of this Guaranty Agreement be effective unless the same be in writing
and signed by an officer of Agent, and then only in the specific instance and
for the purpose given.  The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies provided by any Applicable Law or
any of the other Loan Documents, including without limitation the Pledge
Agreement.
 
(b)           Failure by Agent at any time or times hereafter to require strict
performance by Borrower, Guarantor, or any other Person of any of the
requirements contained in any of the Loan Documents now or at any time, from
time to time, hereafter executed and delivered by Borrower, Guarantor, or any
such other Person shall not waive, affect, or diminish the right to demand
strict performance thereof, and such right shall not be deemed to have been
modified or waived by any course of conduct or knowledge of Agent or any officer
or employee thereof.
 
 
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(c)            No waiver of any Event of Default or any other breach, default,
or requirement shall operate as a waiver of any other Event of Default or the
same Event of Default on a future occasion, and no action permitted hereunder
shall in any way affect or impair any of the rights of Agent or the obligations
of Guarantor under this Guaranty Agreement or under any of the other Loan
Documents (except to the extent, if any, as may be specified in any such
waiver).  Any determination by a court of competent jurisdiction of the amount
of any principal and/or interest or other amount constituting any of the
Guaranteed Obligations shall be conclusive and binding on Guarantor irrespective
of whether Guarantor was a party to the suit or action in which such
determination was made.
 
9.             Notice of Sale.  In the event that Guarantor is entitled to
receive any notice under the UCC, as it exists in the state governing any such
notice, of the sale or other disposition of any Collateral or other property
securing all or any part of the Guaranteed Obligations, it is agreed that at
least ten days notice of the time and place of any public sale, or the time
after which any private sale or other disposition may be made of any such
Collateral or other property, shall be deemed to be reasonable notice in
conformity with such requirements; provided, that notice given in any other
reasonable manner or at any other reasonable time shall be sufficient.
 
10.           Payment by Guarantor.  Whenever Guarantor pays any sum which is or
may become due under this Guaranty Agreement, Guarantor shall also deliver
written notice thereof to Agent contemporaneously with such payment.  Such
notice shall be effective for purposes of this paragraph when given with such
payment to Agent in a manner prescribed for notices hereunder.  For purposes of
this Guaranty Agreement, in the absence of such notice in compliance with the
provisions hereof, any sum received by Agent on account of the Guaranteed
Obligations shall be conclusively deemed paid by Borrower.
 
11.           Agent.  Agent shall have all of the rights, powers, and benefits
as are prescribed by the Loan Documents.
 
12.            Cumulative Remedies; No Election.  If Guarantor is or becomes
liable or obligated for the Guaranteed Obligations, by endorsement or otherwise,
other than under this Guaranty Agreement, such liability or obligation shall not
be in any manner impaired or affected hereby, and the rights and remedies of
Agent hereunder shall be cumulative of any and all other rights and remedies
that Agent may ever have against Guarantor.  The exercise by Agent of any right
or remedy hereunder or under any other agreement, document, or instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.  This Guaranty Agreement may be enforced from time to
time as often as occasion for enforcement may arise as may be determined by
Agent, and it is agreed and understood that it shall not be necessary for Agent,
in order to enforce payment by Guarantor, first to exercise any rights or
remedies against Borrower, the Collateral, or any other Person under the Loan
Documents or any Applicable Law.
 
13.           Binding Effect.  This Guaranty Agreement, and Guarantor’s
performance hereunder, is for the benefit of Agent, the Purchasers, and their
successors and permitted assigns, and in the event of an assignment by Agent, or
its successors or permitted assigns, of the Guaranteed Obligations, or any part
thereof, the rights and benefits hereunder, to the extent applicable to the
indebtedness, liabilities, and obligations so assigned, shall be deemed
transferred with such indebtedness, liabilities, and obligations without
necessity of further express action.  This Guaranty Agreement is binding upon
Guarantor, and his successors and assigns, including, without limitation, the
estate of Guarantor and his heirs upon his death.
 
14.           Subordination.  Guarantor hereby agrees that the Subordinated
Indebtedness (as defined below) shall be subordinate and junior in right of
payment to the prior Full Payment of all Guaranteed Obligations as herein
provided.  After the occurrence and during the continuance of an Event of
Default, the Subordinated Indebtedness shall not be payable, and no payment of
principal, interest, or other amounts on account thereof, and no property or
guarantee of any nature to secure or pay the Subordinated Indebtedness shall be
made or given, directly or indirectly, by or on behalf of Borrower or received,
accepted, retained, or applied by Guarantor unless and until Full Payment of the
Guaranteed Obligations.  If any sums shall be paid to Guarantor by Borrower or
any other Person on account of the Subordinated Indebtedness when such payment
is not permitted hereunder, such sums shall be held in trust by Guarantor for
the benefit of Agent and shall forthwith be paid to Agent without affecting the
liability of Guarantor under this Guaranty Agreement and may be applied by Agent
against the Guaranteed Obligations in accordance with the Note Purchase
Agreement.  Upon the request of Agent, Guarantor shall execute, deliver, and
endorse to Agent such documentation as Agent may reasonably request to perfect,
preserve, and enforce its rights hereunder.  For purposes of this Guaranty
Agreement, the term “Subordinated Indebtedness” means, with respect to
Guarantor, all indebtedness, liabilities, and obligations of Borrower to
Guarantor, whether such indebtedness, liabilities, and obligations now exist or
are hereafter incurred or arise, or are direct, indirect, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of whether
such indebtedness, liabilities, or obligations are evidenced by a note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such indebtedness, obligations, or liabilities may, at their
inception, have been, or may hereafter be created, or the manner in which they
have been or may hereafter be acquired by Guarantor.  Guarantor agrees that any
and all Liens (including any judgment liens), upon Borrower’s assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all Liens upon Borrower’s assets securing payment of the
Guaranteed Obligations or any part thereof, regardless of whether such Liens in
favor of Guarantor or Agent presently exist or are hereafter created or attached
(provided that the foregoing shall not be interpreted or deemed to allow the
existence of any such Liens to the extent otherwise prohibited by the Loan
Documents).  Without the prior written consent of Agent, Guarantor shall not (i)
file suit against Borrower or exercise or enforce any other creditor’s right he
may have against Borrower or (ii) foreclose, repossess, sequester, or otherwise
take steps or institute any action or proceedings (judicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor’s relief, or insolvency
proceeding) to enforce any obligations of Borrower to Guarantor or any Liens
held by Guarantor on assets of Borrower.  In the event of any receivership,
bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency
proceeding involving Borrower as debtor, Agent shall have the right to prove and
vote any claim under the Subordinated Indebtedness and to receive directly from
the receiver, trustee, or other court custodian all dividends, distributions,
and payments made in respect of the Subordinated Indebtedness until the Full
Payment of the Guaranteed Obligations.  Agent may apply any such dividends,
distributions, and payments against the Guaranteed Obligations in accordance
with the Note Purchase Agreement or other Loan Documents.  Conflict in
Agreements. If the subordination provisions of this Section 14 conflict with the
terms of that certain Subordination Agreement dated as of the date hereof
between Guarantor, Agent and Borrower (the “Subordination Agreement”), the terms
of such Subordination Agreement shall govern the subordination terms between
Agent and the Guarantor.
 
 
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15.           Right of Setoff.  Guarantor hereby grants to Agent a right of
setoff upon any and all monies, securities, or other property of Guarantor, and
the proceeds therefrom, now or hereafter held or received by or in transit to
Agent from or for the account of Guarantor, whether for safekeeping, custody,
pledge, transmission, collection, or otherwise, and also upon any and all
deposits (general or special) and credits of Guarantor, and any and all claims
of Guarantor against Agent at any time existing.  The right of setoff granted
pursuant to this paragraph shall be cumulative of and in addition to Agent’s
common law right of setoff.
 
16.           Further Assurances.  Upon the request of Agent, Guarantor will, at
any time and from time to time, duly execute and deliver to Agent any and all
such further agreements, documents, and instruments, and supply such additional
information, as may be reasonably necessary to obtain the full benefits of this
Guaranty Agreement.
 
17.           Savings.  If any provision of this Guaranty Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable, this Guaranty
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
herefrom.  Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of this Guaranty
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.  Notwithstanding anything to the contrary contained herein, no
provision herein or in any other document evidencing the Guaranteed Obligations
shall require the payment or permit the collection of interest in excess of the
maximum permitted by any Applicable Law.  Guarantor and, by its acceptance of
this Guaranty Agreement, the Agent, hereby confirms that it is the intention of
such Person that this Guaranty Agreement and the obligations of Guarantor
hereunder not constitute a fraudulent transfer or conveyance for the purposes of
any insolvency proceeding, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Guaranty Agreement and the obligations of Guarantor
hereunder.  To effectuate the foregoing intention, the Agent and Guarantor
hereby agree that the obligations of Guarantor under this Guaranty Agreement at
any time shall be limited to the maximum amount as will not result in such
obligations of Guarantor hereunder or this Guaranty Agreement constituting an
unenforceable fraudulent transfer or fraudulent conveyance.
 
 
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18.           Modification in Writing.  No modification, consent, amendment, or
waiver of any provision of this Guaranty Agreement, and no consent to any
departure by Guarantor herefrom, shall be effective unless the same shall be in
writing and signed by a duly authorized officer of Agent and, as to any
modification or amendment, Guarantor, and then shall be effective only in the
specific instance and for the specific purpose for which given.
 
19.           Expenses.  Guarantor agrees to pay on demand by Agent all
reasonable out-of-pocket costs and expenses incurred by Agent in connection with
the negotiation, preparation, execution, and performance of the terms and
provisions of this Guaranty Agreement and any and all amendments, modifications,
renewals, restatements, and/or supplements hereto from time to time, including,
without limitation, the reasonable out-of-pocket fees and expenses of legal
counsel to Agent, in each case, if not paid by Borrower in accordance with the
Note Purchase Agreement and subject to any applicable limitations contained in
the Note Purchase Agreement.  If Guarantor should breach or fail to perform any
provision of this Guaranty Agreement, Guarantor agrees to pay to Agent all costs
and expenses incurred by Agent in the enforcement of this Guaranty Agreement
from time to time, including, without limitation, the reasonable fees and
expenses of all legal counsel to Agent.
 
20.            No Oral Agreements.  THIS GUARANTY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN GUARANTOR AND LENDER RELATING TO THE SUBJECT MATTER OF THIS
GUARANTY AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.  THIS GUARANTY AGREEMENT
SUPERSEDES ALL PRIOR (IF ANY) ORAL AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS
RELATING TO THE SUBJECT MATTER OF THIS GUARANTY AGREEMENT.
 
21.           Notices.  Unless otherwise specifically provided in this Guaranty
Agreement, all notices or other communications required or permitted to be given
under this Guaranty Agreement shall be given, if to Agent, as specified in the
Note Purchase Agreement, or if to Guarantor, to Borrower in the manner specified
in the Note Purchase Agreement.
 
22.           Survival.  All representations, warranties, covenants and
agreements of Guarantor in this Guaranty Agreement shall survive the execution
of this Guaranty Agreement.
 
23.           Counterparts.  This Guaranty Agreement may be executed in any
number of counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute one and the same Guaranty
Agreement.  Delivery of the signature page of this Guaranty Agreement by
telecopy or other electronic means shall be effective as delivery of a manually
executed counterpart hereof and shall be deemed valid as an original.
 
24.           GOVERNING LAW.  THIS GUARANTY AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW
PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).
 
25.           Consent to Forum.  GUARANTOR HEREBY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER
NEW YORK COUNTY, NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO
THIS GUARANTY AGREEMENT, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY
HIM SOLELY IN ANY SUCH COURT.  GUARANTOR IRREVOCABLY WAIVES ALL CLAIMS,
OBJECTIONS AND DEFENSES THAT HE MAY HAVE REGARDING SUCH COURT’S PERSONAL OR
SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  GUARANTOR IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION
28.  Nothing herein shall limit the right of Agent to bring proceedings against
Guarantor in any other court, nor limit the right of any party to serve process
in any other manner permitted by Applicable Law.  Nothing in this Guaranty
Agreement shall be deemed to preclude enforcement by Agent of any judgment or
order obtained in any forum or jurisdiction.
 
 
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26.           Waivers by Guarantor.  To the fullest extent permitted by
Applicable Law, Guarantor waives (a) the right to trial by jury (which Agent
hereby also waives) in any proceeding or dispute of any kind relating in any way
to this Guaranty Agreement or the Guaranteed Obligations; (b) presentment,
demand, protest and notice of presentment; (c) notice prior to taking possession
or control of any Collateral for the Guaranteed Obligations; (d) any bond or
security that might be required by a court prior to allowing Agent to exercise
any rights or remedies; (e) the benefit of all valuation, appraisement and
exemption laws; (f) any claim against Agent, on any theory of liability, for
special, indirect, consequential, exemplary or punitive damages (as opposed to
direct or actual damages) in any way relating to any Obligations, Loan Documents
or transactions relating thereto; and (g) notice of acceptance
hereof.  Guarantor acknowledges that the foregoing waivers are a material
inducement to Agent entering into the Note Purchase Agreement and that Agent is
relying upon the foregoing in its dealings with Borrower.  Guarantor has
reviewed the foregoing waivers with his legal counsel and has knowingly and
voluntarily waived his jury trial and other rights following consultation with
legal counsel.  In the event of litigation, this Guaranty Agreement may be filed
as a written consent to a trial by the court.
 
27.            Irrevocable Nature of Guaranty.  This Guaranty Agreement shall be
irrevocable.  Guarantor acknowledges that any purported or attempted revocation
shall constitute an Event of Default.
 
28.            Notice.  Except as otherwise provided herein, any notices
desired, required or permitted to be given hereunder shall be delivered by email
to each email address listed below (as applicable) and (i) personally, (ii)
mailed, certified or registered mail, return receipt requested, postage prepaid,
(iii) by commercial overnight courier service, charges prepaid, or (iv) by
confirmed facsimile (provided that a paper version is also sent by any of (i),
(ii), or (iii) above) to the following addresses and numbers, or such other
addresses and numbers as shall be given by notice delivered hereunder:
 
 
If to the Agent:

 
Enhanced Capital Texas Fund LP
601 Lexington Avenue, 55th Floor
New York, NY  10022
Attn: Barry Osherow
Email: bosherow@enhancedcap.com

and
Shane McCarthy
Email: smccarthy@enhancedcap.com

 
with copies of notices to any of the foregoing (which shall not constitute
notice) to:

Perkins Coie LLP
131 South Dearborn Street
Suite 1700
Chicago, IL 60603
Attn: Teri A. Lindquist
Email: tlindquist@perkinscoie.com
Facsimile: (312) 324-9547
 
 
If to the Guarantor:

 
Richard J. Kurtz
270 Sylvan Avenue
Englewood Cliffs, NJ 07632
 
 
 
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with copies of notices to any of the foregoing (which shall not constitute
notice) to:
 
McDermott Will & Emery LLP
340 Madison Avenue
New York, NY 10173
Attn: Stephen E. Older
Email: solder@mwe.com
Facsimile: (212) 547-5444

or to such other address or telecopy number as each party may designate for
itself by like notice give in accordance with this Section 28.
 
29.           Headings.  The paragraph headings in this Guaranty Agreement are
for convenience of identification only and do not limit any of the provisions
hereof.
 
30.            Patriot Act Notice.  Guarantor acknowledges notice by Agent that
pursuant to the requirements of the Patriot Act, Agent is required to obtain,
verify and record information that identifies Guarantor, including his legal
name, address, social security number, date of birth and other information that
will allow Agent to identify him in accordance with the Patriot Act.
 
 
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IN WITNESS WHEREOF, the undersigned has executed this Guaranty Agreement as of
the effective date specified in the introductory paragraph hereinabove.
 

   
GUARANTOR
             
/s/  Richard J. Kurtz
     
Richard J. Kurtz
             
Full Legal Name:
                             
Address of Legal Residence:
                                 

 
 
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