GUARANTY
 
  This Guaranty is made this 24th day of November 2009, by such guarantors
listed on the signature pages hereof (collectively, jointly and severally,
“Guarantors,” and each, individually, a “Guarantor”), in favor of Iroquois
Master Fund Ltd. (together with its successors and assigns, “Buyer”).
 
RECITALS
 
WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of
November 23, 2009 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules thereto, the “Securities Purchase
Agreement”) by and among NACEL ENERGY CORPORATION, a Wyoming corporation
(“Parent”), Buyer, and each of the other investors listed on the Schedule of
Buyers attached thereto (together with Buyer, “Buyers”), Parent has agreed to
sell, and Buyers have agreed to purchase, severally and not jointly, certain
Notes and Warrants; and
 
WHEREAS, each Guarantor is a direct or indirect wholly-owned Subsidiary of
Parent and will receive direct and substantial benefits from the purchase by
Buyers of the Notes and Warrants; and
 
WHEREAS, in order to induce Buyers to purchase, severally and not jointly, the
Notes and Warrants as provided for in the Securities Purchase Agreement,
Guarantors have agreed to jointly and severally guaranty all of Parent’s
obligations under and with respect to the Notes and the Securities Purchase
Agreement; and
 
WHEREAS, in connection herewith, Guarantors, Parent and Buyers have entered into
that certain Security Agreement dated of even date herewith (as amended,
restated, supplemented, or otherwise modified from time to time, including all
schedules thereto, the “Security Agreement”), pursuant to which Guarantors and
Parent (Guarantors and Parent, collectively, “Obligors” and each, individually,
an “Obligor”) have granted each of the Buyers continuing security interests in
all assets of each Obligor, as more fully set forth in the Security Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, each Guarantor hereby agrees as follows:
 
1.           Definitions. All capitalized terms used herein that are not
otherwise defined herein shall have the meanings given them in the Security
Agreement.
 
2.           Guaranteed Obligations. Guarantors jointly and severally hereby
irrevocably and unconditionally guaranty to Buyer the due and punctual payment
in full of all of the present and future payment and performance obligations of
each Obligor arising under the Securities Purchase Agreement, any and all Notes
payable to Buyer, the Security Agreement, and the other Transaction Documents,
including, without duplication, attorneys’ fees and expenses and any interest,
fees, or expenses that accrue after the filing of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
Insolvency Proceeding (collectively, the “Guaranteed Obligations”).
 

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3.           Guarantors’ Representations and Warranties. Each Guarantor
represents and warrants to Buyer that such Guarantor expects to derive
substantial benefits from the purchase by Buyers of the Notes and Warrants and
the other transactions contemplated hereby and by the other Transaction
Documents. Buyer may rely conclusively on a continuing warranty, hereby made,
that such Guarantor continues to be benefited by this Guaranty and Buyer shall
have no duty to inquire into or confirm the receipt of any such benefits, and
this Guaranty shall be effective and enforceable by Buyer without regard to the
receipt, nature or value of any such benefits.
 
4.           Unconditional Nature. No act or thing need occur to establish any
Guarantor’s liability hereunder, and no act or thing, except full payment and
discharge of all of the Guaranteed Obligations, shall in any way exonerate any
Guarantor hereunder or modify, reduce, limit or release any Guarantor’s
liability hereunder. This is an absolute, unconditional and continuing guaranty
of payment of the Guaranteed Obligations and shall continue to be in force and
be binding upon each Guarantor until all of the Guaranteed Obligations are
indefeasibly paid in full and discharged.
 
5.           Subrogation. No Guarantor will exercise or enforce any right of
contribution, reimbursement, recourse or subrogation available to such Guarantor
as to any of the Guaranteed Obligations, or against any Person liable therefor,
or as to any collateral security therefor, unless and until all of the
Guaranteed Obligations shall have been indefeasibly paid in full and discharged.
 
6.           Enforcement Expenses. Each Guarantor shall pay or reimburse Buyer
for all costs, expenses and attorneys’ fees paid or incurred by Buyer in
endeavoring to collect and enforce the Guaranteed Obligations and in enforcing
this Guaranty.
 
7.           Obligations Absolute. Each Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than the indefeasible payment in full and
discharge of the Guaranteed Obligations. In furtherance of the foregoing and
without limiting the generality thereof, each Guarantor agrees that none of its
obligations hereunder shall be affected or impaired by any of the following acts
or things (which Buyer is expressly authorized to do, omit or suffer from time
to time, without consent or approval by or notice to any Guarantor): (a) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all of the Guaranteed Obligations; (b) one or more extensions or
renewals of the Guaranteed Obligations (whether or not for longer than the
original period) or any modification of the interest rates, maturities, if any,
or other contractual terms applicable to any of the Guaranteed Obligations or
any amendment or modification of any of the terms or provisions of any of the
Transaction Documents; (c) any waiver or indulgence granted to Parent or any
other Obligor, any delay or lack of diligence in the enforcement of the
Guaranteed Obligations, or any failure to institute proceedings, file a claim,
give any required notices or otherwise protect any of the Guaranteed
Obligations; (d) any full or partial release of, compromise or settlement with,
or agreement not to sue, Parent, any other Obligor or any other Person liable in
respect of any of the Guaranteed Obligations; (e) any release, surrender,
cancellation or other discharge of any evidence of the Guaranteed Obligations or
the acceptance of any instrument in renewal or substitution therefor; (f) any
failure to obtain collateral security (including rights of setoff) for the
Guaranteed Obligations, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (g) any collection, sale, lease or disposition of,
or any other foreclosure or enforcement of or realization on, any collateral
security; (h) any assignment, pledge or other transfer of any of the Guaranteed
Obligations or any evidence thereof; or (i) any manner, order or method of
application of any payments or credits upon the Guaranteed Obligations. Each
Guarantor waives any and all defenses and discharges available to a surety,
guarantor or accommodation co-obligor.
 
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8.           Waivers by Guarantors. Each Guarantor waives any and all defenses,
claims, setoffs and discharges of Parent, or any other Obligor or Person,
pertaining to the Guaranteed Obligations, except the defense of discharge by
indefeasible satisfaction and discharge in full. Without limiting the generality
of the foregoing, no Guarantor will assert, plead or enforce against any Buyer
any defense of waiver, release, discharge or disallowance in any Insolvency
Proceeding, statute of limitations, res judicata, statute of frauds,
anti-deficiency statute, fraud, incapacity, minority, usury, illegality or
unenforceability which may be available to Parent or any other Obligor or Person
liable in respect of any of the Guaranteed Obligations, or any setoff available
to any Buyer against Parent or any other such Obligor or Person, whether or not
on account of a related transaction. Each Guarantor expressly agrees that such
Guarantor shall be and remain liable for any deficiency remaining after
foreclosure of any mortgage or security interest securing the Guaranteed
Obligations, whether or not the liability of Parent or any other Obligor or
Person for such deficiency is discharged pursuant to statute or judicial
decision. The liability of each Guarantor shall not be affected or impaired by
any voluntary or involuntary liquidation, dissolution, sale or other disposition
of all or substantially all of the assets, marshalling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of, or other
similar event or proceeding affecting, Parent or any of its assets. No Guarantor
will assert, plead or enforce against any Buyer any claim, defense or setoff
available to such Guarantor against Parent. Each Guarantor waives presentment,
demand for payment, notice of dishonor or nonpayment and protest of any
instrument evidencing the Guaranteed Obligations. Buyer shall not be required
first to resort for payment of the Guaranteed Obligations to Parent or any other
Person, or their properties, or first to enforce, realize upon or exhaust any
collateral security for the Guaranteed Obligations, before enforcing this
Guaranty.
 
9.           If Payments Set Aside, etc. If any payment applied by Buyer to the
Guaranteed Obligations is thereafter set aside, recovered, rescinded or required
to be returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of Parent or any other Obligor or Person), the
Guaranteed Obligations to which such payment was applied shall for the purpose
of this Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Guaranteed
Obligations as fully as if such application had never been made.
 
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10.           Additional Obligation of Guarantors. Each Guarantor’s liability
under this Guaranty is in addition to and shall be cumulative with all other
liabilities of such Guarantor to Buyer as guarantor, surety, endorser,
accommodation co-obligor or otherwise of any of the Guaranteed Obligations,
without any limitation as to amount.
 
11.           No Duties Owed by Buyer. Each Guarantor acknowledges and agrees
that Buyer (a) has not made any representations or warranties with respect to,
(b) does not assume any responsibility to such Guarantor for, and (c) has no
duty to provide information to such Guarantor regarding, the enforceability of
any of the Guaranteed Obligations or the financial condition of Parent or any
other Obligor or Person. Each Guarantor has independently determined the
creditworthiness of Parent and the enforceability of the Guaranteed Obligations
and until the Guaranteed Obligations are paid in full will independently and
without reliance on Buyer continue to make such determinations.
 
12.           Miscellaneous.
 
(a)           This Guaranty may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof. Any party delivering an executed counterpart of this
Guaranty by facsimile or other electronic method of transmission also shall
deliver an original executed counterpart of this Guaranty but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Guaranty.
 
(b)           Any provision of this Guaranty which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.
 
(c)           Headings used in this Guaranty are for convenience only and shall
not be used in connection with the interpretation of any provision hereof.
 
(d)           The pronouns used herein shall include, when appropriate, either
gender and both singular and plural, and the grammatical construction of
sentences shall conform thereto.
 
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(e)           Unless the context of this Guaranty or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Guaranty or
any other Transaction Document refer to this Guaranty or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Guaranty or such other Transaction Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this Guaranty
unless otherwise specified. Any reference in this Guaranty or in any other
Transaction Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein or in any
other Transaction Document to the satisfaction in full of the Guaranteed
Obligations shall mean the indefeasible payment in full in cash and discharge,
or other satisfaction in accordance with the terms of the Transaction Documents
and discharge, of all Guaranteed Obligations in full. Any reference herein or in
any other Transaction Document to the satisfaction in full of the Secured
Obligations shall mean the indefeasible payment in full in cash and discharge,
or other satisfaction in accordance with the terms of the Transaction Documents
and discharge, of all Secured Obligations in full. Any reference herein to any
Person shall be construed to include such Person’s successors and assigns.
 
(f)           This Guaranty shall be effective upon delivery to Buyer, without
further act, condition or acceptance by Buyer, shall be binding upon each
Guarantor and the successors and assigns of each Guarantor, and shall inure to
the benefit of Buyer and its participants, successors and assigns. This Guaranty
may not be waived, modified, amended, terminated, released or otherwise changed
except by a writing signed by each Guarantor and Buyer.
 
(g)           The language used in this Guaranty will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. For clarification
purposes, the Recitals are part of this Guaranty.
 
(h)           All dollar amounts referred to in this Guaranty and the other
Transaction Documents (as defined in the Securities Purchase Agreement) are in
United States Dollars (“US Dollars”), and all amounts owing under this Guaranty
and all other Transaction Documents shall be paid in US Dollars. All amounts
denominated in other currencies shall be converted in the US Dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation.
“Exchange Rate” means, in relation to any amount of currency to be converted
into US Dollars pursuant to this Guaranty, the US Dollar exchange rate as
published in the Wall Street Journal on the relevant date of calculation.
 
13.          Notices. All notices and other communications provided for
hereunder shall be given in the form and manner, and delivered to such
addresses, as specified in the Security Agreement.
 

 
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14.           Governing Law; Jurisdiction; Service of Process; Jury Trial. The
Guarantors hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5
they have chosen that all questions concerning the construction, validity,
enforcement and interpretation of this Guaranty shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each Guarantor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Chicago, Illinois, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper; provided, however, any suit seeking enforcement of this
Guaranty may be brought, at Buyer’s option, in the courts of any jurisdiction
where Buyer elects to bring such action. Each Guarantor hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Guaranty and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Without limitation of the foregoing, each Guarantor hereby irrevocably appoints
Parent as such Guarantor’s agent for purposes of receiving and accepting any
service of process hereunder. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
 
[signature page follows]

 

 
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IN WITNESS WHEREOF, this Guaranty has been duly executed by each Guarantor as of
the date set forth above.

 
0758817 B.C. Ltd., a corporation existing pursuant to
 
the British Columbia Business Corporations Act
 
By:
  [sig3.jpg]  
Name: Murray Fleming
 
Title: Secretary
     
BLUE CREEK WIND ENERGY FACILITY LLC, a
 
Texas limited liability company
 
By:
  [sig3.jpg]  
Name: Murray Fleming
 
Title: Officer of Sole Member

 
 

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CHANNING FLATS WIND ENERGY FACILITY
  LLC, a Texas limited liability company  
By:
  [sig3.jpg]  
Name: Murray Fleming
  Title: Officer of Sole Member      
HEDLEY POINTE WIND ENERGY FACILITY
  LLC, a Texas limited liability company      
By:
  [sig3.jpg]  
Name: Murray Fleming
  Title: Officer of Sole Member

 
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LEILA LAKE WIND ENERGY FACILITY LLC, a
  Texas limited liability company  
By:
  [sig3.jpg]  
Name: Murray Fleming
  Title: Officer of Sole Member      
SNOWFLAKE WIND ENERGY FACILITY LLC, an
 
Arizona limited liability company
 
By:
  [sig3.jpg]  
Name: Murray Fleming
  Title: Officer of Sole Member      
SWISHER WIND ENERGY FACILITY LLC, a
  Texas limited liability company  
By:
  [sig3.jpg]  
Name: Murray Fleming
  Title: Officer of Sole Member

 
 
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